Overview

Country Overview

The West African nation of Benin is bordered by Togo to the west, Nigeria to the east, and Burkina Faso and Niger to the north. It has an estimated population of 10 million inhabitants as of 2011. With the support of the International Monetary Fund (IMF) and the World Bank, Benin has been able to make important economic and structural reforms and sustain its economic growth rates over the last decade. Nevertheless, poverty is still widespread and the economy remains undiversified and vulnerable to external shocks.

Political Context

Benin continues to enjoy a stable and democratic government. Since the end of the Marxist-Leninist regime in 1989, it has organized four presidential elections and four legislative elections peacefully. Current president Yayi Boni is fulfilling a second five-year term which ends in 2016. Legislative and local elections are due respectively in April and May 2015, and presidential elections are slated for 2016.

Economic Overview

Real GDP grew by 5.4% in 2012, 5.6% in 2013, and an estimated 5.7% in 2014 - a sharp increase from the previous five-year average of 3.7%. Growth has been primarily driven by trade and agriculture. Continued improvements at the port of Cotonou have increased traffic and boosted efficiency, while favorable weather conditions have strengthened agricultural output. Cotton production was 240,000 tons in 2012/13, 307,000 tons in 2013/14 and is estimated at 350,000 tons for the 2014/15 season. On the demand side, investment increased sharply in 2013, spurred by a rise in oil exploration. However, this has had little impact on the demand for domestically produced goods.

Benin’s fiscal stance remains stable, and the overall fiscal deficit is estimated at 3.1% of GDP in 2014 (cash basis, excluding grants), following 3.7% in 2013 and 2.4% in 2012. Customs revenues slightly underperformed over 2014 as have domestic tax revenues. This was due to a drop in informal re-exports to Nigeria. Thanks to prudent fiscal policy, the overall budget deficit and balance of payments deficit remain at acceptable levels, and sovereign debt continues below 30% of GDP. Inflation was moderate at about 1% in 2013, thanks in large part to low food price inflation. On May 23, 2014, the Executive Board of IMF completed the sixth and last review of Benin’s economic performance under a program supported by the Extended Credit Facility (ECF) arrangement. The government has requested a new three-year facility from the IMF.

Medium-term outlook

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 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, improved agricultural productivity, and an improved business environment will be key to taking greater advantage of Benin’s geographic position as a gateway to the Nigerian market and land-locked countries to its north.

Development Challenges

Despite progress in improving access to basic services, achieving the Millennium Development Goals (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 will be difficult, however, without a sharp acceleration of the current trends. In the health sector in particular, child and maternal mortality remain very high despite a reduction over the past years.

In education, the universal primary education goal and the goal completion rate for boys are likely to be reached, but the 2005 goal of parity in primary and secondary education has not been met and will not be reached in 2015 without increased efforts. 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 remains challenging, even with sustained actions.

At the Consultative Group Meeting on Financing Benin’s Development, organized by the government in Paris in June 2014, donors and private investors pledged a record $10.4 billion (against a funding gap of $6.7 billion) to support the country’s development priorities. A strategic guidance mechanism has been put in place to oversee the transformation of these pledges into structuring investments.

Last Updated: Apr 02, 2015

World Bank Group Engagement in Benin

The World Bank Group’s Country Partnership Strategy (CPS 2013-2016) for Benin is organized around three main pillars: the foundation pillar focuses on governance and public sector capacity, the second pillar addresses sustainable growth, competitiveness and employment, and the third pillar supports access to basic social services and social inclusion. The current portfolio comprises of 14 projects for a total commitment of $492.16 million. The key sectors addressed include: budget support, urban development, environment, telecommunications, youth employment, health, nutrition and population, capacity building, cross-border special economic zones, energy, and regional transport.

International Finance Corporation (IFC)

The International Finance Corporation’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) through the strengthening of 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).

Multilateral Investment Guarantee Agency (MIGA):

The Multilateral Investment Guarantee Agency’s current portfolio in Benin consists of three investments in the tourism, infrastructure (telecommunications), and services sectors, with a combined gross exposure of $8.4 million.

Last Updated: Apr 02, 2015

The World Bank Group has contributed to Benin’s development performance in the following sectors:

Improving Infrastructure and Sanitation

The Benin Emergency Urban Environmental Project, with a financing of $50 million, was launched in December 2011 to improve infrastructure and mitigate the negative environmental impact of floods in the Cotonou agglomeration and to increase the country’s level of preparedness for future flooding. As of March 2015, the project implementation is judged satisfactory, with a disbursement rate of about 80%. The major civil works include: (i) the enhancement and construction of the Fifadji Bridge, (ii) the construction and rehabilitation of existing solid waste collection points and of two solid waste transfer stations, and (iii) the cleaning, recalibration and reconstruction of the drainage networks in Cotonou. The civil works on the opening of a new cell at the Ouesse landfill and the paving of the road leading to the site are at 90% and 95% completion rates respectively. These works and the many others that are planned will benefit 1,426,000 beneficiaries (of which 52% is female). They will reduce by 30% the number of households vulnerable to flooding in the targeted municipalities and will help rehabilitate 10.70 km of drainage network.

A wastewater master plan is being designed for the Cotonou agglomeration and will include a pilot low-cost small scale sanitation project. With respect to flooding and disaster risk management, the project supports the preparation of contingency plans for the 21 communes most vulnerable to inundation. An additional financing of $6.4 million was approved and signed on June 5, 2014 to expand on the cleaning and grading of clogged drainage networks in Cotonou, beyond the scope of the parent project and to provide technical support the National Flood Disaster Agency. A second additional financing of $40 million is currently under preparation.

Facilitating Trade and Transport

Through the regional Abidjan-Lagos Trade and Transport Facilitation Project (ALTTFP), approved in March 2010 for a total of $75 million in International Development Association (IDA) financing, the Bank is helping address transport and trade facilitation bottlenecks identified along the corridor which account for about 65% of trade in West and Central Africa. In Benin, despite important delays, the infrastructure works to rehabilitate and expand the Godomey-Pahou road (16 km), one of the most congested sections along the corridor, are almost complete. Furthermore, the project has attracted additional funding from the African Development Bank and works are currently underway to address the needs of another section of the corridor, from Pahou-Ouidah-Hillacondji, which is situated near 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, operations at the port of Cotonou have begun to improve. The introduction of a “single window” for trade along with measures to streamline the operational procedures has also greatly contributed to smoother and more efficient operations. The results are promising, with substantial reductions in the average port dwell time from 19 days in 2011 to 12 at the end of 2012, with an exceptional achievement of 7 days at the beginning of 2013. The project also supports Benin’s customs and border agencies modernization agenda. The ALTTFP framework is increasingly used as a platform for discussing and improving the corridor performance indicators, which are aimed at gradually enabling real regional integration in West Africa.

Last Updated: Apr 02, 2015

The European Union, African Development Bank, United Nations agencies, bilateral donors, World Bank Group, and 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. 

Last Updated: Apr 02, 2015


LENDING

Benin: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments