Benin's Booming Economy Spurs Poverty Reduction, Needs Inclusive Fiscal Reforms

Benin is riding a wave of economic success, with 2024 marking its fastest growth rate since 1990, as outlined in the latest Benin Economic Outlook released by the World Bank. Titled Raising Domestic Revenue Mobilization While Protecting the Poor, the report highlights a 7.5% economic growth rate in 2024 — driven largely by robust performance in services and industrial sectors, including export-oriented manufacturing, logistics, and telecoms.

This remarkable growth has translated into tangible social progress, with poverty dropping by 2.2 percentage points, from 33.2% in 2023 to 31% in 2024. While the trend is encouraging, the report cautions that more inclusive taxation, better-targeted public spending, and reinforced social safety nets are vital to ensuring that Benin’s economic success is broadly shared and sustainable.

Macroeconomic Stability and Industrial Growth Drive Transformation

According to the report’s lead author, Mamadou Tanou Baldé, a World Bank economist, Benin’s fiscal and macroeconomic discipline has yielded dividends. The country successfully met the West African Economic and Monetary Union (WAEMU) fiscal deficit ceiling of 3% in 2024, a target last achieved nearly a decade ago. This was made possible through fiscal consolidation efforts, prudent public spending, and increased domestic revenue collection.

Benin also managed to improve its debt profile, partly by rebalancing towards domestic borrowing, in line with its Medium-Term Revenue Mobilization Strategy and Debt Management Framework. These developments provide a stable platform for increased private sector investment, particularly in infrastructure and industrialization.

One of the standout catalysts for economic diversification is the Glo-Djigbé Industrial Zone (GDIZ). Positioned as a gateway for Benin’s integration into global value chains, GDIZ is already attracting textile, agribusiness, and pharmaceutical investors. This industrial zone is expected to play a central role in job creation and regional exports, further reducing poverty.

Poverty Expected to Decline to 22.3% by 2027

The World Bank projects that economic growth will average 7.1% from 2025 to 2027, bolstered by the continuing expansion of manufacturing and improvements in trade facilitation, despite regional trade uncertainties and global market volatility.

If current trends continue, Benin could see its poverty rate decline further to 22.3% by 2027, marking a nearly 11 percentage point drop in just four years — a feat rarely matched in the West African region.

Tax Reforms and Revenue Mobilization: Strong Gains but Room for Improvement

The second section of the report provides an in-depth analysis of Benin’s domestic revenue mobilization strategy. Since 2016, the country has demonstrated resilience in revenue collection, despite facing external shocks like border closures, the COVID-19 pandemic, inflationary pressures in 2022, and regional insecurity.

Key reforms include:

• Simplification of tax policies

• Digitization of tax collection systems

• Improved compliance and service quality in tax administration

These measures have resulted in tax revenue rising from 9.2% of GDP in 2016 to 13.2% in 2024, a 4% increase over eight years. However, Benin still lags behind regional peers, and a larger tax base is essential to funding its ambitious development goals, especially as external aid becomes more constrained.

Protecting the Poor: Inequality and Social Spending

While Benin’s fiscal system currently reduces inequality by an estimated 3 Gini points, the report argues that more equitable fiscal tools could do much more.

“A more progressive tax structure, paired with targeted social transfers, could lift over 100,000 people out of poverty annually,” said Arthur Alik-Lagrange, World Bank Lead Economist and co-author of the report.

Current challenges include:

• Low coverage of existing social safety nets

• Limited redistributive impact of general subsidies and non-targeted spending

• Inefficiencies in public investment and delivery systems

Key Recommendations for a More Inclusive Growth Path

To achieve inclusive and sustainable development, the World Bank recommends that Benin:

1. Expand and better target social safety nets to cover the most vulnerable populations.

2. Introduce more progressive taxation, such as property taxes and luxury consumption taxes, to ensure fairer contribution from high-income groups.

3. Enhance the efficiency of public spending, particularly in education, health, and rural development.

4. Deepen financial sector reforms to improve access to credit for small and informal businesses.

5. Invest in human capital, especially through basic services and skills development aligned with industrial needs.

A Balancing Act for the Future

Benin’s economic outlook is undoubtedly positive, but maintaining this momentum requires balancing fiscal prudence with inclusive growth strategies. The nation’s ability to mobilize domestic resources while protecting its poorest citizens will determine whether its growth trajectory translates into broad-based prosperity.

As the country moves towards deeper industrialization and global trade integration, the spotlight will remain on whether revenue, equity, and opportunity grow in tandem — ensuring no one is left behind in Benin’s economic transformation.