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Benin Benin: Selected Issues and Statistical Appendix

Author(s):
International Monetary Fund
Published Date:
March 2008
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Basic Data

Area
Resident population
Total (2005 est.)7,395,040
Growth rate (1998–2005)3.1
GDP per capita (2005)596
IMF Position (as of October 31, 2006)
QuotaSDR 61.90 million
Fund holding of currencySDR 59.72 million
2002200320042005

Est.
(Annual changes in percent, unless otherwise indicated)
National income, prices and cotton production
GDP at current prices6.85.73.48.5
GDP at constant prices4.53.93.12.9
GDP deflator2.21.70.35.4
Consumer price index (average)2.41.50.95.4
Consumer price index (end of period)1.20.82.63.7
Production of cotton (in ’000 of tons) 2/337.5333.1427.7190.8
Central government finance
Revenue13.210.20.29.1
Expenditure and net lending8.211.60.713.9
Money and credit
Net domestic assets 3/4.611.63.412.9
Domestic credit 3/7.512.84.813.4
Net claims on central government 3/2.3-0.21.53.2
Credit to the nongovernment sector16.133.04.520.2
Broad money-3.86.6-6.721.8
Velocity (GDP relative to average M2)3.43.63.63.7
External sector (in terms of CFA francs)
Exports, f.o.b.-3.914.17.7-6.0
Imports, f.o.b.13.83.63.9-5.5
Export volume10.411.6-11.922.7
Import volume5.54.73.03.3
Terms of trade (minus = deterioration)-19.33.421.2-15.9
Nominal effective exchange rate (minus = depreciation)2.58.84.4-0.5
Real effective exchange rate (minus = depreciation)5.58.42.42.2
(In percent of GDP, unless otherwise indicated)
Basic ratios
Gross investment17.219.619.019.6
Gross domestic saving3.36.76.79.6
Gross national saving8.811.211.712.8
Central government finance
Revenue16.317.016.416.5
Expenditure and net lending19.520.620.121.1
Primary balance 4/-2.5-3.1-3.3-4.3
Primary balance (narrow definition)5/1.00.20.0-1.4
Overall fiscal deficit (payment order basis, excluding grants)-3.3-3.7-3.7-4.6
Overall fiscal deficit (cash basis, excluding grants)-4.3-3.7-4.5-3.6
Debt service (after debt relief) in percent of revenue 1/ & 6/3.21.67.0
External sector
Trade balance-12.2-11.3-11.0-9.6
Current account balance (excluding grants)-8.6-8.6-7.9-7.2
Current account balance (including grants)-8.4-8.3-7.2-6.8
Overall balance of payments-3.6-0.4-3.22.8
Debt-service to exports ratio 1/0.012.56.96.5
Net present value of debt-to-exports ratio 7/244.2147.1132.178.6
Debt-to-GDP ratio (after HIPC and before MDRI)50.338.632.436.9
Gross reserves in months of imports8.811.18.711.4
Memorandum items:
Nominal GDP (in billions of CFA francs)1,956.72,067.92,138.22,319.7
CFA francs per U.S. dollar (period average)694.6580.1527.6526.6
Population (midyear, in millions)6.87.07.27.4
Sources: Beninese authorities; and IMF staff estimates and projections.

The 2006 projections incorporate the MDRI resources for the IMF, IDA and AfDF in stock operations.

Cotton production for T-1/T season. Production of cotton seed in crop year T-1/T affects agricultural production in year T-1, industry, services, and exports of ginned cotton in year T.

In percent of broad money at the beginning of the period.

Total revenue minus all expenditure, excluding interest due.

Total revenue minus all expenditure, excluding foreign-financed capital expenditure and interest due.

Interest payment only.

After HIPC relief and before MDRI.

Sources: Beninese authorities; and IMF staff estimates and projections.

The 2006 projections incorporate the MDRI resources for the IMF, IDA and AfDF in stock operations.

Cotton production for T-1/T season. Production of cotton seed in crop year T-1/T affects agricultural production in year T-1, industry, services, and exports of ginned cotton in year T.

In percent of broad money at the beginning of the period.

Total revenue minus all expenditure, excluding interest due.

Total revenue minus all expenditure, excluding foreign-financed capital expenditure and interest due.

Interest payment only.

After HIPC relief and before MDRI.

I. Private Investment Dynamics and Growth in Benin1

Summary

Benin has been undergoing democratization since the early 1990s, a process that has been furthered by the recent 2006 presidential elections. With program engagement with the Fund virtually uninterrupted since the 1990s, the country reached the completion point under the enhanced HIPC Initiative in March 2003 and began receiving assistance under the Multilateral Debt Relief Initiative (MDRI) in 2006. The current three-year Poverty Reduction and Growth Facility arrangement was approved in August 2005. In this context, the government that took office in April 2006 has adopted a strategy to strengthen macroeconomic stability and promote private-investment-led growth.

The following study uses econometric techniques to investigate the short- and long-run behavior of private investment and its contribution to growth in Benin. It finds that besides developments in the institutional and regulatory framework and in the terms-of-trade, public investment and private capital formation facilitated by credit to the private sector have a strong impact on growth performance. The analysis also confirms that slow improvement in Benin’s economic freedom, reflecting weak institutions and limited progress in implementing structural reforms, impedes private investment. Speed-of-adjustment analysis indicates that a 1 percent increase in private investment leads to a 0.2 percent increase in long-run GDP growth. Conversely, a 1 percent shock to private investment would entail a 16-percent yearly correction, requiring about 4 years to close half of the deviation of real GDP from its long-run equilibrium.

On the basis of these findings, the study underscores that:

  • By promoting private sector development and directing fiscal resources to public investment in infrastructure and institutional building, the authorities could help Benin realize higher long-run growth. The additional fiscal space created by MDRI-related aid should be allocated to high-return projects.
  • Structural reforms and the gradual formalization of informal economic activities through appropriate market incentives could help improve Benin’s economic competitiveness and strengthen its fiscal position.
  • A segmented public-private sector partnership could deepen the private sector’s involvement in Benin’s infrastructure development.
  • Finally, broadening access to credit would boost private investment and support growth.

A. Introduction

1. This study analyzes the relationship between private investment and growth, and their key determinants. To the extent that private investment is an important determinant of long-run growth, a comprehensive assessment of their relationship is essential to identify and appropriately address related policy issues. Such an assessment is of particular importance to Benin given that, despite its macroeconomic stability, the country has so far failed to attract significant private investment flows.

2. The analysis uses econometric techniques to investigate the short- and long-run behavior of private investment and its links to growth. Consistent with earlier growth accounting studies, it establishes that private investment is indeed a critical determinant of growth in Benin. Moreover, public investment appears to have an important role in supporting private investment and growth. This suggests that channeling part of the additional fiscal space in debt relief to public investment could benefit Benin’s medium term growth rate. The analysis also shows that adverse shocks, e.g., the terms of trade, can have long-lasting effects, while credit to the private sector has a short-lived impact on private investment and growth. And there is significant potential for institutional reforms to improve the business environment, raise private investment and invigorate growth.

3. The rest of the chapter is organized as follows: Section B provides background and stylized facts on Benin’s economic performance. Section C briefly describes the theoretical basis of the econometric model and discusses the estimation results. Section D provides insights on private investment behavior and its impact on growth through Variance Decomposition, Impulse Response Function, and Historical Decomposition Analysis. Section E offers concluding remarks and policy prescriptions for sustained growth through private investment.

B. Background and Stylized Facts

4. Benin has recorded modest private investment rates and per capita GDP growth despite its relatively good position within the WAEMU. Between 1965 and 2005, real GDP grew by an annual average of 3.4 percent, with per GDP capita increasing by only 0.3 percent per annum. After the 1994 CFA franc devaluation, real GDP growth rebounded to a yearly average of 4.4 percent during 1994–2005, and real GDP per capita increased by 1.7 percent per year.

5. Interestingly, since 1994, real private investment has tended to slow relative to historical rates (See Figure 1). The pace of real private investment growth decelerated from an annual average of 14 percent during 1980–93 to 6.1 percent in 1994–2006. Similarly, in the key cotton sector (see Box 1), investment has been insufficient to cover capital depreciation. The stock of foreign direct investment (FDI) in the cotton sector2 declined from US$441 million in 1998 to US$291 million in 2004, while total FDI inflows nearly doubled during the same period (US$ 60 millions in 2004, from US$33 millions in 1998).

Figure 1.Benin: Constant GDP and Private Investment, 1965–2005

(Natural log of constant value in CFA franc terms)

Source: Benin authorities.

Box 1.Cotton Production in Benin

  • The cotton sector and trade explain most of Benin’s output fluctuations. The cotton sector remains a dominant economic sector, though cotton seed production has a relatively small share of nominal GDP (about 3 percent on average during 2000–05) and is subject to large swings.
  • Production. Of the approximately 550,000 Benin families who run small farms to generate their main income, about 310,000 grow cotton and sell cotton seed. About 14,000 new small farmers (in net terms) enter the agricultural sector each year. Average family size in rural areas is 10 people. Ginning industry processing capacity is estimated at 600,000 tons.
  • The sectoral implication of cotton production. The production of cotton seed in crop year T-1/T affects agricultural production in year T-1, industry, services, and exports of cotton lint in year T.
  • The growth of cotton seed production in crop year T/T+1 affects agricultural production in year T and industry and services in year T+1. Noncotton-related sectors grow as the same rate as in the benchmark case. Authorities assumed a one-to-one impact. For instance a 1 percent increase in cotton seed production would imply a 1 percent increase in cotton-related activities in secondary and tertiary sectors. It was estimated in 2002 that the production of seed cotton represented about 15 percent of agricultural production, 10 percent of cotton-related industry, and 10 percent of cotton-related services.
  • Marketing. Cotton marketing, including the allocation of seed cotton to all ginning companies, is partly controlled by the parastatal ginning company (SONAPRA). The cotton sector is overregulated. Prices for inputs, transport, and seed cotton are centrally determined by institutions representing stakeholders (farmers, suppliers of inputs, and ginning companies).
  • Risks. Persistent sectoral risks pertain to (i) production (e.g., rainfall and high input costs); (ii) ginning quality; (iii) marketing and international price changes, (iv) transportation; and (v) credit allocation (e.g., liquidity constraints and incidence of nonperforming loans).

6. Private investment matters for growth. Over the last five years, economic growth has been more robust in CEMAC than in WAEMU countries. Text table 13 indicates that this can partly be explained by differing private investment performance in the two regions. High returns in the oil sector that is associated with greater private investment, have helped the CEMAC countries enjoy relatively higher real GDP growth. Interestingly, the Central African Republic, the only non-oil country in the CEMAC, achieved a real GDP growth of -0.4 percent on average during 2000–05, together with the lowest private investment ratio in the region.

Text table 1.Comparative Private Investment, 2000–05
Country2000–052000–032004–05
(percent of GDP)
WAEMU 1/11.111.211.1
Benin12.512.213.1
Burkina Faso10.610.510.8
Côte d’Ivoire7.77.87.5
Mali12.112.810.5
Niger5.25.15.6
Senegal17.017.516.2
Togo16.115.517.3
CEMAC 1/21.022.517.9
Cameroon16.516.316.8
Central African Rep.4.54.54.5
Chad27.333.514.8
Congo, Republic of16.015.716.6
Equatorial Guinea41.148.925.5
Gabon19.820.119.1
Memorandum items:(real GDP growth in percent)
WAEMU 1/3.02.63.6
CEMAC 1/5.75.26.6
Source: I.M.F. - World Economic Outlook, 2006.

PPP weighted.

WAEMU: West African Economic and Monetary Union.

CEMAC: Communauté Economic des Etats d’Afrique Centrale.

Source: I.M.F. - World Economic Outlook, 2006.

PPP weighted.

WAEMU: West African Economic and Monetary Union.

CEMAC: Communauté Economic des Etats d’Afrique Centrale.

7. Benin’s institutions, regulatory system, and financial sector developments likely impede private investment (Text Table 2). The World Bank’s 2006 “Doing Business” report ranks Benin 137 out of 175 countries in terms of ease of doing business. This relatively lackluster performance partly reflects cumbersome licensing requirements, difficult labor market conditions, scarce credit, and high factor costs. Casero and Varoudakis (2004) found similar impediments to private investment in Tunisia.

Text table 2.Selected Countries: Comparative Rankings of Doing Business 1/
Ease of doing BusinessStarting a BusinessDealing with LicensesEmploying WorkersRegistering PropertyGetting Credit
2006

rank
change

2006/05
2006

rank
change

2006/05
2006

rank
change

2006/05
2006

rank
change

2006/05
2006

rank
change

2006/05
2006

rank
change

2006/05
Benin1372126-13133-2121285-11170
Other WAEMU 2/
Burkina Faso16381312168-2153-1164-11170
Cote d’lvoire14115154-10158-11330101641430
Mali15510163-312220131-19361430
Niger160914712126291680103-21430
Senegal1466150-2661152115101430
Togo1513169-3132-71451155-191430
Sources: World Bank, 2006. www.doinbusiness.org

Countries are ranked from 1 to 175 with 1 being the best performer.

Except Guinea-Bissau.

Sources: World Bank, 2006. www.doinbusiness.org

Countries are ranked from 1 to 175 with 1 being the best performer.

Except Guinea-Bissau.

8. Progress in improving the business environment has been slow. Among the WAEMU countries Benin has made the least progress in improving the business environment in the last couple of years. The country’s “ease of doing business” indicators gained only 2 points from 2005 to 2006 while the WAEMU best performer during the period, Côte d’Ivoire, improved by 15 points. Excessive regulations and other institutional factors may have contributed to the laggard performance. The relatively subdued progress may also reflect delays in implementing reforms and in addressing various institutional weaknesses, especially in the cotton sector.

C. The Empirical Model

9. The background discussion suggests that understanding the impact of private investment on Benin’s long-run growth requires an understanding of institutional factors and the regulatory framework. There is not much empirical research in this area, particularly on developing countries. Most studies have to some extent looked separately at financial development or trade liberalization and growth, or have emphasized the role of public or fiscal policy, or institutions. Also, less attention has been paid to the relationship between private sector dynamics and growth while controlling for public investment, financial sector development, external factors, and institutional changes.

10. The analysis here uses the time-to-build approach to estimate the potential impact of private investment on growth. According to this approach, capital stock becomes productive once the investment projects are completed in sequence. It acknowledges that lags in investment returns depend on production technology (see Altug 1989, 1993 and Kydland and Prescott 1982), as opposed to the cost-of-adjustment model4 or irreversible investment under uncertainty models.5 The empirical model used here is a structural vector autoregression model (SVECM) that captures the time lag needed for initial investment to contribute to future growth,6, as well as endogeneity problems among the system variables.

11. The model includes the following set of endogenous variables:

Where:

  • LTRAD: the log of trade volume index is the external factor variable.
  • LGINV: the log of public investment is the proxy for fiscal variable.
  • LCRED: the log of credit to the private sector is the proxy for financial variable (as opposed to interest rate).
  • LPINV: the log of private investment incorporates private sector behavior.
  • LGD: the log of real GDP represents supply factors.

12. The background discussion above and existing empirical literature motivate the choice of variables8. Including public capital (LGINV) in the model helps to assess whether there is a crowding-in or a crowding-out effect of fiscal policy on private investment. The choice of LCRED, credit to the private sector, is justified as it is well known from the empirical literature that the interest rate channel is less effective in, and the credit channel better suited for, capturing the effectiveness of monetary policy.9 However, LCRED can also be viewed as a structural variable given that Benin’s financial sector has been growing in response to ongoing sector reforms. Furthermore, as shown in Figure A, the LCRED would give a sense of the extent to which financial deepening may be conducive to growth.

