Benin WT/TPR/S/131 
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I. ECONOMIC ENVIRONMENT 
(1) OVERVIEW  
1. Benin covers an area of 112,622 km2.  It is bordered by Burkina Faso and Niger to the north, 
Nigeria to the east, the Atlantic Ocean to the south, and Togo to the west.  In  2003, its population was 
approximately 7 million, of whom 44 per cent liv ed in urban areas. Per capita GDP in 2001 was 
US$380.1 The rate of demographic growth is fairly hi gh (the birth rate being 2.6 per cent per annum) 
and average life expectancy is 53 years. 
2. Since its trade policies were first reviewed in 1997, Benin has modified its development 
programme by adopting a Poverty Reduc tion Strategy Paper (PRSP) in 2002.2  It has also continued 
with its macroeconomic stabilizati on and structural reform programme , with the support of a Poverty 
Reduction and Growth Facility (PRGF) from the IM F, which was renewed in May 2003.  Benin’s 
principal objectives under the PRSP are to control government finance, support the common monetary 
policy of the West African Monetary Union (WAM U), and to speed up structural reform (cotton 
subsector and public sector).3  In 2003, Benin met the eight trade criteria monitored by the West 
African Economic and Monetary Union (WAEMU). 
3. Economic growth mainly depe nds on trends in the primary sector, which fluctuate 
considerably due to climate variations;  the ser vices sector has become more important, to the 
detriment of other sectors. Average rates of econom ic growth of 7 to 8 per cent over the period 2000-
2014 would be needed to double the per capita gross domestic product (GDP), but the growth rate forecast for 2003 will not enable this goal to be met. The informal sector remains important, but its 
total size has not been determined. 
4. According to the UNDP, Benin is 159
th out of 175 countries as far as its human development 
level is concerned.4  Under the Heavily Indebted Poor C ountries Initiative (HIPC), since 2003 Benin 
has been granted relief amounting to US$124 million (in nominal value), equivalent to 
US$84.4 million in net present value terms.5  This relief has been granted as a result of the sustained 
efforts at reform and in order to ensure that the indebtedness criteria do not exceed the thresholds set 
under the HIPC following the fall in cotton prices. 
(2) RECENT ECONOMIC PERFORMANCE6 
(i) Growth, employment and poverty 
5. Since the first review, the economy has moved ahead in  fits and starts (Table I.1).  This is due 
to the difficulties caused by the macroeconomic imbalance and the deeply-rooted structural 
weaknesses, to which should be added the decline in international prices for cotton 
(Chapter IV(2)(iii)). According to the authorities, growth in GDP in 2002 was 4.6 per cent and 
                                                      
1 IMF (2003b). 
2 Government of Benin (2002). 
3 IMF (2003b). 
4 The human development indicator assesses the leve l reached in terms of life expectancy, education 
and adjusted real in come. UNDP (2003). 
5 According to the IMF, to date, the reduction in Benin’s external debt has been US$460 million (IMF 
Press Release No. 03/42 of 25 March 2003). 
6 The main sources consulted were: IMF (2003b); and IMF (2002). WT/TPR/S/131 Trade Policy Review 
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6.7 per cent in 2003.7  The GDP growth forecast for 2004 is 6.4 per cent, but achievement of this 
growth objective will depend on the structural reforms introduced under the Poverty Reduction 
Strategy Paper. 
Table I.1 
Basic economic indicators for Benin, 1997-2004 
(Share of GDP) 
  1997 1998 1999 2000 2001 2002 2003 2004a
 (percentage of annual change) 
GDP (percentage) 5.7 7 4.5 5.0 4.9 6.2 4.6 6.7 6.4 
 (percentage)  
Primary 35.8 36.6 35.8 34.9 34.5 33.8 33.8 33.6 
Agriculture  25.2 26.4 25.5 25.1 24.6 23.8 23.8 23.6 
Livestock and fisheries 10.6 10.2 10.3 9.8 9.9 10.1 10.0 9.9 
Secondary 13.5 12.6 12.8 12.9 13.4 13.6 13.7 14.0 
Mining and manufacturing 8.9 8.3 8.3 8.4 8.7 8.7 8.6 8.8 
Electricity, gas and water 0.7 0.7 0.8 0.8 0.9 1.1 1.3 1.3 
Construction and public works 3.9 3.6 3.7 3.7 3.7 3.8 3.9 3.9 
Tertiary 45.0 44.7 44.4 44.6 44.6 45.0 44.9 45.0 
Trade 6.4 6.3 6.1 6.8 7.1 7.2 7.6 7.8 
Transport and 
  telecommunications 16.7 16.4 16.5 16.7 16.7 16.8 16.5 16.5 
Non-tradable services 11.1 11.0 10.8 10.4 10.1 10.1 10.0 9.8 
Other services 10.8 11.0 11.0 10.7 10.7 10.9 10.8 10.9 
a Estimates.  
Source: Ministry of Finance and the Economy, Economic Forecasting Department. 
 
