Country Brief

Brief last updated Septembre 2009

History

Benin, formerly known as Dahomey, was a French colony from 1902 until it achieved independence in 1960. Its name was changed to Benin in 1972 following a military coup d’état. Since a national conference in 1990 that shook the foundation of the “Marxist-Leninist” state that had been established in 1972, Benin has become a multiparty democracy with Mr. Nicephore Soglo defeating the former military leader Mr. Kerekou to become president in the March 1991 election. Mr. Kerekou returned to office in the election of 1996, and was re-elected in March 2001 for a second and last five-year term as stipulated in the Constitution. The transparent presidential elections of March 2006 led to the election as Head of State of an independent candidate, Mr. Yayi Boni, the former President of the West African Development Bank.

Increased freedom of the press and strengthening of civil society institutions have reinforced the country’s democratic foundations. Market-oriented economic policies have been implemented since 1991.

Basic facts

• Real gross domestic product (GDP) growth rate recovered to 4.6 % in 2007 (from 3.3 % in 2003-2005) and further strengthened to 5 % in 2008, its highest level since 2001.
• While inflation was broadly contained under the West African Economic and Monetary Union (WAEMU) convergence criterion of 3 % in the past years, overall inflation peaked to 8 % in 2008, reflecting inflationary pressures from higher international food and fuel prices.
• With a per capita income of US$690 (Atlas method, 2008), Benin ranks in the lower income group of countries.  Despite progress in improving access to basic services, achieving the Millennium Development Goals (MDGs) remains a significant challenge.  While Benin is on track to meet the MDG targets for access to potable water in rural areas, hunger and reduced HIV/AIDS prevalence, attaining the rest of the MDGs would be difficult without sharp acceleration of current trends.
• Benin’s Country Policy and Institutional Assessment (CPIA) rating in 2008 was 3.6.
• Transparency International: With an overall score of 3.1 from Transparency International in 2008, Benin rates relatively well in sub-Saharan Africa (14th out of 49 countries). But Benin rates poorly by international standards (96th out of 180 surveyed countries).
• World Bank Doing Business ranking (2009): 169 out of 181 countries.
• HIV/AIDS prevalence is 1.2%.
• Poverty remains widespread with the incidence of monetary poverty steadying at about 33 percent in 2007 while non-monetary poverty is estimated at 39.7 % in 2007.

Recent political developments

President Yayi Boni’s coalition “ Force Cauris pour un Bénin Emergent (FCBE)” won the largest number of seats at the 2007 legislative elections. FCBE subsequently negotiated a pro-government majority in the Parliament with seven minor parties and coalitions joining the FCBE. However, this majority remains very fragile with an increasing number of the parties initially allied with the President now siding with the opposition. Since the 2008 municipal elections, interest group power struggles have made it difficult for the government to implement its reform agenda, especially when Parliament approval is required. This situation reached a peak in October 2008 with Parliament’s refusal to pass the 2008 supplementary budget law, forcing the President to execute the budget by ordinance. However, the situation has recently improved. The 2009 budget was passed unanimously by the National Assembly. In addition, the new procurement code, complying with the WAEMU’s directives, has been recently passed by the Parliament. Cognizant that political consensus is critical to major structural reforms, the President has initiated consultations with the main political parties, civil society and the private sector.  Presidential elections are scheduled for 2011.

Economy

Notwithstanding the negative shocks of the food and oil price increases, Benin’s economic performance has remained broadly satisfactory and macroeconomic stability was maintained over the last years. Real GDP growth recovered from 3.8 percent in 2006 to 4.6 % in 2007 and further strengthened to 5.0 % in 2008, its highest level since 2001. Strong agricultural production, buoyant activity in the Port of Cotonou and high demand from Nigeria constituted the main engines for growth. While inflation was broadly contained under the WAEMU convergence criterion of 3 % over the past years, overall inflation peaked to 8.0 % in 2008 reflecting inflationary pressures from higher international food and fuel prices.    

