Republic ofBenin WT/TPR/S/27
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I. THE ECONOMIC ENVIRONMENT
(1) Major features oftheeconomy
1. Benin covers 112,622 km2totheeastofNigeria (Chart I.1),andhasaround sixmillion
inhabitants. Themainstay oftheeconomy isagriculture (cotton, foodcrops), which provide overone
third ofthegross domestic product (GDP), three quarters ofthejobsandthemajor partofexport
earnings. With apercapita income oflessthanUS$400 in1996, Benin belongs tothegroup ofleast
developed countries. Thestateofhealth andeducation areaconsiderable obstacle toBenin 'seconomic
development. There isahighinfant mortality rate; average lifeexpectancy atbirth is51years.
Illiteracy affects 74percentofwomen. Education andhealth aretwooftheGovernment 'smain
development priorities, buttogether theyonlyaccount foraround 3percentofGDP (Table I.1).
WT/TPR/S/27 Trade Policy Review
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Table I.1
Basic social data, 1970-1995
Indicators 1970 1990 1995
Population (millions) 2.8 4.7 5.5
-Urban population (percentage) 27 36 37
Rateofpopulation growth (percentage) 2.6 3.2 3.2
Infant mortality rate(per000livebirths) 125 106 89
Lifeexpectancy (men) 43 49 52
Public spending onhealth (percentage ofGDP) ... 3.6 1.7
Public spending oneducation (percentage ofGDP) 3.5 3.0 2.6
Illiteracy (percentage ofpopulation):
-Men 75 68 51
-Women 91 84 74
Human development indicator (HDI ranking/total number ofcountries) ... 149/160 154/174
...Notavailable.
Source: World Bank (1994), World Tables; United Nations Development Programme, Human Development Report, several issues, and
information supplied bytheBeninese authorities.
2. Trade isthesecond mostimportant sector ofBenin 'seconomy afteragriculture andprovides
over20percentofGDP. Itconsists largely oftransit tradewiththeland-locked countries tothenorth
(Niger, Burkina Faso), which usetheportofCotonou ontheAtlantic Ocean1;andtrade from east
towestwithNigeria andTogo. Because ofNigeria 'svastsize,thelength ofcommon border andthe
amount oftrade between thetwocountries, Benin 'seconomy depends toagreater extent oneconomic
trends inNigeria thanonfluctuations intheglobal price ofcotton.2Other factors haveprobably had
agreater effect onthelong-term trend ineconomic growth, notably investment policy (seebelow) and
State intervention intheproduction andmarketing ofagricultural products (Chapter IV(2)).
3. Themanufacturingsectormainlyproducesessentialgoods(soap,edibleoils,beverages,cement),
together withtextiles andother cotton products. Theservices sector plays amajor partintheeconomy
(45percentofGDP), showing theimportance ofthistrade. Although sizeable mining andenergy
potential hasbeenidentified, littleofitisexploited.
4. Approximately halfofthejobsareintheinformal sector (BoxI.1),particularly inagriculture
andtrade, including international trade. Thissector 'sexpansion maybeduetotheinflexibility of
1Porto Novo istheadministrative capital ofBenin andCotonou isitseconomic centre.
2ThefallinBenin 'sGDP incomparison withthatofNigeria translates intothefollowing figures (adjusted
serial correlation):
Ln(GDP Benin)=5.0+0.22 Ln(GDP Nigeria), R2=0.88, n=18(1979-96)
(16.0) (3.6) DW=1.14
Where GDP: Gross Domestic Product at1987 market prices, domestic currency; theaddition ofavariable
reflecting thefluctuations intheglobal price ofcotton didnotyield anysignificant figures.
Source: World Bank (1994); UNCTAD; andWTO Secretariat estimates based onstatistics provided bythe
Beninese authorities.Republic ofBenin WT/TPR/S/27
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theplanned economic system ineffect during the1970s and1980s. With theimplementation ofthe
budgetary rehabilitation plans attheendofthe1980s, thissector became asafety valve forcivilservants
whohadlosttheirjobs, butatmuch lower levels ofpay. Thecommon border withNigeria andthe
many opportunities forsmuggling afforded bytheimport prohibitions inforce inBenin, havealso
promoted thissector 'sactivities. TheBeninese Government recognizes thattheinformal sector makes
animportant contribution tonational economic development, andadopts aconciliatory attitude towards
informal enterprises, which contribute littletothecountry 'staxsystem.
BoxI.1: Theinformal sector inBenin
Theinformal sector covers virtually alleconomic activities from agriculture toservices andincluding
trade andconstruction. Itissaidbytheauthorities toaccount formore thantwothirds oftheoverall
value added ofwholesale andretail trade (including import-export andtransit). Moreover, cooperatives
andinformal savings andloanassociations, such astontines, finance theeconomic activities ofalarge
sector ofthepopulation whose income level does notallow them access tobanking services. Oneofthe
major difficulties faced bysmall-scale businesses ishowtoobtain financing, banks being traditionally
reluctant togrant credit toindividuals asthere isnorecourse iftheydefault onrepayment.
