Overview

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Country Overview

Benin is bordered by Togo to the west, Nigeria to the east, and Burkina Faso and Niger to the north. As of 2016, it had an estimated population of 10.9 million. With the support of its partners, Benin has been able to undertake important economic and structural reforms.

Political Context

Benin has a stable and democratic government. Since the end of a Marxist-Leninist regime in 1989, it has organized six presidential elections, seven legislative elections, and three local elections peacefully. Presidential elections held in March 2016 were won by the multi-millionaire and cotton sector tycoon, Patrice Talon. In December 2016, the new government adopted an ambitious development program called “Programme d’Actions du Gouvernement” structured around 45 flagship projects aimed at improving the productivity and living conditions of the population.

President Talon’s proposals to reform Benin’s political model were rejected by parliament in April 2017. These included the introduction of an independent Auditor General’s Office; a new method of appointing members to the Constitutional Court; the simplification of procedures in the High Court of Justice; and a revamping of political party funding. The socio-political atmosphere remains largely favorable and conducive for reforms, but economic expectations remain high and there is pressure on the government to accelerate efforts to reduce high youth unemployment, address poor living standards, accelerate economic growth, and improve the quality of public services.

Economic Overview

Benin’s economy relies heavily on informal re-export and transit trade to Nigeria, which makes up roughly 20% of GDP, and on agricultural production. The tertiary sector as a whole accounts for 50% of GDP, while agriculture accounts for approximately 25% of GDP and between 45% and 55% of the country's employment. The economy is characterized by a high degree of informality, representing an estimated 65% of the total economy and employing over 90% of the labor force. Real GDP growth is projected to accelerate to 5.4% in 2017, from 4.0% in 2016. Growth has been relatively significant in recent years at 4.8% in 2012, 7.2% in 2013, and 6.4% in 2014, but decelerated to 2.1% in 2015, mainly due to a slowdown of re-export activities and a fall in agriculture production. Cotton production reached approximately 451,000 tons in 2016 from 269,218 tons in 2015, and the government expects an increase of 11% in 2017. Industrial production growth will accelerate at 7.2% in 2017, from 4.5% in 2016. The sector will benefit from cotton ginning activities, as well as dynamism in the construction sub-sector linked to the implementation of a government investment plan. Inflation is estimated at -0.8% for 2016 and is projected to remain under the West Africa Economic Market Union’s target of 3% in 2017. . With the partial implementation of the PAG, Benin’s overall fiscal deficit (including grants), will increase in 2017 to 7.9 % of GDP, from 6.2% in 2016; and decrease thereafter to 4.1% and 1.9% of GDP in 2018 and 2019 respectively.

Social Context

Despite moderate GDP growth of between 4% and 5% annually over the past two decades, poverty remains widespread and often on the rise in Benin. National poverty rates were 37.5% in 2006, 35.2% in 2009, 36.2% in 2011, and 40.1% in 2015. Female-headed households experience lower levels of poverty (28% compared to 38% for male-headed households), but women remain more vulnerable and continue to suffer from a lack of economic opportunities. Women are also underrepresented in high-level decision making positions. The education and health sectors represent a significant share of annual public expenditure (on average 23% of public expenditure is allocated to education and 7% to the health sector). Significant efforts are needed to ensure more equity in their geographical distribution and greater effectiveness and efficiency in the management of these two sectors.

Development Challenges

Benin is vulnerable to exogenous shocks, primarily: adverse weather conditions, terms of trade shocks (cotton and oil prices), and developments in Nigeria. The outlook for 2017 is clouded by the impact of a possible further depreciation of the Nigerian naira, which will be felt through more reduction in re-exports and exports to Nigeria, as 80% of Benin’s imports are typically destined for Nigeria via informal cross-border trade.

The government needs to accelerate reforms to reduce poverty and promote shared prosperity. Despite some progress, a weak business environment continues to be a deterrent for domestic and international investors. In Doing Business (DB) indicators, Benin ranked 153 in DB2016 and 155 in DB2017, but made progress on “starting a business” as well as on “getting electricity.” However, more needs to be done to improve access to credit and tax payments.

In addition, Benin continues to face major corruption challenges, ranking 95 out of 175 countries in the Transparency International’s 2016 Corruption Perceptions Index (it was ranked 83 in 2015).