6. There have not been any major changes in th e composition of the GDP since 1997; services 
and agriculture continue to dominate the economy while the manufacturing sector’s share of GDP 
remains modest. The role played by agriculture a nd livestock rearing (the largest employer) in total 
employment is rising, whereas in the other sector s it is stable or falling. These data cannot be 
considered wholly reliable because of  the size of the informal sector. 
7. In 2001, the Government and the parastatal sector employed 8.5 per cent of the working 
population, formal private enterprises employed 11. 2 per cent and informal enterprises 80 per cent of 
the labour force. The unemployment rate is 5.5 per cent of the working population, but 
underemployment is estimated to affect 70 per cent of  the labour force and is the major problem in the 
labour market rather than unemployment.8 
8. A relatively high rate of demographic growth, t ogether with fluctuations in economic growth, 
have led to an increase in poverty, especially in rural areas.9 The proportion of the population living 
below the poverty threshold has risen from 43.4 per cent at the time of the first review to 49 per cent, 
the majority of these being poor people living in rural areas (59 per cent of economically 
disadvantaged households). Around two-fifths of  the population does not have access to drinking 
water. The literacy rate is high (compared with the rest of the region and other low-income countries 
at the global level), but disparities between women and men in terms of education are significant. 
                                                      
7 According to the IMF, growth in GDP in 2002 was some 6 per cent, and the growth forecast for 2003 
was 5.6 per cent. IMF (2003b). 
8 National Institute of Statistics and Economic Analysis (2002). 
9 Government of Benin (2002). Benin WT/TPR/S/131 
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(ii) Inflation 
9. Since 1995, consumer price inflation has fallen sharply, from some 13 per cent to below 3 per 
cent since 2002. The rise in prices in 2000 and 2001 was mainly caused by higher prices for fuel on 
the parallel market, which led to an increase in lo cal transport costs, higher prices for pharmaceuticals 
and stronger demand for cereals. The slower pace of  inflation in 2002 was above all due to lower 
transport costs. Estimates for 2004 show that the rate  will remain below 3 per cent, as called for in the 
WAEMU’s Convergence, Stability, Growth and Solidarity Pact (Table I.2). 
 
Table I.2 
WAEMU convergence criteria, 1997-2003 
(Percentage) 
 Standard 1997 1998 1999 2000 2001  2002 2003 
Primary criteria        
Basic fiscal balance with 
HIPC/nominal GDP  >=0 1.4 3.1 3.4 2.4 0.4 0.2 0.1 
Basic fiscal balance excluding 
HIPC/nominal GDP  >=0 1.4 3.1 3.4 2.5 1.3 0.6 0.1 
Inflation  <= 3 3.3 5.8 0.3 4.2 4.0 2.4 2.8 
Outstanding debt/GDP <=70 65.3 60.6 59.3 57.5 56.1 56.7 54.3 
Payments arrears (in CFAF 
billions) <= 0 7.9 0.0 0.0 0.0 0.0 0.0 0.0 
Secondary criteria         
Payroll as percentage of tax 
revenue  <= 35 39.0 35.1 33.0 31.7 32.7 31.9 31.0 
Investment as percentage of 
domestic resources/tax revenue  >=20 7.5 8.2 11.4 11.5 22.4 19.3 20.8 
Current external position 
excluding grants as a percentage 
of nominal GDP <= 5 -7.8 -6.1 -7.6 -4.6 -6.3 -6.2 -5.0 
Tax ratio  >=17 12.0 12.6 13.1 13.7 13.5 14.4 14.6 
 
Source : WAEMU (2003), Budgetary indicators and convergence criteria in the WAEMU zone . 
 
