AFRICAN DEVELOPMENT FUND

BENIN

ENERGY SECTOR BUDGET SUPPORT PROGRAMME - PHASE I

(PASEBE I)

RDGW/ECGF/PESD/COTG DEPARTMENTS

March 2017

Translated Document

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TABLE OF CONTENTS

INFORMATION ON THE PROGRAMME ............................................................................................ ii

LOAN INFORMATION ............................................................................................................................. ii

Client Information ........................................................................................................................................ ii

I. INTRODUCTION: THE PROPOSAL ............................................................................................. 1

II. COUNTRY CONTEXT ..................................................................................................................... 1 2.1. Political Situation and Governance Context ..................................................................... 1 2.2. Recent Economic Trends, and Macro-economic and Budgetary Analysis .......................... 2

2.3. Economic Competitiveness ............................................................................................. 3 2.4. Energy Sector Review .................................................................................................... 3 2.5. Public Finance Management ........................................................................................... 5

2.6. Inclusive Growth, Poverty Situation and Social Context ................................................... 5

III. GOVERNMENT’S DEVELOPMENT PROGRAMME ................................................................. 6 3.1. Government’s Development Strategy and Medium-Term Reform Priorities ...................... 6 3.2. Obstacles to the National/Sector Development Programme Implementation ...................... 6

3.3. Consultation and Participatory Process ............................................................................ 6

IV. BANK SUPPORT FOR THE GOVERNMENT’S STRATEGY ..................................................... 7 4.1. Linkages with the Bank Strategy ..................................................................................... 7 4.2. Compliance with Eligibility Criteria ................................................................................ 7

4.3. Collaboration and Coordination with the Other Partners ................................................... 7 4.4. Linkages with Other Bank Operations ............................................................................. 7 4.5. Analytical Underpinnings ............................................................................................... 8

V. PROPOSED PROGRAMME ........................................................................................................... 8 5.1. Programme Goal and Objective ...................................................................................... 8 5.2. Programme Components ................................................................................................ 9 5.3. Policy Dialogue ........................................................................................................... 11

5.4. Loan Conditions .......................................................................................................... 11 5.5. Good Practice Principles for the Application of Conditionality ........................................ 12

5.6. Financing Requirements and Mechanisms ..................................................................... 12 5.7. Application of Bank Group Policy on Accumulation of Non-Concessional Debts ............ 12

VI. PROGRAMME IMPLEMENTATION .......................................................................................... 13 6.1. Programme Beneficiaries .............................................................................................. 13 6.2. Impact on Gender, the Poor and Vulnerable Groups ....................................................... 13

6.3. Environmental Impact and Climate Change ................................................................... 13 6.4. Impact in Other Areas .................................................................................................. 13

6.5. Implementation, Monitoring and Evaluation .................................................................. 14 6.6. Financial Management and Disbursement ..................................................................... 14

VII. LEGAL DOCUMENTATION AND AUTHORITY ...................................................................... 15

7.1. Legal Documentation ........................................................................................................................ 15

7.2. Conditions for Bank Intervention ....................................................................................................... 15

7.3. Compliance with Bank Group Policies ............................................................................................... 15

VIII. RISK MANAGEMENT ................................................................................................................... 15

IX. RECOMMENDATION ................................................................................................................... 16

Annex I: Benin – Energy Sector Budget Support Programme in Benin – Phase I (PASEBE I): Matrix

of Measures

Annex II: Note on Relations with the IMF

Annex III: Agreement with Benin on an Extended Credit Facility Arrangement

Annex IV: Selected Macro-Economic Indicators

Annex V: Table of Bank Operations in Benin under CSP 2012-2016

i

CURRENCY EQUIVALENTS

(September 2016)

UA 1 = CFAF 821.62

UA 1 = EUR 1.25

UA 1 = USD 1.39

FISCAL YEAR 1 January - 31 December

ACRONYMS AND ABBREVIATIONS

ADF African Development Fund

AFD French Development Agency

AfDB African Development Bank

BCEAO Bank of West African States

BOAD West African Development Bank

CEB Communauté Electrique du Bénin (Benin Electricity Community)

CEET Compagnie Energie Electrique du Togo (Togo Electric Energy Company)

CPIA Country Policy and Institutional Assessment

CSP Country Strategy Paper

DGE General Directorate of Energy

EIBD ECOWAS Investment and Development Bank

EU European Union

GDP Gross Domestic Product

HDI Human Development Index

IMF International Monetary Fund

JICA Japanese International Cooperation Agency

MCA-Benin Millennium Challenge Account - Benin

MCC Millennium Challenge Corporation

MDG Millennium Development Goal

MEF Ministry of the Economy and Finance

MEME Ministry of Energy, Mines and Water Resources

PBA Performance-Based Allocation

PPA Power Purchasing Agreement

PRGS Growth and Poverty Reduction Strategy

RMC Regional Member Country

SBEE Société Béninoise d’Energie Electrique (Benin Electric Power Company)

SME Small and Medium-Sized Enterprises

TFP Technical and Financial Partner

TGFO AfDB Field Office in Benin

UA Unit of Account

UNDP United Nations Development Programme

VAT Value Added Tax

WAEMU West African Economic and Monetary Union

WAPP West Africa Power Pool

WB World Bank

ii

INFORMATION ON THE PROGRAMME

INSTRUMENT : Sector Budget Support

PBO DESIGN MODEL : Programme Support Operation

LOAN INFORMATION

Client Information

BORROWER : Benin

ORGANE D’EXÉCUTION : EXECUTING AGENCY : Ministry of the Economy and Finance

Financing Plan

Source Amount (UA)

2017

Amount (CFAF)

2017

Amount (UA)

2018

Instrument

ADF-13

12.02 million

9.88 billion

To be defined

Loan

ADF (resources

cancelled)

7.9 million

6.47 billion

To be defined

Loan

TOTAL COST 19.92 million 16.35 billion To be defined

Key ADF Loan Information

Loan Currency Unit of Account

Interest Rate 2.8572%

Interest Rate Margin Not Applicable

Service Commission 0.75% per year on loan amount disbursed but not yet repaid

Commitment Fee 0.50% on undisbursed loan amount starting 120 days after signature

of the Loan Agreement.

Other Charges None

Tenor 40 years

Grace Period 5 years

Implementation Schedule – Key Milestones (Expected)

Concept Note Approval September 2016

Appraisal September 2016

Programme Approval March 2017

Effectiveness April 2017

Single Tranche Disbursement April 2017

Completion December 2017

iii

PROGRAMME SUMMARY

Programme

Overview

Programme Name : Energy Sector Budget Support Programme in Benin – Phase I (PASEBE I)

Expected Outcomes: Support for efforts made by the Government of Benin towards regular supply of electricity in the

short term, by ensuring fuel supply to independent producers; improvement of sector governance by supporting reforms

that will in the medium term enable Benin to increase its national electricity production and have a tariff system that reflects

the real costs of electric power.

Overall implementation schedule: Sector budget support – programme support operation : March 2016 – December 2017

Programme cost: UA 19.92 million

Programme

Outcomes

The expected programme outcomes are: (i) stabilization of electricity production; and (ii) efficient management of the

electricity sub-sector.

Compliance with

Bank Priorities

The programme is consistent with the Bank’s Country Strategy Paper (CSP 2012-2016) for Benin whose mid-term review

took place in 2014, especially its two pillars: (i) Development of support infrastructure for production and competitiveness,

and (ii) Promotion of good governance. It is also in line with the first of the Bank’s High 5 priorities (“Light up and power

Africa”), and contributes to two other priorities: "Industrialize Africa" and "Improve the living conditions of people in

Africa". Furthermore, it is in keeping with the Bank’s Strategy for the New Deal on Energy for Africa (2016-2025),

particularly the creation of a conducive environment for reforms.

Needs Assessment

and Rationale

The demand for electricity in Benin has been growing steadily due to sustained economic growth (over 5% in 2015),

population growth and galloping urbanization. The sector’s difficulties over the past few years have been exacerbated

particularly by frequent selective power cuts. These power cuts are due to: (i) the drop in quantities of power imported

from the main supplier countries (Cote d’Ivoire, Ghana, and Nigeria) which can no longer supply the CEB (Benin and

Togo) with the contractual quantities of energy since they now have to prioritize the steadily growing demand at home, as

well as CEB’s unpaid bills owed to these external suppliers; (ii) shortage of fuel supplies to Independent Power Producers

which in 2015 accounted for nearly 90% of the electricity generated locally in Benin. This national production helped to

satisfy nearly 8% of local electricity demand in 2015, with the remaining 92% provided by the CEB (imported and locally

produced community hydroelectric and thermal power); and (iii) the lack of significant investments to rehabilitate SBEE’s

production and distribution plants. With these difficulties, demand far exceeds supply, hence the frequent and increasingly

longer power cuts which hurt economic activities, particularly those of the informal sector and very small, small and

medium-sized enterprises with very little means to buy back-up generators and obtain regular supply of fuel. PASEBE I

comes within this context to offer special support to Benin’s Government to help it reduce selective power cuts and

implement actions to provide long-term resolutions to the crisis in the electricity sub-sector.

Harmonization This operation is designed jointly with the other Technical and Financial Partners (TFP). It supplements the budget support

operation that the World Bank is preparing for Benin and which targets actions in the electricity sub-sector. The operation

is in line with the actions of the Millennium Challenge Corporation (MCC) which, under the second Compact approved in

September 2015, will support Benin to improve electricity sub-sector governance, increase energy production, and

strengthen distribution facilities. The Bank’s budget support will supplement the European Union’s efforts aimed at

strengthening the Electricity Regulatory Authority.

