## _cr09117

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---

### PARPA II: adoption and institutionalization
- PARPA II (revised PARPA 2005–09) is the Mozambican Poverty Reduction Strategy Paper and the operational plan for Government’s Five Year Program (2005–09).
- Prepared through broad-based consultations with major stakeholders and civil society, involving national and provincial Development Observatories.
- For the first time includes a strategic matrix of key indicators jointly developed by Government, donors and civil society.
- Indicators are integrated into and monitored through the Economic and Social Plan (PES) and the PRSP Annual Progress Report (BdPES), which are submitted to Parliament.
- PARPA II was presented to the Executive Boards of Directors of the International Development Association and the International Monetary Fund in November 2006, along with the Joint Staff Advisory Note.
- Government and direct budget support donors review program implementation annually in April and agree new commitments four weeks later; a joint Mid-Year Review in September agrees performance indicators and targets for the following year.
- The April 2008 Joint Review and the September 2008 Mid-Year Review aide-mémoires were used as background for this JSAN.

### Macroeconomic and fiscal framework (2007)
- Staffs welcome coverage of macroeconomic developments in 2007 but encourage broader discussion of the fiscal sector and donor aid inflows and a forward-looking macroeconomic framework.
- Core policy objective: maintain high and sustainable growth to reduce poverty.
- 2007 macro context:
  - Extensive flooding and significant increases in international import prices for fuel and foodstuffs.
  - Higher international prices for exports and substantial investment capital inflows.
- Key macroeconomic outcomes and policy settings:
  - GDP growth in 2007: 7 percent.
  - Mozambique’s macroeconomic program supported by an IMF Policy Support Instrument since June 2007.
  - Government committed to avoid recourse to domestic financing to make room for private sector credit.
  - Large domestic debt repayments since 2002, but unable to make repayments in 2007 due to shortfalls in external aid (donor administrative delays) intended for on-lending and some deficiencies in cash-flow management.
  - Domestic revenues increased by 1 percent of GDP compared to 2006, owing to stronger income and profit tax collections.
  - Expenditures on ‘priority’ areas declined from 17 percent of GDP and 65 percent of total expenditures in 2006 to about 16.5 percent of GDP and about 61 percent of total expenditures in 2007.
  - Continued difficulties executing capital expenditures.
- Monetary and price developments:
  - Bank of Mozambique maintained prudent monetary policy with a flexible exchange rate.
  - Overall inflation trended down but erratic due to volatile food prices; objective to reduce overall inflation to about 6 percent was not met.
  - Overall inflation in the twelve months to December rose to above 10 percent due to climate shocks and higher fuel and food import prices.
  - Foodstuffs account for over half of the overall CPI basket; food prices in the two years to the end of 2007 increased by about one-third.
  - Excluding food and energy-related items, inflation fell below the 5 percent medium-term target for overall inflation.
  - Private sector credit increased 17 percent.
  - Broad money’s share in GDP rose, reflecting financial deepening.
- External position in 2007:
  - Aid flows about 13 percent of GDP.
  - Private capital inflows approached 6 percent of GDP.
  - Official import coverage raised to five months (well above the 4 month target).
  - Real effective exchange rate appreciated by 6 percent.
- Risks from global developments and policy advice:
  - Mozambique vulnerable to the global financial crisis and economic slowdown.
  - Lower import prices expected to help reduce inflation and benefit the trade balance, but lower export volumes and reduced private capital inflows likely to reduce economic growth.
  - Possible turbulence could spread to the financial system; authorities urged to monitor and respond decisively.

