Overview

  • Bordered by Togo, Nigeria, Burkina Faso, and Niger, Benin has a 121-kilometer-long coastline on the Gulf of Guinea and a population of close to 11.5 million (2018). Benin has recently been carrying out key economic and structural reforms.

    Political Context

    Benin is a stable democracy, despite some tension surrounding the legislative elections held on April 28, 2019. The most recent presidential elections held in March 2016 were won by the multi-millionaire cotton tycoon, Patrice Talon. The government currently enjoys an absolute majority in Parliament (83 deputies). In accordance with the party system reform approved by the National Assembly in 2018, several political parties and movements were merged to create a new charter of political parties. Benin now has around 10 State-recognized parties compared to over 200 identified parties prior to the reform. The next commune-level and local elections are expected to be held in June 2020.

    Economic Overview

    Benin's economy is heavily reliant on the informal re-export and transit trade with Nigeria (estimated at approximately 20% of GDP), and on agriculture. Despite a recent downward trend, the poverty rate remains high, at 46.4% in 2018, with a poverty line of $1.90  a day in purchasing power parity.

    Economic activity accelerated to 6.7% in 2018 from 5.8% in 2017 (a per capita GDP growth rate of 3.8%), driven by vibrant port activity (+8.5% in 2018) and a sound agricultural sector buoyed by record cotton production (+17% in 2018) and the diversification of emerging export sectors (pineapple, cashew nuts). Growth was also driven by the lagged effect of public investments (particularly infrastructure) and a vibrant services sector. Inflation remains moderate at 1% in 2018, in view of the prudent monetary policy implemented at the regional level.

    The fiscal deficit (including grants) fell from 5.9% to 4% of GDP between 2017 and 2018 owing to higher  revenues and lower capital expenditures. However, the debt-to-GDP ratio increased, from 54.4% in 2017 to 56.8% in 2018. While an adjustment reduced outstanding domestic debt from 32.4% to 30.3% of GDP in October 2018, outstanding external debt increased sharply from 4.4% to 26.5% of GDP.

    The current balance deficit (excluding grants) fell from 10.2% in 2017 to 8.5% in 2018, caused by an increase in agricultural exports and a reduction in food imports. The key export products in 2018 were cotton, cashew nuts, and pineapples, while energy and petroleum products made up the bulk of imports.

    Like the eight countries of the West African Economic and Monetary Union (WAEMU), Benin’s monetary policy is managed by the Central Bank of West African States (BCEAO), which keeps the CFA franc pegged to the euro. The BCEAO’s foreign exchange reserves reached 4.5 months of imports in 2018, against 4.1 months in 2017, essentially owing to the issuance of Eurobonds by Senegal and Côte d’Ivoire and community-wide fiscal consolidation. Despite a tighter monetary policy in 2018, regional liquidity pressures were mitigated by the issuance of Eurobonds. After remaining stable in 2017, the real effective exchange rate (REER) rose 2.4% in 2018, reflecting, in part, the strengthening of the euro.

     

    Social Context

    Despite steady, robust economic growth over the past two decades, poverty remains widespread owing to limited growth in per capita terms (only 1.6% on average during 2006–16). National headcount poverty rates were estimated at 40.1% in 2015. Female-headed households experience lower levels of poverty (28% compared to 38% for male-headed ones), but generally women suffer from a lack of economic opportunity and are under-represented in high-level decision-making positions. The education and health sectors account for a significant share of public expenditure (23% and 7%, respectively, on average). Greater public spending efficiency and a more equitable geographical distribution of resources would pave the way for lower poverty rates and more inclusive growth.

    Development Challenges

    Benin is vulnerable to exogenous shocks: climate hazards, varying terms of trade (cotton and oil prices), and developments in Nigeria—its main trading partner and the main source of its economic activity as 80% of Benin’s imports are destined for Nigeria. The economic recovery in Nigeria, where the recession officially ended in September 2017, drove growth in Benin.

    Despite some progress in the formal sector, Benin’s weak business environment continues to deter domestic and international investors. Benin occupies position 93 on the Logistics Performance Index and ranks 153 out of 190 countries in the World Bank’s Doing Business report on business regulation. Benin has recently made progress in “starting a business” and “getting electricity,” but must, however, do more in the areas of “getting credit” and “paying taxes.” Moreover, despite strides made, Benin continues to grapple with major corruption-related challenges, ranking 85 out of 180 countries on Transparency International's Corruption Perceptions Index for 2018, with a score of 40/100.

    Last Updated: Oct 10, 2019

  • In December 2016, the new government adopted the Government Action Program [Programme d'actions du gouvernment PAG], a development plan structured around 45 flagship projects aimed at improving productivity and living conditions. A National Development Plan (NDP) was launched in January 2019 for the 2018-25 period, with the aim of achieving the priority targets of the Sustainable Development Goals (SDG).