Bank’s Added Value The Bank is one of the key partners of the energy sector in Benin. Over the past few years, it financed several operations

in the electricity sub-sector, including the multinational NEPA (Nigeria) – CEB (Benin-Togo) Electricity Grid

Interconnection Project, the Project to Electrify 17 rural centres, and the Rural Electrification Project II. These three

projects have all been completed. The Bank also financed the Ghana-Togo-Benin Interconnection Project through a 330-

kV Line which is an essential link of the WAPP coastal backbone linking Nigeria to Cote d’Ivoire. This ongoing project

will be completed at end-2017. At national level, the Bank is preparing a Project to Restructure and Strengthen the Sharing

and Distribution System of Société Béninoise d’Energie Electrique (SBEE) which will be approved in 2017. Given the

increasing scope of the Bank’s energy sector interventions, this programme is relevant because it will help to improve the

overall electricity sub-sector governance framework so as to facilitate implementation and guarantee the impact of the

ongoing and future interventions of the Bank and other development partners in Benin.

Contributions to

Gender Equality

and Women’s

Empowerment

The programme will help to improve the living conditions of the population, and hence of women who make up 52% of

the population of Benin. It will, in particular, benefit 31% of the population who will have access to electricity, especially

women who are very active in the informal sector (petty trading, catering, handicraft, and processing of food products) and

have very limited means to procure back-up power generators.

Policy Dialogue

and Related

Technical

Assistance

This operation will also help to consolidate dialogue with Benin’s Authorities for the implementation of measures that can

mitigate constraints on the supply of stable electric power. Dialogue with the Government will be through supervision

missions and regular meetings between the Government and the Country Economist present in Benin and TGFO. Dialogue

will also rely on the Energy Thematic Group in which AfDB participates. This will help to strengthen synergy with other

partners’ interventions, especially the energy-sector based programme of MCA-Benin, which is the executing agency of

MCC. Dialogue will be underpinned by analytical works and situational reports that will be produced with TFP support to

improve the performance of the sector.

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RESULTS-BASED LOGICAL FRAMEWORK

I.

Project Country/Name: Energy Sector Support Programme in Benin – Phase I (PASEBE I)

Project Goal: Increase energy supply so as to create conditions for inclusive economic growth and improve sector governance

RESULTS CHAIN PERFORMANCE INDICATORS MEANS OF VERIFICATION RISKS/

MITIGATION

MEASURES

Indicator

(including CSIs)

Baseline Situation Target 2017

IMP

AC

T

Inclusive and

sustainable economic

growth as a result of

regular power supply

GDP growth rate 5.0 % in 2015 6% in 2017

Reports of the Ministry of the

Economy and Finance

Risks : (i) Macro-

economic; (ii)

fiduciary

Mitigation Factor

and Measures:

- Rigour in public

finance management

- Rigour and

compliance with

public procurement

procedures

- Bank monitoring

missions

% of urban households with access

to electricity 58% in 2015 60% in 2017

Report of the Ministry of Energy,

Mines and Water Resources

Reports of DGE % of rural households with access

to electricity 7% in 2015 8% in 2017

OU

TC

OM

E

S

Power services

improved Power deficit 90 MW in 2016 0 MW

Reports of the Ministry of

Energy, Mines and Water

Resources; SBEE and DGE

Reserve capacity 0 MW in 2016 60 MW

OU

TP

UT

S

Output 1 : Support Regular Power Supply

Component 1:

Support for regular

power supply

Significant increase in national

electric power supply

140 MW

350 MW (+150 MW from

leased generators +60 MW of

additional imports from

Nigeria)

Signing of generator lease

agreement to supply 150 MW

Signing of contracts to import 60

MW from a Nigerian Independent

Power Producer (IPP)

An authorization from the High

Inter-State Authority of the

Electricity Community of Benin

to import 60 MW

Output 2: Improve Sector Governance

Component 2.1 :

Strengthening of the

Electricity

Regulatory Authority

(ARE)

ARE’s recurrent budget Irregular State

budget allocation

(CFAF 500 million

in 2014; 120

million in 2015

Joint decree of the Ministry of

Energy and the Ministry of the

Economy and Finance

instituting a fee to cover the

operating costs of ARE

Reports of the Ministry of

Economy and Finance

ARE report

v

Revision of electrical Decree No.

2009 – 182 of 13 May 2009

amended in 2017 to give ARE the

power to approve tariffs

- Decree revised Publication of decree

Component 2.12 : Streamlining of

SBEE management

Appointment of a new management

team and new members of SBEE

Board of Directors

Interim

management team

established

Officials appointed through

competition

Members of the Board of

Directors appointed in

accordance with the

recommendations of the

consultant recruited by MCA-

Benin

Reports of the Ministry of

Energy,

SBEE reports

State arrears owed to SBEE - State-SBEE crossed debts

reconciled, and the balance

known

Proposed arrears settlement

plan

Statement of reconciliation of

SBEE’s crossed debts

Report of the Ministry of Energy

KE

Y

AC

TIV

ITI

ES

Key Activities:

- Signing of Loan Agreement and fulfilment of conditions precedent to the intervention of the African

Development Fund

- Implementation of adopted measures, Quarterly progress reports, Bank supervision reports, and the

Programme Completion Report

- ADF Loan : UA 19.92 million

1

I. INTRODUCTION: THE PROPOSAL

1.1. Management hereby submits this proposal concerning the granting of an ADF loan of UA 19.92

million to Benin to finance the Energy Sector Budget Support Programme in Benin – Phase I (PASEBE

I). PASEB I is the first phase of a programme-based budget support operation. This approach allows for

greater aid effectiveness and better alignment with the country’s development policies in order to create

conditions for inclusive sustainable growth. This multi-year framework also helps to build a medium-term

platform for dialogue on key reforms aimed at increasing energy supply in the country. The programme’s

inter-sector approach will help to create synergy between the Bank’s Energy Department and Budget Support

Department to ensure better complementarity.

1.2. The programme aims to improve electric power supply and electricity sub-sector governance in

order to create conditions for inclusive and sustainable economic growth. By providing immediate response

to curb selective power cuts, the programme will have a positive impact on economic growth and thus contribute

to improving the population’s living conditions.

1.3. PASEBE I is consistent with the guidelines of the Governance Action Plan (GAP 2016-2021),

approved in October 2016 and focusing mainly on the improvement of governance and promotion of

growth-support infrastructure. GAP 2016-2021 gives priority to strengthening energy capacity and the

Government seeks provide the country adequate means to obtain quality energy services in sufficient

quantity and under optimum conditions of cost and supply security. The objective is to create conditions

conducive to robust and sustained growth that can generate a multiplier effect on improvement of the

incomes and living standards of the population. PASEBE I is also consistent with the energy sector

rehabilitation plan recently adopted by the Government. The choice of budget support operation stems mainly

from the need to provide an urgent response to the crisis in the electric power sub-sector.

1.4. The programme is consistent with the Bank Group’s Ten-Year Strategy (2013-2022) and

contributes to achieving three of the five strategic objectives (High Fives) namely: (i) Light up and power

Africa; (ii) Industrialize Africa; and (iii) Improve the living standards of the people of Africa. It will

contribute to the implementation of the Bank’s Energy Sector Policy (approved in 2012), which targets

a two-fold objective: (i) support efforts made by Regional Member Countries (RMC) to provide their

populations and production sectors with access to modern reliable energy services at affordable cost;

and (ii) help RMCs to develop an energy sector that is socially, economically and environmentally

viable. Another rationale for the Bank’s financing proposal is its alignment with the Bank’s New Deal

on Energy for Africa (2016-2025) approved in 2016 to achieve universal access to energy by 2025. By

aiming to appoint SBEE officials through competition and strengthen ARE so as to empower it to set

electricity rates, the project aligns with the strategic theme of the New Deal on Energy for Africa which

is "Creating a favourable policy framework". In addition, the objective of preparing a plan for the

Government to clear its arrears to SBEE aligns the project with the theme "Strengthening the capacity of

electricity companies to guarantee success". The programme is also consistent with the policy on programme

support operations.

II. COUNTRY CONTEXT

2.1. Political Situation and Governance Context

2.1.1. The socio-political climate in Benin in 2016 is marked by the recent elections that changed the

country’s political configuration. The presidential elections held in March 2016 allowed for a peaceful

change at the helm of State. This shows that democracy and stability are being consolidated in Benin,

and this will help to usher in a conducive environment for growth.

2.1.2. Although the country is pursuing reforms in economic and financial governance, progress

remains inadequate. The implemented reforms mostly concern the new finance laws organic

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framework (LOLF), as well as the modernization of the tax/customs administrations and public

procurement system. According to Transparency International, the country’s corruption perception

index stood at 37 points in 2015 against 39 in 2014 (on a scale from 0 (Very Corrupt) to 100 (Least

Corrupt)).

2.1.3. As regards Benin’s procurement system, normative progress was made in the reform of public

procurement procedures and transposition of WAEMU Directives on public procurement. The reviews

conducted by the Bank in 2010 and 2014 on the use of the national public procurement system concluded

that the national system largely complies with international standards and the Bank Policy thanks to the

transposition of Directives Nos. 4 and 5 of WAEMU.

2.2. Recent Economic Trends, and Macro-economic and Budgetary Analysis

2.2.1. Since 2012, the country has recorded economic growth rates above 5%, sustained by

agricultural production and trade. Growth slowed down in 2015 when rates fell from 6.5% in 2014 to

5% in 2015, due mainly to the wait-and-see attitude shown by business operators because of elections

in Nigeria and Benin, and the over 30% drop in cotton production due to a dry spell during the planting

period. In the first quarter of 2016, economic activity was marked mainly by the holding of presidential

elections in Benin, the persistence of power outages and slowdown of economic activity in Nigeria.

Growth forecasts for 2016 were thus revised downward to 5% as against initial forecasts of 5.8%.

Inflation has remained below the community threshold of 3% since 2013, due to the steady fall in the

prices of food products and transportation.

2.2.2. With respect to budget management, it was marked over the past few years by an aggravation

of the budget deficit, excluding grants, which rose from 3.5% of GDP in 2013 to 8.5% of GDP in 2015.

This increase is due to lower customs revenue as a result of shrinking re-export activity and to the over

30% increase in public spending between 2013 and 2015. Public spending increased because of

resources committed for organization of different elections in 2015 and 2016, as well as the over 30%

increase in capital expenditure to accelerate public projects in 2015.

