By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE)-The International Monetary Fund (IMF) Wednesday advised the Republic of Benin, West Africa to speedily resolve the issue of its troubled banks as it granted the country $16.1 million extended credit facility (ECF).

This is coming on the heels of a statement by Naoyuki Shinohara, Deputy Managing Director (DMD) and Acting Chair of the Fund at conclusion of the Executive Board’s discussions under the ECF arrangement for Benin.

Shinohara said enhancing the soundness of the financial sector would contribute to economic growth. Therefore, it’s important for Benin Republic authorities   to speed up the resolution of troubled banks, address weaknesses in supervision, and promote easier access to bank credit.

He affirmed that the country’s economic outlook is generally positive, but subject to internal and external risks arising from heavy dependence on weather conditions and vulnerability to trade policy decisions in Nigeria because an estimated 80 percent (80%) of Benin’s imports are informally re-exported to Nigeria.

“Accelerated structural reforms are needed to turn the positive 2012 growth outcome into a sustainable trend and to reach the growth rates necessary to reduce poverty in a country with the population growing at 3.5 percent a year. In line with the Poverty Reduction Strategy Paper update currently under preparation, the authorities are rightly focusing on increasing infrastructure investment crucial for accelerating growth. Thanks to prudent fiscal policies, Benin’s debt level offers some fiscal space to increase investment. To ensure that the rise in spending delivers results, the quality of spending would also need to be improved further,” Shinohara said.

According to Shinohara, Benin’s macroeconomic performance under the ECF arrangement continues to be strong and growth has been higher than expected because of the recovery in commerce and agriculture, and inflation has returned to below 3%. “The government has addressed its structural reform backlog. Several long-delayed structural benchmarks under the ECF have been implemented, including the use of the taxpayer identification number at customs,” he said.

The IMF DMD further affirmed that the Benin Republic authorities remain committed to prudent fiscal policies which will be complemented by reforms to strengthen the revenue base. “In particular, customs reform will be revamped by replacing the overreliance on external customs operators by a new approach that aims at developing customs administration’s own capacity. Over the medium-term, the dependency on customs revenues should be reduced by strengthening the domestic revenue base,” Shinohara said.

The IMF chief said accelerated structural reforms are needed to turn the positive 2012 growth outcome into a sustainable trend and to reach the growth rates necessary to reduce poverty in a country with the population growing at 3.5% a year.

“In line with the Poverty Reduction Strategy Paper update currently under preparation, the authorities are rightly focusing on increasing infrastructure investment crucial for accelerating growth. Thanks to prudent fiscal policies, Benin’s debt level offers some fiscal space to increase investment. To ensure that the rise in spending delivers results, the quality of spending would also need to be improved further,” Shinohara affirmed.

The disbursement of the $16.1 million will bring the total disbursements under the arrangement to the equivalent of SDR 63.67 million (about US$96.8 million).

The IMF said in completing the review, the board also approved a request for an extension of the arrangement, which was set to expire in September 2013, through April 2014 to allow for a rephasing of the final disbursement and associated review.  “The extension will allow time to implement the authorities’ new customs reform agenda,” the IMF said.