(iii) Monetary and exchange policy 
(a) Institutional arrangements 
10. The countries belonging to the West African Economic and Monetary Union (WAEMU), 
including Benin, have common monetary and exchange policies.10 The WAEMU complements the 
West African Monetary Union (WAMU) by an economic integration component 
(Chapter II(6)(iii)(a)) and incorporates its provisi ons, including a common currency administered by 
the Central Bank of West African States (BCEAO), a specialized and autonomous institution of the 
WAEMU.11 Benin, like the other member countries of the WAEMU, accepted Article VIII of the 
IMF’s Articles of Agreement on 1 June 1996. 
                                                      
10 The WAEMU Treaty was signed on 11 January 1994 by Benin, Burkina Faso, Côte d’Ivoire, Mali, 
Niger, Senegal and Togo; Guinea-Bissau acceded to the Treaty on 1 January 1997. 
11 Monetary cooperation among member countries of  the WAMU, set up in 1962 with a new Treaty 
signed in 1973, and France dates back to the colonial era. The BCEAO is the result of a monetary cooperation agreement signed with Fran ce in 1972 and supplemented by the tr ansactions account agreement of 1973. WT/TPR/S/131 Trade Policy Review 
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11. The franc of the African Financial Community  (CFA) is the WAMU’s currency unit. Until 
1 January 1999, when the euro became the currenc y of countries belonging to the European Monetary 
Union, the CFA franc had fixed parity with the French franc.12 The CFA franc now has fixed parity 
with the euro: CFAF 1,000 = €1.52449017.13 The introduction of the euro did not lead to any 
substantive changes as far as the arrangeme nts in the franc zone are concerned.14 
12. There is no monetary policy implemented at the national level as the BCEAO is responsible 
for issuing CFA francs and ensuring their stability. Its responsibilities are set out in its articles of 
incorporation as follows: to implement the mone tary policy guidelines defined by the WAMU 
Council of Ministers; to transact exchange operations; to hold and administer member countries’ 
exchange reserves; and to promote the proper fu nctioning of the Monetary Union’s system of 
payments. 
13. The BCEAO defines its monetary policy in such  a way as to maintain the rate of external 
cover for the currency at a satisfactory level and, in  principle, to sustain economic activity in member 
countries without inflationary pressure. The BCEAO supports each member’s monetary policy by 
fixing objectives for the money supply and credit on an annual basis. These take into account the 
general financing needs of each member country’s  economy and the resources needed to meet them, 
as determined by each national Credit Committee.  There are ceilings for advances to national 
treasuries, which are subject to an interest rate fi xed by the BCEAO, with a penalty if their ceiling is 
exceeded. Advances have now been frozen at the 31 December 2002 levels, pending the consolidation 
planned by the monetary authorities. The long-term  objective is gradually to guide States towards 
financial markets by issuing public securities. 
14. Maintaining a common monetary policy calls fo r financial discipline on the part of each 
country belonging to the Union, which retains its  own decentralized economic policy. The WAEMU 
has established a Convergence, Stab ility, Growth and Solidarity Pact15, subject to multilateral 
monitoring since 2000. According to the latest data (2003), provided by the IMF and the WAEMU 
Commission, Benin meets the eight convergence criteria , with an inflation rate below the threshold of 
3 per cent; a debt/GDP ratio below the limit of 70 per cent; and at least 20 per cent of government investment financed from domestic sources.
16 The time-limit originally set for the year 2000 has been 
postponed until mid-2005 due to the problems enc ountered by some WAEMU member States in 
meeting the four main converg ence criteria (Table I.2). 
(b) Foreign exchange regulations17 
15. Foreign exchange transactions between the BCEAO and Benin’s commercial banks are at a 
fixed rate, as are exchange operations by economic operators. In addition, the buying and selling rates 
for other currencies are determined on the basis of  the rate for the euro on the foreign exchange 
market. 
                                                      