13. An institutions variable, denoted INSTt is assumed to be exogenous in the system. It is measured using the Fraser Institute’s Economic Freedom Index10 results for 1996–2006, extrapolated back to 1965 using the average scores derived from individual correlation to (only) trade, fiscal burden, foreign investment, banking, and wages and prices. The ranking ranges from 5 to 111; the better the institution is, the lower the ranking.

14. The model set up. The full representation of the model is as follows:

where πi (i = 1…, p), P is the number of lag, and φ unknown parameter vectors. As variables in (1) are in log terms, by subtracting and adding various lags of Yt one gets the following dynamics of (1): basis for cointegration analysis. By subtracting and adding various lags of Yt, (1) can be re-written as:

A variable preceeded by the operator Δ can be interpreted as the percentage change; (2) can also be rewritten as:

This equation, the “error correction” representation, has the merit of representing the dynamics for each individual (system) variable in terms of its deviation from its long-run equilibrium (the first term13) and in terms of its year-to-year or short-term change (the last two terms).

D. Empirical Evidence1415

15. The investment equation supports the conclusion that the trade index and public investment have a positive impact on private investment in the long-run. It appears that credit to the private sector does not have a significant long-run impact on private investment or on GDP growth. However, public investment and the export index have a direct impact on GDP growth and an indirect output effect via private investment. This result is consistent with the empirical literature, which suggests that public investment stimulates private investment (Oshikoya 1994, Odedokun 1997, and Ramirez 2000).

The long-run equilibrium equations for private investment and GDP are16:

ECT_PINV and ECT_GDP are the error correction terms for private investment and GDP equations respectively. They are the residual terms between actual value (left-hand side) and estimated values (right-hand side)

The short-run dynamic equations are:17

16. It follows from the long- and short-run equations above that:

  • Private investment is a significant long-run determinant of growth though its sluggish adjustment tends to dampen output growth. A 1 percent increase in private investment will yield a 0.2 percent long-run increase in GDP. However, as the speed of adjustment to the long-run equilibrium depends crucially on the cause of the gap, a 1 percent shock to private investment would entail an estimated 16 percent correction each year;18 requiring about 4 years to close 50 percent of the deviation of real GDP from its long-run equilibrium. Changes in institutions, past growth performance, public investment, and credit to the private sector positively and significantly affect private investment19.
  • The terms of trade and public investment have a negligible short-term impact on private investment. However, these factors are long-run determinants of private investment. There is no evidence of private investment crowding out by public investment in the short run.
  • Credit to private sector, supply factors, and the institutional framework significantly affect private investment in the short run. The positive impact of institutions on growth is confirmed by Ali (1997) and Ali and Crain (1999), who found that economic freedom is a more robust determinant of growth than are political freedom and civil liberties.

17. The SVECM approach provides a clearer picture of the relationship between the selected economic variables and their dynamic behavior across time. By contrast, descriptive statistics or ordinary least square regressions do not account for endogeneity problems or for contemporaneous and dynamic interactions between variables. For instance, simple descriptive statistics do not account for the silent dynamics of the direct and indirect contribution of private investment to the business cycle. Text table 3 below shows the linkages between the issues we are addressing and the econometric methodology we are applying. 20

Text table 3.Study Objective and Econometric Methodology
Questions to addressEconometric

methodology
1What are the long-run determinants of private investment and growth?Cointegration relations
2What would be the dynamic adjustment of GDP (or of private investment) toward its long-run equilibrium in response to various structural shocks?Error correction model (representation)
3What would have been the historical trend of GDP (private investement) if it had to be purged from private investment (Supply shock)?Historical decomposition (HD)
If policy does not change and looking forward,
4how much would private investment (or GDP) likely contribute to GDP growth (or private investment)?Variance decomposition (VD)
5What would be dynamic behavior of private investment (or GDP) in response to various shocks?Impulse response function (IRF)
Notes:

Depending on unit root results that may lead to SVAR analysis for I(0) series or SVECM for I(1), most recent studies employ simultaneously HD, VD and IRF because of their complementarity.

HD, VD, and IDF provide complementary insights to the analysis.

Notes:

Depending on unit root results that may lead to SVAR analysis for I(0) series or SVECM for I(1), most recent studies employ simultaneously HD, VD and IRF because of their complementarity.

HD, VD, and IDF provide complementary insights to the analysis.

Text table 4.Error Correction Model, 1965 - 2005
Short-run dynamic equation of
Public investmentCredit to the private sect.Private investmentGDP
Loading ParametersECT_PINV 1/-0.190.22-0.110.00
[-1.41]*[2.88]**[-2.83]**n.a.
ECT_GDP 1/0.31-0.280.00-0.26
[3.33]**[-1.79]*n.a.[2.84]**
Short-run parametersChange in:
TOT(-1)-0.380.260.140.23
[-2.00]**[0.60][0.49][0.90]
GINV(-1)0.17-0.200.05-0.26
[4.03]**[-1.63]*[0.38][-1.33]*
CRED(-1)0.260.660.840.11
[1.03][3.64]**[1.66]*[1.43]*
PINV(-1)-0.250.090.17-1.65
[-3.17]**[1.10][2.22]**[-2.17]**
GDP(-1)0.490.670.520.24
[2.99]**[0.53][2.91]**[102]
INST0.040.440.150.03
[0.06][1.82]*[2.03]**[107]
INST(-1)0.58-0.010.010.24
[0.51][-0.29][0.44][2.01]**
Adj. R-squared0.750.640.850.75
S.E. equation0.020.020.020.05
F-statistic1.791.331.29-0.02
Akaike AIC-2.27-3.65-1.39-3.48
Schwarz SC-2.77-1.55-1.87-2.78
t-statistics in [], 41 observations, optimal lag length = 2,ECT_PINV = Error correction model for private investment;ECT_GDP = Error correction model for GDP;TOT = Terms of trade; GINV=Public investment; CRED=Credit to the private sectorPINV = Private investment; INST=Economic freedom index (institution variable).

The joint test weak exogeneity test (WETS) of TOT for the two cointegrating vectors, PINV for GDP equation and GDP for PINV failed to reject the null hypothesis at χ 2 (3) = 4.160 [0.2447]

t-statistics in [], 41 observations, optimal lag length = 2,ECT_PINV = Error correction model for private investment;ECT_GDP = Error correction model for GDP;TOT = Terms of trade; GINV=Public investment; CRED=Credit to the private sectorPINV = Private investment; INST=Economic freedom index (institution variable).

The joint test weak exogeneity test (WETS) of TOT for the two cointegrating vectors, PINV for GDP equation and GDP for PINV failed to reject the null hypothesis at χ 2 (3) = 4.160 [0.2447]

Variance decomposition

18. Our variance decomposition analysis estimates the relative significance of each random innovation to the system variable by subjecting all endogenous variables in the SVAR model to standard deviation shocks. That is, for each period, the resulting simulated error, in a given endogenous variable, is decomposed into the error arising from its own innovation and the error stemming from the shock to the rest of endogenous variables.

Text Table 5.Forcast-Error Variance Decomposition 1/
Shock to
HorizonStandard

error
Terms of

trade
Public

investment
Credit to

Private sect.
Private

investment
Supply

factor
Variance decomposition of private investment
Year 11.1867.00010.4583.76176.9211.859
Year 21.2977.13410.9973.71565.60512.549
Year 41.9316.13210.7615.77258.37718.958
Year 62.2753.91811.7027.94951.63724.795
Year 82.3792.88712.49510.55746.85427.207
Year 102.5321.53012.50612.59445.90027.471
Variance decomposition of GDP
Year 12.5941.48810.0050.18213.74174.585
Year 22.8671.42810.5780.36816.44771.179
Year 43.2106.41710.6470.33827.66054.937
Year 63.7167.32611.0360.36125.41255.865
Year 83.9388.09912.4580.78524.84853.811
Year 104.0918.45812.4340.77826.13852.192

Based on structural factorization.

Based on structural factorization.

  • As expected, both private investment and real GDP explain the predominance of their own shocks. In the first period after a shock, private investment explains about 77 percent of its own shock. GDP explains 75 percent of its own shock. The fact that private investment and GDP movements are explained by their past value suggests that they have a significant lagged effect.
  • The effects of private investment and GDP appear to be mutually reinforcing, and the contribution of private investment to GDP appears high and long lasting. The contribution of shock to the supply factor on the private investment forecast error suggests that the labor market and investment conditions have a greater impact than (i) terms of trade, (ii) credit to the private sector, and (iii) public investment on the private investment forecast error. In regard to the contribution of a private investment shock to GDP, the results show that, a shock to private investment has the strongest and longest-lasting effect on GDP.
  • The impact of credit to the private sector on the GDP forecast error variance is relatively limited, though it is more significant and greater for private investment. Although the impact of GDP forecast error variance remains below 1 percent, the portion of private investment forecast error variance attributable to credit to the private sector increases from about 3.8 percent to 12.6 percent, indicating that a possible indirect output impact of credit is channeled through private investment. Finally, the short-lived effect of credit may reflect the fact that such credit is mostly short term.
  • The forecast error variance of private investment and GDP to terms of trade shocks display asymmetric responses. While it is steadily decreasing on private investment forecast error variance, it is increasing at a relatively high pace on GDP forecast error variance, indicating that the country will continue to be vulnerable to external shocks and that external factors are weaker determinants to private investment than are domestic conditions such as macroeconomic stability, labor market conditions, investment environment, credit market conditions, and fiscal conditions through public investment. Finally, the public and private nexus appears to reinforce the solid linkage between private investment and GDP.

Historical decomposition

19. Historical decomposition analysis is another way to assess the importance of different shocks over time. It evaluates the portion of the forecast error attributable to each of the structural shocks. The advantage of historical decomposition is its ability to reveal the relative importance of shocks in different periods.

20. Interestingly, the results support the previous findings on variance decomposition analysis. The results show that since the 1990s, public investment has become the most significant of the determinant of private investment.21 Supply factors 22 shocks were more marked during 1975’1990, and the impact of credit was significant but relatively limited.

21. Supply factors drive private investment. Private investment would have been higher if it had been driven by supply factors.23 Supply factors mostly influenced private investment until early in 1990, when the centrally planned economic regime gave way to a new market-oriented economy.

Figure 2.Benin: Historical Decomposition of Private Investment, 1975–2005

(Annual change)

Source: IMF staff estimates.

Impulse Response Function

22. We use impulse response function (IRF) analysis to further investigate private investment and GDP dynamics.24 IRF provides the time path of change in private investment and real GDP in response to a one-unit shock to terms of trade, public investment, credit to private sector, private investment, and GDP.

23. The IRF analysis confirms most of the variance decomposition results. The GDP response to private investment shocks holds. The first year after the shock, GDP growth picks up; however, in the sixth year after a slowdown, the impact of private investment is positively correlated with some marginal comovement of output response to shock to public investment. This result confirms the public and private nexus to the output effect of private investment.

24. Private investment overreacts to its own shock. Except for shocks to private investment, the GDP and private investment response is less than one to one. Because investment is irreversible, any adverse shock to private investment could lead to a sudden halt in private investment followed by disinvestment. Responses of a change in private investment to a terms-of-trade shock is limited; however, there is a persistent response to a private sector credit shock. However, the GDP change in response to a terms-of-trade shock is more pervasive and persistent.

Figure 3.Impulse Response to a “Shock” in Terms of Trade, Public Investment, Credit to Private Sector, Private Investment, and GDP

Source: Fund staff estimates.

E. Conclusion and Policy Issues

25. The econometric analysis finds that— besides Benin’s institutional and regulatory framework and terms-of-trade developments—public investment and credit to the private sector positively affect growth through increased private investment. The analysis also confirms that an obstacle to private investment in Benin is the country’s slow improvement in economic freedom owing to weak institutions and a slow pace of structural reforms. Speed of adjustment analysis shows that while a 1 percent increase in private investment leads to a 0.2 percent increase in GDP in the long run, a 1-percent shock to private investment would entail a 16-percent correction each year, requiring about 4 years to close 50 percent of the deviation of real GDP from its long-run equilibrium.

26. Promoting private sector development and directing fiscal resources to public investment would likely shift Benin to a higher long-run growth path. Given fiscal constraints, it remains imperative that any additional space created in the post-MDRI era is allocated to high-return projects.

27. Institutions also appear to be an important determinant of investment and growth; however, slow institutional changes do little to improve private investment and growth trends. Since 1996, cumbersome trade and informal market property rights and regulations have significantly affected the economic freedom index, with Benin’s performance rating on the Fraser Institute’s Economic Freedom Index increasing only 0.3 percent per year, on average, in 1996–2006. Structural reforms and the gradual elimination of informal economic activities through market incentives would therefore likely help improve Benin’s economic competitiveness and fiscal stance.

28. A segmented public-private partnership could deepen the private sector’s involvement in Benin’s infrastructure development. The partnership could be achieved in large companies, small and medium enterprises, as well as in the informal sector.

29. Finally, greater access to credit would likely boost private investment and support growth. As is evident from the historical decomposition analysis, supply shocks, for example through changing labor market and investment conditions, have a strong impact on private investment forecast error variance. Credit to the private sector indirectly affects growth via its impact on private sector investment; this effect, however, is short lived, apparently because in Benin such credit has tended to be short term in nature.

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Appendix A: Time Series Analysis

Figure A.Benin: Selected Economic Indicator, 1965 - 2005

(Natural log of constant value)

Source: Benin authorities.

Appendix B: Econometric Model

Variables ordering

Because the variance decomposition and impulse response function through the SVAR methodology are sensitive to the ordering of variables, following the SVAR literature our system variables are ordered according to assumed decreasing exogeneity.25 In other words, the terms of trade variable is assumed to be the most exogenous variable, while GDP is considered the most endogenous. Public investment and credit to the private sector are considered two policy instruments; however, credit to the private sector is assumed to be endogenous to the fiscal instrument.26

Cointegration rank

The model below

indicates that the rank of Π and Π determines how the process Yt-1 enters the system.

If we assume that rank (Π)≤ r, Π can be written as Π = αβ’, where α and β are n x r vectors. The statistical hypothesis of cointegration is based on the rank of Π. It is known that:

If rank (Π) =n, all variables Yt-1 are stationary (I(0)).

If rank (Π) = 0, ΔYt is stationary.

If 0 ≺rank (Π) =r ≺ n, there are r cointegrating relations.

Data and modeling steps

The analysis uses annual data for 1965–2005 from the World Bank Development Indicators 2006 and the IMF International Financial Statistics of June 2006. The data in these series (except for terms of trade and institutions) are at constant prices (2000=100). Before specifying and estimating the model, we apply a series of Augmented Dickey-Fuller (ADF) tests to analyze the generation process of each variable (see Appendix Table C1).

