After the review of its program … The IMF notes progress for the Beninese economy For two weeks, a mission of the International Monetary Fund (IMF) led by Mr. Luc Eyraud stayed in Cotonou for the fifth review of the economic and financial program concluded in April 2017 with Benin as part of the Extended Credit Facility (ECF) agreements. This Tuesday, November 05, 2019 at the Presidency of the Republic, a joint press briefing was held by the Head of Mission and the Minister of Economy and Finance Romuald Wadagni. Read the full statements of the two personalities below.

Luc Eyraud, Head of the IMF Mission for Benin: “The IMF program in Benin is globally a success

“We have just completed the fifth review of the three-year program between Benin and the IMF. We have reached an agreement on the main lines of economic policy. The results of the Program are and continue to be very satisfactory. All performance indicators for the first half of 2019 were met. The deficit in the first half of the year was lower than expected. The mobilization of tax revenues has been excellent. As for the economy, we note a growth in 2019 which is 6.4%. This is strong growth driven in particular by agriculture and services. Part of our discussions have been on the 2020 draft budget and the policy measures underlying this draft budget. We congratulate the Beninese authorities who have decided to target a deficit of 1.8% in 2020. A low deficit which is well below the regional ceiling of 3%. We also commend the revenue mobilization reforms that are being made for next year. Revenue mobilization efforts will help finance development projects and also improve the ability to repay debt. It was also noted that the debt to GDP ratio will be constant next year. That’s very good news. This is a very good measure of fiscal prudence and a good macroeconomic condition.

We also talked about the composition of the public debt. External debt has increased in recent years to the detriment of domestic debt in connection with the issuance of the Eurobond in March 2019. This external debt has been beneficial and will help reduce the debt burden and extend the maturity of the debt. We welcome the authorities’ efforts to update medium-term debt strategies and continue efforts in public debt management.

We are following the issue of Nigeria’s border closures very closely. What I can tell you is that as part of our mission, we analyzed the economic implications of closing borders. I am thinking of three types of economic impact. The first relates to public finances due to the fall in customs revenue but partly offset by the excellent performance of tax revenue over the first half of the year. The second impact is related to inflation and costs. We have observed an increase in the price of smuggled gasoline (Editor’s note: Kpayo) but combined with a fall in the price of agricultural products. Rather, we see a drop in costs linked to the closure of the borders by Nigeria. And finally there is an effect on growth which will not be expected in the long term if the closure continues. For the moment, we estimate that growth has slowed down slightly to 6.4% but for 2020 we continue to keep growth at 6.7% which is growth in the medium term.

What specific messages do you have to send to international investors who are still hesitant to invest in Benin?

Three elements that make the difference in Benin. I will first say that the macroeconomic environment is very good. We have growth above 6% with extremely low inflation and a really minimal exchange rate. We have very good macroeconomic management with a very prudent budgetary policy and a reduced budget deficit. Debt shows that the risk of debt distress is really moderate. The IMF program in Benin is overall a success. All quarterly performance indicators since the start have been met.

The second aspect that also makes the difference is linked to Benin’s strong growth potential in the medium term. The IMF’s Article IV report in May 2019 estimated that Benin’s medium-term growth was above 6%. This places Benin in the top 4 countries in sub-Saharan Africa. Obviously, realizing this strong growth potential requires efforts and the authorities are very committed to macroeconomic reforms, in the field of infrastructure and energy, which make work easier for private investors. Finally, a point that often attracts the attention of foreign investors is economic governance. And here, what is interesting is that we have observed a notable improvement.

The latest Doing Business report notes an improvement of 4 places for Benin and measures are being taken to improve all these performances.>>

Romuald Wadagni, Minister of the Economy and Finance: “… the results confirm that we are on the right track…”

“The first message is that the results are very satisfactory. The second message is that Benin’s economy is doing well. We have a growth which remains dynamic despite the exogenous shocks, in particular the shocks linked to the closing of the borders with Nigeria. These two elements are not the result of chance.

If I take the first element which relates to the results of our work, I will just recall that the government has deemed it useful to appeal to the IMF in its desire to have an external eye, a critical eye in order to see the way in which is managed today what belongs to the community ie public finances but also the way in which all this is managed for the young Beninese of tomorrow. It is within this framework that there have been a certain number of measures and actions to be taken and which are checked every six months. It is nevertheless gratifying that for the fifth time in a row, that we have had qualified and very satisfactory results. These are my feelings on the first message

On the second message, what I especially want to remember is that today we have an economy that is much more resilient. We are in a period where we are experiencing an exogenous shock. But despite this the economic situation is relatively good, growth is maintained at a level which remains one of the strongest in Africa. This is the result of the reforms initiated since 2016. I would like to cite, for example, actions that have been taken at the level of the administration, in particular the modernization of the financial authorities which, despite the exogenous shocks, make it possible to secure our revenues and keep them at a fairly good level. It is also the result of reforms aimed at the diversification and structural transformation of our economy. When you take the major contributors to growth, you notice that the primary sector, in particular agriculture, cotton where we have become the first producer, remains dynamic and this is due to the reforms. Thanks to the reforms undertaken in the sector such as training farmers and providing them with quality inputs on time, you have noticed the explosion in productivity in most food sectors. With paddy rice we were at 200,000 tonnes in 2015, today in 2019 we are at 400,000 tonnes. The Head of State has set up an emergency program and has given instructions so that we reach 1 million tonnes of rice produced within two years. Thousands of producers saw their yield increase from 2015 to 2019 and it is a fact.

When we take the rice that we all consume, in 2015 we had a production of around 235,000 tonnes and this year we are talking about 1.5 million tonnes. You can add market garden products. You can see in concrete terms that it is the fruit of reforms that have made it possible to better train people, to enable them to have access to quality inputs. In the same way, you take other sectors such as construction. There is not a single department today in Benin where you will not see major works taking place. The government ensures that as many nationals as possible are involved so that we have the transfer of skills but also so that our compatriots can have access to training and employment. There is also a respite from our external dependence because sometimes things appear obvious but if the Head of State does not put all his leadership to make things move in the right direction, we may have already a breakdown in energy from the outside which would have plunged our country and its economy into disarray. We do not realize that the reforms in the energy sector have been really important. We also see young and new businesses entering the service sector every week. It is a diversification of performance in all of these sectors which means that despite the exogenous shocks, we have strong growth overall. It is really the fruit of the relaunch strategy that has been put on hold since 2016. If you take the last twenty years, this is the first time in history that Benin has experienced a growth rate of over 5% for three years in a row. It means that something is happening. When the IMF comes to consolidate you in its elements, that obliges you and encourages you to continue the efforts. We are on the right path. The more time passes, the more each of our fellow citizens will realize that all of the decisions that are sometimes difficult to understand today were necessary. In the years to come, we will have to look at Benin as an oasis of countries and prosperity in Africa. This is President Talon’s ambition and the results confirm that we are on the right track. >>