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2005-2009-Benin-Country Strategy Paper

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2005-2009-Benin-Country Strategy Paper AFRICAN DEVELOPMENT FUND REPUBLIC OF BENIN RESULTS-BASED 2005-2009 COUNTRY STRATEGY PAPER COUNTRY DEPARTMENT WEST REGION MAY 2005 SCCD: G. G. Annexes 01 Republic of Benin: Administrative Map 02 Bank Group Operations 03 Bank Group’s Strategic Framework Matrix 04 Country Socio-Economic Indicators 05 Key Macro-economic and Financial Indicators 06 National Accounts (current prices) 07 National Accounts (constant prices) 08 Public Finance 09 Monetary Survey 10 Balance of Payments and Financing Requirements 11 Millennium Development Goals 12 Main Boxes on Benin 13 Benin Poverty Reduction Strategic Paper Monitoring Indicators Boxes Box 1 : Key Features of the Country Box 2 : Poverty Characteristics Box 3 : Summary of the Key Elements of the Government’s Agenda and Expected Outcome Box 4 : Donor Interventions by Sector Box 5 : Consultations on the Bank Group’s Strategy Tables Table 1 : Results-based CSP Framework TABLE OF CONTENTS Acronyms, Currency Equivalents and Executive Summary i-v I INTRODUCTION 1 II RECENT DEVELOPMENTS 2 2.1 Political Context 2 2.2 Macro-Economic and Structural Context Issues 3 2.3 Sectoral Context Issues 6 2.4 Priority Cross-Cutting Issues 8 2.5 Poverty and Social Context Issues 13 2.6 Medium-term Economic Outlook and External Environment 15 2.7 Private Sector Business Climate and Issues 17 III. NATIONAL DEVELOPMENT AGENDA AND MEDIUM-TERM PROSPECTS 18 3.1 Key Elements of the Government’s Development Agenda 18 3.2 Assessment of the Implementation Progress of the Agenda 20 3.3 Partnership Framework 21 3.4 Challenges and Risks 22 IV BANK GROUP COUNTRY ASSISTANCE STRATEGY 23 4.1 Country Context and Strategic Selectivity 23 4.2 Portfolio Management and Lessons Drawn from Past CSPs 25 4.3 CSP Results Framework 26 4.4 CSP Pillars and Areas of Focus 29 4.5 Regional Dimensions of the Bank Group Assistance 34 4.6 Bank Group Assistance 34 4.7 Partnership and Harmonisation 37 V RESULTS-BASED MONITORING AND EVALUATION 37 5.1 Monitoring of CSP Outcomes and Bank Group Performance 37 5.2 Risk Management 38 5.3 Country Dialogue Issues 38 VI CONCLUSIONS AND RECOMMANDATIONS 39 This report was prepared following a mission of the Bank’s Country Team to Benin in December 2004. The mission was composed of Mr. R. KANE, Macro-economist, OCCW.2, (Head of mission), Mrs S. FORYT, Specialist on health issues, OCSD, Mr. M. SOUARE, Transport Expert, OCIN, and Mr. H. NOUDEDJI, Agro- economist, OCAR. During its stay in Cotonou, the 2005-2009 CSP preparation mission was also supported by an OCSD supervision mission headed by Mr. E. PORGO, Division Manager, OCSD.2, and including Mrs A. DAO SOW, OCSD.2 and Mr. I. SANOGO, OCSD. The 2005-2009 CSP validation mission was conducted in May 2005. i ACRONYMS AND ABREVIATIONS ADB : African Development Bank ADF : African Development Fund AIDS : Acquired Immunodeficiency Syndrome BCEAO : Central Bank of West African States CAA : Caisse autonome d’amortissement (Autonomous amortization fund) CENTIF : Cellule nationale de traitement des informations financières (National financial information processing unit) CFAA : Country Financial and Accountability Assessment CFAF : Franc of the African Financial Community CGP : Country Governance Profile CMVP : Cellule de moralisation de la vie publique (Public Life Improvement Unit) CNCS : Comité national de coordination et de suivi (National Coordination and Follow-up Committee CPAR : Country Procurement Assessment Review CSP : Country Strategy Paper DANIDA : Danish Cooperation Agency DWSS : Drinking Water Supply and Sanitation ECOWAS : Economic Community of West African States EU : European Union FECECAM : Fédération des caisses d'épargne et de crédit agricole mutuel (Federation of Savings Banks and Mutual Agricultural Credit Funds) FIAS : Foreign Investment Advisory Service GDP : Gross Domestic Product GNP : Gross National Product HDI : Human Development Index HIPC : Heavily-Indebted Poor Countries HIV : Human Immunodeficiency Virus IDA : International Development Association IMF : International Monetary Fund INSAE : Institut national de statistique et d’analyses économiques (National Statistics and Economic Analysis Institute) I-PRSP : Interim Poverty Reduction Strategy Paper JBS : Joint Budget Support MTEF : Medium-Term Expenditure Framework OHADA : Organization for the Harmonization of Business Law in Africa PADS : Health Care System Development Support Project PARB : Programme d’appui aux réformes budgétaires (Budget Reforms Support Programme) PASRP /PRSSP : Poverty Reduction Strategy Support Programme) PERAC : Public Expenditure Reform Adjustment Credit PGFP : Plan de gestion forestier participatif (Participatory Forest Management plan) PP : Public Procurement PRGF : Poverty Reduction