## 1mozea2019004 ## Source details **Canonical URL:** [1mozea2019004](https://www.imf.org/-/media/files/publications/cr/2019/1mozea2019004.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2019/1mozea2019004.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2019/1mozea2019004.pdf.json) --- ### Executive summary — context, scale, and shocks - Governance and corruption vulnerabilities are described as macro-critical for Mozambique’s economy. - Estimated costs of corruption during 2002 to 2014: up to USD 4.9 billion (approximately 30 percent of the 2014 GDP). - Spring 2016 debt disclosure: - Two SOE loans (Proindicus and MAM) valued at approximately USD 1.1 billion. - Several other smaller bilateral loans USD 0.3 billion. - Total disclosed USD 1.4 billion, equivalent to approximately 11 percent of the 2015 GDP. - Additional disclosure: 0.85 billion of a third state-owned company, Ematum, was discovered at the beginning of 2014. - Shocks intensifying governance weaknesses: fall in commodity prices, drought, withdrawal of donor budget support, Tropical Cyclones Idai and Kenneth. ### Progress and reforms undertaken - Over the last 15 years: comprehensive legislative and institutional framework adopted addressing administration of justice, business regulation, AML/CFT, SOEs, and the financial sector. - Specific measures and actions: - December 2017: action plan prepared to strengthen governance, transparency, and accountability (not formally adopted and made public). - Fiscal risk mitigation: approval/implementation of a 2017 decree on issuance of debt and guarantees; approval of a new law on state-owned enterprises; 2018 Decree to regulate other public entities; creation of a fiscal risks unit. - Bank of Mozambique (BM): revising central bank organic law; revising banking law for crisis management and resolution; strengthening supervisory capacity; anti–money laundering/terrorist financing efforts. - Anti-corruption: ERDAP 2016-19 adopted; commercial sections in courts instituted; insolvency administrator legal regime on calendar for first half of 2019; digitization and centralization plans; overhauled SOE legal framework. ### Remaining weaknesses and vulnerabilities - Enforcement gaps: framework not consistently or comprehensively enforced; rule of law undermined by insufficient implementation and missing regulations/guidelines. - Market regulation: excessive complexity and opaqueness. - AML/CFT: tools not effectively mobilized for anti-corruption, weaknesses in monitoring transactions related to politically exposed persons (PEPs) and real property transactions. - Fiscal governance shortcomings: - Fragmented and incomplete oversight of SOEs and public institutions. - Public investment management lacks procedural discipline. - Debt management is weak and lacks transparency. - Treasury management inefficiencies and weak controls. - Central bank governance: insufficient autonomy and absence of an oversight body to check executive functions. - Institutional fragmentation: overlapping mandates and diffusion of accountability. ### Implementation challenges and priorities - Key constraints: - Insufficient budgetary resources; need for more training and capacity development for complex corruption investigations and financial transactions. - Need for credible, consistent, and effective implementation of existing laws. - Need to enhance external institutional oversight of public expenditure. - Address information silos and access barriers to reduce opaqueness and conflicts of interest. - Transparency priorities: - Evenhanded implementation of the 2014 Right to Information Law. - Increased disclosure of beneficial ownership, extractive contracts, and fiscal reporting. - Greater transparency of laws and sanctions to improve predictability and business environment. - Stakeholder roles: government to lead reforms; civil society, private sector, and development partners critical; transnational governance issues require regional and global cooperation. ### Debt disclosures and institutional context - The three SOEs: Ematum (tuna fishing), Proindicus (maritime protection), and MAM (shipyard construction) were created shortly before loans executed and headed by the same CEO (senior security services officer at the time). - Government prepared an action plan after debt disclosures; several reforms undertaken while others underway. - Donor assistance provided across governance areas but no central coordination mechanism for donor efforts. ### Public perceptions and comparative indicators - WGI (2017): deterioration over past 10 years for all six dimensions; control of corruption declined since 2010. - Afrobarometer (2015): 48 percent said corruption increased over the last year. - Perceptions: police, taxes, and local governments identified as highly corrupt; Maputo (city and province), Niassa, and Zambézia perceived as higher incidence areas. - Demographics: 45 percent of the population is under 15 years old. ### Fiscal, PFM, and AML/CFT diagnostic findings - PEFA and IMF assessments: significant vulnerabilities despite progress. - FATF/ESAAMLG: 2004 FATF standard assessment (2009) found Mozambique noncompliant with most recommendations; only four recommendations partially met. - TADAT (2015) and DeMPA (2008 and 2017): mixed results with many D/D+ ratings in debt management, taxpayer information, arrears monitoring, and other core processes. ### Company registry, digitization, and beneficial ownership - Current state: company registry not fully electronic, not centralized, and held at provincial level. - Planned actions: - Digitize registry; tackle historical records as resources permit; integrate with national databases ultimately. - Incorporate beneficial ownership information into the company registry (work ongoing; linked to AML/CFT measures). - Expected benefits: improved cross-checking by law enforcement and tax authorities; better CSO monitoring; access for agencies such as GIFiM. ### AML/CFT framework — deficiencies and planned improvements - Legal/assessment timeline: - Law No. 14/2013 passed to address 2011 MER deficiencies. - ESAAMLG onsite mutual evaluation in September 2018; assessment under new FATF standard with onsite visit in late 2019 and mutual evaluation discussion in August 2020. - Key deficiencies: - Lack of effective supervision of DNFBPs; lack of enforceable PEP identification requirements; gaps in national ML/TF risk identification; lack of beneficial ownership transparency; mutual legal assistance and asset forfeiture gaps. - GIFiM priorities: - Complete National Risk Assessment by end-2019. - Corruption identified as the fifth most common predicate offense. - Real property and insurance sectors particularly vulnerable. - Cabinet to prioritize implementing regulations for GIFiM’s organic law; guidelines for reporting by real property and insurance agents to be published. - GIFiM seeks to join the Egmont Group; Council of Ministers to prioritize request. - GIFiM needs additional resources including compliance officers and analysts. ### Public financial management, IFMIS, and control framework - PFM pillars and status: - Reforms produced SISTAFE Law, e-SISTAFE IFMIS, and Treasury Single Account (CUT); Strategic Plan for Public Finances 2016-2019 supports these. - IFMIS covers planning/budgeting, budget execution, and reporting; rolled out extensively including district level. - Fiscal reports classified in accordance with international standards (FTE, 2015). - Majority (80 percent of more) of central government cash balances managed through TSA and reconciled daily via e-SISTAFE; substantial funds remain outside TSA (district services, small amounts of tax, externally financed projects) (PEFA, 2015). - Priorities to reduce corruption vulnerabilities: - Openness of public procurement; surveillance and transparency of SOEs; regulatory framework and transparency for public-sector debt; restore sound budget execution (chain of expenditure); implement formalized control framework by IGF. ### Public debt management and SOE legal/regulatory reforms - Public sector debt: total public sector debt in nominal terms reached about 110 percent of GDP in 2018. - Decree 77/2017 amendments planned to clarify contracting and guaranteeing of public debt, delegation powers (Article 9(2)), ex-post ratification procedure (Article 12), and to resolve legal uncertainty vis-à-vis higher-ranking laws (Article 30). - Planned powers for Minister responsible for finance to oversee SOE/subnational borrowing and guarantees. - SOE law/decree amendments planned: - Clarify oversight agency purpose and functions; define MEF responsibilities for monitoring SOE debt contracting; include fit and proper requirements for SOE board selection; clarify applicability to enterprises with exclusive or majority state shareholding. ### Budget execution, control framework, and arrears risks - Current practice: weekly cash releases to UGBs with no recording/monitoring of commitments at obligation time; commitment, verification, and payment phases recorded simultaneously in e-SISTAFE conflicting with SISTAFE Law’s three-stage process. - Risks: vulnerabilities to arrears, mismanagement, corruption; suppliers may demand payment before delivery; reputational deterioration. - Measures to restore chain of expenditure: - Budget department to set quarterly commitment ceilings for spending agencies. - Issue decree/admin order to mandate real-time recording of commitment/verification in e-SISTAFE and require attachment of e-SISTAFE commitment note for each purchase. - Publish decree, run communication campaign to suppliers, and train managers. - Involve internal control and internal audit in assessments. - Note: restoring normal chain of expenditure requires no new IFMIS development per IMF TA reports. ### Fiscal reporting and transparency commitments - Current reporting: quarterly fiscal reports (REO) published 45 days after period; General State Accounts (CGE) published annually after Assembly approval; Administrative Tribunal to issue report/opinion on CGE by November 30 following reference year. - Gaps: incomplete institutional coverage; arrears and state-owned shares not fully reported. - Commitments: publish yearly fiscal risk statement; continue improving transparency and publication of key fiscal reports. ### Extractive sector governance actions - Importance: LNG expected to contribute upwards of several billions of dollars in future revenues. - Oversight: MIREME with Institute of Energy, INAMI, and INP. - Licensing and transparency actions: - Flexicadastre online registry implemented with public access. - Commit to publish all mining contracts and license-related information; seek to publish contracts signed prior to Mining Law adoption. - For bidding: publish evaluation criteria, final bids, ratings, and ensure independent verification online. - Make licensing application process fully electronic as resources permit. - Require reporting and publication of beneficial ownership in license applications; commit to EITI beneficial ownership requirements and public registry. - Undertake updated IMF Fiscal Transparency Evaluation including Pillar IV. ### Public procurement and public investment management — weaknesses and immediate actions - Procurement weaknesses: - Over 50 percent of total public acquisitions procured by direct bidding (2015 PEFA). - End-2017 UFSA statistics: only a third of central and provincial procurement awarded through open tendering. - Complaint mechanisms inefficient; weak capacity in spending agencies. - Reforms: - Development of public procurement and asset management module in e-SISTAFE (MPE) including e-procurement to record appraisal to awards. - Immediate actions: - Adopt legal framework making appraisal mandatory for capital expenditure above a determined threshold. - Publish CCSPP decisions and summary minutes. - Publish manual on project identification/formulation/assessment and quarterly procurement statistics distinguishing open competitive tenders vs. direct awarding. ### Surveillance, transparency, and governance of SOEs - Non-financial public sector characterized as vast, complex, and vulnerable. - Planned actions: - Conduct comprehensive census/audit of government shares in private companies using IMF GFSM 2014 definition of SOEs. - Publish lists of private companies with public-sector shareholders and disclose government share, capital stock, liabilities, and key financial performance indicators for