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Aissatou Diallo
Many Sub-Saharan African (SSA) countries, like Benin, have scaled up public investment during the last decade. Such a strategy contributed to the improvement of infrastructure, but also to a build-up of debt vulnerabilities. Looking forward, the planned fiscal consolidation will result in some restraint of public spending, and, in particular, public investment. In this context, maintaining or even raising the region’s economic growth will require an offset by the private sector. The analysis draws lessons from countries that have successfully transitioned from public investment to private investment-led growth using a global sample starting in the mid-1980s. These lessons highlight policies that have been crucial in fostering a rebound of private investment in the wake of a contraction of public investment. The analytical framework proposed by Hausman, Rodrik and Velasco (2005) is used to identify and classify such policies. Finally, the paper analyses how the identified policies could help Benin achieving a smooth transition from public to private sector-led growth.
International Monetary Fund. African Dept.

High Potential Activities F. Lesson 5: Use Tax Incentives Sparingly G. Conclusion FIGURES 1. Distribution of Annual Changes in Public and Private Investment 2. Typology of Policies Supporting Private Investment TABLES 1. Summary of the Expansionary Fiscal Consolidation Literature 2. Episodes of Successful Transitions from Public to Private Investment Led Growth References ANNEXES I. Robustness Analysis II. Policies Implemented During the Episodes TAX REVENUE MOBILIZATION IN BENIN: LESSONS FROM SUCCESSFUL EXPERIENCES IN LIDCS

Aissatou Diallo

gains in the case of a successful transition V. POLICIES IMPLEMENTED IN SUCCESSFUL TRANSITIONS A. Typology of Policies Used in the Paper B. Main Lessons VI. CONCLUSION FIGURES 1. Evolution of debt and public investment 2. Distribution of Annual Changes in Public Investment 3. Typology of Policies Supporting Private Investment TABLES 1. Summary of Criteria Used in the Expansionary Fiscal Consolidation Literature 2. Episodes of Successful Transitions from Public to Private Investment Led Growth 3. Selection of Episodes Using Alternative Criteria

International Monetary Fund. African Dept.

2–3 years leading to an economic recovery over 2–3 years. Table 1. Summary of the Expansionary Fiscal Consolidation Literature References Magnitude of the Consolidation Duration of the Consolidation Test Period to Assess Success 1 “Budgetary Consolidation in Europe: Quality, Economic Conditions, and Persistence” (Von Hagen, Hallett and Strauch, 2002) 2.5 percent 2 years 2 years “Tales of Fiscal Adjustments” ( Alesina and Ardagna, 1998 ) 3 percent 2 years 2 years “European Commission Directorate-General for

Aissatou Diallo

recovery over 2–3 years. Our conditions of ‘’successful transition’’ are inspired by the criteria used in the literature on successful fiscal consolidation insofar as they are ad hoc and broadly in line with the latter. However, we use a less restrictive change in private investment (5 years) to include more low-income developing countries and frontier economies into the sample. Table 1. Summary of Criteria Used in the Expansionary Fiscal Consolidation Literature References Magnitude of the Consolidation Duration of the Consolidation Test Period

International Monetary Fund. African Dept.
This Selected Issues paper discusses a growth-at-risk (GaR) model which is used to compute a distribution of expected GDP growth for Benin. The model predicts growth rates of ~6.7 percent for 2019 and a range of 6.4–6.8 percent in the medium-term (depending on the specification). Risks to future growth are assessed to be tilted to the downside. 2019 GDP growth is estimated around 6.7 percent, on average, across several specifications. The model considers external factors (world trade, global financial conditions, trade policy uncertainty, and US consumer sentiment), country-specific exposures to external factors (commodity terms of trade and trade-partner growth), and domestic factors (domestic financial conditions, fiscal policy, and the exchange rate). The analysis reveals that growth projections estimated both for the median and mode are slightly higher conditioned on 2018 data, yet when expectations about 2019 are considered using World Economic Outlook projections they fall. Overall, risks seem to be tilted to the downside. Medium term growth is estimated at between 6.4 and 6.8 percent. Risks to growth remain tilted to the downside, yet less skewed than in the short term.