More inclusive growth, along with taxation and spending strategies focused on vulnerable populations, could further reduce poverty and inequality in Benin. This is according to the latest edition of the Benin Economic Outlook report.
The first part of the report titled "Raising Domestic Revenue Mobilization while Protecting the Poor" reviews recent economic developments and presents medium-term prospects for the country. In 2024, Benin experienced its highest economic growth since 1990 at 7.5%, largely due to strong performances in services and industrial sectors. Poverty rates dropped from 33.2% in 2023 to 31% in 2024.
Fiscal consolidation efforts allowed Benin to meet the West African Economic Monetary Union's fiscal deficit target of 3% in 2024 and improve its debt profile. The country is nearing integration into global value chains through the development of the Glo-Djigbé industrial zone (GDIZ). Despite uncertainties in global trade, economic growth is projected to average 7.1% over 2025-2027, with a potential decline in poverty to 22.3% by 2027.
"Continued efforts to mobilize domestic resources and a rebalancing of the composition of debt in favor of domestic debt, in line with medium-term revenue mobilization and debt strategies, should enable Benin to maintain its macroeconomic stability, which is critical for attracting private investment and supporting the ongoing economic transformation," said Mamadou Tanou Baldé, World Bank Economist and Lead author of the report.
The second part emphasizes domestic revenue mobilization while safeguarding vulnerable groups. Simplified tax policies and digitized tax collection processes have enhanced service quality and secured revenue collection. Since 2016, revenue mobilization has shown resilience despite challenges such as border closures, COVID-19 pandemic impacts, rising living costs in 2022, and insecurity issues. Tax revenue increased from 9.2% of GDP in 2016 to 13.2% by 2024.
Despite progress made, Benin still lags behind peers regarding domestic revenue mobilization necessary for financing its development plan. While reducing inequality by three Gini points through its fiscal system, improving it with more targeted taxes could potentially lift over 100,000 people out of poverty annually.
"To improve the situation, Benin should strengthen social safety nets implement more progressive taxation increase social spending more targeted at poorest improve redistributive impact fiscal policies," adds Arthur Alik-Lagrange World Bank Lead Economist co-author report."