AFRICAN DEVELOPMENT BANK
BENIN
ECONOMIC COMPETITIVENESS SUPPORT PROGRAMME (PACEB)
APPRAISAL REPORT
Public Disclosure Authorized Public Disclosure Authorized Authorized Disclosure Public Authorized Disclosure Public
Translated Document
ECGF/RDGW/PGCL DEPARTMENTS October 2018
Table of contents PROGRAMME INFORMATION ...... ii
LOAN INFORMATION ...... ii
I. PROPOSAL ...... 1 II. COUNTRY AND PROGRAMME CONTEXT ...... 1 2.1 Political Situation and Governance Context ...... 1 2.2 Recent Economic Developments, Macroeconomic and Fiscal Analysis ...... 2 2.3 Benin’s Economic Competitiveness ...... 4 2.4 Public Financial Management ...... 4 2.5 Inclusive Growth, Poverty Status and Social Context ...... 5 III. GOVERNMENT DEVELOPMENT PROGRAMME ...... 5 3.1. Government's Overall Development Strategy and Medium-Term Priorities ...... 5 3.2 Weaknesses and Challenges in Implementing the National Development Agenda ...... 6 3.3 Consultation and Participation Processes ...... 6 IV. BANK SUPPORT FOR GOVERNMENT STRATEGY ...... 6 4.1 Linkages with Bank Strategy ...... 6 4.2. Compliance with Eligibility Criteria ...... 7 4.3. Collaboration and Coordination with Other Partners ...... 7 4.4. Linkages with Other Bank Operations ...... 7 4.5. Analytical Work Underpinning the Programme ...... 8 V. PROPOSED PROGRAMME ...... 9 5.1. Programme Purpose and Objective ...... 9 5.2. Programme Components ...... 9 5.3 Expected Programme Implementation Outcomes ...... 13 5.4. Policy Dialogue ...... 13 5.5. ADF Loan/Grant Conditions ...... 14 5.6. Good Practice Principles Applied to Conditionality ...... 15 5.7. Financing Needs and Mechanisms ...... 15 5.8. Application of Bank Policy on Non-Concessional Debt Accumulation ...... 16 VI. IMPLEMENTATION ...... 16 6.1 Programme Beneficiaries ...... 16 6.2 Social and Gender Impact ...... 16 6.3. Impact on Environment and Climate Change ...... 16 6.4. Implementation, Monitoring and Evaluation...... 17 6.5. Financial Management and Disbursement ...... 17 VII. LEGAL FRAMEWORK ...... 18 7.1. Legal Instrument ...... 18 7.2. Conditions Associated with Bank Intervention ...... 18 7.3. Compliance with Bank Group Policies...... 18
VIII. VIII. RISK MANAGEMENT ...... 19 IX. RECOMMENDATION ...... 19
ANNEX 1: Government Development Policy Letter ANNEX 2: Programme Measures Matrix ANNEX 3: Benin-IMF Relationship ANNEX 4: Key Macroeconomic Indicators
Tables Table 1 – Key macroeconomic indicators ...... Table 2 –PACEB - PACEB I prior measures ...... Table 3 – Estimated financing requirements and sources (in CFAF billion) ...... Table 4 – Risks and mitigation measures ......
CURRENCY EQUIVALENTS As at 31 July 2018
Currency Unit UA1 = XOF 791.4 UA 1 = EUR 1.19 UA 1 = USD 1.44 UA 1 = SDR 1.0
FISCAL YEAR [1January – 31 December]
ACRONYMS AND ABBREVIATIONS
ADF African Development Fund AFD French Development Agency AfDB African Development Bank BCEAO Central Bank of West African States BOAD West African Development Bank CEB Benin Electricity Community CEET Compagnie Energie Electrique du Togo (Togo electric power company) CPIA Country Policy and Institutional Assessment CSP Country Strategy Paper DGE Energy Directorate DPEBEP Multi-year Budget and Economic Programming Paper DPPD Multi-year Expenditure Planning Document EBID ECOWAS Bank for Investment and Development EU European Union GDP Gross Domestic Product GPRS Growth and Poverty Reduction Strategy HDI Human Development Index IMF International Monetary Fund JICA Japan International Cooperation Agency MCC Millennium Challenge Corporation MDG Millennium Development Goals MEF Ministry of Economy and Finance MEME Ministry of Energy, Mines and Water MSME Micro Small and Medium Enterprises PAG Government Action Program PBA Performance-Based Allocation PEFA Public Expenditure and Financial Accountability PGRGFP Comprehensive Public Financial Management Reform Plan PIMA Public Investment Management Assessment PPA Power Purchase Agreement PPP Public-Private Partnership RMC Regional Member Countries SBEE Société Béninoise d’Energie Electrique (Benin electric power company) SME Small and Medium Enterprises TFP Technical and Financial Partners UA Unit of Account UNDP United Nations Development Programme VAT Value Added Tax WAEMU West African Economic and Monetary Union WAPP West African Power Pool WB World Bank
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PROGRAMME INFORMATION
INSTRUMENT : General Budget Support (GBS)
PBO DESIGN MODEL : Programmatic Operation in 2 phases
LOAN INFORMATION
Client Information
BORROWER : Republic of Benin
EXECUTING AGENCY : Ministry of Economy and Finance
Financing Plan
2018 2019 ADF Grant in UA 2 170 000 1 950 000 ADF Loan in UA 4 830 000 4 050 000 Total 13 000 000
Financing through budget support by technical and financial partners (*) 2018 2019 Partner in FE in CFAF in FE in CFAF I- Grants European Union EUR 48 000 000 31 486 000 000 EUR 44 800 000 29 387 000 000 AfDB UA 2 170 000 1 717 000 000 UA 1 950 000 1 543 000 000 Saudi Arabia 10 000 000 000 TOTAL GRANTS 43 203 000 000 30 930 000 000 II-loans World Bank EUR 12 900 000 8 475 000 000 EUR 25 800 000 16 900 000 000 AfDB 4 830 000 UC 3 822 000 000 4 050 000 UC 3 205 170 000 TOTAL LOANS 12 297 000 000 20 105 170 000 GRAND TOTAL 55 500 000 000 51 035 170 000 (*) The financings are general budget and sector (energy, agriculture, governance, decentralization) supports
Key ADF Financial Information ADF LOAN Loan currency UA Interest type Fixed Interest rate margin* % Service fee 0.75% per year on the loan amount disbursed and not yet repaid 0.5% on the undisbursed loan amount 120 days after signature of the loan Commitment fee Agreement Other charges Maturity 40 years Grace period 5 years Due date Half-yearly
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ADF GRANT GRANT Currency UA Commitment fee N/A Other charges (service) N/A Due date
Implementation Schedule – Milestones (expected)
Programme approval 31 October 2018 Effectiveness November 2018 Last disbursement 30 June 2020 Completion 30 June 2020
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Executive Summary
Programme Country : BENIN overview Programme name: Benin- Economic Competitiveness Support Programme (PACEB) Overall implementation schedule : November 2018 - December 2019 Operational Instrument: General budget support Programme cost: UA 13 million of which UA 7 million for Phase 1 in 2018 and UA 6 million for Phase II in 2019 Sector : Investment climate and energy sector Programme At programme completion, increased private investment, including foreign direct investment, is Outcomes expected, as well as improved productive sector performance both of which constitute economic growth and job creation drivers. The private investment rate should rise from 19.2% of GDP in 2017 to 22.9% of GDP in 2019 and the value added of the industrial sector should increase from 7.5% of GDP in 2017 to 9% of GDP in 2019. Also expected is a substantial increase in electricity supply and strengthening of energy inclusion with the increased installed production capacity which will reach 354 MW in 2019 with a maximum production cost of CFAF 150/ kWh against a capacity in 2017 of 180MW and a cost of CFAF 275/kWh. Additionally, the rural electricity access rate will improve gradually to reach 8% in 2019 compared to 7% in 2017. Alignment with Bank The Programme aligns with the Bank's Country Strategy Paper (CSP) for Benin for the period priorities 2017-2021. It falls within the framework of this strategy, and more particularly Pillar II, namely strengthening of competitiveness and regional integration supportive infrastructure. PACEB will also contribute to the implementation of Pillar I aimed at developing agricultural value chains and agro-industry through private sector promotion. It is in line with the Bank's 2013-2022 Ten-Year Strategy and the Bank's Governance Action Plan (GAP II 2014-2018), more specifically, it contributes towards achieving three of the Bank’s high five strategic priorities, namely: (i) "Light up and Power Africa", (ii) "Industrialise Africa" through investment promotion measures and (iii) "Improve the quality of life for the people of Africa, by supporting reforms aimed at improving budget management and the effectiveness of public action through improved economic and financial governance. It is also aligned with the Bank's Strategy for the New Deal on Energy for Africa (2016-2025), including the creation of a reform-friendly environment. Needs assessment The Government Action Programme (PAG 2016-2021) is the lone framework for steering and rationale government action. Its overall cost of CFAF 9,039 billion, including CFAF 760.283 billion for the energy sector, aims to achieve an average growth rate of 6.5% and the creation of around 500,000 direct jobs. The private sector is at the core of the implementation strategy for the 3 pillars and the 7 priority areas with 61% of the expected financing, notably through PPPs for high-impact investments capable of accelerating structural economic transformation. The objective is to achieve an average annual investment rate of 34% of GDP (compared to 18.8% in 2016). However, Benin’s investment climate remains unattractive to private investors in view of the multiple persistent constraints on business promotion. Benin ranks 151st out of 190 with major challenges, mostly related to Getting electricity where the country ranks 174th, and Registering property where it ranks 127th. Furthermore, the PIMA exercise which assesses investment management found weaknesses through an analysis of the fiscal sustainability of investment projects including PPPs. The combined effect of the aforementioned constraints and weaknesses undermines the sustainability of PAG and the achievement of the set development objectives. PACEB, by concomitantly supporting an improved investment climate and improved energy sector governance, will provide the Government with the financial and technical wherewithal to implement its medium-term action plan for sustainable and inclusive growth. Additionally, budget support resources will partially cover the financing needs of the 2018 and 2019 budgets, amounting respectively to CFAF 366 billion and CFAF 271.7 billion. Harmonisation Efforts are still required as regards coordinating the interventions of technical and financial partners (TFPs), in particular those intervening in the budget support framework. Despite the existence since 2007 of a protocol agreement formally governing the consultation framework on budget support, there is still no joint matrix of TFP interventions coordinated by the Government. However, the TFPs are in a process of strengthening the complementarity of their actions through dialogue and follow-up of reforms. PACEB was designed in collaboration with the other multilateral and bilateral donors particularly those engaged in the energy sector and private sector development in Benin (IMF, MCA, WB, USA, France, and AFD). Bank value added The Bank has proven expertise in strengthening financial and sector governance in Africa. More specifically, the Bank enjoys a comparative advantage in the dialogue on energy sector reforms in Benin, being a key partner in this sector. In recent years, it has financed several operations in the
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electricity sub-sector. These include, besides the previous sector budget support (PASEBE), the Multinational Electricity Grid Interconnection Project involving NEPA (Nigeria) and CEB (Benin- Togo), the 17 Rural Centres Electrification Project and the Rural Electrification Project II, the Ghana-Togo-Benin 330 kV Line Interconnection Project, which is a vital link in the WAPP coastal backbone to link Nigeria to Côte d'Ivoire. Contribution to Despite the existence of a legal and institutional framework for gender promotion in Benin, gender gender equality and inequalities are persistent and particularly visible through women’s limited access to factors of women’s production and their weak purchasing power, resulting in their heavy economic dependence. The empowerment most recent assessment of MDG 3 (promote gender equality and empower women) in 2016 shows stagnation and even deterioration of women's employment and poverty status with three times less women compared to men employed in urban areas (8.7% of women versus 24.3% of men) and the monetary poverty incidence among female-headed households rose from 27.6% in 2011 to 39% in 7% in 2015. The PACEB measures support gender-responsive budgeting in the energy sector to support the effective operationalisation of the ECOWAS guidelines on gender, energy and social inclusion domesticated by Benin on 26 July 2018. Policy dialogue and PACEB will strengthen dialogue with the Government on public policies to support Benin's associated technical economic transformation. The dialogue will focus on conditions for effective implementation of assistance the national policy on the promotion of private investments, including those for and from MSMEs. Dialogue with the Government will be conducted through supervision missions and regular meetings between the Government and the Bank’s Field Office in Benin. The dialogue will also be based on the Energy Thematic Group to which the AfDB belongs. This will enhance synergy with the interventions of other TFPs, notably the MCA-Benin Programme, which is the executing agency of the MCC programme focusing on the energy sector.