According toastudy ofinformal activities inurban areas conducted in1992 inthe10major towns of
Benin, theurban informal sector 'scontribution tothegross domestic product (GDP) isaround 7.5per
cent. Thestudy alsocounted atotalof136,448 establishments deemed tobeinformal inaccordance with
thefollowing fourcriteria:
- Notlisted intheRegister ofCommerce;
- notaffiliated tothesocial security scheme;
- does notkeep accounts inaccordance withlegal accounting requirements;
- hasnostatus asapartnership orcompany.
Application ofthese criteria yields thefollowing results:
- 98percentofestablishments arenotlisted intheRegister ofCommerce;
- 99.3 percentarenotaffiliated tothesocial security scheme;
- 99.3 percentdonotkeep accounts;
- 99.8 percentdonothave thestatus ofpartnerships orcompanies.
According tothisstudy, urban informal jobsinthe10towns surveyed areestimated at233,024 andcan
bebroken down asfollows: around 16.8 percentintheproduction sector, 32.5 percentinservices,
48.8 percentintrade, and1.8percentinconstruction. Thiscompares withthe56,000 jobs(1992) in
themodern sector (both private andpublic, including government services). Themajority ofjobsinthe
urban informal sector arefilled bymen(63.4 percent). Ontheother hand, theproportion ofwomen is
higher inretail trade (73percent) andthecatering sector (92percent).
Small urban producers invest anaverage ofCFAF 173,732 tostartuptheir business. Inmost cases, the
financing required tosetupaninformal economic entity ortoprovide additional equipment subsequently
isprovided bynon-modern financial channels such asself-financing (69.7 percent), tontines (8.5per
cent), family loans (6.9percent), bequests orgrants (3.4percent). Bank loans account for0.26 per
centandaidprogrammes for0.39 percent.
Interms ofeconomic results, thestudy showed thatthemonthly turnover inthesector in1992 was
CFAF 72,000, andvalue added was54percent. In1993, small-scale businesses accounted forlessthan
5percentofrevenue from theState'sdirect andindirect taxes.
Source: Government oftheRepublic ofBenin (1992).WT/TPR/S/27 Trade Policy Review
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(2) Economic developments
(i) Marxist-Leninist period
5. From 1974to1989, Benin pursued aMarxist-type centralized economic policy. Government
monopolies were established inthefinancial sector andinindustry, including export sectors (palm
oil,cotton, oil).Owing toexternal factors, notably expansion inthepetroleum sector inNigeria and
theuranium sector inNiger, together withtheconsequent highdemand forimports, thiseconomic
policy wastemporarily viable. From theendofthe1970s, however, theParty'sauthorities realized
thatitwasnecessary totakeurgent remedial measures tocounter thedecline intheperformance of
almost allpublic enterprises.3
6. In1982, aslowing down ofgrowth inneighbouring countries, exacerbated bythedeterioration
intheterms oftrade, ledtoasudden dropinGDP (Chart I.2). Gross fixed capital formation that
yearreached 33percentofGDP (CFAF 115billion). Between 1980 and1985, theconstant decline
intheperformance ofstateenterprises confirmed thatGovernment investment wasnotprofitable and
represented aheavy burden ontheeconomy.4Between 1985and1990, economic growth wasvirtually
stagnant, falling byalmost 3percentin1987 and1989. Thebudget deficit, excluding grants, then
amounted toaround 11percentofGDP andthecurrent account deficit verged on10percent.
7. Thisdownturn inperformance bystateenterprises gained thefinancial sector asaresult of
theinternal arrears accumulated bytheStateandstateenterprises andowed tocivilservants, suppliers
andtheCentral Bank ofWest African States (BCEAO), andtheexternal arrears, which amounted to
16percentofGDP in1987. Onemethod often used todisguise thebudgetary imbalance was
refinancing,withtheBCEAO,thethreecommercialbanksanddevelopmentbanks,whichhadthemselves
financed theState'sactivities andstateenterprises.5In1988, thethreebanks, which made upthewhole
ofthebanking system, collapsed andwerewound up.Failure topaycivilservants forseveral months
reportedly accelerated thechange ofeconomic policy in1990.
(ii) Stabilization andadjustment
8. Although reforms were implemented from 1986 onwards, including arecruitment freeze, a
10percentreduction inwages inthepublic sector andsome privatization, theprocess accelerated
afterdemocracy wasinstalled inFebruary 1990 andpolitical andcivilstability returned. Amajor
programme tostabilize public finance wasintroduced inclose collaboration withtheInternational
Monetary Fund andtheWorld Bank. Reforms wereadopted inorder toincrease earnings andsoreduce
thepublic sector deficit; support measures were taken tofacilitate thetransfer totheprivate sector
oftheemployees dismissed frompublic service andstateenterprises. Thebanking system wasrestored
andseveral newprivate banks included.
3Adekounte, F.L.(1996).
4Until itwasabolished inAugust 1996, theFonds national d'investissement wastheGovernment 'schosen
toolforchannellingprivateinvestment,financedbymandatorycontributionsfromenterprisesestablishedinBenin.
Thiscontribution corresponded to15percentofgross profits (even ifnetprofit amounted toaloss). TheFonds
thenreimbursed inpartsome private investment costs. Themandatory contributions were suspended in1991;
enterprises thathadinvested received therepayments claimed. According tothelawonthecreation oftheFonds,
however, theremainder ofthecontributions lesstheeligible repayments must behanded backtotheenterprises
without interest 30years afterthedateofthecontribution, inother words, from 2005 onwards. Thepossibility
ofissuing marketable securities inorder toenhance thefinancial liquidity oftheenterprises isunder consideration.