government-controlled companies. - For minority-share cases, publish company name and share held by government. ### Financial sector oversight and central bank governance - Banking sector structure and trends: - Number of banks nearly doubled from 10 to 19 between 2005 and 2017. - Branch networks increased from 218 in 2005 to 659 in 2017. - Four largest (all foreign-owned) hold almost 80 percent of loans and deposits. - 4.9 million bank accounts active in 2017, held by about 33 percent of the adult population. - Vulnerabilities: - NPLs rose to 13.4 percent in August 2018 (from 5.7 percent in 2016). - Main vulnerabilities: sovereign risk exposure, government and SOE arrears to suppliers, slow economic recovery, high real interest rates. - Reform priorities: - New regulations to increase capital and liquidity requirements; stronger supervision and enforcement. - Separate onsite and off-site supervisory functions; enhance supervisory tools and data analytics. - Modernize safety net and crisis management framework via banking law, central bank law, bank liquidation law, deposit insurance fund law, corporate insolvency law, and capital market law reforms. - Revised banking law to include crisis management framework, resolution powers, recovery/resolution planning, and administrative bank liquidation framework. - Strengthen licensing/suitability and fit and proper requirements, corporate governance, and capital reserves. ### Anti‑corruption legal and institutional framework - Legal framework: - Initial anti-corruption law in 2004; 2012 PLAC package (revised Criminal Code, Criminal Procedures Code, Witness Protection Law, Public Probity Law). - Institutions: - Central Public Ethics Commission (CPEC) established by Public Probity Law (2012) to address conflicts of interest; nine part‑time members serving three-year terms. - Administrative Tribunal: ex-ante examination of procurement contracts. - Public Prosecutor’s Office (PGR): investigates and prosecutes; ex-ante review mandate for procurements above MT 2.55 million (600 minimum national salaries). - PGR houses GCCC and Receipt and Verification Committee (RVC). - GCCC mandated to investigate and prosecute corruption; RVC collects/verifies asset declarations. - Financial Intelligence Unit (GIFiM) receives/analyzes STRs and prepares follow-up reports. - Planned legislative reforms and institutional strengthening: - Revise Public Probity Law to clarify scope, strengthen conflict-of-interest definition, and require declaration of interests on hiring. - Draft decree on sanctions under Public Probity Law prepared; passage considered critical. - Improve implementation via enhanced public ethics committees in ministries/agencies with published terms of reference, training roles, confidentiality protections, and sufficient staffing/time. - Address resource shortfalls progressively (tribunals, magistrates, investigators, auditors, electronic systems, websites, salaries). - Strengthen GCCC: establish Maputo provincial office; electronic public complaints platform; expand communications; develop written procedures to limit discretion in investigations and case assignment. - Enhance coordination and HR management between GCCC and SERNIC, consider regulations on rotation, secondments, promotions, and compensation. ### Reform measures — consolidated prioritized actions (selected high-priority items) - Transparency: - Compile electronic list of “public servants” under Public Probity Law — Priority: High — Responsible: Central Public Ethics Commission. - Digitize company registry and make accessible — Priority: Medium — Responsible: Ministry of Justice. - AML/CFT: - Develop/implement DNFBP registration and STR filing regulations — Priority: High — Responsible: Council of Ministers; GIFiM. - Fiscal governance and SOEs: - Strengthen PDM regulatory framework and SOE oversight; publish annual SOE lists and financial indicators — Priority: High — Responsible: Mozambique Government; IGEPE; debt management unit. - Publish quarterly comprehensive reports on public sector debt, guarantees, and on-lending — Priority: High — Responsible: IGEPE; debt management department. - Chain of expenditure and control framework: - Issue quarterly commitment ceilings and decree to enforce real-time recording in e-SISTAFE and attachment of commitment notes — Priority: High — Responsible: DNT, DNPO. - Adopt formalized control framework assessed by IGF and AT — Priority: High — Responsible: IGF, AT. - Central bank and financial sector: - Complete revision of Central Bank Organic Law — Priority: High — Responsible: BM. - Complete revision of banking law to modernize safety net/crisis management — Priority: High — Responsible: BM. - Anti-corruption: - Enhance GCCC procedures for investigating/prosecuting corruption cases — Priority: High — Responsible: Ministry of Justice. - Review Public Probity Law to strengthen prevention of conflicts of interest and asset declaration system (digitize and publish compliance) — Priority: High/Medium — Responsible: Ministry of Justice. ### Key diagnostic indicators (selected numeric results preserved) - Public sector debt: total public sector debt reached about 110 percent of GDP in 2018. - Corruption and governance scores: - WGI Control of Corruption: -0.86 (scale -2.5 to +2.5). - WGI Regulatory Quality: -0.73 (scale -2.5 to +2.5). - Doing Business 2019: Ease of starting a business rank 174 of 190; Ease of doing business rank 135 of 190 economies, score 55.53 (scale 0–100). - Doing Business (selected indicators): Enforcing contracts distance to frontier 39.78; Resolving insolvency distance to frontier 46.89; enforcement cost estimated 53.3% of contract value; enforcement time 950 days; insolvency average recovery 29.1 cents on the dollar in 1.5 years. - PEFA: PI.2 D+; PI.4 C; PI.5 D; PI.6 C+; PI.9 D; PI.11 D+; PI.23 D+; PI.29 D+ (selected). - FTE (2014): Tax expenditures ≈ 3% of GDP; deposits represent 40% of GDP (financial sector exposure flagged). - TADAT (2015) highlights many D/D+ ratings (e.g., P1-1 D; P4-10 D; P5-11 D). - DeMPA (2017) (selected) shows many D ratings across debt management indicators (e.g., DPI-3 1 D; DPI-4 1 D). - Banking sector indicators: - Banks increased from 10 to 19 (2005–2017). - Branches increased from 218 to 659 (2005–2017). - Four largest banks hold almost 80 percent of loans and deposits. - 4.9 million bank accounts active in 2017, held by about 33 percent of adult population. - NPLs: 5.7 percent in 2016; 13.4 percent in August 2018. - Public procurement: over 50 percent of acquisitions procured by direct bidding (PEFA 2015); UFSA end-2017: only a third of procurement awarded through open tendering. - Extractive governance: LNG expected to contribute upwards of several billions of dollars in future revenues; EITI validation 2017: meaningful progress with corrective measures requested. *Source: 1mozea2019004 (IMF diagnostic report excerpts).* ### Executive Summary ...................................................................................................... ### Executive Summary ### Context and scale of governance and corruption concerns - Mozambique’s economy is at a turning point; governance and corruption vulnerabilities are macro-critical. - One study estimated the costs of corruption to Mozambique during the period 2002 to 2014 at up to USD 4.9 billion (approximately 30 percent of the 2014 GDP). - Disclosure in Spring 2016 of previously hidden debt by two SOEs (Proindicus and MAM) valued at approximately USD 1.1 billion, plus several other smaller bilateral loans (USD 0.3 billion), came to a total of USD 1.4 billion, equivalent to approximately 11 percent of the 2015 GDP. - Mozambique has been hit by a series of shocks: fall in commodity prices, drought, withdrawal of donor budget support, and Tropical Cyclones Idai and Kenneth, intensifying the impact of governance weaknesses. ### Progress and reforms already undertaken - Over the last 15 years, a comprehensive legislative and institutional framework has been adopted addressing administration of justice, business regulation, AML/CFT, SOEs, and the financial sector. - Some high-profile cases have been prosecuted under the new framework. - December 2017: an action plan to strengthen governance, transparency, and accountability was prepared. - Fiscal risk mitigation measures include: - Approval and implementation of a 2017 decree on issuance of debt and guarantees. - Approval of a new law on state-owned enterprises. - A 2018 Decree to regulate other public entities such as institutes, funds, and foundations. - Creation of a fiscal risks unit. - Bank of Mozambique (BM) efforts: - Working to revise the central bank organic law to address governance vulnerabilities. - Undertaking a revision of the banking law to strengthen crisis management and bank resolution. - Strengthening supervisory capacity through new regulation, stronger supervision, and technical assistance. - Substantial efforts to tackle money laundering and financing of terrorism. - Mozambique has signed many relevant international anti-corruption conventions and is incorporating standards into domestic law. - Overarching anti-corruption plan adopted in March 2016 (ERDAP 2016-19) with each government agency developing and beginning to implement specific anti-corruption measures. - Recent and ongoing measures: instituting commercial sections in courts; legislative process for legal regime for the Insolvency Administrator (on calendar for the first half of 2019); rationalizing business licensing, public financial management, taxation, and customs systems; digitizing and centralizing processes and registries; overhauling legal framework for SOEs; strengthening institutional framework to fight corruption. ### Remaining weaknesses and vulnerabilities - Governance and anti-corruption framework is not consistently or comprehensively enforced. - Rule of law is undermined by insufficient implementation of existing legislation and regulations, including absence of necessary regulations and explanatory guidelines in some cases. - Market regulation is marked by excessive complexity and opaqueness. - AML/CFT tools have not been effectively mobilized to fully support anti-corruption efforts, particularly in monitoring transactions related to politically exposed persons, including real property transactions. - Fiscal governance shortcomings include: - Fragmented and incomplete oversight of SOEs and public institutions. - Public investment management lacks procedural discipline. - Debt management is weak and lacks transparency. - Treasury management is marked by inefficiencies and weak controls. - Central bank governance shortcomings: insufficient autonomy and absence of an oversight body to provide checks and balances on the bank’s executive functions. - Institutional fragmentation: scope for strengthening governance and anti-corruption framework and clarifying responsibilities to prevent diffusion of accountability and overlapping mandates. ### Implementation challenges and priorities - Key constraints: - Insufficient budgetary resources and need for more training and capacity development, especially for complex corruption investigations and related financial transactions. - Need for credible, consistent, and effective implementation of existing laws. - Need to enhance external institutional oversight to effectively oversee public expenditure. - Addressing information silos and access barriers to reduce opaqueness and risks of conflicts of interest. - Transparency priorities: - Ensure evenhanded implementation of the access to information law. - Increase disclosure of beneficial ownership, extractive contracts, and fiscal reporting. - Greater transparency of laws and sanctions to improve predictability and the business environment. - Stakeholder roles: - Government commits to leading reforms and recognizes the critical roles of civil society, the private sector, and development partners. - Transnational aspects of poor governance and corruption require regional and global multilateral attention. ### Government commitment and outlook - Anti-corruption is a high-level priority: President Nyusi emphasized zero tolerance in 2014 and declared in 2018 that “it is time to act, relentlessly and concretely,” against corruption. - The Central Anti-Corruption Commission (GCCC) and other institutions have articulated strong anti-corruption rhetoric and intent. - Conditions are in place for durable progress, building on reforms already