Last Updated: Oct 10, 2017
World Bank Group Engagement in Benin

The World Bank Group’s Country Partnership Strategy (CPS) 2013–2017 for Benin is organized around three main pillars: (i) governance and public sector capacity; (ii) sustainable growth, competitiveness and employment; and (iii) access to basic social services and social inclusion. The current portfolio comprises 15 national, active operations for a total commitment of $715.54 million, and is supplemented by four trust funds totaling $50 million. It covers the following sectors: budget support, urban development, community development, environment, telecommunications, youth employment, health, nutrition, capacity building, energy, and regional transport. In January 2017, the World Bank Group launched the process for preparing a new strategy for Benin. The first step of the process—the Systematic Country Diagnostic ( SCD )—has been completed, pending its submission to the World Bank Board. The SCD has concluded that weak governance, weak infrastructure services, and barriers to trade and competitiveness are the most binding constraints that the country needs to address to achieve the Bank’s standard twin goals of poverty reduction and shared prosperity. The second step of the process is underway to design a Country Partnership Framework that will pave the way to preparing new projects and programs.

International Finance Corporation (IFC)

IFC’s current strategy for Benin focuses on: (i) partnering with financial intermediaries to improve access to finance for enterprises; (ii) providing capacity-building to financial institutions to strengthen the financial sector and promote business growth; (iii) supporting the development of infrastructure to attract investments (port, electricity, telecom); (iv) strengthening the investment climate in collaboration with the World Bank; and (v) assisting in scaling up access to rural water under a Public Private Partnership (PPP) model, while building local advisory capacity to support the PPP transaction preparation.

Multilateral Investment Guarantee Agency (MIGA):

MIGA’s current portfolio consists of three investments in the tourism, telecommunications, and services sectors, for a gross exposure of $8.5 million.

Last Updated: Oct 10, 2017
The World Bank Group has contributed to Benin’s development performance in the following sectors.

Health

The Benin Health System Performance Project ($44 million) launched in September 2011, with the goal of increasing the coverage of quality maternal, neonatal, and child health care services. It also aims to strengthen the institutional capacity of the Ministry of Health. As of March 2016, the project continues to make good progress in terms of implementation and has disbursed about 70% of its funds. The main component of this operation supports a Results-Based Financing (RBF) approach in eight of Benin’s 34 health districts. Many indicators of this operation have exceeded their targets while the rest is on track.

Through the RBF intervention, major improvements in the quality of care have been documented in all facilities covered. The rate of antenatal care visits complying with quality standards was over 30% (baseline 5% in 2010, end target of 25%) and the availability of health workers, essential drugs, and equipment has also improved. A mixed methods survey conducted in 2015 revealed that the average availability of essential drugs in the eight districts covered reached 78%, while the average availability of essential equipment was 71% (for a target of 80%), and the availability of health workers was 86%. As for quantitative indicators, results from a recent health survey have confirmed that the RBF districts have significantly improved their performance: for instance, while the immunization rate in the country is only 40%, the RBF districts have increased this rate to 86%. To strengthen the impact of the RBF intervention on populations’ health, new and innovative interventions are being implemented, including contracting with private health facilities and communities to extend health services to more beneficiaries.

Given its success, the RBF approach has been scaled up nationally with financial support from the Global Fund to Fight AIDS, Tuberculosis and Malaria and the Global Alliance for Vaccines and Immunization. The World Bank is playing a key role in convening this harmonized support.

Agriculture

The Benin Agricultural Productivity and Diversification Project (PADA) funded by the World Bank ($31 million) and the Global Food Crisis Response Program ($15 million) launched in 2012 with the objective to help the country restore and improve productivity and selected value chains (rice, aquaculture, pineapple and cashew). As of March 2016, the total number of direct beneficiaries reached 130,376 people, of which 33% are female. The competitive funds and matching grants have supported 124 micro projects (of which 22 are led by women) that are showing interesting results across the targeted value chains. A total area of 12,184 hectares has been provided with small scale irrigation (some rehabilitated others developed). This exceeds the target value of 9,000 hectares and is having a positive impact on yield and crop production. In addition, 119 warehouses are currently under construction out of which 90 have already been completed and delivered. It should also be noted that significant actions are currently underway to provide targeted trainings which would help increase the number of beneficiaries adopting improved technologies to further boost productivity within the targeted value chains.

Last Updated: Oct 10, 2017
The European Union, African Development Bank, United Nations agencies, bilateral donors, World Bank Group, and IMF are among Benin’s key partners. Non-traditional creditors, such as China and the Islamic Bank, are also increasingly active. Since 2004, annual joint missions of the main donors providing budget support have taken place, and together they monitor the implementation of key structural and sector reforms including aid harmonization for which a Memorandum of Understanding was signed in December 2007. At the sector level, joint government-donor reviews are regularly carried out in the core sectors of rural water, health, education, agriculture, transport, and justice.

Last Updated: Oct 10, 2017