5Stasavage, D.(1997).Republic ofBenin WT/TPR/S/27
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9. Themacroeconomic rehabilitation between 1990 and1993 wassignificant andwascontrary
totheregional trend prior tothedevaluation ofJanuary 1994 (seebelow). TheState'sbudget once
again hadapositive primary balance andthishasbeenmaintained, eventhough debtpayments still
result inabudget deficit (Table I.2). Bank deposits inthenewly-established banks increased greatly
asaresult ofcapital repatriation. Themonetary supply increased byalmost onethirdduring thisperiod,
reflecting therecovery ineconomic activity, while bankcredits tothepublic sector, which hadbeen
amajor cause ofthecollapse ofthebanking sector, remained stable. Theequilibrium ofthebalance
ofpayments was,however, achieved largely asaresult ofexternal grants, which exceeded 10percent
ofGDPonaverage. Between 1990and1995, Benin 'sgross international reserves, expressed inmonths
ofimports ofgoods, tripled. Alongside theadjustment, therewasmodest butconstant economic growth
(Chart I.2).
10. Atthesametime, theGovernment alsoreformed thetaxsystem, introducing, interalia,VAT
andasimplified taxation system forsmall enterprises (BoxI.2). Intheareaoftrade reform, import
licences andthemajority ofquantitative import restrictions wereabolished. In1996, thenumber of
products subject toprice controls wasreduced tolessthanfive. Export taxes andlicences forthe
majorityofproductswereabolished.Inaddition,therequirementsforcarryingoutcommercialactivities
were simplified (Chapter III).
11. On12January 1994, thedomestic currency (theCFA franc) wasdevalued from CFAF 50
toF1toitspresent level ofCFAF 100toF1(Annex I.1). Thedevaluation wastheresult ofthe
appreciation oftheCFA franc inrealeffective terms inthemajority ofcountries inthefranc zone.
InBenin, thisappreciation reflected toalarge extent theimportant depreciation intheNigerian naira
inrealterms (Chart I.3).WT/TPR/S/27 Trade Policy Review
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Table I.2
Basic Economic Indicators, 1990-1996
1990 1991 1992 1993 1994 1995a1996a
Population (millions) 4.7 4.8 5.0 5.2 5.3 5.5 5.7
Nominal GDP (CFAF billion)b502.3 535.7 570.8 601.7 847.7 1,035.8 1,125.5
Nominal GDP (US$ million)b1,844.7 1,899.0 2,156.4 2,124.6 1,526.8 2,075.5 2,200.0
Nominal GDP percapita (US$) 392.5 395.6 431.3 408.6 288.1 377.4 386.0
Including: Fixed investment per
capita 52 53 57 59 46 63 6.5
GDP atconstant prices (percentage
change) 3.6 4.7 4.1 3.2 4.3 4.8 5.5
Consumer prices (percentage change)c1.1 2.1 5.9 0.5 38.6 15.1 4.7
Exchange rate(CFAF/US$) 272.3 282.1 264.7 283.2 555.2 499.2 511.6
Realeffective exchange rate(percentage
change)c.d1.7 -1.4 3.8 -0.2 -35.8 7.5 ...
Monetary supply (M2; percentage
change) 62.0 31.2 25.6 5.9 41.2 39.0 8.8
Interest rate(bank rate;percentage)e11.0 10.7 12.0 7.5 5.5 6.0 6.0
External debt(percentage ofexports in
CFAF) 415.6 357.3 395.6 437.8 427.9 724.0 566.0
Gross international reserves (in
US$million) 77.8 176.2 255.0 286.7 221.0 288.7 332.4
Gross international reserves (inmonths
ofimports) 1.9 3.7 4.6 7.9 9.6 7.9 6.8
UseofGDP (percentage ofGDP):
Private consumption 81.3 82.0 83.7 83.3 79.1 78.7 82.2
Government consumption 13.2 12.0 11.9 11.8 10.5 10.0 9.8
Gross capital formation 14.2 14.5 13.9 14.9 14.3 19.0 18.0
Gross domestic savings (excluding
government transfers) 8.0 8.8 5.9 7.4 11.2 10.4 19.3
Netexports ofgoods andnon-factor
services -8.7 -8.5 -9.5 -10.0 -4.7 -9.7 -8.3
Public accounts (percentage ofGDP):
Internal revenue 9.9 11.5 12.2 12.9 12.5 14.4 15.2
Including: Import duties 4.1 4.8 4.9 5.4 5.0 5.8 6.3
Public spending 19.9 18.7 20.1 17.6 19.4 21.4 19.2
Balance -10.0 -7.2 -7.9 -4.7 -6.9 -7.0 -4.6
Primary balancef-1.3 0.5 1.3 2.2 2.1 2.2 3.2
Balance ofpayments (percentage of
GDP)
Trade balance -7.3 -7.5 -8.8 -9.3 -4.2 -7.3 -5.6
Current operations balance (excluding
government grants) -6.2 -5.7 -8.0 -7.5 -5.0 -8.6 -7.1
...Notavailable.
aEstimate.
bAtcurrent market prices.
cAverage overtheperiod.
dAminus signindicates depreciation.
eEndofperiod.
fExcluding interest onthedebtandinvestment spending.
