Benin: Growth and Poverty Reduction Strategy Support Programme: US$ 33 Million ADF Budget Support Loan and Grant

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Tunis, 29 April 2009 –  The Republic of Benin will receive a US$ 33 million combined loan and grant approved on Wednesday in Tunis by the Board of Directors of the African Development Fund (ADF), the concessionary window of the African Development Bank (AfDB) Group, to finance the country’s Third Growth and Poverty Reduction Strategy Support Programme (GPRSSP III).

The 11 million Units of Account* (US$ 16.5 million) loan and grant in the same amount will support the implementation of Benin’s Poverty Reduction and Growth Strategy (PRGS) 2007-2009 and the Public Finance Management Action Plan (PMAP) 2009-2011, both of which aim at strengthening good governance through increased efficiency and effectiveness in public finance management, and building a solid base for sustainable private sector-driven economic growth.

GPRSSP III is aligned with the Bank’s intervention strategy in Benin for 2005-2009, which focuses on “the diversification of production”. The Programme is the continuation of the previous Poverty Reduction Strategy Support Programmes (PRSSP I and II), designed to complete the structural (privatization and diversification of the economy) and public finance (improvement of internal and external controls) reforms in order to accelerate economic growth and poverty reduction.

Since 1990, the Bank has financed a series of reform support operations that have enabled Benin to embark on a process of stabilizing public finance and significantly reducing internal and external deficits. The financing instrument used by the Bank to support these programmes was budget support prepared jointly with other technical and financial partners, including the World Bank, the International Monetary Fund and the European Union.

The people of Benin will be the main beneficiaries of the programme and, more specifically, the poor to whom the government will allocate substantial expenditures by maintaining a good implementation rate of budget allocations to the priority sectors of the strategy (Agriculture, Health, Education, Water and Sanitation), as well as more efficient public resource management. Furthermore, economic operators will benefit from improvement in the business climate through the easing of procedures for starting businesses, facilitating access to land, combating corruption and granting tax benefits.

The programme will help to mitigate the impact of the global financial crisis on public finance, and strengthen macro-economic stability.

As a result of global financial crisis, the budget deficit, which was about 167.5 billion CFAF in late December 2008, increased to 214.8 billion CFAF in 2009 and will reach 231.2 billion CFAF in 2010. A total of 41 billion CFAF will be required in 2009 and 52.4 billion FCFA in 2010 to fund identified activities. ADF budget support will be UA16.5 million (12.6 billion CFAF) in 2009 and UA 5.5 million (4.2 billion FCFCA) in 2010, representing 18% of the residual gap.

* UA 1 = US$ 1.49507= CFAF 736.928 as at 29-04-2009

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