2.2.3. Debt: Although the country’s debt level rose in 2015, it remains low, judging from the debt

sustainability analysis jointly conducted in 2015 by the IMF and World Bank. According to national

statistics, the public debt level (domestic and external) was estimated at 41.6% in 2015 as against 31%

in 2014 and 25.4% in 2013. The increased debt level in 2015 stems mainly from recourse to the public

securities market and direct bank loans to finance certain projects. Each year, the Government prepares

a public debt strategy paper attached as Annex to the Finance Law. The strategy for 2017-2021

prioritizes recourse to concessional resources from Benin’s conventional donors, a gradual increase in

semi-concessional financing from new financial partners, and the mobilization of limited amounts of

non-concessional borrowings on a case-by-case basis to finance profitable projects. Such commitment

is guarantee that the debt will be kept under control so as not to hamper the country’s development. The

country is discussing with the IMF to conclude a programme which could start before end-2016.

2.2.4. Trade: Benin’s external trade is still marked by a structural deficit of its external current

account and weak exports diversification, reflecting the low level of agricultural and industrial

development. In 2015, the deficit of its current external account stood at 7.1 % of GDP as against 7.2%

in 2014.

2.2.5. The macro-economic prospects are based on growth, which averaged about 6% over the 2017-

2019 period, thanks to higher agricultural production, infrastructure spending and fewer selective cuts

in electric power distribution. The economic policy guidelines for the coming years are also consistent

with the framework for achieving the Sustainable Development Goals (SDGs) by 2030. However, the

prospects remain contingent on security risks in the West African sub-region and the slowdown of

economic activity in Nigeria linked to the drop in oil prices. Climatic risks are also significant, as seen

3

in recurrent floods, pockets of drought, and delays in the first rains, as was the case in 2015.

2.3. Economic Competitiveness

2.3.1. Despite efforts made by the country, its economic competitiveness remains low.

According to the 2015-2016 Global Competitiveness Report, Benin was ranked 122nd out of 140

countries, with an overall competitiveness score of 3.5 on a scale of 1 to 7. The factors that most hamper

Benin’s economic competitiveness are inadequate infrastructure and technological development,

difficult access to credit, corruption and administrative red tape. Thanks to major reforms aimed at

improving the country’s competitiveness and business climate, Benin was ranked among the ten best

reforming countries in the World Bank’s 2015 and 2016 Doing Business Reports with respect to the

business climate. In the 2017 report, the country was ranked 155th out of 190 countries. The country

gained 60 positions the same year, moving from the 117th position to the 57th for the starting a business

criterion. Although the private sector has become more dynamic over the past few years, fostered by the

country’s closeness to Nigeria, the dynamism nevertheless remains limited and dominated by the

informal sector. The difficult access to factors of production (power, water, internet, and land) and

financing is still a challenge that the country needs to tackle. Benin’s economy can become highly

competitive by implementing robust energy sector reforms, along with transformative projects. Indeed,

local and foreign investors place a high premium on access to energy.

2.4. Energy Sector Review

2.4.1. Benin’s energy sector is marked by low per-capita power consumption, high dependence

on external sources, a predominance of fuel biomass (fire wood, charcoal and plant wastes) and the

population’s low access to modern energy sources (petroleum products and electricity). Per-capita

electric power consumption is very low and stands at around 42 kWh/inhabitant/year. The country’s

energy supply is totally externally-sourced, which exposes it to external shocks over which it has no

control. Indeed, Benin imports 100% of the petroleum products it consumes.

2.4.2. SBEE obtains its electric power supply primarily from the Benin Electricity Community

(CEB), which provided nearly 92% of Benin’s energy needs in 2015, as against 97% in 2014. The

quantity of electric power imported by SBEE from CEB rose to 1,100GWh in 2015, representing a

0.84% drop compared to 2014 when it was 1,109 GWh. So in 2015, SBEE supplied from its own

production about 9% of domestic demand for electric power. The electricity produced by SBEE’s

generation plants rose sharply in 2015 to 103 GWh as against 30 GWh in 2014, corresponding to a 237%

increase. In 2015, 90% of this locally-produced electricity using mainly thermal plants (diesel/fuel) was

ensured by independent producers under two generator lease contracts totalling 80 MW that expired at

end-September 2016. Current peak demand is estimated at 230 MW, while available supply is below

140 MW, making a shortfall of 90 MW. The electricity access rate at national level remains low at 31%

(58% in urban centres and 7% in rural areas) as against an average of 40% in Africa.

2.4.3. Benin’s main electric power suppliers are Nigeria, Cote d’Ivoire and Ghana through the

Benin Electricity Community (CEB). Due to growing internal demand in these supplier countries

today, these countries are not always able to provide CEB with the contractual quantities and voltages

of energy. Apart from the supplier countries’ internal constraints, imports have also dropped because

CEB has difficulties paying its external suppliers with whom it no longer enjoys the status of privileged

client. This drop in imports has resulted in the resurgence of selective power cuts which affects Benin

and its economy, and might create social unrest.

2.4.4. The electricity sub-sector in Benin is divided into two segments. The first segment is the

CEB (the common entity for Benin and Togo) governed by an International Agreement instituting the

Benin-Togo Electricity Code signed on 27 July 1968. It has exclusive rights to undertake energy

transmission activities and import electric power from neighbouring countries. Consequently, CEB is

4

the sole entity authorized to buy electric power from the regional electricity market to meet the needs of

the two countries. Since the revision of the Benin-Togo Electricity Code on 23 December 2003, the

electricity production segment is now open to independent producers. The second segment is controlled

by Société Béninoise d’Energie Electrique (Benin Electric Energy Company, SBEE) whose main

mission is to distribute and market electric power in Benin. It also has thermal generation facilities with

an installed capacity of 38 MW, nearly 80% of which is available (broken down or obsolete generators).

2.4.5. The sector’s difficulties have worsened over the past few years, and the issue of regular

supply and cost of electric power increasingly seems to be a major obstacle to the country’s

inclusive and sustainable growth. Benin faces strong demand for electric power due mainly to

expanding economic activities and population growth. In 2015, national demand for electric power

increased by over 5%, while the available supply declined by nearly 1%. This situation leads to multiple

interruptions in electricity supply due to insufficient supply (CEB and local production), which heavily

penalizes the development of socio-economic activities.

2.4.6. To remedy this electric power shortage, the public authorities have prepared an action

plan with three types of actions: (i) actions to be undertaken immediately and whose effects are

immediate, including those to end selective power cuts before end-2016; (ii) actions to be undertaken

immediately, but whose effects will only be felt in two to three years (2017 – 2018); and (iii) actions to

be undertaken to have generation facilities that meet national demand as from 2019 and improve the

financial situation of the electricity sector stakeholders. Actions to be undertaken immediately have to

do with the signing of contracts with independent producers for the installation of total production

capacity of 150MW and the import of an additional 60 MW from Nigeria (without passing through

CEB). To do that, an exceptional waiver should be granted to Benin by the High Inter-State Council of

CEB to be able it to directly import electric power from neighbouring countries. CEB will make

appropriate arrangements to import the power through its transmission network.

2.4.7. In addition, several other actions have been taken to boost electric power supply over the

medium and long term. These actions will provide Benin with installed capacity of 335 MW by 2019.

Since current supply is not up to 140 MW, the Government has signed a contract with a Finnish firm

for the rehabilitation of several diesel generators in SBEE plants in Porto-Novo, Parakou and Natitingou.

On completion of rehabilitation works expected to start in October 2016 and cover a period of six

months, 15 generators will be rehabilitated and help to recover an additional 30 MW production capacity

by April 2017. Regarding the 80-MW Maria Gleta plant, the Government has published an international

competitive bidding notice to recruit an independent producer for the transformation of the current gas

and A1 power plant into a gas and heavy fuel oil (HFO) power plant, and extension of the plant capacity

to 120 MW. During the selection of the private partner, the Government submitted a request to the Bank

soliciting support from the African Legal Support Facility (ALSF) in the process (contract preparation,

negotiations). The plant rehabilitation and extension will be undertaken by the private partner and should

be completed by end-2018. The plant will run on gas and fuel (dual) under a public-private partnership

(PPP) arrangement for private electricity production for a period of 20 years. The Maria Gleta site will

also house the new 120-MW thermal plant (gas/fuel) under a new project (to cost CFAF 106 billion)

co-financed by IDB, BOAD, BIDC and the Government. Bidding documents for the supply and

installation of plant equipment have already been published. This new plant will be commissioned at

the start of 2019. For its management, SBEE will recruit a private management and maintenance

company. Furthermore, under bilateral cooperation with China, the Benin Government plans to

construct a 120 MW hydropower plant in Dogo Bis by 2022 (Works are expected to start in 2017).

Lastly, MCA-Benin and AFD intend to finance two solar power plants of a total capacity of 65 MW,

with 45 MW and 20 MW respectively.

2.4.8. Other actions are underway to strengthen the main electricity sub-sector stakeholder and

make the environment attractive. These actions include: (i) improvement of SBEE management. The

Government has changed the company’s managing team by appointing an interim team pending the

5

recruitment of the General Manager and Deputy General Manager through competition in the first

quarter of 2017. The Government has also reviewed the missions and profiles of the members of the

company’s Board of Directors. In this regard, MCA-Benin has initiated the recruitment of a consultant

to: (a) prepare the terms of reference of the new SBEE Management Team; and (b) definition of the

composition and profile of the members of SBEE Board of Directors; (ii) strengthen the Electricity

Regulatory Authority (ARE) by amending Decree No. 2009-182 of 13 May 2009 establishing ARE so

as to empower it to approve rates. Furthermore, pending the institution of a levy on electric power sales

for the benefit ARE, the Government undertakes to provide sufficient resources for its operation. In

2015, the Government drastically reduced ARE’s budgetary allocation from CFAF 500 million in 2014

to CFAF 120 million in 2015, an amount that did not meet its operating requirements. This fee is

expected to be instituted after electricity supply is stabilized; and (iii) revision of the tariff structure to

reflect the real costs of electric power and ensuring the economic sustainability of all the value chain

stakeholders. This new tariff structure will be made in such a way as to include a social tranche for low-

income households.

