Aid and Budget Transparency in Mozambique¹

Transparent budget processes are critical in democratic societies and citizens have the right to know where and how their resources are being invested. In Mozambique, where nearly half of the budget is financed by external aid, aid transparency becomes an important factor in supporting this democratic process. This short study looks at some of the constraints faced by governments (in preparing and implementing the budget), by the parliament (in their oversight role) and by civil society (in monitoring the budget process) related to lack of transparency of aid and the budget.

Aid transparency

External donors contributed some US$1.6 billion in aid to the Government of Mozambique in 2009. These donors have all committed to making aid more effective by adhering to the Paris Declaration on Aid Effectiveness (2005) and to the Accra Agenda for Action (2008). However information about how much money is available, how it is being spent and what are the results of that aid are still poor.

Mozambique has made some progress in recording information about aid flows through the establishment of an online database called ODAMOZ (www.odamoz.org.mz) where donors record regularly how much money they have committed to spend or have spent on individual projects. This database however has been undermined by two things. Firstly, not all of the data is uniformly or correctly entered, making the picture inaccurate and secondly, the database is not yet linked to the government electronic state financial administration system (E-SISTAFE). This latter problem however should be addressed with the launch of the new version of ODAMOZ in May 2010.

Poor information affects in particular the health sector where aid is extremely fragmented in different projects. It is hard to budget without a clear idea of how much money will be available and aid commitments are not always delivered upon. The Global Fund, which is the largest donor to the health sector, in 2007 for example only disbursed 54% of its aid during the last month of the year, making it impossible to spend in that year. The United Nations practice of designing transversal programmes in various sectors, including health, makes it hard for the Ministry to know how much money is available.

When aid is reflected in the budget and in national financial management systems, it is easier to plan for and monitor. Yet nearly half of all aid money coming to the government does not use government budgetary execution, reporting or procurement procedures and two-thirds does not use government audit procedures. This makes it all but impossible for the government, parliament or civil society to monitor clearly how this money is being spent. The United States was the largest donor to Mozambique in 2009 but not one dollar of this money was channelled through Mozambican systems. The African Development Bank, the World Bank and Portugal also bypass national systems to a considerable extent.

Finally lack of predictability about aid in the future makes budgetary planning difficult. The only two donors to have rolling future commitments to Mozambique are the British and Dutch governments.

Budget transparency

The government has made efforts to improve the public financial management system through the introduction of the Single Treasury Account, but the planning and monitoring of the budget still lacks sufficient parliamentary and citizen engagement and oversight for a democratic country. As one interviewee said "the budget process is exclusively the governments and others hardly take advantage of the windows of opportunity for participation." While some of the explanation for this can be attributed to lack of capacity on the part of for example parliamentarians and civil society organisations, there are still transparency gaps which need to be improved.

The budget planning process is hindered by the fact that the budget is delinked from the planning process (Economic and Social Plan) and is not based on the budgetary ceilings that are defined in the Medium Term Expenditure Framework.

The key document for budgetary reporting is the State General Account; however a key limitation is that there is nearly a two year delay in publishing this report. Legally this report should be presented to the parliament within 8 months, which does not happen. And while it is shared with the donors, it is not made available in sufficient time to the public. The Administrative Court has recommended that a number of inconsistencies and opaque areas (e.g transfers to public companies, sectoral own revenue) in the report are clarified but these issues have still not been addressed. The Administrative Court have recently committed to making this report available in a simplified version of the general public which would be an improvement.

At the local level, the problem of lack of access to information is particularly acute, where interviewees cited a number of problems they encountered including intimidation and lack of collaboration of local authorities, lack of publication of information about local taxes and public officials reluctant to share information.

The weight of aid in the budget contributes to the fact that there is more energy invested in the government - donor joint review process, where results are measured against donor agreed performance frameworks, than in facilitating parliamentary or citizen oversight.

Key recommendations:

The study recommends that a number of actions be taken by the government, parliament, donors and civil society to improve the budget process through increased transparency. Donors need to provide more timely information about predictable aid and channel more of their aid through government systems. The government should publish revenue reports and make the Economic and Social Plans the basis of the State Budget which should in turn be clearly linked to the mediumterm expenditure framework.

Civil society and the parliament both need to increase their monitoring and oversight role. Parliamentarians need to take a more proactive role in demanding accountability and transparency from the government and donors, and in demanding transparency and effectiveness in the districts that they are linked to. Civil society organisations could increase their capacity to engage in budget monitoring by focusing on a few strategic areas.

1. This is a summary of a study commissioned by the Informal Governance Group (a group of international NGOs working on governance and aid effectiveness issues in Mozambique) and the Alliance 2015