    World Bank Group Engagement in Benin

    The World Bank’s Country Partnership Framework with Benin, which is aligned with the government’s development plan, covers the period 2018-23 and was approved in July 2018. It revolves around three areas:

    • structural transformation of the economy to promote competitiveness and productivity;
    • investing in human capital;
    • enhancing resilience and reducing climate-related vulnerabilities.

    World Bank Group commitments currently stand at $930 million to finance 13 national projects. A trust fund valued at $300,000 and six regional projects financed to the tune of $202 million complete this portfolio.

    These projects cover several sectors: budget support, tourism, urban development, access to potable water, community development and social protection, governance, environment, agriculture, youth employment, storm water management, nutrition, capacity development, energy, and transport.

    Other projects include the digital rural transformation project, the early childhood development project, the agricultural competitiveness project, the tourism promotion project, and the small town water sanitation project.

    The strategy of the International Finance Corporation (IFC), the private sector arm of the World Bank Group, focuses on four pillars:

    • partnering with financial intermediaries to improve access to finance for enterprises;
    • providing capacity building to financial institutions to strengthen this sector and promote business growth;
    • supporting the development of infrastructure to attract investments (in ports, the electricity sector, and telecommunications);
    • strengthening the investment climate in collaboration with the World Bank, and scaling up rural access to water under public-private partnerships (PPP) while building local capacity in this sector.

    Last Updated: Oct 10, 2019

  • Social Safety Nets

    The Bank financed a social safety net pilot program targeting the poorest households through the Decentralized Community-Driven Services Project (PSDCC). Monthly allocations of CFAF 3,500 (about $6) helped families from the selected villages keep children in school, reducing the trafficking of Beninese children employed as agricultural laborers in Nigeria. These households also benefited from income-generating activities. The program provided $4 million in regular cash transfers to over 13,000 poor households from 125 villages. With a total of $76 million, the first phase of the PSDCC covered all 77 communes in Benin. Upon closing in December 2017, it had implemented nearly 1,300 community and 240 commune-level sub-projects that included classroom construction and repair, health centers, potable water points, and commercial infrastructure and rural roads, directly helping close to 390,000 beneficiaries, of whom 49.3% were women.

    The new phase of the project, launched in February 2019, will continue the social safety nets program to reach 18,000 new poor households by 2022 and strengthen the national social protection system, in partnership with the Government’s Insurance for Reinforcing Human Capital [Assurance pour le Renforcement du Capital Humain ARCH] project.

    Agriculture

    Launched in 2012, the Benin Agricultural Productivity and Diversification Project (PADA), funded by the World Bank ($31 million) and the Global Food Crisis Response Program ($15 million), has helped restore and improve the productivity of selected value chains of products—such as rice, aquaculture, pineapples, and cashews—and increase their value added. Additional financing of $45 million was allocated to it in 2017. As of July 2019, the total number of direct beneficiaries had reached 243,664 against a target of 250,000 beneficiaries by 2021. About 39% are women, against an end target of 40%.

    Competitive funds and matching grants have supported 230 micro-projects (68 led by women); these projects are yielding positive results across the value chains. A total area of 11,728 hectares of agricultural land was provided with small-scale irrigation and drainage, against an end target of 12,678 hectares, which is having a positive impact on yields and production. Moreover, the project financed the construction of 200 warehouses and 60 drying zones, which helped considerably reduce post-harvest losses, particularly for subsistence crops and cashew nuts.

    Lastly, the project has supported the development of professional bodies working in cashews and pineapples, putting producers, processors, and other stakeholders in a better position to influence policy decisions at higher levels.

    Last Updated: Oct 10, 2019

  • The European Union, African Development Bank, United Nations agencies, bilateral donors, the World Bank Group, and the IMF are Benin’s key partners. Non-traditional creditors, such as China and the Islamic Development Bank, are also increasingly active. Since 2004, annual joint missions of the main donors have taken place. Together they monitor the implementation of structural and sector reforms. Government–donor reviews are regularly carried out at the sector level.

    Last Updated: Oct 10, 2019

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LENDING

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

*Amounts include IBRD and IDA commitments

MULTIMEDIA



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Additional Resources

Country Office Contacts

Main Office Contact
Banque Mondiale
B.P. 03-2112
Cotonou, Bénin
+229-21-30-5857
For general information and inquiries
Yao Gnona Afangbedji
Consultant
+229-21-30-5857
yafangbedji@worldbank.org
For project-related issues and complaints
beninalert@worldbank.org