Mozambique experience on aid effectiveness

BACKGROUND

The Mozambican government has been putting in place policies and strategies aimed to promote economic growth, reduce poverty and reach Millennium Development Goals. Over the last 17 years the country has embarked on structural adjustment programmes to reinvigorate the economy and reduce poverty. Development partners have been instrumental in providing resources to finance government development efforts given that internal resources are insufficient to respond to growing needs. Thus, Mozambique has been an aid dependent country for a long time. Over the last years overseas development assistance has remained strong constituting 29 per cent of gross domestic product in 2000 and 16 per cent in 2005. In absolute terms grants and loans to Mozambique excluding IMF (International Monetary Fund) and highly indebted poor countries grants amounted to $724million and $926million for 2000 and 2005, respectively (GMD 2007). In 2007, aid covered more than 50 per cent of the state budget.

Despite this level of development assistance flow and impressive economic growth averaging 8 per cent over the last 5 years, Mozambique continues to be highly dependent on foreign aid. Moreover, 54 per cent of the population still lives in absolute poverty meaning that the government will continue to seek external assistance to pursue its development agenda in line with its five year development plan, poverty reduction strategy programme/plan of action for the reduction of absolute poverty (PRSP/PARPA) and MDGs. Hence, Mozambique needs to engage its development partners in a permanent dialogue to improve the quality of aid in line with the present aid effectiveness agenda.

AID EFFECTIVENESS

The ultimate goal of aid is to support governments in their efforts towards the development of countries, institutions and the people. Looking at aid flow overtime and development indicators one can conclude that the achievements have been lower than desired. It is within this context that donors, governments, civil society organisations and other development actors started seeking ways to make aid more effective. Several gatherings have been taking place with the view to defining strategies and actions to promote aid effectiveness. The Monterrey consensus of 2002, the Amsterdam high level meeting, the first high level forum on aid harmonisation held in Rome in 2003 and the second high level forum held in Paris in 2005 all made commitments related to aid effectiveness, in which donors and partner countries shared responsibilities in making aid work. In particular the Paris declaration set five guiding principles to monitor the course of actions to be undertaken by donors and partner countries namely:

(1) Ownership: partner countries exercise effective leadership over development policies and strategies and coordinate development outcomes;

(2) alignment: donors base their overall support on partner countries’ national development strategies, institutions and procedures;

(3) harmonisation: donors’ actions are more harmonised, transparent and collectively effective;

(4) managing for results: managing resources and improving decision-making for results and;

(5) mutual accountability: donors and partner countries are accountable for development results (high level forum, 2005 ‘Paris declaration on aid effectiveness’.)

It is against this background that this paper seeks to explore the Mozambique experience on aid effectiveness in terms of mutual accountability and donors’ alignment to national programmes and harmonisation and assess the implementation of policies to advance the country’s and peoples’ agenda setting regarding the delivery of aid.

OWNERSHIP OF DEVELOPMENT PROCESSES

Ownership implies that partner countries exercise effective leadership over development policies and strategies and coordinate development outcomes. It means that governments play a leading role in the definition of the development agenda and strategies, ensuring the participation of all stakeholders, namely civil society, private sector, the parliament and the public at large and taking responsibility for development outcomes.

In Mozambique the development agenda has been spelled out through different instruments:

(1) agenda 2025: a long-term vision that sets development objectives for a 25 year horizon. It was formulated by a group of counsellors composed of reputable citizens from different political parties, private sector, academia and civil society;

(2) the government five year plan which is inspired by the agenda 2025 and sets development objectives and strategies for five years. This plan is formulated by the government with the participation of government officials;

(3) PRSP/PARPA: a medium term plan that sets objectives and strategies for poverty reduction over a five year period; and;

(4) medium term expenditure framework: a fundamental tool for the construction of plans and macroeconomic frameworks for short and long-term, aims to indicate the amount of financial resources needed to implement activities over a three year horizon, to respond to policies defined within the five year plan and PARPA.

The implementation of the five-year plan and PRSP is done through annual plans termed plano económico e social (economic and social plans) and their monitoring is ensured by Balanço do plano económico e eocial.

By definition, PRSP is formulated in a participatory manner involving all stakeholders ranging from government officials to civil society organisations, private sector, individual citizens and donors. From a simple consultation in the first PRSP, the second generation was characterised by increased civil society and private sector participation in the planning process as well as in the production of contents, excluding the macroeconomic framework. A similar structure was created at the provincial level to allow for more citizen participation in this exercise. Parliamentarians, though, did not take part in the process.

Although the PRSP exercise is considered satisfactory, it faced some constraints that require due attention. Unlike donors that have policy experts, both government and civil society organisations faced capacity challenges in terms of human resources and/or expertise to meet the needs of this complex exercise. This has resulted in external influence to the process. The formulation of medium term expenditure framework with its subordination to macroeconomic framework set by the IMF leaves little room for the government to expand its budget to respond to felt national needs. On the other hand, the fact that the government has to comply with commitments set within multilateral and bilateral agreements make national programmes underpinned to external agendas. Thus, there is a need to strengthen the capacity of national actors to promote a true ownership and reduce the conditions that undermine national leadership. On the other hand, parliamentarians should exercise an oversight role in the definition of development agendas to safeguard national interests.

DONORS ALIGNMENT TO NATIONAL PROGRAMMES

According to the Paris declaration, donors should base their overall support on partner countries’ national development strategies, institutions and procedures. In Mozambique donors have been channelling their resources through different mechanisms implying different types of alignment with their respective conditionalities. These are general budget support, sector wider approach and project support. Through the general budget support mechanism donors channel their resources to the state budget. To coordinate their activities regarding the delivery of aid through general budget support and sector wider approaches, development partners came together to constitute parceiros de apoio programático (partners for programmatic support), presently composed of 19 bilateral and multilateral donors. This is indeed a space where these development partners seek to join efforts to honour their commitment to support the national agenda in a transparent manner.

It is estimated that 30 per cent of total partners for programmatic support portfolio representing 80 per cent of the overall aid flow to the country goes to direct budget support, the rest being channelled to sector programmes through sector wider approaches (GMD 2007). Direct budget support funds are aligned to national programmes as their allocation depends on government priorities. However, some conditionalities are attached to them in the sense that access to these funds relies on broad agreements and acknowledgement that appropriate development policies are in place. For all direct support funds the government uses its own systems to allocate funds to different projects and programmes and implement related activities.

Since 2004 the conditionalities have been expressed in terms of memorandum of understanding through performance assessment framework in which the government and its development partners commit to underlying principles for the delivery and use of aid. Thus, the government commits to peace and democratic political processes, the rule of law and human rights, good governance and probity in public life, combating poverty in line with PARPA and sound macroeconomic policies. Development partners on other hand commit to: alignment on government systems, predicable funding, transparent conditions, harmonisation and capacity building.

Sector wide approaches consist of sector budget support and common basket funds in which partners for programmatic support and non-partners for programmatic support participate. Different conditions and procedures as well as transaction costs are associated with these funds. Whereas in the sector budget support there is no interference in terms of definition of priorities and external auditing, in common basket funds there is a significant rigidity in both. In Mozambique five main sector wide approaches can be identified namely for education (FASE) funded by seven donors with $57million commitment for 2007; health (PROSAUDE) supported by 14 donors with $120million committed for 2007; agriculture (PROAGRI) funded by seven donors with $30million committed for 2007; HIV/Aids with $12million committed for 2007 and public finances (UTRAFE) with $8million committed for 2007(GMD 2007). An example of common basket funding is the funds for drugs and medicine estimated at $14million for 2004.

Partners for programmatic support memorandum of understanding are playing an important role in the alignment of aid for both direct budget support and sector wide approaches because it has also been influencing donors through sector memorandum of understanding to base their priorities on PARPA, promote transparency and plan and execute capacity enhancement. As a result, the agriculture and education sector have new and improved memorandum of understanding and for the health sector a new memorandum of understanding is in preparation.

Off budgets constitute a big proportion of aid in Mozambique. Although the real extent of the funding is unknown, it was estimated that more than 30 per cent of external funding for 2003 was off budget. This affects the efficient and effective government role in planning, budgeting and executing this proportion of aid. On the other hand, the endless processes for complying with a variety of donors’ procedures rise transaction costs and bring a burden to government capacity.

An independent evaluation carried out to monitor partners for programmatic support performance for 2006 showed that donors are using the public management systems and are also increasing their overall budget support, although it remains below the target level.

Despite the improvements stated above, some constraints still face the delivery of aid in Mozambique: lack of common understanding about the meaning of quality of aid, ideal amounts to be allocated to different sectors and the role of the government. On the other hand, there is a high proportion of off budgets. There is also weak coordination, which is reflected in the high portion of sector aid as opposed to direct budget support. In addition, there is a big concentration of donors in few sectors such as education and health and overlaps due mainly by the donors’ rules and policies from their own countries and constituencies as well the nature of the sector. Moreover, sectors requiring big amounts of resources do not attract funding from small donors. Bureaucracy from donor countries is also a factor that makes aid ineffective, as they have to go through lengthy procedures before disbursing the funds. Finally, technical assistance that is not demand driven and therefore not aligned to national priorities and the requirement of co-funding of ten to 15 per cent of project costs reduce the impact of aid by increasing the cost of aid with non priority cost and delays in the disbursement of funds when the government is unable to present its share in project costs and therefore, being penalised for non compliance with commitments.

HARMONISATION OF DONORS’ PROCEDURES

Within the Paris declaration principles harmonisation means that donors’ actions are more harmonised, transparent and collectively effective to ensure that transaction costs are kept at acceptable levels and that the burden of multiple reporting is reduced. To this end, in 2000 the partners for programmatic support came up with a formal coordination framework designated joint donor programme for macro financial support. In 2004 this mechanism was replaced by a memorandum of understanding between the partners for programmatic support and the government of Mozambique in which they outlined commitments for the improvement of quality and effectiveness of programme aid and built a partnership based assistance approach under the poverty reduction strategy. One of the immediate partners for programmatic support goals and condition for signing the memorandum of understanding was the improvement of direct budget support. In addition, the partners for programmatic support committed themselves to work in six areas namely align assistance to government policies and systems, reduce transaction costs, increase predictability of aid flows, eradicate bilateral conditionality, promote transparency and enhance government’s capacity. Monitoring was to be implemented through the performance assessment framework mentioned in the previous section.

Despite these commitments there are still major constraints regarding donor harmonisation: single practices and procedures, sometimes including less consensual indicators; bureaucracy in the process of funds disbursements, single and independent evaluations, etc. Examples of these practices are World Bank’s reluctance to use government procurement in some of its programmes and the millennium challenge account individual practices. These behaviours bring serious strain to government capacity and can discourage other donors currently committed with harmonisation procedures and conditionality reform. In addition, failure to meet those differentiated indicators can result in the interruption of funding. Another constraint is the reluctance of some donors to support value added tax on aid in kind. Whereas United Nations Development Programme is currently paying this expense other donors like the African Development Bank and the European Commission do not.

MUTUAL ACCOUNTABILITY

Mutual accountability means that donors and partner countries are accountable for development results. To meet this objective, they clearly define their roles and responsibilities and install a system through which an evaluation of performance is carried out. As mentioned in the previous section, the Mozambican government and the partners for programmatic support designed a performance assessment framework that monitor progress in the implementation of the poverty reduction strategy programme against the commitments made in the memorandum of understanding. The performance assessment framework defined by donors and the government is based on the matrix of indicators that are part and parcel of PARPA. The government and partners for programmatic support also created two important spaces for dialogue and mutual accountability: the joint review and the development observatory.

Joint review is an exercise carried out twice a year (April and September) to monitor progress towards compliance with commitments set out in the memorandum of understanding. The April joint review makes an evaluation of the implementation of the economic and social plan and determines the allocation of resources by donors according to their satisfaction with government performance. The September joint review discusses donors’ pledges to the state budget. This space was originally for donors and the government but since 2007 it was expanded to include civil society.

Development observatory is a forum in which the government, donors and civil society organisations meet to evaluate progress made regarding the implementation of PARPA and takes place once a year. This forum has also been replicated in the provinces and it is supposed to bring subsidies to the national development observatory and joint reviews. To take advantage of this space, civil society organisations have produced annual reports reflecting citizens and civil society organisations perceptions about government’s performance towards poverty reduction and what they can or have done to contribute to such efforts. These reports and their respective recommendations are presented at development observatory for consideration.

While the joint review is a decisive forum in terms of donors’ aid commitments, the development observatory is a dialogue platform without binding consequences regarding the decisions made that are seen more as recommendations.

Overall there is a positive evaluation regarding the creation and pertinence of these two spaces because they allow for a systematic monitoring of both government and donors’ performance within the framework of commitments set out in the memorandum of understanding. Joint review in particular can be seen as a platform where the government and civil society can influence the agenda for aid delivery. However, there are also some constraints and challenges facing the effective use of these spaces.

1. Whereas lack of government compliance with its commitments result in cuts in disbursements, there is no mechanism to force donors to comply with theirs;

2. Performance assessment framework indicators are quantitative and do not reflect civil society concerns with qualitative evaluations;

3. The realisation of development observatory is not aligned with the joint review and planning cycle at central and provincial levels. Joint review being a decision-making point regarding funding, this should be preceded by both provincial and national development observatory and these should take into account the planning cycle at district, provincial and central levels, to accommodate input from these levels;

4. Government lacks adequate capacity (human and technical) to cope with the joint review exercise, which requires qualified people to be active in different working groups;

5. There is a power imbalance between donors and government in this process, with the government in a weaker position;

6. There is no clear definition of civil society role in the joint review and no feedback mechanism on its recommendations to the development observatory;

7. Civil society does not participate in the true negotiation forum under joint review in which heads of cooperation and high level government officials make decisions around aid issues;

8. The government is more accountable to donors than to its people;

In addition, the government has been strengthening its internal systems: introduction of medium term expenditure framework, roll out of e-SISTAFE – an electronic system for the management of public finances, improvement of the procurement system and setting up of anti-corruption units.

Despite these achievements the government has to improve its capacity at central, provincial and district levels, especially regarding costing of its activities and monitoring; strengthen coordination of activities among ministries; improve governance regarding the rule of law and use of public goods; improve democracy and further reduce poverty through equitable distribution of income, reduction of regional disparities and provision of support to national entrepreneurs. Above all, the Mozambican people have to set their genuine development agenda in an inclusive manner on which all aid efforts should go.

CONCLUSION

Mozambique has been an aid dependent country for a long time, which poses some constraints in terms of the definition of its own development agenda. Some conditionalities attached to aid have reduced its impact making the government less accountable to its people and by excluding some segments of the populations that aid is supposed to serve.

In order to reverse this situation, the Mozambican government and its development partners have been putting in place some mechanisms and procedures to make aid more effective. The establishment of partners for programmatic support forum and formulation of memorandum of understanding and performance assessment framework, the creation of joint reviews and development observatories are all efforts aimed at improving the effectiveness of aid.

As a result of these efforts donors have been trying to improve their performance through increased alignment of their aid to national programmes, using some government procedures and systems, taking steps to harmonise their procedures and engaging in mutual accountability exercise. On its part, the government has been putting in place improved systems and procedures to manage public resources, ensure good governance and combat poverty.

Despite these positive actions, some challenges still face both government and donors to make aid more effective. National programmes are still influenced by external agendas weakening the government leadership role. Although with a decreasing trend, donors still put money where they have vested interest not necessarily where government priorities are. Donors are also using their own procedures and systems for part of their funding resulting in high transaction costs and strained government capacity. The government on the other hand needs to further improve its capacity for coordination and planning and institute more reliable systems and procedures. It also needs to further improve governance and reduce poverty.

The space created by joint review and development observatory should be better utilised to making it a truly democratic arena in which the government and civil society can influence the aid agenda while ensuring equal accountability criteria for both government and donors. The government should also use this space to get leverage from civil society and other national actors for better dialogue and negotiation with donors.

Finally, the government, donors and civil society organisations should reflect on whether aid is being channelled to a development agenda that truly reflects the development needs of the people of Mozambique and if aid effectiveness efforts are being directed towards the right development path.

* Marta Luis Cumbi is the Director for Cooperation and Advocacy at the Foundation for Community Development in Mozambique. She is a member of governing boards of the Mozambican Debt Gorup, Mozambican Education Network, Forum for African Women Educationalists - Mozambique chapter, Southern African Network against Child Abuse and G20 (a national civil society platform advocating for poverty erradication). She is also a vice coordinator of SADC National Commission for Human Development and Special Programmes Committee. She is a board member of CIVICUS and FAWE Prominent Educationalist.

* This article is an extract from a longer paper which will be included as a chapter in the forthcoming "African Perspectives on Aid in Africa" book published by AFRODAD and Fahamu.

* Please send comments to [email protected] or comment online at http://www.pambazuka.org/

REFERENCES:

AFRODAD (2007) ‘Critical assessment of aid management and donor harmonisation, the case of Mozambique’

GMD (2007) ‘Aid delivery and country’s progress, the case of Mozambique’ High Level Forum (2005) ‘The Paris declaration on aid effectiveness’

República de Moçambique (2007) ‘Balanço do plano económico e social 2006’ República de Moçambique (2006) ‘Plano de acção para a redução da pobreza absoluta’

Republic of Mozambique and IMF (2007) ‘Letter of intent, memorandum of economic and financial policies and technical memorandum of understanding’