Benin is one of the 30 or so poorest countries in the world. Gross domestic product (GDP) per capita measured with the purchasing power parity conversion (which makes allowance for the low price of many basic commodities in Benin) was estimated to be US$1,030 for the year 2000. The economy is heavily dependent on agriculture, which employs approximately 80 percent of the population. Crops are grown for export as well as domestic consumption. Industry is relatively underdeveloped and restricted mainly to simple import substitution products and basic agro-industrial processes.
Successive governments have struggled to tighten the country's economic and fiscal performance at the request of the International Monetary Fund (IMF) and the World Bank, while dealing with trade union pay demands. Benin entered agreements with the IMF in 1989 to introduce reforms. Though progress has been slow and is hindered by political infighting, there have been significant changes in the economy as a result of these reforms. In 1991-96 the government privatized or liquidated 100 state enterprises including cement, textiles, brewing, tobacco, and petroleum enterprises. The insurance sector has been liberalized , leading to increased
Monetary policy is controlled by membership of the Union Economique et Monetaire Ouest-Africaine (UEMOA,) and Benin is also a member of the African Franc Zone, which consists of those countries that use the CFA franc for their national currencies. Membership limits government borrowing and credit creation and sets interest rates as well. The UEMOA oversaw a 50 percent devaluation of the CFA franc in 1994, which increased the prices received by producers for exports. Local production recovered, and GDP growth rose to about 5 percent a year in the late 1990s. The other effect of the CFA franc devaluation was that it led to inflation rising to 38 percent in 1994 and 14 percent in 1995. Inflation then fell to 4.9 percent in 1996 and 3.5 percent in 1997. It rose once more in 1998 to 5.7 percent due to wage increases, cereal crop shortages, and the energy crisis caused by the drought in Ghana. Inflation fell again in 1999 to 3 percent.
Agriculture has been the main economic growth sector. Cotton production grew over 300 percent from 1990 to 1997. However, cotton production has been affected adversely by falling prices and management problems. Gasoline production stopped in 1998, but rehabilitation is under way due to the recent rise in world oil prices. In 1998 a drought in Ghana led to a serious setback in economic growth due to interruption of Benin's electricity supply, which caused much industry to close. Electricity supplies returned to normal in 1999.
The U.S. State Department states: "the most daunting obstacle to economic development … is the pervasive and increasing level of corruption throughout society. Corruption impacts virtually all aspects of social, economic, and political life in Benin. Inefficient and un-motivated government bureaucracies, even when not overtly corrupt, also make it extremely difficult for foreign businesses to conduct operations in Benin." The government agreed in 2001 to increase plans to end corruption, but the effect of these measures is not yet clear.