### Poverty situation
- Long-term trends:
  - National poverty headcount fell from 69 to 54 percent during 1997–2003.
  - Reduction in rural poverty was more pronounced though rural poor proportion remained higher than urban poor.
- Data and 2007 assessments:
  - Next household survey not due until 2009.
  - 2007 poverty assessment based on agricultural panel survey data (TIA 2002–05) suggests poverty and inequality may have increased in recent years; this preliminary result may be related to the drought in 2005.
  - Several qualitative assessments suggest recent increase in poverty and inequality, particularly in urban areas.
  - Dramatic increases in world agricultural and fuel prices may set back some gains from the past decade.
  - BdPES refers to these developments in passing but does not give appropriate prominence or investigate causes, per Staffs.
- Staff recommendations on poverty monitoring and targeting:
  - Strengthen measures to protect the most vulnerable strata of society given volatility and upward pressures on international food prices.
  - Improve mechanisms for poverty monitoring and develop transparent mechanisms for allocation of public resources for strategic objectives.
  - Continue institutionalization and quality improvement of Development Observatories; improve alignment between PES and BdPES.
  - Improve household survey programs, rationalize agricultural statistical system, conclude the Orientation Guide for the Development Observatory (OD), and strengthen Civil Society capacities.
  - Use Medium Term Fiscal Framework (MTFF) and program budgeting to provide a budget profile directed towards poverty reduction that benefits the more vulnerable population and takes into account gender issues.

### Public finance management (PFM)
- General progress in 2007:
  - Roll-out and use of e-SISTAFE completed; increased visibility of impact with use of direct budget execution.
  - Better coverage and structuring of the Budget Execution Report (BER) 2007.
  - Increased inclusion of own revenue in the State Budget (OE).
  - Strengthening of the MTFF 2008–2010.
  - Implementation of program budgeting in three sectors of the State Budget 2008.
- Staffs encourage integration of payroll, pensions and external funds into direct execution procedure and strengthening applications at decentralized levels.
- Revenue reforms and challenges:
  - Government’s target to increase total State revenue by 0.5 percent of GDP annually was exceeded in 2007.
  - Improvements in reduction of tax evasion, management of VAT refunds, and simplification of fiscal and customs procedures.
  - Main challenges: improve budgeting and accounting of own revenue, broaden the revenue base, and manage accumulated debts associated with VAT payments for externally funded projects.
- Procurement and auditing reforms:
  - 472 Units for the Management and Execution of Acquisitions (UGEAs) created, staffed and operational at central, provincial and district level.
  - Training of technical staff and improved coverage of Central Procurement Supervision Unit (UFSA) activities.
  - Procurement process assessed using OECD/DAC methodology; results translated into an action plan.
  - Internal audit: recruitment and training for sector inspectorates and completion of the Basic Auditing Manual.
  - Number of concluded internal auditing reports: 130 in 2007, a 25 percent increase compared to 2006.
  - External auditing (Tribunal Administrativo, TA): conduct of a total of 281 financial audits, an increase of 115 percent; significant improvements in scope and quality of analysis for the General State Accounts (CGE) 2006 report and opinion.
- Staffs encourage improved public access to TA judgments and the Report and Opinion on the CGE, simpler direct connection of the TA to the e-SISTAFE network, and ensured follow up of audits, including payment of fines.
- Staff recommendation: develop a new PFM strategy with a prioritized implementation action plan, building on the 2008 PEFA findings, the 2008 ROSC on fiscal transparency, and the forthcoming CPAR procurement assessment.

### Governance
- Justice sector:
  - Progress in 2007, with approval of Judiciary Organization Law and Organic Law of the Public Ministry.
  - Increase in number of verdicts and coverage of free legal assistance.
  - Delays persist in finalizing legal instruments aimed at improving access to justice (Penal Code, Penal Process Code, Law on the National Legal Aid Institute (IPAJ), Law on Community Courts).
- Anti-corruption:
  - Reorganization of Central Anti-Corruption Office and provincial offices; clarified institutional mission and hiring of specialized human resources.
  - Monitoring responsibilities for the Anti-Corruption Strategy transferred to the Inter-ministerial Commission on the Public Sector Reform (CIRESP) and to the Development Observatory.
- Staffs’ recommendations and concerns:
  - Urge Government to demonstrate stronger efforts in the fight against corruption and accelerate implementation of measures and strategies.
  - Note corruption as a main constraint to business environment development; development partners express need for faster progress.
  - Need to adjust national law in accordance with ratified International Conventions and clarify court application of these Conventions.
  - Eliminate perception of impunity at higher levels and avoid potential conflicts of interest between public officials’ responsibilities and their commercial interests.
  - Improve mechanisms for collection and analysis of information to monitor and assess reform effects on citizens.

