Budget support donor coordination in Mozambique commenced in the mid-1990’s and was formalised in 2000 with the establishment of the Joint Donor Programme (JDP) for Macro-Financial Support. The number of donor agencies contributing to this program has grown rapidly from an original 6 agencies in 2000 to 15 agencies in 2004 . This agreement has now been superseded by a Memorandum of Understanding (MoU) signed at the end of the 2004 Joint Review (April 5, 2004) that sets out in great detail the procedural arrangements for the budgetary support (and balance of payments support) program.

A significant proportion of development assistance is being provided in the form of direct budget support, currently by fifteen donors, referred to as the G- 15 (i.e., Belgium, Denmark, the European Commission, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Sweden, Switzerland, the United Kingdom and the World Bank). Observing external partners include Canada, Japan, Spain, the United States, the United Nations, the International Monetary Fund, and the African Development Bank. Budget support donors have made significant progress in aligning their assistance with the PARPA and existing government systems. This is evidenced by the Performance Assessment Framework (PAF) process. Over the last year government has been through a rigorous process of internal dialogue to develop the PAF as a prioritized list of annual commitments for delivery of PARPA objectives. Government and donor commitments agreed to in the PAF and reflected in the country’s Annual and Economic Social Plan and the revised MOU, govern overall relationship between budget support donors and the GoM.

This revised MOU (to replace the previous Joint Agreement) governing the budget support joint program sets out the nature of Government-donor partnership, commitments on both sides, aspects of alignment and how donors will respond to performance against the PAF. To avoid the creation of parallel systems which would undermine the drive to enhance domestic accountability, the Government is committed to using the PAF to operationalize the PARPA, develop and improve its existing annual planning, budgeting and monitoring process. The G 15 is committed to using the PAF as the single conditionality framework for budget support and using government monitoring information as the basis for their assessment of performance.

A key requirement of the new MoU is an annual report by PAP’s on their performance against commitments to provide their program aid (direct budget support and balance of payments support) more effectively, predictably and with increased transparency of terms and conditions, amongst other objectives.

A questionnaire was designed to undertake a baseline study on the 2003 levels and the 2004/2005 planned steps for improvement of donor compliance with best practice principles. The Program Aid Partners Performance Assessment (PAPPA) baseline and later reports will build upon existing assessments undertaken in Mozambique, as well as best practice and lessons learnt in the context of the Development Assistance Committee (DAC) and the Strategic Partnership with Africa (SPA). The baseline study will be updated annually in order to monitor the progress of individual PAP’s towards meeting their commitments under the MoU. Progress will be measured in particular in the (i) alignment with Mozambican instruments, processes and systems of financial management; (ii) predictability of donor flows; (iii) transparency of conditions and funding; (iv) harmonization by eliminating bilateral requirements; (v) reduction of transaction costs for the GoM; and (vi) enhancement of the capacity of the GoM to meet its commitments. The PAPPA will include an overview on the cooperation portfolio of the PAPs in Mozambique, the aid modalities applied and changes to be expected in the spirit of this MoU. In particular, on-budget and off-budget flows will be made transparent.

A joint NORAD-SIDA-World Bank CFAA has been completed.

Program Aid Partners (PAPs) commissioned an independent review of donor performance in 2004 against the commitments and indicators set out in the PAPPA matrix, and compared with the 2003 baseline survey. Financial support for the report (completed May 2005) was provided by DFID and the Swiss State Secretariat for Economic Affairs (SECO).

Joint DFID/SIDA Evaluation of Budget Support is in progress for 9 countries (including Mozambique). The work is led by DFID and the literature review has been completed. Final report in the form of a SIDA working paper is expected by December 2005.

Donors in Mozambique have spontaneously developed a culture of dialogue, which has reached a high level of formalization and transparency. Regular exchanges based on a participatory process include all donors active in the country. The UN Resident Coordinator co-chairs the Development Partners Group with the World Bank. The Group meets monthly and allows donors to discuss and resolve issues of common interest.

Tied technical assistance also remains a problem. The high share of the government budget being provided by donors makes donor harmonization, predictability and transparency extremely important. Fourteen bilateral donors, referred to as the G-14, and the World Bank are providing a high proportion of development assistance in the form of direct budget support. Budget support donors work well together and have made significant progress in aligning their assistance with the PARPA and existing government systems. This is evidenced by the Performance Assessment Framework (PAF) process.

