Benin is a small country with a population estimated at just under 10 million in 2011. Important economic and structural reforms, supported by the IMF and the World Bank, helped Benin sustain its economic growth rates over the last decade. Nevertheless, poverty is still widespread and the economy remains undiversified and vulnerable to external shocks.
The national economy relies on the agriculture sector, in particular on cotton, transit and re-export trade. The agriculture sector accounts for about 32% of GDP and is the source of livelihood for nearly 70% of the country’s workforce. Cotton is the primary export commodity accounting for about 25 to 40% of official total exports. Re-export trade with Nigeria is estimated to represent approximately 20% of GDP and explains the vulnerability of the economy to trade policy changes in its neighboring and main trading partner.
The global economic and financial crisis contributed to a significant economic slowdown in Benin, and a widening of the fiscal and current account deficits. Growth decelerated in 2009 and 2010 further to weaker global demand for exports, a decrease in re-export trade, primarily to Nigeria, lower cotton production, lower foreign direct investment and the 2010 floods. A slowdown in activity at the Port of Cotonou in the second half of 2011, following resistance to and problematic implementation of a new Import Verification Program (PVI), reduced growth from a projected 3.8% to 3.5%. However, growth rebounded in 2012 (5.4%), thanks to significantly higher cotton production and increased port volumes and traffic. Growth projections for 2013 are estimated at 5%. These developments will have a positive impact on Benin’s macroeconomic fundamentals, its fiscal position and poverty alleviation.
In June 2010, the International Monetary Fund (IMF) approved a three-year Extended Credit Facility (ECF) arrangement for Benin. On August 28th 2013, the IMF completed the fifth review of the ECF, and its Board also approved a request for an extension of the arrangement to April 2014. This extension will allow for a re-phasing of the final disbursement and associated review and will give the authorities more time to implement the customs reform agenda.
Benin continues to enjoy a stable and democratic government with four presidential elections and four legislative elections organized peacefully since the end of the Marxist-Leninist regime in 1989. President Yayi Boni was reelected in March 2011 to a second five-year term and his alliance gained a majority in the National Assembly. Local and municipal elections are planned for 2013, but no specific date has been given yet, and efforts are currently underway to find solutions to correct the insufficiencies of the Computerized Permanent Electoral List (LEPI) which is being contested by opposition parties.
Key development challenges
The third Growth and Poverty Reduction Strategy (2011-2015) adopted by the Government in 2011 is currently under implementation. Benin aims to become an emerging economy by 2025 through increasing sustainable growth over the medium-term and making progress towards the Millennium Development Goals (MDGs). Increasing economic growth and raising per capita GDP will require that Benin increasingly capitalize on its comparative advantages in agriculture and its position as a regional trading center. Agricultural diversification and improved agricultural productivity will be key, as will an improved business environment in order to take greater advantage of Benin’s geographic position in serving the Nigerian market and its role as a gateway to land-locked countries to its north.
Despite progress in improving access to basic services, achieving the MDGs remains a significant challenge. Benin is on track to meet the MDGs for access to potable water in rural areas, eradicating hunger, and reduced HIV/AIDS prevalence. Attaining the rest of the MDGs would be difficult, however, without a sharp acceleration of the current trends. In particular, in the health sector, child and maternal mortality remain very high despite a sharp reduction over the last years. In education, the universal primary education goal and the completion rate goal for boys are likely to be reached, but the 2005 goal of parity in primary and secondary education has not been met and would not be reached by 2015 without reinforced effort. Furthermore, improving the quality of education and the management of the sector remain key challenges. Finally, while Benin is in a position to meet the MDG for rural water supply, reaching the sanitation goal would be very challenging, even with sustained actions.
Last updated: September 2013
The strategic vision of the World Bank Group’s new Country Partnership Strategy (CPS), approved by the Board on April 9, 2013, is to harness Benin's comparative advantages to spur a sustainable and shared economic growth. The CPS is designed to strengthen governance so that Benin can capitalize on its comparative advantages. It is organized along three pillars: the foundation pillar focuses upon governance and public sector capacity, and the other two pillars address (i) sustainable growth, competitiveness and employment, and (ii) access to basic social services and social inclusion. Key sectors covered by the new strategy include: budget support; urban development; environment; telecommunications; youth employment; health, nutrition and population; capacity building; cross-border special economic zones; energy; and regional transport. The total IDA allocation for Benin for the CPS period is projected around $493.7 million.