### Human development: health, education, water and sanitation
- Health sector:
  - Progress in 2007, but HIV/AIDS pandemic continues to undermine development.
  - Ministry of Health took steps to improve public finance management.
  - Delays in donor fund disbursements negatively affected planned activities: training in Obstetric Care, provision of antiretroviral therapy (adults and pediatric), expansion of health network, and acquisition of equipment.
- Education sector:
  - Positive performance and progress in implementing the Strategic Plan for Education and Culture (PEEC).
  - Net enrolment rate of 6-year old girls: 70 percent against planned 67 percent.
  - Targeted completion rate for girls: 27 percent (slightly exceeded).
  - Pupils per teacher ratio: stayed at 73:1 instead of the planned 71:1.
  - Main challenges: improving quality of education, facilitating sustainable expansion of post-primary education, and building capacity for program management, particularly at the decentralized level.
- Water and sanitation sector:
  - Exceeded 2007 targets: newly constructed scattered water sources: 1,529 against 1,055 planned.
  - Coverage rates increased: rural coverage to 49 percent and urban coverage to 40 percent.
  - Number of people with access to safe drinking water increased to 9.9 million.
  - Sanitation coverage increased to 47 percent in urban areas and to 39 percent in rural areas.
  - Sector defined new roles within decentralization and initiated decentralizing funds to districts and provinces.
  - A 2006/2007 Performance Audit highlighted problems: pending VAT reimbursements, weak financial management, and lack of reliable data on execution of external funds; sector prepared and is implementing an Action Plan to address these issues.

### Social protection performance
- A total of 143,000 people received assistance through the various social protection programs (Food Subsidy Program; Direct Social Support; Social Benefits through Work, Income Generation and Community Development), which is 19 percent above the 2007 target.
- Food Subsidy Program adjustments:
  - Levels of cash transfers were increased from 70MT to 100MT as the minimum level and from 140MT to 300MT for the maximum level.
- Institutional access:
  - Number of branches of the National Institute for Social Protection (INAS) was increased from 19 to 30.

### Economic development
- Natural resources management and legal framework:
  - Revision of the fiscal regime for mineral and petroleum concessions to improve the fiscal contributions of these sectors was a positive achievement in 2007.
  - Concessions for projects need to be granted in a transparent and competitive way, in accordance with the existing legal framework.
  - Opportunity to maximize multi-sectoral policy and operational interventions to capitalize on cross-sectoral synergies (example: synergies between water resource management with hydropower generation, irrigation and flood control).
- Agriculture sector performance and targets:
  - Number of hectares of irrigation systems constructed and/or rehabilitated with public funds was only 88 percent of the target.
  - Percentage of land title requests processed within 90 days was only 52 percent of the target.
  - During 2007, the Rural Development Strategy and the Green Revolution Strategy were approved, followed by the approval of the Food Production Action Plan in 2008.
  - Staffs’ observations:
    - Importance to expand provision of agricultural services and need to increase financial and human resources for the agricultural sector.
    - New strategies could give more emphasis to the economic justification for investments and clarify the rationale by identifying the exact source of market failure.
- Business environment and private sector constraints:
  - Mozambique’s Doing Business ranking improved by six positions in 2007, then decreased by two positions in 2008.
  - More than 90 districts have no commercial banks.
  - Very limited access to finance and high costs of financial services constrain growth of the productive sector.
  - Low level of infrastructure restricts private sector growth.
  - Private sector cites corruption and criminality as negative influences on performance.
- Recommended actions to improve private sector environment:
  - Elimination of the minimum capital requirement in the creation of a company.
  - Gradual elimination of the pre-shipment inspections, in coordination with the creation of domestic customs capacity.
  - Merger of the procedures in the process of obtaining construction licenses (request of the Land User Right (‘DUAT’), request of the topographical map, and the authorization for construction).

