Module 12 - Mozambique: Harmonized Donor Funding Around Principles and Coordination

At the end of civil war in 1992, Mozambique was one of the world’s poorest countries. Despite subsequent shocks caused by drought (in 1992/93 and 2003/04) and floods (in 2000 and 2001), the agricultural sector grew by an annual average of 6.8 percent between 1992 and 1997 and 4.6 percent between 1997 and 2003. Rapid growth in the mid-nineties reflected recovery from a very low base. More recent growth has been driven by some increase in food crop yields and by expansion in cash crops such as cotton, sugar, tobacco, and sesame.

These growth levels have been sequentially induced by the return of displaced rural families, sustained liberalization of macroeconomic and sectoral policies, and the gradual entry and expanding operations of new agribusinesses. Periodic flooding and drought constitute large exogenous shock to Mozambique’s economy, but the potentially large fiscal and monetary effects of these shocks were kept under control by government commitment to macroeconomic discipline and sustained generosity on the part of Mozambique’s external partners. As a result of substantial investment in communications infrastructure, liberalized agricultural markets are becoming increasingly integrated at domestic and regional levels. In partnership with private sector and aid partners, the Government of Mozambique is pursuing efforts to promote a better investment climate to improve competitiveness, stimulate domestic investment, and attract foreign investment.

The Mozambique Agricultural Sector Public Expenditure Program, originally a five-year APL project to support the Ministry of Agriculture (MINAG) in implementing the first phase of the National Agricultural Development Program (PROAGRI), has been extended until the end of 2006 to support the transition to Phase II (2006-2010) of the same program. Bank support to PROAGRI II and other rural programs will mainly come from the PRSC series. Originally PROAGRI was supported by some 20 development partners operating under two aid modalities—sector budget support (SWAP) and discrete projects. As the national economic and social situation evolved and public management improved, some partners decided to provide most of their support in the form of general budget support. This modality of aid is the most important for financing the Second Poverty Reduction Plan (PARPA II, 2006-2010), in which PROAGRI II is the agricultural component. The group of donors following the SWAP approach has remained more or less constant, as some development partners initially operating through discrete projects have now adopted the SWAP approach. PROAGRI II will be funded through three aid modalities: (1) sector budget support, (2) general budget support, and (3) discrete projects. Engineering a system to coordinate these three modalities, enhance links with central planning and budget institutions, and reinforce MINAG’s leadership of the program is quite a challenge.