How Benin’s reforms are driving economic stability

The Executive Board of the International Monetary Fund has recently approved $67 million in funding for the Republic of Benin. This decision comes on the heels of the conclusion of the 2024 Article IV Consultation for the West African country. Constant Lonkeng Ngouana, the IMF Mission Chief to Benin, joined CNBC Africa to discuss the significant developments and reforms that have been driving economic stability in Benin. The country has been commended for its resilience in the face of economic shocks and is poised for continued strong growth in the coming years. Benin entered into a 42-month arrangement with the IMF in July 2022 with the aim of supporting the Beninese people during turbulent times and laying the groundwork for inclusive growth in the medium term. This program, anchored in the national development plan, has been instrumental in guiding Benin towards economic stability. The recent approval of the fourth review out of seven by the IMF's executive board is a testament to the government's reform drive and well-calibrated policy responses. Benin's GDP growth was estimated at 6.4% in 2023, with forecasts indicating continued robust growth in the medium term. One of the key areas of focus for Benin is domestic revenue mobilization. With significant development needs in core and social sectors such as health and climate change, adequate revenue mobilization is essential for sustainable growth. The government has made strides in this area, with the tax to GDP ratio increasing from 11% at the start of the program to 13% in 2023. A medium-term revenue mobilization strategy has been developed to guide future efforts in this critical area. Reforming fuel subsidies is another policy priority for the government of Benin. While the size of the fuel subsidy is relatively small, it is crucial to consider the trade-offs involved in spending decisions. The government must carefully consider how to allocate resources to meet the country's diverse needs while ensuring financial sustainability. Implementing the reform of fuel subsidies will require measures to protect vulnerable groups, particularly in the large informal market sector. In a conversation with CNBC Africa, Constant Lonkeng Ngouana emphasized the importance of balancing competing priorities in policymaking and fostering a social contract among Beninese citizens. He highlighted the need for thoughtful and strategic decision-making to address the country's development challenges within a limited resource envelope. The IMF stands ready to provide technical support to the government of Benin as it navigates key policy reforms for sustainable economic growth. Overall, Benin's recent economic performance and policy trajectory have garnered praise from the IMF, signaling a positive outlook for the country's future. With a strong reform agenda and a focus on domestic revenue mobilization and subsidy reform, Benin is on track to achieve lasting economic stability and inclusive growth.