2.4.9. The last SBEE audited reports show that: (i) the turnover for FY 2014 was CFAF 104.738

billion as against CFAF 106.432 billion in 2013, or a 1.59% drop; (ii) the value added in 2014 was

CFAF 26.348 billion as against CFAF 30.585 billion in 2013, or a 13.86% drop ; (iii) SBEE’s trading

results for FY 2014 stood at CFAF 4.022 billion as against CFAF 5.319 billion in 2013; (iv) the net

result for FY 2014 showed a profit of CFAF 4.441 billion as against CFAF 1.825 billion in 2013. SBEE’s

financial situation would have been much better if Government departments had paid their electricity

bills. Indeed, SBEE billed the departments close to CFAF 28 billion in 2014 and 2015, which has not

yet been paid, pending reconciliation of mutual debts and credits between the Government and SBEE.

2.5. Public Finance Management

2.5.1. Public Finance Management: Although the country is pursuing reforms, especially the

transposition of WAEMU guidelines, progress remains inadequate. The outcome of the diagnostic study

conducted under the public finance performance review mechanism (PEFA 2014) indicates weaknesses

in budget credibility and completeness. Given the mounting public deficit and debt observed between

2013 and 2015, the new Government has taken measures to further curb public spending. A finance law

corrigendum (budget) was introduced in June 2016, and the budget deficit for 2016 was revised

downward from 5.6% to 4.9%. Savings were made on public expenditure mainly by grouping Ministries

together, repealing some decrees that grant benefits to civil servants, and abolishing some institutions,

including those attached to the Presidency. The Government also suspended 18 of the 22 pre-financing

contracts for transport projects signed by the previous Government with the private sector. The pre-

financing amount, which accounted for 24% of GDP at end-March 2016, was reduced to 4% of GDP.

Over the past decade, Benin undertook reforms to strengthen public finance control structures and fight

against corruption, particularly by establishing the National Anti-Corruption Authority in 2011. Despite

these efforts, Transparency International’s Corruption Perception Index ranked the country 83rd out of

167 countries in 2015.

2.6. Inclusive Growth, Poverty Situation and Social Context

2.6.1. The social situation is marked by persistent poverty and inequalities, reflecting the

limited inclusive nature of growth. Despite improvements, economic growth cannot keep pace with

the accelerated population growth (population growth rate rose from 3.25% between 1992 and 2002 to

3.5% between 2002 and 2013). Recurrent interruptions in electricity supply impacts more on low-

income households, who depend a lot on informal activities hardest hit by selective power cuts. The

poverty incidence rose from 36.2% to 40.3% of the population between 2011 and 2015, affecting rural

areas (43.3% in 2015) more than urban areas (36.4 %). The unemployment and under-employment

levels remain high, affecting over 50% of the labour force. Modern social protection mechanisms remain

marginally developed, with less than 10% of workers covered by social security and health insurance.

6

In the education sector, progress was made in access, participation, retention and equity. The sector’s

problems have to do with flows management and inadequacy between training opportunities and

development needs. In the health sector, the country could not achieve most of the Millennium

Development Goals (MDGs), except the goal of reducing HIV/AIDS prevalence among pregnant

women. Gender inequalities persist in terms of access to education, resources and decision-making

bodies. Women’s activities are concentrated in rural areas and the informal sector, and are still

confronted by supervision difficulties, absence of guarantees, and access to land and appropriate

financing.

III. GOVERNMENT’S DEVELOPMENT PROGRAMME

3.1. Government’s Development Strategy and Medium-Term Reform Priorities

3.1.1. The Government’s Action Programme (PAG 2016-2021), approved in October 2016, is an

appropriate instrument for inclusive growth and sustainable development. The Government’s overall

objective for the 2016-2021 period is "sustainable economic recovery and social development in Benin".

This programme’s specific objectives are to: (i) create conditions for consolidating democracy and

firmly establishing good governance; (ii) develop the bases for structural transformation of the economy;

and (iii) improve people’s living standards. These specific objectives are broken down into strategic

focus areas, which are in turn operationalized by the Ministry through concrete actions". PAG 2016-

2021 is supported by the 2017-2019 Multi-Year Budget and Economic Programming Document. For

2017, the priority areas are: (i) investment in large-scale agriculture and development of four flagship

sub-sectors: maize-rice-pineapple-cashew nuts; (ii) promotion of the processing industry and

professionalization of handicraft; (iii) development of physical capital and infrastructure (roads, energy,

ICTs, in particular); (iv) promotion of good quality human capital capable of attracting wealth creators;

(v) development of tourism, regional development and vitalization.

3.2. Obstacles to the National/Sector Development Programme Implementation

3.2.1. The difficulties in the energy sector, especially the inability to supply regular electricity,

hampers prospects for inclusive economic growth in the country. National electric power supply is

heavily dependent on imports from Nigeria, Ghana and Cote d’Ivoire, through CEB. These imports

account for close to 92% of the electric power consumed in Benin. The bulk of the remaining 8% is

covered by generators leased from private companies. Ninety percent of the local electric power in 2015

was thus produced by hired private generators. These private companies bill their services very

expensively, including fees for supplying equipment and services, and variable fees for the electric

power produced. Fuel supply is also billed, although this is borne by the Government. The average

production cost of diesel generators is CFAF 200 kWh as against CFAF 60 for energy imported via

CEB. This CFA 200 kWh cost is largely higher than the CFAF 115 kWh average price at which SBEE

sells electricity.

3.3. Consultation and Participatory Process

3.3.1. The programme’s design was the outcome of consultation with stakeholders in Benin,

thereby laying emphasis on the participatory approach and stakeholder/beneficiary involvement

throughout the process. Thus, the Bank’s programme preparation and appraisal missions held

consultations with SBEE, DGE, the Ministries and Government departments concerned with energy

issues, as well as the main Technical and Financial Partners of the sector (the IMF, World Bank, MCA-

Benin, EU, AFD, and KFW). The concerns raised by stakeholders are reflected in this programme. The

concerns focus on more availability of electric power and the financial equilibrium of SBEE.

3.3.2. The participation of national stakeholders and beneficiary groups during the programme

implementation will be in the Energy Thematic Group comprising development partners who meet with

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the Ministry of Energy at least once every year to update and coordinate activities in the electricity sub-

sector.

IV. BANK SUPPORT FOR THE GOVERNMENT’S STRATEGY

4.1. Linkages with the Bank Strategy

4.1.1 PASEBE I is aligned with the Bank’s Country Strategy Paper (CSP 2012-2016) for Benin, whose

mid-term review took place in 2014, especially its two pillars: (i) Development of infrastructure for

supporting production and competitiveness; and (ii) Promotion of good governance. The programme is

also in line with the priorities of the Bank’s Ten-Year Strategy (2013-2022) and the High 5s: "Light up

Africa". In addition, it is consistent with Pillar I: "Public sector management and economic

management" and Pillar II "Sector governance" of the 2014-2018 Governance Action Plan (GAP II). It

will also help to implement Pillar II "Economic empowerment" of the Bank’s Gender Strategy (2014-

2018), as well as with the Bank’s 2014-2019 Strategy for Addressing Fragility and Building Resilience

in Africa, particularly strategic focus No. 2 (Promotion of resilient societies through inclusive and

equitable access to employment, basic services and revenue from natural resources) which considers

the promotion of equitable access to basic economic services, including energy, as a source of resilience.

4.2. Compliance with Eligibility Criteria

4.2.1. Benin fulfils the eligibility criteria for the policy-based reform instrument. The

Government is committed to reducing poverty as reflected in the guidelines of PAG 2016-2021 which

is a continuation of PRGS 2011-2015. Despite poor weather conditions and the economic slowdown in

Nigeria, Benin’s main trade partner, the macro-economic situation remains robust thanks to the support

given by the Authorities to economic activity and budgetary stringency. This is corroborated by the

IMF’s conclusions in its report on Article IV consultations, published in January 2016. As regards

fiduciary assessment, the Country Fiduciary Risk Assessment (CFRA) conducted by the Bank in 2014

showed that the overall fiduciary risk remains substantial, but moderate. Benin has been enjoying

political stability for several years. This stability is confirmed by the holding of democratic presidential

elections in March 2016 in a calm and transparent atmosphere, following which a new President was

elected.

4.3. Collaboration and Coordination with the Other Partners

4.3.1. PASEBE I was designed in consultation with the other donors involved in the energy sector in

Benin. It mainly seeks to supplement the USD 40 million budget support that the World Bank is

preparing for Benin for the 2016-2017 period, targeting actions in the electricity sub-sector, including

better financial viability and instituting a new tariff policy for SBEE. The operation is in line with the

activities of MCA-Benin, especially those that aim to: (i) recruit a consultant to define the profiles and

missions of SBEE’s managers and Board of Directors; (ii) recruit a consultant to propose a new

electricity tariff structure; (iii) invest close to USD 136 million to boost electricity production capacity

in Benin, including solar plants for a total capacity of 45 MW, and off-grid projects targeting zones not

covered by SBEE network. The Bank’s budget support will also consolidate the EU’s efforts to

strengthen ARE, which benefited from EUR 500,000 financing that enabled it to rent premises and

procure office equipment. The EU is also preparing a EUR 103 million budget support for the 2016-

2020 period to help consolidate 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 11 public sector projects, including 3

international projects, for a total commitment of UA 261.4 million, comprising UA 165.9 million

(63%) for national projects and UA 95.5 million (37%) for multinational projects. Projects at risk

8

account for 9% of the portfolio. The portfolio disbursement rate is 30% and the average project age is

3.5 years. The sector breakdown of the portfolio portrays the predominance of transport infrastructure

(about 55%) followed by agriculture (34%), energy (7%), water and sanitation (3%) and the financial

sector (2%). The project’s overall performance is very satisfactory, with a score of 3 on a scale from 0

to 4.

4.4.2. Complementarity with Other Operations: PASEBE I is in synergy with the Bank’s other

operations in the country, especially the Multinational Project for Interconnection of the Electricity

Networks of Nigeria and CEB through a 330 kV line financed by the Bank in 2002. Indeed, it is this

line that will transmit 60 MW of electric power under the Power Purchase Agreement (PPA) that Benin

intends to conclude with Nigeria, in addition to the already existing PPA with Nigeria and CEB.