The International Finance Corporation (IFC)
IFC’s current strategy for Benin focuses on: (i) partnering with financial intermediaries to improve access to finance for Micro, Small and Medium Enterprises (MSMEs); (ii) providing capacity-building to financial institutions to strengthen the financial sector and promote business growth; (iii) supporting the development and modernization of infrastructure necessary to attract foreign direct investment (port, electricity, telecom), by strengthening the investment climate in collaboration with the World Bank; and (iv) offering direct assistance (financial and technical) to medium enterprises in vital sectors of the economy (e.g. food/agribusiness) or providing significant positive externalities and development impact (education, health).
The Multilateral Investment Guarantee Agency (MIGA)
MIGA’s current portfolio in Benin consists of three investments, in the tourism and infrastructure (telecommunications) and services sectors, with a combined gross exposure of $8.4 million.
World Bank Institute (WBI)
WBI’s mission is to strengthen the capacity of leadership teams & multi-stakeholder coalitions to implement reforms in order to tackle frontier development challenges and achieve results. WBI pursues this mission through four business lines (structured learning, innovation platforms, practitioner exchanges, and leadership and coalition building) and seven thematic areas of focus (Governance, innovation and fragile states; Knowledge and Learning; Urban; Public-private partnerships; Climate change; Growth and competitiveness; and Health systems).
The European Union, African Development Bank, United Nations agencies, bilateral donors, the World Bank, and the IMF are among Benin’s key partners. Non-traditional creditors, such as China and the Islamic Bank, are also increasingly active. Since 2004, annual joint missions of the main donors providing budget support have taken place, and together they monitor the implementation of key structural and sector reforms, including aid harmonization for which a Memorandum of Understanding was signed in December 2007. At the sector level, joint government-donor reviews are regularly carried out in the core sectors of rural water, health, education, agriculture, transport and justice. Since 2004, the African Development Bank (AfDB) has aligned its program loans with the PRSP and the PRSC. On public procurement reform, the AfDB and IDA teams have enhanced their coordination, leading to the selection of joint sets of prior actions. The two teams plan to continue to work closely on public expenditure management reforms, public procurement, internal and external controls, and capacity building.
Last updated: September 2013
Facilitating trade and transport
Through the regional Abidjan-Lagos Trade and Transport Facilitation Project (ALTTFP) approved in March 2010 (total IDA financing for Benin of US$75 million), the Bank is helping address transport and trade facilitation bottlenecks identified along the corridor which accounts for about 65% of trade in West and Central Africa. In Benin, work is ongoing to rehabilitate and expand the Godomey-Pahou road which is one of the most congested road sections along the corridor. Furthermore, the project attracted additional funding from the African Development Bank for another section of the Beninese corridor (Pahou-Ouidah-Hillacondji, towards the border with Togo).
With support from the United States Government’s Millennium Challenge Corporation, IDA and a public-private partnership (PPP) launched by the government, efforts have started to improve operations at the Port Cotonou through the introduction of a “single window” for trade along with measures to streamline the operational procedures. The results are already promising, with substantial reductions in the average port dwell time (from 19 days in 2011 to 13 days at the end of 2012, and 7 days at the beginning of 2013). The project also supports the customs and border agencies modernization agenda in Benin. Finally, the ALTTFP framework is increasingly used as a platform for discussing and improving the corridor performance indicators aimed at gradually enabling real regional integration in the West Africa region.
Promoting better behaviors towards forests management
The Forest and Adjacent Lands Management Project – FALMP (US$6 million GEF funding) has helped Benin establish the basis for a participatory and integrated management of forests and adjacent lands and has contributed to a significant behavior change among the beneficiary populations. Various training activities organized (integrated management of ecosystems, results-based management, improved production systems, improved charcoal production techniques) have proved highly productive for the beneficiaries. The participatory forests management plans developed have allowed the enrichment of 9,853 ha and the reforestation of 406 ha. The creation of 26 rural wood markets has contributed to reduce the pressure exerted on the forests by the populations to meet their needs for firewood. A total of 99 community-based organizations are actively involved in forests management operations supported by the FALMP (plant production, reforestation, maintenance and monitoring of plantations), and 39 micro projects for alternative income-generating activities have been financed for the benefit of 782 direct beneficiaries, including 469 women. An additional financing (USD5.56 million) approved by the Bank in March 2013 will help scale up activities through effective implementation of the forest management plans and an expansion of income generating activities to a greater number of communities.