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RESULTS-BASED LOGICAL FRAMEWORK Country and Project name: Benin- Benin’s Economic Competitiveness Support Programme (PACEB) Project Goal: Contribute towards creating conditions conducive to strong and inclusive growth supported by private investment. RESULTS CHAIN PERFORMANCE INDICATORS MEANS OF RISKS/MITIGATI VERIFICATIO ON MEASURES N Indicators (including CSIs) Baseline target Growth is sustained, Economic growth rate 5.6% in 2017 7.1% in 2021 DGAE/ANSAE sustainable and Competitiveness index 3.47 in 2017 5 in 2021 WB report
inclusive IMPAC T Outcome 1: The Value added of the industrial sector 7.5% GDP 8% GDP 2018 and 9% GDP 2019 INSAE/DGAE/I Risk 1: performance of the Trade balance deficit 14.5% GDP 14% 2018 and 12.19 in 2019 MF Macroeconomic productive sectors is Private investment rate 19.3 in 2017 19.7 in 2018 and 22.4 in 2019 instability due to improved the country's Outcome 2: Energy Households’ access to electricity in 7% in 2017 7.5% in 2019 and 8 % in 2020 ABERME economic inclusion is boosted rural areas vulnerability to KWh cost CFAF 275 CFAF 250 in 2018 and CFAF 150 in 2019 ME/SBEE exogenous shocks. The Government is Production capacity 180 MW 230MW in 2018 and 354MW in 2019 ME/DG- committed to ENERGY/ strengthening the SBEE resilience of the A) Improvement of the investment environment country by implementing a a.1.1) Adoption of the draft Drawn up and Presidency A.1) Improvement of Report of transmission of the draft policy of structural regulatory and investment code by the Government in the Investment Code to the National transformation of technical institutional Assembly by the Council of Ministers the economy and validation framework for the pursuing reforms promotion of private process agreed with the IMF investments a.1.2) Adoption of the bill on Drawn up and Report of transmission of the bill on Presidency and other partners. MSMEs by the Government in the MSMEs to the National Assembly by the technical Council of Ministers
validation process a.1.3) Adoption by the Government of TORs Report of the adoption by the Council of MPD/DGFD Mitigation the national policy on private prepared and Ministers of the national policy on private Measure 1: The investments promotion validated investments promotion. Government is a1.4) Conduct of a study on the TORs Presidency /MIC committed to strengthening the creation of a fund to support access to developed Study report validated in 2019 finance for MSMEs and promote resilience of the women's entrepreneurship country by a.1.5) Creation of the Sèmè pilot Draft decree Decree establishing the zone and Presidency implementing a special economic zone prepared approving management plans, adopted by policy of structural the Council of Ministers in 2019 transformation of the economy and Judge (s) Judges and Consular Advisers of the pursuing reforms a.1.6) Installation and recruited and Cotonou Commercial Court and the Porto agreed with the IMF operationalization of the Cotonou in training Novo Commercial Court of Appeal are and other partners. Commercial Court and the Porto Novo installed in 2018 (Installation report) and Court of Appeal include 6% of women Risk 2 : Fiduciary A.2) Optimisation of Consultant Regulatory instrument on manual (or guide) MPD/DGPSIP Risks due to the budgetary a.2.1 Update and validation of a recruited; on public investments planning, selection weaknesses in the framework of public manual (or guide) on public Work in and programming adopted in 2018 public financial investment investments planning, selection and progress management system management programming No liabilities MEF/DGB a.2.2 Effective presentation of PPP- Presentation of PPP-related liabilities in list related liabilities in Schedule to 2019 Schedule to 2019 and 2020 Budget Laws. Budget Law. Mitigation Measure 2 : Lack of PIP selection criteria are posted on the MEF MPD/DGPSIP a.2.3 Preparation and publication of formal criteria and MPD websites as from 2018 selection criteria for Public Investment The efficient Projects. implementation of the PSMRP and the a.2.4 Adoption of the implementing Law Implementing decrees of the unified and Presidency /BAI measures envisaged decrees of the unified and official available, official legal framework for Public - under PACEB will legal framework for Public-Private decrees in Private Partnership contribute towards
Partnership the process consolidating the of adoption gains and a.2.5 Production and publication of In progress The 2011 to 2014 audit reports published on ARMP accelerating the audits of 2011 - 2017 public the ARMP website in 2018 and the 2015 to improvement of the procurements 2017 audit reports published on the ARMP integrity of the website in 2019. OUTCOMES
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B) Improved energy sector governance and promotion of energy inclusion public financial B.1) Improved Directives in Report of transmission by the Council of ME/ Presidency management energy sector b.1.1 Adoption of the Benin the validation Ministers of the draft Benin electricity system. governance Electricity Code bill by the process code to the National Assembly Government Risk 3 : Bill in the Report of transmission to the National ABERME b.1.2 Adoption by the Government of technical Assembly by the Council of Ministers of Weak human the bill on renewable energies validation the bill on renewable energies adopted by resources capacity process the Council of Ministers in 2019 to implement Draft decree Decree on the method of determining the ARE b.1.3 Adoption of the decree on identified reforms transmitted to basis and conditions for collecting the determination of the basis and the regulation charge adopted by the Council of methods for collecting the regulation Mitigation government Ministers in 2019 charge Measures 3: The Government b.1.4 Determination of the methods of Draft order in Joint Order of Ministers in charge of Energy has put in place a calculation, recovery of license fees, the validation and of Finance laying down the methods of major institutional authorisation and declaration of process calculation, recovery of license fees, and monitoring and operation of electrical installations in authorisation and declaration of operation of evaluation system Benin electrical installations in Benin adopted in which should ensure 2018 ABERME/ARE the effective B.2 Improved b.2.1 Adoption of the technical Draft protocol Technical cooperation protocol between ABERME/SBEE implementation of electricity access cooperation protocol between SBEE in the SBEE and ABERME for access to PAG. Besides and ABERME for access to electricity. technical electricity signed in 2018 setting up seven validation autonomous
process executing agencies, and the b.2.2. DPPD 2019 and 2020 of the Under DPPD 2019 validated in 2018 and 2020 ME/DGB establishment of an Ministry of Energy, gender sensitive. preparation validated in 2019 by the Ministry of Energy inter-ministerial contain specific gender promotion sub- committee for the programs promotion of b.2.3 Conduct of an impact Study The impact assessment of the new tariff ME/MPD investments and assessment of the new tariff policy conducted policy on households validated by presidential on households September 2018 at the latest monitoring units, the system’s main b.2.4 Adoption by the Government In the Decree on the regulatory framework for ME/ARE specificity is the of the national regulatory process of off-grid electrification adopted by the analysis and framework for off-grid transmission Council of Ministers no later than 30 investigation bureau electrification to the September 2018 (BAI) put in place. Council of It is an expert centre Ministers in the service of the Government and attached to the Presidency of the Republic. Composed of national and international experts, this bureau BAI provides high- level technical assistance to the structures tasked with implementing the reforms and the GAP
Components Funding Component A : Improvement of the investment AfDB: UAM 13 : UAM 7 in 2018 and UAM 6 in 2019 environment External financing of 2018 and 2019 funding requirement Component B : Improved energy sector governance AfDB: UA 13 million ; IMF : SDR 63.67 million* ; EU : EUR 92.8 million ; WB : and promotion of energy inclusion EUR 38.7 million
NB: The measures in “bold” are measures precedent to the 1st Tranche in 2018 and the measures in “italics are triggers of the 2nd tranche of 2019. The other measures are programme performance measures.
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MANAGEMENT’S REPORT AND RECOMMENDATION TO THE BOARD OF DIRECTORS CONCERNING A PROPOSAL TO EXTEND AN ADF LOAN AND GRANT TO BENIN FOR ITS ECONOMIC COMPETITIVENESS SUPPORT PROGRAMME (PACEB)
I. PROPOSAL
1.1 Management submits the following proposal and recommendation concerning the extension of a loan of UA 4.83 million and a grant of UA 2.17 million from the resources of the African Development Fund (ADF) to the Republic of Benin for the financing of Phase I of its Economic Competitiveness Support Programme (PACEB-I).
1.2 PACEB I constitutes the first phase I of a set of two programmatic budget support operations spanning Fiscals 2018 and 2019, with a total funding budget of UA 13 million. The programmatic approach supports aid predictability and facilitates alignment with the country's development policy to create conditions conducive to inclusive and sustainable growth. Furthermore, this multi-year framework serves as a medium-term platform for dialogue on major reforms to boost Benin's economic competitiveness, and provides for a series of reforms considered indicative triggers for Phase 2 (PACEB II).
1.3 This new reform support operation comes in continuation of the Benin Energy Sector Support Programme (PASEBE) approved in 2017 by the Bank to support essential emergency measures put in place by the Government to address the country’s severe energy crisis. Thanks to the measures supported, an additional generation capacity (rental of generators) of 150 MW and importation from Nigeria of 60 MW outside the CEB contract was possible, enabling Benin to secure additional power supply of 210 MW and curb load shedding. The reforms under this new PACEB seek to consolidate gains from this stopgap emergency programme, while putting in place a long-term policy of increasing the energy supply which is vital for the growth of the competitive productive sectors and for promoting energy inclusion. This will go further to improve the business environment and public investment governance and thus attract more private investors to the job-creating and high value-added sectors including the energy sector.
1.4 The priority reforms identified result from continuous dialogue between the Government of Benin and development partners and this consultation will continue during the implementation phase of the programme. PACEB is built around the following components: (i) strengthening the investment environment and (ii) improving energy governance and inclusion. Through these two components, crosscutting reform measures for all sectors of activity will be implemented with a view to removing the key constraints on Benin’s economic competitiveness and reducing spatial disparities in energy access. Additionally, the programme’s approach will ensure greater complementarity between the Bank's financial and technical instruments (reform support, investment support and technical support).
II. COUNTRY AND PROGRAMME CONTEXT
2.1 Political Situation and Governance Context
2.1.1 Political Situation: Benin enjoys a democratic and stable regime. Since 1989, the country has held six presidential elections, seven parliamentary elections and three local elections, which have all unfolded peacefully. The March 2016 presidential election resulted in a smooth change of power at the helm of the state. This reflects a consolidation of democracy and stability in Benin, and helps to create an environment conducive to growth. President Talon has formed a coalition government of the parties that supported him during the presidential election and enjoys, in terms of alliances, a majority in the National Assembly. In December
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2016, the new team adopted the "Government Action Programme" (PAG), a development plan built around 45 flagship projects aimed at improving the productivity and living conditions of the population. However, President Talon's proposal to reform Benin’s political model was rejected by Parliament in April 2017. These reforms involved setting up an independent general inspectorate office, introducing a new method of appointing members of the Constitutional Court, streamlining the proceedings of the High Court of Justice; reorganizing the financing of political parties, establishing a single six-year term and ratification of external loans by the President of the Republic. Although the socio-political climate remains overall favourable and conducive to reform, the authorities are confronted by high economic expectations and pressures to reduce youth unemployment, improve living conditions, spur growth and strengthen public services.
2.1.2 Governance: The Mo Ibrahim Foundation's 2017 report (on the year 2016) on the assessment of overall governance in Africa shows that Benin ranks 14th out of 54 countries assessed with a score of 60% out of 100, thus gaining one point compared to 2016 when it was ranked 15th. With such results, Benin ranks second among French-speaking African countries after Senegal, its score being higher than both the African average of 50.8 and the West sub- region average of 53.8. However, the country’s efforts must be continued with a view to fast- tracking progress, which is apparently weakening, with an average annual rate of + 0.16 over the last 10 years and +0.05 over the last 5 years. In particular, the reforms will need to be accelerated with respect to accountability where progress is weak (+0.05 on average over 5 years) and more specifically investigating corruption, the trajectory of this sub-criterion being negative (- 2.60 average over 5 years). The creation and operationalization of the National Anti- Corruption Authority (ANLC) in 2017 and the creation of the Special Court for the Suppression of Economic Crimes and Terrorism (CRIET) in July 2018 fall within this framework and should further strengthen anti-corruption actions. Transparency International's 2018 report (for the year 2017) ranks Benin 86th out of 180 countries assessed with a score of 39/100, up 10 places relative to 2016 when it was ranked 95th among 176 countries.
2.2 Recent Economic Developments, Macroeconomic and Fiscal Analysis
2.2.1 Over the past five years, Benin’s economy has recorded an economic growth rate averaging around 5%. The country returned to satisfactory economic performance in 2017, following mixed results in 2016 and 2015 due particularly to the electoral context, the drop in cotton prices and the recession in Nigeria. Benin relies heavily on its neighbour, Nigeria, for trade. Driven by a satisfactory agricultural season with a record cotton production of 453,000 tonnes, continuation of priority investments and the tertiary sector’s dynamism, as well as Nigeria’s economic recovery, growth stood at 5.6% in 2017, against 4% in 2016 and 2.2% in 2015.
2.2.2 Inflation has remained below the Community threshold of 3% since 2013, (0.4% in 2015, 0.2% in 2016 and 0.6% in 2017), due to the steady decline in food prices and slump in world oil prices. As a member of the West African Economic and Monetary Union (WAEMU), the country has also benefited from the prudent monetary policy conducted by the Central Bank of West African States (BCEAO) to maintain price stability. Due to rising food prices, and the rise in global oil prices and the appreciation of the Naira, inflation is projected to stand at 2.1% in 2018 and is expected to remain below the Community threshold of 3% over the period 2018-2021, despite the tensions that could arise from increased investment expenditure in the framework of the implementation of PAG.
