Donors Promise 379 Million Dollars in Budget Support

1 June 2011

Maputo — 16 of the 19 donors and funding agencies who provide direct support to the Mozambican state budget have promised 379 million US dollars in this form of aid for 2012.

The pledges were delivered to Finance Minister Manuel Chang at a ceremony in Maputo on Tuesday.

Three donors – Germany, Holland and Norway – have been unable to announce their commitments for 2012, since these are awaiting ministerial or parliamentary approval. But if these remain at the same level as this year, then total budget support for 2012 will reach 452 million dollars – somewhat higher than the 2011 figure of 448 million dollars.

This group of donors is known as the Programme Aid Partners (PAPs) or the G-19. They consist of the World Bank, the African Development Bank, the European Commission, 13 individual European Union members, Canada, Norway and Switzerland.

Of the 16 who announced their commitments on Tuesday, 10 pledged exactly the same sum as in 2010. The European Commission increased its commitment from 50 million to 50.625 million euros, while five other donors (Austria, Denmark, Ireland, Switzerland and Sweden) announced a reduction in budget support.

The sharpest reduction is from one of the minor donors, Austria, which cut its support from 3.2 to 2.5 million euros, a reduction of 25 per cent. The Swiss contribution falls by 22 per cent from 4.5 to 3.5 million Swiss francs, while Ireland reduced its support by 18 per cent, from 11 to nine million euros – perhaps not surprising given the financial turmoil that has hit Ireland.

The Swedish reduction is 6.3 per cent – from 315 to 295 million Swedish crowns – while Denmark reduces its contribution by 6.1 per cent – from 65 to 61 million Danish crowns.

The major contributors to budget support remain the World Bank (85 million dollars), Britain (48 million pounds – equivalent to 76 million dollars), and the European Commission (50.6 million euros, equivalent to 68.4 million dollars). These three partners account for over 60 per cent of the 379 million dollars promised so far.

Pledges for Programme Sector Support rose sharply, from 262.9 million dollars this year to 309.6 million dollars for 2012, an increase of 17 per cent. This is money earmarked for the common funds that support programmes in various social and economic areas.

The largest beneficiary is the Education Support Fund (FASE) – aid from the G-19 rises from 84.6 to 115.9 million dollars. Similarly, contributions to the common fund for health, Prosaude, rise from 75.4 million dollars this year to 111.9 million in 2012. However, a question mark hangs over this fund – the outgoing G-19 chairperson, British High Commissioner Sean Cleary, pointed out that the donors’ contribution will depend on solving questions arising from the latest audit of the Health Ministry.

Taking the budget support and the sector programme support together, and assuming that Germany, Norway and Holland maintain the same level of support as last year, the total programme aid from the G-19 for 2012 will be 760 million dollars (at the current exchange rates of the euro, and the other currencies in which aid is denominated, against the dollar).

The pledges follow the annual joint review of performance between the government and the G-19, which ended on 19 May, and concluded that the government is making sufficient progress to allow the donors to continue with general budget support.

But there are concerns among the G-19 at the slow pace of poverty reduction, and at continuing problems of governance and corruption.

Cleary told the Tuesday ceremony that “budget support can only be justified on the basis of results. It is very important to show results to the Mozambican people, and to our peoples, and show that public funds are being used in an efficient and effective manner”.

“A rapid and substantial reduction in poverty will require more efforts in the future”, stressed Cleary. “More efforts in increasing agricultural productivity, in job creation and in improving the business environment are essential to guarantee inclusive and sustainable growth”.

He also wanted to see “very rapid advances in such important areas as good political and economic governance and the fight against corruption”.

Cleary assured Chang that the government “can count on our support in the implementation of its anti-poverty programme”. Furthermore, the fact that programme aid is increasing, despite the financial pressures faced by most G-19 members “proves the strength and depth of our relationship”.

Chang agreed – the fact that the G-19, in the face of an international financial crisis, had decided to maintain, and even increase, their aid to Mozambique showed how solid the relationship was.

He promised that the budget support would be used to carry out the government’s new Poverty Reduction Action Plan (PARP) – at the heart of this plan were such matters as raising agricultural productivity, creating new jobs, good governance and macro-economic stability.

Chang said that the predictability of aid was “fundamental in planning and budgeting in the fight against poverty”, and he praised the G-19 for keeping to the agreed schedule for aid disbursements.

Despite some tension between government and donors in early 2010 arising from the 2009 general elections (and often referred to as a “donor strike”), in the end all the budget support pledged for 2010 had been disbursed. This year, said Chang, the aid is flowing normally.

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