Table C1.Augmented Dickey-Fuller Test, 1965–2005
D-lagt-adfbeta Y_1sigmat-DY_lagt-probAICF-prob
Terms of trade
Level2-1.2090.833130.1342-1.8010.0809-3.915
1-1.7910.757050.1385-1.6370.1108-3.8760.0809
0-2.6990.661570.1418-3.8540.0609
first diff2-3.853**-0.581010.1351-0.99540.3268-3.902
1-7.211**-0.894660.13512.2650.03-3.9260.3268
0-9.034**-0.400970.1428-3.840.0604
Public investment
Level2-1.6720.872430.21051.1290.2669-3.014
1-1.4780.888770.21140.68690.4968-3.0310.2669
0-1.3750.899580.2098-3.0710.4261
first diff2-4.903**-0.177390.19433.0060.005-3.175
1-3.525*0.189440.216-0.80660.4255-2.9870.005
0-5.551**0.0640380.2149-3.0220.0135
Private investment
Level2-0.65540.984090.1353-0.67490.5045-3.899
1-0.63460.984730.1342-0.73090.4699-3.940.5045
0-0.66320.984150.1333-3.9780.6167
first diff2-4.492**-0.469540.13391.050.3014-3.919
1-4.976**-0.248670.13410.65520.5167-3.940.3014
0-6.723**-0.127170.133-3.9820.4727
Credit to private sector
Level2-1.8070.943410.20480.54280.5909-3.069
1-1.8740.942090.20270.4590.6492-3.1140.5909
0-1.9830.940050.2004-3.1620.7799
first diff2-2.1860.44180.2057-1.7190.095-3.061
1-3.452*0.218990.2115-0.66240.5122-3.0290.095
0-5.238**0.119680.2098-3.070.1966
Real GDP
Level21.2291.01970.03216-1.2490.2206-6.773
10.90361.0140.032420.17650.861-6.780.2206
00.9951.01470.03197-6.8340.4599
first diff2-3.761**-0.124690.032850.26850.79-6.73
1-4.663**-0.0745880.03240.92990.359-6.7820.79
0-5.509**0.0711610.03233-6.8110.6374
T=37, constant term, 5%=-2.94; 1%=-3.62
T=37, constant term, 5%=-2.94; 1%=-3.62

The second step of the analysis specifies the VAR model, including the model-checking procedure. This includes optimal lag choice, stability, normality, AR, and heteroschedascity tests (see Appendix Table C2 and C3; and Figure C1 and C2). Because the system variables are integrated of order 1, a crucial step is to draw its information content through the cointegration analysis. We apply the Johansen cointegration technique (Johansen 1988; Johansen and Juselius 1990).

Figure C1.Benin: Model Stability Test (with two lags)

Figure C2.Benin: Residual Normality Tests

Table C2.Optimal Lag Length
Significance of each lag 1/Significance of all lags up to 5 2/
Lag 51.3464 [0.2506]Lag 5 - 5 2/1.3464 [0.2506]
Lag 40.66561 [0.8336]Lag 4 - 5 3/1.0386 [0.4707]
Lag 30.81999 [0.6843]Lag 3 - 5 4/1.5540 [0.0963]
Lag 20.85296 [0.6508]Lag 2 - 5 5/1.5335 [0.0943]
Lag 12.6521 [0.0147]*Lag 1 - 5 6/9.3677 [0.0000]**

F-Statistics, F(25,20)

F-Statistics from descendant order F(25,20), F(50,26), F(75,28), F(100,29), and F(125,29).

F-Statistics, F(25,20)

F-Statistics from descendant order F(25,20), F(50,26), F(75,28), F(100,29), and F(125,29).

Table C3.AR, Normality, and Heteroschedasticity Tests
VariableStatisticEmpirical value
AR 1-2 test
LTOTF(2,22) =2.4959 [0.1055]
LGINVF(2,22) =4.2061 [0.0284]*
LCREDF(2,22) =1.5290 [0.2389]
LPINVF(2,22) =0.33618 [0.7181]
LGDPRF(2,22) =0.84006 [0.4451]
OverallF(50,48) =1.7469 [0.0272]*
Normality test
LTOTChi^2 (2) =1.7135 [0.4245]
LGINVChi^2 (2) =2.2329 [0.3274]
LCREDChi^2 (2) =3.1381 [0.2082]
LPINVChi^2 (2) =0.36529 [0.8331]
LGDPRChi^2 (2) =3.3347 [0.1887]
OverallChi^2 (10)=15.009 [0.1317]
Heteroschedasticity test
LTOTF(20,3) =0.099211 [0.9997]
LGINVF(20,3) =0.27895 [0.9681]
LCREDF(20,3) =0.18058 [0.9938]
LPINVF(20,3) =0.22086 [0.9860]
LGDPRF(20,3) =0.23048 [0.9835]
OverallChi^2 (300) =301.62 [0.4628]

Structural Model and Identification Issues

The empirical analysis, in estimating a structural vector autoregressive (SVAR), imposes a number of restrictions for identification purposes. The structural representation of Equation is:27

Assuming two cointegration vectors, the long-run effects of εt shocks can be written as Φ and C = φA-1 B28 are of rank 3 that is =5-2, as we have 5 endogenous variables and 2 cointegration relationships. A and B are nonsingular. A meaningful impulse response function will require at least 5 (5-1)/2=10 restrictions.

  • Given that there are 2 cointegration relations, at most 2 have transitory effects or zero have long-run impacts.
  • There are at least 3=5-2 shocks with permanent effects.
  • These two transitory shocks will induce 6=2*(5-2) independent restrictions.
  • Following King et al. (1991), 2*(2-1)/2=1 contemporaneous restriction identities will be imposed.
  • Using a data-oriented approach by degree of significance, we impose 3*(3-1)/2 additional restrictions.
  • Together, the total number of restrictions for the identified system will be [2*(5-2)] + [2*(2-1)/2] + [3*(3-1)/2] = 10.
Appendix C: Diagnostic Tests and Structural Model Long-run Matrix

Data generation processes indicate that most of the economic variables are nonstationary. Although the F-test indicates one lag, we extend the number of lags to 2, as suggested by Park (1994), to account for more memory effect. At lag 2, the model passed the residual normality and heteroschedasticity tests while the null hypothesis of non–AR 1-2 is rejected at 10 percent. Further, the stability of the model variables at lag 2 passed the 1-up and N-down Chow tests, indicating that the system has perfect stability.

Table C4.Unrestricted Cointegration Rank Test (Maximum Eigenvalue) 1/, 2/, 3/,
Hypothesized No. of CE(s)Eigen valueMax-Eigen Statistic5 percent Critical ValueProb.**
None *0.75853.87030.4400.000
At most 1 *0.56831.85924.1590.004
At most 20.34516.09217.7970.089
At most 30.1757.32211.2250.223
At most 40.0893.5424.1300.071

Max-eigenvalue test indicates 2 cointegrating eqn (s) at the 0.05 level

denotes rejection of the hypothesis at the 0.05 level

MacKinnon-Haug-Michelis (1999) p-values

41 observations from 1965 - 2005.

Test assumes no intercepts and no trend.

the test is carried with two lags in VAR.

Max-eigenvalue test indicates 2 cointegrating eqn (s) at the 0.05 level

denotes rejection of the hypothesis at the 0.05 level

MacKinnon-Haug-Michelis (1999) p-values

41 observations from 1965 - 2005.

Test assumes no intercepts and no trend.

the test is carried with two lags in VAR.

Table C5.Structural Model/Long-Run Matrix.
CoefficientStd. Errorz-StatisticProb.
C(21)-1.5450.192-8.0290.000
C(31)-4.3620.273-15.9540.000
C(41)-0.4410.172-2.5660.010
C(51)0.2610.1821.4340.152
C(32)1.3000.03537.6040.000
C(42)0.1790.1671.0730.283
C(52)0.0010.1820.0040.997
C(23)0.5780.02127.0790.000
C(43)0.1790.1531.1710.242
C(54)-0.4410.167-2.6480.008
Included observations: 36 after adjustmentsModel: Ae = Bu where E[uu’] = I, and B = I
Included observations: 36 after adjustmentsModel: Ae = Bu where E[uu’] = I, and B = I

Long-run Matrix

Figure C3.Benin: Historical Decomposition of GDP, 1975 - 2005

(Annual change)

Source: Staff estimate.

Statistical Appendix
Table 1.Benin: Gross Domestic Product by Sector of Origin at Current Prices, 2000–2005
200020012002200320042005
Est.
(Billions of CFA francs)
Primary sector586.5633.0660.6663.5686.0716.9
Agriculture and forestry421.7451.2463.2459.6473.1485.9
Livestock and fishing93.8105.8113.9121.4127.8136.1
71.176.083.582.585.194.9
Secondary sector217.1244.6267.1283.6285.3313.4
Manufacturing and handicrafts3.74.04.34.75.06.1
Construction and public works137.8156.3167.0171.2167.6183.1
Mining and petroleum13.415.720.925.525.928.2
Water, gas, and electricity62.268.674.982.286.896.0
Tertiary sector749.1816.9880.9953.9984.01,090.1
Trade574.7631.7682.1741.8760.9844.7
Transport and other services280.7305.2328.4350.1354.3399.1
Public administration113.8130.9140.3161.0163.9179.4
Other services29.332.335.138.639.644.4
150.9163.3178.3192.1203.1221.7
174.4185.2198.8212.1223.1245.4
GDP at factor cost1,525.01,664.61,776.21,866.01,919.22,080.3
Indirect taxes (net)154.7167.6180.5201.9219.0239.4
GDP at market prices1,679.71,832.21,956.72,067.92,138.22,319.7
(Percent of GDP)
Primary sector34.934.533.832.132.130.9
Agriculture and forestry25.124.623.722.222.120.9
Livestock and fishing5.65.85.85.96.05.9
4.24.14.34.04.04.1
Secondary sector12.913.413.713.713.313.5
Manufacturing and handicrafts0.20.20.20.20.20.3
Construction and public works8.28.58.58.37.87.9
Mining and petroleum0.80.91.11.21.21.2
Water, gas, and electricity3.73.73.84.04.14.1
Tertiary sector44.644.645.046.146.047.0
Trade34.234.534.935.935.636.4
Transport and other services16.716.716.816.916.617.2
Public administration6.87.17.27.87.77.7
Other services1.71.81.81.91.91.9
9.08.99.19.39.59.6
10.410.110.210.310.410.6
GDP at factor cost90.890.990.890.289.889.7
Indirect taxes (net)9.29.19.29.810.210.3
GDP at market prices100.0100.0100.0100.0100.0100.0
Sources: Institut National de la Statistique et de l’Analyse Economique (INSAE); and staff estimates.
Sources: Institut National de la Statistique et de l’Analyse Economique (INSAE); and staff estimates.
Table 2.Benin: Gross Domestic Product by Sector of Origin at Constant 1985 Prices, 2000–2005
200020012002200320042005
Est.
(Billions of CFA francs)
Primary sector314.7334.9343.0350.7370.7369.4
Agriculture and forestry227.9245.1249.0254.6271.1264.6
Livestock and fishing48.650.452.153.955.757.6
38.239.441.942.243.947.1
Secondary sector114.4124.6134.7137.8137.4144.5
Manufacturing and handicrafts0.90.91.01.01.11.2
Construction and public works77.784.490.690.789.193.5
Mining and petroleum9.711.313.414.314.515.4
Water, gas, and electricity26.128.029.731.832.734.3
Tertiary sector329.1346.4364.0382.8387.7408.3
Trade244.5259.2273.2287.7289.1305.6
Transport and other services110.7116.9122.7128.5127.5136.4
Public administration42.845.648.551.150.853.7
Other services12.813.814.815.916.017.1
78.282.987.292.294.898.4
84.587.290.895.198.6102.6
GDP at factor cost746.0793.0828.0856.8881.2906.5
Indirect taxes (net)59.662.565.771.676.479.3
GDP at market prices805.6855.5893.7928.4957.6985.8
(Annual changes in percent)
Primary sector4.56.42.42.25.7-0.4
Agriculture and forestry4.97.51.62.26.5-2.4
Livestock and fishing2.03.63.43.53.33.5
5.53.26.30.74.07.3
Secondary sector8.68.98.12.3-0.35.1
Manufacturing and handicrafts6.05.411.10.010.05.0
Construction and public works8.88.77.30.1-1.85.0
Mining and petroleum12.716.218.66.71.46.3
Water, gas, and electricity6.67.16.17.12.85.0
Tertiary sector3.65.35.15.21.35.3
Trade4.16.05.45.30.55.7
Transport and other services4.05.65.04.7-0.87.0
Public administration3.86.56.45.4-0.65.7
Other services5.87.67.27.40.66.9
4.06.05.25.72.83.8
2.33.14.14.73.74.1
GDP at factor cost4.76.34.43.52.92.9
Indirect taxes (net)7.04.95.19.06.73.8
GDP at market prices4.96.24.53.93.12.9
Sources: Institut National de la Statistique et de l’Analyse Economique (INSAE); and staff estimates.
Sources: Institut National de la Statistique et de l’Analyse Economique (INSAE); and staff estimates.
Table 3.Benin: Supply and Use of Resources at Current Prices, 2000–2005(Billions of CFA francs)
200020012002200320042005
Est.
Supply of resources2,131.12,313.32,494.52,616.42,706.32,855.5
Gross domestic product1,679.71,832.21,956.72,067.92,138.22,319.7
Imports of goods and nonfactor services451.4481.1537.8548.5568.1535.7
Goods314.8340.1387.0400.9416.4393.3
Services136.6141.0150.8147.6151.7142.4
Use of resources2,131.12,313.32,494.52,616.42,706.32,855.5
Gross domestic expenditure1,887.42,053.22,229.52,333.62,399.82,552.7
Consumption1,559.51,681.21,892.81,928.51,994.62,097.2
Public185.6202.4243.7274.9290.8339.0
Private1,373.91,478.91,649.11,653.61,703.81,758.3
Gross investment327.9371.9336.7405.1405.3455.4
Fixed and portfolio investment317.1345.2345.8389.3390.2425.3
Central government122.5135.3119.6141.1131.0144.2
Private sector194.7209.9226.2248.2259.1281.1
Change in stocks10.726.7-9.215.715.130.1
Exports of goods and nonfactor services243.7260.1265.0282.8306.5302.8
Goods132.9153.2147.3168.1181.0170.2
Services110.9106.9117.7114.7125.4132.6
Gross Domestic savings120.2151.063.9139.4143.7222.5
Resource gap207.7221.0272.8265.7261.6232.9
Private transfers59.559.155.350.860.061.4
Public transfers (current)28.161.170.666.968.048.2
Income paid abroad (net)-8.7-15.6-18.1-24.7-20.5-23.3
Gross national savings199.1255.5171.7232.5251.1308.8
Current account deficit-128.8-116.4-165.0-172.6-154.2-158.6
Sources: Beninese authorities; and staff estimates.
Sources: Beninese authorities; and staff estimates.
Table 4.Benin: Supply and Use of Resources at Current Prices, 2000–2005(Percent of GDP)
200020012002200320042005
Est.
Supply of resources126.9126.3127.5126.5126.6123.1
Gross domestic product100.0100.0100.0100.0100.0100.0
Imports of goods and nonfactor services26.926.327.526.526.623.1
Goods18.718.619.819.419.517.0
Services8.17.77.77.17.16.1
Use of resources126.9126.3127.5126.5126.6123.1
Gross domestic expenditure112.4112.1113.9112.8112.2110.0
Consumption92.891.896.793.393.390.4
Public11.111.012.513.313.614.6
Private81.880.784.380.079.775.8
Gross investment19.520.317.219.619.019.6
Fixed and portfolio investment18.918.817.718.818.218.3
Central government7.37.46.16.86.16.2
Private sector11.611.511.612.012.112.1
Change in stocks0.61.5-0.50.80.71.3
Exports of goods and nonfactor services14.514.213.513.714.313.1
Goods7.98.47.58.18.57.5
Services6.65.86.05.55.95.9
Gross Domestic savings7.28.23.36.76.79.6
Resource gap12.412.113.912.812.210.0
Private transfers3.53.22.82.52.82.6
Public transfers (current)1.73.33.63.23.22.1
Income paid abroad (net)-0.5-0.9-0.9-1.2-1.0-1.0
Gross national savings11.913.98.811.211.713.3
Current account deficit-7.7-6.4-8.4-8.3-7.2-6.8
Sources: Beninese authorities; and staff estimates.
Sources: Beninese authorities; and staff estimates.
Table 5.Benin: Production and Producer Prices of Cotton Products, 1999/00–2004/05
1999/002000/012001/022002/032003/042004/05
Est.
Production(Thousands of tons)
Seed cotton363.6336.6400.7337.5333.1427.7
Cotton Seed154.6143.3167.9148.0146.0187.5
(CFA francs per kilogram)
Producer prices
Seed cotton185200200180190190
Cotton Seed656864711319
Sources: Ministry of Rural Development, Department of Planning and Research; and Société Nationale pour la Promotion Agricole (SONAPRA).
Sources: Ministry of Rural Development, Department of Planning and Research; and Société Nationale pour la Promotion Agricole (SONAPRA).
Table 6.Benin: Production and Cultivated Area of Principal Food Crops, 1999/00–2004/2005
1999/002000/012001/022002/032003/042004/05
Est.
(Thousands of metric tons)
Production
Maize783750686797788842
Sorghum127155165183163164
Millet293635413537
Rice (paddy)344955635465
Total cereals973990941108410411107
Cassava2,1092,3502703315530552955
Yams1,6471,7451701215120112257
Beans748578958294
(Thousands of hectares)
Cultivated area
Maize625782623685663714
Sorghum155126183193174181
Millet384446514545
Rice (paddy)182327292325
Total cereals836975879958905965
Cassava202219240262238226
Yams145156156174167173
Beans113119116135119123
Source: Ministry of Rural Development, Department of Planning and Research.
Source: Ministry of Rural Development, Department of Planning and Research.
Table 7:SONAPRA’s Cost Structure, 1999/00–2004/05 1/(CFA francs per kilogram, unless otherwise indicated)
1999/002000/012001/022002/032003/042004/05
Est.
Purchase cost per unit of seed cotton384.2426.0425.9393.5445.0408.0
Producer price of seed cotton185.0200.0200.0180.0190.0190.0
Commission and local taxes191.2210.0210.0189.0200.0200.0
Transport costs8.016.016.024.555.018.0
Total production costs of ginned cotton (f.o.b.)774.2859.0666.4600.3885.0682.0
Purchase costs per unit of ginned cotton486.3531.0541.3501.6768.0570.0
Ginning costs43.658.659.936.058.067.0
Financial costs36.033.124.429.928.022.0
Transport costs15.723.123.015.020.013.0
Other168.3193.70.00.0
Insurance, freight, and other export costs24.319.417.917.711.010.0
Total production costs of cotton seed (c.i.f.)21.617.37.213.44.10.3
Transport costs12.111.35.17.52.10.0
Other production costs0.50.70.60.90.90.1
Insurance, freight, and other export costs9.05.31.55.11.10.2
Total costs (f.o.b)762.6851.6637.0768.8787.0248.0
Variable costs645.6735.8563.8691.0704.0219.0
Fixed costs117.0115.873.177.883.029.0
Total costs (c.i.f.)795.9876.3673.7613.7889.1682.3
Sales prices
Seed cotton (producers’ price)185.0200.0200.0180.0190.0190.0
Ginned cotton668.4804.0592.0795.4238.0370.0
Cotton seed64.867.663.670.813.019.0
Profit per unit
Seed cotton-14.4-26.0-25.9-15.713.4-25.0
Ginned cotton-105.9-55.0-57.195.061.062.0
Cotton seed43.250.256.457.45.05.0
Memorandum items:
Total profits (in billions of CFAF)-10.4-0.1-9.5-2.24.4-2.1
Contribution to government revenue (in percent)-10.4-0.1-9.5-18.40.00.0
Total Production of seed cotton (’000 tons)363.6336.6400.7337.5333.1427.7
Sources: Société Nationale pour la Promotion Agricole (SONAPRA); and staff estimates.