undertaken; the Government is committed to achieving enduring results through evenhanded, consistent, and effective implementation. *Executive Summary, 1mozea2019004* ### 0.85 billion of a third state-owned company, Ematum, was discovered at the beginning of 2014. The three companies ### 1mozea2019004 - 0.85 billion of a third state-owned company, Ematum, was discovered at the beginning of 2014. The three companies ### Debt disclosures and institutional context - 0.85 billion of a third state-owned company, Ematum, was discovered at the beginning of 2014. - The three companies Ematum, Proindicus, and MAM focus respectively on tuna fishing, providing maritime protection, and shipyard construction. - The three enterprises were created shortly before the loans were executed and were all headed by the same CEO, who at the time was a senior officer of the security services. - The government prepared an action plan following the debt disclosures specifically designed to strengthen governance, improve transparency, and ensure accountability; the plan has not been formally adopted and made public, but several reforms have been undertaken while others are underway. - Reference to IMF 2017 Article IV Consultation—Press Release; Staff Report; and Statement by the Executive Director for the Republic of Mozambique: https://www.imf.org/en/Publications/CR/Issues/2018/03/07/Republic-of-Mozambique-2018-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-45701. ### Donor support and coordination - Mozambique receives assistance in various aspects of governance and anti-corruption reforms from a number of donors, including the IMF. - There is no central coordination mechanism for these efforts, which could be more effective in ensuring consistency and complementarity and in avoiding duplication. - Donor examples (areas of support): World Bank (debt management, public investment appraisal, procurement, EITI, investment climate, insolvency); African Development Bank (infrastructure); European Union (judiciary and Public Prosecutor’s Office); Switzerland (Central Anti-Corruption Commission strategic plan); Norway (managing natural resource revenues); German Agency for International Cooperation (streamlining market regulation); UK Department for International Development (commercial legislation reform and dissemination of statistics). ### Role of domestic stakeholders and international cooperation - Domestic stakeholders must provide impetus for reform: civil society as watchdog and source of expertise, advocacy, and engagement; private sector as part of the solution. - Corruption has both demand and supply sides: need to enforce domestic legislation, enhance checks and balances, and address illicit financial flows from Mozambique to other countries, loan pushing by foreign banks, and concealment of corrupt proceeds in offshore jurisdictions. - Bolstering international cooperation on complex multi-jurisdictional cases is necessary and requires active cooperation of the private sector. ### Comparative governance indicators and public perceptions - According to the most recent data (2017), during the past 10 years, the Worldwide Governance Indicators (WGI) deteriorated for all six dimensions. - Mozambique is at Sub-Saharan Africa’s (SSA) average on one indicator (voice and accountability) but has fallen behind neighboring countries on political stability, government effectiveness, regulatory quality, rule of law, and control of corruption. - Mozambique’s WGI control of corruption shows a decline since 2010. - Afrobarometer (2015): 48 percent of respondents said that the level of corruption has increased over the last year. - Public perceptions identify police, taxes, and local governments as institutions with high perception rates of corruption. - National surveys: second National Assessment of Perceptions of Corruption (Ministry of Public Administration, 2010) indicated police, licensing agencies, procurement of goods and services, customs, and health and education services as most vulnerable. - Perceptions that acts of corruption were more frequent in Maputo (city), Maputo (province), Niassa, and Zambézia. - Demographics noted: 45 percent of the population is under 15 years old. ### Fiscal, PFM, and AML/CFT assessments - Mozambique has fared poorly in both IMF and third-party assessments in the fiscal and AML/CFT areas. - Public Expenditure and Financial Accountability (PEFA) and IMF Fiscal Affairs Department assessments highlighted significant vulnerabilities while recognizing substantial progress. - Financial Action Task Force’s 2004 AML/CFT standards assessment (2009 evaluation) found Mozambique to be noncompliant with most recommendations and that only four recommendations had been partially met. ### Overall evaluation of reforms and implementation constraints - Government measures adopted: laws addressing administration of justice; streamlining business regulations; strengthening the AML/CFT framework; organization and regulation of SOEs and public institutes and funds; improvements to payroll and integrated financial management systems; modernization of revenue management; governance of Bank of Mozambique (BM) and the financial sector. - International conventions and ratifications: signed the United Nations Convention Against Corruption on May 25, 2004 and ratified it on April 9, 2008; ratified the African Union Convention on Preventing and Combating Corruption on February 8, 2006. - Institutional anti-corruption bodies: GCCC, the Central Public Ethics Commission, the Receipt and Verification Committee, and the Financial Intelligence Unit. - Constraints on effective implementation: low technical capacity, inadequate budgetary resources, lack of sufficient institutional autonomy, poor oversight and accountability mechanisms, overlapping responsibilities leading to duplication, confusion, and diffuse accountability. - Government commitment to combat vested interests and stop impunity related to high-level corruption. ### Transparency measures and digitization plans - Critical registries are either entirely or partially manual: company registry (legal entities registry), land registry, movable property registry, and notarial database—these limit investigations, verification of property ownership, and tax liability ascertainment. - Plans to digitize various registries and procedures are in progress to improve transparency and reduce conflicts of interest. - Measures to ensure easier access to information: - Support establishment of free, public access to all legal instruments in force through a government-operated website; government will support incorporation of all regulations and decrees. - Develop terms of reference for focal points in each ministry and public institution to compile and update an electronic database of persons who fall under the definition of “public servant” in Article 3 of the Public Probity Law and provide ongoing access to relevant government entities and commercial banks. - Implement the 2014 Right to Information Law more fully; require ministries and public agencies to establish and publish procedures for responding to public requests for access to information including contact persons/units, deadlines, guidance on withholding, and publication of compliance statistics (number of requests received, responses, justifications for negative responses, and response times). ### Rule of law and judiciary modernization - Judicial resources are insufficient; measures needed to address procedural delays and manual court processing that can result in misplaced files. - Electronic Judicial Record and Information System (Sistema de Expediente e Informação Judicial Electrónico, SEIJE) is now in 20 courts. - Commercial sections introduced within six provincial courts for insolvency, bankruptcy, and commercial debt; two magistrates allocated to each commercial section. - An insolvency law was passed in 2015; draft regulations prepared and passage of regulations prioritized. - Property registry reform: Decree-Law 2/2018 of August 23, 2018 established the Integrated Real Property Registration System. Plans: - Digitize the land registry with electronic registration; many requisite steps to be carried out in 2019. - Under the new Real Property Registration Code, land registry systems will be interoperable to provide effective data transmission. - Digitize the movable property registry for registration and access to historical records. ### Market regulation and business environment reforms - 2019 World Bank Doing Business Report ranks Mozambique at 174 and 135 of 190 economies for ease of starting a business and ease of doing business, respectively. - Plans to streamline licensing of economic activities: - Ministry of Industry and Commerce established a “one-stop shop” (Balcão de Atendimento Único, BAU) for business registration; no compulsory equivalent for licensing. - Draft legislation under legal review to mandate participation of relevant ministries in a single one-stop licensing shop. - Establish a unified revenue collection service linked to e-SISTAFE to streamline payment of licensing fees and reduce rent-seeking opportunities. - Ministry of Industry and Commerce consulting with private sector; matrix of proposed reform priorities disseminated for 2018 and 2019. - Commercial Code under review to streamline company registration procedures. - Improve coordination of inspections of economic activities to reduce resource drain, uncertainty, and opportunities for corruption. - Outreach and information dissemination measures: intensify outreach to BAU branches and public, provincial workshops, television and social media, development of a dedicated online information portal, and the public repository of legal instruments in force to ensure a level playing field and address corruption vulnerabilities. *Source: 1mozea2019004 - 0.85 billion of a third state-owned company, Ematum, was discovered at the beginning of 2014. The three companies (PDF).* ### 21. Further transparency regarding the company registry will also be pursued. ### 1mozea2019004 - 21. Further transparency regarding the company registry will also be pursued. ### Company registry, digitization, and beneficial ownership - Current situation: - The company registry is not fully electronic and is not easily accessible. - Information is not centralized but rather collected and held at the provincial level. - Planned actions: - Digitize the registry to provide easier access by government agencies and the public. - Tackle historical records digitization as resources permit (digitization already being implemented for new registrations). - Integrate the company registry database with other national databases ultimately. - Incorporate beneficial ownership information into the company registry (work ongoing; see AML/CFT section). - Expected benefits: - Better cross-checking by law enforcement and tax authorities. - Improved ability for CSOs to monitor possible conflicts of interest and corruption vulnerabilities. - Easier access for agencies such as GIFiM to beneficial ownership data once digitized. ### AML/CFT framework: deficiencies, assessments, and planned improvements - Legal and assessment background: - Parliament passed Law No. 14/2013 addressing deficiencies highlighted in the 2011 Mutual Evaluation Report. - Mozambique was last assessed against the FATF 2004 standard by ESAAMLG in September 2018. - Mozambique will be assessed under the new FATF standard with an onsite visit in late 2019 and the mutual evaluation discussion in August 2020. - Key identified deficiencies and vulnerabilities: - Lack of effective supervision of Designated Non-Financial Businesses and Professions (DNFBPs). - Lack of enforceable requirements for financial institutions to identify PEPs. - Gaps in identification of national ML/TF risks, transparency of beneficial ownership of corporate vehicles, and mutual legal assistance and asset forfeiture legislation. - Risk assessment and priorities: - GIFiM plans to complete a National Risk Assessment by end-2019. - GIFiM identified corruption as the fifth most common predicate offense in Mozambique and found the real property and insurance sectors particularly vulnerable to laundering proceeds of corruption. - DNFBPs have not filed STRs as envisaged in the law to date. - Cabinet will prioritize approval of implementing regulations for GIFiM’s organic law so GIFiM can publish guidelines for reporting by real property and insurance