However, the global economic slowdown is dampening Benin’s economic prospects. The global crisis has already had a negative impact on customs receipts. Customs revenue collections were 20.4 % lower than programmed during the first five months of 2009, reflecting the slowdown of activity in Nigeria and the depreciation of the naira. Furthermore, real GDP growth was revised downward to 3.8 % in 2009 from 5.7 % initially as global demand for Benin’s exports declines, trade relations with Nigeria weaken while growth estimates for 2010 were revised from 6.0 % prior to the global crisis to 3.0 %. However, with recent signs of recovery in the global economy and contingent on the acceleration of the pace of structural reforms to improve competitiveness and investments in infrastructure, real GDP growth could recover to 5.7 % in 2011. Inflation would decelerate to 4.0 % in 2009 as inflationary pressures associated with the food and fuel crisis abate and fall gradually to below 3 % in 2010 and thereafter.

Development picture/donor coordination

The European Union, African Development Bank, United Nations agencies, bilateral donors, the World Bank, and the International Monetary Fund (IMF) are key partners in aid coordination for Benin. Non-traditional creditors, such as China and the Islamic Banks, are starting to play an important role. The government has started an initiative to develop an aid effectiveness and harmonization action plan, based on earlier work done by a joint government-development partners group on aid effectiveness chaired by the Ministry of Economy. Furthermore, a Memorandum of Understanding (MoU) was signed on December 4, 2007 by the government and the development partners providing budget support to accelerate the pace of harmonization.  Since 2004, joint missions of the main donors that are providing budget support for  implementation of the Poverty Reduction Strategy Paper take place each September.  Joint government-donor reviews are regularly carried out in the core sectors of rural water, health and education.  This experience is being expanded to other sectors. Many international and local non-governmental organizations are also active in the country.

World Bank role

A new Country Assistance Strategy (CAS) for FY2009-12 was discussed at the International Development Association (IDA) Board on February 26, 2009.  The current portfolio consists of ten projects for a total commitment of US$359 million equivalent.  This includes seven IDA projects, two Global Environment Facility (GEF) grants and an Emergency Food Security Support Program grant of US$9 million financed by the Food Price Crisis Response Task Force.  There is a high undisbursed balance due to the young portfolio and delays in effectiveness of the new projects.  The portfolio has been characterized by significant delays in effectiveness for new projects, slow disbursement rates and procurement delays.  The country office is monitoring the portfolio regularly through mini-country performance portfolio reviews.

Benin’s regional program portfolio consists of an ongoing West Africa Power Pool Project, a Niger Basin Water Resources Management Project, a West Africa Biosafety Program, a West and Central Africa Aviation Security and Safety Program, as well as the follow-up Abidjan Lagos Transport Corridor and Trade Facilitation Projects under preparation.  Benin is also expected to participate in the Adjarala Hydro Electric Project.

The International Finance Corporation’s (IFC) current strategy for Benin focuses on the following: partnering with financial intermediaries to improve access to finance for micro, small and medium enterprises (MSMEs); providing capacity building to financial institutions to strengthen the financial sector and promote business growth; offering direct assistance (financial and technical) to medium enterprises in vital sectors of the economy (e.g. food/agribusiness), or providing significant positive externalities and development impact (education, health); and supporting the development and modernization of infrastructure necessary to attract foreign direct investment, (e.g. ports, electricity, telecom) by strengthening the investment climate in collaboration with the World Bank.  In that context, given the success of IFC in the implementation of the private-public partnership (PPP) through the award of a container terminal concession to a private operator at the Port of Cotonou and the advisory in the port sector reform, IFC will explore further scope for other sector reforms and PPP/Privatization opportunities.  As of June 30, 2009, IFC portfolio stands at $5.6 million. 

The Mulitlateral Investment Guarantee Agency’s (MIGA) current portfolio in Benin consists of two investments, in the tourism and infrastructure (telecommunications) sectors, with a combined gross exposure of $2.4 million.  MIGA has not received any formal requests to provide guarantees for foreign direct investment during the first half of FY10.

World Bank Institute (WBI) : Recently, programs have taken place in Benin which featured activities in various areas, including the use of rapid-results approaches to support HIV/AIDS in Sudan, Special Economic Zones and Cluster Development programs , and programs on anti-corruption in governance.  In FY2010, WBI is implementing its strategic renewal with a focus on seven cross-cutting themes that are responsive both to corporate priorities and to strong country demand, including: fragile and conflict-affected states, the global economic crisis, governance, climate change, health systems, urban development, and public-private partnerships (service delivery).

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