Crop year: October 1 - September 30.

Sources: Société Nationale pour la Promotion Agricole (SONAPRA); and staff estimates.

Crop year: October 1 - September 30.

Table 8.Benin: Retail Price of Major Petroleum Products, 2000–2005(CFA francs per liter)
200020012002200320042005
Est.
Premium gasoline320350323348348383
Regular gasoline305325298328330375
Kerosene180210188195217321
Diesel258285263293300381
Source: Société Nationale de Commercialisation des Produits Pétroliers (SONACOP); and Ministry of Commerce (MCAT).
Source: Société Nationale de Commercialisation des Produits Pétroliers (SONACOP); and Ministry of Commerce (MCAT).
Table 9.Benin: Transportation Activity, 2000–2005(Thousands of metric tons, unless otherwise indicated)
200020012002200320042005
Est.
Port traffic
Loading398.7380.5462.2469.4488.2596.0
Of which:
Palm products0.00.00.024.00.00.0
Cotton products276.4220.6212.0241.0178.7267.0
Transit4.96.55.68.6
Unloading2,674.82,929.33,007.73,808.93,520.64,556.0
Of which:
Hydrocarbons423.0323.9514.7838.1835.0840.0
Transit839.6984.9514.7838.1
Total3,073.53,309.93,469.94,278.33,968.85,152.0
Transit844.51,005.91,055.51,229.71,241.72,041.0
Niger419.7513.6549.7799.9671.41,041.0
Nigeria332.2402.0350.6311.4416.6629.0
Burkina Faso5.214.465.137.225.6105.0
Togo2.85.06.32.83.06.0
Mali15.328.747.014.00.442.0
Rail traffic
Passengers (in millions per kilometer)156.666.768.265.645.417.0
Freight (in millions of tons per kilometer)153.293.888.885.733.823.0
Upfreight (in thousands of metric tons)154.8105.1100.5102.543.652.0
General merchandise132.693.794.691.237.644.8
To Benin6.411.48.911.36.07.1
To Niger126.282.382.680.031.625.0
Hydrocarbons22.211.48.911.36.05.3
To Benin22.211.48.911.36.05.3
To Niger0.00.00.00.00.00.0
Downfreight (in thousands of metric tons)117.461.79.961.834.340.9
From Benin113.058.389.260.132.638.9
From Niger4.43.43.71.71.72.0
Sources: Ministry of Transportation, Directorate of the Port of Cotonou; Bénin-Niger Railway (OCBN); and staff estimates.
Sources: Ministry of Transportation, Directorate of the Port of Cotonou; Bénin-Niger Railway (OCBN); and staff estimates.
Table 10.Benin: Consumer Price Index in Urban Areas, 2000–2005 1/(Index, December 1996=100, unless otherwise indicated)
200020012002200320042005
Est.
January108.7116.8119.8123.3124.8127.9
February109.7115.6119.9123.8124.3128.2
March112.2117.5120.3124.1123.3131.0
April113.2118.9122.1124.6124.1130.8
May114.4120.9121.8124.8124.9131.2
June117.3120.3123.8124.2125.4132.2
July116.4120.7126.2124.4125.7133.5
August115.8119.5122.8123.0124.3133.2
September115.1119.0121.0122.5124.6133.5
October116.9119.4121.4123.8124.7133.8
November117.1120.3123.1124.6127.0133.6
December119.2122.0123.5124.5127.7132.5
Average114.7119.2122.1124.0125.1131.8
Changes in percent4.24.02.41.50.95.4
Source: Institut National de la Statistique et de l’Analyse Economique (INSAE).

Index is based on data covering five major cities.

Source: Institut National de la Statistique et de l’Analyse Economique (INSAE).

Index is based on data covering five major cities.

Table 11.Benin: Industrial Minimum Legal Wage, 2000–05(CFA francs per hour)
March, 2000144.2
December, 2000144.2
December, 2001144.2
December, 2002144.2
April, 2003173.3
December, 2003173.3
December, 2004173.3
December, 2005173.3
Sources: Central Bank of West African States (BCEAO); and Ministry of Labor and Social Affairs.
Sources: Central Bank of West African States (BCEAO); and Ministry of Labor and Social Affairs.
Table 12.Benin: Consolidated Government Operations 2000–2005
200020012002200320042005
Est.
(Billions of CFA francs)
Total revenue266.2281.0318.2350.7351.4383.4
Tax revenue234.1247.1282.5313.6311.4334.0
Tax on international trade126.7133.2145.9163.6155.9174.8
Direct and indirect taxes107.4113.9136.6150.0155.5159.2
Nontax revenue32.133.935.737.140.049.4
Total expenditure322.5353.2382.1426.3429.5489.3
Wages74.880.790.1108.0118.3130.3
Pensions and scholarships19.320.521.525.726.726.5
Current transfers26.841.573.761.865.581.8
Other expenditure64.759.658.479.580.3100.4
Investment122.5135.3119.6141.1131.0144.2
Budgetary contribution35.055.454.571.861.276.3
Financed from abroad87.479.865.169.369.867.9
Net lending (minus = reimbursement)0.30.43.2-2.00.7-0.8
Primary balance (narrow definition) 1/32.323.219.94.0-0.6-31.9
Interest14.115.215.512.37.06.9
Internal debt1.61.81.21.01.21.3
External debt12.413.514.311.35.85.6
Overall balance (payment order basis)-55.2-72.3-63.9-75.7-78.1-105.8
Change in arrears-30.6-6.7-6.7-2.1-8.5-42.2
External debt (princip & int pymts)-14.80.00.00.00.00.0
Domestic debt-15.8-6.7-6.7-2.1-8.5-42.2
Payments during compl period/float-0.68.3-13.81.3-10.763.4
Overall balance (cash basis)-71.4-70.7-84.4-76.4-97.3-84.7
Financing87.570.784.476.597.284.7
Domestic financing13.9-49.011.4-3.22.4-6.4
Bank financing1.2-47.813.7-1.28.918.2
Net use of Fund resources-2.5-3.0-6.8-3.5-2.8-3.4
Disbursements6.37.53.65.41.10.7
Repayments-8.9-10.6-10.4-8.9-3.9-4.1
Other3.8-44.720.42.311.721.5
Nonbank financing12.6-1.3-2.3-2.0-6.5-24.6
External financing73.7119.773.179.694.891.1
Project financing74.479.870.469.369.867.9
Grants25.324.515.331.940.939.7
Loans49.155.355.137.428.928.1
Amortization due-22.9-17.5-18.8-17.9-9.3-9.7
Program aid1.741.73.711.234.333.0
Grants1.721.53.74.914.88.2
Loans0.020.30.06.319.524.8
Debt relief obtained20.515.717.817.00.00.0
Financing gap0.00.00.00.00.00.0
Possible HIPC Initiative assistance0.00.00.00.00.00.0
Residual financing gap0.00.00.00.00.00.0
Memorandum items:(Percent of GDP, unless otherwise stated)
Total revenue15.815.316.317.016.416.5
Total expenditure19.219.319.520.620.121.1
Of which:
Wages4.54.44.65.25.55.6
Public investment7.37.46.16.86.16.2
Overall bal (pymnt ord basis, excl. grts)-3.4-3.9-3.3-3.7-3.7-4.6
Primary balance (narrow definition) 1/2.71.31.00.20.0-1.4
Primary balance (broad definition)-2.5-3.1-2.5-3.1-3.3-4.3
GDP (billions of CFA francs) 2/1,679.71,832.21,956.72,067.92,138.22,319.7
Sources: Beninese authorities; and staff estimates.

Total revenue minus total expenditure, excluding foreign-financed investment, interest payments, and net lending.

In billions of CFA francs.

Sources: Beninese authorities; and staff estimates.

Total revenue minus total expenditure, excluding foreign-financed investment, interest payments, and net lending.

In billions of CFA francs.

