Dept Relief
Benin gets US$ 460 million HIPC debt relief and IMF loans

afrol.com, 18 July - The World Bank Group's International Development Association (IDA) and the International Monetary Fund (IMF) have agreed to support a comprehensive debt reduction package for Benin under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. Total relief from all of Benin's creditors is worth around US$ 460 million. This is equivalent to US$ 265 million in net present value (NPV) terms, and about 31 percent of the total NPV of debt outstanding at end-1998 after the full use of traditional debt relief mechanisms. IDA and the Fund will start providing interim debt relief by August 1, 2000. 

Under the enhanced HIPC Initiative, countries with a satisfactory track record of macroeconomic and structural policy implementation and a NPV of external debt exceeding 150 percent of exports are eligible to receive debt relief. With a debt NPV debt-to-export ratio of 218 percent at end 1998, debt relief equivalent to $ 265 million in NPV terms will bring the ratio down to 150 percent and below 100 percent from 2011 onward, freeing up considerable resources for anti-poverty programs. 

Of the level provided under the enhanced framework, bilateral creditors will be responsible for US$77 million, while multilateral creditors will provide the remaining US$ 189 million. IDA will provide debt relief amounting to US$ 124.3 million (US$ 84.4 million in NPV terms) and covering about 50 percent of Benin's debt-service obligations to IDA over the next 15 years. The debt relief of US$ 24.3 million committed by the IMF will be delivered over a seven-year period, and will cover on average 31 percent of debt-service obligations to the Fund.

Benin will reach its completion point under the Initiative and receive the remainder of its debt relief from all creditors once it has achieved satisfactory progress in implementing a number of monitorable actions. This includes the completion of a Poverty Reduction Strategy Paper (PRSP), which will be drafted in a broad consultative process with civil society groups and the support of international partners. The Government of Benin expects to complete the PRSP by April 2001. 

Benin's eligibility for debt relief under the enhanced HIPC Initiative is a recognition by the international community of the progress made in implementing an ambitious program of economic reforms. The assistance under the enhanced HIPC Initiative will complement ongoing efforts to combat poverty by improving health and education and build momentum toward the achievement of the International Development Goals. 

Benin's track record
Since the mid-1990s, Benin has been implementing an ambitious program of economic reforms, which has received broad support from the international community. Overall, progress was made in reestablishing financial stability, restoring economic growth, and strengthening the efficiency of the economy. More recently, the government has made further advances in reforming the budget process, refining social sector strategies, and liberalizing the cotton sector. 

The combination of a sustained increase in per capita income and reforms in social policies resulted in an improvement in social indicators in such areas as primary education, immunization rates, health services, and water quality. Yet much remains to be done to reduce significantly poverty and improve living standards. With a per capita income estimated at US$ 380 in 1999, Benin is still among the poorest countries in the world, and according to official data, about one-third of the population falls below the absolute poverty line.

IMF approves US $36 million PRGF loan
The International Monetary Fund (IMF) approved a three-year arrangement for Benin under the Poverty Reduction and Growth Facility (PRGF) in a total amount equivalent to US$ 36 million to support the government's 2000-03 economic program. The decision will enable Benin to draw an amount equivalent to US$ 9 million immediately.

In commenting on the Executive Board's discussion, Eduard Aninat, Deputy Managing Director and Acting Chairman of the Board, said: "The Beninese authorities are to be commended for the progress achieved under the 1996-99 program supported by a three-year arrangement under the poverty reduction and growth facility (PRGF). Robust real GDP growth led to a marked increase in per capita income, inflation continued to be moderate, and fiscal performance remained strong. 

"The authorities are placing increased emphasis on reducing Benin's still widespread poverty, and are developing policies through broad-based consultation with civil society. They have prepared an interim Poverty Reduction Strategy Paper (PRSP), and a full PRSP is scheduled to be completed by April 2001. 

"Under the new medium-term program, the authorities are determined to accelerate the implementation of their unfinished structural reform agenda while maintaining macroeconomic stability and improving social conditions in the country. Important reforms include the participation of the private sector in management of public utilities and the liberalization of the cotton sector. As further steps to improve public resource management and transparency, and reduce corruption, the authorities are strengthening budget preparation and execution procedures and reforming the civil service. With the successful implementation of these reforms, Benin will be well-placed to enter a sustained period of high growth and poverty reduction. Nevertheless, there will be a continued need for substantial international assistance on concessional terms," Aninat said.

Sources: IMF & World Bank

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