4.4.3. Lessons Learned from Previous Operations: The Bank has implemented several budget support

operations in Benin, namely the Budget Policy-Based Programme (PARB) approved in 2001, two

Poverty Reduction Support Programmes (PASRP I and PASRP II) approved in 2003 and 2005, and the

Economic and Financial Reforms Support Programme (PAREF) approved in 2012. The lessons learned

at completion of the projects remain relevant, and are reflected in this programme’s design, particularly

the need for a coherent national strategy in the intervention sector, the importance of involving key

national structures directly or indirectly concerned with the programme objectives throughout the

project cycle, and the need to support the programme through institutional support operations. The

SBEE Grid Reinforcement Project scheduled for 2017 will contribute to strengthening the outputs of

PASEBE I. The Bank also financed nine (9) operations in the electricity sub-sector in Benin. The two

recent projects are: (i) the electrification project for 17 rural centres, which was the subject of a

completion report in September 2006 and a performance review report in May 2011; and (ii) the second

rural electrification project completed in 2011 and whose completion report was prepared in December

the same year. The main lesson learned here is the need to reduce time frames for: (i) the ratification of

loan/grant agreements and procurements; (ii) the disbursement of counterpart contributions; and (iii)

recourse to long-term structures for the implementation of projects.

4.5. Analytical Underpinnings

4.5.1. PASEBE I is based on a number of works, including the Study to assess the economic cost

of the poor quality and development of energy services conducted in 2010 and updated by the current

Government. The 2010 study concluded that poor quality of electric power supply hampers production

and runs down the working materials and other equipment of industrial enterprises, thereby reducing

productivity and affecting public finance as seen in the dwindling tax revenue. The production sectors

suffered losses estimated at close to CFAF 157 billion from 2006 to 2010, determined using declared

rates of decline of activities, proportionate to each sector’s share in GDP. As regards households, about

CFAF 30 billion was invested from 2008 to 2010 in equipment to control poor energy quality.

Irrespective of the results of the update on the 2010 study, the Government feels that the situation has

worsened and short-term solutions should be found, while preparing a long-term strategy. PASEBE I is

also based on the diagnosis of the electricity sector master plan, as well as the joint Government/TFP annual

energy sector review reports.

V. PROPOSED PROGRAMME

5.1. Programme Goal and Objective

5.1.1. The programme’s main goal is to increase electric power supply so as to create appropriate

conditions for more inclusive and sustainable economic growth. Its specific objectives are to: (i) support

regular electric power supply; and (ii) improve sector governance.

9

5.1.2. The rationale for the Bank’s assistance is the need to provide an urgent response to the electric

power shortage that Benin is currently experiencing due to insufficient national supply and the

difficulties encountered by the country’s main electric power suppliers. This insufficient power supply

affects economic activity in the country, and if nothing is done, it can affect the country’s macro-

economic stability and cause social unrest. Thus, by Letter No. 295/MPD/DG/SGM/DGIFD/DPF/SBOI

of 13 May 2016, the Government requested budget support to help it remedy the power crisis situation

marked by long and frequent power cuts. Granting the country financial support will enable it to increase

national production through fuel supplies to IPPs established in the country, and contract for additional

power supply outside the CEB contract. In the long run, these two actions will help to increase overall

supply, reduce selective power cuts, and create appropriate conditions for economic recovery and social

peace. PASEBE I also comes within a context where tax revenue is negatively affected by the slowdown

of economic activity in Nigeria and the Naira devaluation. This has led to lower imports destined for re-

export to Nigeria and dwindling customs duties (7% drop in 2015) which in turn has led to deeper budget

deficit. Thus, if granted, the financial requested support will enable the country to create appropriate

conditions for economic recovery, increase budgetary resources, and have resources to undertake more

actions for the population.

5.2. Programme Components

5.2.1. The programme is designed around two (2) main guidelines aimed at supporting regular supply of

electric power and improving sector governance.

Component I – Support for regular electric power supply

5.2.2. Support for regular electric power supply consists in supporting Government’s efforts to ensure

regular electric power supply to the country by: (i) continuing to supply fuel to generation plants hired

by independent producers for total capacity of 150 MW; (ii) importing 60 MW from Nigeria’s

independent producers in addition to contractual quantities received from CEB. If implemented, these

actions will allow for a quick solution to the problem of electric power deficit, along with other actions

over the next three years to sustainably increase national electric power supply.

5.2.3. Problems and Constraints: Insufficient electric power supply hampers economic growth. The main

challenges in this component include: (i) increasing electric power supply; (ii) improving service quality with

fewer outages; and (iii) developing access to electric power. Through this component, the focus will mostly be to

improve the country’s capacity to supply stable electric power to administrative services, businesses, industrial

enterprises and households connected to the power grid.

5.2.4. Recent measures adopted by the Government: Several measures have been identified by the

Government to address the crisis in the electricity sub-sector. To address the electric power deficit and reduce

outages, Government took immediate measures consisting in increasing available energy supply by an

additional capacity of 230 MW. To that end, an international competitive competition was launched for

the production, before end-2016, of 150 MW under a lease arrangement. The competitive bidding

process culminated in the selection of two (2) independent producers: one to supply 100 MW and the

other 50 MW. Each contract covers a period of 12 months from the date of commercial commissioning

of the equipment scheduled for end-October 2016. The supply of fuel to run the generators thus leased

is the responsibility of the Government of Benin. An analysis of the two contracts is attached as Annex

VII of the Technical Annexes. Immediate actions taken by the Government to address the energy

situation include negotiating with a Nigerian independent producer to supply a total minimal quantity

of 60 MW, at a per-kWh cost ranging between CFAF 70 and 80. These negotiations are patterned on

the PPA model prepared by the ECOWAS Electricity Sector Regulatory Authority (ARREC). To

conclude these contracts, Benin received special authorization from the CEB High Inter-State Council

allowing it to directly import electric power for a 12-month period without passing through CEB, which

only has to ensure transit on its existing 330kV transmission network between Benin and Nigeria.

10

5.2.5. Programme Activities and Expected Outcomes: The Bank will support the Benin Government to

supply fuel required for operating leased generators of total production capacity of 150 MW. The Bank’s support

will also help the Government to offer guarantees to the Nigerian independent producer with whom negotiations

are underway to import 60 MW. The IPP demands that advance payment equivalent to three (3) months of bills

be made to it. The aim of these two measures is to respond rapidly to the electricity sub-sector crisis marked by

recurrent selective power cuts. The Government’s commitment to provide adequate funds for the supply of fuel

for 12 months will be one of the measures that Government must fulfil before PASEBE I is presented to the ADF

Board of Directors for approval. The supply of the equivalent of three (3) months electric power to the Nigerian

supplier is considered as an indicative measure. Implementing the measures of this component of the programme

will help to achieve the following results: (i) at least 210 MW increase in electric power supply at end-2016; (ii)

improvement of SBEE’s service quality by a significant drop in power cuts in terms of frequency and duration.

Component II: Improvement of Sector Governance

5.2.6. Improvement of governance in the electricity sub-sector is contingent on reforms to: (i)

strengthen the organizational structure of SBEE; (ii) improve the financial situation of SBEE by clearing

arrears owed by the State; and (iii) strengthen ARE’s missions and operating resources.

5.2.7. Problems and Constraints: The main constraints stem from weaknesses in two of the main

stakeholders of the electricity sub-sector in Benin, namely SBEE and the Electricity Regulatory

Authority (ARE). These weaknesses hamper the former’s economic viability and prevent the latter from

exercising its regulatory power. SBEE’s high level of indebtedness is a major constraint that weakens

all electricity sector stakeholders. Debt is largely caused by State services which do not pay their

electricity bills, making it impossible for SBEE to in turn honour its obligations to its suppliers,

particularly CEB which supplies close to 92% of electric power to SBEE. The recovery rate of SBEE’s

debts is 30% for Government departments and public institutions, and 65% for clients who are not

Government departments. The State has not paid any bills to SBEE since it made a 5 billion payment in

2013. At end-2015, the amount of invoices issued to Government departments was about CFAF 14

billion. SBEE also suffers from its very close proximity to State authorities, which robs its managers of

the necessary autonomy to efficiently manage the company. Indeed, the State holds 100% of SBEE’s

capital, and appoints its managers as well as the members of its Board of Directors. For its part, ARE

was established in 2003 to ensure electricity service quality and set rates to guarantee the sub-sector’s

financial equilibrium. Indeed, ARE is not in a position to accomplish its missions because Decree No.

2009-182 of 13 May 2009 establishing it does not give it effective power to set rates. Furthermore, ARE

does not have stable and sufficient resources for its operation and financial autonomy. The CFAF 120

million budget granted it for FY 2016 turned out to be insufficient. It relies for its operation on a

European Union subsidy of EUR 500,000 which, in particular, provides resources for the rental of its

premises.

5.2.8. Recent Measures Adopted by the Government: These measures include the improvement of

SBEE management. The Government changed the company’s management team by appointing an

interim team pending the recruitment of a General Manager and Deputy Manager through competition.

The Government also reviewed the missions and profiles of the Board members of the company. In this

regard, MCA-Benin will recruit a consultant to prepare the terms of reference of the new management

team and define the composition and profile of members of the Board of Directors. In its search for

ways of reducing electric power consumption by Government services, the Government is currently

installing pre-paid meters in the various Ministries.

5.2.9. Activities of the Programme and Expected Outcomes: The programme seeks to encourage the

Government and SBEE to reconcile their mutual and other debts, and agree on a debt settlement plan.

The operation will support the Government by enabling it to honour part of its debt to SBEE. The

programme also aims to encourage the Government to provide ARE with sufficient financial resources

and empower it to set electricity rates by: (i) revising Decree No. 2009-182 of 13 May 2009 establishing

11

the ARE; (ii) instituting, by joint decree of the Ministry of Energy and the Ministry of the Economy and

Finance, a fee to finance the operation of ARE.

