The International Monetary Fund (IMF) has said that the partial elimination of fuel subsidies in Nigeria would have a negative effect this year in the Republic of Benin on household real income and growth.
The IMF mission chief for Benin, Mr. Mario de Zamaróczy, dropped the hit in a statement he made at the end of discussions on the third review of a program supported by the Extended Credit Facility (ECF) of the IMF.
The meeting, which had in attendance the President of Benin, Dr. Boni Yayi,Prime Minister Mr. Pascal Koupaki, Minister of Economic Analysis, Development, and Planning, Mr. Marcel de Souza,; Ms. Adidjatou Mathys, Minister of Economy and Finance; and other senior officials was held to discuss the disbursement of a third tranche of US$16.90 million to the country.
The discussion also focused Discussions on recent economic developments in Nigeria that are relevant for Benin, policy implementation under the ECF, and structural reforms.
According to Mario de Zamaróczy, the country is already suffering from setback caused by poor earnings from its port activities last year saying that “Economic growth in 2011 is estimated at 3.1 percent, 0.7 percentage point below earlier estimates, among others because of a slowdown in port activities that hampered commercial activity”.
He noted that “In 2012, growth is projected to remain moderate, despite an expected improvement in port activities, dragged down by the global economic slowdown and by the increase in the price of imported gasoline from Nigeria”.
The Mission chief who sounded gloomy in his assessment of the Benin economy said that “Annual average inflation, which in 2011 was below the 3 percent convergence criterion of the West African Economic and Monetary Union (WAEMU), is projected to be elevated in 2012, as a result of the above-mentioned fuel price hike. Despite the rise in non-traditional exports, the external current account deficit, excluding grants, deteriorated slightly in 2011 because of higher international fuel prices”.
He however said that there may be some hope for the country its export trade stating that “ It is expected to narrow in 2012 reflecting strong cotton exports. As a result, the overall balance of payments is expected to turn from a small deficit (0.1 percent of GDP) in 2011 to a small surplus (0.6 percent of GDP) in 2012”.
He said that “Revenue performance during the second half of 2011 was weaker than expected, and as a result, the end-year cumulative revenue target was missed by a margin of 1.3 percent of GDP”.
However, he noted that “the monthly revenue target for December was met. To preserve the stability of public finances, the authorities responded to the shortfall in revenue by compressing expenditure and with savings from the wage bill. The elimination of a number of ghost employees, a review of allowances and entitlements, and the postponement of some recruitment kept the wage bill below target.
Referring to preliminary data, he said that “the performance criteria on the primary fiscal balance and net domestic financing were met at end-September and the corresponding benchmarks at end-December. However, the indicative targets on priority social spending were missed by a wide margin in September and December, reflecting weaknesses in the monitoring process of these expenditure categories. The authorities intend to strengthen procedures for protecting the execution and timely disbursement of priority social expenditure in 2012”.
On some other feedings by the IMF mission to the country, he said that “the 2012 budget adopted by the National Assembly in December broadly supported a stable macroeconomic environment saying that “Objectives therein include a significant increase in the revenue-to-GDP ratio to create fiscal space for public investment and social spending”.
The mission, he said noted that “the launch of the one-stop-window at the Port of Cotonou, the installation of a scanner in the port, and the implementation of an enhanced program of import value verification. These reforms met with some initial resistance and start-up problems, but going forward, they are expected to improve revenue collection and the efficiency of the port.
Mario de Zamaróczy also said that “the several important structural measures are still behind schedule, including a study on wage policy in the civil service, and several measures related to the computerization of customs offices”.
While urging the authorities to accelerate the completion of these and other overdue reforms, he said that it should also discussed new structural measures to come, including fiscal and financial measures.
The mission also met with members of the National Assembly, and representatives of labour unions, banks, and the business and donor communities.
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