In 2004, an MOU between GoM and 14 programmatic support donors (including the WB) was signed. The Group expanded to 18 donors in 2006 and constitutes the G-18 or Program Aid Partners (PAPs). The MOU commits both parties to a mutual accountability process by undertaking annual reviews of Performance Assessment Frameworks (PAFs) for the GoM and the PAPs.

The Government has developed a PRSP, an MTEF, sector policy papers, and annual work programs that are discussed with donors and other stakeholders.

The major issue with regard to timing of donor missions is the current lack of alignment between sectoral reviews (particularly in the SWAP sectors) and the Joint Review. Several sectors, including health, education, roads, water and agriculture, have well-established sector-wide programmes, with their own sector-based evaluation procedures. Actually, the oldest SWAP in Africa is in agriculture in Mozambique (1991). However, the timing of these sectoral reviews seem to be rather arbitrary and designed more for the convenience of the main donor agencies supporting these sectors, rather than being aligned with the sectoral ministries’ own planning and budgeting cycles. Some sectors (e.g. health ) have already begun to review their own dialogue mechanisms in order to seek better alignment with the Joint Review process.

The joint review process also raises questions about the role of the IMF/WB Joint Staff Assessment of Mozambique’s PRS annual report, given that the current ongoing work within the Ministry of Planning and Finance to enhance the quality of the annual Economic and Social Plan (PES) will mean that this document will in future be used as a de facto annual report on progress in the implementation of the PARPA. Both processes would ideally be completely integrated (or at least coincide) since they involve the same government officials presenting and reviewing a very similar range of performance-related indicators.

There are still too few genuine examples of donors undertaking joint missions and joint analytical work, although it has become more common for donors participating in the budget support program to be willing to use the results of evaluation missions undertaken by other agencies as the basis for their own program orientation. In this respect, general economic and social analysis and sectoral reviews undertaken by the World Bank are probably the most commonly used by other donors.

Development agencies in Mozambique delegated responsibility for specific activities in the area of macroeconomic/budget support. Specifically, these agencies agreed to conduct joint program reviews to simplify and harmonize procedures, improve the quality of monitoring and subsequently reduce transaction costs. The cost was shared among the development agencies, but the responsibility for organizing and commissioning consultants was shifted each year to a lead agency.

Also, Ireland has a delegated cooperation agreement in Mozambique.

The CG meeting was held in Paris and was chaired by the World Bank.

Harmonized or semi-harmonized financing schemes have been developed in planning, agriculture (budget support), education, public sector reform, policy research, health and health policy formulation, police academy, water, sanitation, and housing. Progress has been made in all sectors, but in some cases gains have been reversed. Small, carefully designed sector-level technical assistance pooling schemes have been more successful and overall, the lack of local capacity has been a major constraint.

In the education sector, an MoU was signed in 2002 in which some donors have agreed to pool their funding to the sector under a common financing mechanism. In health, an annual joint assessment with common indicators was initiated in 2002 by some donors. Some donors have agreed to a code of conduct on how to move from policy dialogue at the sub-sector level to a full SWAp. This was based on the successes of two pooled funding arrangements at the sub-sector level, for the provision of pharmaceuticals, and the funding of recurrent expenditure at the provincial level. Some donors set up a third common fund for the development of the Health Sector Strategic Plan.

The World Bank has carried out a detailed study of donor procurement and disbursement procedures, and, under the education SWAp, some donors are expected to agree on common NCB thresholds, the use of post review, and common reporting formats. Donors have not agreed on pooled funding because of weaknesses in existing capacity for financial management. However, most donors support a gradual move toward budget support as the Government improves its financial management capacity.

A Poverty and Social Impact Analysis (PSIA) on the impact of school fees in primary school enrolment and retention was completed by the WB in January 2005. Besides the Government, DFID, Ireland, Save the Children, UNICEF, and WFP provided technical support. Financial assistance was received from DFID, and GTZ.

In light of the negative impact of school fees on student enrolment and completion rates in primary education and to promote equitable access to education, the Government abolished primary school fees, effective the 2005 academic year (i.e. mid-January 2005). However, parents and other interested parties could make voluntary contributions (in cash or in kind).