### Cross-cutting issues
- HIV/AIDS:
  - Epidemiological data collected in 2007 revealed that the prevalence rates of HIV/AIDS continue to rise, especially in the south of the country.
  - Progress in treatment noted, but Staffs emphasize need to expand scale, quality and effectiveness of national response, especially for prevention.
  - Sectors should review their approach to social protection in relation to orphaned and vulnerable children.
- Natural disasters and disaster management:
  - Government implementation of the Master Plan for Prevention and Mitigation of Natural Disasters continued; 2007 experienced floods, cyclones and drought.
  - Floods exceeded the record 2001 levels, but timely preparations and intervention minimized human impact.
  - Environmental shocks significantly affected food security, reducing physical and economic access to foodstuffs for the most vulnerable households.
  - Staffs note need to improve coordination during the planning phase among governmental sectors and cooperation partners implementing the Master Plan.
  - Financing and institutional recommendations:
    - Improved mechanisms should be found for financing the National Contingency Plan.
    - Improvements needed in the resettlement process.
    - Identify mechanisms for creation of a National Disaster Fund to address ex-ante and ex-post needs (i.e., disaster prevention, relief and recovery) and include systems and/or mechanisms for risk transfer.
- Environmental management and climate change:
  - In 2007 two instruments were approved: the Environmental Strategy for the Sustainable Development of Mozambique, and the Law of Spatial Planning.
  - Implementation difficulties remain; MICOA needs to strengthen coordination between sectors and promote use of instruments such as Strategic Environmental Assessments for sector programs.
  - National Plan for Adaptation to Climate Change (NAPA) was approved in 2007 and needs wide circulation and integration into sector, provincial and district plans.
  - MICOA will continue to promote functioning of Environmental Units in sectors and companies involved in exploitation of natural resources.
- Gender issues:
  - 2007 advances: study on women’s contribution to economic growth; development of protocols for provision of medical aid to victims of violence; dissemination of the Gender Policy and implementation strategy; elaboration of the National Plan for the Advancement of Women; creation of the District Councils for the Advancement of Women (CDAM).
  - Sectoral improvements included inclusion of women in literacy programs, better provision of obstetric care, and increased geographical coverage of Offices for Assistance to Victims of Violence.
  - Ongoing challenge: give greater visibility to gender equality across sectors; continued lack of gender disaggregated data makes it difficult to analyze impact of government policies and programs on genders.

### Conclusions and priority issues
- Staffs agree with Government’s broadly positive assessment of performance in several areas of implementation of the PARPA II during 2007, but identify the need to give priority to:
  - Improvement of mechanisms for allocation of public resources to strategic objectives:
    - Use planning instruments (MTEF, program budgeting) more deliberately to provide a budget profile directed towards poverty benefiting the more vulnerable population, and taking into account gender issues.
  - HIV/AIDS prevention:
    - Increase the scale, quality and effectiveness of the national response, based on a revision of the current strategy.
  - Maximizing benefits from natural resources:
    - Strengthen capacity for selection, negotiation and monitoring of projects and investments, and the legal framework for public-private partnerships to maximize benefits from minerals, petroleum, hydropower, forestry, and agriculture.
  - Economic development in rural areas:
    - Give more attention to small and medium-size firms, stimulate and create synergies between primary sectors (agriculture, forestry, fisheries, aquaculture) and tourism, improve coordination of policies and investments in economic and social infrastructures, and increase provision of public agricultural and financial services.
  - Anti-Corruption Strategy:
    - Government needs to demonstrate stronger efforts in the fight against corruption and eliminate the perception of impunity at higher levels.
    - Avoid potential conflict of interest between public officials’ responsibility and their commercial interests.
    - Establish an adequate monitoring system that regularly produces data on administrative measures in public service, as well as cases taken to court.
    - Adjust national legislation to the ratified international conventions.

