A mission from the International Monetary Fund (IMF) led by Joannes Mongardini has said this in a statement after conclusion of its visit in the Country.
However, the statement says, domestically financed capital expenditures doubled, and the wage bill increased by 24 percent compared with 2008. These developments widened the overall fiscal deficit (excluding grants) to 7.0 percent of GDP, which was financed through additional budget support from the international community and domestic borrowing. On the external sector, cotton exports declined significantly reflecting lower international prices and workers' remittances fell. As a result, the current account deficit, excluding grants, widened to 9.3 percent of GDP, compared with 7.0 percent in 2008. While the banking sector experienced some liquidity pressures in the first half of the year, as deposit growth decelerated, it overall weathered the crisis relatively well, and prudential ratios improved.â€
“In view of the continued impact of the global economic crisis on Benin, the mission noted that the maintenance of macroeconomic stability required a prudent fiscal policy in 2010. In addition, the mission underscored the need to reduce the fiscal deficit over the medium term to preserve fiscal and debt sustainability and align expenditures with available financing. In this regard, the mission exhorted the authorities to continue reforms in revenue administration and expenditure management. Prudence is also needed regarding developments in the wage bill as further wage increases, like in 2009, would jeopardize fiscal and debt sustainability. In this context, the mission welcomes the implementation of a framework for consultations between the trade unions and the government. It encourages both sides to align wage demands to available resources.
“The mission reached broad understandings on an economic program that could form the basis for the authorities' request for an Extended Credit Facility (ECF) arrangement. These understandings will be reviewed by IMF management, before being presented to the IMF Executive Board for consideration.â€
Benin: Maintenance of macroeconomic stability requires a prudent fiscal policy
Special Correspondent - 2010-03-29 08:42
The global economic crisis had a negative impact on Benin in 2009. Notwithstanding the authorities' countercyclical fiscal policies, real GDP growth slowed to 2.7 percent, compared with 5.0 percent in 2008. Inflation came down to an average 2.2 percent, reflecting lower food and fuel prices. Government revenues stagnated mostly because of lower trade activity. A strong fiscal adjustment effort in the second half of 2009 to align expenditures with available financing limited large expenditure overruns.