Table 13.Benin: Central Government Revenue, 2000–2005
200020012002200320042005
Est.
(Millions of CFA francs)
Total revenue266,217280,977318,177342,881351,416383,446
Direct taxes55,23063,13161,64376,39482,28983,779
Taxes on income and profits33,32940,16746,81547,80947,35053,232
Individual4,4874,2555,8026,8208,5557,826
Corporate25,99033,00437,55436,42634,03139,880
Other taxes2,8532,9093,4584,5634,7645,526
Taxes on payroll and workforce21,90022,96414,82828,58534,93830,548
Domestic taxes on goods and services54,09554,33067,35075,71179,57678,126
Value-added tax27,84531,60041,45440,77549,73853,660
Domestic production, sales, and excises7,3524,4164,2775,8685,4304,393
Taxes on specific services3,3414,3074,5287,1245,7815,672
Motor vehicle taxes (vignette)1,40000000
Other14,15714,00717,09121,94418,62714,401
Taxes on international trade and transactions126,699133,248145,881159,215155,903174,815
Customs duties32,71234,38740,12444,67327,86745,925
Value-added tax75,71879,26486,60685,09198,36693,826
Export duties, including re-exportation tax9192,4391,7711,173976919
Other17,35117,15817,38128,27928,69434,146
Nontax revenue30,19330,26843,30331,56133,64846,726
From nonfinancial public enterprises4,9015,1495,0475,3881,346699
Contribution to government employees’ pension fund8,5009,26910,79111,15513,88314,360
Repayment on on-lending
Other nontax revenue16,79215,85027,46515,01818,41931,667
(Percent of GDP)
Total revenue15.815.316.316.616.416.5
Taxes on income and profits3.33.43.23.73.83.6
Domestic taxes on goods and services3.23.03.43.73.73.4
Taxes on international trade and transactions7.57.37.57.77.37.5
Nontax revenue1.81.72.21.51.62.0
(Percent of total tax revenue)
Taxes on income and profits23.425.222.424.525.924.9
Domestic taxes on goods and services22.921.724.524.325.023.2
Taxes on international trade and transactions53.753.153.151.149.151.9
Sources: Beninese authorities; and staff estimates.
Sources: Beninese authorities; and staff estimates.
Table 14.Benin: Central Government Expenditure, 2000–2005
200020012002200320042005
Est.
(Billions of CFA francs)
Total expenditure322.2356.9384.5428.3437.4490.1
Primary expenditure220.7268.2303.8346.7352.0415.3
Salaries, pensions, and scholarships94.1101.2111.6133.7145.0156.8
Wage bill74.880.790.1108.0118.3130.3
Pensions and scholarships19.320.521.525.726.726.5
Other expenditure and current transfers91.5111.5132.2141.3145.8182.2
Budgetary contribution to investment35.055.460.171.861.276.3
Interest14.115.215.512.215.56.9
Internal debt1.61.81.20.90.81.3
External debt12.413.514.311.314.75.6
Investment expenditure financed from abroad87.479.865.169.369.867.9
Net lending (- =reimbursement)0.3-2.03.2-2.00.70.0
(Percent of GDP)
Total expenditure19.220.519.620.720.521.1
Primary expenditure13.115.415.516.816.517.9
Salaries, pensions, and scholarships5.65.85.76.56.86.8
Wage bill4.54.64.65.25.55.6
Pensions and scholarships1.11.21.11.21.21.1
Other expenditure and current transfers5.46.46.86.86.87.9
Budgetary contribution to investment2.13.23.13.52.93.3
Interest0.80.90.80.60.70.3
Internal debt0.10.10.10.00.00.1
External debt0.70.80.70.50.70.2
Investment expenditure financed from abroad5.24.63.33.43.32.9
Net lending (- =reimbursement)0.0-0.10.2-0.10.00.0
(Percent of total expenditure)
Total expenditure100.0100.0100.0100.0100.0100.0
Primary expenditure68.575.279.081.080.584.7
Salaries, pensions, and scholarships29.228.429.031.233.232.0
Wage bill23.222.623.425.227.026.6
Pensions and scholarships6.05.75.66.06.15.4
Other expenditure and current transfers28.431.234.433.033.337.2
Budgetary contribution to investment10.915.515.616.814.015.6
Interest4.44.34.02.83.51.4
Internal debt0.50.50.30.20.20.3
External debt3.93.83.72.63.41.1
Investment expenditure financed from abroad27.122.416.916.216.013.8
Net lending (- =reimbursement)0.1-0.60.8-0.50.20.0
Source: Ministry of Finance.
Source: Ministry of Finance.
Table 15.Benin: Operations of the Social Security Fund, 2000–2005(Millions of CFA francs)
200020012002200320042005
Est.
Contributions12,96513,82820,38622,47623,90923,335
Family allowances5,5096,5348,7119,58910,1889,957
Workers’ compensation1,3041,7111,9782,1922,3352,291
Retirement6,1527,3129,69710,69511,38611,088
Other revenue10,1002,2353,5764,4465,8515,825
Total receipts23,06517,79223,96226,92229,76029,160
Benefits5,2215,9006,6267,7488,4529,670
Family allowances8828748611,0361,5242,096
Workers’ compensation170177157198344236
Retirement4,1694,8495,6086,5146,5847,368
Other expenses8,8192,2263,6944,6546,4596,792
Total expenditure14,0398,12610,32012,40214,91216,491
Surplus/deficit (-)9,0269,66613,64214,52014,85012,669
Source: Social Security Fund (OBSS).
Source: Social Security Fund (OBSS).
Table 16.Benin: Monetary Survey, 2000–2005
200020012002200320042005
Est.
(Billions of CFA francs; end of period)
Net foreign assets352.7476.8426.7398.1336.7387.3
Central Bank of West African States (BCEAO)261.5371.2318.1326.9257.6328.5
Banks91.2105.6108.671.279.158.7
Net domestic assets172.9115.7143.1209.5230.3303.6
Domestic credit181.7133.4178.1251.0280.0356.0
Net claims on government-12.3-60.1-46.5-47.7-38.9-20.8
Credit to the nongovernment sector194.0193.5224.6298.7312.1375.1
Other items (net)-8.8-17.7-35.1-41.3-49.7-52.5
Broad money (M2)525.6592.5569.8607.6567.0690.8
Currency211.2223.8170.9190.3129.9195.2
Bank deposits308.3360.1391.9409.9429.0487.0
Deposits with national post and savings agency6.18.67.07.48.18.6
(Percent of beginning-of-period broad money, unless otherwise specified)
Memorandum items:
Net foreign assets10.723.6-8.5-5.0-10.18.9
Net domestic assets10.5-10.94.611.63.412.9
Domestic credit9.4-9.27.512.84.813.4
Net claims on government0.3-9.12.3-0.21.53.2
Credit to the nongovernment sector9.1-0.15.213.02.211.1
Broad money21.212.7-3.86.6-6.721.8
Velocity of broad money3.53.33.43.53.63.7
(GDP relative to average M2)
Credit to the economy (annual change in percent)25.5-0.316.133.04.520.2
Nominal GDP (in billions of CFA francs)1,679.71,832.21,956.72,067.92,138.22,319.7
Source: Central Bank of West African States (BCEAO); and staff estimates.
Source: Central Bank of West African States (BCEAO); and staff estimates.
Table 17.Benin: Summary Account of the Central Bank of West African States (BCEAO), 2000–2005(Billions of CFA francs; end of period)
200020012002200320042005
Est.
Gross foreign assets323.5431.5369.6370.8305.9365.1
Gross claims on central government52.851.145.641.936.232.1
Advances to the treasury0.00.00.00.00.00.0
Treasury bonds1.31.10.70.40.30.1
Trust Funds on-lent and Structural Adjustment
Facility (SAF)/Enhanced Structural
Adjustment Facility (ESAF) loans51.550.044.941.536.032.0
Other assets9.97.65.51.90.00.0
Total assets386.1490.2420.7414.6342.1397.2
Banknotes and coins outside banks211.2223.8170.9190.3129.9195.2
Government deposits and cash63.6111.388.687.563.656.5
Deposits60.2109.286.985.360.853.8
Central government59.8105.786.185.360.853.6
Other public agencies0.43.50.80.00.00.2
Cash held by the treasury3.42.11.72.22.92.7
Commercial banks’ deposits and cash37.177.186.381.791.099.0
Deposits25.963.670.375.283.4
Cash11.213.516.015.815.6
Public enterprises deposits1.12.40.60.80.50.7
Short-term foreign liabilities0.73.11.83.812.88.2
SDR allocations9.08.88.77.77.57.2
Long-term foreign liabilities 1/61.357.249.740.135.528.4
Other liabilities2.26.514.02.71.32.0
Total liabilities386.4490.2420.6414.6342.1397.2
Source: Central Bank of West African States (BCEAO).

Mainly Trust Fund and outstanding SAF/ESAF loans.

Source: Central Bank of West African States (BCEAO).

Mainly Trust Fund and outstanding SAF/ESAF loans.

Table 18.Benin: Summary Account of Commercial Banks, 2000–2005(Billions of CFA francs; end of period)
200020012002200320042005
Est.
Reserves of commercial banks37.177.186.378.0112.388.4
Cash in vault11.213.516.018.615.815.6
Deposits at Central Bank of West African States (BCEAO)25.963.670.359.496.572.8
Gross foreign assets151.0178.5170.0147.4160.2157.8
Gross claims on government25.823.020.623.813.127.9
Central administration25.822.318.219.013.127.9
Other public agencies0.00.72.44.80.00.0
Credit to the nongovernment sector194.0192.8222.2293.9312.1375.1
Performing credit183.6184.5208.2280.2289.8336.3
Crop credit0.52.419.820.46.315.4
Other118.6182.1188.4259.8283.5320.8
Nonperforming credit10.58.314.013.722.338.9
Other assets27.417.537.031.46.918.7
Total assets435.4488.9536.1574.5604.6667.9
Private sector deposits261.6304.1325.0355.9364.1411.1
Short-term foreign liabilities59.872.961.476.281.199.1
Banks9.418.419.223.629.235.6
Call accounts18.917.98.95.93.03.8
Other31.536.633.346.748.959.7
Government deposits79.484.495.081.797.0108.1
Central administration33.834.329.528.532.633.0
Other public agencies45.650.165.553.264.475.1
Central bank refinancing0.00.00.00.00.00.0
Long-term foreign liabilities2.30.91.42.52.03.5
Other liabilities32.326.653.558.067.247.9
Total liabilities435.3488.9536.3574.3611.4669.6
Source: Central Bank of West African States (BCEAO).
Source: Central Bank of West African States (BCEAO).
Table 19.Benin: Net Claims on the Central Government, 2000–2005 1/(Billions of CFA francs; end of period)
200020012002200320042005
Est.
Central Bank of West African States (BCEAO)-10.4-27.6-42.2-45.6-27.4-24.2
Gross claims on central government52.843.645.641.936.232.1
Treasury52.843.645.641.936.232.1
Autonomous Amortization Fund (CAA) and the Road Fund0.00.00.00.00.00.0
Central government deposits63.271.287.887.563.656.3
Treasury32.740.753.963.834.719.7
Indemnification and Rehabilitation Fund (FIR)0.20.20.20.20.20.2
CAA16.916.912.67.17.89.6
Road Funds0.00.00.00.00.13.0
Cash held by central administration3.43.41.72.22.92.7
Project-related deposits with the BCEAO10.010.019.414.218.121.1
Commercial banks-3.70.0-11.3-9.5-19.5-5.1
Gross claims on central government25.823.418.219.013.127.9
Of which
Treasury bonds20.420.413.810.57.122.1
Central government deposits29.535.529.528.532.633.0
Of which
Treasury20.130.117.118.722.318.4
CAA and National Investment Fund (FNI)6.53.34.23.84.74.3
Private deposits with national post and savings agency6.16.37.07.48.18.6
Net credit to central government-8.00.0-46.5-47.7-38.9-20.8
Source: Central Bank of West African States (BCEAO).

The government includes the treasury, the Autonomous Amortization Fund (CAA), the National Investment Fund (FNI) and the Road Fund.

Source: Central Bank of West African States (BCEAO).

The government includes the treasury, the Autonomous Amortization Fund (CAA), the National Investment Fund (FNI) and the Road Fund.

Table 20.Benin: Distribution of Credit to the Economy, 2000–2005 1/(Millions of CFA francs; end of period)
200020012002200320042005
Est.
Short term
Agriculture3,6314,1116,1827,6137,9378,623
Industry13,63916,46814,33129,63028,23760,300
Construction4,1305,4775,1514,2077,82211,906
Transportation1,7328,3527,69715,76515,86629,102
Commerce61,69351,57373,66976,40498,685144,622
Services35,79127,41735,40745,61596,49937,967
Other465581113,3826,361
Total121,081113979142,438179,235258,428298,881
Of which:
Public and semipublic enterprises20,75619,53924,41730,72541,28251,069
Medium term
Agriculture2,2672,4591,9271,2585279
Industry4,3523,0926,7097,44011,0084,445
Construction27635,02726418465
Transportation9145,1672,7742,7185,69612,629
Commerce5,2075,3004,2143,4266,05215,312
Services35,18126,74321,56428,05445,14821,688
Other102076021371,6903,697
Total47,95843,03137,81743,05970,06458,315
Of which:
Public and semipublic enterprises8,2217,3776,4837,3815,5394,849
Long term
Agriculture160002400
Industry00000228
Construction000000
Transportation000005,974
Commerce000003,881
Services2370000131
Other02033621341660
Total39720336215816610,214
Of which:
Public and semipublic enterprises000006,209
Grand total169,436157,213180,617222,452328,658367,410
Of which:
Public and semipublic enterprises28,97726,91530,90038,10746,82162,127
Source: Central Bank of West African States (BCEAO).

As reported to the Credit Risk Registry (Centrale des Risques).

Source: Central Bank of West African States (BCEAO).

As reported to the Credit Risk Registry (Centrale des Risques).

Table 21.Benin: Central Bank Lending Rates, January 2000-December 2005(Percent per annum; end of period, unless otherwise indicated)
Rediscount Rate (TES)Special Rate for Advances to Treasury 1/Repurchase RateAverage Monthly Money Market Rate (TMM)Reserve Requirment Rate
2000January5.754.955.254.953.00
February5.754.955.254.953.00
March5.754.955.254.953.00
April5.754.955.254.953.00
May5.754.956.004.953.00
June6.504.956.004.953.00
July6.504.956.004.953.00
August6.504.956.004.953.00
September6.504.956.004.959.00
October6.504.956.004.959.00
November6.504.956.004.959.00
December6.504.956.004.959.00
2001January6.504.956.004.959.00
February6.504.956.004.959.00
March6.504.956.004.959.00
April6.504.956.004.959.00
May6.504.956.004.959.00
June6.504.956.004.959.00
July6.504.956.004.959.00
August6.504.956.004.959.00
September6.504.956.004.959.00
October6.504.956.004.959.00
November6.504.956.004.959.00
December6.504.956.004.959.00
2002January6.504.956.004.959.00
February6.504.956.004.959.00
March6.504.956.004.959.00
April6.504.956.004.959.00
May6.504.956.004.959.00
June6.504.956.004.959.00
July6.504.956.004.959.00
August6.504.956.004.959.00
September6.504.956.004.959.00
October6.504.956.004.959.00
November6.504.956.004.959.00
December6.504.956.004.959.00
2003January6.504.956.004.959.00
February6.504.956.004.959.00
March6.504.956.004.959.00
April6.504.956.004.959.00
May6.504.956.004.959.00
June6.504.956.004.959.00
July5.504.955.004.959.00
August5.504.955.004.959.00
September5.504.955.004.959.00
October5.504.955.004.959.00
November5.004.954.504.959.00
December5.004.954.504.959.00
2004January4.504.954.004.959.00
February4.504.954.004.959.00
March4.504.954.004.959.00
April4.504.954.004.9513.00
May4.504.954.004.9513.00
June4.504.954.004.9513.00
July4.504.954.004.9513.00
August4.504.954.004.9513.00
September4.504.954.004.9513.00
October4.504.954.004.9513.00
November4.504.954.004.9513.00
December4.504.954.004.9513.00
2005January4.504.954.004.9513.00
February4.504.954.004.9513.00
March4.504.954.004.9513.00
April4.504.954.004.9513.00
May4.504.954.004.9513.00
June4.504.954.004.9513.00
July4.504.954.004.9515.00
August4.504.954.004.9515.00
September4.504.954.004.9515.00
October4.504.954.004.9515.00
November4.504.954.004.9515.00
December4.504.954.004.9515.00
Source: Central Bank of West African States (BCEAO).

Reform of lending rate structure, involving the abolition of the preferential discount rate and the creation of a special rate for advances to the treasury.

Source: Central Bank of West African States (BCEAO).

Reform of lending rate structure, involving the abolition of the preferential discount rate and the creation of a special rate for advances to the treasury.

Table 22.Benin: Balance of Payments, 2000–2005
200020012002200320042005
Est.
(Billions of CFA francs)
Trade balance-181.9-186.9-239.7-232.8-235.4-223.1
Exports, f.o.b.132.9153.2147.3168.1181.0170.2
Cotton107.3115.999.3116.1114.693.0
Oil0.00.00.00.00.00.0
Other25.637.348.052.066.477.2
Imports, f.o.b.-314.8-340.1-387.0-400.9-416.4-393.3
Of which: petroleum products-46.8-40.1-53.0-61.9-80.6-69.0
Services and income (net)-34.5-49.7-51.2-57.5-46.8-45.1
Services-25.8-34.1-33.1-32.9-26.3-21.8
Credit110.9106.9117.7114.7125.4132.6
Debit-136.6-141.0-150.8-147.6-151.7-154.4
Income-8.7-15.6-18.1-24.7-20.5-23.3
Of which: interest due on government debt-12.4-13.5-14.3-11.3-5.8-5.6
Current transfers (net)87.6120.2125.9117.7128.0109.6
Unrequited private transfers59.559.155.350.860.061.4
Public current transfers28.161.170.666.968.048.2
Current account-128.8-116.4-165.0-172.6-154.2-158.6
Capital account32.331.822.7103.240.939.7
Public project grants32.331.822.735.640.939.7
Debt cancellation0.00.00.067.60.00.0
Financial account (net)148.4178.771.461.243.9184.5
Medium- and long-term public capital29.561.439.927.342.847.0
Disbursements52.478.958.647.452.156.8
Project loans52.458.758.641.032.632.0
Program loans0.020.30.06.319.524.8
Amortization due-22.9-17.5-18.8-20.1-9.3-9.7
Principal not yet due 1/0.00.00.0-67.6
Medium- and long-term private capital53.226.08.818.826.446.7
Deposit money banks11.3-14.4-3.037.40.0-20.4
Short-term capital-1.643.719.640.320.049.8
Errors and omissions56.061.96.25.1-45.361.4
Overall balance52.094.0-70.9-8.2-69.471.0
Financing-52.0-94.170.98.269.3-70.9
Change in net foreign assets (- increase)-57.7-109.753.1-8.869.3-70.9
Of which: net use of Fund resources-2.5-3.0-6.8-3.4-2.6-2.6
Loans6.37.53.65.51.10.7
Repayments-8.9-10.6-10.4-8.9-3.7-3.3
Change in external arrears (+ increase)-14.80.00.00.00.00.0
Interest-4.90.00.00.00.00.0
Principal-9.90.00.00.00.00.0
Debt relief obtained20.515.717.817.00.00.0
Financing gap0.00.00.00.00.00.0
(Percent of GDP)
Current account-7.7-6.4-8.4-8.3-7.2-6.8
Overall balance3.15.1-3.6-0.4-3.23.1
Memorandum items:(Billions of CFA francs)
Reexports139.5147.9164.9146.2120.5129.8
Imports for reexports-97.8-97.8-86.0-74.8-59.8-66.2
Sources: Central Bank of West African States (BCEAO); and staff estimates.

operation at the completion point.