*Source: Joint Staff Advisory Note (JSAN) reviewing implementation of PARPA II and 2007 performance, based on Government PES, BdPES, and joint review documents.*

### 1. In September 2006, Government formally approved its revised Action Plan for

### 1. In September 2006, Government formally approved its revised Action Plan for

### PARPA II: adoption and institutionalization
- PARPA II (revised PARPA 2005–09) is the Mozambican Poverty Reduction Strategy Paper and the operational plan for Government’s Five Year Program (2005–09).
- Prepared through broad-based consultations with major stakeholders and civil society, involving national and provincial Development Observatories.
- For the first time includes a strategic matrix of key indicators jointly developed by Government, donors and civil society.
- Indicators are integrated into and monitored through the Economic and Social Plan (PES) and the PRSP Annual Progress Report (BdPES), which are submitted to Parliament.
- PARPA II was presented to the Executive Boards of Directors of the International Development Association and the International Monetary Fund in November 2006, along with the Joint Staff Advisory Note.
- Government and direct budget support donors review program implementation annually in April and agree new commitments four weeks later; a joint Mid-Year Review in September agrees performance indicators and targets for the following year.
- The April 2008 Joint Review and the September 2008 Mid-Year Review aide-mémoires were used as background for this JSAN.

### Macroeconomic and fiscal framework (2007)
- Staffs welcome coverage of macroeconomic developments in 2007 but encourage broader discussion of the fiscal sector and donor aid inflows and a forward-looking macroeconomic framework.
- Core policy objective: maintain high and sustainable growth to reduce poverty.
- 2007 macro context: extensive flooding and significant increases in international import prices for fuel and foodstuffs; higher international prices for exports and substantial investment capital inflows.
- GDP growth in 2007: 7 percent (noted as somewhat below the 8 percent average annual growth achieved over the previous five years).
- Mozambique’s macroeconomic program supported by an IMF Policy Support Instrument since June 2007.
- Government fiscal stance:
  - Committed to avoid recourse to domestic financing to make room for private sector credit.
  - Large domestic debt repayments since 2002, but unable to make repayments in 2007 due to shortfalls in external aid (donor administrative delays) intended for on-lending and some deficiencies in cash-flow management.
  - Domestic revenues increased by 1 percent of GDP compared to 2006, owing to stronger income and profit tax collections.
  - Expenditures on ‘priority’ areas declined from 17 percent of GDP and 65 percent of total expenditures in 2006 to about 16.5 percent of GDP and about 61 percent of total expenditures in 2007.
  - Continued difficulties executing capital expenditures.
- Monetary and price developments:
  - Bank of Mozambique maintained prudent monetary policy with a flexible exchange rate.
  - Overall inflation trended down but erratic due to volatile food prices; objective to reduce overall inflation to about 6 percent was not met.
  - Overall inflation in the twelve months to December rose to above 10 percent due to climate shocks and higher fuel and food import prices.
  - Foodstuffs account for over half of the overall CPI basket; food prices in the two years to the end of 2007 increased by about one-third.
  - Excluding food and energy-related items, inflation fell below the 5 percent medium-term target for overall inflation.
  - Private sector credit increased 17 percent (weaker than expected).
  - Broad money’s share in GDP rose, reflecting financial deepening.
- External position in 2007:
  - Aid flows about 13 percent of GDP, broadly in line with previous years.
  - Private capital inflows approached 6 percent of GDP, substantially higher than in recent years.
  - Official import coverage raised to five months (well above the 4 month target).
  - Real effective exchange rate appreciated by 6 percent.
- Risks from global developments:
  - Mozambique vulnerable to the global financial crisis and economic slowdown.
  - Lower import prices expected to help reduce inflation and benefit the trade balance, but lower export volumes and reduced private capital inflows likely to reduce economic growth.
  - Possible turbulence could spread to the financial system; authorities urged to monitor and respond decisively.

