Press Release No. 08/220

Press Release: Statement by an IMF Staff Mission to Benin

September 24, 2008

An International Monetary Fund (IMF) mission visited Cotonou during September 10-24, 2008 to conduct the fifth review under the three-year economic program supported by the IMF's Poverty Reduction and Growth Facility (PRGF). The mission met with the President of the Republic, His Excellency Dr. Boni Yayi, the Senior Minister for Prospective Development, and Evaluation of Public Policy, Mr. Koupaki, Minister of Economy and Finance, Mr. Lawani, and other senior officials. It also held fruitful discussions with representatives of the private sector, the banking community, and labor union leaders.

Mr. Joannes Mongardini, IMF mission chief for Benin, issued the following statement in Cotonou on September 24, 2008:

"Economic activity remains strong. Real GDP growth is projected to accelerate further to 5.1 percent in 2008, from 4.6 percent in 2007, despite the food and fuel crisis. Growth is driven by a rebound in activity in the Port of Cotonou, buoyancy in the agriculture sector and higher infrastructure investment. The external current account deficit, excluding grants, is expected to widen to over 10 percent of GDP, reflecting the adverse developments in Benin's terms of trade, due to the increase in food and fuel prices. The gross international reserve position remains comfortable at about 8 months of prospective import cover.

"The authorities' economic program supported by the PRGF arrangement remained broadly on track in the first half of 2008. Revenue performance exceeded the program target by a large margin thanks to continued efforts to strengthen tax and customs administrations. However, expenditure overruns in current transfers and capital spending largely reflected the authorities' response to the food and fuel crisis and an acceleration of infrastructure spending. The government has subsequently implemented a new policy of full pass-through of international food and fuel prices, known as the "verité des prix", which will help to bring about a quick exit from the crisis and maintain the sustainability of the budget. It is also addressing structural weaknesses in the administrative and absorptive capacity of the economy. It has also launched bids for the privatization of Continental Bank-Benin and the ginneries of SONAPRA, a state-owned company, to strengthen investment and growth.

"The government is committed to reducing inflationary pressures by limiting expenditures for the remainder of 2008. The budget for 2009 would also aim at preserving macroeconomic stability while accommodating urgent infrastructure investment and social needs.

"The mission reached a preliminary understanding on macroeconomic and structural policies for the remainder of 2008 and 2009, which could form the basis for completing the fifth review under the PRGF arrangement. This preliminary understanding will be submitted for approval by IMF management in the next few weeks, before being presented to the IMF Executive Board towards the end of 2008.

"The mission would like to reiterate its readiness to strengthen the partnership between the authorities and the IMF in order to help Benin address the challenges of boosting economic growth and reducing poverty, with a view to achieving the Millennium Development Goals.

"The mission would like to express its gratitude for the warm hospitality of the authorities, the very constructive dialogue, and the close cooperation during its stay in Cotonou."