As part of a new initiative launched by the United Nations Development Programme (UNDP) to extend sovereign credit ratings to sub-Saharan African countries, Benin has been assigned by UNDPs partner Standard and Poors a B-plus long-term and B short-term sovereign credit ratings. The outlook looks stable.
– Through this project, UNDP intends to support countries in their efforts to mobilize resources from private capital markets, which are required to secure accelerated rates of economic growth and reduce poverty, said UNDP Associate Administrator Zephirin Diabre, adding:
– We hope that better access to financing would help Benin and other developing countries to tackle a broad range of poverty alleviation issues and provide an incentive to achieve the Millennium Development Goals.
Per capita Gross Domestic Product (GDP) is estimated at a low 539 dollars in 2003. Moreover, Benin is highly reliant on the export of a single commodity, cotton, and the re-export trade with oil-rich Nigeria, Africas most populous nation.
Weak human development indicators, infrastructure deficiencies, slow reforms, and the lack of a defined industrial strategy constrain economic development prospects.
Government deficits averaging a low 0,5 percent of GDP over 1999-2003 are projected to remain below 2 percent of GDP over the medium term. In addition, Benin reached the Heavily Indebted Poor Countries (HIPC) completion point in April 2003, paving the way for a reduced external debt burden.
After HIPC debt reductions, the government debt burden is estimated at 38,4 percent of GDP in 2003. Government interest payments are also low, at 4,1 percent of revenues in 2003, as most external debt is owed to official creditors and on concessional terms.
– The ratings on Benin are supported by a prudent fiscal stance and debt reduction under the HIPC debt initiative, as well as the countrys membership of the West African Economic and Monetary Union (WAEMU), said Standard and Poors credit analyst Mame-Fatou Diagne.
Standard and Poors analysts noted however that the ratings could be undermined in the event of external shocks; such as a sharp fall in cotton prices, or a deterioration of relations with Nigeria negatively affecting trade. The ratings would also come under pressure in the event of fiscal laxity.
Benin is the third country to receive a rating under the UNDP initiative. In September, Ghana became the first country to be assigned a B-plus long-term foreign currency sovereign credit rating under the initiative.
Cameroon was the second country to receive a B long-term and B short-term sovereign credit ratings in November. More sub-Saharan African countries are expected to receive ratings in 2004.
UNDP is on the ground in 166 countries, working with them on their own solutions to global and national development challenges. As they develop local capacity, they draw on the people of UNDP and our wide range of partners.
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