agents; guidelines for other DNFBPs to follow as resources permit. - Due diligence on PEPs and beneficial ownership: - Under 2013 revisions, banks are required to conduct enhanced due diligence on PEPs. - Number of STRs filed by financial institutions is low and of varying quality. - BM has strengthened inspections and levied sanctions against institutions that file STRs with omissions, especially regarding PEPs. - Compilation and updating of the list of “public servants” under the Public Probity Law could help identify PEPs if shared with commercial banks, or help define positions falling under PEPs. - Concerns exist about limited availability and transparency of beneficial ownership information and weaknesses in the asset declaration system. - Ministry of Justice is working on legislation to allow consistent collection of information on beneficial owners through the company register; this effort will be bolstered by digitization of the company registry. - BM has strengthened requirements for adequately identifying beneficial owners under the terms of the law as part of inspections and financial information reports from GIFiM. - Cooperation and capacity: - Domestically, government will advance memoranda of understanding pending between GIFiM and the GCCC and between GIFiM and the Public Prosecutor’s Office (PGR). - Internationally, GIFiM seeks to join the Egmont Group; the Council of Ministers will prioritize this request. - GIFiM will need additional resources, including additional compliance officers and analysts, as conditions permit. ### Fiscal governance and transparency: PFM, IFMIS, and control framework - Scope of assessment: - Key pillars assessed: integrity of public financial management (PFM), revenue and customs administration, control framework, external oversight and fiscal transparency, legal framework, and the integrated financial management system (IFMIS). - PFM fundamentals and tools: - Reforms over the last 20 years produced: a fiscal framework (SISTAFE Law), a modern IFMIS system (e-SISTAFE), and a treasury single account (CUT). - These are supported through the Strategic Plan for Public Finances 2016-2019. - IFMIS covers planning and budgeting, budget execution, and reporting; extensively rolled-out including at district level. - Fiscal reports classified in accordance with international standards (FTE, 2015). - The majority (80 percent of more) of central government’s cash balances are now managed through the Treasury Single Account, reconciled daily through e-SISTAFE; substantial funds remain outside the TSA (services at the district level, small amounts of tax collected and externally financed projects) (PEFA, 2015). - Priorities to restore fiscal governance and reduce corruption vulnerabilities: - Openness of public procurement procedures. - Surveillance and transparency of SOEs. - Regulatory framework and transparency in management and approval of public sector debt to ensure sustainability. - Restoration of a sound budget execution procedure (chain of expenditure). - Implementation of a formalized control framework on critical aspects of PFM by the Inspectorate General of Finance (IGF). - The Administrative Tribunal will assess PFM and IGF supervision framework within its competence as external supervision authority. ### Legal and regulatory reforms: public debt management and SOEs - Public debt management decree reforms (decree 77/2017 amendments planned): - Include provisions clarifying contracting and guaranteeing of public debt, including: - Details on power of the Minister responsible for finance to delegate powers on an exceptional basis for public debt management operations (Article 9(2)). - Clarify procedure under Article 12 for ex-post ratification by the Council of Ministers of guarantees already issued. - Revise provisions under Article 30 that revoke all provisions that contradict the decree to remove legal uncertainty given the decree is lower-ranking than laws. - Clarify, for statistical or accounting purposes, public debt limits and whether debt contracted or guaranteed by SOEs should be included in general government debt (in compliance with accounting and statistical standards). - Add provisions to grant the Minister responsible for finance powers to oversee (including set quantitative limits, approve, and monitor) borrowing and guarantee transactions of SOEs and subnational governments (as appropriate). - SOE law and decree amendments planned: - Clarify provisions of the decree on SOEs (in application of Law 3/2018) and the decree on public debt management regarding approval of public debt accrued by SOEs. - Specify the purpose and functions of the new agency envisaged by law to coordinate and oversee SOEs—clarify whether it is the owner of the SOEs or performs state-ownership-related functions. - Include provisions delineating responsibilities of the Ministry of Economy and Finance (MEF) with respect to monitoring and strengthening SOE debt contracting. - Incorporate clear and robust fit and proper requirements for selection of SOE board members to ensure professionalism and competency. - Clarify that articles 2 and 36 of the law and article 3 of the decree on SOEs apply to enterprises with exclusive or majority state shareholding. ### Revenue collection and customs: vulnerabilities and reforms - Challenges: - Tax collection is below potential due to the size of the informal economy, insufficient digitization of transactions, and strong rent-seeking around high-profit businesses. - Wide range of VAT exemptions and special reliefs add complexity and result in significant lost revenue and corruption opportunities. - Customs procedures remain an area of pronounced weak governance despite improvements from the single window (JUE). - Illegal capital flows remain a challenge. - Planned and ongoing measures: - Improvements to the taxpayers register and introduction of a modern revenue management system (e-tributação). - Reduction of exemptions. - Voluntary compliance and institutional risk management strategy with improved audits. - Establishment of a large taxpayer unit focusing on the top one hundred taxpayers. - Enhancement of the VAT-refunds process. - The Tax Authority (AT) is implementing the 2018-2022 strategic plan to modernize tax-payment processes and streamline procedures. - AT has a simplified tax system for small business taxpayers to encourage formalization. - AT approved its Anti-Corruption Strategy and associated action plan, including revision and dissemination of the Code of Conduct for AT employees. - AT signed Memoranda of Understanding with the GCCC and the Ministry of the Interior for joint anti-corruption activities. - Specific training being conducted for customs managers in customs valuation, investigation, and risk management. ### Public procurement and public investment management: weaknesses and immediate actions - Current weaknesses: - Large percentage of government bids are not competitive. - According to the 2015 PEFA assessment, over 50 percent of total public acquisitions are procured by direct bidding. - End-2017 statistics from the Unit for the Supervision of Acquisitions show only a third of both central and provincial procurement awarded through open tendering procedures. - Complaint mechanisms are inefficient; capacity in spending agencies to implement tendering procedures is weak. - Public investment weaknesses persist (delays in partner disbursement, weaknesses in monitoring projects). - Reforms underway: - Development of a public procurement and asset management module in e-SISTAFE (MPE), including an e-procurement platform to record appraisal to awards. - Immediate actions to improve governance over public procurement: - Adopt a legal framework rendering appraisal mandatory for all capital expenditure above a certain threshold; threshold to be chosen according to CCSPP capacity; appraisals based on predefined standard criteria. - Publish all decisions issued by the Public Project Coordination and Selection Committee (CCSPP), with a summary of meeting minutes as the practical format. - Adopt and publish the manual on identification, formulation, and assessment of public projects, including list of appraisal criteria; complement with capacity-building activities in proposing sectors. - Publish quarterly statistics on public procurement containing statistics on contracts procured through open competitive tenders vs. direct awarding. ### Surveillance, transparency, and governance of SOEs - Context and intent: - The non-financial public sector is vast and complex, vulnerable to governance issues, mismanagement, and corruption. - Reforms will clarify beneficial ownership and participation systems to enhance oversight of public companies. - A single agency empowered by the new SOE law and related draft decree will be the sole public entity overseeing SOEs; decree to be further amended to clarify oversight and debt approval of SOEs. - Planned essentials: - Conduct a comprehensive census/audit of all government shares in any private company using IMF’s GFSM 2014 definition of SOEs to identify and classify public corporations by economic nature. - Use the registry to enforce governance rules, prevent conflicts of interest, and monitor financial performance of troubled companies. - Specific publication and transparency actions: - Publish a list of all private companies with public-sector shareholders compiled using GFSM 2014 definition of SOEs. - Assess level of government ownership in each company identified, taking into account direct and indirect participation of all public-sector entities or companies. - For all government-controlled companies, publish a list showing the share held by the government, together with the capital stock, liabilities, and key financial performance indicators focused on financial risks. - For non-government-controlled companies (where the government holds a minority share), publish a list showing the company name and the share held by the government. *Source: 1mozea2019004 - 21. Further transparency regarding the company registry will also be pursued.* ### Box 1: Example of Financial Risk Indicators for SOEs ### Box 1: Example of Financial Risk Indicators for SOEs ### Financial risk indicators: definition - Financial risk indicators for SOEs are those that provide information on the risk of a public enterprise not being able to meet its financial obligations. - GFSM 2014, paragraph 2.31 defines public corporations as “entities that are capable of generating a profit or other financial gain for their owners, are recognized by law as separate legal entities from their owners, and are set up for purposes of engaging in market production.” ### Public debt management - Total public sector debt in nominal terms reached about 110 percent of GDP in 2018. - Public sector debt service is expected to consume a significant share of public revenue over the next several years. - Recent decree on issuance of debt and public guarantees approved; decree contains provisions aligned with good practices and makes approval of debt mandatory (under certain conditions) by the MEF, but requires amendments to further enhance and clarify the PDM framework (see paragraphs 30-31). - Decree applies to the public sector as a whole; remaining uncertainties on practical modalities for approving subnational government and SOE debt will be clarified. - Exact modalities for SOE debt will be further elaborated in the decree implementing the SOE law. - Will strengthen debt reporting transparency with quarterly debt statistical reports. ### Budget execution - Current practice: Treasury issues a weekly release of cash to UGBs for paying invoices; there is no recording nor monitoring of commitments at the time obligations incur. - Spending units keep invoices and contracts in ad-hoc ledgers outside of the e-SISTAFE and record commitment, verification, and payment phases simultaneously in the electronic system, despite SISTAFE Law defining a three-stage expenditure process (commitment, verification, payment). - Systemic impacts and risks: - Opens vulnerabilities to arrears, mismanagement and corruption. - Accumulation of arrears reduces number of suppliers and raises risk of non-transparent arrangements (including bribes and kickbacks). - Encourages suppliers to ask for payment before delivery, contrary to good practice. - Deteriorates government reputation for transparent and sound business relations. - Measures to restore chain