1 Government-Donor Relationship Presentation to Prpmoting Mutual Accountability in Aid Relationship, Dar-es-Salaam November 2005 República de Moçambique

2 Tópicos Program Aid Partners (PAPs) Historical Background Memorandum of Understanding Objectives Government Commitments Dialogue and Monitoring Process Response Mechanisms PAPs Commitments Government, PAPs and Civil Society Relationship with MTFF planning Contents

3 Program Aid Direct Budget Support Support to Balance of Payments The two types of funding directly to State Budget PAPs (= G17) = World Bank, European commission, 15 bilateral donors/partners Program Aid Partners (PAPs)

4 Historical Background 1980s/90s: Program Support (Stabilization and Structural Adjustment Program) 2000: First Joint Program (G6) (Like minded donors) 2001: IFIs and Bilateral Partners endorse the PRSP (PARPA ) 2003: ‘PAF Principles’ Report (G14) 2004: Memorandum of Understanding GoM and PAPs (G-15) (MoU) (now 17 becoming 18)

5 MoU: Objectives Poverty Reduction Support evolution, implementation and monitoring of PRSP/PARPA Partnership with open dialogue On contents and progress on the poverty reduction strategy through the policy documents submitted to Parliament (PARPA, MTFF, PES, OE)

6 MoU: Objectives Aid Effectiveness and country ownership Reduce transaction costs to country and technical staff Efficient resource allocation on public spending Predictability of external resources to the Budget Improve efficiency in Public Administration Improve monitoring and evaluation processes Strengthen internal accountability

7 MoU: Government Commitments Basic Principles Peace, democracy, rule of law, human rights, good governance, fight against corruption Commitments to reduce poverty and sound macroeconomic policies PES Matrices (Reduced Number of Indicators) Outcomes related to MDGs Cross cutting reforms

8 MoU: Dialogue and Monitoring Dialogue and Monitoring Processes Follow the Planning and Budgeting cycle as well as Government Reports Joint Reviews (GoM and PAPs) Annual Review (April/May) Evaluate Performance in year n-1 (BdPES, RTEO) Mid Year Review (September) Plans for year n+1 (MTFF, PES, OE)

9 MoU: Response Mechanism Performance in year n-1 affects disbursements in year n+1 Several Modalities: One tranche; or combinations of fixed and variable tranches Exceptions: WB: performance in year n-1 affects disbursements in year n Sweden and Swiss: performance in year n affects the variable tranche for year n+1 Commitments can not be changed after August 31 (except if violation of basic principles )

10 MoU: PAPs Commitments Align with national (Mozambican) policy documents, processes and monitoring schemes Improve predictability of funds and disbursements Transparency on the conditionalities Improve donor harmonization Reduce administrative burden (missions and reports) Strengthen Government capabilities

11 GoM, PAPs and Civil Society This process should strengthen internal accountability, because the dialogue with internal stakeholders is still weak Civil Society views at the Poverty Observatory should be a contribution to the Joint Review Transparency and accountability of PAPs (PAP matrix) Open space to support Civil Society in general to perform its role

12 Relationship with MTFF Planning Some figures will clarify the role of external partners External Resources account for “more” than 50% of public sector resources Grants represent around 63% of total external resources Direct Budget support (grants and Loans) around 33-35% of total external resources Direct Budget support represents 17-18% of total expenditures

13 Relationship with MTFF Planning Any financial exercise requires some assumptions on foreign resources and lots of negotiations with external (bilateral and multilateral) partners Some of the PAPs start to have a 3 year horizon for flows commitments (WB, EC, and some bilateral) MoU emphasizes the use of government planning and budgeting cycle

14 Relationship with MTFF Planning: The Practice The Joint Reviews are important moments to discuss policies and indicators within the priority areas of government action for the following 3 years. The methodology is as follows: Steering Committee, 5 Thematic Groups and 20 Technical Teams Thematic Groups and their composition: Poverty Related Issues: Growth and Macroeconomic Stability; Poverty; Monitoring and Evaluation

15 Relationship with MTFF Planning: The Practice Thematic Groups and their composition (cont.): Public Finance Management: Taxation and Fiscal Reforms; Planning, Budget, Budget Execution and Auditing; Procurement; SISTAFE Governance: Public Sector Reform, Decentralization; Legal Reform Private Sector Development: Financial Sector; Business Environment; Agriculture and Rural Development; Environment; Telecom. and Transports; Roads; Energy Service Delivery: HIV/AIDS; Health; Education; Water and Sanitation

16 Relationship with MTFF Planning: The Practice Technical Teams report to Thematic Groups, and these to Steering Committee First Stage: Backward Looking Second Stage: Forward Looking Third Stage: Aid Memoire and related documentation (Matrix of selected indicators of PES) NOTE: Before the Joint Review generally IMF Mission to “clear” on macro issues: growth, inflation, exchange rates, fiscal, monetary, and external side (BoP)

17 Relationship with MTFF Planning: Final Remarks The Joint Review is a moment that puts together a lot of specialists both from GoM and external partners to discuss policies and indicators for the priority areas of government action. Its format helps a structured and organized way for discussion and in particular for cross-cutting issues. The exercise allows timely and focused discussions on activities, outputs, and major challenges for Mozambique. Technical Teams help think about the “right” things and the need for more internal (within GoM) inter-sectoral coordination in policy design. External partners have more technical and qualified staff than GoM (they always outweigh the GoM in number of personnel)

18 Relationship with MTFF Planning: Final Remarks Danger 1: More accountability to external partners than to Parliament and Civil Society Danger 2: Being 17, external partners can “gang” up together if some “breach” of trust occurs, and disbursements stop Problem: the period of discussions is still relatively long, administrative burden to GoM due to scarcity of skilled staff within the public sector institutions Being at the early stages, need still to adjust discussions with planning and budget cycles to strengthen domestic institutions in the policy dialogue But, it should be understood as a process: confidence building and trust, capacity building including better negotiation capacity, and improve instutional arrangements.

19 Thank You Very Much! República de Moçambique