5.3. Policy Dialogue

5.3.1. This operation is crucial for consolidating dialogue with the authorities on factors

hampering energy sector performance. With all the ongoing and planned operations in its intervention

programme, the Bank will be one of the main partners in the sector in the coming years. Thus, this

programme is strategic since it will help to strengthen dialogue to improve the overall energy sector

governance framework, as well as facilitate implementation and guarantee the impacts of the Bank’s

ongoing and future interventions.

5.4. Loan Conditions

5.4.1. Three preliminary measures have been identified under PASEBE I and are presented in the

table below. The measures were the subject of dialogue with Benin authorities during an appraisal

mission in September 2016. The indicative measures will promote dialogue with the Government of

Benin after disbursement of funds. This approach will create a solid platform for dialogue for

implementation of the measures identified, ahead of other interventions planned by the Bank in the

energy sector and budget support in Benin. The measures are outlined in the table below.

Table 1 Preliminary Measures in 2016 and Indicative Measures

MEASURES PRECEDENT TO

PRESENTATION TO THE BANK’S

BOARD OF DIRECTORS – 2016

EVIDENCE OF

IMPLEMENTATION INDICATIVE MEASURES

Component 1 : Support for Regular of Electric Power Supply

Measure 1: Provide resources required for

the purchase of fuel to operate the newly

contracted production units for the supply of

150 MW (done)

Evidence 1: Evidence of

provision in whole or in part of

resources required for the

purchase of fuel (included in the

2017 budget)

Indicative Measure 1: Provision of

resources required for advance payment

corresponding to 3 months of electricity

bills to be purchased from a Nigerian

supplier

Measure 2 : Obtain authorization from the

High Inter-State Council to allow Benin to

import electric power without passing

through CEB (done)

Evidence 2 : Transmission of

authorization of the High Inter-

State Authority

Indicative Measure 2: Signing of

electric power supply agreements with a

Nigerian independent producer for a

minimum additional capacity of 60 MW

Component 2 : Support for Improvement of Sector Governance

Sub-component 2.1. Strengthening of the Electricity Regulatory Authority

Indicative Measure 3 : Revision of

Decree No. 2009–182 of 13 May 2009 in

2017 to empower ARE to approve rates

Indicative Measure 4 : Joint Order of

the Ministry of Energy and the Ministry

of the Economy and Finance to institute a

fee to finance ARE operation

Sub component 2.2. Improvement of SBEE Management

Measure 3: Reconcile the mutual debts of the

State and SBEE (done)

Evidence 3: Transmission of the

mutual debt statement as at 30

November 2016

Indicative Measure 5: Transmission of

the action plan for the appointment of the

GM, DGM and composition of the BD of

SBEE after the work of the consultant

recruited by MCA-Benin

Indicative Measure 6: Update of the

mutual debt reconciliation statement

between SBEE and the Government.

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5.5. Good Practice Principles for the Application of Conditionality

5.5.1. Pursuant to Bank Policy on Budget Support Operations, the five good practice principles for the

application of conditionality were observed in the design of PASEBE I. In its design, this budget support

operation took into account the five (5) good practice principles for the application of conditionality: (i)

stronger national ownership by emphasizing dialogue with the Government during the implementation of its

energy sector recovery strategy; (ii) the macro-economic and public finance management thematic group serves

as a framework for coordination of partners who provide budget support; (iii) the programme is fully consistent

with the Government’s development priorities in the energy sector; (iv) disbursement conditions will be fewer

and flow from the energy sector matrix; and lastly (v) the Bank’s support is aligned with the country’s budgetary

cycle.

5.6. Financing Requirements and Mechanisms

5.6.1. This budget support operation is an integral part of external financing sources that will

contribute to offset the budget deficit. During the programme implementation (2017), the budget

deficit, excluding budget support, stands at CFAF 1002.9 billion. To bridge this gap, there is external

financing (including budget support) amounting to CFAF 210.3 billion, and domestic financing

amounting to CFAF 792.6 billion. The Bank Group’s budget support operation represents 43% of the

financing requirements for 2017.

Table 2

Financing Requirements and Sources in CFAF Billion

Financing Requirements for 2016 and 2017 (in CFAF Billion)

2016 (RFL) 2017 (Est.)

A Total Revenue and Grants 948.5 1 007.7

Including grants 0 15.8

B Total Net Expenditure and Loans 1,423.5 2,010.6

Recurrent expenditure 1,026.6 1,569.4

Including interest payments on debt 82.0 103.7

Equipment expenditure 396.9 441.1

C Overall Balance (commitment base) (A - B) -475.0 -1,018.7

D Accumulated Arrears 0.000 0.000

E Overall Balance (commitments base including grants)

(C + D) -475.0 -1,002.9

F External Financing (excluding budget support) 60.45 172.7

G Domestic financing 391.3 792.6

H Financing (F+G) 451.8 965.3

I Financing Requirements (-H-E) 23.2 -37.6

J Bank Contribution 0 16.35

K Other Contributions 23.2 21.25

Financing Gap 0.0 0.0

L Residual Financing Gap 0.000 0.000

5.7. Application of Bank Group Policy on Accumulation of Non-Concessional Debts

5.7.1. Financed with Benin’s ADF allocations, PASEBE I is consistent with Bank Policy on Non-

Concessional Loans. The country’s debt sustainability analysis indicates a low debt risk level. Discussions are

underway with the IMF for the conclusion of a programme before end-2016. Furthermore, Benin is eligible for

non-concessional borrowings on a case-by-case basis for investment projects with high economic yield, within

upper limits that will be determined in the programme with the IMF.

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VI. PROGRAMME IMPLEMENTATION

6.1. Programme Beneficiaries

6.1.1. Development of the energy sector on a stable basis will benefit the country’s economy as a whole.

The programme’s direct beneficiaries are SBEE and the Electricity Sector Regulatory Authority. The indirect

beneficiaries are private sector operators, especially very small, small and medium-sized enterprises, mostly those

developed by women and youths through more availability of electric power needed to properly operate their

activities. The programme will also help to improve the quality of services offered by social infrastructure, such

as access to medical services, water and education. Thus, the final beneficiaries of the programme are the

population, who will enjoy better living conditions as a result of inclusive growth supported by a reliable energy

sector. Apart from these direct beneficiaries, the entire population of Benin will benefit indirectly from the

programme’s significant socio-economic spinoffs, especially as a result of better public service delivery (health,

education, drinking water, etc.), private sector development, job creation, and reduced urban insecurity.

6.2. Impact on Gender, the Poor and Vulnerable Groups

6.2.1. The programme will help to improve the living conditions of households, and consequently

women. Indeed, selective power cuts mostly affects households and women. The programme will directly benefit

31% of Benin’s population, who currently have access to electricity. Most of them are women (52%) who are

very active in the informal sector (petty trading, catering, handicraft, food processing) and have little means to

buy back-up generators or fuel in sufficient quantities to operate during selective power cuts. Access to electricity

will help to lighten women’s household chores and enable them to gain time that could be used for income-

generating activities. Improving electric power supply will also have a positive impact in terms of maternal and

neonatal health, as well as women’s physical security (lighting in towns and villages will curb attacks on women).

By supporting economic activity, the programme will help to boost economic growth, improve people’s

living conditions, and preserve social peace. Indeed, prolonged interruption of electric power supply

will have a devastating impact on economic activity, given the links between electricity, water supply,

activities in the public/private sectors and those of households connected to networks (water and

electricity) in large urban centres. Thus, PASEBE I will help to foster economic growth, which slowed

down in 2015 due partly to power outages, as well as to more vigorously implement policies and

programmes that will improve people’s living conditions and reduce poverty.

6.3. Environmental Impact and Climate Change

6.3.1. This programme is a budget support operation, which supports reforms that do not have a direct

incidence on the environment and climate change (Category III). As such, it will not negatively affect the

environment, directly or indirectly, and is unlikely to induce negative social impacts. With respect to the

Integrated Safeguard System (ISS) requirements, the programme does not require an environmental and social

assessment. Improving the management of the electricity sector will generally have positive impacts on the

efficient use of resources.

6.4. Impact in Other Areas

6.4.1. The programme will contribute to improving the quality of public and social services. Indeed, by

helping to improve electricity supply efficiency, the programme will respond more appropriately to the

population’s expectations as regards public and social services (hospitals, schools and universities, etc.).

14

6.5. Implementation, Monitoring and Evaluation

6.5.1. The programme implementation will be coordinated by the Ministry of Energy, Water and

Mines working closely with the Ministry of the Economy and Finance. In this regard, the Ministry of

Energy will ensure that the entities concerned (SBEE, ARE, and DGE) fully play their roles, each in its own

sphere, in implementing the reforms. All the above stakeholders were consulted during the PASEBE I preparation

and appraisal missions so as to ensure better ownership of the programme by the Government. The Ministry of

Energy, Water and Mines will submit periodic programme progress reports to the Bank. In addition, the Bank

will closely monitor programme implementation.

6.6. Financial Management and Disbursement

6.6.1. Country Fiduciary Risk Assessment: The financial management system did not perform

satisfactorily due to a number of weaknesses: (i) the very frequent use of exceptional budget expenditure

execution procedures; (ii) shortcomings in cash-flow planning; (iii) absence of an effective mechanism

for limiting expenditure commitments to appropriations; (iv) failure to use the estimated cash-flow plan

for budget management; (v) the failure to process or partial processing of some budgetary operations in

SIGFIP; (vi) non-exhaustive information in budget implementation reports which are a tool for

monitoring budget management; and (vii) few and poor quality CDC staff. Although the overall

fiduciary risk is significant, it could be gradually made moderate through implementation of the

PAAGFP which is expected to be updated based on the 2014 PEFA review.

6.6.2. Financial Management and Disbursement Mechanisms: The programme’s proposed financing is

a UA 19.92 million loan from Benin’s ADF-13 country allocation. This amount will be disbursed in a

single tranche after approval of the programme by the ADF Board of Directors, subject to fulfilment of

the conditions agreed between the Bank and Government as outlined in paragraph 8.2.3. The funds will

be paid into a special Public Treasury account opened with the National BCEAO Agency in Cotonou.