of expenditure: - Budget department will set quarterly ceilings for commitments in spending agencies, based on revenue forecasts. - Issue a decree or administrative order making real-time recording of commitment and verification of expenditure mandatory for all units operating within e-SISTAFE and making attachment (subject to invalidity) of the commitment note issued by e-SISTAFE mandatory for each purchase. - Publish the decree/administrative order, run a communication campaign targeting suppliers, and train spending agency managers. - Involve internal control and internal audit functions in regular assessments and controls to ensure the chain of expenditure is effectively restored. - Note: restoring the normal chain of expenditure does not need any new development in the IFMIS (as noted in recent IMF technical assistance reports). ### Control framework, internal and external audit - Internal and external audit entities score adequately in PEFA and FTE evaluations, but internal control in Beneficiary Management Units (UGBs) needs strengthening. - Current controls have not prevented UGBs from exceeding budget allocations and accumulating arrears due to loose commitment controls on goods and services. - Inspections of goods and services are currently conducted only on a documentary basis. - A sound control framework is based on three key features: - Risk assessment: assists management to make informed decisions about acceptable risk levels and appropriate controls/mitigating measures. - Control framework: a control matrix (table) documenting controls; evidence of performed controls should be retained. - Assessments on effectiveness: management, internal audit and external auditors should regularly assess whether the control environment is effective by reperforming some controls. - Wage bill controls: - Legislative framework is comprehensive and clear. - Wage bill execution and control improved following implementation of payroll management system (e-Folha) and routine “proof of life” (“prova di vida”) exercises. - Public employee register (e-CAF) based on updated biometric information is used as a source of verification for payroll processing. - Increasing number of payroll transactions run through the banking system, increasing traceability. - Hiring practices and bonuses and overtime payments still lack effective control. - IGF will undertake a targeted audit of sectors where these problems are most prevalent. - Ministry of State Administration and Public Service (MAEFP) will verify ex-ante each request for new recruits against the approved staff ceiling prior to submission to the Administrative Tribunal. - IGF and Administrative Tribunal actions to implement and assess UGB control framework: - IGF, with a group of previously-selected UGBs, will develop a matrix to assess transparency of public procurement procedures and the use of e-SISTAFE to record all phases of the chain of expenditure execution. - Administrative Tribunal will assess efficacy of the control system in the UGBs and issue its own opinion. ### Fiscal reporting and transparency - 2014 FTE evaluation: fiscal reporting is in line with basic and good practices; fiscal reports include central government cash position, debt, and financial assets and cover the budgetary central government and part of the general government. - Institutional coverage of fiscal reports remains limited; does not provide complete and reliable information on operations performed by the social security fund and numerous autonomous entities. - Important balance sheet elements not reported: current value of arrears and shares of corporations owned by the State. - Public access to fiscal information: - Available: budget summary information; quarterly fiscal reports (REO) published 45 days after the period in reference; General State Accounts (CGE) published annually following approval by the Assembly of the Republic. - Administrative Tribunal will issue its report and opinion on the General State Accounts by November 30 of the year following the reference year. - Commitment to improve transparency: - Publish the fiscal risk statement on a yearly basis. - Continue to improve transparency and publication of other key fiscal reports. ### Extractive Sector Governance - Extractive industries are important to the Mozambican economy; natural gas exploitation (LNG) expected to contribute upwards of several billions of dollars in future revenues. - Oversight: Ministry of Mineral Resources and Energy (MIREME) with three oversight organizations—Institute of Energy (energy), Institute of Mines, INAMI (mining), and Institute of Petroleum, INP (oil/gas). - Mining activities regulated via prospecting and research licenses; mining concessions; mining certificates; mining passes; licenses of mining processing; and licenses of commercialization of mineral products. - Technical and financial criteria for allocation and registration of mining licenses set out in Annex 10 of the Mining Law Regulation. - Applications for mining licenses made to INAMI and referred to MIREME for approval; online registry (Flexicadastre) implemented with public access. - Revised Mining Law adopted in 2014 specifies mining contracts must be published in the Official Gazette; recognition that publication requirement has not always been enforced and contracts negotiated since 2015 have not been published. - Commitment to transparency and licensing procedures: - Ensure all contracts will be published in an easily accessible manner and continue cooperation with civil society to publish as much information relating to mining contracts as possible. - Seek agreement with contractual parties to publish contracts signed prior to the Mining Law’s adoption. - For licenses awarded through bidding, publish evaluation criteria, final bids, relative ratings of bids, and ensure independent verification of final award is available online. - Make licensing application process fully electronic as resources permit, with public access to application information. - Provide applicants notifications at each stage and information on processing timelines as established in law and regulations. - Each extractive oversight entity to establish and publish clear procedural guidelines including contact persons/units and deadlines by which the agency must respond at each stage. - Each oversight entity shall publish statistics on compliance, including number of applications received and length of time taken to complete each stage. - State participation and beneficial ownership: - Direct and indirect state participation in extractive industries should be fully disclosed. - Mozambique committed to EITI standards and prioritizes compliance with EITI’s beneficial ownership requirements. - Beneficial ownership information to be held in a publicly available registry; in the interim, require reporting of beneficial ownership information in license applications, which will be published. - Commit to an updated IMF Fiscal Transparency Evaluation including Pillar IV on resource revenue management and implement subsequent recommendations tailored to Mozambique’s circumstances. ### Central Bank governance and operations - Commit to adopt international best practices for governance. - Following assessment of Bank of Mozambique’s revamped organizational and decision-making structure, will implement changes including formalizing guidelines on each unit’s functions and further streamlining organizational structure. - Revising the Central Bank Organic Law to strengthen BM’s mandate, limit monetary financing, and improve BM’s autonomy and governance structure, notably by introducing checks and balances in line with recommendations of the 2016 IMF Safeguard Report. - Next steps: collect feedback from stakeholders, consult Fund staff on alignment with leading practices, submit to BM’s Board for approval, and present to the Cabinet, Council of Ministers, and Parliament. ### Financial sector oversight - Banking sector growth and structure: - Number of banks increased by nearly 100 percent (from 10 to 19) between 2005 and 2017. - Branch networks increased from 218 in 2005 to 659 in 2017. - Four largest banks—all foreign-owned—hold almost 80 percent of loans and deposits. - 4.9 million bank accounts active in 2017, held by about 33 percent of the adult population. - Banking vulnerabilities and recent history: - After domestic and external shocks in 2015-2016, fast credit growth led to increased bank vulnerabilities and resolution of two banks in the last quarter of 2016. - NPLs increased to 13.4 percent in August 2018 (from 5.7 percent in 2016) due to economic slowdown, high real interest rates, accumulation of domestic spending arrears, and tighter supervisory oversight. - Overall banks are liquid, well-capitalized, and profitable on average; main vulnerabilities: sovereign risk exposure, government and SOEs arrears to suppliers, slow economic recovery, and high real interest rates. - Strengthening oversight and reforms: - Addressing bank vulnerabilities via new regulations to increase capital and liquidity requirements, stronger supervision, and enforcement of prudential requirements. - Improving oversight by separating onsite and off-site functions; need for further training and improvements in supervisory tools to collect, analyze, and use data. - Identified need for an external assessment of the BSA supervision platform to identify weaknesses and improve it. - BM working to modernize safety net and crisis management framework to address bank failures in an orderly fashion; modernizing framework implies reform of central bank law, banking law, bank liquidation law, law of the deposit insurance fund, corporate insolvency law, and capital market law. - Concerns: gaps in the regulatory environment and governance weaknesses in small financial institutions may allow criminal elements to take control, increasing operational risks and facilitating concealment of proceeds of corruption and illicit activities. - BM has begun focusing on sanctioning commercial banks for non-compliance with regulations. - Banking law revision priorities: - Revised banking law will include an effective crisis management framework providing for: (i) a clear and adequate scope of coverage; (ii) relevant set of resolution powers and tools; (iii) suitable recovery and resolution planning requirements; and (iv) robust funding arrangements suited to Mozambique. - A clear framework for administrative bank liquidation will be adopted. - Strengthen licensing and supervision with new suitability and fit and proper requirements for shareholders and managers of credit institutions and financial companies, corporate governance system, and new capital reserves for own funds. ### Anti-corruption framework - Anti-corruption legal framework: - Initial anti-corruption law adopted in 2004; enhanced in 2012 by the Legislative Anti-Corruption Package (PLAC) which included a revised and consolidated Criminal Code, a revised Criminal Procedures Code, a Witness Protection Law, and a Public Probity Law. - Institutional architecture: - Central Public Ethics Commission (CPEC) established by the Public Probity Law of 2012 to focus on conflicts of interest of public officials; CPEC composed of nine individuals serving for three-year terms, with three each elected by parliament, judiciary, and government; members serve without compensation on a part-time basis, meeting once weekly. - Administrative Tribunal conducts ex-ante examination of government procurement contracts. - Public Prosecutor’s Office (PGR) investigates and prosecutes and has been mandated with ex-ante review of government procurements above a MT 2.55 million threshold (contracts between the central government and other entities when the amount exceeds 600 minimum national salaries in the Civil Service) to ensure compliance with relevant rules and regulations. - PGR houses the Central Anti-Corruption Commission (GCCC) and the Receipt and Verification Committee (RVC). - GCCC, with investigators and magistrates, mandated to investigate and prosecute corruption and related crimes. - RVC collects and verifies asset declarations from public officials. - Financial Intelligence Unit (GIFiM) receives and analyzes suspicious transaction reports, focusing on reports from commercial banks, and prepares detailed reports for follow up by law enforcement in cases of possible money laundering or financing of terrorism. - Coordination and evolving roles: - Law No. 4/2017 (Organic Law on the Public Prosecutor’s Office) gives the PGR authority to audit contracts between the central government and other entities when the amount exceeds 600 minimum national salaries in the Civil Service. - Memorandum of understanding between the Public Prosecutor’s Office and the Administrative Tribunal clarifies division of supervision responsibility and plans to evaluate whether it (continued). *Source: How to Improve the Financial Oversight of Public Corporations, Allen, R. and M. Alves. 