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2.2.3 Budgetary management has been marked over the recent period by a worsening of the budget deficit and an increase in the public debt level. The overall budget deficit (including grants) increased from 1.9% of GDP in 2014 to 8% of GDP in 2015, reaching 6% and 5.9% of GDP respectively in 2016 and 2017.
2.2.4 An analysis of the public finance structure reveals points of vulnerability The government's increased recourse to the regional financial linked to the high dependence of state market to finance public investment projects has raised the present value of the public debt to 48.4% of GDP in 2017, revenues on trade with Nigeria and the compared to 41.9% in 2016. In particular, the domestic public weak tax base, with the predominance of debt has grown from about 8.6% of GDP to 33.6% of GDP the informal sector. Addressing these between 2013 and 2017 and represents 60% of total debt. However, the PV of debt-to-GDP ratio remains consistently weaknesses is a major challenge for the below the indicative benchmark of 56% of GDP. The level of country, in view of the implementation of indebtedness also remains below the WAEMU convergence PAG. This means a substantial financing criterion of 70% of GDP. Over the 2018-20021 period, the total public debt (external and domestic) will increase at the need, which the government covered beginning of the period thanks to increased public investment, through the issuance of government bonds which is essential to bridge the infrastructure gap, but should and through external support from technical decrease thereafter. The programme agreed with the IMF aims in particular to minimize the country's risk of debt overhang and financial partners. Public debt has thus by ensuring that increased public investment is compatible increased, with a low-to-moderate debt with debt sustainability. The overriding objective is to limit distress risk according to the IMF’s the current value of public sector debt to 50% of GDP, thus below the threshold value of 56% of GDP. The debt strategy September 2017 debt sustainability adopted by the State aims to diversify its creditor base. At the analysis. The public debt ratio increased domestic level, the focus is on private sector support, through from 25.4% in 2013 to 50.2% in March Public-Private Partnerships for the financing of some high- impact investments, and on the financial market for the 2017. In this regard, the government will mobilization of long-term financing resources at low cost need to pursue improved domestic resource particularly through partial guarantee mechanisms of partners mobilisation (14.7% of GDP in 2016, and such as the World Bank and AfDB. Additionally, the Government undertook the capacity building of the Caisse 16.8% in 2017) and improved debt autonome d'amortissement [Autonomous Sinking Fund sustainability, in line with the economic (CAA)] as well as the effective implementation of the programme agreed with the IMF. This SDR Treasury Single Account (TSA) to improve the management of cash flows and tailor short-term debt instruments to 111.42 million programme is supported by liquidity needs. In particular, special focus is put on the the Extended Credit Facility for a period of monitoring and assessment of risks and any liabilities of public three years to consolidate the country's enterprises and PPPs. economic fundamentals.
2.2.5 External trade is still marked by a structural current account deficit and under- diversified exports, reflecting the low-level agricultural and industrial development. The current account deficit (including grants) is estimated at 11.1%, of GDP in 2017 against 9.4% of GDP in 2016. Foreign capital flows have increased to enable financing of the current account deficit. According to the IMF, foreign direct investment (FDI) flows were 3.9 percent of GDP in 2016, as in 2015. These investments particularly concerned the port and industrial sectors, as well as the banking sector with the increase of the minimum capital. At end- June 2017, all banks had to meet the minimum capital requirement of CFAF 10 billion set by BCEAO.
2.2.6 Economic Outlook. In view of the strong actions already undertaken by the Government and the start of structural transformation reforms, the economic outlook is positive. For a successful implementation of the Growth for Sustainable Development Programme (PC2D 2018-2021) and of the Government Action Programme 2016-2021 whose main objective is to "kick-start the country’s sustainable economic and social development ", Benin’s GDP should record sustained growth which would foster acceleration of the economy’s structural transformation and diversification. The substantial increase in public and private investment (infrastructure, agriculture, tourism, basic services, etc.) initiated in 2017 is
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expected to continue over the period and lead to a projected GDP growth of 6.0% in 2018 and a growth rate averaging 6.6% between 2019 and 2022, and the deficit should gradually reduce to 4.7% of GDP in 2018, and 2.4% of GDP and 1.1% of GDP respectively in 2019 and 2020, well below the WAEMU threshold of 3%. The economy is also expected to benefit from the agricultural sector’s sound performance, the continued rise in cotton ginning activity, the resilience of the tertiary sector (transport, telecommunications, and trade) and the consolidation of Nigeria’s economic recovery. Moreover, the country's increased electricity production capacity, which is supported particularly by the second Millennium Challenge Account (MCA) grant agreement, which came into force in 2017, and whose full financing (USD 400 million over 5 years) is devoted to this, should also contribute to economic revival.
2018(e) 2020 (p) Table 1 ‒BENIN- Macro-economic indicators 2016 2017 2019 (p) 6.0 6.7 GDP growth 4.0 5.6 6.3 Population growth rate 2.6 2.7 2.6 2.6 2.7 Real GDP/ per capita growth rate 1.4 2.9 3.4 3.4 3.4 Inflation. 0.2 0.6 2.1 2.3 2.2 Budgetary balance (commitment basis including grants) (% GDP) 6.0 5.9 4.7 2.4 1.1 Budgetary balance (cash basis) (% GDP) 6.7 6.8 6.3 4.3 2.9 Current account (% GDP) 9.4 11.1 10.8 9.2 8.9 Fiscal pressure rate (% GDP) 14.5 17.6 17.6 17.1 17.7 Data from national authorities & IMF staff report article IV
2.3 Benin’s Economic Competitiveness
Benin's economy remains uncompetitive and struggling to attract foreign investment. According to the Global Competitiveness Report 2017, Benin ranks 120th out of 140 countries, with an overall competitiveness index score of 3.47 on a scale of 1 to 7. The key constraints on Benin's economic competitiveness are: (i) harsh business environment; (ii) power supply deficiency, (iii) infrastructure deficit and deficiency. In the 2018 Doing Business report, Benin ranks 151st out of 190. However, there is a qualitative leap of 60 positions for the criteria relating to the deadlines for starting a business, going from 117th to 57th and 56th in 2017 and 2018, thanks to the establishment of a one-stop shop. This improvement also results from progress recorded in trading across borders through the digitalisation of all prior clearance documents through an electronic platform in the port of Cotonou, and in the publication of building permits. Despite this remarkable progress, major challenges remain particularly regarding getting electricity, where the country is ranked 174th; paying taxes 174th; enforcing contracts 170th; resolving insolvency and protecting minority investors 146th or registering property where it is ranked 127th. This shows that despite its highly strategic geographical location, particularly its proximity to Nigeria and its key asset, namely the port of Cotonou, which makes this country a transit and commercial hub for its landlocked neighbours Niger and Burkina, Benin is struggling to position itself as a private investment destination of choice.
2.4 Public Financial Management
Benin's public financial management system is based on a legal and regulatory framework that is overall in line with international standards. Over the last ten years, the country has embarked on a sustained public financial management (PFM) reform drive with the main objectives of stepping up the mobilization of domestic resources to support public investment and improving public spending efficiency to render it more aligned with public policies. The reforms conducted since 2008 through the implementation of the Action Plans for the Improvement of Public Financial Management (PAAGFP 2008-2011 and PAAGFP 2012- 2015) have yielded some results, particularly in terms of budget preparation, domestication of
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WAEMU directives on the harmonized PFM framework; preparation each year of three medium-term macroeconomic frameworks and, since 2014, preparation each year of the Multi- year budget and economic programming paper (DPBEP) and its use in preparing the budget as well as the timely enactment of the budget law. Similarly, the Tax Code and Customs Code have been revised with the introduction of greater transparency for taxpayer obligations and rights; and popularisation of the use of the single Taxpayer Identification Number (TIN). However, this progress, although significant, should be consolidated and efforts are still required with regard to budget execution where fiscal discipline is affected by: (i) weak budget credibility in terms of expenditure; (ii) non-prior approval of expenditure ceilings and lack of linkage between investment decisions and medium-term current expenditure projections; (iii) overuse of exceptional procedures for budgetary expenditure execution. The successful implementation of the new Comprehensive Public Financial Management Reforms Plan (PSMIPP 2017-2020) aims to correct the above-mentioned shortcomings and the results already achieved at end- 2017 and the first half of 2018 under the IMF-backed programme, particularly in terms of domestic resource mobilisation and streamlining of current expenditures.
2.5 Inclusive Growth, Poverty Status and Social Context
2.5.1 At the social level, the situation is marked by persistent poverty and inequalities, reflecting non-inclusiveness of growth. Despite improved economic growth, this remains inadequate in the face of accelerated population growth (from 3.25% between 1992 and 2002 to 3.5% between 2002 and 2013). Despite growth rates of between 4% and 5% over the past two decades, poverty remains on the uptrend. The poverty rate nationwide rose from 35.2% in 2009 to 40.1% in 2015. Social insecurity is rife. It is more prevalent in rural areas (43.3% in 2015) than in urban areas (36.4%). Benin's Human Development Index (HDI) has scarcely improved in recent years due to inadequate progress in terms of access to basic social services (health, nutrition, education, water and sanitation), standing at 0.485 in 2015 against 0.468 in 2010, and ranking the country 167th out of 188 countries. Unemployment and underemployment levels remain high, affecting more than 50% of the working population, while modern social protection mechanisms remain underdeveloped. Additionally, electricity access remains low, averaging 58% in urban centres and 31% at the national level, and dropping to 7% in rural areas.
2.5.2 Progress in gender equality promotion remains limited. The country ranks 166th out of 188 for the Gender Inequality Index in the 2016 Human Development Report. Gender inequalities persist in terms of access to education, resources and decision-making. Women's activities are concentrated in rural areas and in the informal sector. They continue to face the challenges of mentorship, lack of guarantees, access to land and appropriate financing.
III. GOVERNMENT DEVELOPMENT PROGRAMME
3.1. Government's Overall Development Strategy and Medium-Term Priorities
3.1.1 Since its installation in April 2016, the Government has clearly expressed its intention to kick-start Benin’s sustainable economic and social development over the period 2017-2021 and has accordingly adopted a Government Action Programme (PAG) spanning those five years.
3.1.2 Meanwhile, with a view to standardizing Benin’s planning framework, the Government has drawn up the National Development Plan (PND 2018-2025) and its operationalization document, the Growth for Sustainable Development Programme (PC2D 2018-2021). PC2D is an operational document based on the PAG guidelines and incorporates the SDG priority targets identified by the Government.
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3.1.3 With a total cost of CFAF 9,039 billion (about USD 14 billion), the 2016-2021 Government Action Programme builds on three pillars: Pillar 1 - Consolidating democracy, rule of law and good governance; Pillar 2 – Kick-starting the structural transformation of the economy; and Pillar 3 - Improving the living conditions of the populace, which belong to the following strategic thrusts : (i) strengthening of the foundations of democracy and rule of law; (ii) Improving governance (iii) strengthening of the macroeconomic framework and maintenance of stability; (iv) Improving economic growth; (v) Improving education performance; (vi) Strengthening basic social services and social protection; and (vii) Balanced and sustainable national territorial development. A total of 140 projects have been identified to boost the economy and ensure the structural transformation of the economy, including 4 major energy sector projects totalling CFAF 760.283 billion, including: (i) modernisation of the thermal sector, development of renewable energies with the construction of two hydropower plants, (ii) building of photovoltaic solar farms and structuring of a biomass fuel sector, (iii) restructuring of the national operator (SBEE) and its network and (iv) energy consumption control.
3.2 Weaknesses and Challenges in Implementing the National Development Agenda
3.2.1 The Government has chosen to prioritize the mobilization of private sector resources (61%) to finance PAG through public-private partnerships (PPPs), for, despite the reforms initiated by the Government in recent years, the business environment is struggling to attract investors. In particular, foreign direct investment (FDI) remains low, representing less than 20% of GDP (UNCTAD Global Investment Report 2017), compared to 32% in Togo and an average of 24% in ECOWAS. Achieving the results planned under PAG largely hinges on the effectiveness of the reform measures designed to remove lingering constraints on the country’s competitiveness, namely the perception of corruption and bureaucracy, infrastructure deficit and deficiency and difficult electricity access due to inadequate power supply but also to the steep tariffs applied.
3.3 Consultation and Participation Processes
The design of PACEB is based on extensive consultations with all stakeholders, including the Ministry of Economy and Finance, Ministry of Development and Planning, Ministry of Energy, the Analysis and Investigation Bureau at the Presidency, employers' organisations, civil society and all technical and financial partners intervening through budget support and supporting energy sector development (IMF, WB, AFD, USA, France, MCA). Discussions with TFPs focused on the respective interventions of each, with a view to consolidating synergies and complementarities. The consultations enabled the involvement of various stakeholders in the design of the proposed reform measures. Through discussions with the civil society, mutual agreement was reached on the practical arrangements for its involvement in the PACEB reforms monitoring and evaluation mechanism that provides for joint biannual reviews with all the stakeholders including the civil society. The participatory process will be maintained throughout the programme’s implementation and during supervision missions.