Source: Information supplied bytheBeninese authorities.Republic ofBenin WT/TPR/S/27
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BoxI.2: Taxation ofenterprises
TheBeninese Government hasimplemented awide-ranging reform tosimplify taxation andmake itmore
effective. Among thechanges made wastheintroduction, inSeptember 1994, ofthetaxeprofessionnelle
unique (TPU) (single trade tax), nowtheonlytaximposed ontheturnover ofsmall enterprises intowns
where thelistoftitles islocated.
Thesystem currently inforce defines enterprises according totheir turnover:
Enterprises whose turnover exceeds CFAF 40million forsaleofgoods and10million forother
activities:
- Thebusiness taxconsists ofafixed feecalculated according totheactivity ortheturnover anda
proportional feecalculated according totherental value ofthebusiness premises; and
- thetaxonindustrial andcommercial profits (BIC), reduced in1990 from 42to38percentfor
legal persons andfrom 38to35percentfornatural persons.
Enterprises whose turnover islessthanCFAF 40million:
- TheTPU is26percentofthevalue ofthebusiness premises andreplaces allother taxes,
including theBIC, VAT andthebusiness tax,intowns where thelistoftitles islocated.
Thesimplification ofthetaxation system andthetaxrelief areaimed atencouraging investment andthe
development ofneweconomic activities intheprivate sector. Inaddition, asingle property taxof26per
centhasreplaced thefourproperty taxes previously imposed (property taxondeveloped land, property
taxonundeveloped land, realestate taxonrentandgeneral taxonproperty income).
Thetaxreform programme alsoprovides forthesimplification ofincome tax:
- Thenumber ofrates forthegraduated taxonwages andsalaries istobereduced tofour: 15,
20,25and40percent;
- thegeneral income taxreform wasunder wayinJuly1997.
12. Theeffect ofthedevaluation onlocal enterprises varied according toanumber offactors.
Forsome enterprises, itwasabreath offresh airbecause theincreased price ofimported goods in
CFA franc terms allowed them toincrease theprice ofthesubstitute products onthespot.6Butit
alsoincreased thecostofimported inputs andtheforeign currency debtburden.7Exporting enterprises
benefited from price increases indomestic currency.8Ontheother hand, devaluation wasfollowed
6Forexample, palm oilproducers wereabletoincrease theselling price overandabove theirlocal production
costssuchaswagesandthepurchaseofpalmkernelsfromplanters.(Sociétéfrançaisedeconseilendéveloppement
(1994)). Theexamples thatfollow arealsoderived from thissource.
7TheSociété béninoise d'eauetd'électricité (SBEE), forexample, imports most oftheelectricity supply
which itthensellsatprices subject toaceiling setbytheState; itsdebts areinforeign currency. SOBEBRA,
which produces beerandaerated drinks, alsoimports themajority ofitsinputs andhaslarge foreign currency
debts.
8Forexample,exportersofcottonandpineapple,whoselltheirproductionatglobalprices,sawlargeincreases
inprofits following thechange inparity.WT/TPR/S/27 Trade Policy Review
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byareduction inoverall demand andthishadanegative effect oncertain enterprises.9Ingeneral,
anenterprise 'sprofits were greater ifitsproduction consisted oftradeables anditsinputs of
non-tradeables.
13. Therevival ofprivate investment istheGovernment 'sprimary objective. There iscurrently
amodest recovery ininvestment, which isreported tobe17percentofGDP. Thisgrowth is,however,
mainly duetopublic investment (Table I.3).Direct foreign investment hasnotexceeded US$10 million
since1990. Thelowlevelofinvestment maybeattributed tothelowstandard ofeducation andtraining,
thequality andcostofcommercial services (forexample, telecommunications, airtransport), andthe
lackofanyreliable legalandjudicial protection forinvestors, forexample, banks granting loans to
enterprises (Chapter II).10Thelackofdynamism inprivate investment mayalsobeduetotheuncertainty
regarding thefuture commercial andtaxsituation under thevarious regional tradeagreements, including
theWAEMU andECOWAS. Tobeprofitable, anylarge-scale investment inanexpanded regional
market would require thedefinitive elimination oftariff andnon-tariff barriers toregional trade, and
thisdoesnotcurrently appear tobehappening.
9Enterprises thatproduce cement, textiles andtobacco sawdemand fortheir products fall,which reflected
thepurchase oflesscostly products (forexample, used clothing) orthedecision nottobuycertain articles.
10Jeune Afrique, No.240, 5May 1997.Republic ofBenin WT/TPR/S/27
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Table I.3
Fixed investment andportfolio investment, 1982-1996
1982 1990 1991 1992 1993 1994 1995 1996a
Fixed investment andportfolio investment
(CFAF billion)115 68 73 76 87 132 173 ...
-Government sector ... 37 40 38 41 80 104 ...
Reminder: external financing ... 26 27 23 26 50 65 ...
-Private sector ... 30 33 38 47 51 69 ...