2016. Washington: International Monetary Fund; excerpts from the IMF staff document on Mozambique fiscal and governance context.* ### 61. The plans to improve the functioning of our anti-corruption framework can be ### 1mozea2019004 - 61. The plans to improve the functioning of our anti-corruption framework can be ### Legislative reforms - Objective: revise the Public Probity Law to make it clearer and more coherent by eliminating incongruities and ambiguity, including rules that have been omitted, and adopting consistent terminology. - Amendments will address: - (i) better defining its scope and clarifying to which individuals the various requirements apply; - (ii) strengthening the definition of conflict of interest; and - (iii) requiring submission by new public servants upon hiring of a declaration of interests. - Timing: The amendment progress will likely be completed during the legislative term beginning in 2020 due to the complexity of the issues. - Supporting measures: - Establish published procedures for reporting conflicts of interest specifying the person or unit to whom potential or actual conflicts shall be reported. - Require statements of no conflict of interest upon hiring. - Provide appropriate confidentiality protections. - Define procedures for recusal, including criteria for waiver. - Define procedures for escalating conflict-of-interest concerns to the GCCC for further investigation. - Additional clarifications to be made under the Public Probity Law: procedures for receipt of gifts, submission of asset declarations, and sanctioning non-compliance with obligations. - A draft decree with respect to procedures for sanctions under the Public Probity Law has already been prepared, and prompt passage is considered critical. - Commitment to align domestic laws with international obligations by addressing legislative deficiencies highlighted in various assessments (examples of deficiencies include non-compliance of the asset recovery provisions with UNCAC standards, failure to criminalize certain corruption-related offenses, a weak system to identify ultimate beneficiaries, and needed updates to the insolvency regime). ### Improvements in the implementation of legislation - Priority: uniform and effective implementation of existing laws is a pressing issue; consistent and comprehensive enforcement of the current legal framework would help Mozambique address many corruption risks. - Under the Public Probity Law: - Ministries and public agencies currently have their own public ethics commissions, which are under the guidance and coordination of the CPEC and which guarantee and supervise implementation of the standards of the conflict of interest system within the agency. - The role of these committees will be enhanced through the preparation and publication of terms of reference. - Committees will be formally tasked with advising, training, and keeping management, staff, and the public informed about conflict-of-interest and anti-corruption measures and integrity policies within their ministry or agency. - Committees will be enabled to carry out their function effectively and free from any undue influence and shall be permitted to maintain the confidentiality of their sources in accordance with Mozambique’s whistleblower law. - Committee members will either be staffed full time on such tasks or provided sufficient time away from their other work to carry out these duties effectively. ### Institutional strengthening - Recognition: nearly all institutions would welcome further resources and training; limited budgets have prevented institutions from fulfilling their mandates. - Resource shortfalls identified: - Insufficient funds to set up tribunals; - Insufficient funds to hire the requisite numbers of magistrates, investigators, auditors, and analysts; - Insufficient funds to maintain electronic systems and set up websites; - Insufficient funds to raise salaries to requisite levels to mitigate corruption concerns. - Response as conditions permit: - Address funding shortfalls progressively. - Invest in human resources through training. - Continue and strengthen training programs for specialists who deal with complex corruption and related financial transactions to provide in-depth and continuing education to keep pace with the rapidly changing financial and technological landscape. - Legislative amendments currently in train will also seek to enhance the independence of institutions such as the CPEC. *Source: 1mozea2019004 - 61. The plans to improve the functioning of our anti-corruption framework can be.* ### 66. We will also seek to strengthen the GCCC in particular. The government supports ### 66. We will also seek to strengthen the GCCC in particular. The government supports ### Strengthening the GCCC and coordination with SERNIC - Support GCCC initiatives: establishment of a Maputo provincial office; establishment of an electronic platform for public complaints of corruption; expansion of public communications. - Priority actions (resources permitting): reduce to writing the GCCC’s detailed procedures for investigating and prosecuting corruption cases, consistent with the Codes of Criminal and Civil Procedure, and provide clear criteria to limit discretion (for example, criteria for assignment of cases to investigators and magistrates following pre-trial investigation). - Coordination with SERNIC: - Assess how to better recognize contributions of SERNIC officers during secondments to the GCCC. - Assessment shows need to create an anti-corruption brigade in SERNIC to better manage members and plan training. - Continue work on better coordination and consider enacting regulations to: - set minimum periods for rotation of SERNIC personnel assigned to the GCCC; - empower the GCCC to extend rotations on an as-needed basis; - ensure promotions and compensation within SERNIC take into account time spent on secondment to the GCCC. ### Reform measures — overview and prioritized actions - Section III lists commitments focused on governance and anti-corruption across several thematic areas. Selected measures and responsibilities (MEASURE — DESCRIPTION — PRIORITY — RESPONSIBLE ENTITY): TRANSPARENCY - 1 Compile an electronic list of those defined as “public servants” as defined in the Public Probity Law in each ministry and public institution - Develop terms of reference for focal points in each ministry/public institution to compile and continuously update an electronic list of persons under Article 3 of the Public Probity Law and provide ongoing access to these lists by relevant government agencies. - Priority: High - Responsible Entity: Central Public Ethics Commission - 2 Regulate and report on compliance with public requests for access to information - Require public agencies to establish and publish procedures for responding to public requests under the 2014 Right to Information Law, include contact persons/units and deadlines; publish statistics on compliance (number of requests received, how responded, justifications for negative responses, length of time taken); develop and disseminate lists of documents/types of information which may be withheld as confidential. - Priority: Medium - Responsible Entity: Ministry of Justice - 3 Establish publicly accessible repository of laws - Ensure free, public access to all legal instruments in force on a government-operated website. - Priority: Medium - Responsible Entity: National Assembly RULE OF LAW - 4 Finalize and implement insolvency regulations - Finalize and implement regulations on insolvency in line with Decree No. 1/2013 and adopt legislation regulating the activity of insolvency administrators. - Priority: High - Responsible Entity: Ministry of Justice - 5 Digitize and make accessible to the public the land and movable property registries - Digitize registries and provide public access for property of public officials to enhance transparency and access by ministries and civil society. - Priority: Medium - Responsible Entity: Ministry of Justice MARKET REGULATION & BUSINESS ENVIRONMENT - 6 Consolidate licensing for all economic activities - Unify licensing under a single entity; mandate centralized payment of licensing fees, linked to e-SISTAFE. - Priority: High - Responsible Entity: Ministry of Industry - 7 Digitize and make accessible to the public the company registry - Digitize company registry and provide public access to enhance transparency and access by ministries and civil society. - Priority: Medium - Responsible Entity: Ministry of Justice AML/CFT - 8 Develop and effectively implement regulations and procedures for DNFBP registration and filing of STRs - Approve regulations and publish/implement guidelines for real property and insurance agents to register with GIFiM and file STRs, in line with FATF standards. - Priority: High - Responsible Entities: Council of Ministers; GIFiM FISCAL GOVERNANCE - 9 Strengthen the PDM regulatory framework - Revise the public debt management decree and the law and decree on SOEs in line with fiscal governance and transparency section of the Report. - Priority: High - Responsible Entity: Mozambique Government - 10 Strengthen transparency of SOE management - Publish, annually: (i) a complete list of entities comprising the SOEs and other public bodies with financial risks indicators; (ii) a link to the annual financial statements with the opinion of the external auditors for the main SOEs; and (iii) the percentage of government share in corporations where the government is not the main shareholder. - Priority: High - Responsible Entities: IGEPE, debt management unit - 11 Strengthen sustainability and transparency of public debt and investment decisions - Provide clear description of borrowing limits and approval for SOEs at MEF / Council of Ministers; publish quarterly, comprehensive and timely reports for public sector debt, guarantees and on-lending; adopt Public Investment law to make project appraisal by DEEF mandatory and publish a summary of its decisions. - Priority: High - Responsible Entities: IGEPE, debt management department - 12 Chain of expenditure - Issue quarterly commitment ceilings for spending agencies and issue decree/admin order to: (i) make real-time recording of commitment and verification of expenditures mandatory for all units operating within e-SISTAFE; and (ii) make mandatory the attachment of the commitment note issued by e-SISTAFE for each purchase and inform suppliers. - Priority: High - Responsible Entities: DNT, DNPO - 13 Control framework - Adopt and implement a formalized control framework regularly assessed by IGF and AT to report on integrity and compliance of key PFM processes on major risks (public procurement, recording of commitments in e-SISTAFE, salaries and wages). - Priority: High - Responsible Entities: IGF, AT - 14 Disclosure of fiscal risks - Resume annual disclosure of the fiscal risk statement covering all major fiscal risks. - Priority: Medium - Responsible Entity: Gabinete de Gestão de Risco - 15 Transparency in Procurement - (i) Publish quarterly reports with statistics on public procurement processes (contracts procured through open competitive tenders vs. direct awarding); and (ii) publish the manual of public procurement procedures. - Priority: Medium - Responsible Entity: Central Unit on Public Procurement (UFSA) EXTRACTIVE SECTOR GOVERNANCE - 16 Compliance with EITI beneficial ownership requirement - (i) Amend commercial code to ensure adequate definition of beneficial ownership and legally compel companies applying for or holding a participating interest in an oil, gas or mining license or contract to disclose their beneficial owner in line with EITI compliance (by 2020); (ii) ensure beneficial ownership information is held in a publicly available registry. - Priority: High - Responsible Entity: Ministry of Mines - 17 Transparency in licensing—beneficial ownership - Require reporting and publication of beneficial ownership in