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Benin - Economy

The Beninese economy remains dominated by the agricultural sector, particularly cotton, which directly or indirectly secures the income of a large part of the population and the activity of the port of Cotonou with re-export to neighboring countries, Nigeria, on which it depends largely.

Benin is a member of the West African Economic and Monetary Union (WAEMU) and the Economic Community of West African States (ECOWAS). Beneficiary of the Highly Indebted Poor Countries (HIPC) and Multilateral Debt Relief (MDRI) initiatives, Benin has benefited from large debt cancellations. The budget deficit widened to 8.5% of GDP in 2015. A new program supported by the Extended Credit Facility (ECF) with the IMF is expected to be signed early in the year.

Benin's economy is chiefly based on agriculture. Cotton accounts for 40% of GDP and roughly 80% of official export receipts. There also is production of textiles, palm products, and cocoa. Corn, beans, rice, peanuts, cashews, pineapples, cassava, yams, and other various tubers are grown for local subsistence.

Benin began producing a modest quantity of offshore oil in October 1982. Production ceased in recent years but exploration of new sites is ongoing. A modest fishing fleet provides fish and shrimp for local subsistence and export to Europe. A number of formerly government-owned commercial activities are now privatized, and the government, consistent with its commitments to the International Monetary Fund (IMF) and World Bank, has plans to continue on this path. Smaller businesses are privately owned by Beninese citizens, but some firms are foreign owned, primarily French and Lebanese. The private commercial and agricultural sectors remain the principal contributors to growth.

Since the transition to a democratic government in 1990, Benin has undergone a remarkable economic recovery. A large injection of external investment from both private and public sources has alleviated the economic difficulties of the early 1990s caused by global recession and persistently low commodity prices (although the latter continues to affect the economy). The manufacturing sector is confined to some light industry, which is mainly involved in processing primary products and the production of consumer goods. Benin is dependent on imported electricity, mostly from Ghana, which currently accounts for a significant proportion of the country's imports.

Benin moved in the direction of increased attention toward poverty reduction throughout the 1990s. In an effort to combat Beninís widespread poverty, the government has undertaken a number of programs and projects. In 1994, Benin adopted the national program on the Social Dimensions of Development. This program was to explicitly integrate the social dimensions of development with the macroeconomic and sectoral policies, formulate and implement a poverty reduction action plan identified by full participation of the most vulnerable groups, and periodically monitor the populationís living conditions to get at the root causes of poverty. In 1998, the National Community Development Program was to supplement the Social Dimensions program using an approach that addressed basic needs identified by the beneficiaries themselves.

Benin has several initiatives to attract foreign capital to build electricity generation facilities in Benin in order to break this dependency. The service sector has grown quickly, stimulated by economic liberalization and fiscal reform. Membership of the CFA franc zone offers reasonable currency stability. Benin's trading partners include Germany, Brazil, U.A.E., Spain, the United States, Singapore, India, Netherlands, Japan, and China. Benin also is a member of ECOWAS.

In March 2003, the World Bank and IMF agreed to support a comprehensive debt reduction package for Benin under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. Debt relief under HIPC amounted to approximately $460 million. Benin received $27.1 million in 2002 and received $32.9 million in 2003. HIPC aimed to reduce Benin's debt-to-export ratio, freeing up considerable resources for education, health, and other anti-poverty programs.

Despite its growth, the economy of Benin still remains underdeveloped and dependent on subsistence agriculture, cotton production, and regional trade. Inflation has subsided over the past several years. Real economic growth for 2009 was 2.7% and increased to 3.0% in 2010. Commercial and transport activities, which make up a large part of GDP, are vulnerable to developments in Nigeria, including fuel shortages.

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Page last modified: 20-04-2017 18:43:14 ZULU