12 When the CFA franc was devalued by 50 per cent in 1994, the fixed rate became CFAF 1,000 = 
F 10. 
13 The same parity applies to the CFA (Central Af rican Financial Cooperation) franc, which is the 
currency of the member co untries of the Central African Economic and Monetary Union (CEMAC), whose 
structure is similar to that of the WAEMU. 
14 Decision of the Council of the European Union of 23 November 1998 concerning exchange matters 
relating to the CFA franc and the Comorian franc (98/683/EC). 
15 Additional Act No. 4/99. 
16 IMF (2003b). 
17 IMF (2003a). Benin WT/TPR/S/131 
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16. In Benin, exchange transactions must be conduc ted through intermediaries authorized by the 
Ministry of Finance. Banks and post offices levy a commission of 0.25 per cent for transfers outside 
the WAEMU and this is transferred to the Ministry of Finance. 
17. Imports exceeding CFAF 500,000 (US$830) must be domiciled with an approved bank. 
18. Payments (other than transactions in gold and the issue, advertising and sale of financial 
instruments) and transfers of capital within th e WAEMU are free. The main provisions of the 
common regulations governing foreign exchange  with third countries are the following: 
- Sums needed to cover current transactions may be freely transferred subject to 
submission of supporting documentation; 
 
- The obligation to repatriate earnings fr om exports to countries outside the WAEMU 
and their conversion into CFA francs within 120 days following the shipment of the 
goods; 
 - Capital may enter freely from any country; and 
 
- Outflow of capital to countries outside th e WAEMU is subject to verification based 
on the submission of supporting documentation (attestation and issue of a transfer authorization by the services of the Ministry of Finance).
18 
 
19. Benin allows foreign investors to repatriate  capital invested and the profits from their 
operations, as well as savings on sal aries by expatriate staff. 
(iv) Budget policy 
20. As regards the external economy, Benin still has a chronic deficit in the balance of goods and 
services, as was the case at the time of the first review of its trade policy (Table I.3). The deficit in commercial transactions of goods has increased sharply (around 44 per cent) since the first review as 
a result of the fall in global cotton prices, desp ite the expansion of dom estic production of cotton 
(Chapter IV(2)(iii)).  The deterioration in the te rms of trade, the increase in the value of imports 
(petroleum products, intermediate goods, capital goods, services), the obsolescence and low level of 
diversification in production, together with the practice whereby goods are imported with a view to 
re-export that is not properly recorded, have also been contributory factors.
19 
                                                      
18 According to the provisions of Article 6 of Regulation No. 09/98/CM/UEMOA on financial relations 
among member States of the WAEMU, investment, loans, deposits and in general all capital movements among member States of the WAEMU are free and not subject to restrictions, pursuant to Articles 76, paragraph (d), 96 
and 97 of the WAEMU Treaty and Article 4 of the WAMU Treaty.  
19 Ministry responsible for coordination of government action, planning, development and employment 
promotion (2001) and BCEAO (2002). WT/TPR/S/131 Trade Policy Review 
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Table I.3 
Balance of payments, 1997-2004 
  1997 1998 1999 2000 2001 2002 2003 2004
a 
 (CFAF billions) 
External economy     
Current transactions -64.5 -47.5 -67.8 -57.3 -54.8 -53.7 -65.7 -64.7 
- Balance in goods -75.3 -93.4 -131.6 -88.1 -131.5 -103.5 -121.4 -108.3 
- Exports, f.o.b. 233.2 244.4 259.5 279.3 273.9 312.3 322.3 363.8 
- Imports, f.o.b. 308.5 337.8 391.1 367.4 405.4 415.8 443.7 472.2 
- Net services -47.4 -36.2 -21.1 -48.3 -42.6 -38.7 -40.5 -51.0 
- Current transfers 58.2 82.1 84.9 79.1 119.3 88.5 96.2 94.6 
Debt reduction 1.8 0.0 11.8 4.9 16.6 17.8 0.0 0.0 
Overall total 0.4 29.7 154.4 63.8 130.2 -50.7 22.4 35.0 
 percentage of GDP 
Memorandum items:     
Trade balance -5.7 -6.4 -8.6 -5.2 -7.2 -5.3 -5.7 -4.6 
Current balance -4.9 -5.4 -4.4 -3.4 -3.0 -2.7 -3.1 -2.8 
a Estimates. 
Source: Ministry of Finance and the Economy , Economic Forecasting Department. 
 