IV. BANK SUPPORT FOR GOVERNMENT STRATEGY
4.1 Linkages with Bank Strategy
4.1.1. PACEB is aligned with the Bank's Country Strategy Paper (CSP) 2017-2021 for Benin and more particularly Pillar II, namely strengthening of competitiveness and regional integration support infrastructure (transport, energy and regional integration). This second pillar aims to remove constraints on the competitiveness of the productive sectors, notably
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agriculture, and access to regional markets. Interventions on this pillar will enable the country to take advantage of the income-generating opportunities offered by its agricultural potential, access to the ECOWAS market and its position as a service corridor for the sub-region, and to contribute to the development of trade in West Africa and inclusive growth in Benin. Furthermore, PACEB is aligned with the Bank's High 5 priorities, in particular three, namely "Light up and Power Africa"; "Industrialise Africa" "Improve the quality of life for the people of Africa". It will also support the country in achieving the Sustainable Development Goals (SDGs), in particular SDG 7 (Affordable and Clean Energy), No. 8 (Decent Work and Economic Growth), No. 9 (Industry, Innovation and Infrastructure) and No.10 (Reduced Inequalities). The programme is also in line with the priorities of the Bank Group's Ten-Year Strategy (2013-2022) and Pillars I "Public Sector Management and Economic Management" and II "Sector Governance" of the Governance Strategic Framework and Action Plan for 2014- 2018 (GAP II). It will also contribute to the implementation of Pillar II "Economic Empowerment" of the Bank's Gender Strategy (2014 - 2018). 4.2. Compliance with Eligibility Criteria 4.2.1. Benin fulfils the eligibility criteria for general budget support operations. The detailed analysis of the eligibility criteria is presented in Annex No. 2. The Government is committed to reducing poverty, as evidenced in the 2016-2021 MAP guidelines, in line with the 2011-2015 GPRS. The macroeconomic situation remains strong, thanks to the authorities' support for economic activity and the implementation of a tight fiscal policy. This fact is confirmed by the IMF's findings in Article IV of the consultation report, published in July 2018. With respect to fiduciary assessment, a review of the Country Fiduciary Risk Assessment (CFRA) was conducted in 2014 by the Bank. This review showed that overall fiduciary risk remains substantial but tending towards moderate. On the political level, Benin has experienced stability over several years. This stability was confirmed by the holding of a democratic presidential election in March 2016, which unfolded in a peaceful and transparent manner, and following which a new president was elected. 4.3. Collaboration and Coordination with Other Partners
4.3.1. PACEB was designed in collaboration with other multilateral and bilateral donors involved in Benin’s energy sector. In particular, it complements the USD 40 million budget support being prepared by the World Bank for Benin for 2018-19, which targets electricity sub- sector actions, including improvement of financial sustainability and introduction of a new SBEE pricing policy. The operation is in line with MCA-Benin’s activities, notably those consisting in investing nearly USD 136 million to increase Benin's power generation capacity, including solar power plants with a total capacity of 45 MW, and off-grid projects targeting areas unserved by the SBEE grid. The Bank's budget support also consolidates EU efforts to strengthen AER, which has received funding of EUR 500,000, and which has enabled AER to rent premises and acquire office equipment. Furthermore, an EU budget support of EUR 103 million over the 2016-2020 period is underway, with the aim of consolidating the rule of law and governance in Benin.
4.4. Linkages with Other Bank Operations
4.4.1. The Bank's active portfolio in Benin comprises 13 public projects for a total commitment of UA 229 million, of which UA 150 million (66%) for national projects and UA 79 million (34%) for multinational projects. The sector breakdown of the portfolio reflects the predominance of transport infrastructure followed by agriculture and energy. The overall performance of the Bank's portfolio is considered moderately satisfactory with an average score of 3 on a scale of 0 to 4 (see Table 2). At end- 2017, the ratio of risky projects was 0% against
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55% in February 2012 and the average age was 3.5 years against 5.7 years in 2012. Moreover, Benin met all the conditions for the first disbursement of active portfolio financing agreements. Regular portfolio reviews have proposed actions to improve portfolio performance and are currently being implemented. (The detailed situation of the portfolio including the projects closed on 31/12/2017 is given in technical appendix No. 9)
4.4.2. Complementarity with other Bank operations: PACEB is in synergy with the Bank's various operations in the sector in Benin. By supporting the reforms seeking to put in place a master plan and regulatory framework for off-grid electrification and foster electricity access in rural areas, PACEB is complementing the actions of the SBEE Sub-transmission and Distribution System Restructuring and Extension Project (PRESREDI), approved in 2016, which mainly targets urban areas. Adopting the technical cooperation protocol between SBEE and ABERME for electricity access forms part of the same objective. Additionally, PACEB consolidates the reforms undertaken under PASEBE, which led to the operationalization of the Electricity Regulatory Authority (ARE). PASEBE had indeed supported the provision by the State from its budgetary resources, of the resources for the operation of ARE which had become lethargic ten years following its inception. Thus, with the operationalization of ARE, PACEB aims to make it autonomous by creating an electricity transactions charge for AER, thus enabling the latter to independently discharge its sector regulation function.
4.4.3. In terms of lessons learned from previous operations: The Bank has implemented a number of budget support operations in Benin, namely, the Budget Reform Support Programme (PARB) approved in 2001, the Poverty Reduction Support Programme (PRSSP I and PASRPII) approved in 2003 and 2005 and the Economic and Financial Reforms Support Programme (PAREF) approved in 2012. The key lessons learned from previous reform support operations were taken into account in the design of the current operation. These include particularly the existence of a coherent national strategy in the sector of intervention, ownership of reforms and effective involvement of the national entities concerned directly or indirectly by the programme objectives. The PACEB design particularly reflected lessons learned from the implementation of PASEBE, the previous Reform Support Programme, which highlights the need for continued structural reforms to ensure sustainable improvement in electricity sector performance. It also highlights the need to extend the reforms to improving the investment climate in order to create conditions conducive to the establishment of private investors who will engage not only in energy production to enhance supply, but will also constitute key power consumers and thus drive up electricity demand. PACEB, alongside other donors such as the MCA, World Bank, and European Union, puts a special focus on energy sector reforms, but also on private sector development with a view to optimizing the existing iterative link between these two sectors.
4.5. Analytical Work Underpinning the Programme
Analytical works conducted by the Government, the Bank and other technical and financial partners (TFPs) served as the basis for the preparation of the budget support programme, the foremost being: (i) expenditure and financial accountability management reviews (PEFA, PIMA), following which the public finance reform action plan has been updated; (ii) the WB report on the status of the business climate (Doing Business 2018), (iii) the IMF diagnosis under Article IV conducted in December 2017, and the second review of the ECF-supported programme for the Republic of Benin, approved in July 2018; (iv) the diagnostic elements of the electricity sector master plan as well as the reports of the joint Government-TFP annual reviews on the sector; (v) Electricity Sector Recapitalization Plan (PRSE) and (vi) Electricity Sub-Sector Master Plan (PDE) in Benin by 2035. The main recommendations of these assessments and diagnostic studies underscore the need for
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continued strengthening of economic, financial and sector governance and stepping up actions to kick-start the structural transformation of the economy in order to generate supplementary national wealth.
V. PROPOSED PROGRAMME
5.1. Programme Purpose and Objective
PACEB aims to contribute towards creating conditions conducive to strong and inclusive economic growth by boosting Benin's economic competitiveness. More specifically, the programme will contribute to: (i) the establishment of a legal and regulatory framework conducive, on the one hand, to the development of a structured private sector that creates added value and, on the other hand, to the optimization of public investment; and (ii) strengthening energy sector governance to fill the energy gap and ensure more inclusive access. The programme addresses the country’s key challenges and constraints. 5.2. Programme Components PACEB is divided into two complementary components, namely (i) Strengthening the investment environment and (ii) Improving energy governance and inclusion. These two components contribute to the implementation of reform measures aimed at removing the main constraints on competitiveness of Benin’s economy and reducing spatial disparities in access to energy. The programme measures matrix is presented in Annex 3. 5.2.1 Component I: Strengthening the Investment Environment This component aims to create a regulatory and institutional framework conducive to the promotion of investments in productive sectors and the implementation of infrastructure projects. It will focus on the following two areas: (i) Improvement of the regulatory and institutional framework conducive to the promotion of private investment (ii) Optimization of the investment management budget framework. a) Context and Constraints The private sector contribution to the national economy remains relatively weak and dominated by the informal sector. The formal industrial private sector remains largely below the country’s potential. The main constraints on private sector development include: (i) non-competitiveness attributable to the high cost of production factors, in particular electricity, (ii) transport and telecommunications infrastructure deficit and deficiency.; (iii) tax policy not attuned to private sector development, in particular the need to enhance synergy between the Investment Code incentives and those of the Special Economic Zone regime; (iv) land tenure insecurity; (v) inadequacy of national policies in terms of guidance and support of MSME/SMI in structuring and developing their activities; and (vi) inadequacy of the regulatory framework for the management of public-private partnership contracts (PPP). In addition, the public investment management assessment (PIMA) exercise conducted in 2018 revealed numerous shortcomings constraining the effective implementation of the public investment programme and thus the reduction of the country's huge infrastructure deficit. It shows that the current management framework limits the quality and sustainability of investments and undermines the efforts and substantial resources being put in by the country. Indeed, various studies and reports (IMF, UNCTAD, Global Forum on Competitiveness) have highlighted Benin's high level of public investment spending compared to other countries in the WAEMU zone, averaging 7% of GDP until 2015 and 9.2% in 2017, and representing over 30% of the budget, against an average of 6% of GDP in the WAEMU zone. However, paradoxically, Benin's infrastructure deficit is among the most severe in the zone. Accordingly, the major challenge is more about improving the national public investment management system’s effectiveness than about the volumes of 9
money invested. According to the IMF (cf. 2017 report, Art. IV), Benin could improve by 55%, the effectiveness of its public investments with the same level of expenditure. Weaknesses noted by the PIMA concern (i) shortcomings in the project appraisal files submitted to the Ministry of Planning and Development (ii) staff shortages at the General Directorate of Public Investment Programming and Monitoring (DGPSIP); (iii) lack of interface between the MPD's computer programming system and sector ministries; and (iv) no official publication of the selection criteria for the PIPs and assessments conducted, thus limiting the transparency of the procedure. (b) Recent Actions by the Government To correct the dysfunctions identified and remove the constraints on private investment, the Government has undertaken numerous strategic reforms. These reforms concern, in particular, (i) adoption of the unified and improved legal framework for Public-Private Partnership and adoption in January 2018 of three out of four implementing decrees, namely: decree on conditions for operation of ad hoc PPP tender committees; decree laying down specific conditions for the control and regulation of procedures for the award and management of PPP contracts and the decree on the powers, composition and functioning of the PPP support unit, (ii) adoption of the legal framework for the creation of Special Economic Zones; (iii) relaxation of the Labour Code provisions; (iv) revision of the public procurement code; (iv) revision of the land code and digitization of the cadastre and electronic management of land titles; (vi) Restructuring of the Investment Promotion and Exports Agency (APIEX); (vii) establishment of commercial courts and setting up of administrative courts in the départements (local authorities); (vii) operationalization of the conciliation and mediation entities for tax and customs disputes and (viii) strengthening of quality infrastructure with the establishment and operationalization of the National Metrology Agency and adoption of a national quality policy. Additionally, to improve public investment management, a public investment preparation and management fund with a budget of CFAF two (02) billion has been set up in 2018 to support sector ministries in designing viable projects. It will finance (i) feasibility studies of Public Investment Projects (PIPs), (ii) recruitment of project management unit members, (iii) outputs of preparatory phases of Public Investment Projects and (iv) closure and evaluation of projects. Furthermore, the design of an integrated programming and resource mobilisation platform has been included in the business plan of the Public Investment Management and Governance Support Project (PAGIPG), the firm's recruitment process is in progress and activities are scheduled to start in 2019. However, Benin will need to maintain the momentum of reforms and accelerate the effectiveness of those in progress in order to become a more attractive foreign and local private sector investment destination. c) PACEB- Supported Measures
To improve the business climate and attract more foreign and domestic private investors, PACEB will support the following measures:
(i) adoption of a new investment code: this new code seeks mainly to simplify the approval regimes and ensure coherence of the investment code provisions with the special regimes provided for investors in the special economic zones as well as the special State assistance regimes aimed at promoting domestic entrepreneurship. (ii) adoption of the bill on MSMEs: this law, which domesticates the provisions of the WAEMU Community MSMEs Charter adopted in December 2015, institutionalizes the mechanism for the recognition and categorization of MSMEs that may enjoy special measures and State aid. Besides setting up the
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Agency for the Implementation of the National Policy on MSME Promotion, the law lays down the framework for MSME support and assistance measures (tax facilities and incentives for the creation and maintenance of MSMEs, for local raw materials processing industries, for nurseries and incubators). The MSME law also covers measures to promote and finance MSMEs (technical assistance, access to land and developed sites, special funding and guarantee mechanisms or institutions), as well as measures to support struggling MSMEs. (iii) installation and operationalization of the Cotonou Commercial Court and the Porto Novo Commercial Court of Appeal; (iv) adoption of the implementing decrees of Law No. 2016-25 of 4 November 2016 to regulate competition in the Republic of Benin. These measures are designed to reassure investors about the reliability, celerity and fairness of the judicial system in force in the context of both contract execution and protection from unfair competition. (v) establishment of the legal framework to formalize the creation of the GUCE (one-stop shop for foreign trade); (vi) establishment of the Sèmè pilot special economic zone; (vii) conduct of a study on the establishment of a fund to support MSME access to financing and promote women's entrepreneurship; (viii) adoption of updated strategic plans for the development of industry and trade sectors; (ix) adoption of the national policy on private investment promotion.