Sources: Central Bank of West African States (BCEAO); and staff estimates.

operation at the completion point.

Table 23.Benin: Balance of Payments, 2000–2005(Millions of US dollars)
200020012002200320042005
Est.
Trade balance-258.0-255.1-345.1-401.4-446.1-423.7
Exports, f.o.b.188.5209.2212.1289.8343.1323.3
Cotton152.2158.3142.9200.2217.3176.6
Oil0.00.00.00.00.00.0
Other36.350.969.189.6125.9146.7
Imports, f.o.b.-446.5-464.3-557.2-691.1-789.2-747.0
Of which: petroleum products-66.4-54.7-76.3-106.7-152.8-131.0
Services and income (net)-48.9-67.9-73.7-99.2-88.6-85.6
Services-36.5-46.6-47.7-56.7-49.8-41.4
Credit157.2145.9169.4197.8237.8251.8
Debit-193.8-192.5-217.1-254.5-287.5-293.2
Income-12.3-21.3-26.1-42.5-38.9-44.2
Of which: interest due on government debt-17.5-18.4-20.6-19.4-11.0-10.6
Current transfers (net)124.3164.1181.3203.0242.5208.2
Unrequited private transfers84.480.779.687.6113.7116.6
Public current transfers39.983.4101.6115.4128.891.6
Current account-182.6-158.9-237.5-297.6-292.2-301.2
Capital account45.843.432.7177.977.575.5
Public project grants45.843.432.761.477.575.5
Debt cancellation0.00.00.0116.50.00.0
Financial account (net)210.5244.0102.8222.183.2360.5
Medium- and long-term public capital41.883.957.447.081.289.3
Disbursements74.3107.784.481.798.8107.8
Project loans74.380.184.470.761.960.7
Program loans0.027.60.010.937.047.1
Amortization due-32.4-23.9-27.0-34.7-17.6-18.5
Principal not yet due 1/0.0-116.5
Medium- and long-term private capital75.535.512.732.450.088.7
Deposit money banks
Short-term capital-2.359.728.269.537.994.5
Errors and omissions79.584.68.98.7-85.9126.8
Overall balance73.7128.4-102.0-14.1-131.5134.8
Financing-73.7-128.5102.014.1131.4-134.7
Change in net foreign assets (- increase)-81.8-149.876.5-15.2131.4-134.7
Of which: net use of Fund resources-3.6-4.2-9.7-5.9-4.9-4.9
Loans9.010.35.29.52.01.3
Repayments-12.6-14.5-15.0-15.3-6.9-6.2
Change in external arrears (+ increase)-21.00.00.00.00.00.0
Interest-7.00.00.00.00.00.0
Principal-14.00.00.00.00.00.0
Debt relief obtained29.021.425.629.30.00.0
Financing gap0.00.10.00.00.1-0.1

operation at the completion point.

Sources: Central Bank of West African States (BCEAO); and staff estimates.

operation at the completion point.

Sources: Central Bank of West African States (BCEAO); and staff estimates.
Table 24.Benin: External Trade Indices, 2000–2005
200020012002200320042005
Est.
(1992=100)
Merchandise exports, f.o.b.
Value index380.2438.4421.5481.0518.0487.1
Volume index273.8266.0293.6327.6288.7354.3
Unit value index225.9268.2233.6238.8291.9224.5
Merchandise imports, f.o.b.
Value index310.1335.1381.3395.0410.2387.5
Volume index130.6138.7146.3153.3157.8163.0
Unit value index237.5241.5260.5257.7259.9237.7
Terms of trade index95.1111.089.692.7112.394.4
(Annual percentage change)
Merchandise exports, f.o.b.
(excluding reexports)
Value index-3.015.3-3.914.17.7-6.0
Volume index-8.0-2.910.411.6-11.922.7
Unit value index9.018.7-12.92.322.2-23.1
Merchandise imports, f.o.b.
(excluding imports for reexports)
Value index8.18.013.83.63.9-5.5
Volume index1.26.25.54.73.03.3
Unit value index6.81.77.9-1.10.9-8.6
Terms of trade index2.116.7-19.33.421.2-15.9
Sources: Beninese authorities; and staff estimates.
Sources: Beninese authorities; and staff estimates.
Table 25.Benin: Services, Income, and Private Transfers, 2000–2005(Billions of CFA francs)
200020012002200320042005
Est.
Services (net)-25.8-34.1-33.1-32.9-26.3-9.8
Credit110.9106.9117.7114.7125.4132.6
Freight and insurance18.824.420.518.115.717.0
Government operations6.910.18.15.66.212.6
Tourism54.746.060.461.862.663.1
Other services18.821.624.324.427.425.9
Other transport11.74.84.44.813.514.0
Debit-136.6-141.0-150.8-147.6-151.7-142.4
Freight and insurance-66.8-65.8-77.0-78.3-71.8-68.7
Government operations-3.8-4.6-4.0-5.9-7.2-7.0
Tourism-8.7-12.7-13.7-12.3-15.4-13.8
Other services-50.5-31.4-34.2-30.2-37.5-33.9
Other transport-6.8-26.5-21.9-20.9-19.8-19.0
Income-8.7-15.6-18.1-24.7-20.5-23.3
Credit22.25.517.511.920.710.5
Debit-30.9-21.1-35.6-36.6-41.2-33.8
Of which
Interest on government debt-12.4-13.5-14.3-11.3-7.9-5.6
Private transfers59.559.155.350.860.061.4
Credit65.065.065.156.362.663.6
Debit-5.5-5.9-9.8-5.5-2.6-2.2
Sources: Central Bank of West African States (BCEAO); and staff estimates.
Sources: Central Bank of West African States (BCEAO); and staff estimates.
Table 26.Benin: Direction of Recorded Exports, 2000–2005 1/
200020012002200320042005
Est.
(Millions of U.S. dollars)
World195.6591.0241.5271.4290.1300.4
Industrial countries39.440.238.839.933.725.5
Of which
United States1.20.60.40.70.10.3
Belgium-Luxembourg4.65.33.03.51.60.6
France3.35.26.84.48.53.6
Italy12.39.39.96.64.33.7
Portugal2.31.92.82.03.23.8
Spain6.15.34.54.34.32.1
Switzerland2.61.52.43.34.92.0
United Kingdom0.92.31.41.90.72.3
Developing countries156.1550.2201.1231.4256.4274.6
Africa28.4433.377.257.581.181.0
Of which
Burkina Faso0.41.11.12.22.24.4
Cote d’lvoire0.91.01.21.44.51.1
Morocco7.34.88.93.22.13.2
Niger7.65.05.17.715.217.9
Nigeria2.913.435.812.816.713.7
South Africa0.71.92.64.32.63.7
Togo0.72.84.112.410.014.5
Asia94.196.7115.7161.7170.5183.9
Of which
Bangladesh8.32.62.910.81.27.6
China, P.R.: Mainland0.70.816.362.3104.993.9
India60.661.342.227.420.022.1
Indonesia9.611.323.925.310.524.5
Korea0.10.00.01.10.00.0
Malaysia1.41.80.71.38.00.0
Thailand7.48.612.515.710.614.3
Europe10.26.35.50.82.21.3
Of which
Turkey8.93.63.70.11.40.0
Middle East2.52.00.87.01.37.2
Of which
Saudi Arabia2.21.60.71.10.34.2
Western hemisphere21.011.92.04.51.31.2
Of which
Argentina0.00.00.10.00.00.0
Brazil17.59.00.90.90.00.6
Not specified countries0.00.01.40.00.00.3
Memorandum items:
European Union35.537.835.835.129.224.2
Oil exporting countries15.227.560.645.028.045.3
Non-oil developing countries140.9522.7140.5186.4228.4229.3
Percent distribution(Percent)
Industrial countries20.26.816.114.711.68.5
Developing countries79.893.183.385.388.491.4
Africa14.573.331.921.227.927.0
Asia48.116.447.959.658.861.2
Europe5.21.12.30.30.80.4
Middle East1.30.30.32.60.52.4
Western hemisphere10.72.00.81.60.40.4
(Annual percent change)
World-5.6202.2-59.112.46.93.6
Industrial countries-9.52.1-3.62.9-15.7-24.3
Developing countries-4.2252.4-63.415.110.87.1
Africa67.01,428.0-82.2-25.541.00.0
Asia2.22.819.739.75.57.8
Europe45.4-38.2-13.5-85.3172.9-40.5
Middle East-29.8-19.1-62.1819.7-81.1445.6
Western hemisphere-51.6-43.2-83.0120.1-71.7-7.6
Source: IMF, Direction of Trade Statistics.

Trade partners data.

Source: IMF, Direction of Trade Statistics.

Trade partners data.

Table 27.Benin: Direction of Recorded Imports, 2000–2005 1/
200020012002200320042005
Est.
(Millions of U.S. dollars)
World562.7622.2720.9886.0897.2892.9
Industrial countries323.1332.7364.8456.6414.7448.3
Of which
United States22.929.720.924.99.718.2
Japan19.020.420.330.120.313.8
Austria0.42.90.50.10.20.1
Belgium-Luxembourg
Denmark4.65.25.15.54.27.9
France150.9144.4172.9214.7165.2194.5
Italy20.723.323.319.210.814.4
Spain16.213.213.218.415.523.5
Switzerland1.22.61.12.323.420.5
United Kingdom18.421.435.741.351.446.7
Developing countries236.0283.3349.5428.8479.2444.2
Africa126.9167.2192.4247.9248.0266.4
Of which
Burkina Faso0.00.10.00.40.30.1
Cameroon2.80.80.84.610.09.6
Cote d’Ivoire52.033.940.547.562.362.4
Morocco1.10.71.02.02.62.8
Nigeria10.229.927.537.726.735.9
South Africa3.311.818.042.46.319.7
Togo7.040.535.735.550.739.8
Asia77.795.5105.8140.4188.2138.6
Of which
Bangladesh0.30.10.00.00.30.3
China, P.R.: Mainland30.046.546.362.778.959.5
India9.08.314.014.714.19.2
Indonesia5.65.65.25.36.98.5
Korea3.06.26.83.95.94.5
Malaysia0.60.92.912.45.48.8
Pakistan5.51.90.80.10.90.2
Thailand15.418.920.331.159.737.4
Europe8.38.113.010.53.93.8
Of which
Turkey1.53.65.14.51.91.9
Middle East20.310.727.719.824.425.7
Of which
Saudi Arabia9.45.54.61.81.59.9
Western Hemisphere2.71.810.510.314.79.7
Of which
Argentina0.10.11.80.20.50.0
Brazil1.40.97.08.69.89.0
Not specified countries1.01.30.70.53.30.5
Memorandum Items:
European Union278.7278.1319.8395.5345.3384.8
Oil exporting countries33.641.445.247.345.860.7
Non-oil developing countries202.3241.9304.2381.5433.3383.5
(Percent of total imports)
Industrial countries57.453.550.651.546.250.2
Developing countries41.945.548.548.453.449.7
Africa22.626.926.728.027.629.8
Asia13.815.414.715.821.015.5
Europe1.51.31.81.20.40.4
Middle East3.61.73.82.22.72.9
Western Hemisphere0.50.31.51.21.61.1
(Annual percent change)
World-33.310.615.822.91.3-0.5
Industrial countries-28.73.09.625.2-9.28.1
Developing countries-38.820.123.322.711.7-7.3
Africa-40.631.815.128.80.07.4
Asia-33.622.910.732.834.0-26.3
Europe-77.4-2.961.5-19.6-62.8-2.1
Middle East168.5-47.2158.0-28.623.35.3
Western Hemisphere-74.9-34.8498.8-2.743.4-34.2
Source: IMF, Direction of Trade Statistics.

Trade partners data reported CIF. These imports include Benin’s reexports.

Source: IMF, Direction of Trade Statistics.

Trade partners data reported CIF. These imports include Benin’s reexports.

Table 28.Benin: Stock of Public and Guaranteed External Debt, 2000–2005(Billions of CFA francs, unless otherwise indicated)
200020012002200320042005
Est.
Multilateral institutions748.7829.0782.7705.9677.1813.9
IMF59.257.153.938.637.031.3
IDA409.1449.4424.3382.2366.6410.6
African Development Bank/Fund181.4205.2193.7152.0150.0237.7
Other99.0117.3110.7133.1123.5134.4
Bilateral creditors188.0188.0177.548.745.542.1
Paris Club 1/131.3136.0128.47.77.24.1
France 2/41.944.041.50.00.00.0
Germany1.51.71.60.00.00.0
Italy20.622.321.10.00.00.0
Norway20.021.019.80.00.00.0
Russia13.013.813.07.724.84.1
United Kingdom2.82.92.70.00.00.0
Other31.530.328.60.00.00.0
Other creditors 3/56.723.922.622.138.338.0
Total debt outstanding (after HIPC Initiative relief)936.7988.9933.6754.6722.6856.0
Memorandum item:
Debt outstanding (in percent of GDP)58.356.947.736.533.836.9
Sources: Autonomous Amortization Fund (CAA); and staff estimates.

In 1997, Russia became a member of the Paris Club.

Including hospital and postal debt.

Excludes debt to Nigeria of which the amount is contested.

Post-HIPC.

Sources: Autonomous Amortization Fund (CAA); and staff estimates.

In 1997, Russia became a member of the Paris Club.

Including hospital and postal debt.

Excludes debt to Nigeria of which the amount is contested.

Post-HIPC.

Table 29.Benin: Debt-Service Obligations on Public and Publicly Guaranteed Debt, 2000–2005(Billions of CFA francs)
200020012002200320042005
Est.
Interest12.713.514.310.69.27.9
Multilaterals (excluding IMF)6.67.37.86.25.37.5
IMF0.70.30.20.20.10.1
Paris Club (medium-term debt)4.75.34.83.93.50.1
Other bilateral creditors0.40.60.60.40.30.3
Short-term debt0.00.00.00.000.0
Postal and hospital debt0.30.00.00.000.0
Other0.00.00.00.000.0
Amortization31.728.029.026.323.318.9
Multilaterals (excluding IMF)14.415.716.513.913.214.5
IMF8.910.510.28.45.74.1
Paris Club (medium-term debt)2.00.91.42.02.20.0
Other bilateral creditors2.60.90.92.02.20.3
Short-term debt0.00.00.00.000.0
Postal and hospital debt3.80.00.00.000.0
Other0.00.00.00.000.0
Total debt service due44.441.543.338.132.526.9
Interest12.713.514.311.39.27.9
Amortization31.728.029.026.823.318.9
Change in arrears (+ increase)-14.80.00.00.000.0
Debt relief and cancellation20.515.723.719.117.011.2
Of which
Paris Club2.24.33.64.54.01.6
Sources: Autonomous Amortization Fund (CAA); and Fund staff estimates.
Sources: Autonomous Amortization Fund (CAA); and Fund staff estimates.
Table 30.Benin: Exchange Rate Developments, 2000–2005
200020012002200320042005
Est.
Exchange rates
Period averages
CFA francs per U.S. dollar705.00732.40694.56580.07527.59526.55
CFA francs per SDR929.70932.44899.68812.62781.45778.11
End-of-period
CFA francs per U.S. dollar704.95744.31644.20533.69489.24553.26
CFA francs per SDR912.49939.91863.24783.15753.61791.84
Exchange rate indices (1990=100)
CFA franc per U.S. dollar258.94269.00255.10213.05193.78193.40
CFA franc per SDR251.49252.23243.37219.81211.38210.48
Nominal effective exchange rate 1/49.8250.1051.3455.8758.3058.01
Real effective exchange rate 1/2/77.3979.2882.1989.0891.2593.23
Source: IMF, Information Notice System.

Trade weighted.

