Identifier
Created
Classification
Origin
08COTONOU658
2008-10-20 06:12:00
UNCLASSIFIED
Embassy Cotonou
Cable title:  

BENIN: IMF FIFTH REVIEW

Tags:  ECON EIND EINV BN 
pdf how-to read a cable
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DE RUEHCO #0658 2940612
ZNR UUUUU ZZH
R 200612Z OCT 08
FM AMEMBASSY COTONOU
TO RUEHC/SECSTATE WASHDC 0598
INFO RUEHDK/AMEMBASSY DAKAR 1437
RUEHFR/AMEMBASSY PARIS 1335
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHZK/ECOWAS COLLECTIVE
RUEHLMC/MILLENIUM CHALLENGE CORP WASHDC
UNCLAS COTONOU 000658 

SIPDIS

DEPT FOR AF/W ACOOK; DLOCKHART
STATE PLEASE PASS TO DEPT OF TREASURY DHALL

E.0.12958: NA
TAGS: ECON EIND EINV BN
SUBJECT: BENIN: IMF FIFTH REVIEW

UNCLAS COTONOU 000658

SIPDIS

DEPT FOR AF/W ACOOK; DLOCKHART
STATE PLEASE PASS TO DEPT OF TREASURY DHALL

E.0.12958: NA
TAGS: ECON EIND EINV BN
SUBJECT: BENIN: IMF FIFTH REVIEW


1. SUMMARY: From September 10-24, an IMF team conducted the fifth
annual review of Benin's economic performance up until June 2008.
On September 24, the team shared its generally favorable conclusions
and some concerns which continue to threaten the GOB's efforts at
sustained growth with international donors. End summary.


2. The team provided a positive assessment of the country's
continued economic growth and efforts to maintain it above 5%. IMF
mission experts interpreted an increase in port activities,
infrastructure construction undertaken to host the recent CENSAD
summit and other infrastructure investments as sources of the
increased growth. They underscored that GOB encouragement of
farmers to diversify and produce more food crops to curb the food
crisis will be instrumental in maintaining positive growth.


3. The IMF mission noted with satisfaction that budgetary revenue
far exceeded IMF expectations, although the country experienced a
net deficit in budgetary expenses justified by necessary subsidies
to cushion the impact of the recent food crisis on the population.
The team commended the GOB for following IMF recommendations to
discontinue such subsidies as the crisis wore off to allow the
market to regulate prices, noting that only importers benefit from
such measures. The team urged international donors to implement
planned budgetary support totaling 19 billion FCFA (40 million
dollars) as soon as the country meets donor requirements. The IMF
requested that the GOB continue its tightened fiscal policy and
encouraged it to maintain its tough line vis-a-vis union leaders who
want across-the-board double digit salary increases (13.5 percent.)


4. The team noted with satisfaction that the GOB implemented
structural reform, selecting the successful bidder for the
divestiture of the cotton parastatal, Sonapra, and starting the
process of selling government majority shares in Continental Bank
Benin. It further commended the GOB for committing experts to
assess Benin Telecoms and its Onigbolo Cement Plant assets. It
encouraged the GOB to speed up the structural reform of remaining
parastatals.


5. The team underscored a number of challenges the GOB needs to
overcome to avoid a slow-down of growth. The GOB must deal with the
country's high inflation rate - presently above 15.4%. It must
alleviate an endemic shortage of electricity and increase the
consumers' electricity tariff levied by electricity parastatal SBEE,
whose deficit is growing. Adherence to budgetary procedure and
transparency in fiscal and contracting policy must improve in 2009.
According to the IMF mission, the GOB must take measures to improve
budgetary absorption capacity, currently estimated below 40 percent.


BOUSTANI