6.6.3. Due to delays in the conduct of external audits by the Audit Bench of the Supreme Court, the

programme will be audited by a private audit firm, financed by the State budget. The audit report on the

programme’s financial flows will be submitted to the Bank no later than six months after the close of

this fiscal year. The terms of reference of the financial audit will be submitted to the Bank for prior

approval.

6.6.4. Procurement: Since programme resources are disbursed as budget support, procurements will

be made in line with national procedures. Benin made significant normative progress during the reform

of public procurement procedures between 2009 and 2013. Law No. 2009-02 instituting the Public

Procurement Code was enacted on 7 August 2009 and, in accordance with WAEMU Directives No.

04/2005 and 05/2005 on public procurement, several implementing decrees were signed.

Responsibilities are clearly defined for institutions tasked with public procurement. However, despite

this progress, much still remains to be done in terms of establishing the legislative, regulatory and

institutional framework of the national procurement system. Due to poor computerization of

procurement operations and interfacing between the Integrated Public Finance Management System

(SIGFIP) and the Integrated Management System (SIGMAP), reform is needed to modernize the public

expenditure management framework. Significant reforms are also required to improve the role of the

National Directorate of Public Procurement Control (DNCMP) and the Public Procurement Regulatory

Authority (ARMP) as fiduciary authorities. That notwithstanding, the review of the national

procurement system conducted by the Bank in 2010 ahead of the use of national competitive bidding

concluded that the system largely complies with international standards and Bank Policy because of the

transposition of the aforementioned WAEMU Directives No. 4 and 5 of 2005.

15

VII. LEGAL DOCUMENTATION AND AUTHORITY

7.1. Legal Documentation

7.1.1. The legal document to be used for the programme is the Loan Agreement between the

Government of Benin (the Borrower) and the African Development Fund (the Fund).

7.2. Conditions for Bank Intervention

7.2.1. Conditions precedent to Presentation of the Programme to the Board: Based on dialogue

with the Government of Benin, it was agreed that the Borrower shall implement the measures precedent

to presentation of the programme to the Bank’s Board of Directors. These conditions are indicated in

Table 1.

7.2.2. Conditions precedent to Effectiveness of the Loan Agreement: Effectiveness of the Loan

Agreement shall be subject to fulfilment of the conditions outlined in Section 12.01 of the General

Conditions Applicable to Loan Agreements, Guarantees and Grant Agreements of the Bank.

7.2.3. Conditions precedent to Disbursement: In addition to effectiveness of the Loan Agreement,

the disbursement of loan resources shall be subject to fulfilment, by the Borrower, of the following

condition: Provide the Fund with evidence of the opening of a treasury account by the Borrower with

the National BCEAO Agency to receive the loan resources.

7.3. Compliance with Bank Group Policies

7.3.1. The main Bank Group guidelines applied in this programme are the Guidelines concerning

loans to support the development budgets of the Bank’s Regional Member Countries as defined in the

Document ADF/BD/WP/2003/182/Rev.2 of 28 April 2004. No waiver is requested in this proposal in

respect of these Guidelines.

VIII. RISK MANAGEMENT

8.1. Two main types of risks are likely to affect achievement of the programme outcomes: (i)

macro-economic instability: The country’s high economic vulnerability to external shocks (drop in

world market prices of cotton, low rainfall, vulnerability to the economic situation in Nigeria, etc.) could

affect the stability of its macro-economic framework; (ii) fiduciary risk: The fiduciary risks are due to

the persistent weaknesses in public finance management, especially in budget credibility and control

mentioned in the 2014 PEFA report.

8.2. However, these risks are mitigated by the new Government’s commitment to manage

public finance more stringently and comply with public procurement procedures. With regard to the

risk linked to macro-economic instability, the Authorities have taken cognizance of these risks and defined

policies aimed at diversifying the economy by further harnessing sectors with high growth potential,

particularly agriculture, fisheries, livestock, agro-industry and tourism. To mitigate the fiduciary risk,

the new Government is resolutely committed to addressing these issues and is implementing measures

to improve procurement efficiency and fight against corruption. Furthermore, several infrastructure

contracts concluded by the Government under conditions deemed non-compliant with the law have been

cancelled. This new Government’s clear commitment will help to mitigate this risk for the programme

actions and measures which will be monitored during PASEBE I supervision missions.

16

IX. RECOMMENDATION

9.1. The energy sector budget support programme (Phase 1) in Benin seeks to help the country

preserve its socio-economic fundamentals achieved over several years of economic reforms. In light of

the foregoing, it is recommended that the Board of Directors approves an ADF loan not exceeding UA

19.92 million to the Government of Benin for implementation of the programme subject to the

conditions defined in this report.

I

Annex I: Benin – Energy Sector Budget Support Programme in Benin – Phase I (PASEBE I): Matrix of Measures

Measures already taken by the

Government to develop the Energy Sector

Programme Measures (PASEBE I) Implementa

tion

Schedule

Outcomes Responsible Entities

A. Support for Regular Electric Power Supply

Signing of generator lease contracts with

independent producers for a capacity of 150

MW

Support the Government to supply fuel to the

independent power producers July 2016

Increase in electric power supply

and reduction of selective power

cuts

Ministry of Energy,

Water and Mines

Authorization by the High Inter-State

Authority to enable Benin import electric

power without passing through CEB

Support the Government to enable Benin

import electric power August 2016

Increase in electric power supply

and reduction of selective power

cuts

Ministry of Energy,

Water and Mines

Negotiations for the signing of electric power

supply contracts with a Nigerian independent

producer for a minimum additional capacity

of 60 MW

Support the Government to enable it to pay

an advance to the Nigerian supplier

equivalent to 3 months’ bills as demanded

January

2017

Increase in electric power supply

and reduction of selective power

cuts

Ministry of Energy,

Water and Mines

B. Improve Sector Governance

Installation of pre-paid metres in Government

departments

Clearance of Government’s debt to SBEE March

2017

Improvement of the electricity

sub-sector

Ministry of the

Economy and Finance

Ministry of Energy,

Water and Mines

II

Annex II: Note on Relations with the IMF

From June 2010 to June 2014, Benin implemented an ECF-backed Economic and Financial Programme

for an amount of SDR 74.28 million. The programme’s implementation was deemed satisfactory by the

IMF after the sixth and last programme review in May 2014.

In December 2015, the IMF Executive Board concluded Article IV consultations with Benin. At the

request of the Government of Benin, a team from the International Monetary Fund (IMF), led by

Christine Dieterich, Mission Chief for Benin, visited Cotonou from June 6 to 18, to start discussions

with the Authorities on a possible three-year economic programme supported by the Extended Credit

Facility (ECF) arrangement.1

Ms. Dieterich issued the following statement at the end of the mission:

“The Government found a difficult macroeconomic and treasury situation upon assuming office in April

2016. In particular, while fiscal policy was generally sound in earlier years, the fiscal deficit increased

to around 8.5 percent of GDP in 2015, with continued spending overruns in the first quarter of 2016.

This widening of the fiscal deficit was financed by large bond issuances in the regional financial market,

adding significantly to future debt service. Worse, during the last quarter of 2015 and first of 2016,

contracts were signed for off-budget projects close to 24 percent of GDP. These loans are expensive and

have short maturities. Due to incorrect classification of these arrangements as Private Public

Partnerships (PPP), standard procurement procedures were circumvented, raising severe concerns about

their governance and quality.

“Despite this expansionary fiscal policy, 2015 growth is estimated to have decelerated to around 5

percent, as the slowdown in Nigeria - Benin’s main trading partner - kicked in. For 2016, with Nigerian

growth decreasing further, Benin’s growth is expected to be in the range of 4.5 to 5 percent. Furthermore,

poverty has worsened since 2011 compared to the household survey of 2015. Inflation has remained

moderate despite a recent rise on account of higher food and fuel prices.

“The Government is determined to reverse the deterioration in the fiscal deficit and debt. The 2016

budget supplement is a decisive step towards bringing the fiscal situation back under control. While

welcoming this impressive budgetary correction, the team cautioned that careful cash management and

commitment control will be required for the rest of the year in order to successfully implement it.

“The Government was able to suspend the majority (20 percent of GDP) of the in-transparent off-budget

projects, as their implementation had not yet started. An evaluation of these projects and their financing

is under way, as this level of additional short-term debt would severely derail fiscal sustainability, and

put at risk macroeconomic stability over the next years.

“Looking ahead, the Government is in the process of preparing a detailed medium-term investment plan.

In view of the debt-service burden and vulnerabilities in the economy, in particular, a narrow and volatile

export base, the challenge will be to find the right balance between preserving debt sustainability and

addressing investment needs aimed at removing growth bottlenecks.

“Being well aware of this challenge, the Government initiated reforms to improve governance and the

regulatory framework, in particular for energy, so as to facilitate private sector investment. This will not

only reduce the investment burden on the budget, but also facilitate the private-sector led growth

necessary to create employment for Benin’s young and growing population. These efforts include

reforms to improve the Government’s spending efficiency, in particular, by addressing severe

weaknesses in audit, and to mobilize additional revenues. In addition, developing the appropriate

regulatory framework for PPP will be necessary to safeguard against future risks for the budget. The

Government has also started to welcome attempts to improve the governance of State-owned enterprises,

in support of an ambitious privatization agenda.

III

“The team met with the President of the Republic, Minister of State, Secretary General in the Presidency,

Minister of State charged with Planning and Development, Minister of the Economy and Finance,

National Director of the BCEAO, and other Government and Central Bank officials, as well as

representatives from the financial sector and international development partners.

“The team wishes to thank the authorities, as well as all other interlocutors, for their hospitality, the

excellent collaboration, and the high-quality discussions. A second mission is planned for late summer,

with the objective of completing negotiations on an ECF programme supported by the IMF.”

IV

Annex III: Agreement with Benin on an Extended Credit Facility Arrangement

Press release N°17/

February 22, 2017

IMF Reaches Staff-level Agreement with Benin on an Extended Credit Facility Arrangement

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings

after a visit to a country. The views expressed in this statement are those of the IMF staff and do not

necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this

mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's

Executive Board for discussion and decision.

