Dutch aid minister Lilianne Ploumen has suspended the government’s development agreement with Benin because of suspected fraud.

Research has shown €4m in Dutch aid cash earmarked for the ministry of water has disappeared, the minister told MPs on Wednesday.

In addition, money has been spent on projects which were not part of the agreement and a number of start-up companies have been given large sums of money, Ploumen said.

The decision to suspend the agreement was not taken lightly, Ploumen said, adding that fraud is unacceptable.

‘The Netherlands would like to offer the people of Benin a better future by carrying out effective programmes,’ she said in a statement. ‘But if it transpires that government institutions are seriously failing, then we have to take steps.’

It is now up to Benin to carry out independent research into what has happened to the money in order to restore the relationship with the Netherlands, she said.

The Netherlands is the biggest single donor to Benin in terms of water aid, the foreign affairs ministry said.