21. According to estimates by the Government, th e deficit in the current balance in 2003 
represented 3.1 per cent of GDP (7.5 per cent accord ing to the IMF), while the forecast for 2004 is 
2.8 per cent of GDP, in line with the continuing decrease shown in Table I.3.20  
22. Benin has seen a rise in revenue from import duties, from CFAF 82.7 billion in 1997 
(US$138 million) to CFAF 145.9 billion in 2002 (US $233 million), resulting in particular from higher 
tariffs following the introduction of the Common External Tariff (Chapter III(2)(iii)(a)) on goods 
from countries outside the WAEMU zone.21 The IMF has estimated that in 2003 revenue accruing to 
the State was equivalent to 17 per cent of GDP, whereas in 1996 it had been some 15 per cent. As far as spending is concerned, the authorities wish to limit it to 16 per cent of GDP (2003), although it was 19 per cent in 1996.  According to the Economic For ecasting Department at the Ministry of Finance 
and the Economy, the payroll will absorb around 22 per cent of expenditure in 2004. 
(v) Transparency and governance 
23. Issues relating to transparency and proper manage ment of public affairs have a direct impact 
on the overall economic environment and on the cond itions under which economic  actors take their 
decisions and operate. 
24. The Government of Benin is determined to prev ent and combat all forms of corruption and to 
improve governance. For this purpose, a new strategy to combat corruption was adopted in July 2002. 
                                                      
20 According to the authorities, this situation is caus ed by the continuing deficits in the balance of 
goods and services, whereas cu rrent transfers mitigate the extent of the deficit in the balance of goods and 
services. 
21 According to the authorities, th e major problems encountered by the customs service in collecting 
revenue are: (i) the measures taken by the Nigerian authorities, which do not allow Benin to import into Nigeria some key products that to a large extent make up the customs revenue; (ii) the expansion of illicit sales of 
petroleum products; and (iii) the reduction in traffic in the port of Cotonou, principally as a result of freight 
going to the ports of Tema (Ghana) and Lomé (Togo), where goods are under-invoiced (Ministry of Finance and the Economy (2002a)). Benin WT/TPR/S/131 
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The Government’s objectives relate to the need to enhance transparency by preparing and publishing 
economic information and by mana ging public resources in such a way as to ensure responsibility, 
efficiency and control of government spending. In  December 2003, Benin signed the United Nations 
Convention against Corruption. The first study on governance and combating corruption should be 
completed during the first half of 2004. 
 
