VZCZCXRO9185
RR RUEHMA RUEHPA
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 
 
¶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