Fixed investment andportfolio investment
(percentage ofGDP)28 14 15 14 15 14 17 ...
-Government sector ... 8 9 7 7 9 12 ...
-Private sector ... 6 6 7 8 5 7 ...
Fixed investment andportfolio investment
(inUS$percapita)95 52 53 57 59 44 63 ...
...Notavailable.
aAtcurrent market prices.
Source: Information supplied bytheBeninese authorities.
(3) Trade performance
14. Itisnoteasytoanalyse thecomposition offoreign tradebecause oftheexistence ofthere-export
trade, whether ornotinformal, which represents between onefifthandonequarter ofimports and
forwhich fewstatistics areavailable. Inaddition, foreign tradebycertain stateenterprises (forexample,
inthepetroleum sector (SONACOP), electricity (SBEE) andcotton (SONAPRA)) isexcluded from
certain foreign trade statistics.
15. Foreign trade consists ofexports oflocal products, themajor export being cotton, andthe
re-export ofimported products, showing thepivotal roleplayed bytrade inBenin (Chart I.4). This
trade reflects Benin 'sgeographical situation, butalsoitspolitical stability andtherelative efficiency
oftheportofCotonou andthelandtransport system incomparison withsome neighbouring countries.
16. Theexport statistics arecalculated according tothebalance ofpayments andalsoinclude
estimates ofthelarge-scale informal trade notrecorded bythecustoms authorities, which caneither
beoflocalorigin (forexample, rawcotton orfoodproducts directly exported byfarmers); orofforeign
origin: inthisinstance, products areusually firstimported intoBenin because inneighbouring countries
theirimport isrestricted ortheyaresubject tohigher customs duties, andarethenre-exported informally
tothesecountries. Theprincipal products concerned arericeandflour, cotton fabrics andothertextiles,
clothing, usedtyresandalcoholic beverages forNigeria. These products arecleared bythecustoms
fordomestic consumption andthenre-exported bylandorriver, avoiding customs posts; oraredeclared
tobeintransit toanother country andthendiverted.
17. Total exports (based onthebalance ofpayments) amounted toCFAF 227billion in1996,
corresponding tooverUS$440 million, following exceptional growth since 1994 duetothehigher
price ofcotton andthequantities produced (Chart I.5).11Total imports (c.i.f.) amounted to
CFAF 286billion, overUS$680 million, in1996. Inconstant prices, theyfellby25percentfollowing
thedevaluation, butthere wasalsoasubstantial recovery in1995 withtheincrease inimports of
intermediate andcapital goods inconnection withpreparations fortheSixthSummit ofFrench-Speaking
Countries inDecember 1995.
11Thefollowing exchange rates have been used inthisChapter: 1992 -CFAF 264.69 perUS$; 1996 -
CFAF 511.55 perUS$.Republic ofBenin WT/TPR/S/27
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Table I.4
Exports, 1992 and1996
(US$ million andpercentage)
Products 1992 1996
US$million Percentage of
totalUS$million Percentage of
total
Total exports (f.o.b.): 371.4 100.0 443.7 100.0
-Exports oflocal products 132.2 35.6 284.0 64.0
-Re-exports 239.2 64.4 159.7 36.0
Exports oflocal products
Ginned cotton 97.5 26.3 230.1 51.9
Cotton seeds 6.4 1.7 10.2 2.3
Petroleum 16.3 4.4 10.2 2.3
Cashew nuts 1.4 0.3 7.5 1.7
Tobacco andcigarettes 0.3 0.1 4.1 0.9
Rice 5.9 1.6 3.1 0.7
Sawn orcutwood 0.3 0.1 1.3 0.3
Fish 0.2 0.1 1.1 0.3
Cement 1.9 0.5 1.1 0.3
Cereal andoilcake 0.2 0.1 0.9 0.2
Banknotes 0.0 0.0 0.6 0.1
Mats andbasketwork 0.3 0.1 0.5 0.1
Motor vehicles, tractors andparts thereof 1.6 0.4 0.4 0.1
Timber intherough 0.0 0.0 0.4 0.1
Ironplates andarticles ofiron 0.3 0.1 0.3 0.1
Machinery, mechanical appliances and
equipment0.6 0.2 0.3 0.1
Oxygen 0.0 0.0 0.1 0.0
Other cereals, wheat, maize 1.1 0.3 0.0 0.0
Reminder: CFAF/US$ exchange rate 264.7 n.a. 511.6 n.a.
n.a. Notapplicable.
