On June 21, 2019, the Board of Directors of the International Monetary Fund (IMF) concluded Article IV consultations with Benin. It also approved the fourth review of the economic performance obtained by Benin under a three-year program supported by an agreement under the IMF’s Extended Credit Facility (ECF); a press release on this has been issued separately. The short-term outlook for the Beninese economy is favorable. According to preliminary estimates, economic activity grew by 6.7% in 2018, mainly thanks to strong port and agricultural activity. Annual inflation, measured by the consumer price index, stood at 1%. The current account deficit increased from 10.0% of GDP in 2017 to 8.3% of GDP in 2018, mainly due to a significant increase in cotton exports. The budget deficit fell to 4.0% of GDP in 2018, due to the reduction in public investment. Financial vulnerability has nevertheless become more salient, with the banking sector showing relatively low profitability and equity. The medium-term outlook remains favorable. Growth is expected to be above 6 ½% between 2019 and 2024. Inflation as measured by the consumer price index and the budget deficit are expected to remain below regional norms over the forecast period. The public debt ratio is expected to start declining from 2019 after five years of rising due to continued fiscal consolidation and strong economic growth. The current account is also expected to continue to improve, subject to continued expansion of agricultural production and meeting deficit targets. The outlook is likely to be revised downwards. In the short term, political discontent following the parliamentary elections in April 2019, weaker than expected growth in Nigeria (which would weaken Benin’s exports, fiscal position and activity) and a further deterioration in the profitability of banks (which could weigh on provisions) could pose risks. In the medium term, growth prospects depend heavily on the ability to revive private investment and attract foreign investors. Assessment by the board of directors Directors agree with the general thrust of the staff assessment. They welcome the macroeconomic performance achieved by Benin in recent years, noting that growth has been vigorous with no signs of inflationary pressures. Directors agree that while the medium-term outlook remains favorable, a profound transformation of the Beninese economy will be necessary to achieve development goals. Directors therefore stressed the need to continue to rigorously implement policies and structural reforms that promote macroeconomic stability, preserve debt sustainability, and encourage inclusive and private sector-led growth. The administrators note with satisfaction that the authorities are determined to respect in 2019 the ceiling of 3% of GDP budget deficit, set by the WAEMU. They stress the importance of sticking to the medium-term fiscal consolidation program in order to ensure debt sustainability and promote external stability at the regional level. Administrators also advise the authorities to redouble their efforts to increase revenue, particularly with respect to value added tax and excise duties, in order to create fiscal space for social spending and avoid spending too much money on social spending. further reduce public investment. Directors commend the authorities for putting the public debt ratio on a downward trend. They note that the recent issuance of a Eurobond diversifies the sources of financing and creates possibilities for lengthening debt maturities. However, they also note that increased access to non-concessional external financing could create medium-term vulnerabilities that will need to be carefully monitored and mitigated. They therefore encourage the authorities to continue to strengthen their debt management framework. Directors stress the need to accelerate the transformation of the economy. Growth must be more stable and more inclusive in order to reduce poverty and generate the tax revenues necessary to finance development projects. Greater involvement of the private sector is also necessary, in order to support growth in a context of reduced budget deficit. Directors stressed the importance of continuing to improve the business climate and infrastructure, while diversifying the economy outside of traditional sectors and avoiding premature deindustrialisation. Directors endorse the authorities’ efforts to improve access to education and health. Finally, they recommend strengthening the anti-corruption mechanism and tackling the vulnerabilities of the financial sector, in particular the low profitability of banks.