These are further measures to operationalize the investment code and MSME law with a view to accelerating the improvement of the investment climate and private sector promotion.
Furthermore, PACEB will support the improvement of the public investment management framework in order to bridge Benin's infrastructure gap which is undermining private sector competitiveness. The reforms concern: (i) Adoption of the decree implementing the unified and secure legal framework for the Public and Private Partnership, and the updated PPP 2018 catalogue; (ii) Update and validation of a manual (or guide) for planning, selection and programming of public investments; (iii) Presentation of the PPP-related liabilities as a schedule to the 2019 Budget Law; (iv) Preparation and Publication of Selection Criteria for Public Investment Projects; (v) Production and publication of public procurement audits for the 2011- 2017 period.
5.2.2 Component II- Improving Energy Sector Governance and Promoting Energy Inclusion. This second component seeks to improve the national electricity company’s performance and implement the accompanying measures of the reform opening up energy production and distribution to the private sector with a view to significantly increasing national coverage, particularly in rural areas. It is built around two specific objectives namely: (i) improve energy sector governance and (ii) improve electricity access. a) Context and Constraints
The energy sector is characterized by a low nationwide electricity coverage rate, a low rate of national electrification, a low rate of rural electrification, a proliferation of fraudulent distribution networks, commonly referred to as “toile d’araignée” (spider’s web), unsuitable
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tariff policy, a financial imbalance in the electricity sector in general, and a low level of private investment in the sector. The country is totally dependent on the outside world for its energy supply, thus exposing it to exogenous shocks over which it has no control. Benin imports all the petroleum products consumed; the bulk of its electrical energy is imported from Nigeria, Ghana and Côte d'Ivoire (in 2017 electricity imports represented 93% of the power consumed).
Besides relying heavily on foreign countries for its energy supply, the country has an extremely low national electricity access rate estimated at 31% (58% in urban centres and 7% in rural areas) against an average of 40% in 2015 in sub-Saharan Africa. However, electricity demand is constantly rising, at an annual rate of around 7%, due mainly to household consumption. The forecasts for the next three years (2018, 2019 and 2020) are respectively 1721, 1860 and 2011 GWh, compared to supply forecasts of 1094, 1203 and 1277 GWh with installed capacities of 268, 354 and 482 MW. The result is a chronic energy deficit despite the actions taken by the Government.
In 2016, the Government embarked on emergency actions to deal with the electricity deficit characterised by lengthy and frequent power outages. The actions undertaken consisted in signing contracts with independent producers to provide supplementary generating capacity (rental of generators) of 150 MW and importing from Nigeria 60 MW outside the CEB contract. These actions provided the country with an additional supply of 210 MW and helped to curb load shedding.
In 2017, the amount of electrical energy distributed by SBEE was 1,202.28 GWh, of which 87.6 GWh was generated locally and 1,202 GWh from importation, and of the 87.6 GWh of generated locally, merely 45.9 GWh are generated by SBEE plants and the remaining 41.7 GWh come from plants rented from private entities at exorbitant cost, putting the State budget under enormous stress. Besides subsidies for the purchase of fuels, estimated in 2018 at over CFAF 7 billion (and 2019 forecasts are roughly the same) the rentals of generators from firms are estimated at CFAF 17.85 billion over the same period, bringing the State’s direct energy sector subsidies to roughly CFAF 32 billion for the period 2018-2019. Thus, despite public subsidies to generation, the kWh cost in the country remains exorbitant, driven up by the per kWh cost of rentals of generators. The selling price of energy at SBEE with rentals of generators is CFAF 250/kWh against CFAF 132/kWh for imported energy supplied by CEB. b) Government Achievements and Strategies
The Government of Benin has undertaken profound electricity sector reforms with the support of the US Millennium Challenge Corporation (MCC) through a USD 375 million-grant agreement signed on 9 September 2015. The programme’s ultimate goal is to increase the productivity and output of enterprises, generate more economic opportunities for households and improve the capacity to provide public and social services by improving electricity supply quantity and quality. The key reforms undertaken by the Government include: (i) signing of a performance contract between the Government and SBEE; (ii) appointment of a Board of Directors at SBEE; (iii) preparation and adoption by the Council of Ministers of a Sector Master Plan; (iv) advance payment of central government energy consumption through the installation of prepayment meters. Additionally, the role of the Electricity Regulatory Authority (ARE) has been strengthened by granting it, among other things, the prerogative to approve electricity tariffs. Nonetheless, defining sustainable financing mechanisms must be accelerated to ensure its financial autonomy.
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c) PACEB-Supported Measures
To structurally increase installed capacities and improve Benin's energy supply on the one hand, and strengthen energy sector transparency and equity making it more open to private investors, on the other, PACEB will support: (i) the adoption of the bill on Benin’s electricity code, which aims to open up the transmission and distribution segments to private investments; (ii) adoption of the renewable energy bill, which governs the exploitation of the country's renewable energy potential with a view to promoting the energy mix; (iii) adoption of the decree laying down conditions for fixing the basis and recovery of the regulation charge; (iv) fixing the methods of calculation and recovery of electrical installation license fees, authorisation and declaration of operation in Benin.
PACEB will also support measures to strengthen energy inclusion to reduce spatial and gender disparities in electricity access through; (i) adoption of the technical cooperation protocol between SBEE and ABERME for electricity access; (ii) adoption of the national regulatory framework for off-grid electrification; (iii) conducting an assessment of the impact of the new tariff policy on households; (iv) gender mainstreaming in the Ministry of Energy DPPD 2019 and 2020.
5.3 Expected Programme Implementation Outcomes
At the end of the programme, an increase in private investment, including foreign direct investment, is expected, as well as an improvement in the performance of the productive sectors, which are drivers of economic growth and job creation. The private investment rate is expected to rise from 19.3% of GDP in 2017 to 22.4% of GDP in 2019, and the value added of the industrial sector should rise from 7.5% of GDP in 2017 to 9% of GDP in 2019. Also expected is a substantial increase in electricity supply and a strengthening of energy inclusion with the increased installed production capacity which will reach 354MW in 2019 with a maximum production cost of CFAF 150/Kwh against a capacity of 180MW in 2017 and a cost of CFAF 275/kwh. Furthermore, the electricity access rate in rural areas will progressively improve to 8% in 2019 compared to 7% in 2017.
5.4. Policy Dialogue
Under the programme, policy dialogue will be intensified on accelerating business climate reforms and investment promotion as well as efficient implementation of planned reforms and investments in the energy/electricity sector. It was also agreed with the Government to maintain dialogue on the effective operationalization of the WAEMU directives so that the 1 January 2020 deadline is met for the programme-budget changeover. To this end, the Government will need to continue its efforts to ensure that, in 2019, the IT tools of the public financial management system are updated and adapted, on the one hand, and that all sector policies accompanied by strategy and action plans are adopted. Similarly, the appointment of programme managers in all ministries and the inclusion in their organisation chart of the expenditure authorisation service as well as the validation of annual performance plans for all ministries must be effective by end-December 2019. Regarding public procurement, dialogue will be maintained on: (i) regular preparation and publication of post-audit and internal control reports on public procurement; (ii) continuation of actions to reduce the number of restrictive procurements (direct contracting, and restricted bidding) whose extent (79% of the contracts awarded in 2017) is a cause for concern in terms of procurement operations and their level of efficiency and equity.
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5.5. ADF Loan/Grant Conditions
5.5.1 Prior Measures
Based on the dialogue between the ADF and the Government, it is agreed that the Government will implement the following steps prior to the presentation of the Programme to the Board of Directors.
Table 2 : PACEBI Prior measures and PACEB II triggers
Measures prior to Board presentation
General prior measure: 1- Maintenance of a stable macroeconomic framework, as indicated in IMF reports or assessments.
Component A) Improvement of investment Component B) Improved governance of energy sector environment and promotion of energy inclusion Action 1 : Adoption by the Government of the draft Action 4: Conduct of an impact assessment of the new investment code tariff policy on households Evidence 1 : Report of the Council of Ministers Evidence 4: Impact assessment of the new pricing policy authorising the transmission to the National on households validated. Assembly of the draft Investment Code Action 2: Adoption by the Government of the bill on Action 5: Government's adoption of the national Micro and Small and Medium Enterprises regulatory framework for off-grid electrification Evidence 2: Report of the Council of Ministers authorizing the transmission to the National Evidence 5: Decree to regulate off-grid electrification in Assembly of the bill on Micro, Small and Medium the Republic of Benin. Enterprises Action 3 : Adoption of the Decree on the updated catalogue of Public Private Partnerships (PPP) 2018 Evidence 3 : Decree on the updated catalogue of Public Private Partnerships (PPP) 2018
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PACEB II Triggers General trigger measures: 1- Maintenance of a stable macroeconomic framework, as indicated by IMF reports 2- Satisfactory implementation of PACEB I. Component A) Improvement of the investment Component B) Improved energy sector governance and environment promotion of energy inclusion Trigger 1 Adoption by the Government of the Trigger 4: Adoption by the Government of the Bill on the national policy of private investments promotion Benin Electricity Code Evidence 1: Report of the Council of Ministers adopting the national policy of private Evidence 4 : Report of the Council of Ministers investments promotion authorizing the transmission to the National Assembly of Benin's draft electricity code Trigger 2 : Conduct of a study on creating a fund to Trigger 5 : Adoption of the bill on renewable energies support access to MSME funding and promoting women's entrepreneurship Evidence 5: Report of the Council of Ministers Evidence 2 : Study on creating a fund to support authorizing the transmission to the National Assembly access to MSME funding and promoting women's of the bill on renewable energies entrepreneurship conducted and validated Trigger 3 : Creation of a pilot special economic Trigger 6 : Adoption of the decree to lay down the zone at Sèmè method for determining the basis and conditions for collecting the regulation fee Evidence 3 : Decree to establish a pilot special Evidence 6 : Decree to lay down the method for
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economic zone at Sèmè determining the basis and conditions for collecting the regulation fee
5.6. Good Practice Principles Applied to Conditionality
In line with the Bank's budget support operations policy of 14 March 2012, the design of PACEB reflected good practice principles with respect to conditionalities. A few preconditions have been agreed with the Government in accordance with the country's reform priorities. The programme's thrusts and results logical framework were previously discussed with the Government and all stakeholders, including other TFPs and civil society. The disbursement schedule is aligned with the budget cycle and their predictability is ensured by the programme- based nature of the operation.
5.7. Financing Needs and Mechanisms
The economic growth prospects over the period 2018-2019 remain positive with real GDP growth rates projected at 6% and 6.3%, respectively. Benin's budget financing requirements are estimated at CFAF 366 billion in 2018 and CFAF 271.7 billion in 2019. This budget support operation forms an integral part of the external financing sources that will help to bridge the budget deficit for the 2018-2019 period (see Table). External financing including budget support totals CFAF 247.1 billion in 2018 and CFAF 291 billion in 2019. For its part, domestic financing amounts to CFAF 118.8 billion in 2018 and - CFAF 43.2 billion in 2019. The ADF's share of the financing needs coverage for 2018 and 2019 stands respectively at CFAF 5.5 billion and CFAF 4.7 billion (at the rate of UA 1= CFAF 791.4).