### Poverty situation
- Long-term progress: national poverty headcount fell from 69 to 54 percent during 1997–2003; reduction in rural poverty was more pronounced though rural poor proportion remained higher than urban poor.
- Next household survey not due until 2009; will show whether poverty continued falling.
- 2007 assessments and risks:
  - 2007 poverty assessment based on agricultural panel survey data (TIA 2002–05) suggests poverty and inequality may have increased in recent years, but this preliminary result may be related to the drought in 2005.
  - Several qualitative assessments suggest recent increase in poverty and inequality, particularly in urban areas.
  - Dramatic increases in world agricultural and fuel prices may set back some gains from the past decade.
  - BdPES refers to these developments in passing but does not give appropriate prominence or investigate causes, per Staffs.
- Staff recommendations on poverty monitoring and targeting:
  - Strengthen measures to protect the most vulnerable strata of society given volatility and upward pressures on international food prices.
  - Improve mechanisms for poverty monitoring and develop transparent mechanisms for allocation of public resources for strategic objectives.
  - Continue institutionalization and quality improvement of Development Observatories; improve alignment between PES and BdPES.
  - Improve household survey programs, rationalize agricultural statistical system, conclude the Orientation Guide for the Development Observatory (OD), and strengthen Civil Society capacities.
  - Use Medium Term Fiscal Framework (MTFF) and program budgeting to provide a budget profile directed towards poverty reduction that benefits the more vulnerable population and takes into account gender issues.

### Public finance management (PFM)
- General progress in 2007:
  - Roll-out and use of e-SISTAFE completed; increased visibility of impact with use of direct budget execution.
  - Better coverage and structuring of the Budget Execution Report (BER) 2007.
  - Increased inclusion of own revenue in the State Budget (OE).
  - Strengthening of the MTFF 2008–2010.
  - Implementation of program budgeting in three sectors of the State Budget 2008.
- Staffs encourage integration of payroll, pensions and external funds into direct execution procedure and strengthening applications at decentralized levels.
- Revenue reforms:
  - Government’s target to increase total State revenue by 0.5 percent of GDP annually was exceeded in 2007.
  - Improvements in reduction of tax evasion, management of VAT refunds, and simplification of fiscal and customs procedures.
  - Main challenges: improve budgeting and accounting of own revenue, broaden the revenue base, and manage accumulated debts associated with VAT payments for externally funded projects.
- Procurement and auditing reforms:
  - 472 Units for the Management and Execution of Acquisitions (UGEAs) created, staffed and operational at central, provincial and district level.
  - Training of technical staff and improved coverage of Central Procurement Supervision Unit (UFSA) activities.
  - Procurement process assessed using OECD/DAC methodology; results translated into an action plan.
  - Internal audit: recruitment and training for sector inspectorates and completion of the Basic Auditing Manual.
  - Number of concluded internal auditing reports: 130 in 2007, a 25 percent increase compared to 2006.
  - External auditing (Tribunal Administrativo, TA): conduct of a total of 281 financial audits, an increase of 115 percent; significant improvements in scope and quality of analysis for the General State Accounts (CGE) 2006 report and opinion.
  - Staffs encourage improved public access to TA judgments and the Report and Opinion on the CGE, simpler direct connection of the TA to the e-SISTAFE network, and ensured follow up of audits, including payment of fines.
- Staff recommendation: develop a new PFM strategy with a prioritized implementation action plan, building on the 2008 PEFA findings, the 2008 ROSC on fiscal transparency, and the forthcoming CPAR procurement assessment.

### Governance
- Justice sector:
  - Progress observed in 2007, with approval of Judiciary Organization Law and Organic Law of the Public Ministry.
  - Increase in number of verdicts and coverage of free legal assistance.
  - Delays persist in finalizing legal instruments aimed at improving access to justice (Penal Code, Penal Process Code, Law on the National Legal Aid Institute (IPAJ), Law on Community Courts).
- Anti-corruption:
  - Reorganization of Central Anti-Corruption Office and provincial offices; clarified institutional mission and hiring of specialized human resources.
  - Monitoring responsibilities for the Anti-Corruption Strategy transferred to the Inter-ministerial Commission on the Public Sector Reform (CIRESP) and to the Development Observatory.
- Staffs’ recommendations and concerns:
  - Urge Government to demonstrate stronger efforts in the fight against corruption and accelerate implementation of measures and strategies.
  - Note corruption as a main constraint to business environment development; development partners express need for faster progress.
  - Need to adjust national law in accordance with ratified International Conventions and clarify court application of these Conventions.
  - Eliminate perception of impunity at higher levels and avoid potential conflicts of interest between public officials’ responsibilities and their commercial interests.
  - Improve mechanisms for collection and analysis of information to monitor and assess reform effects on citizens.

