22 February 2013

Mozambique: Aid Donors Not Honouring Their Promises

Maputo — Mozambique’s dependence on foreign aid fell sharply in 2012 – but largely because aid donors did not honour their promises.

Cited in Friday’s issue of the independent daily “O Pais”, Finance Minister Manuel Chang said that the 2012 state budget envisaged that 41.4 per cent of expenditure would be financed by foreign grants and loans. But in the event, much of this promised aid did not turn up – the figures are now in, and they show that foreign aid covered just 27 per cent of public expenditure.

It is widely believed that among the key factors in the contraction of foreign aid is the international financial crisis, and the sovereign debt crisis in the euro zone.

Some of this shortfall was compensated for by the state raising more taxes than forecast – nonetheless the end result of broken donor promises was that total expenditure in 2012 was 137.9 billion meticais (about 4.6 billion US dollars, at current exchange rates), rather than the 163 billion meticais planned.

The government was thus forced to save money – and one of the areas cut was debt servicing. According to Chang, speaking on Thursday at a seminar on public expenditure in the southern city of Matola, debt servicing was only 89.2 per cent of what had initially been programmed.

Nonetheless, this was still a real growth of 16.8 per cent in debt payments when compared with 2011.

Chang warned that “although the public debt remains within the parameters of sustainability, we should strengthen our capacity to monitor indebtedness and increase our rigour in contracting new debts”.

The National Director of the Treasury, Maria Isaltina Lucas, spokesperson for the meeting, said there remain serious problems in obtaining full data on the foreign aid component of budgetary execution.

“Some projects are written into the budget while they are still under discussion with donors”, she said, “and the money is disbursed, not in the amounts envisaged, or not in the same financial year”.

Chang also called for a review of the way wages are paid and controlled in the state apparatus. He said he was particularly concerned about overtime payments, and the way in which new workers are recruited for the state.

He added that the state faces a major challenge to increase the provision for key sectors such as education, health, security and public order.

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