20220724-IMF-Benin_Selected_Issues_46页_1mb

Summary of Selected Issues on Benin

Core Content

This document provides an analysis of public expenditure, tax potential, and trade relations in Benin, focusing on how these factors affect inclusive growth. It is prepared by the International Monetary Fund (IMF) as part of a periodic consultation with Benin and includes key findings on public spending in health and education, tax revenue mobilization, and the impact of border closures with Nigeria.

Main Points

Public Expenditure for Inclusive Growth

• Low Public Spending: Public spending in Benin has historically been low, averaging 15.3% of GDP from 2000–20, well below regional and global averages. It ranked consistently in the bottom decile globally.
• Stagnation and Spikes: While public spending in Benin has remained flat for most of the period, it saw a spike in 2020 due to the pandemic, increasing by 4.5 percentage points of GDP.
• Social Spending: Social spending (education, health, and social protection) averaged about 5% of GDP over the last decade, significantly lower than the 8.2% for LICs. The Ministry of Finance monitors this, with a peak in 2018 followed by a decline.
• SDG Targets: To achieve the Sustainable Development Goals (SDGs), public spending needs to increase to around 23% of GDP by 2026, and further to 21% by 2030. This would require stronger revenue mobilization and spending efficiency.

Health Sector Spending and Outcomes

• Low Health Spending: Public health spending averaged 0.6% of GDP in 2016–19, one third of LICs' average. It has been declining over the past two decades.
• Inequality in Access: There is significant inequality in access to health services and outcomes across income groups and regions. The poorest households have much lower access to maternal health services and suffer higher malaria prevalence.
• Healthcare Indicators: Benin lags behind LICs in key health indicators such as hospital beds, physicians, and nurses per 10,000 people. Malaria remains a major health challenge, with prevalence above 40% in 2020.
• Economic Impact of Malaria: Malaria has significant socioeconomic costs, including reduced productivity and increased poverty. It is a leading cause of morbidity and mortality, particularly among children.

Education Sector Spending and Outcomes

• Education Spending: Public education spending in Benin averaged 18.8% of the budget during 2016–18, higher than LICs' average of 15.5%, but still lower in terms of GDP share (3.1% vs. 4.1%).
• Enrollment and Quality: School enrollment rates have improved, but disparities remain. Benin has performed better in primary education quality, with improved learning outcomes, partly due to school feeding programs and better teacher-student dialogue.
• Inequality in Education: Completion rates in primary education are significantly lower for children from poorer households (21% vs. 76% for the richest). Regional disparities also persist, with some departments achieving much higher completion rates.
• Efficiency Gains: There is potential for efficiency improvements, especially in secondary education, where the teacher-to-student ratio is higher than the LICs average. Benchmarking and frontier analysis suggest that Benin could achieve similar outcomes with fewer resources.

Key Challenges and Opportunities

Public Spending Challenges

• Fiscal Constraints: Public spending has not kept up with demographic trends, limiting the government's ability to fulfill non-traditional state functions.
• Implementation Gaps: Weak implementation of capital expenditure, especially for foreign-financed projects, has hindered progress.
• Fiscal Sustainability: Scaling up public spending must be balanced with maintaining fiscal sustainability and debt management.

Tax Revenue Mobilization

• Low Tax Revenue: Benin's tax-to-GDP ratio is low, and the government has identified five pillars for improving domestic revenue mobilization, including enhancing tax compliance, broadening the tax base, and improving tax administration.
• Tax Potential: Estimations suggest there is significant potential to increase tax revenue, which would support the necessary public spending for inclusive growth.

Trade Relations with Nigeria

• Formal and Informal Ties: Benin has strong formal and informal trade ties with Nigeria, particularly in transit-based services.
• Impact of Border Closure: The closure of the Nigerian border had a negative impact on Benin's economy, as evidenced by satellite night light data. This highlights the importance of regional trade and connectivity for economic development.

Recommendations

Fiscal and Public Management

• Align Budgeting with SDGs: Ensure the medium-term expenditure framework aligns with SDGs and emphasizes strategic resource allocation.
• Improve Multi-Year Budgeting: Integrate multi-year budget frameworks with annual planning and embed them in the decision-making process.
• Enhance Program Budgeting: Transition to program budgeting to improve accountability and link resources to outcomes.

Social Spending

• Expand Social Protection: Implement means-tested social safety nets using the social registry to improve access to basic health services for vulnerable populations.
• Improve Health Outcomes: Scale up anti-malaria programs, improve access to maternal health services, and enhance implementation of health capital expenditure.
• Enhance Education Quality: Focus on improving efficiency in secondary education, accelerating vocational training, and upgrading school infrastructure in underserved areas.

Institutional Reforms

• Leverage Civil Society: Increase the role of civil society in the formulation and monitoring of social spending to enhance transparency and reduce corruption.
• Strengthen Tax Systems: Focus on the five pillars of tax reform to improve domestic revenue mobilization and support public spending goals.

Conclusion

Benin faces significant challenges in public expenditure and tax mobilization, which hinder inclusive growth. Addressing these issues through improved efficiency, strategic spending, and institutional reforms is essential to achieving the SDGs and improving social outcomes. The document highlights the need for a balanced approach to fiscal sustainability, public service delivery, and social protection.