IMF says Benin prudent fiscal policy kept fiscal deficits at manageable levels

WASHINGTON

Today the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Benin.1 The Board also approved the fourth review under the Extended Credit Facility (ECF) arrangement during the same meeting. Benin has consolidated and reinforced recent gains in macroeconomic management, but significant challenges remain in accelerating economic growth and reducing poverty. Prudent fiscal policy has kept fiscal deficits at manageable levels and has averaged a basic primary surplus over the period 2010–June 2012. This policy, combined with the benefits of the Heavily Indebted Poor Countries (HIPC) and the Multilateral Debt Reduction Initiatives (MDRI), has kept public debt low, at about 32 percent of GDP.

Real growth rebounded after the 2010 floods, to about 3½ percent in 2011 and is anticipated to maintain this rate through 2012. Authorities have made some progress on structural reforms and significantly improved disbursements of priority social expenditure. Challenges remain in achieving public investment targets, infrastructure development, and promotion of private sector activity. Appropriate monetary policy by the Central Bank of West African States (BCEAO) has helped keep inflation low at about 2½ percent in 2010-11. A significant increase in fuel prices imported from Nigeria in January 2012 resulted in a jump in the consumer price index, but does not appear to have a persistent inflationary impact. The recent spike in international food prices has not had a notable impact in Benin, given the country’s ability to supply basic staples with domestic production.