The Macroeconomic Policy Response to COVID-19 in Benin

The government of Benin and the BCEAO responded to COVID-19 with expansionary monetary and fiscal policies, including cash transfers, subsidies, and increased liquidity for banks and the agricultural sector. While these measures stimulated aggregate demand and supported food security, the expansion of the money supply led to higher consumer price inflation, which threatened real household incomes. The brief recommends transitioning to contractionary monetary policy during periods of economic growth to curb inflation and better targeting future fiscal spending toward vulnerable households and hard-hit sectors like hospitality and industry to maximize the fiscal multiplier effect.

• The COVID-19 pandemic caused a significant economic contraction in Benin, with the GDP growth rate dropping from 6.9% in 2019 to 3.9% in 2020, before rebounding to 6% in 2021.
• Expansionary monetary policy led to a 14% increase in broad money supply between January 2020 and January 2021, which resulted in the highest Consumer Price Index (CPI) levels seen in five years.
• The government implemented a fiscal stimulus totaling FCFA 244.5 billion ($434.1 million) in 2020, which included FCFA 5.76 billion ($10 million) for direct cash transfers and electricity and water subsidies for citizens.
• Specific support was provided to the hospitality sector, including FCFA 4.1 billion ($7.5 million) to cover electricity bills for hotels and travel agencies for three months, and rent exemptions for travel agencies.
• To maintain food security and stable prices, the government and BCEAO targeted the agricultural sector through a FCFA 30 billion ($55 million) subsidy fund to support a FCFA 100 billion ($185 million) interest-free financing line, as well as subsidized loans at a 2% rate.
• The BCEAO increased banking sector liquidity by adopting a full allotment strategy at a fixed rate of 2.5% and extending the collateral framework to include bank loans for 1,700 prequalified private companies.
• The brief argues that future fiscal policy should target the most vulnerable households to enhance the fiscal multiplier effect, as these households consume a larger proportion of their income on domestic goods, reducing leakages into savings and imports.
• To mitigate the negative impact of prolonged inflation on real incomes and prevent debt defaults, the document recommends implementing contractionary monetary policy during periods of economic growth and high aggregate demand.

APA

South African Institute of International Affairs (2022). The Macroeconomic Policy Response to COVID-19 in Benin. https://saiia.org.za/research/the-macroeconomic-policy-response-to-covid-19-in-benin/

Chicago

South African Institute of International Affairs. The Macroeconomic Policy Response to COVID-19 in Benin. 2022. https://saiia.org.za/research/the-macroeconomic-policy-response-to-covid-19-in-benin/.

Wikipedia

{{cite report |author=South African Institute of International Affairs |title=The Macroeconomic Policy Response to COVID-19 in Benin |date=23 February 2022 |url=https://saiia.org.za/research/the-macroeconomic-policy-response-to-covid-19-in-benin/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{southafricaninstituteofinternationalaffairs2022macroeconomic, author = {{South African Institute of International Affairs}}, title = {{The Macroeconomic Policy Response to COVID-19 in Benin}}, institution = {South African Institute of International Affairs}, year = {2022}, month = feb, url = {https://saiia.org.za/research/the-macroeconomic-policy-response-to-covid-19-in-benin/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }