The Programme aid Partnership in Mozambique

The Mozambican government defines the reduction of absolute poverty as the key priority for its mandate. The strategy to attain this goal is enshrined in the Action Plan for the Reduction of Absolute Poverty - II (PARPA II), which reflects the Government's 5 year plan.

The commitment of the Mozambican government to adopting and effectively implementing a series of well articulated policies aimed at poverty reduction is supported by international development aid partners. Making aid effective is one of the strategic goals advocated in the context of the global partnership for development, under the Millennium Development Goals (MDGs). One way to do this is by setting up mechanisms to coordinate aid to the national development programmes of the beneficiary countries by their bilateral partners and multilateral organisations such as the World Bank, the European Union, the African Development Bank and others.

The Programme Aid Partnership (PAP) has been established in Mozambique along these lines. It is a coordination scheme involving 18 cooperation partners who provide direct support to the Mozambican state budget. The Government of Mozambique and the Programme Aid Partners (PAPs) signed a Memorandum of Understanding in 2004, which sets out the principles for this partnership and defines commitments to improve the quality of the Programme Aid.

The partners are the African Development Bank (ADB), Belgium , Canada , Denmark , European Commission, Finland , France , Germany , Holland , Ireland , Italy , Norway , Portugal , Spain , Sweden , Switzerland , United Kingdom , World Bank and Austria. United States of America and United Nations recently joined as Associate Members in 2009.

The state budget is at the heart of the budget support programme, with pledges amounting to USD 471 million in 2009. This is one of the largest joint programmes in Africa , both in terms of amounts and the number of partners involved.

The overall objective of the PAP is to ensure funding to the public sector for poverty reduction, clearly and transparently linked to performance.

This multi-donor budget support system is a sophisticated and innovative process which is already seen as an example to be replicated in other African countries and beyond.

What is the objective of providing budget support to the Government of Mozambique?

Many of the things that need to be done to achieve the MDGs (such as improvements to education and health services) depend on public spending, which is managed through the government budget. The objective of providing aid directly to the budget of Mozambique is to increase the resources available for public spending and thus to contribute to the success in the struggle against poverty.

Another key aspect of working with the budget is that it provides an important avenue for dialogue between government and donors on development policies and public spending choices. In other words, general budget support allows for a dialogue that is more focused on key policy priorities in stead of highly repetitive and fragmented dialogue processes with individual donors. The transfer of financial resources alone does not automatically generate policy, institutional and governance improvements: appropriate technical assistance and policy dialogue are also needed.

Some of the benefits of budget support are medium term, rather than immediate. These include increased allocative efficiency and lower transaction costs for the government and the donors, though in the short term the assessment, monitoring and dialogue still may be a heavy burden to key players in the Government of Mozambique.

Some benefits are even longer term, such as more effective local institutions and stronger domestic accountability.

This approach led to increased concern to provide assistance that: enhances government ownership of the reform programme and its accountability to its own people; develops sustainable capacity; provides transparency and predictability of resource flows; and is provided in a way that maximises value for money and minimises transaction costs.

Donors have the responsibility to align their procedures in order to reduce transaction costs and they have to provide predictable support within an agreed time frame, minimising and making clear any conditions under which their support might be modified or withdrawn.

On the other hand, government has the responsibility to improve public financial management, take control of the process, develop medium term planning instruments, match ownership with improved accountability to their own citizens, guarantee the timely availability of all documentation and establish an agreed disbursement schedule.

How do PAPs work?

The procedural and financial arrangements of the PAP are formalised in the MoU. The MoU was prepared in the spirit of mutual accountability between the signatories. It systematically clarifies the performance and reporting commitments of the Government of Mozambique (GoM) as well as the PAPs. While the GoM is accountable based on the terms of its performance assessment framework, the PAPs have also signed up to a number of specific commitments concerning how they will provide programme aid in future. These obligations are an effort to effectively implement the concerns of the Rome Declaration on Harmonisation at the country level.

Monitoring and dialogue processes follow an annual review process aligned with GoM's planning, budgeting and monitoring cycle. Monitoring and dialogue processes use:

- Planning documents including the PARPA, PES (and PAF), CFMP and OE, as well as other information, reports and documentation relevant to these programmes and budgets, especially on macroeconomic and poverty reduction developments.

- Monitoring documents including Balanço do PES (half year and year), Budget Execution Reports, the General State Account and annual audit reports (including the Administrative Tribunal Report on the General State Account and the quarterly reports on the flow of counterpart funds), an annual report on public financial management assessment and other reports agreed upon by GoM and PAPs.

All formal performance assessments are undertaken jointly by GoM and PAPs and not bilaterally (except when PAP legislation requires a national or institutional audit authority to undertake their own assessment of PAP operations, in which case the PAP will inform other PAPs and GoM, undertake a joint process where possible, share results and pursue any concerns through the mechanisms of this MoU).

There are two joint GoM-PAP reviews on Programme Aid: the annual review (following the production of the Balanço de PES) and a mid-year review (prior to submission of the PES and OE to Parliament). The annual review is focused on coming to a joint view on performance, which serves as the basis for commitments. The mid-year review focuses on dialogue on forward planning and budgeting and agreement on the PAF. The joint view on performance may include divergent opinions, where these are acceptable to all signatories. In the exceptional case where a joint view cannot be reached, following increasingly higher-level dialogue, views will be reported separately.

In addition, PAPs have elaborated terms of reference which define the organisation structure and responsibilities at different levels in order to support effectively GoM's poverty reduction strategy.