license applications. - Priority: High - Responsible Entity: Ministry of Mines - 18 Transparency in licensing—procedures - Enforce timing of application/approval process by requiring each extractive oversight entity to establish and publish clear guidelines including contact persons/units and deadlines; publish statistics on compliance (number of applications received and length of time taken to complete each stage). - Priority: Medium - Responsible Entity: Ministry of Mines - 19 Award of mining licenses - Publish evaluation criteria, final bids, associated scores and bid awards and independent verification of final award; make licensing application process fully electronic with public access and applicant notifications at each stage. - Priority: Medium - Responsible Entity: Ministry of Mines - 20 Fiscal Transparency Evaluation - Undertake updated Fiscal Transparency Evaluation including Pillar IV on resource revenue management and implement recommendations. - Priority: Medium - Responsible Entity: Ministry of Finance CENTRAL BANK GOVERNANCE - 21 Complete the revision of the Central Bank Organic Law - Revise BM’s Organic Law to strengthen BM’s mandate, limit monetary financing, and improve autonomy and governance structure, notably by introducing checks and balances. - Priority: High - Responsible Entity: BM - 22 Assess effectiveness of organizational structure - Following assessment, implement further modifications identified as critical, including formalizing guidelines on each unit’s functions and further streamlining organizational structure. - Priority: Medium - Responsible Entity: BM FINANCIAL SECTOR OVERSIGHT - 23 Complete the revision of the banking law - Revise banking law to modernize the safety net and crisis management framework, in line with international best practice as applicable in the case of Mozambique. - Priority: High - Responsible Entity: BM ANTI-CORRUPTION FRAMEWORK - 24 Enhance procedures for pursuing corruption cases - Develop clear, written procedures for the GCCC on steps for investigating and prosecuting corruption cases, including clear criteria for assignment of cases. - Priority: High - Responsible Entity: Ministry of Justice - 25 Review Public Probity Law, including to strengthen prevention of conflicts of interest - Review law to: (i) better clarify to which individuals various requirements apply; (ii) strengthen definition of conflict of interest; (iii) require submission by new public servants upon hiring of declaration of interests; establish published procedures for reporting conflicts of interest (indicate person/unit, confidentiality protections, procedures for recusal and waiver, procedures for escalating concerns to the GCCC). - Priority: High - Responsible Entity: Ministry of Justice - 26 Adopt procedures to enhance compliance with Public Probity Law - Adopt procedures to clarify ambiguities including procedures for receipt of gifts; procedures for submitting asset declarations (including limitations on ability to amend or correct declarations); procedures for applying sanctions regarding non-compliance. - Priority: Medium - Responsible Entity: Ministry of Justice - 27 Review the asset declaration system to enhance compliance - Digitize asset declaration process and facilitate public access to filed declarations; publish a list of individuals required to file and whether each has complied; revise the form to ensure it collects all relevant information. - Priority: Medium - Responsible Entity: Ministry of Justice - 28 Enhance framework for reporting conflicts of interest—contact point - Prepare and publish terms of reference for public ethics contact person or unit in each government agency to coordinate corruption- and conflict-of-interest-prevention measures; person/unit to report directly to head of agency, maintain confidentiality, be enabled to carry out functions effectively and free from undue influence, and be staffed full time or provided sufficient time. - Priority: Medium - Responsible Entity: Ministry of Justice - 29 Enhance coordination and human resource management between the GCCC and SERNIC - Enact regulations setting minimum periods for rotation of SERNIC personnel assigned to the GCCC; empower GCCC to extend rotations as needed; ensure promotions and compensation within SERNIC take into account time spent on secondment to the GCCC. - Priority: Medium - Responsible Entity: Ministry of Justice ### Annex I — government entities participating in the diagnostic report (selected) - Government Entities listed include: Administrative Tribunal; Bank of Mozambique; Central Anti-Corruption Commission (GCCC); Central Public Ethics Commission; Central Unit on Public Procurement (UFSA); Corporate Registry Office; Criminal Investigative Police (SERNIC); Directorate of Economic and Financial Studies; Financial Intelligence Unit (GiFM); Institute for the Management of State Holdings (IGEPE); Inspectorate General of Finance (IGF); Institute of Mines (INAMI); Institute of Energy; Ministry of Mineral Resources and Energy; Ministry of Justice; Ministry of Economy and Finance; Ministry of Industry and Commerce; National Institute of Statistics; Pharmaceutical Drug Center; Public Debt Office; Public Prosecutor’s Office (PGR); Receipt and Verification Committee; Tax Authority. - Judiciary: Superior Council of Magistrates; Supreme Court of Mozambique. - International Organizations: African Development Bank; Delegation of the European Union to Mozambique; World Bank. - Foreign Governments: High Commission of the Republic of South Africa in Mozambique; UK Department for International Development. - Nongovernmental Organizations: Bar Association; Centro de Integridade Pública (CIP); Publish What You Pay Mozambique (Kuwuka JDA). - Business Sector examples: Anadarko; Associação de Comércio, Indústria e Serviços (ACIS). ### Annex II — summary of main indicators (selected numeric results) - Doing Business Report (scale 0–100): - Enforcing contracts: 39.78 - Resolving insolvency: 46.89 - Doing Business rank: Mozambique ranked 167th of the 190 economies assessed for enforcing contracts (distance to the frontier 39.78), with an estimated enforcement cost of 53.3% of the contract value and a time cost of 950 days (improvement over 2017 enforcement costs at 119% of contract value). Insolvency: average recovery of 29.1 cents on the dollar in 1.5 years; insolvency distance to the frontier 46.89 ranks Mozambique 84th among the 190 economies assessed. - CPIA (scale 1–6): - Property rights and rules-based governance: 2.5 - Ibrahim Index of African Governance (scale 0–100): - Rule of Law: 53.8 (ranked 31 of 54 countries assessed; trend described as “Increasing Deterioration”). - Bertelsmann Transformation Index (scale 1–10): - Rule of Law: 3 - Index of Economic Freedom (scale 1–100): - Property Rights: 33.9 - Judicial Effectiveness: 35.2 - Worldwide Governance Indicator (regulatory quality): Mozambique at the 25th percentile with a score of -0.73 on a scale of -2.5 to +2.5. - World Bank Doing Business 2019 ranks cited: - Ease of starting a business: 174 of 190 economies. - Ease of doing business: 135 of 190 economies, score 55.53 (scale 0–100). *Source: Extracts from the cited IMF diagnostic report content unit.* ### 51.61 for SSA. The CPIA assessments on the business regulatory environment (which ### 1mozea2019004 - 51.61 for SSA. The CPIA assessments on the business regulatory environment (which ### Indicators on Market Regulation - WGI (Scale -2.5 (low) – +2.5 (high)) - Regulatory Quality -0.73 - CPIA (Scale 0 (low) – 6 (high)) - Q6: Business Regulatory Environment 3.0 - Q15: Quality of Public Administration 3.0 - Trade: 2017 4.0 - Bertelsmann Transformation Index (Scale 0 (low) – 10 (high)) - Consensus Building 4.6 - Steering Capability 4.7 - Resource Efficiency 2.7 - Private Property 5.5 - Market Organization 4.5 - Global Insight Business Risk (Scale 0 (low) – 1 (high)) - 0.33 - Africa Integrity Index (Scale 0 (low) – 100 (high)) - In practice, major public procurements involve competitive bidding. 0 - In practice, civil servants' work is not compromised by political interference. 0 - In practice, civil servants are appointed and evaluated according to professional criteria. 0 - In practice, citizen requests for public information are effective. 0 - In practice, the government actively enforces the protection of patents, copyrights, trademarks or other intellectual property rights. 25 - In practice, the Office of National Statistics (ONS) produces detailed and timely data on employment. 50 - In practice, there is a government policy/strategy to increase citizen access to the Web. 50 - In practice, roads/bridges networks between towns and cities exist and are maintained. 25 - In practice, there is a functioning safety monitoring system for air transport. 75 ### Public Financial Management and Fiscal Transparency — overview - Key diagnostics used: - Public Expenditure and Financial Accountability (PEFA) - Fiscal Transparency Evaluation (FTE) - Tax Administration Diagnostic Assessment Tool (TADAT) - Public Investment Management Assessment (PIMA) - Debt Management Performance Assessment (DeMPA) - Open Budget Index (OBI) - Extractive Industries Transparency Initiative (EITI) validation - OECD Methodology for Assessing Procurement Systems (MAPS) preliminary assessment - Summary finding: diagnostics capture systems, processes and institutions; highest scores indicate practices meeting internationally recognized standard of good performance. Selected indicators presented below. ### PEFA (Mozambique 2015) - Assessment applied two complementary versions: 2015 testing version and 2011 methodology. - General finding: Mozambique has continued to improve its PFM system, with increased performance in areas such as fiscal transparency and budget reporting, although further reforms are needed to make the system fully consistent with international good practice. - PEFA Indicators (Scale D (low) – A (high)) - PI.2 Composition of expenditure outturn compared with original approved budget D+ - PI.4 Classification of the budget C - PI.5 Comprehensiveness of information included in budget documentation D - PI.6 Extent of reporting on extra-budgetary operations C+ - PI.8 Performance information for achieving efficiency in service delivery C - PI.9 Public access to key fiscal information D - PI.10 Fiscal risks management C+ - PI.11 Public investment management D+ - PI.12 Public asset management C+ - PI.18 Legislative scrutiny of the annual budget law C+ - PI.19 Revenue administration compliance C+ - PI.23 Transparency, competition and complain mechanisms in procurement D+ - PI.25 Effectiveness of internal audit C+ - PI.27 Quality and timeliness of in-year budget reports C+ - PI.29 SAI independence and external audit of the government’s annual financial reports D+ - PI.30 Legislative scrutiny of external audit reports D+ - 2011 methodology additional indicators: - PI.4 Stock and monitoring of expenditure payment arrears D+ - PI.16 Predictability in the availability of funds for commitment of expenditures C+ - PI.20 Effectiveness of internal controls for non-salary C+ ### FTE (Mozambique 2014) - Mozambique was the first African country to undertake and publish the FTE, in 2014. - Evaluation headline: fiscal reporting and budgeting practices broadly in line with basic and good practices, but disclosure and management of fiscal risks are inadequate and should be improved to manage expected increase in natural resource revenues. - FTE Indicators (Scale: Not Met (low), Basic, Good, Advanced (high)) - 1.1.1 Structure of the Public sector: No registry of public sector entities consistent with international practices — Not Met - 1.1.3 Coverage of Stocks: The annual financial reports cover cash and debt, but most of the State’s assets and liabilities are not reported — Basic - 1.1.5 Tax Expenditures: Tax expenditure has increased to 3% of GDP, but limited information on revenue loss is published annually — Basic - 1.3.2 Data Consistency: The fiscal reports include basic reconciliation between the balance and the financing, but limited internal consistency checks may reduce the reliability of the fiscal reports (discrepancies) — Basic - 1.4.4 Reliability: The requirements of SISTAFE are not fully met and also impact the reliability of financial statements — Not Met - 2.4.1 Fiscal Policy Objectives: No comprehensive set of fiscal targets and fiscal rules in place to manage the expected natural resource