13 June 2014

Mozambique: UK Ends Direct Budget Support to Mozambique

Maputo — The British government has stopped giving general budget support to Mozambique, the British High Commissioner in Maputo, Joanna Kuenssberg, confirmed on Friday.

She told reporters that Britain had donated over a billion US dollars to Mozambique over the past decade, not including contributions via multilateral bodies such as the World Bank and the European Union, but would no longer be making direct contributions to the state budget.

Koenssberg said that the decision to end budget support did not mean that Britain is “abandoning Mozambique”. There would instead be new forms of aid, tied to indicators on good governance.

Elaborating on this theme at a reception, marking the official birthday of Queen Elizabeth II, Koenssberg said “the contexts of change in Mozambique and in the United Kingdom have led us to revise our focus.

We are changing our stress to areas intended to promote inclusive economic growth, such as employment and skills, sustainable agriculture and the empowerment of women in partnership with the Mozambican government”.

“We are developing a new mechanism for financial aid and are moving away from general budget support”, she said.

“This new financing”, Koenssberg continued, “will be clearly linked to the delivery of the policies and actions necessary for inclusive economic growth: for example, strengthening public financial management, the fight against corruption, and improving the investment climate”.

A source in the British government's Department for International Development (DFID) said this was not directly related to last year's issue of 850 million US dollars worth of bonds issued by the newly formed Mozambican Tuna Company (EMATUM), and guaranteed by the Mozambican government.

The EMATUM bond guarantee took donors by surprise. Prior to September 2013, it had never been mentioned, and such a large guarantee was a flagrant violation of the 2013 budget law,

The EMATUM scandal led Britain to suspend disbursements of budget support in the last quarter of 2013, although the funds were eventually provided.

The DFID source added that, regardless of EMATUM, the five year (2009-2013) budget support programme was coming to an end.

Nonetheless, she added, EMATUM “brought to the fore questions of fiscal transparency and how the government takes investment decisions”.

Discussions are still under way as to what will replace budget support, and the exact indicators that will be used. The British and Mozambican authorities are still in discussions over this.

But it is already clear that there will be an overall reduction in British aid to Mozambique. General budget support from Britain was 71.1 million US dollars in 2012 and 65.5 million dollars this year. The DFID source told AIM that support via the new mechanism in 2015 will be lower than this.

The change will come as a blow to the Mozambican authorities who have long insisted that direct budget support is the most efficient and effective means of delivering aid. Britain was one of the largest providers of budget support - in recent years only the World Bank and the European Union have provided more aid than Britain to the Mozambican budget.

Mozambique is one of several countries which have received direct budget support from Britain. The DFID source said these were being looked at on a “country by country basis”.

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