Source: Beninese Government.WT/TPR/S/27 Trade Policy Review
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Table I.5
Imports bymain product groups, 1992 and1996
(US$ million andpercentage)
HSline Product group 1992 1996
Value
(US$ million)Percentage
oftotalValue
(US$ million)Percentage
oftotal
Total imports (c.i.f.) 648.6 100 681.8 100
Total imports (f.o.b.) 560.4 86.4 561.8 82.4
-Imports fordomestic consumption 383.3 59.1 439.3 64.4
-Imports forre-export 177.1 27.3 122.5 18.0
Total imports (c.i.f.):
50-67 Cotton, textiles andclothing 98.7 15.2 83.9 12.3
27 Petroleum products 66.6 10.3 79.8 11.7
28-29,31-32 Chemicals 38.1 5.9 45.1 6.6
10 Cereals 151.6 23.4 42.3 6.2
84 Machinery andmechanical appliances 27.4 4.2 33.6 4.9
74-83 Metal andmetal articles 31.0 4.8 33.2 4.9
87 Transport equipment 42.9 6.6 30.3 4.4
85 Electrical equipment 20.5 3.2 23.7 3.5
48-49 Stationery andbooks 11.8 1.8 17.2 2.5
26 Minerals andmineral products 15.6 2.4 14.6 2.1
30 Pharmaceuticals 8.4 1.3 14.1 2.1
19 Edible preparations 8.3 1.3 11.4 1.7
04 Milk anddairy produce 5.2 0.8 11.4 1.7
17 Sugars andsugar confectionary 11.9 1.8 10.5 1.5
22,24 Beverages andtobacco 19.3 3.0 9.3 1.4
11 Products ofthemilling industry 16.9 2.6 9.1 1.3
68-70 Ceramic products, glassware andarticles ofstone 4.3 0.7 6.1 0.9
02 Meat andedible meat offal 11.7 1.8 4.4 0.6
33 Cosmetic preparations 10.3 1.6 3.6 0.5
03 Fishandcrustaceans 8.7 1.3 3.4 0.5
Other (informal imports) 39.5 6.1 194.9 28.6
Reminder: CFAF/US$ exchange rate 264.7 n.a. 511.6 n.a.
n.a. Notapplicable.
Source: Beninese Government.
(ii) Regional pattern oftrade
20. Cotton isexported toseveral countries, buttheprincipal destinations areBrazil, Morocco and
Portugal (Table I.6). Cashew nutsaremainly exported totheEuropean Union, theUnited States and
India.Othertradeismainlywithneighbouringcountries,especiallyNigeriaandtheland-lockedcountries
inthehinterland.Republic ofBenin WT/TPR/S/27
Page 13
Table I.6
Exports bydestination, 1992 and1996
(US$ million andpercentage)
1992 1996
US$million Percentage
oftotalUS$million Percentage oftotal
Total exports (f.o.b.) 371.4 100.0 443.7 100.0
European Union: 33.6 9.1 60.5 13.6
Germany (former FRG) 0.4 0.1 2.4 0.5
Belgium 13.0 3.5 2.1 0.5
Spain 2.1 0.6 10.4 2.3
France 1.6 0.4 8.8 2.0
Italy 7.0 1.9 9.6 2.2
Netherlands 1.0 0.3 1.4 0.3
Portugal 5.4 1.5 24.8 5.6
Brazil 3.3 0.9 49.5 10.4
Morocco 11.1 3.0 24.6 5.7
Thailand 3.6 1.0 19.0 4.3
Indonesia 3.3 0.9 13.0 2.9
Taiwan 1.0 0.3 7.0 1.6
India 1.2 0.3 6.3 1.4
Nigeria 5.1 1.4 6.1 1.4
China 0.8 0.2 3.7 0.8
South Africa 1.5 0.4 3.1 0.7
Niger 1.7 0.5 2.5 0.6
Switzerland 0.4 0.1 2.2 0.5
Bangladesh 0.1 0.0 1.2 0.3
Other 52.3 14.1 66.0 14.9
Destination ofpetroleum products 16.2 4.4 10.2 2.3
Destination ofinformal trade 237.4 63.9 171.7 38.7
Reminder: CFAF/US$ exchange rate 264.7 n.a. 511.6 n.a.
n.a. Notapplicable.
Source: Beninese Government.
21. Themajority ofBenin 'simports come fromtheEuropean Union, inparticular France, which
accounts formorethan18percentofimports (Table I.7).Theothermajor trading partners areThailand
(rice), theEuropean Union andChina. Statistics onimports from Nigeria donotreflect themajor
part(informal) ofthistrade.WT/TPR/S/27 Trade Policy Review
Page 14
Table I.7
Imports bysource, 1992 and1996
(US$ million andpercentage)
1992 1996
Value
(US$ million)Percentage
oftotalValue
(US$ million)Percentage
oftotal
Total imports (c.i.f.) 648.6 100.0 681.8 100.0
European Union: 248.0 38.2 231.1 33.9
Germany (former FRG) 18.9 2.9 19.5 2.9
Belgium 14.0 2.2 9.5 1.4
Denmark 4.9 0.8 9.2 1.4
Spain 8.3 1.3 12.5 1.8
France 134.1 20.7 125.3 18.4
Italy 9.2 1.4 11.2 1.6
Netherlands 42.9 6.6 31.6 4.6
United Kingdom 20.8 3.2 21.4 3.1
Thailand 102.4 15.8 31.7 4.7
China 24.2 3.7 22.0 3.2
Japan 32.0 4.9 20.3 3.0
Côted'Ivoire 8.9 1.4 17.7 2.6
United States 34.6 5.3 17.3 2.5
Senegal 12.0 1.9 11.3 1.7
India 6.7 1.0 9.5 1.4
Republic ofKorea 2.6 0.4 6.9 1.0
Democratic People 'sRepublic ofKorea 1.1 0.2 3.6 0.5
Brazil 5.7 0.9 2.0 0.3
Pakistan 25.6 3.9 1.5 0.2
Turkey 1.0 0.2 0.8 0.1
Origin ofinformal trade 143.5 22.1 305.9 44.9
Reminder: CFAF/US$ exchange rate 264.7 n.a. 511.6 n.a.
n.a. Notapplicable.