Table 3: Estimated financing needs and sources (in CFAF billion) Rubric 2018 (CFAF billion) 2019(CFAF billion)
A Total revenue including grants 1088.6 1152.5 of which tax revenue 855.2 933.1 B of which grants 67.0 71.0 C Total expenditure and net loans 1377.6 1343.2 including : interest payments 132.9 161.1 including : capital expenditure 500.0 400 D Overall balance (commitment basis) excluding programme 356.0 261.7 grants (A -B-C) E Accumulation of arrears(-) = reduction) -10.0 -10.0 F Overall balance (settlement basis) excluding programme grants 366.0 271,7 (D+E) G Net external financing (excluding Bank contribution) 241.6 286.3 H Bank contribution 5.5 4.7 I Domestic financing (net) 118.8 -43.2 J Financing (G+H+I) 365.9 247.8 K Residual financing gap (F-J) 0 23.9
Source: Benin Authorities and IMF (July 2018)
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5.8. Application of Bank Policy on Non-Concessional Debt Accumulation
The programme is in line with the Bank's principles of concessional borrowing. Under the ECF- supported programme with the IMF in April 2017, the authorities have committed to concessional borrowing, given the country's upward debt risk trend. PACEB, financed by an ADF loan and grant, remains in line with the Government's commitments on concessional borrowing.
VI. IMPLEMENTATION
6.1 Programme Beneficiaries
PACEB’s direct beneficiaries are the Ministry of the Economy and Finance through financing of the national budget, the Ministry of Energy, AER, SBEE, CEB and all private sector actors. Indirectly, the programme will benefit the Benin population as a whole. It will definitely lay the groundwork for a structural transformation of the economy around viable private and public investment projects that are engines of strong and sustainable economic growth and socio- economic well-being thanks in particular to the induced improvement in basic public services (health, education, drinking water, etc.), private sector development, job creation and reduction of urban social insecurity.
6.2 Social and Gender Impact
The programme will contribute towards reducing social and gender inequalities by putting in place appropriate measures and mechanisms to foster rural electricity access, subsequently leading to improved public services and development of the local economic potential. Additionally, PACEB measures support gender-responsive budgeting in the energy sector through the mainstreaming of gender-related sub-programmes in DPPDs, including the improvement of clean cooking energies to alleviate women's housework and protect them from domestic smoke and its health consequences. The Ministry of Energy will also have a gender unit to support the effective operationalization of ECOWAS directives on gender and energy and social inclusion that Benin domesticated on 26 July 2018. Moreover, PACEB's measures will lay the groundwork for a structural transformation of the economy and the multiple opportunities that will be developed around major private investment projects and public infrastructure will constitute job generation drivers. For instance, the installation and operationalization of the Cotonou Commercial Court and the Porto Novo Commercial Court of Appeal will recruit at least 6% female Judges and Consular Advisers. Revision of the land code will take into account women's access to land in the same way as men’s. Conducting a study on creating a fund to support access to MSME funding and promote women's entrepreneurship will contribute towards developing women’s engagement in Benin’s formal sector trade. The "budget support" project is assigned Category 4, according to the Gender Marker System. For information purposes, the technical annex on gender presents the country’s gender situation.
6.3. Impact on Environment and Climate Change
In accordance with the Bank's Environmental and Social Assessment Procedures (ESAP), the programme was assigned Category 3 on 7 September 2018 as it does not negatively impact the environment, directly or indirectly, or induce negative social impacts. Improving energy sector management will have overall positive environmental impacts by replacing wood fuels with cleaner fuels. The environmental and social safeguards framework in Benin have been assessed as suitable for the environmental and social management of any additional projects that an enhanced investment climate may generate. ABE has a General Guide for the conduct of ESIAs
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and Sector Guide for electrification. In addition, environmental units are set up in sector ministries, including the energy ministry. They participate in the studies and their follow-up. In terms of climate change, the project is classified under Category 3 according to the Bank's Climate Safeguards System (CSS). No action outside categorisation is necessary. Also, Benin has a National Adaptation Programme of Action (NAPA). This is a process to specify the levels of vulnerability of livelihoods and socio-economic development actors and determine the priority and urgent adaptation needs based on the resources and intervention capacities available to the social groups concerned.
6.4. Implementation, Monitoring and Evaluation.
The Ministry of Economy and Finance, through the Economic and Financial Programmes Monitoring Unit (CSPEF) will be responsible for the implementation of PACEB. CSPEF’s role is, among other things, to interface with the technical and financial partners on the formulation, negotiation, implementation and monitoring of support and reform programmes in the economic and financial domain. The capacity of the CSPEF was deemed satisfactory in terms of performance in the implementation of the previous budget support operation, the support programme (PASEBE), whose implementation rate is over 90%. Under PACEB, it will ensure that the Ministry of Energy, APIEX and all the various stakeholder structures play their full role in implementing reforms within their spheres of competence. The CSPEF will provide ADF with semi-annual and annual programme implementation reports prepared based on a joint review with the programme's stakeholder structures as well as members of civil society, including Social Watch. The ADF will monitor the Programme in coordination with the group of TFPs present in Benin. The ADF will conduct at least two programme supervision missions per year and will ensure interaction with all Programme stakeholders, including civil society
6.5. Financial Management and Disbursement
6.5.1. Audit and Disbursement: The overall fiduciary risk was deemed significant, but expected to move to moderate with the effective implementation of the Comprehensive Public Financial Management Reforms Plan (PSMIP 2017-2020) and measures agreed under PACEB (see Technical Annex 1). In accordance with the 2017-2021 fiduciary strategy of Benin's CSP, PACEB will be implemented through all components of the expenditure chain of the national public financial management system. It will be disbursed in a single tranche each year during 2018 and 2019 fiscal years. Disbursements will be made in a special account opened at BCEAO in the name of PACEB. An annual audit of the financial flows of the Programme will be conducted by the Audit Bench of the Supreme Court in accordance with the Protocol Agreement on Budget Support signed between the Government and development partners in 2007. The audit reports shall be sent to the ADF no later than 30 June of the year following that which was audited.
6.5.2. Procurement. The legal framework in force is based on Law No. 2017-04 of 19 October 2017 on the Public Procurement Code in the Republic of Benin. The Bank's assessment finds that the system is overall compliant with the generally accepted procurement Rules and Procedures. In the light of these conclusions, Benin's public procurement framework seems relatively satisfactory for an appropriate use of the Bank's resources through budget support. The risk was deemed to be "moderate" overall but marked by a strong tendency to use procurement waiver methods (direct contracting, restricted bidding). On the basis of DNCMP's 2017 activity report, direct contracting represented 8% of the total amount of contracts for the year 2017. The report also indicates a rate of 17.6% for open bids, and 71% for restricted bids. However, the code specifies that the restricted bidding procedure may be used only where the
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goods, works or services, owing to their specialised nature, are available only to a limited number of suppliers, companies or service providers". Although the direct contracting rate seems to meet the maximum requirement of 10% set in the code, the contracts awarded through waivers (direct contracting, and restricted invitation to tender) i.e. 79%, leaves an impression of a major flaw in procurement operations. Additionally, public procurement audits are not yet being conducted on a regular basis and the resultant recommendations seem under-explored. In light of the weaknesses noted, the Bank will strengthen dialogue to ensure that (i) open bidding is effectively the default procurement method and procurements through this method must represent the highest proportion in value of total volume of contracts awarded, including direct contracting authorized by the Council of Ministers, (ii) direct contracting authorized by the Council of Ministers (type, scope) are regulated with a prior relevance check by the DNCMP in accordance with the provisions of the Public Procurement Code.
VII. LEGAL FRAMEWORK
7.1. Legal Instrument
The Programme will be financed through a loan agreement and a Grant Protocol between the African Development Fund (ADF) and the Republic of Benin.
7.2. Conditions Associated with Bank Intervention
7.2.1 Measures prior to presentation of the Programme to the Board: Presentation of the Programme to the ADF Board of Directors is subject to evidence by the Republic of Benin of the implementation of all the prior measures adopted in accordance with the ADF as specified in Table 2 under point 5.4.1 of this report.
7.2.2 Conditions precedent to effectiveness of the Loan Agreement and the Grant Protocol:
1. The effectiveness of the Loan Agreement shall be subject to fulfilment of the conditions set forth in Section 12.01 of the General Conditions Applicable to Loan Agreements and Guarantee Agreements of the African Development Fund (Sovereign Entities) of February 2009; and
2. The effectiveness of the Grant Agreement shall be subject to fulfilment of the condition referred to in Section 10.01 of the General Conditions Applicable to Protocol Agreements Relating to Grants of the African Development Fund of February 2009.
7.2.3 Conditions Precedent to Disbursement of the ADF Loan and Grant:
The opening by the Borrower, to the satisfaction of the ADF, of a treasury account in the books of the Central Bank of West African States (BCEAO), intended to keep the ADF Loan and Grant resources.
7.3. Compliance with Bank Group Policies
PACEB complies with the Bank Group Policy for Programme-based Support Operations (ADB/BD/WP/2011/68/Rev.3/Approval, F/BD/WP/2011/38/Rev.3/Approval), in particular the general budget support instrument. No exceptions are requested to this Policy in this proposal.
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VIII. VIII. RISK MANAGEMENT
The table below is a general presentation of the risks that may undermine Programme implementation or achievement of results.
Table 4 – Risks and mitigation measures
Risks Risk level Mitigation measures Macroeconomic instability Moderate The Government is committed to building the country’s resilience by owing to the country's implementing a genuine policy of structural economic economic vulnerability to transformation and pursuing reforms agreed with the IMF and other exogenous shocks. partners. Fiduciary risks owing to Substantial The effective implementation of the PSMRP and the measures weaknesses in the public envisaged under PACEB will contribute towards consolidating gains financial management and accelerating increased integrity of the PFM system. system. Weak human resources Moderate The Government has put in place a major institutional monitoring capacity to implement and evaluation system which should ensure the effective identified reforms implementation of PAG. Besides establishing seven autonomous executing agencies, and setting up an inter-ministerial committee for investments promotion and presidential monitoring units, the system’s key specificity is the establishment of the analysis and investigation bureau (BAI). It is a skills centre in the Government’s service attached to the Presidency of the Republic. Composed of national and international experts, BAI provides high-level technical assistance to the entities tasked with implementing the reforms and PAG.
IX. RECOMMENDATION
In light of the foregoing, it is recommended that the Board of directors approve an ADF loan of UA 4.83 million and an ADF grant of UA 2.17 million from the resources of the African Development Fund (ADF) for the Republic of Benin to finance Phase 1 of its Economic Competitiveness Support Programme (PACEB I).
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ANNEX 1: Development Policy Letter
Tél : 21 30 10 20 – Fax : 21 30 18 51 01 BP ; 30MMMMMM2 COTONOU – ROUTE DE L’AEROPORT www.finances.bj
September 2018
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Tél : 21 30 10 20 – Fax : 21 30 18 51 01 BP ; 302 COTONOU – ROUTE DE L’AEROPORT www.finances.bj
Cotonou,
His Excellency Romuald WADAGNI
Minister of Economy and Finance
Cotonou, BENIN TO
Mr. Akinwumi A. ADESINA President of the African Development Bank Group Abidjan, CÔTE D’IVOIRE Mr. President,
1. As part of its development policy, the Government has drawn up and adopted the National Development Plan (PND) and its operational document, the Growth Program for Sustainable Development (PC2D), with a view to standardizing the planning framework. PC2D 2018-2021 is a document based on the guidelines of the Government Action Program (PAG- Revealing Benin) and takes into account the Sustainable Development Goals (SDGs) to implement the various actions adopted for the period 2018-2021.
2. This document, which extends its scope of coverage to all areas of government intervention, is accompanied by a performance measurement framework to enable a yearly assessment of the progress achieved in its implementation, and the organization of yearly reviews of its implementation with all stakeholders. PC2D will thus facilitate strategic consultation and dialogue between the Government, Technical and Financial Partners (TFPs) and the other stakeholders.
3. This development policy letter reports on Benin's economic and social progress in recent years and on the policies that the Government plans to implement to stimulate economic growth and consolidate development progress in Benin with the general budget support program dubbed "Benin Economic Competitiveness Support Program (PACEB 2018-2019)" for which it is seeking support from the African Development Bank (AfDB).
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4. Through its key measures, the program aims to contribute towards creating favourable conditions for strong and inclusive economic growth, by boosting Benin's economic competitiveness. More specifically, the program will contribute towards: (i) establishing a legal and regulatory framework conducive to the development of a structured private sector that creates added value, and to optimized public investment; and (ii) improving energy sector governance to fill the energy gap and ensure more inclusive access. The program addresses the country’s key challenges and constraints.
5. This document focuses on the following points: (i) economic context and recent developments; (ii) reform policy and (iii) reform policies coordination, monitoring and implementation mechanism.
I. Economic Context and Recent Developments
6. Over the past seven years, the Government has implemented the Growth Strategy for Poverty Reduction (SCRP 2011-2015), which closed at end- 2015. A review of the implementation of the SCRP 2011-2015 reveals that economic activity was consolidated from 2011 until 2013, followed by a slight downturn in 2014, with a real economic growth rate of 6.5% in 2014 against 6.9% in 2013. In 2015, the level of economic activity declined with an estimated growth rate of 2.1%. In 2016, the economic growth rate stood at 4.0%; a sharp rise compared to 2015, with exceptional harvests thanks to more favourable weather conditions. However, the policy measures implemented during the 2011-2016 period failed to reduce poverty, with the monetary poverty rate falling from 37% in 2011 to 40.1% in 2015.