(3) TRENDS IN TRADE  
Breakdown of trade  
 25. According to the statistics available (Chart I. 1), Benin’s exports are as little diversified as 
they were at the time of the first review of its trade policy and the share of value-added products is 
still negligible. Although global cotton prices have reac hed their lowest level since 1994, cotton is still 
the main export, rising significantly from 46.3 per cent of total exports in 1998 to 65 per cent in 2002. Exports of manufactures still play a minor role despite the textile industry established in Benin 
(Chapter IV(4)). 
26. The breakdown and geographical structure of trade is difficult to circumscribe because of the 
important role played by informal channels and re -export trade. Benin does not appear to have been 
able to take full advantage of the situation caused by the crisis in Côte d’Ivoire, especially as regards 
the re-export of goods arriving in the port of Cotono u and going to landlocked c ountries; this is due to 
the proximity of competitor ports, delays in the por t of Cotonou and “incidental costs” (frequent road 
controls) (Chapter IV(5)(iii)(a)). 
27. As far as destination is concerned, Benin’s ex ports have diversified considerably since the 
first review of its trade policy. Africa and Asia (p articularly India) have become its leading export 
markets, followed by the European Union (Chart I.2). Trade with WAEMU and ECOWAS partners is 
moving ahead slowly (Chart I.3). According to the authorities, Nigeria is still an important customer, 
but the majority of trade is not officially recorded. 
28. The breakdown of imports appears to have cha nged little and food products, fuel, electricity, 
chemicals, and transport machinery and equipment are still at the top of the list (Chart I.1). On the 
whole, the origin of the imports is still the same, with France occupying first place, followed by Asia, 
WAEMU member countries, and Nigeria (Charts I.2 and I.3). 
 WT/TPR/S/131 Trade Policy Review 
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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 
1998 1999 2000 2001 2002 
0% 20% 40% 60% 80% 100% 
1998 1999 2000 2001 2002 Chart I.1  
Breakdown of trade in goods, 1998 - 2002
(a) Exports  
(b) Imports Importations  
Source:  WTO Secretariat calculations, based on data in the UNSD, Comtrade database (ISIC, Rev.3).
Cotton
Other manufactures
Mining
Other agricultural  products
Other
Textiles
Food products 
Transport machinery and equipment  
Chemicals
Agricultural raw materials 
Other
Textiles
Other mining and quarrying products
Electricity  
 Benin WT/TPR/S/131 
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Chart I.2  
Destination and origin of tr ade in goods,  1998 and 2002
1998  2002
Brazil ésil
16.4 
Other American
 pays  countries
1.7
France
19.5
Other EU countries  
17.6 
 Other European 
countries  
3.3 Asia 
19.2 Africa 
21.0 Other countr ies- 
 1.3 
 
India
14.2France 
3.9 Other EU 
countries  
12.1 
Other European
countries
2.6
Other Asian countries 
25.5 Africa
39.3America 
0.9 
America 
8.3 
France
20.7
Other EU countries
25.0 
 Other European 
countries 
3.7 Asia 
20.2 Africa 
20.5 Other 
  countries 
1.6 Percentage  
America 
4.8 
France 
24.0 
Other EU  pays 
 countries 
20.2 Other European
  countries
2.8Asia
20.8Africa
22.4Other
      countries
5.0(b) Origin of imports(a) Destination of exports  
Source:  WTO Secretariat calculations, based on data in the UNSD, Comtrade database (ISIC, Rev.3)  Other
  countries
1.5
 WT/TPR/S/131 Trade Policy Review 
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Chart I.3  
Trend in intra-WAEMU exports, 1999 and 2001  
1999  2001
Note: 
Source:  The data for 2001 for Côte d'Ivoire and Mali are WTO Secretariat estimates.
Ministry of Finance and the Economy.  Niger 
64.3 Togo 
6.5 Senegal  
3.5 Burkina Faso  
10.4 
Côte d'Ivoire
8.1
Mali
7.2
Niger 
45.6 Togo
25.2Senegal
10.6Burkina Faso  
10.0 Côte d'Ivoire
7.6 
Mali
1.0  
 
 
 
(4) OUTLOOK  
29. Despite some efforts at agricultural diversifica tion, the economy still depends to an excessive 
extent on the production of cotton. The economy’s rec overy seems to be well  under way and Benin is 
the only member that meets all the convergence crit eria set by the WAEMU. Nevertheless, the high 
cost of inputs and its energy dependence are an obs tacle to Benin’s industri alization. The rate of 
economic growth is estimated to be 6.4 per cent fo r 2004, while the inflation rate will remain below 
the limit of 3 per cent. The State’s continued withdrawal from economic activities and the reforms 
undertaken in the public sector should make the econom y more dynamic. The impact of the crisis in 
Côte d’Ivoire does not appear to have affected Be nin to the same extent as other countries in the 
subregion.