Deflated by the relative consumer prices.

Source: IMF, Information Notice System.

Trade weighted.

Deflated by the relative consumer prices.

Table 31.Benin: Summary of the Tax System as of June 2006(All amounts in CFA francs)
Nature of Tax or LiabilityTax Description, Scope, and Collection ProcedureExemptions and DeductionsRates
1. Collected for the central government’s general budget
1.1 Direct tax
1.1.1 Tax on industrial, commercial, artisanal, and agricultural profits (impôts sur les bénéfices industriels, commerciaux, artisanaux et agricoles—IBICAA) (Tax Code Art.1-31)Levied on the profits from activities carried out within the country.

Losses may be carried over for three years. The BMF (minimum profit tax) was abolished in the 1994 Budget Law (BL).

Quarterly prepayment for enterprises using the accounts-based system due by the 10th of March, June, September, and December.

Quarterly prepayment for enterprises using the simplified accounts-based system due by the 10th of June and December.
Cooperatives, agricultural credit unions, and mutual associations are exempt. Realized capital gains are exempt if reinvested within three years. Overheads of all types, personnel expenditure, labor, rental of movable and immovable property leased by the enterprise, rent paid by credit takers for the portion representing interest costs, repayments actually made, and repayments deferred in previous and deficit fiscal years are deducted.



Mutual funds and investment trusts are exempt (2000 BL).

Also exempt are capital gains realized upon sales of securities and received by individuals (2000 BL). Securities income is deducted from the tax base, without any special prerequisite.
Companies: 38 percent.

Petroleum companies: 55 percent (1999 BL)

Sole proprietorships and mining companies:

35 percent (1999 BL)

Artisans: 17.5 percent.

For activities other than those of petroleum companies, the minimum annual tax payable is the higher of CFAF 100,000 or 0.5 percent of declared turnover.
-Introduction in customs of a tax prepayment on profits (acompte sur impôts sur les bénéfices - AIB) from any imports for profit.

-Introduction, for credit to the central government’s general budget, of a prepayment (AIB) in the form of taxes withheld at source on service providers.

-Introduction of a special lump-sum prepayment of CFAF 50,000 per imported vehicle, that can be charged against the BIC tax (2000 BL).

Introduction of a deduction at source of full tax due for fabric and miscellaneous retailers.

Introduction of withholding at source for foreign [service] providers.
Non-commercial imports. Enterprises appearing in the list prepared annually by the DGID.3 percent (2004 BL).





3 percent (2004 BL).





1 percent and 1.5 percent





(2006 BL) After 60 percent reduction Individuals: 35 percent and companies 38 percent
1.1.2 Tax on companies’ motor vehicles (Tax Code Art. 32 bis-32 quinter)Annual tax paid quarterly on motor vehicles for private transport of persons, owned or used by companies or other public or private industrial or commercial establishments.Motor vehicles used solely in the context of company activities.- Motor vehicles with less than 7 horsepower: CFAF 150,000.

- Other categories: CFAF 200,000.
1.1.3 Single tax on road transport (taxe unique sur les transports routiers-TUTR), Tax Code Art. 31.Annual tax levied on vehicles used for public transport of people or goods.Vehicles with less than four wheels for transport of people or goods.1) Vehicles for public transport of people:

0-9 seats: CFA 38,000

10-20 seats: CFA 57,000

Over 20 seats: CFA 86,800

2) Vehicles for public transport of goods:

0-2.5 tons: CFA 49,500

2.6-5 tons: CFA 57,000

5.01-10 tons: CFA 86,800

Over 10 tons: CFA 136,400
1.1.4 Tax on noncommercial profits (impôt sur les bénéfices non commerciaux—BNC) (Tax Code Art. 33-47)Levied annually on earnings from independent professional activity.Reasonable expenses necessary for the production of income. No personal exemptions. Profits received by nonbusiness persons from the sale of company rights totaling no less than CFAF 100,000 are exempt.35 percent. However, there is a minimum tax based on minimum profits determined by applying a coefficient ranging from 9 percent to 25 percent, depending on the type of business generating the turnover.
Prepayment in the form of taxes withheld at source on service providers.50 percent reduction for CGA members who meet the Tax Code requirements. 10 percent (2004 BL).
1.1.5 Progressive tax on salaries and wages (impôt progressif sur les traitements et salaries—IPTS) (Tax Code Art. 48-57)Withheld monthly from gross salaries, emoluments, wages, earnings, bonuses, overtime compensation, professional benefits in cash and in kind, and allowances of all types, including for transportation. Payable on gross income without any deduction for pension fund constitution.Family allowances and social security assistance and wage increases or allowances for social security reasons. For private sector wages, the portion of these allowances or increases exceeding the amount payable by the Social Security Fund (OBSS) to equally qualified civil servants of the same grade and marital status is not exempt.Progressive and calculated as follows:

CFAF
Up to 50,0000 percent
50,001-130,00015 percent
130,001-280,00020 percent
280,001-530,00025 percent
Over 530,00040 percent
Deductions are allowed in proportion to the number of dependent children, as follows:

1 child0 percent
2 children5 percent
3 children10 percent
4 children15 percent
5 children20 percent
6 children23 percent
1.1.6 Payroll tax (versement patronal sur salaires—VPS) (Tax Code Art. 58-63, 1996 BL), payable by employers in place of the former payroll and apprenticeship taxesIndividuals and legal entities paying salaries, emoluments, wages, and incidental compensation are liable for this tax.1. Central and local governments.

2. Public agencies and offices engaged in nonprofit activities.

3. Diplomatic representations and international organizations.

4. Taxpayers liable for the single professional tax (TPU).
Single rate of 8 percent, reduced to 4 percent for private educational institutions.

The tax base is the same as for the IPTS.
1.1.7 Tax on income from financial assets (impôt sur les revenus des capitaux mobiliers) (Tax Code Art. 72-151)Withheld at source on dividends, interest, attendance fees, and other forms of distributions of corporate profits to individuals and legal entities, as well as on any sums or securities allocated at any time whatever to partners and shareholders for any reason other than repayment of their contributions and any hidden distributions whatever.- Interest on sums entered on savings bank books;

- Interest and any other proceeds of accounts held at credit institutions in the name of the national savings bank;

- Interest on investment loans (excluding any commercial loans granted by the banks); and

- Income from obligations received by entities residing outside the West African Economic and Monetary Union (WAEMU) zone.
On income from claims: 15 percent of the interest on deposits and guarantees.

On income from securities (impôt sur le revenu des valeurs mobilières—IRVM): 18 percent.

The following reductions apply (2000 BL):

- For share proceeds: 10 percent;

- For bond income: 13 percent;

- For lots and redemption premiums paid to creditors and bondholders: 15 percent.
1.1.8 Tax on rental income (taxe immobilière sur les loyers—TIL) (Tax Code Art. 198-204)Levied on gross rental income received by individuals and companies.None.Monthly rental income brackets: Up to CFAF 50,000: 10 percent; and Over CFAF 50,000: 20 percent.
1.1.9 General income tax (impôt général sur les revenus—IGR) (Tax Code Art. 152-186)Levied annually on total net personal income from all sources, excluding salaries and wages.The following deductions are allowed on rental income: the schedular tax, maintenance costs, and interest.

A 30 percent deduction is also allowed for management, insurance, and depreciation costs. Personal deductions for dependents are allowed as a percentage of taxable income, ranging from 10 percent for a married taxpayer with no children to 40 percent for a married person with six or more children.

The tax is increased by 30 percent for single, widowed, and divorced taxpayers without dependent children. Income of up to CFAF 100,000 per year is exempt. Income from bonds received by persons residing outside the WAEMU zone is exempt.
The general income tax consists of two levies:

(a) a fixed levy ranging from CFAF 2,000 to CFAF 15,000 based on income level and with no reference to family obligations; and

(b) a progressive levy based on the following scale:

CFAF
Up to 100,000Exempt
100,001-600,0006 percent
600,001-800,00015 percent
800,001-1,600,00020 percent
1,600,001-2,500,00025 percent
2,500,001-3,500,00030 percent
3,500,001-4,500,00040 percent
4,500,001-5,500,00050 percent
Over 5,500,00060 percent
1.1.10 Land tax (taxe foncière unique) (Tax Code Art.1084-8)Levied on the real rental value of taxable property in areas with an Urban Land Register (RFU), where it replaces the FB and the FNB.Properties belonging to the central and local governments, etc. are exempt. There is a temporary 5-year exemption for exclusively residential buildings.- For developed rental property: 6 percent;

[- For developed rental property: 12 percent, of which 6 percent for the national budget;]

- For undeveloped property: 5 percent. However, by deliberation of the elected representatives, the rates can be reduced or raised by up to two points.
1.1.11 Professional tax (taxe professionnelle unique—TPU) (Tax Code Art. 1084-9 to 1084-16)Levied on professional rental values.

Applicable to small enterprises with a turnover of less than:

- CFAF 40 million for purchases and resales;

- CFAF 15 million for services. Applicable in areas with an RFU.
- Central government activities;

- Legal entities;

- Taxpayers liable for the BNC tax;

- Pharmacists;

- Construction and public works enterprises; and

- Individuals engaging in a profession for which the specifications require full accounting.
- 6 percent of the professional rental value. However, this rate may be reduced or raised by up to two points, by deliberation of the elected representatives;

- 6 percent of the tax base in additional contributions by enterprises with a turnover below the limits set by order of the minister responsible for finance, in place of the BIC tax, the IGR, and the VPS.
1.2 Indirect taxes
1.2.1 Value-added tax (VAT) (Tax Code Art. 219-272)Levied on the proceeds of sales of goods and services, as well as production and importing.

Applicable to entities with a turnover of more than:

- CFAF 40 million for those engaged in trading and similar activities; and

- CFAF 15 million for those in other activities.

May be applicable, by taxpayer option, to:

- sales and services effected by entities with an annual turnover below the limits set by order of the minister responsible for finance; and

- public passenger transport operations.
- Proceeds shown in Annex 1 of the 2004 Budget Law Ordinance;

- Medical consultations, health care, and any medical services, including the transportation of injured persons, as well as services provided during stays in hospitals, clinics, and other similar institutions, excluding care provided by veterinarians;

- Composition, printing, and sales of newspapers and periodicals, excluding advertising income;

- Sales made by nonprofit associations;

- Public or private passenger transport;

- Postage stamps, revenue stamps, and other similar assets;

- Banking and financial operations subject to the tax on financial activities (TAF);

- Operations subject to the formality of registration;

- Sales of original works of art by their authors.



- Tax-on-tax deductions. In production and processing operations, wholesale trade imports, deductions are allowed of taxes paid upstream on goods, materials, and equipment that are inputs to taxable activities.
Single rate of 18 percent.

-Zero for exports.
1.2.2 Tax on financial activities (taxe sur les activités financières—TAF) (Tax Code Art. 293-1 to 293-5)Levied on operations carried out by banks and other financial institutions, excluding those not specifically related to trade in securities and money.- BCEAO operations;

- Operations of lending and credits to the public treasury and local governments;

- Operations of credits, loans, advances, deposits on account, commitments, and similar operations carried out between banks and financial institutions, whether or not installed in the Republic of Benin; and

- Operations not specifically related to trade in securities and money and that are liable for VAT, such as: sales, rentals, leasing, studies and consultations, transfers of fees, invoicing, and similar operations;

- Operations of banks lending to enterprises engaged in the construction of low-cost housing.
10 percent on the value before tax of services, commissions, and interest income.
1.2.3 Insurance tax (taxe unique sur les contrats d’assurance) (Tax Code Art. 913-934)Levied annually on insurance premiums.Insurance contracts concluded by agricultural mutual insurance companies or funds are exempt, as well as health and life insurance contracts, instruments concerning approved fraternal associations and unions, and craft unions.Fire: 20.0 percent.

Automobiles and miscellaneous risks:

10 percent.

Export credit guarantees: 0.25 percent.

Transportation insurance: 5 percent.
1.2.4 Single specific tax on petroleum products (Taxe Spécifique Unique sur les produits pétroleirs-TSUPP) (Tax Code new Art. 249 bis-256 bis)Levied on all sales of petroleum products in Benin (first transfer).- Products already taxed; and

- Exports.
- 65 francs/litre on premium gas;

- 55 francs/litre on normal gas;

- 20 francs/litre on gasoil

- 17 francs/litre on lubricants; and

- 23 francs/kilo on grease
1.2.5 Tax on tobacco and cigarettes (Tax Code, new Art. 257 bis-260 bis)Levied on imported and locally manufactured tobacco and cigarettes.- Tobacco and cigarettes already taxed; and

- Exports.
10 percent applied to (2003 BL):

- the customs value of imports, plus duties and taxes collected upon entry, excluding VAT; and

- local production, on the producer price, excluding VAT.
1.2.6 Tax on beverages (Tax Code, new Art. 261 bis-268 bis)Levied on:

- sales of locally manufactured beverages; and

- imports of beverages into Benin.
- Noncarbonated water;

- Beverages already taxed; and

- Exports.
- For nonalcoholic beverages: 3 percent; and

- For alcoholic beverages: 10 percent (2003 BL).

Applied to:

- imports at customs value, plus duties and taxes collected upon entry, excluding VAT; and

- local production, on the producer price, excluding VAT.
1.2.7 Tax on wheat flour (taxe unique sur la farine de blé) (Tax Code, new Art. 266 bis-270 bis)Levied on locally milled and imported wheat flour.- Wheat flour already taxed; and

- Exports.
1 percent applicable to:

- imports at customs value, plus duties and taxes collected upon entry, excluding VAT; and

- local production, on the producer price, excluding VAT.
1.2.8 Tax on perfumes and cosmetics (Tax Code, new Art. 271 bis-275 bis)Levied on perfumes and cosmetics, whether locally manufactured or imported.- Products already taxed; and

- Exports.
5 percent applicable to:

- imports at customs value, plus duties and taxes collected upon entry, excluding VAT; and

- local production, on the producer price, excluding VAT.
1.2.9 Tax on cooking oils and fats (Tax Code, new Art. 276-280)Levied on locally manufactured and imported cooking oils and fats.- Cooking oils and fats already taxed; and

- Exports.
1 percent applicable to:

- imports at customs value, plus duties and taxes collected upon entry, excluding VAT; and

- local production, on the producer price, excluding VAT.
1.2.10 Tax on gambling (Tax Code Art. 293-6 to Art. 193-8)Levied on all gambling, excluding those subject to VAT.Gambling subject to VAT.5 percent applicable to the selling price of tickets for the various games provided for the public by National Lottery of Benin (LNB).
1.2.11 Radio and TV tax (taxe radiophonique et télévisuelle) (Tax Code Art. 290-293)Levied annually on the use of radio and television sets on behalf of the radio and television broadcasting office of Benin.None.Annual tax of CFAF 500 per radio set owned by the taxpayer.

CFAF 700 for two radio sets.

CFAF 900 for three radio sets.

CFAF 1,200 for more than three radio sets.

CFAF 3,000 per television set.
1.3 Registration and stamp duty
1.3.1 Registration duty (droits d’enregistrement) (Tax Code Art. 541-586)- Conciliation minutes;

- Unnamed instruments;

- Instruments on corporate dissolution without transfer of movable or immovable goods;

- Instruments mentioned in Art. 543-544;

- Instruments mentioned in Art. 545;

- Instruments mentioned in Art. 547;

- First instance and Appeals Court divorce judgments and decrees;

- Overdrafts granted to business persons and cash facilities;

- Consolidated overdrafts, term credits, and any signature commitments, including security deposits, endorsements, documentary credits, and any special assistance; and

-Property transfers, leases, capital increases, company mergers, and other transactions, etc.
None.