7. In April 2016, a new of public action drive was launched with the vision advocated by the Government to "revive Benin’s sustainable economic and social development” through the Government Action Program (PAG) 2017-2021 dubbed "Bénin Révélé" (Revealing Benin).
8. In this context, the Government embarked on drawing up the National Development Plan (PND) 2018-2025 and its first operationalization document, the Growth for Sustainable Development Program (PC2D) 2018-2021. The said Program aligns with the implementation of the 2030 Agenda for Sustainable Development Goals (SDGs) and the African Union Agenda 2063 constitutes the operationalization document of the National Development Plan.
9. The PC2D is a document that is developed in place of the Growth Strategy for Poverty Reduction (CPRS). It is the document of dialogue with the Technical and Financial Partners (TFP) within the framework of the various economic and financial programs. It is fully consistent with the Government's Action Program and is aimed at achieving the Sustainable Development Goals (SDGs).
10. In total, there are seven (7) operational thrusts designed to guide the implementation of the 2018-2021 Growth for Sustainable Development Program, namely: (i) strengthening the foundations of democracy and rule of law, (ii) improving governance, (iii) restoring the macroeconomic framework and maintaining stability, (iv) improving economic growth, (v) improving education performance, (vi) strengthening basic social services and social protection and (vii) balanced and sustainable territorial development.
11. n terms of management of the macroeconomic framework, it is worth noting that at the end of the last economic and financial program (ECF) concluded with the IMF and satisfactorily completed in 2014, the Government of Benin in 2017 signed with the IMF a new three-year ECF- supported program approved by the Executive Board on 7 April 2017. In this
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regard, the Government has committed to implementing a set of measures aimed at maintaining macroeconomic and financial stability and raising living standards. These efforts include reforms to improve public spending efficiency and mobilize domestic revenues.
12. At the level of the revenue authorities, the implementation of reforms aimed at modernizing the tax administration (taxes) to ensure sustainable improvement of revenue collection is ongoing. More specifically, significant progress is recorded in implementing the Tax Administration Strategic Orientation Plan (POSAF) and the Government has also adopted a plan to strengthen tax compliance in accordance with the agreement with the IMF. At the customs level, the Government has: (i) set up a goods tracking system to ensure better electronic tracking of cargo; (ii) increased cargo scanning to widen the taxable base with the introduction of scanning at the Port of Cotonou since November 2017; and (iii) introduced transaction value. Additionally, measures have been implemented to strengthen cooperation between these two administrations. Several IT developments have thus been launched to streamline interaction between customs and taxation. They include: (i) establishment of a common tax-to-customs data exchange platform; (ii) development of several interfaces integrated into the common platform.
13. Regarding public spending, reforms have been initiated to ensure rigorous monitoring and improve public investments efficiency. They concern in particular: (i) the census-payment operations of active and retired State employees using biometrics; (ii) systematic use of banking services for scholarships and university aid; (iii) systematic use of banking services for periodic benefits of civil servants in active employment and pensions of CFAF 50,000 or more; (iv) the new policy of establishment of public services which focuses on the completion and construction of administrative buildings to substantially reduce rent and rental charges both at home and abroad; (v) establishment of the Official Travel Unit (CVO) for better planning of trips abroad, better monitoring and rationalization of related appropriations and (vi) completion of the Public Investment Management Assessment (PIMA) in October 2017 with technical assistance from the IMF to improve public investment quality.
14. Considerable efforts have been made to improve the availability of public debt management information. The Caisse Autonome d'Amortissement (CAA) has a website; a public debt statistics bulletin is published quarterly; an annual report on public debt management has been prepared and a medium-term debt strategy document is annexed to the 2017 budget.
15. Mindful of this context, the Government intends to implement a series of reforms to support the achievement of expected economic and social progress.
II. Envisaged Reform Policy
16. Benin's economy remains uncompetitive and is struggling to attract foreign investors. According to the Global Competitiveness Report 2017, Benin ranks 120th out of 140 countries, with a global competitiveness index score of 3.47 on a scale of 1 to 7. The key factors undermining Benin’s economic competitiveness concern particularly: (i) weaknesses in the legal and regulatory framework of the business environment, (ii) prohibitive cost of and difficult access to energy, and (iii) difficult access to credit.
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17. The reforms under the PACEB (2018-2019) - associated program for which the Government is seeking World Bank support for the year 2018 concern: (i) strengthening the investment environment; (ii) improving energy sector governance and promoting energy inclusion. The program addresses the country’s key challenges and constraints.
PACEB 1 reform scheduled for the year 2018
Strengthening the investment environment
18. In the PC2D, the priority actions for increased growth include the implementation of reforms for private sector promotion and structural transformation of the economy.
19. To make Benin a particularly attractive investor destination, a new investment promotion scheme was put in place in 2017 and is devoted to streamlining the institutional and regulatory framework for investment promotion in Benin. In terms of strategy, an inter- ministerial Investment Promotion Committee has been set up to improve government consultation on business climate issues and to provide coordinated responses to investors’ expressed needs and expectations. At the operational level, the Investments and Exports Promotion Agency (APIEX) has been restructured to become the sole gateway for investors, and showcases investments and exports promotion in Benin. Moreover, the Government conducted the Public Investment Management Assessment (PIMA) in October 2017 with technical assistance from the IMF, aimed at improving public investments quality.
20. With a view to strengthening ongoing actions and measures, the Government has identified as priority areas under PACEB 1: (1) improvement of the regulatory and institutional framework for private investment promotion, and (2) optimization of the fiscal framework for budget management of public investments.
21. As concerns improving the regulatory and institutional framework for private investments promotion, the Government has included among priorities:(i) adoption of the investment code; (ii) adoption of the law on Micro, Small and Medium Enterprises (MSME); (iii) establishment of the legal framework to formalize the creation of the Foreign Trade One- Stop-Shop (GUCE); (iv) installation and operationalization of the Commercial Court of Cotonou and the Porto Novo Commercial Court; and (v) adoption of the implementing decrees of Law No. 2016-25 of 4 November 2016 on the organization of competition in the Republic of Benin.
22. With regard to optimizing the fiscal framework of public investment budget management, the Government's efforts include: (i) update and validation of a public investments planning, selection and programming manual (or guide); (ii) effective presentation of PPP-related liabilities as schedule to 2019 Budget Law, (iii) preparation and publication of the selection criteria for Public Investment Projects, (iv) adoption of implementing decrees for the unified and improved legal framework for Public and Private Partnership; and (v) preparation and publication of 2011 - 2014 public procurement audits.
Improving energy sector governance and promoting energy inclusion
23. Under PC2D interventions, the Government decided to continue reforms aimed at improving energy sector governance and in particular the regulatory framework, to facilitate private sector investment.
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24. As part of the MCA's second compact reforms, the Government signed a performance contract with Société Béninoise d’Energie Electrique (SBEE). The implementation of this STATE/SBEE performance contract has, among other things, enabled bold actions to improve SBEE’s financial viability. The two key outcomes of the said actions are: reduced expenses and increased revenues. Also, further reform actions have been taken to increase the energy supply to the public.
25. For the sustainability of ongoing actions, the Government intends to prioritize efforts to (1) improve energy sector governance and (2) improve electricity access
26. With regard to improving energy sector governance, the key actions adopted under PACEB 1 concern laying down conditions for calculation and recovery of license fees, authorization for electrical installations and to operate them in Benin.
27. With regard to improving the energy supply-demand match, efforts are focused on (i) adoption of the technical cooperation protocol between SBEE and ABERME for electricity access; (ii) development of a gender-sensitive DPPD 2019 by the Ministry of Energy; (iii) conducting an impact assessment of the new tariff policy on households; and (iv) adoption of off-grid electrification in the Republic of Benin.
PACEB 2 Reforms for the Year 2019
Strengthening the investment environment
28. To improve the regulatory and institutional framework for private investments promotion, the Government has decided on the following measures: (i) adoption of the national private investments promotion policy; (ii) conduct of a study on the creation of a fund to support MSME access to financing and promote women's entrepreneurship; (iii) adoption of updated strategic plans for trade and industry sector development; and (iv) establishment of the Sèmè Special Pilot Economic Zone.
29. In terms of optimizing the fiscal framework of public investment budget management, the key measure envisaged by the Government is the preparation and publication of 2015-2017 public procurement audits.
Improving energy sector governance and promoting energy inclusion
30. For the year 2019, as regards improving energy sector governance, the key actions adopted under PACEB 2 will concern (i) passing of the bill on the Benin Electricity Code, (ii) passing of the bill on renewable energies, (iii) issuance of the decree on the method for determining the basis of and conditions for regulation fee collection.
31. Regarding the promotion of electricity access, the key action is the development by the Ministry of Energy of a gender-sensitive DPPD 2020.
32. The Government undertakes to implement these reform actions that will facilitate the achievement of the PC2D results as well as the success of the program associated with PACEB 1. The actions described above could, if necessary, be complemented by further reforms, in collaboration with the AfDB, in particular for the next general budget support program.
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III. Reform policy coordinating and implementation monitoring mechanism
33. This program will be implemented under the authority of the Ministry of Economy and Finance, through the Economic and Financial Programs Monitoring Unit (CSPEF), in close collaboration with sector ministries and other entities concerned with the program's focus areas. The African Development Bank will also carry out program reviews as needed. Regular dialogue will be maintained with the African Development Bank as part of monitoring the implementation of planned actions.
34. The Government hereby undertakes to make every necessary effort to implement the above measures and actions and reiterates its request to the African Development Bank to make available the requested funding.
Romuald WADAGNI Minister of Economy and Finance
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ANNEX 2: PACEB Measures Matrix
Objectives Measures 2018 Measures 2019 Component 1 – Improving the investment environment Adoption of the draft investment code by the Adoption of the industrial development policy and action plan Government
Evidence: Minutes of the Council of Ministers meeting Evidence: Minutes of the Council of Ministers adopting the policy meeting authorizing the transmission of the draft Investment to the National Assembly
Adoption of the MSME bill by the Government
Evidence: Minutes of the Council of Ministers meeting authorizing the transmission of the MSMEs bill to the National Assembly
Adoption of the Decree on the updated Update of the catalogue of PPPs catalogue of PPPs 2018 Evidence: Catalogue of PPPs 2019 updated and validated by Evidence: Decree on the updated catalogue of decision of the Minister of State for Planning and PPPs 2018 Development Put in place the legal framework through the Conduct of a study on the setting up of a guarantee fund to signing of the new decree formalizing the creation support access of MSMEs to funding and promote women's of GUCE (one-stop shop for foreign trade) entrepreneurship. Evidence: Decree or Order formally setting up the GUCE Evidence: Study report validated Adoption of the implementing instruments of Adoption of the decree creating the Sèmè pilot special the unified and improved legal framework for economic zone Public - Private Partnership Evidence: Decree creating the pilot zone Improve the regulatory and Evidence: Implementing decrees of the unified and institutional secure legal framework for Public - Private framework for Partnership Finalization of the land management system computerization promoting private process for complete dematerialization of property transfer investments Evidence: Completion Report Publication of the 2011-2014 audit reports Production and publication of the 2015 - 2017 audit reports Evidence: Reports published on the ARMP website will be program- supported measures
Evidence: Reports published on the ARMP website
Installation and operationalization of the Cotonou Commercial Courts and the Porto Novo Court of Appeal Evidence: Minutes of installation of judges and consular advisers Adoption of the implementing decrees of Law Adoption by the Government of the National Policy on No. 2016-25 of 4 November 2016 organizing Private Investment Promotion competition in the Republic of Benin: Evidence: Minutes of the Council of Ministers meeting Evidence: Decree appointing judicial adopting the National Policy on Private Investment representatives in the Republic of Benin Promotion
Evidence: Order appointing Sales managers, Commercial Attachés and Commercial Conduct of a study on the creation of a fund to support Controllers access to financing for MSMEs, and promote women's entrepreneurship
Evidence: Study on the creation of a fund to support the access to financing for MSMEs, and to promote women’s entrepreneurship conducted and validated
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Update and validation of a manual (or guide) for Adoption of the implementing instrument of the unified and planning, selection and programming of public secure legal framework for the Public - Private Partnership Optimize the investments budgetary Evidence: Instruments defining stakeholder roles and framework of Evidence: Manual (or guide) updated and instruments instructing the mandatory prior opinion of the validated Ministry of Economy and Finance before the signing of public investments PPPs. management Effective presentation of the 2019 budget law on Strengthening Public Investment Planning. PPP- related liabilities Evidence: Regulatory instruments on the requirement of Evidence: Schedule to 2019 Budget Law feasibility studies and evaluation and external review thresholds
Preparation and publication of criteria for selection of public investment projects
Evidence: Criteria Document posted on the website of the Ministry of Planning and Development Component 2 – Improving energy sector governance and energy inclusion
Improve energy Adoption by the Government of the bill on the Benin sector governance electricity code
Evidence: Minutes of the Council of Ministers meeting authorizing the transmission to the National Assembly of the bill on the Benin electricity code
Determination of the methods of calculation, recovery of license fees, authorization and declaration of operation of electrical installations in Benin Adoption of the Renewable Energy Bill
Evidence: Joint Order of Ministers in charge of Evidence: Minutes of the Council of Ministers meeting Energy and Finance authorizing the transmission to the National Assembly of the draft law on renewable energies
Adoption of the decree on the method for determining the basis of and recovering the regulation charge.