revenue, and no regular reports on numerical objective for the main fiscal aggregates — Not Met - 3.1.2 Specific Fiscal Risks: Fiscal operations prone to various specific fiscal risks not yet addressed, disclosed and quantified — Basic - 3.2.2 Asset and Liability Management: Borrowing is authorized by law and some risks surrounding the government’s debt holdings are analyzed and disclosed, but the risks analysis is too limited in respect of the significant stocks of debts and financial assets of the public sector — Basic - 3.2.3 Natural Resources: Lack of public information on the volume and current value of the natural resources, which represents the main assets and fiscal risk in Mozambique — Not met - 3.2.5 Guarantees: Government guarantees, and their management policy are not disclosed — Not met - 3.2.6 Financial Sector Exposure: Financial exposure of government has not been quantified and disclosed annually (deposits represent 40% of GDP) — Not Met - 3.2.7 Major and Multi-Annual Contracts: No published government report including total rights, obligations, and other exposures under major and multi-annual contracts — Not Met - 3.3.2 Public Corporations: Direct transfers between the government and public corporations are disclosed on an annual basis, but fiscal risks resulting from financial performance of public corporations are not assessed — Basic - 3.3.3 Quasi-fiscal activity: No qualitative discussion of quasi-fiscal activities in the budget (QFAs resulting from electricity pricing policy estimated in 2009 at 7 % of GDP, or 19% of budget) — Not Met - 3.3.4 Health and Social Security: The current financial position of social security is not disclosed annually; INSS financial situation and liabilities are not monitored — Not Met ### TADAT Diagnostic (Mozambique 2015) - Mozambique was among the first countries to assess tax administration using TADAT. - Assessment finding: despite progress in modernizing revenue collection, the basis for a solid system is not yet in place: the taxpayer register is incomplete and inaccurate, on-time filing and payment rates of core tax returns are low, and there is no consolidated compliance and institutional risk management strategy. - TADAT Indicators (Scale D (low) – A (high)) - P1-1. Accurate and reliable taxpayer information D - P1-2. Knowledge of the potential taxpayer base C - P2-3. Identification, assessment, ranking, and quantification of compliance risks D - P3-8. Time taken to respond to information requests D+ - P4-10. On-time filing rate D - P5-11. Timeliness of payments D - P5-12. Stock and flow of tax arrears C+ - P6-13. Use of tax audits and other initiatives to detect and deter inaccurate reporting C - P6-14. Coverage of automated information cross-checking D - P6-15. Monitoring the extent of inaccurate reporting D - P7-17. Stock and flow of dispute cases C+ - P7-18. Time taken to resolve disputes D - P7-19. Degree to which dispute outcomes are acted upon D - P8-21. Use of efficient collection and reporting systems C - P9-23. External oversight of the tax administration C+ - P9-26. Publication of activities, results, and plans C+ ### PIMA Diagnostic (Mozambique 2015) - PIMA pilot in Mozambique showed relatively strong institutions for budget comprehensiveness but weaknesses in public investment management reducing efficiency of public investment for growth. - Key PIMA Indicators (Scale low – high) - 1.a. Permanent Fiscal Rules for Fiscal Policy Low - 1.b. Fiscal rules to protect Public Investment Low - 4.c. Contingent PPPs Liabilities Low - 5.b. Independent Regulators Setting the Prices of Economic Infrastructure services Low - 5.c. Government Oversight of SOEs Investment Low - 7.c. Information on PPPs Transactions in the Budget Documentation Medium - 9.a. Cost-Benefit Analysis for Capital Projects Medium - 9.b. Appraisal of Projects Low - 9.c. Risks Taken into Account in Project Appraisals Low - 10.b. Government Publishes and Adheres to Standard Criteria for Project Selection Medium - 10.c. Pipeline of Approved Investment Low - 11.a. Total Project Outlays Appropriated by Parliament Low - 12.a. Commitment of Expenditure on Capital Projects Low - 12.b. Cash for Project Outlays Timely Released Low - 13.c. Ex-post Audits of Capital Projects Low - 14c. Ex post Review and Evaluation of Major Projects Low - 15.a. Surveys of Public Assets Medium - 15.b. Non-Financial Asset Values Recorded in the Government Balance Sheets Medium ### DeMPA Evaluations (Mozambique 2008 and 2017) - Two DeMPA evaluations completed: 2008 and 2017. - General finding (2017): mixed track record in government debt management capacities and institutional arrangements; technical and analytical skills improving but lack of adequate debt management policies and procedures and persisting front and back office weaknesses require immediate actions. - DeMPA Indicators (Scale D (low) – A (high)) — Mozambique 2017 Scores - DPI-2 1. Managerial Structure: Borrowing and Debt-Related Transactions C - DPI-2 2. Managerial Structure: Loan Guarantees D - DPI-3 1. DMS: Quality of Content D - DPI-3 2. DMS: Decision-Making Process D - DPI-4 1. Debt Reporting and Evaluation: Debt Statistical Bulletin D - DPI-4 2. Debt Reporting and Evaluation: Reporting to Parliament or Congress C - DPI-5 1. Audit: Frequency and Comprehensiveness C - DPI-5 2. Audit: Appropriate Response D - DPI-6 2. Fiscal Policy: Availability and Quality of Information on Key Macro Variables and DSA D - DPI-8 1. Domestic Borrowing: Market-Based Mechanisms and Preparation and Publication of a Borrowing Plan D - DPI-9 1. External Borrowing: Borrowing Plan and Assessment of Costs and Terms D - DPI-10 1. Loan Guarantees: Availability and Quality of Documented Policies and Procedures D - DPI-10 2. On-lending: Availability and Quality of Documented Policies and Procedures D - DPI-11 1. Effective Cash Flow Forecasting D - DPI-13 1. Segregation of Key Staff Duties C - DPI-14 1. Debt Records: Completeness and Timeliness D - DPI-14 2. Debt Records: Registry System D ### Extractive Industry Governance (EITI) - 2017 EITI validation: International Secretariat concluded Mozambique made meaningful progress in implementing 2016 EITI Standards. - EITI Board: noted meaningful progress, recognized inclusion of transparency provisions in the 2014 Petroleum and Mining Laws, encouraged strong implementation of the law; authorities given 18 months to carry out corrective measures. - Shortcomings to address: more comprehensive disclosure of state participation and revenues; more transparency in allocation and transfer of licenses; disclosure of beneficial ownership; more transparency regarding in-kind revenues, SOE transactions and quasi-fiscal expenditure; improve data quality and accessibility. - 2017 EITI Categories and Mozambique Scores - Licenses and contracts 2.5 - Beneficial ownership Not assessed - State participation Inadequate progress - Revenue collection 4.4 - Transportation revenues Inadequate progress - SOE transactions Inadequate progress - Socio-economic contribution — 6.2 SOE quasi-fiscal expenditures No progress - Outcomes and impact — 7.2 Data accessibility Not assessed ### Corruption and governance indicators - Transparency International’s Global Corruption Barometer 2015-17: 30-40% of survey respondents said they paid a bribe when they came into contact with a public service in the 12 months prior to the survey. - Detailed 2013 results: 30-40% paid a bribe to the tax, permitting, land, judicial, education, and medical authorities; 65% paid a bribe to the police. - Worldwide Governance Index for Control of Corruption: Mozambique rated -0.86 on a scale of -2.5 (weak) to 2.5 (strong); steady decline since 2010 where the score was -0.45. - World Bank CPIA rating for “Transparency, Accountability and Corruption in Public Sector”: 2.5 on a 6-point scale. - Ibrahim Index of African Governance: overall governance score 51 out of 100, ranking 25 of 54 countries; transparency and accountability received 30.5/100, ranking Mozambique 34 of *Source: 1mozea2019004 - 51.61 for SSA. The CPIA assessments on the business regulatory environment (which — PDF chapter).* ### 54. The overall trend for both measures was “Increasing Deterioration.” Maplecroft gave ### 1mozea2019004 - 54. The overall trend for both measures was “Increasing Deterioration.” ### Transparency, accountability, and public perceptions - Maplecroft gave Mozambique 1.43 on a 10-point scale for the effectiveness of official efforts to combat bribery. - In the transparency and accountability category of the Africa Integrity Index, several shortcomings are identified for Mozambique, including: - independence of bodies mandated to receive and investigate cases of alleged public-sector corruption; - investigation of top-level corruption. - Afrobarometer (Round 5, 2013) findings on Mozambican opinions: - 63% of respondents saw no difference between the ruling party and the state. - 66% agreed or agreed strongly that state resources should only be used for state business and should not be used for political party business. - 61% agreed or agreed strongly that members of parliament should not be allowed to hold any other public position. - Opinion on the neutrality of the GCCC: - 42% agreed that it performed its duties neutrally. - 29% agreed that the GCCC made decisions that favored particular people or political parties. ### Indicators on Corruption — Mozambique (reported values) - Corruption WGI - Scale -2.5 (low) – +2.5 (high) - Control of Corruption: -0.86 - CPIA - Scale 0 (low) – 6 (high) - Q16: Transparency, Accountability and Corruption in Public Sector: 2.50 - Ibrahim Index of African Governance - Scale 0 (low) – 100 (high) - Overall Governance: 51 - Transparency and Accountability: 30.5 - Maplecroft - Scale 0 (low) – 10 (high) - Ranks 198 economies on the prevalence of bribery and the effectiveness of official efforts to combat it on a scale 0-10: 1.43 - Africa Integrity Index - Scale 0 (low) – 100 (high) - In practice, allegations of corruption against senior level politicians and/or civil servants of any level are investigated by an independent body.: 0 - In practice, the body/bodies that investigate/s allegations of public sector corruption is/are effective.: 25 - In practice, appointments to the body/bodies that investigate/s allegations of public sector corruption support/s the independence of the body.: 0 ### Definitions and conceptual framing (excerpted definitions used in the Report) - “Governance”: - refers to the institutions, mechanisms, and practices through which governmental power is exercised in a country, including for the management of public resources and regulation of the economy. - includes processes at the country level, including institution-level structural arrangements. - is an inherently neutral term, describing the framework for exercising authority, not characterizing its results. - “Good governance”: - is a normative concept recognizing that the quality of governance can impact its effectiveness and efficiency in achieving desired outcomes. - “Corruption”: - generally accepted definition: “the abuse of public office for private gain.” - focuses on abuse by public actors; fraudulent acts perpetrated exclusively by private citizens are not covered (though corruption is often facilitated by private actors). - an act can be corrupt even if it does not result in direct financial gain (e.g., abuse of office due to political interference). - can pervert the law-making process itself (e.g., “state capture” where legislators’ decisions are motivated exclusively by private interests). - systemic corruption is defined in related IMF work as circumstances where “corruption is no longer a deviation from the norm, but is manifested in a pattern of behavior so pervasive and ingrained that it becomes the norm.” ### Policy-relevant implications highlighted in the text - The presence of corruption generally indicates shortcomings in good governance. - Any effective strategy for addressing corruption problems must be more comprehensive than simply anti-corruption measures; durable solutions will encompass governance improvements more broadly, including: - transparency; - accountability; - appropriately balanced regulation; - effective institutions. - Promoting good governance is presented as the most durable way of addressing systemic corruption. *Source: 1mozea2019004 (IMF Diagnostic Report excerpt).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2019/1mozea2019004.pdf_