and Growth Facility PRS : Poverty Reduction Strategy PRSC : Poverty Reduction Strategic Credit PRSP : Poverty Reduction Strategy Paper RBCSP : Results-Based Country Strategy Paper SAL : Structural Adjustment Loan SBEE : Société béninoise d’énergie électrique (Electricity and Water Company of Benin) SIGFIP : Système informatique de gestion intégrée des finances publiques (Integrated Public Finance Management System) ii SONACOP : Société nationale de commercialisation des produits pétroliers (National Petroleum Products Marketing Company) SONAPRA : Société nationale de production agricole ((National Agricultural Production Company) SP-CNDLP : Secrétariat Permanent de la Commission Nationale pour le Développement et la Lutte contre la Pauvreté (Permanent Secretariat of the National Committee for Development and Poverty Reduction) TOFE : Table of the State’s financial operations) UNDP : United Nations Development Programme WAEMU : West African Economic and Monetary Union CURRENCY EQUIVALENTS (May 2005) Currency Unit = CFA Franc UA 1 = 758.03 FCFA UA 1 = US $ 1.53199 Fiscal Year 1st January to 31 December Weights and Measures Metric System iii EXECUTIVE SUMMARY 1.1. Benin, with a gross national per capita income estimated at about US $ 440 in 2003, has registered remarkable progress since the adoption, in May 2003, of the Bank Group’s assistance strategy. At the macro-economic level, such progress was materialized through a real GDP growth estimated at 5%, inflation control and a bearable budget deficit. Benin has put into operation a system meant to monitor and evaluate its poverty reduction programmes, through the Social Change Observatory (Observatoire du Changement Social). Besides, a medium and long-term expenditure mechanism for the 2003-2005 period and performance indicators were finalized for the key priority sectors. With respect to governance, the country can boast of a remarkable political stability as well as progress in the entrenchment of democracy. The country’s performances were considered satisfactory by its development partners, particularly the IMF, despite the fact that a public expenditure overrun was observed in 2004. In March 2005, the rating agency Standard and Poors confirmed Benin’s “B+” long-term credit rating and “B” short-term credit rating. This rating reflects prudent public finance management, the scale of the financial support provided by the country’s development partners and the foreign debt relief granted to Benin. At the structural level, the implementation of reforms was pursued, notably in the fiduciary sector, liberalization and private sector promotion, as well as in building the capacity of the poor to participate in the decision-making and production process. The HIPC resources managed in the same way as the other public expenditures are identifiable in the budget. 1.2. However, after an average annual growth rate of about 5% between 2000 and 2003, the real GDP growth rate dropped to 2.7% in 2004. This downturn of economic activity is, among other things, a reflection of the decline in harbour operations and trade restrictions imposed on the country by Nigeria. Besides, the cotton sub-sector which is a source of income for more than two million people and is the country’s main export product, has been confronted with a major crisis since 2002, due to the decline in production and the appreciation of the Euro in relation to the dollar, which penalises Beninese exports to the Asian market. The developments registered since 2003 does not show any significant progress in the fight against poverty. On the contrary, the poverty divide has widened. The main factors that weaken the Beninese economy are the poor diversification of the country’s production, which essentially relies on the cotton sub-sector, as well as the fact that the added value of the tertiary sector, which contributes over a third of the GDP, is highly dependent on trade relations with Nigeria. Concerning liberalisation, the reforms initiated in 2004 have been delayed with regard to the privatisation of government-owned enterprises. 1.3. In the field of governance, despite the positive results registered as regards the improvement of democracy and budget management, Benin intends to pursue its actions relating to: (i) the consolidation of the fiduciary framework and the government procurement system, (ii) the reform of the judicial sector and the fight against corruption and money laundering (iii) the improvement of stakeholders’ participation by building the capacity of the private sector and removing barriers hindering private investments. Strengthening the structures and mechanisms meant to monitor and implement the poverty reduction strategy also contributes to the consolidation of the rule of law. 1.4. Benin has considerable assets capable of accelerating its economic
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