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Overview

  • Bordered by Togo, Burkina Faso, Niger, and Nigeria, Benin has a 121-kilometer-long coastline on the Gulf of Guinea, a population of close to 11.53 million (2018), and an average life expectancy of 61.2 years.  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, especially cotton, which is the country’s leading export product.

    Despite steady, robust economic growth over the past two decades, poverty remains widespread owing to limited growth in per capita terms (only 1.5% on average during the period 2008–2018). The national headcount poverty rate was estimated at 40.1% in 2015 as against 49.5% in 2008 (based on the international poverty threshold set at S$1.90 per person per day in purchasing power parity (PPP) terms).

    Greater economic diversification, more efficient public spending, and a more equitable geographical distribution of resources would pave the way for lower poverty rates and more inclusive growth.

    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 comply with the new Charter of political parties. Benin now has around a dozen State-recognized parties compared to over 200 parties prior to the reform. The next commune-level and local elections are expected to be held in May 2020.

    Economic Overview

    • The short-term outlook is negative due to the global economic slowdown associated with COVID-19. External transmission channels will play a significant role, particularly the slowdown in the Nigerian economy in the wake of low oil prices and the overall drop in raw material prices, especially cotton. Based on estimates from the International Monetary Fund (IMF), investors have already withdrawn S$83 billion from emerging markets since the start of the COVID-19 crisis. Capital outflows are likely to lead to a sharp drop in foreign direct investment (FDI) and to increased financing costs. The impact of internal transmission channels – reduction in consumption and domestic investment – will depend on contagion risk and the public policy choices made to combat the pandemic.
    • Before the spread of the coronavirus, a crisis that will have a negative impact on economic activity and government revenue, Benin had recorded solid economic outcomes between 2016 and 2019, with average real GDP growth of 5.5%. But the decision taken by Nigeria, Benin’s main economic partner, to unilaterally close its land borders with its neighbors in August 2019 has dealt a major blow to economic activity in Benin. Indeed, despite the country’s relative resilience, economic activity slowed to 6.4% in 2019 from 6.7% in 2018 (representing per capita GDP growth of 3.5%).
    • On the supply side, growth was driven by agriculture, thanks to extensive cotton production (+18%) in the first half of the year. Industry and services also contributed positively to growth, thanks to the increase in locally-generated electricity following the opening of a new power station. On the demand side, consumer spending and private investment were the major contributors to economic activity. Inflation remained moderate at -0.9% in 2019 owing to heightened agricultural output despite the rise in fuel prices.
    • The fiscal deficit (grants included) fell considerably from 2.9% to 0.5% of GDP between 2018 and 2019, driven by the limited execution of externally financed projects that led in turn to a reduction in investment spending, while domestic and non-tax revenue flows compensated in part for the shortfall in customs revenue caused by the closure of the border. The debt-to-GDP ratio was stabilized, moving from 41.5% in 2018 to 41.6% in 2019. The overall risk of debt distress remains moderate.
    • The external current account deficit (including grants) widened from -4.6% of GDP in 2018 to -5.1% of GDP in 2019, driven by the drop in cotton prices and the increase in imports of construction inputs and energy products.  The key export products were cotton and cashew nuts, while energy products, machinery and construction material 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 were equivalent to 4.9 months of imports in 2019, against 4.5 months in 2018, owing primarily to community-wide fiscal consolidation and net capital inflows. The real effective exchange rate (REER) depreciated by 5% in 2019, driven by the nominal depreciation of the euro against the US dollar and the persistently lower inflation rate of WAEMU in relation to its trading partners.

    The business environment improved in the formal sector but remains weak. Benin occupies position 76 on the Logistics Performance Index and ranks 149 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.”  Moreover, despite the 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 02, 2020

  • In December 2016, the new government adopted a National Development Plan for the period 2018-2025, with the aim of achieving the priority targets of the United Nations Sustainable Development Goals (SDG). The development plan is based on 45 flagship projects and aims to improve productivity and living conditions.

    The World Bank’s program in Benin is guided by a partnership framework that is aligned with the government’s development plan. The framework is reviewed and renewed on average every four or five years. Approved in July 2018, the current framework covers the period 2018-2023 and 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 $1.05 billion to finance 14 national projects. 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, storm water management, nutrition and early childhood development, empowerment of women, and energy.

    In addition, on June 26, 2020, the World Bank released emergency financing of $50 million to assist Benin in its fight against the COVID-19 pandemic.

    In response to the COVID-19 pandemic, the World Bank has also:

    • stepped up implementation of the disease surveillance project REDISSE;
    • mobilized $10.4 million for an emergency response 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 02, 2020

  • The following are some of the results obtained in the key areas of development, with World Bank financing.

    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, thereby reducing the child labor among 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.
    • 77 communes in Benin benefited from this project, with direct support provided to close to 390,000 beneficiaries, 49.3% of whom were women.
    • 18,000 new poor households are expected to benefit from the project by 2022.

    Agriculture

    Launched in 2012, the 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 rice, aquaculture, pineapple, and cashew value chains and increase their value added. Additional financing of $45 million was allocated in 2017.

    • As of March 2020, the total number of direct beneficiaries under the project had reached 307,296, surpassing the February 2021 target of 250,000. About 39% are women, against an end target of 40%.
    • PADA financing has supported 269 micro-projects (68 led by women); these projects are yielding positive results across the value chains.
    • A total area of 11,828 hectares of agricultural land was equipped with small-scale irrigation and drainage, against an end target of 12,678 hectares.
    • Moreover, the project financed the construction of 200 warehouses and 65 drying areas, which helped to significantly reduce post-harvest losses, particularly for subsistence crops and cashew nuts.
    • In terms of livestock, 714,753 small ruminants and 1,773,701 head of poultry were vaccinated under the project.

    Last Updated: Oct 02, 2020

  • 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 02, 2020

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LENDING

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

*Amounts include IBRD and IDA commitments

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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