Source: Beninese Government.
(iii) Trade inservices, netflows ofresources andlong-term debt
22. In1996, Benin 'sexternal debtwasCFAF 709billion (US$1.4 billion), corresponding to63per
centofGDP. Every yearsince 1989, Benin hasnegotiated external debtrelief. InNovember 1996,
67percentofitsbilateral debt(CFAF 127billion) withtheParis Club wascancelled. Most ofthe
debt(CFAF 454billion in1996) iswithmultilateral institutions, however, andcannot therefore be
rescheduled.
23. Since 1994, thetrade balance deficit hasoscillated between 4.2and7.3percentofGDP
(Table I.8);theauthorities forecast a6.6percentdeficit for1997. There isalsoadeficit intheservices
balance, which escalated in1994asaresult oftheincrease ininterest ontheexternal debt. Since 1995,
insurance andfreight costsrelated totheexpansion inimports hasalsohelped toaccentuate thedeficit.
Following devaluation, private transfers increased considerably asinvestment inproperty inBenin
became more attractive toBeninese living abroad. Thecurrent account balance nevertheless shows
adeficit andmostofitsfinancing comes fromexternal budget aid.In1996, official grants amountedRepublic ofBenin WT/TPR/S/27
Page 15
toalmost 5percentofGDP. Netflows ofresources toBenin aremuch less,owing todebtservicing
payments, which absorb close toonefifthofexport earnings forgoods andservices eachyear.
Table I.8
Balance-of-payments developments, 1992-1997
1992 1993 1994 1995 1996 1997a
(US$ million)
Trade balance (f.o.b.-f.o.b.) -189.3 -198.1 -64.5 -132.9 -124.3 -139.7
Netservices -77.4 -54.7 -47.7 -102.0 -100.1 -88.8
Interest onexternal debt -61.6 -39.9 -40.5 -59.9 -51.0 -36.7
Freight andinsurance -72.9 -71.7 53.3 -81.9 -89.3 -90.0
Tourism 23.8 24.7 17.5 21.6 18.6 17.7
Other transport 54.8 49.8 28.8 34.5 37.3 40.7
Other services -21.5 -17.7 -0.2 -16.2 -15.6 -20.5
Netprivate transfers without matching
contribution95.2 94.3 57.6 68.1 67.1 65.9
Current balance (excluding grants) -171.5 -158.6 -47.7 -186.1 -151.1 -115.2
Official grants 132.2 144.4 84.1 100.2 167.3 137.6
Current balance (including grants) -39.3 -14.1 36.4 -85.9 16.2 22.4
Netcapital movements -36.3 -33.2 -3.2 -25.6 44.8 30.1
Overall balance -75.6 -47.3 33.1 -111.6 61.0 52.5
(Percentage ofGDP)
Trade balance/GDP -8.8 -9.3 -4.2 -7.3 -5.6 -6.5
Current balance (excluding
grants)/GDP-8.0 -7.5 -5.0 -8.6 -7.1 -6.6
Grants/GDP 6.1 6.8 5.5 4.8 7.6 6.0
Reminder: CFAF/US$ exchange rate 264.7 283.2 555.2 499.2 511.6 572.0
aForecast.
Source: Beninese Government.
(4) Outlook
24. TheGovernment 'stargets fortheperiod 1997-1999 aretoachieve growth of6percentin
realterms andtokeepthecurrent account deficit (excluding grants) to5.5percentofGDP in1999,
while atthesametimestrengthening thesocial infrastructure. According totheauthorities, thiswould
require agrowth ofalmost 10percentinthevalue ofexports oflocalproducts overtheperiod. The
Government isaware thatthese results depend toalarge extent onthesatisfactory performance of
thecotton sector andafavourable trend inglobal prices.WT/TPR/S/27 Trade Policy Review
Page 16
Annex I:Exchange regulations13
25. Within thefranc zone, Benin belongs totheWest African Economic andMonetary Union
(WAEMU, formally WAMU), whose issuing authority istheCentral Bank ofWest African States
(BCEAO).14Thecurrency usedwithin theunion istheCFA (African Financial Community) franc.
Itsparity isCFAF 100perFrench franc. Bothofthetworegional central banks havean"operations
account" withtheFrench Treasury, intowhich theirdisposable foreign currency ispaidandwhich
theyusetomake transfers outside thezone.15Thespecial feature ofthisaccount isthatitmaybecome
adebit account without anylimits setapriori because oftheFrench Government 'sundertaking to
guarantee theconvertibility ofCFA francs overandabove available foreign assets.16
26. Theexchange rateoftheCFA franc andother foreign currencies isfixed onthebasis ofthe
corresponding exchange ratefortheFrench franc. Theratesinclude commission of2.5percentlevied
bybanks andpostoffices onalltransfers outside theWAEMU, andthissumispaidtotheFrench
Treasury. There isnotaxontheselling orbuying offoreign currency. Forward exchange operations
aresubject toauthorization bytheMinistry ofFinance 'sDirectorate ofMonetary andFinancial Affairs,
which isresponsible forexchange controls inconjunction withtheDirectorate ofForeign Trade of
theMinistry ofTrade, Handicrafts andTourism.
