Country Report Benin April 2008

Outlook for 2008-09: Fiscal policy

Benin's fiscal deficit is estimated to have widened to 4.6% of GDP in 2007, reflecting increased social and election-related expenditure-the legislative election was held in March 2007-and a larger wage bill following the recruitment of new civil servants. Given that local elections are scheduled for April 2008, expenditure will remain high in early 2008, although a period of consolidation is expected from the second quarter of the year. Cuts in civil service costs are likely to be difficult to achieve politically. Consequently, only slow progress will be made with the reform of the civil service pay structure urged by the IMF and donors, under which across-the-board pay rises would be replaced by a system based on merit. However, revenue should increase, owing to reforms in tax collection and customs administration. As a result of these trends the Economist Intelligence Unit expects the fiscal deficit to narrow to 4.4% of GDP in 2008 and 4.1% of GDP in 2009. As in recent years, the deficits will be financed largely through external borrowing.

© 2008 The Economist lntelligence Unit Ltd. All rights reserved
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