### Human development: health, education, water and sanitation
- Health sector:
  - Progress in 2007, but HIV/AIDS pandemic continues to undermine development.
  - Ministry of Health took steps to improve public finance management.
  - Delays in donor fund disbursements negatively affected planned activities: training in Obstetric Care, provision of antiretroviral therapy (adults and pediatric), expansion of health network, and acquisition of equipment.
- Education sector:
  - Positive performance and progress in implementing the Strategic Plan for Education and Culture (PEEC).
  - Net enrolment rate of 6-year old girls: 70 percent against planned 67 percent.
  - Targeted completion rate for girls: 27 percent (slightly exceeded).
  - Pupils per teacher ratio: stayed at 73:1 instead of the planned 71:1.
  - Main challenges: improving quality of education, facilitating sustainable expansion of post-primary education, and building capacity for program management, particularly at the decentralized level.
- Water and sanitation sector:
  - Exceeded 2007 targets: newly constructed scattered water sources: 1,529 against 1,055 planned.
  - Coverage rates increased: rural coverage to 49 percent and urban coverage to 40 percent.
  - Number of people with access to safe drinking water increased to 9.9 million.
  - Sanitation coverage increased to 47 percent in urban areas and to 39 percent in rural areas.
  - Sector defined new roles within decentralization and initiated decentralizing funds to districts and provinces.
  - A 2006/2007 Performance Audit highlighted problems: pending VAT reimbursements, weak financial management, and lack of reliable data on execution of external funds; sector prepared and is implementing an Action Plan to address these issues.

*Source: Joint Staff Advisory Note (JSAN) reviewing implementation of PARPA II and 2007 performance, based on Government PES, BdPES, and joint review documents.*

### 23. In general, the performance of the social protection sector was positive. A total of

### _cr09117 - 23. In general, the performance of the social protection sector was positive. A total of

### Social protection performance
- A total of 143,000 people received assistance through the various social protection programs (Food Subsidy Program; Direct Social Support; Social Benefits through Work, Income Generation and Community Development), which is 19 percent above the 2007 target.
- In relation to the Food Subsidy Program:
  - Levels of cash transfers were increased from 70MT to 100MT as the minimum level and from 140MT to 300MT for the maximum level.
- Institutional access:
  - Number of branches of the National Institute for Social Protection (INAS) was increased from 19 to 30, allowing beneficiaries closer access to the services.

### Economic development
- Natural resources management and legal framework:
  - Revision of the fiscal regime for mineral and petroleum concessions to improve the fiscal contributions of these sectors was a positive achievement in 2007.
  - Concessions for projects need to be granted in a transparent and competitive way, in accordance with the existing legal framework.
  - Opportunity to maximize multi-sectoral policy and operational interventions to capitalize on cross-sectoral synergies (example: synergies between water resource management with hydropower generation, irrigation and flood control).
- Agriculture sector performance and targets:
  - Number of hectares of irrigation systems constructed and/or rehabilitated with public funds was only 88 percent of the target.
  - Percentage of land title requests processed within 90 days was only 52 percent of the target.
  - During 2007, the Rural Development Strategy and the Green Revolution Strategy were approved, followed by the approval of the Food Production Action Plan in 2008.
  - Staffs’ observations:
    - Importance to expand provision of agricultural services and need to increase financial and human resources for the agricultural sector.
    - New strategies could give more emphasis to the economic justification for investments and clarify the rationale by identifying the exact source of market failure.
- Business environment and private sector constraints:
  - Mozambique’s Doing Business ranking improved by six positions in 2007, then decreased by two positions in 2008.
  - Very limited access to finance (illustrated by the fact that more than 90 districts have no commercial banks) and high costs of financial services constrain growth of the productive sector.
  - Low level of infrastructure restricts private sector growth.
  - Private sector cites corruption and criminality as negative influences on performance.
- Recommended actions to improve private sector environment:
  - Elimination of the minimum capital requirement in the creation of a company.
  - Gradual elimination of the pre-shipment inspections, in coordination with the creation of domestic customs capacity.
  - Merger of the procedures in the process of obtaining construction licenses (request of the Land User Right (‘DUAT’), request of the topographical map, and the authorization for construction).

