Abstract
This 2004 Article IV Consultation highlights that Benin’s economic performance over 2001–03 was strong. Real GDP growth averaged 5.3 percent, driven by growth in the cotton and services sectors. Inflation was low, averaging 2.6 percent per year. The external current deficit narrowed in 2003 as terms of trade improved. Progress in the structural area was mixed. However, macroeconomic performance since the beginning of 2004 has suffered from a poor cotton crop and the tightening of import restrictions by Nigeria.
October 6, 2004
This statement provides information that has become available since the staff report was issued. The new information does not alter the thrust of the staff appraisal.
1. Fiscal data at end-June 2004 indicate that the fiscal situation is broadly on track (Table 1). All indicative targets for end-June 2004 were met, with the exception of the target for the wage bill, which was slightly exceeded (by 2 percent). In particular, both revenue and poverty-reducing outlays were higher than projected at the time of the consultation mission.
2. Reflecting the general weakness in economic activity and the tightening of monetary policy, credit growth slowed down during the first five months of 2004. At end-May 2004, credit to the nongovernment sector had increased by 12 percent on a 12-month basis, compared to 33 percent at end-2003. In parallel, the ratio of non performing loans of commercial banks increased from 5 percent at end-2003 to 6 percent at end-May 2004. Inflation remained low, with the consumer price index increasing by 1.1 percent in the twelve-month period ending July 2004.
3. The authorities have started implementing budgetary cuts as planned (CFAF 30 billion, equivalent to 1.4 percent of GDP) to compensate for the shortfall in revenue (with respect to budgeted levels), and thus limit this year’s fiscal deficit to 5½ percent of GDP. Internal government discussions on the identification of the budget cuts were concluded in August. Budgetary allocations for domestically financed capital expenditure were reduced by CFAF 27.6 billion and for current spending by CFAF 2.4 billion.
4. The privatization process of the four ginning mills of SONAPRA has reached its final stage. The government has recently accepted the highest offers received for three mills through a competitive bidding process; the transfer of these mills to the qualified bidders is envisaged to be completed by end-October 2004. Regarding the fourth ginning mill, some delays have been incurred because the highest bidder was unable to provide sufficient financing guarantees; however, the authorities are confident that the sale of the mill could be completed in the coming weeks.
Benin: Indicative Targets for 2004
(In billions of CFA francs, unless otherwise indicated)
Cumulative amounts since end-December 2003.
Excluding grants.
Total government expenditure minus interest payments, externally financed investment expenditure, and net lending.
Benin: Indicative Targets for 2004
(In billions of CFA francs, unless otherwise indicated)
| 2004 | |||||||
|---|---|---|---|---|---|---|---|
| End-March | End-June | End-September | End-December | ||||
| Target | Actual | Target | Actual | ||||
| Indicative targets | |||||||
| Net bank credit to the government | −34.8 | −19.1 | −9.5 | −17.4 | −23.7 | −23.9 | |
| Nonaccumulation of new external payments arrears by the central government |
0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| New nonconcessional external debt with a maturity of one year or more contracted or guaranteed by the central government |
0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Short-term external debt with a maturity of less than one year (stock) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Wage bill 1/ | 28.4 | 29.5 | 58.8 | 60.2 | 86.4 | 114.0 | |
| Poverty-reducing expenditure 1/ | 20.4 | 6.8 | 17.8 | 27.8 | 59.9 | 102.0 | |
| Total government revenue 1/ 2/ | 92.2 | 76.2 | 156.3 | 162.8 | 244.3 | 340.4 | |
| Primary government expenditure 1/ 3/ | 88.5 | 64.4 | 148.8 | 148.7 | 250.9 | 354.4 | |
| Memorandum items: | |||||||
| Program grants and loans 1/ | 0.0 | 0.0 | 0.0 | 0.0 | 31.7 | 40.0 | |
| Target for spending on projects financed by enhanced HIPC Initiative 1/ | 4.8 | 0.4 | 3.4 | 2.0 | 11.2 | 19.1 | |
Cumulative amounts since end-December 2003.
Excluding grants.
Total government expenditure minus interest payments, externally financed investment expenditure, and net lending.
Benin: Indicative Targets for 2004
(In billions of CFA francs, unless otherwise indicated)
| 2004 | |||||||
|---|---|---|---|---|---|---|---|
| End-March | End-June | End-September | End-December | ||||
| Target | Actual | Target | Actual | ||||
| Indicative targets | |||||||
| Net bank credit to the government | −34.8 | −19.1 | −9.5 | −17.4 | −23.7 | −23.9 | |
| Nonaccumulation of new external payments arrears by the central government |
0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| New nonconcessional external debt with a maturity of one year or more contracted or guaranteed by the central government |
0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Short-term external debt with a maturity of less than one year (stock) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Wage bill 1/ | 28.4 | 29.5 | 58.8 | 60.2 | 86.4 | 114.0 | |
| Poverty-reducing expenditure 1/ | 20.4 | 6.8 | 17.8 | 27.8 | 59.9 | 102.0 | |
| Total government revenue 1/ 2/ | 92.2 | 76.2 | 156.3 | 162.8 | 244.3 | 340.4 | |
| Primary government expenditure 1/ 3/ | 88.5 | 64.4 | 148.8 | 148.7 | 250.9 | 354.4 | |
| Memorandum items: | |||||||
| Program grants and loans 1/ | 0.0 | 0.0 | 0.0 | 0.0 | 31.7 | 40.0 | |
| Target for spending on projects financed by enhanced HIPC Initiative 1/ | 4.8 | 0.4 | 3.4 | 2.0 | 11.2 | 19.1 | |
Cumulative amounts since end-December 2003.
Excluding grants.
Total government expenditure minus interest payments, externally financed investment expenditure, and net lending.