Evidence: Decree on the method for determining the basis of and recovering the regulation charge
Adoption by the Government of the National Gender- sensitive DPPD 2020 of the Ministry of Energy. Regulatory Framework for Off-Grid Electrification Evidence: The DPPD 2020 of the Ministry of Energy, validated in 2019, and contains specific gender promotion Evidence: Decree regulating off-grid sub-programs electrification in the Republic of Benin. Conduct of an impact assessment of the new tariff policy on households
Improving Evidence: The impact assessment of the new electricity access tariff policy on households conducted and validated Adoption of the technical cooperation protocol between SBEE and ABERME for electricity access. Evidence: protocol of technical collaboration between SBEE and ABERME for electricity access signed in 2018
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ANNEX 3: BENIN - IMF RELATIONSHIP
29 June 2018: Press Release: IMF Executive Board completes second review under the Extended Credit Facility agreement and approves a USD 22.4 Million Disbursement for Benin
• The outlook is positive, although achieving high and inclusive growth remains challenging.
• The implementation of public policies has been satisfactory and the program is on course.
• Economic activity is expanding, with growth estimated at 5.6% for 2017 and expected to reach 6.0% in 2018.
On 29 June 2018, the Executive Board of the International Monetary Fund (IMF) completed the second review of the three-year agreement for Benin under the Extended Credit Facility (ECF). The Executive Board decision, taken on a lapse of time basis [1], immediately makes available to Benin SDR 15.917 million (approximately USD 22.4 million).
Economic activity grew and inflation remained low in 2017. The strong growth, estimated at 5.6%, is due to the record level of cotton production and Nigeria’s economic recovery. Annual inflation returned to a positive 0.1% due to food and petroleum product prices. The current account deficit is estimated to have widened in 2017 as a result of increased goods imports, due to increased investment and food imports. The implementation of the 2017 budget fared better than expected and the overall budget deficit (excluding grants) was limited to 7.0% of GDP, due mainly to higher domestic revenues. Public expenditure was maintained at the levels forecast in the program. As a result, public debt accumulation was slower than expected.
The results achieved under the program remain satisfactory. All ongoing and end- 2017 performance criteria were met, along with all structural benchmarks. The under-execution of social spending at end- June 2017 was rectified in September and the indicative target for end- December 2017 was exceeded.
The medium-term outlook remains positive. They imply acceleration in real GDP growth between 2019 and 2022, supported by increased agricultural output resulting from government action, and by increased private investment. In the medium term, inflation should stay below the 3% WAEMU convergence rate. The planned trajectory of fiscal consolidation should reduce the budget deficit (including grants) by 2019 below the WAEMU convergence criterion of 3% of GDP. Strong export growth would improve the external balance position, while capital inflows supported by foreign direct investment and portfolio investment would enable Benin to contribute moderately to WAEMU's foreign exchange reserves.
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ANNEX 4- Key macroeconomic indicators
Benin Selected Macroeconomic Indicators
Indicators Unit 2000 2013 2014 2015 2016 2017 (e) 2018 (p)
National Accounts GNI at Current Prices Million US $ 2,710 9,187 9,857 9,465 9,157 ...... GNI per Capita US$ 390 890 930 870 820 ...... GDP at Current Prices Million US $ 2,360 9,160 9,723 8,295 8,572 9,958 11,325 GDP at 2000 Constant prices Million US $ 2,360 3,975 4,228 4,316 4,488 4,741 5,025 Real GDP Growth Rate % 4.9 7.2 6.4 2.1 4.0 5.6 6.0 Real per Capita GDP Growth Rate % 1.7 4.4 3.6 -0.5 1.3 3.0 3.3 Gross Domestic Investment % GDP 18.7 27.8 28.6 26.1 24.6 26.5 26.2 Public Investment % GDP 6.4 6.1 5.3 7.7 5.9 5.8 5.6 Private Investment % GDP 12.2 21.7 23.2 18.4 18.7 20.7 20.6 Gross National Savings % GDP 13.6 20.4 20.0 16.6 15.2 19.0 19.8
Prices and Money Inflation (CPI) % 4.2 1.0 -1.1 0.3 -0.8 0.1 2.4 Exchange Rate (Annual Average) local currency/US$ 709.9 493.9 493.6 591.2 593.1 582.1 558.1 Monetary Growth (M2) % 68.1 14.9 15.9 9.1 -0.3 5.2 ... Money and Quasi Money as % of GDP % 38.2 58.7 64.1 68.5 65.8 60.7 ...
Government Finance Total Revenue and Grants % GDP 17.5 19.3 17.2 17.3 15.2 16.1 16.1 Total Expenditure and Net Lending % GDP 19.2 21.0 19.1 25.3 21.4 21.9 20.9 Overall Deficit (-) / Surplus (+) % GDP -1.7 -1.7 -1.9 -8.0 -6.2 -5.8 -4.7
External Sector Exports Volume Growth (Goods) % 43.2 102.1 27.2 19.2 -1.4 36.3 46.9 Imports Volume Growth (Goods) % -12.2 35.1 23.6 -13.4 4.9 17.8 26.8 Terms of Trade Growth % -32.2 -14.2 -2.3 -3.9 -2.1 -5.8 -5.7 Current Account Balance Million US $ -104 -673 -886 -745 -809 -1,042 -919 Current Account Balance % GDP -4.4 -7.4 -9.1 -9.0 -9.4 -10.5 -8.1 External Reserves months of imports 8.6 0.4 0.3 3.5 3.4 1.0 0.1
Debt and Financial Flows Debt Service % exports 16.9 5.4 5.1 5.4 4.6 5.1 6.4 External Debt % GDP 51.2 17.3 18.4 20.9 21.4 23.1 23.5 Net Total Financial Flows Million US $ 232 698 670 386 487 ...... Net Official Development Assistance Million US $ 243 660 599 430 493 ...... Net Foreign Direct Investment Million US $ 60 360 405 229 161 ......
Real GDP Growth Rate, 2006-2018 Inflation (CPI), Current Account Balance as % of GDP, 2006-2018 2006-2018 % 8.0 10 0.0 7.0 8 6.0 -2.0 5.0 6 -4.0
4.0 4 -6.0 3.0 2 -8.0 2.0 0 -10.0 1.0
-2 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 -12.0 2,006 2,007 2,008 2,009 2,010 2,011 2,012 2,013 2,014 2,015 2,016 2,017 2,018
0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source : AfDB Statistics Department; IMF: World Economic Outlook,April 2018 and International Financial Statistics, April 2018; AfDB Statistics Department: Development Data Portal Database, April 2018. United Nations: OECD, Reporting System Division. Notes: … Data Not Available ( e ) Estimations ( p ) Projections Last Update: May 2018
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Benin COMPARATIVE SOCIO-ECONOMIC INDICATORS
Develo- Develo- Year Benin Africa ping ped Countries Countries Basic Indicators GNI Per Capita US $ Area ( '000 Km²) 2017 115 30,067 80,386 53,939 Total Population (millions) 2017 11.5 1,184.5 5,945.0 1,401.5 2500 Urban Population (% of Total) 2017 44.8 39.7 47.0 80.7 2000
Population Density (per Km²) 2017 101.6 40.3 78.5 25.4 1500 GNI per Capita (US $) 2016 820 2 045 4 226 38 317 1000 Labor Force Participation *- Total (%) 2017 71.3 66.3 67.7 72.0 Labor Force Participation **- Female (%) 2017 69.8 56.5 53.0 64.5 500 Sex Ratio (per 100 female) 0 2017 99.6 0.801 0.506 0.792 2000 2005 2010 2011 2012 2013 2014 2015 2016 Human Dev elop. Index (Rank among 187 countries) 2015 167 ...... Popul. Liv ing Below $ 1.90 a Day (% of Population) 2015 49.5 39.6 17.0 ... Benin Africa Demographic Indicators Population Grow th Rate - Total (%) 2017 2.6 2.6 1.3 0.6 Population Grow th Rate - Urban (%) 2017 3.6 3.6 2.6 0.8 Population < 15 y ears (%) 2017 41.6 41.0 28.3 17.3 Population Growth Rate (%) Population 15-24 y ears (%) 2017 20.1 3.5 6.2 16.0 3.5 Population >= 65 y ears (%) 2017 2.9 80.1 54.6 50.5 3.0 Dependency Ratio (%) 2017 80.3 100.1 102.8 97.4 2.5 Female Population 15-49 y ears (% of total population) 2017 24.2 24.0 25.8 23.0 2.0 Life Ex pectancy at Birth - Total (y ears) 2017 60.2 61.2 68.9 79.1 1.5 Life Ex pectancy at Birth - Female (y ears) 2017 61.7 62.6 70.8 82.1 1.0 Crude Birth Rate (per 1,000) 2017 34.8 34.8 21.0 11.6 0.5 Crude Death Rate (per 1,000) 2017 9.0 9.3 7.7 8.8 0.0 Infant Mortality Rate (per 1,000) 2016 63.1 52.2 35.2 5.8 2000 2005 2010 2012 2013 2014 2015 2016 2017 Child Mortality Rate (per 1,000) 2016 97.6 75.5 47.3 6.8 Total Fertility Rate (per w oman) 2017 4.5 4.6 2.6 1.7 Benin Africa Maternal Mortality Rate (per 100,000) 2015 405.0 411.3 230.0 22.0 Women Using Contraception (%) 2017 18.8 35.3 62.1 ...
Health & Nutrition Indicators Phy sicians (per 100,000 people) 2016 15.3 46.9 118.1 308.0 Life Expectancy at Birth Nurses and midw iv es (per 100,000 people) 2016 59.8 133.4 202.9 857.4 (years) Births attended by Trained Health Personnel (%) 2014 77.2 50.6 67.7 ... 80 Access to Safe Water (% of Population) 2015 77.9 71.6 89.1 99.0 70 60 Access to Sanitation (% of Population) 2015 19.7 51.3 57 69 50 Percent. of Adults (aged 15-49) Liv ing w ith HIV/AIDS 40 2016 1.0 39.4 60.8 96.3 30 Incidence of Tuberculosis (per 100,000) 2016 59.0 3.8 1.2 ... 20 Child Immunization Against Tuberculosis (%) 10 2016 96.0 245.9 149.0 22.0 0 Child Immunization Against Measles (%) 2016 74.0 84.1 90.0 ... 2000 2005 2010 2012 2013 2014 2015 2016 2017 Underw eight Children (% of children under 5 y ears) 2014 18.0 76.0 82.7 93.9
Prev alence of stunding 2014 34.0 20.8 17.0 0.9 Benin Africa Prev alence of undernourishment (% of pop.) 2015 10.3 2 621 2 335 3 416 Public Ex penditure on Health (as % of GDP) 2014 2.3 2.7 3.1 7.3
Education Indicators Gross Enrolment Ratio (%) Primary School - Total 2015 132.5 106.4 109.4 101.3 Primary School - Female 2015 127.6 102.6 107.6 101.1 Infant Mortality Rate Secondary School - Total 2015 58.8 54.6 69.0 100.2 ( Per 1000 ) Secondary School - Female 2015 48.9 51.4 67.7 99.9 100 90 Primary School Female Teaching Staff (% of Total) 2015 23.9 45.1 58.1 81.6 80 Adult literacy Rate - Total (%) 2012 32.9 61.8 80.4 99.2 70 60 Adult literacy Rate - Male (%) 2012 45.0 70.7 85.9 99.3 50 Adult literacy Rate - Female (%) 2012 22.1 53.4 75.2 99.0 40 30 Percentage of GDP Spent on Education 2015 4.4 5.3 4.3 5.5 20 10 0 Environmental Indicators 2000 2005 2010 2011 2012 2013 2014 2015 2016 Land Use (Arable Land as % of Total Land Area) 2015 23.9 8.6 11.9 9.4 Agricultural Land (as % of land area) 2015 33.3 43.2 43.4 30.0 Forest (As % of Land Area) 2015 38.2 23.3 28.0 34.5 Benin Africa Per Capita CO2 Emissions (metric tons) 2014 0.6 1.1 3.0 11.6
Sources : AfDB Statistics Department Databases; World Bank: World Development Indicators; last update : May 2018 UNAIDS; UNSD; WHO, UNICEF, UNDP; Country Reports. Note : n.a. : Not Applicable ; … : Data Not Available. * Labor force participation rate, total (% of total population ages 15+) ** Labor force participation rate, female (% of female population ages 15+)
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