Benin’s authorities and an IMF staff team reached staff-level agreement on a three-year economic

program that could be supported by an ECF for about USD 150.4 million.

The request is subject to approval by the IMF Executive Board, which is expected to consider it in

March/April 2017.

The authorities’ program would help Benin achieve a strong and inclusive growth in order to reduce

poverty while ensuring public finance and debt sustainability.

At the request of the government of Benin, a team from the International Monetary Fund (IMF), led by

Norbert Toé, Mission Chief for Benin, visited Cotonou from February 15 to 22, 2017, to finalize

discussions with the authorities on a three-year economic program that could be supported by the IMF

under its Extended Credit Facility (ECF) arrangement.

At the conclusion of the mission, Mr. Toé issued the following statement:

“The IMF team reached staff-level agreement with the authorities, subject to approval by IMF

Management and the Executive Board, on a three-year program that could be supported by an

arrangement under the ECF in an amount of SDR 111.42 million (about USD 150.4 million) or 90

percent of Benin’s quota in the IMF.

“The three-year economic program reflects the strategic orientations of the Government’s Action Plan,

2016-21, and aims to improve the living conditions for the population, maintain a stable macroeconomic

environment, and preserve public debt sustainability. The main objectives of the program are to (i) create

fiscal space through the modernization of the tax and customs administration and enhancing the

efficiency of government spending; (ii) refocus policies on sustainable and inclusive growth through

targeted social spending and investment in infrastructure; and (iii) strengthen the business environment.

The program includes a set of comprehensive structural reforms aimed at improving revenue

administration, strengthening public financial management and debt management, and supporting

private sector development. Regarding domestic revenue mobilization, the government aims to increase

domestic revenues from 14.7 percent of GDP in 2016 to 17.4 percent of GDP by the end of the program,

essentially through a broadening of the lax base.

International Monetary Fund

Washington DC 20431, USA

V

“The ECF-supported program would help Benin achieve a strong and inclusive growth in order to reduce

poverty while ensuring public finance and debt sustainability. The IMF resources will help the country

address its balance of payment need and also catalyze significant support from development partners

that would preserve debt sustainability.

“The authorities and IMF staff agreed on the importance of preserving debt sustainability in light of the

important public investment program. In this context, a debt sustainability analysis will be carried out

on a regular basis and the government has committed to improve public investment management and

promote partnership with the private sector as well as technical and financial partners in order to improve

infrastructure investment.

“A report on the staff-level agreement is expected to be submitted to the IMF Executive Board for

consideration in March/April 2017.

“The mission met with President Talon, and held discussions with Romuald Wadagni, Minister of

Economy and Finance; Abdoulaye Bio Tchané, Senior Minister of State of Planning and Development;

Pascal Irénée Koupaki, Senior Minister of State, General Secretary at the Presidency, Alain Komaclo,

National Director of the regional central bank (BCEAO), and other senior government officials, as well

as with representatives of Benin’s international development partners and the banking and business

communities.

“The mission is grateful to the authorities for the constructive spirit in which discussions were held and

for their warm hospitality.”

1 The ECF is a concessional lending instrument for low-income countries with a three-year Government economic programme agreed with the IMF.

VI

Annex IV: Selected Macro-Economic Indicators

Indicators Unit 2000 2011 2012 2013 2014 2015 (e) 2016 (p)

National Accounts

GNI at Current Prices Million US $ 2 502 7 041 7 537 8 155 8 585 ... ...

GNI per Capita US$ 360 720 750 790 810 ... ...

GDP at Current Prices Million US $ 2 360 7 814 8 117 9 111 9 575 9 042 9 766

GDP at 2000 Constant prices Million US $ 2 360 3 578 3 770 3 983 4 244 4 463 4 707

Real GDP Growth Rate % 4,9 3,3 5,4 5,6 6,5 5,2 5,5

Real per Capita GDP Growth Rate % 1,7 0,4 2,6 2,9 3,8 2,4 2,8

Gross Domestic Investment % GDP 18,7 24,1 22,7 28,5 25,0 26,5 28,8

Public Investment % GDP 6,4 6,3 5,7 6,1 5,4 6,0 6,3

Private Investment % GDP 12,2 17,8 17,0 22,4 19,6 20,6 22,5

Gross National Savings % GDP 14,8 10,9 9,7 11,1 10,9 16,2 16,9

Prices and Money

Inflation (CPI) % 4,2 2,7 6,7 1,0 -1,1 0,4 2,3

Exchange Rate (Annual Average) local currency/US$ 712,0 471,9 510,5 494,0 494,4 591,4 603,1

Monetary Growth (M2) % 68,1 9,0 10,8 14,9 17,3 16,2 ...

Money and Quasi Money as % of GDP % 38,1 56,6 55,8 59,0 65,8 67,7 ...

Government Finance

Total Revenue and Grants % GDP 17,5 20,1 20,7 21,3 19,1 17,7 18,0

Total Expenditure and Net Lending % GDP 19,2 21,9 21,2 23,2 21,2 22,0 21,6

Overall Deficit (-) / Surplus (+) % GDP -1,7 -1,7 -0,4 -1,7 -1,9 -4,3 -3,6

External Sector

Exports Volume Growth (Goods) % 43,2 -6,4 19,5 101,3 18,2 4,0 17,7

Imports Volume Growth (Goods) % -6,9 6,2 10,5 39,9 -3,0 2,4 18,3

Terms of Trade Growth % -28,1 -57,9 -37,9 -20,7 -8,9 -7,9 -9,0

Current Account Balance Million US $ -104 -516 -587 -673 -690 -639 -695

Current Account Balance % GDP -4,4 -6,6 -7,2 -7,4 -7,2 -7,1 -7,1

External Reserves months of imports 8,6 5,2 4,1 3,0 3,3 3,4 ...

Debt and Financial Flows

Debt Service % exports 16,3 4,4 6,2 5,6 6,2 7,4 5,9

External Debt % GDP 55,9 16,9 16,9 19,0 20,4 19,5 19,0

Net Total Financial Flows Million US $ 232 703 589 698 564 ... ...

Net Official Development Assistance Million US $ 243 673 509 660 600 ... ...

Net Foreign Direct Investment Million US $ 60 161 230 360 377 ... ...

Source : AfDB Statistics Department; IMF: World Economic Outlook, October 2015 and International Financial Statistics, October 2015;

AfDB Statistics Department: Development Data Portal Database, March 2016. United Nations: OECD, Reporting System Division.

Notes: … Data Not Available ( e ) Estimations ( p ) Projections Last Update: April 2016

BeninSelected Macroeconomic Indicators

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

%

Real GDP Growth Rate, 2004-2016

-2

0

2

4

6

8

10

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Inflation (CPI),

2004-2016

-10,0

-9,0

-8,0

-7,0

-6,0

-5,0

-4,0

-3,0

-2,0

-1,0

0,0

2 004

2 005

2 006

2 007

2 008

2 009

2 010

2 011

2 012

2 013

2 014

2 015

2 016

Current Account Balance as % of GDP,

2004-2016

VII

Annex V: Table of Bank Operations in Benin under CSP 2012-2016

Table 2 : Implementation of the CSP Operational Programme and Resources Mobilised between 2012 and 2016 (in UAM)

Financed Operations

Amount

Initially

Envisaged

Window/YearAmount

ApprovedADF

Private

Sector

Window

FSN OthersApproval

YearRemarks

Operations planned and approved or

being considered

Budget Support to Economic and

Financial Reforms (2012-2013)30,00 FAD/2012 30,00 30,00 2012

Oueme Valley Agricultural Infrastructure

Support Project30,00 ADF/2013 44,77 40,03 4,74 2013 GEF Grant

Parakou Urban Crossing Project 35,00ADF/2014-

201536,50 35,30 1,20 2014 and 2015 GEF Grant

FINADEV Line of Credit for SME

Financing0,80

Private

Sector/20140,80 0,80 2014

Project of Benin's Adherence to the

African Trade Insurance Agency (ATI-

ACA)

4,97 ADF/2015 4,97 4,97 2015

Phase 2 of the Community Forest

Management Support Project

(PAGEFCOM II)

5,00 ADF/2015 7,00 5,00 2,00

Planned for

the second

half of 2016

GEF Grant

Financing of the Abidjan –Lagos

Motorway Corridor Study :UA 1 million1,00 ADF/2015 1,00 1,00 2016

Phase II of the Togo/Benin

Multinational Lome-Cotonou Road

Rehabilitation and Abidjan-Lagos

Corridor Transport Facilitation Project

3,30 ADF/2015 1,00 1,00

Planned for

the second

half of 2016

Other Planned but Unimplemented

Operations

Dual 50MW Thermal Power Plant

Construction Project at the Maria Gléta

Site

20,00Private Sector

Window/20120,00 Not done

Benin-Togo Multinational 147MW

Adjarala Hydropower Plant Project35,00 ADF/2014 0,00 Not done

Financed by

another donor

SBEE Distribution Networks

Rehabilitation Project10,00 ADF/2016 0,00

Postponed to

2017

Unplanned but Approved Operations or

Those Being Studied

Support for the Decentralisation of

Water and Sanitation Services (Protos

NGO)

0,79 0,79 2013 AWF Grant

Improvement of the Management of the

Grand Nokoue Oil Sludge0,84 0,84 2013 AWF Grant

Project of Emergency Assistance to the

Population of Malanville et Karimama0,53 0,53 2014 FSS Grant

E-Administration and National Optic

Fibre Backbone Needs Study0,04 0,04 2014

KOAFEC

Grant

Project to Reduce SONEB Water Losses

and Improve DWS Systems Viability6,00 6,00 2015

Livestock Production and Resilience

Support Project17,07 17,07 2015 GAFSP Grant

Project to Support Transparency in

Micro-Finance Institutions in Benin0,30 0,30 2015 FRCM Grant

Energy Sector Budget Support 18,71 18,71

Prévu en

décembre

2016

Total 175,07 170,31 136,01 0,80 6,00 27,50

Origin of Mobilized Resources