27. Payments within thefranc zonearenotsubject toexchange controls, withtheexception of
thefollowing transactions: measures concerning goldandtherepatriation ofexport earnings; and
theissuing, advertising andofferofsecurities andother financial instruments. Payments withGambia,
Ghana, Guinea, Liberia, Mauritania, Nigeria andSierra Leone areusually made through theWest
African Clearing House.
(a) Payments related totrade ingoods
28. Allimport transactions mustbedomiciled withanauthorized bankwhen theirvalue exceeds
CFAF 500,000. Ifdocumentary credit isopened, theforeign exchange maynotbeacquired more
thaneight daysbefore shipment ormayonlybeacquired onthedatefixed forpayment ifthegoods
havealready beenimported.
29. Payment forexports toforeign countries, including countries withanoperations account, is
duewithin 180daysfollowing thearrival ofthegoods attheirdestination. Exports foranamount
exceeding CFAF 500,000 mustobligatorily bedomiciled withanauthorized bank. Foreachexport
transaction, residents must, within onemonth following thedateonwhich theybecome due,collect
13Exchange regulations within thefranc zone aredescribed inIMF(1996). Thefollowing section istoa
large extent based onthissource. Asummary isalsogiven inWTO (1995).
14Inaddition toWAEMU member countries, thefranc zone includes France anditsoverseas departments
andterritories, Monaco, members oftheCentral African Customs andEconomic Union (CACEU -Cameroon,
Chad,Congo,Gabon,EquatorialGuinea,andCentralAfricanRepublic),whosecentralbankistheBankofCentral
African States (BEAC), andComoros. Themembers oftheWAEMU areBenin, Burkina Faso, Côte d'Ivoire,
Guinea-Bissau, Mali, Niger, Senegal andTogo. BCEAO headquarters areinDakar andthere isanagency in
each oftheother member States.
15Operations Account Convention, Dakar, 1973. Each central bank alsohasaFrench Treasury ordinary
current account inplaces where ithasitsownestablishment; theOperations Account isdebited orcredited with
theamount ofthetransfers resulting from thelevelling down ortopping upofthisaccount (Article 3).
16Collange P.andPlane P.(1994).Republic ofBenin WT/TPR/S/27
Page 17
theamounts payable tothembyforeign countries, including theWAEMU States andcountries ofthe
franc zone, forgoods exported, andrepatriate them tothebankofdomiciliation.
(b) Payments forinvisible transactions
30. Payments forinvisible transactions maybemade freely within thefranc zone; other payments
forinvisibles aresubject toprior approval bytheMinister ofFinance17;inpractice, approved banks
andpostoffices areempowered toauthorize transfers ofuptoCFAF 50,000. Settlement oftrade-related
invisibles ispermitted freely iftheunderlying tradetransaction hasbeenapproved ordoesnotrequire
authorization. Transfers ofprofits, dividends androyalties tonon-residents aresubject topriorapproval
bytheMinistry ofFinance.
31. There isaceiling ontheamounts which residents travelling abroad forbusiness ortourism
maytakeoutside thefranc zone. InAugust 1993, following aflight ofcapital, theBCEAO suspended
thebuying ofbank notes circulating outside thefranc zone countries withoperations accounts;
non-residents 'accounts cannolonger befreely credited bydeposits inCFAfrancs made through foreign
correspondents. These accounts cannolonger bedebited either without prior authorization.
32. Foreigners working inBenin maytransfer upto50percentoftheirwages abroad iftheylive
withtheirfamily inBenin andupto80percentiftheirfamily livesabroad.
33. Receiptsfrominvisibletransactionsmustbecollectedandpassedonwithintwomonthsfollowing
thedatetheyaredueorencashed. Travellers maybring intoBenin anunlimited number ofbanknotes
issued bytheBCEAO ortheBanque deFrance. Foreign banknotes brought inbyresidents mustbe
soldtoanauthorized bankwithin eight days.
(c) Transfer ofcapital
34. Capital maybefreely transferred within thefranc zone. Capital transfers outside thefranc
zonerequire theapproval oftheMinister forFinance. Investment abroad byresidents issubject to
priorauthorization, including investment bybranches orsubsidiaries abroad ofcompanies established
inBenin. Borrowing abroad andtheissuance, advertising orsaleofforeign securities inBenin are
subject toauthorization bytheMinistry ofFinance.
35. Direct foreign investment inBenin issubject toprior declaration totheMinistry ofFinance,
which maypostpone itforuptotwomonths.18Prior declaration isalsorequired fortheselling of
anyinvestment. Allpayments made fromabroad toBenin withaviewtodirect oranyother investment
musttakeplace through anauthorized agent andmustinvolve either asurrender offoreign exchange
onthecurrency market orthedebiting ofaforeign account infrancs.
17Benin signed Article VIII(Sections 2,3and4)oftheArticles ofAgreement oftheInternational Monetary
Fund on1June 1996.
18Investment isdeemed tobedirect ifitinvolves taking over control oftheenterprise.