Benin Gets $200m Loan Approval from IMF

The Executive Board of the International Monetary Fund (IMF) has approved a two-year $200 million funding arrangement for Benin under the Resilience and Sustainability Facility (RSF), according to a statement.

The amount of SDR 148.56 million or about $US200 million equates to 120 per cent of quota, with disbursements to start when the First Review of the arrangement is completed.

According to IMF, the arrangement will support the authorities’ agenda to build resilience to climate change by mainstreaming climate considerations in policymaking, mitigating transition risks through a comprehensive fuel subsidy reform and catalysing other sources of climate financing.

The Board also completed the Third Review under the 42-month blended EFF/ECF arrangement.

It was noted that the EFF/ECF was approved on July 8, 2022, to help Benin address pressing financing needs, support the country’s National Development Plan cantered on achieving the Sustainable Development Goals (SDGs), and catalyse donor support.

This completion of the review allows for the immediate disbursement of SDR 101.58 million (about US$136 million) toward budget support, bringing total disbursement under the program to SDR 369 million (about US$494 million).

Program performance remains strong, with all end-June 2023 quantitative targets met and structural benchmarks implemented.

Following the Executive Board discussion, Mr. Okamura, Deputy Managing Director and Acting Chair said,  “The authorities’ steadfast reform implementation is helping navigate headwinds from the Niger border closure, amidst regional sanctions on that country, and the phasing-out of fuel subsidies in Nigeria. Remaining vigilant vis-à-vis the financial and socio-economic fallout from these shocks will be important for preserving macroeconomic stability.

“Robust tax collection is supporting fiscal consolidation toward the authorities’ strategy of converging to the West-African Economic and Monetary Union-wide fiscal deficit norm of 3 percent of GDP by 2025, in line with the program’s debt sustainability objectives. The recently adopted Medium-Term Revenue Strategy (MTRS)—aimed at improving the efficiency of the tax system and expanding the tax base—should sustain ongoing revenue collection efforts and help meet Benin’s large development needs over time.

“Contingency planning is paramount, considering heightened uncertainty. The authorities should maintain flexibility in budget execution, including a phased approach to their public investment.

“Accelerating the operationalization of the social registry will facilitate targeting as social programs are being scaled up, and help compensate vulnerable households in the fiscal adjustment process.

“Sustaining the ongoing reform drive to enhance the rule of law and the anticorruption framework will solidify the institutional foundations of private sector led growth that benefits all Beninese. Remaining vigilant vis-à-vis financial sector risks and promoting financial inclusion will support sustainable growth.

“Steadfast implementation of the authorities’ climate change agenda under the new Resilience and Sustainability Facility (RSF) will complement the EFF/ECF in supporting overall socio-economic resilience.

“The identified RSF reform measures build on the authorities’ national adaptation plan and existing diagnostics, including the IMF’s Climate Public Investment Assessment (C-PIMA), the World Bank’s Country Climate and Development Report (CCDR), and leverage the Global Center on Adaptation’s expertise. Naira Devaluation Deepens Economic Crisis in Nigeria

“They aim at addressing key structural challenges that expose Benin to climate shocks and should help mitigate balance of payment risks and catalyse other sources of climate financing.”