Claims tradable on the money market.





Furniture leasing contracts.
Fixed duty of CFAF 500.

Fixed duty of CFAF 1,000.

Fixed duty of CFAF 2,000.

Fixed duty of CFAF 4,000.

Fixed duty of CFAF 4,000 and CFAF 7,000.

Fixed duty of CFAF 6,000 (2000 BL).

0.25 percent with a minimum of CFAF 5,000 (1999 BL).

Fixed duty of CFAF 6,000.
1.3.2 Progressive inheritance and gift duty (droits sur les mutations à titre gratuit)(Tax Code Art. 593-612)Levied on the value of property transferred free of charge.Transfers to the heirs of military personnel and civilians killed on duty are exempt. A CFAF 6 million deduction is allowed for a spouse and for each child (up to six). There is a 25 percent deduction for transfers under a marriage contract.Set by bracket (on the net value of the property) according to the degree of kinship of recipients, ranging between 3 percent and 45 percent.
1.3.3 Mortgage duty (droit d’hypothèque) (Tax Code Art. 955-961)- Registration

- Insertion of a deed transferring or extinguishing a real right.
None.- For a parcel of land valued at less than CFAF 1 million: CFAF 7,700; and

- For a parcel of land valued at more than CFAF 1 million: 7.5 per thousand plus a fee of CFAF 200.

- On sums mentioned in the deed or, where applicable, on an estimate provided by the parties: 3 per thousand.
1.3.4 Stamp duty (droits de timbre) Tax Code Art. 613-777)Levied on:

- stamped paper,

- commercial instruments,

- transportation contracts,

- sea transport, and

- bills of lading.
None.-Stamp duty of CFAF 50 to CFAF 1,200;

- Proportional duty of 1 per thousand (1999 BL); and

- Fixed duty, depending on the amount, on receipts of:

Up to CFAF 100: none;

CFAF 101-1,000: 10 percent;

CFAF 1,001-5,000: 25 percent;

CFAF 5,001-10,000: 50 percent;

CFAF 10,001-50,000: 100 percent;

Over CFAF 50,000 and per bracket of CFAF 50,000: 30 percent;

- Fixed duty of CFAF 2,500 (1998 BL).
1.4 Duty and taxes collected by customs
1.4.1 Customs dutyLevied on the value of all imports intended for the local market.- Grants to the central and local governments;

- Diplomatic and consular offices;

- Equipment and capital goods, arms and ammunition for customs, the police, water and forests, the army, and the gendarmerie;

- Grants of objects and articles for the practice of religion;

- Investment Code;

- Imports of raw materials by local industries;

- Personal objects and effects;

- Mailings for the Red Cross, the Red Crescent, and aid agencies that have signed an agreement with the government;

- Medical samples; and

- Funeral objects.
0, 5, 10, and 20 percent (see Art. 7 of Regulation 02/97/CM/UEMOA of 11/28/97).
1.4.2 Community solidarity levy (prélèvement communautaire de solidarité-PCS)Levied ad valorem on merchandise imported from third countries by WAEMU member countries and marketed.- Merchandise in transit;

- Merchandise in warehouses;

- Goods acquired under external financing contracts subject to an exemption clause;

- Assistance and grants to the central government and charities;

- Merchandise on which the PCS was paid under previous arrangements;

- Goods imported by enterprises operating under a stabilized tax system;

- Goods with duty-free diplomatic status; and

- Petroleum products.
1 percent (see supplementary Decree 04/96 of May 10, 1996).
1.4.3 Statistical tax (redevance statistique–RS)Levied ad valorem on all merchandise imported:

- for the local market;

- in transit;

- for reexport.
- Diplomatic and consular exemptions;

- Goods acquired under external financing agreements subject to an explicit exemption clause; and

- Merchandise in transit toward landlocked countries.
1 percent (see Regulation 02/2000/CM/UEMOA of June 29, 2000).
1.4.4 Customs stamp (timbre douanier)Levied on all customs operations.Whenever entry duties or taxes are payable.- 4 percent of the RS; and

- 4 percent of the exit tax, where applicable.

- Included in VAT.
1.4.5 Highway maintenance tax (taxe de voirie)Levied ad valorem on all imports and exports.- Merchandise transported by rail; and

- Postal packages.
- 0.15 percent for marketing operations; and

- 0.85 percent for all other operations.
1.4.6 Value-added tax (VAT)Levied ad valorem on imports for commercial purposes.- Pharmaceuticals and condoms;

- Books and teaching materials;

- Milk;

-Seed products;

- Reproductive animals;

- Cocoa beans;

- Animal food products; and

- Electric power.
18 Percent.
1.4.7 Information technology tax (redevance informatique)Specially levied on each written declaration.Marketing operations.- CFAF 2,000 per declaration.

- Included in VAT.
1.4.8 Radio tax (taxe radiophonique)Special license on imports of radio sets.Articles not intended for the national market.CFAF 500 each.
1.4.9 Television tax (taxe télévisuelle)Levied ad valorem on imports of television sets.Articles not intended for the national market.5 Percent.
1.4.10 Transit tax on merchandise (taxe de circulation sur les marchandises)Special tax on the following merchandise when declared to be in transit:

- Wool and fine hair fabric;

- Synthetic and artificial fiber fabric;

- Bed linen, table linen, and other articles;

- Cotton fabric;

- Tobacco and cigarettes; and

- Alcoholic beverages.
Still valid but no longer applied.Specific taxes ranging from CFAF 200 to CFAF 1,500 per item.
1.4.11 Transit tax on trucks (taxe de circulation sur camions)Special tax on foreign trucks transporting more than 1,500 kilograms in merchandise.CFAF 5,000 per truck.
1.4.12 Import tax on temporarily exempt goods (taxe d’importation en franchise temporaire)Special tax on foreign passenger vehicles.Diplomatic and consular exemptions.CFAF 5,000 per vehicle.
1.4.13 Exit tax (taxe fiscale de sortie)Levied ad valorem on exports.All products, except cocoa beans, crude petroleum, and precious metals.Variable.
1.4.14 Guarantee Funds (Fonds de Garantie)Levied ad valorem on merchandise as security deposit for interstate transit operations.- Diplomatic and consular exemption; and

- Vehicles in circulation.
0.25 percent collected for the Chamber of Commerce and Industry of Benin.
1.4.15 Special reexport tax (taxe spéciale de réexportation—TSR)Applied ad valorem on a restrictive list of merchandise in Decree 054/MFE/DC/SGM/DGDDI/DAR of March 1, 2001.Products not listed in Decree 054/MFE/DC/SGM/DGDDI/DAR of March 1, 2001.8 percent
1.4.16 Community levy (prélèvement communautaire-PC)Collected ad valorem in the Economic Community of West Africa States (ECOWAS) context on all products from third countries.- Equipment for foreign aircraft and boats;

- Merchandise in warehouses;

- Decorations and trophies;

- Assistance to the government and charities;

- Merchandise on which the PC has already been paid under previous arrangements;

- Externally financed public contracts;

- Diplomatic and consular exemptions; and

- Re-exports by local industries operating under special tax arrangements.
0.5 Percent
1.4.17 Presumptive installment payment (Acompte forfaitaire)Levied ad valorem on imports for commercial purposes.Noncommercial imports. Enterprises appearing on the list prepared by the DGID.3 percent.
2 Collected for local government budgets
2.1 Tax on developed property (contribution foncière des propriétés bâties—FB) (Tax Code Art. 976-987)Levied on the rental value of developed property, and uncultivated land intended for industrial or commercial purposes, including fixed assets (buildings).Exemptions: public buildings, sport buildings, schools, buildings for public worship, and medical and welfare facilities.

A five-year exemption is allowed for new buildings.

Deductions: 40 percent for houses and 50 percent for factories.
Variable, depending on the area. Example:

25 percent in Ouidah;

20 percent in Lokossa.
2.2 Tax on undeveloped property (contribution foncière des propriétés non bâties—FNB) (Tax Code Art. 988-996)Levied on the market value of undeveloped property, as calculated by the DGID.Exemption: public properties and land (up to 5 hectares of land owned by individuals).

A 30-year exemption applies to the recently cultivated, previously forested areas.
Variable, depending on the area; applicable to the market value of undeveloped property (e.g., 6 percent in Natitingou).
2.3 Land tax (taxe foncière unique) (Tax Code Art. 1084-1 to 1084-8)Levied on the real rental value of taxable property in areas with an urban land register (RFU), where it replaces the FB and the FNB.Property belonging to the central and local governments and to religious, school, and university establishments. A five-year temporary exemption applies to exclusively residential buildings.- For developed rental property: 6 percent;

[- For developed rental property:12 percent;]

- For undeveloped property: 5 percent. However, by deliberation of the elected representatives, the rates can be reduced or raised by up to 2 points.
2.4 Professional tax (taxe professionnelle unique—TPU) (Tax Code Art. 1084-9 to 1084-15Paid by the taxpayers mentioned in 1.1.11 above, this replaces the business license (patente) and the liquor license (licence) in areas with an RFU.- Central government activities;

- Legal entities;

- Taxpayers liable for the BNC tax;

- Pharmacists; and

- Construction enterprises; etc.
- 6 percent of the professional rental value. However, this rate may be reduced or raised by up to 2 points, by deliberation of the elected representatives;

- 6 percent of the tax base in additional contributions by enterprises with a turnover below the limits set by order of the Minister Responsible for Finance, in place of the BIC tax, the IGR, and the VPS.
2.5 Business license tax (contribution des patentes) (Tax Code Art. 997-1032)Levied on individuals and corporations engaged in commercial, industrial, and professional activities.Enterprises liable for the TPU. Public bodies, civil servants, fishermen, farmers, home-based artisans, and mining concessionnaires, for their raw materials mining and sales.

Newly established enterprises are granted a temporary five-year exemption.
Two levies are applicable:

- Fixed duty based on the type of activity, the number of employees, and the equipment; and

- Proportional duty based on the rental value of professional premises, ranging from 6 percent to 17 percent. Supplementary business license for procurement: 0.25 percent Additional centimes are added to these rates.
2.6 Liquor license tax (contribution deslicenses) (Tax Code Art. 1033-1038)Levied on the same terms as the business licence tax mentioned above in 2.5 on enterprises serving alcoholic beverages.Enterprises liable for the TPU.Duty calculated on the basis of the enterprise category, determined by the type of activity and the type of beverage marketed. Fixed duty ranges from CFAF 7,000 to CFAF 60,000.

Additional centimes are added to these rates.
1Prepared by Issouf Samake.
2Source: The World Bank, 2006. “West and Central Africa: Strategies for Cotton Sector Development in West and Central Africa - Towards a Regional Textile and Garment Industry”
3Text table 1 also raises the issue of productivity of capital which is not discussed here.
4The neoclassical prospective, cost-of-adjustment approach considers that decision-makers choose the capital stock rather than investment rate, therefore, as the cost of capital changes, they would instantaneously adjust the level of capital stock to the “desired” level. The “desired” capital could be considered the optimal level which is different from the actual capital stock.
5As removing investment is costly and in the presence of uncertainty, the decision-maker may delay investment decision in light of new information.
6For instance, among others, the empirical studies of Breitung et al. (2003) and Zhou (2000) attempted to use time-to-build approach and VAR methodologies to explain relations between investment and its determinants.
7The number of endogenous variables was limited to five to preserve degrees of freedom problems given the relatively limited number of annual observations (41).
8See Ghura and Hadjimichael (1996) and Calamitsis, Basu, and Ghura (1999) for the use of a similar set of variables in the modified version of the neoclassical growth model.
9See for instance “Reflections on Credit Policy in Developing Countries: Its Effect on Private Investment” by Mansoor Dailami and Marcelo Giugale in Country Economics Department (The World Bank, April 1991, WPS 654).
10The index’s total scores the average of a set of variables that includes trade, fiscal burden, foreign investment, banking, wages and prices (excluding property rights, regulations, government intervention, monetary policy, and the informal market). There is some empirical evidence of a bidirectional relationship between institutions, growth, and investment. The rationale for the choice of INST as an exogenous variable is that its composition is mostly dominated by fiscal and monetary policy instruments—which are not used in our set of endogenous variables; however, the extrapolation back to 1965 may induce some noise. Conversely, using alternative measures such as those for institutions and democracy from the Polity project would not support the choice of INST as exogenous. (http://www.cidcm.umd.edu/polity/data/variables.asp)
11Although this is the original ranking, the order is reversed in the dataset in order to facilitate the economic interpretation. See Text table 4, a positive change in INST would be interpreted as improvement in institution.
12(2) is the basis for cointegration analysis. Π=[IΣi=1pπi],Γi=[Σj=i+1pπj],i = (1,…, p-1), and from, χi={φ,i=0Γiφ,i=1,,p1
13The relations β’Yt-1 are the cointegrating relations, and the coefficients β are the long-run parameters; The coefficients α can be interpreted as the speed of adjustment to the long-run equilibrium.
14The model variables passed most diagnostic tests for the SVECM analysis: (i) unit root test; (ii) choice of optimal lag lentgh; (iii) residual normality and heteroschedasticity tests; and (iv) system variables stability tests.
15There are two long-run relationships within the system (3) above. The analysis below focuses on the behavior of private investment and the relationship between GDP and private investment. We test whether there is a long-run relationship between the endogenous variables using the maximum eigenvalue test. As shown in Text table 3, the application of the likelihood ratio test shows that the null hypothesis of no cointegrating relationship can be rejected at the 5 percent confidence level (for the null hypothesis of at most 1 cointegrating equation, max-eigenvalue statistics = 31.86 > critical value =24.16, [p-value: 0.00]), thereby strongly suggesting that there is two cointegrating equations among the endogenous variables.
16To identify the cointegrating vector, and because the long-run impact of LGDP on PINV is insignificant, we impose a zero restriction on LGDP coefficient in the PINV equation. ECT_PINV is the error correction term for private investment and ECT_GDP for GDP equations.
17The weak exogeneity test statistics (WETS) indicates that TOT is weakly exogenous to two cointegrating vectors, and that PINV and GDP are weakly exogenous to beta vector associated to GDP and to the beta vector associated to PINV. The retained system has then imposed zero these feedback coefficient..
18A pure supply shock would imply that 26 percent of the deviation of real GDP from its long-run equilibrium is corrected each year; therefore necessitating about 3 years to close 50 percent of gap after the initial shock.
19The output impact of temporary shocks to private investment can be traced through several channels, such as: (i) an increase in private investment financed with FDI that increases imports of goods and fuels domestic inflation and exchange rate appreciation, thereby contributing to output contraction; and (ii) in a time-to-build perspective, an increase in private investment associated with negative cash-flows and lower value added during the initial year of the investment.
20Because the model variables follow unit root (I(1)) processes and show the existence of cointegration, we transform our model into a structural vector error correction model (SVECM); we then sequentially use variance decomposition, historical decomposition, and impulse response function techniques. That would imply the imposition of a minimal number of restrictions for identification purposes. See Appendix B for more detail.
21These include private investment, terms of trade, GDP, credit to private sector, and Public investment.
22Such as low labor cost, capital land, and existing physical capital stock.
23Institutional variable is not controlled for.
24See also the long-run matrix estimate.
25The rationale for the ordering is to facilitate the structural factorization exercise, which will use data-oriented as well as theory-based restrictions. This technique, as opposed to the Cholesky ordering, is based on an orthogonalized set of innovations that does not depend on the vector autoregressive ordering to which impulse responses are sensitive (see Pesaran and Shin, 1998).
26Because private sector investment is a component of aggregate demand, it is assumed to have only a transitory impact on GDP.
27Variables in Equation 2 are stationary.
28The long-run matrix estimate is provided in Appendix Table C4.

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