Fitch affirms Benin’s ’B+’ rating, highlights robust growth and proactive debt management

Investing.com -- Fitch Ratings has reaffirmed Benin’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ’B+’ and maintains a Stable Outlook. The affirmation is based on the country’s strong growth outlook, fueled by structural reforms and a commitment to fiscal deficit reduction.

Benin’s robust growth, expected to remain above 6.5% through 2026, is driven by increased production in agriculture and construction, as well as the expansion of agroindustry and textiles. Public investments in large infrastructure projects and structural reforms contribute to the positive GDP growth outlook. Despite external shocks, such as the border closure with Niger and economic volatility in Nigeria, the economy has proven resilient.

The country is making gradual progress in diversifying its economy and export receipts. Key projects include the expansion of the Port of Cotonou, aiming to establish it as a regional hub, and the Glo-Djigbé industrial zone, contributing to a shift towards higher value-added products. The first phase of the industrial zone is fully operational, with the second phase under development, enhancing prospects for job creation and private investments.

Fiscal consolidation continues in Benin. The fiscal deficit narrowed to 3% of GDP, from 5.5% in 2022 and 4.1% in 2023, reflecting increased revenue and lower current expenditure. Fitch projects the fiscal deficit will stabilize at 2.9% of GDP in 2025-2026, as further increases in revenue will finance social expenditure.

In January 2025, Benin issued a $500 million 16-year Eurobond, using half of the proceeds to buy back part of its 2032 Eurobond. This move, along with similar liability management exercises in 2021 and 2024, has reduced short- to medium-term amortizations due, lowering Benin’s financial need to 6.3% of GDP in 2026 from 8.5% in 2023.

Benin’s public debt is projected to decline from 53.6% in 2024 to 51% of GDP in 2026, slightly below the ’B’ median of 54%. The country’s debt structure remains favorable, with 60% of its end-2024 external debt stock being concessional, contributing to a weighted average interest rate of less than 3.50%.

The current account deficit (CAD) is forecasted to narrow from 6.3% of GDP in 2024 to 5.1% as stronger agricultural proceeds and export diversification increased export receipts and the import needs of capital-intensive projects reduced.

Political tensions may increase ahead of the presidential election in April 2026. A revision of the electoral law in March 2024 could reduce opposition participation in the election. However, governance, as measured by the World Bank Governance Indicators (WBGI), has improved in recent years.

Despite these challenges, Benin’s ’B+’ rating reflects a strong growth outlook, supported by a record of structural reforms and proactive debt management. The country’s commitment to fiscal discipline and the resilience of its economy to external shocks underscore the stable outlook.

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