12 December 2012

Mozambique: 2013 Budget Shows Further Reduction in Dependence

Maputo — Mozambique’s dependence on foreign aid is continuing to decline, according to the state budget for 2013, presented to the country’s parliament, the Assembly on the Republic on Wednesday by Finance Minister Manuel Chang.

The budget envisages total state expenditure of 174.96 billion meticais (about 5.87 billion US dollars, at current exchange rates). State revenue from taxation and other domestic sources is estimated at 113.96 billion meticais, leaving a deficit of 61 billion meticais to be covered by foreign grants and loans.

This means that the government expects foreign aid to cover 34.9 per cent of the budget, while 65.1 per cent will be covered by domestic resources.

Some years ago, foreign aid paid for over half of Mozambican public expenditure. Now the figure is declining to just over a third. In the 2012 budget, 39.6 per cent of expenditure was covered by foreign grants and loans. The figure was 44.6 per cent in the 2011 budget, and 51.4 per cent in 2010.

This decline is due in part to budgetary pressures in donor countries, arising from such factors as the sovereign debt crisis in the euro zone.

The data from the last joint annual review between the government and the group of 19 donors and funding agencies that provide direct support to the Mozambican budget indicated that budget support in 2013 will be 15.4 million dollars less than in 2012.

Some donors (such as Belgium, Spain and Switzerland) have not yet confirmed their contributions to the budget for 2013, while Holland has announced that it will end budget support as from 2013 because of concerns over corruption.

There is a much sharper reduction in foreign support for projects – down from 15.5 billion meticais in 2012 to 4.8 billion in 2013. Support for common donor funds (such as PROSAUDE, to support the health ministry), has fallen from 9.5 billion meticais this year to an expected 7.6 billion in 2013. Some areas that were once heavily dependent on foreign aid, notably the National AIDS Council (CNCS), will now receive no foreign funds at all.

However, the World Bank has announced an increase in its finding from 110 million dollars this year to 210 million in 2013. Of this sum 50 million dollars is earmarked for climate change programmes, and a further 50 million for agriculture.

The budget will allow the Mozambican state to recruit 10,700 new workers – a reduction on the 13,000 new state workers recruited this year. Education and justice have been protected – there is room to recruit 8,500 new teachers, and 200 new staff for the justice system, the same as in 2013.

But only 1,500 new health workers can be recruited in 2013, compared with 1,800 in 2012. Every other sector in the public administration can only recruit 500 new staff between them, compared with 2,500 this year.

The current budget, covering the state’s running costs, is set at 98.2 billion meticais, the capital budget at 68.5 billion meticais, and financial operations at 8.3 billion meticais.

In the current budget, just short of 50 per cent will be spent on wages and other staff costs, 18.8 per cent on goods and services, 15.8 per cent on current transfers, 4.8 per cent on subsidies, and 5.7 per cent on debt servicing.

The subsidies item in the budget, Chang explained, covers the deficits of public companies, and the subsidies “on goods and services that are essential to the public” – namely a subsidy on wheat flour to keep the price of bread low, and fuel subsidies for urban passenger transport.

The priority sectors for poverty reduction take up 71.5 per cent of public expenditure, once debt servicing and financial operations have been excluded – which is a substantial increase in the figure of 66.9 per cent in the 2012 budget.

18.6 per cent of the budget will be spent on education (18.2 per cent in the 2012 budget), and 10.3 per cent on health (up from 7.7 per cent in 2012). This is still far short of the 15 per cent for health that African leaders pledged in the Abuja Declaration of 2001.

17.9 per cent of the budget is earmarked for infrastructures (up from 13.7 per cent in 2012). Roads account for 10.7 per cent, public works, including water supply, for 5.9 percent, and electricity and mineral resources for 1.3 per cent.

Agriculture and rural development take 12.6 per cent of the budget (11 per cent in 2012), while governance, security and the judicial system account for 8.3 per cent (up from 7.9 per cent in 2011). The share in the budget of employment and social protection programmes rises from 2.7 to 3.6 per cent.

Chang said “the budgetary space envisaged for the priority sectors seeks to increase investment in strengthening basic socio-economic infrastructures, to increase productivity and competitiveness in agriculture and industry, to strengthen the institutions of legality and justice, and to strengthen social protection”.

These were all “vital factors for stimulating the sustainable, inclusive and broad-based economic growth”, required for poverty reduction.

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