### Cross-cutting issues
- HIV/AIDS:
  - Epidemiological data collected in 2007 revealed that the prevalence rates of HIV/AIDS continue to rise, especially in the south of the country.
  - Although important progress has been achieved, notably in treatment, Staffs note much more must be done to expand the scale of the national response and improve its quality and effectiveness, especially for prevention.
  - Particular attention must be given to the approach to HIV/AIDS in all sectors and sectors should review their approach to social protection in relation to orphaned and vulnerable children.
- Natural disasters and disaster management:
  - Government implementation of the Master Plan for Prevention and Mitigation of Natural Disasters continued; 2007 experienced floods, cyclones and drought.
  - Floods exceeded the record 2001 levels, but timely preparations and intervention minimized human impact.
  - Environmental shocks significantly affected food security, reducing physical and economic access to foodstuffs for the most vulnerable households.
  - Staffs note need to improve coordination during the planning phase among governmental sectors and cooperation partners implementing the Master Plan.
  - Financing and institutional recommendations:
    - Improved mechanisms should be found for financing the National Contingency Plan.
    - Improvements needed in the resettlement process.
    - Identify mechanisms for creation of a National Disaster Fund to address ex-ante and ex-post needs (i.e., disaster prevention, relief and recovery) and include systems and/or mechanisms for risk transfer.
- Environmental management and climate change:
  - In 2007 two instruments were approved: the Environmental Strategy for the Sustainable Development of Mozambique, and the Law of Spatial Planning.
  - Implementation difficulties remain; MICOA needs to strengthen coordination between sectors and promote use of instruments such as Strategic Environmental Assessments for sector programs.
  - National Plan for Adaptation to Climate Change (NAPA) was approved in 2007 and needs wide circulation and integration into sector, provincial and district plans.
  - MICOA will continue to promote functioning of Environmental Units in sectors and companies involved in exploitation of natural resources.
- Gender issues:
  - 2007 advances: study on women’s contribution to economic growth; development of protocols for provision of medical aid to victims of violence; dissemination of the Gender Policy and implementation strategy; elaboration of the National Plan for the Advancement of Women; creation of the District Councils for the Advancement of Women (CDAM).
  - Sectoral improvements included inclusion of women in literacy programs, better provision of obstetric care, and increased geographical coverage of Offices for Assistance to Victims of Violence.
  - Ongoing challenge: give greater visibility to gender equality across sectors; continued lack of gender disaggregated data makes it difficult to analyze impact of government policies and programs on genders.

### Conclusions and priority issues
- Staffs agree with Government’s broadly positive assessment of performance in several areas of implementation of the PARPA II during 2007, but identify the need to give priority to:
  - Improvement of mechanisms for allocation of public resources to strategic objectives:
    - Use planning instruments (MTEF, program budgeting) more deliberately to provide a budget profile directed towards poverty benefiting the more vulnerable population, and taking into account gender issues.
  - HIV/AIDS prevention:
    - Increase the scale, quality and effectiveness of the national response, based on a revision of the current strategy.
  - Maximizing benefits from natural resources:
    - Strengthen capacity for selection, negotiation and monitoring of projects and investments, and the legal framework for public-private partnerships to maximize benefits from minerals, petroleum, hydropower, forestry, and agriculture.
  - Economic development in rural areas:
    - Give more attention to small and medium-size firms, stimulate and create synergies between primary sectors (agriculture, forestry, fisheries, aquaculture) and tourism, improve coordination of policies and investments in economic and social infrastructures, and increase provision of public agricultural and financial services.
  - Anti-Corruption Strategy:
    - Government needs to demonstrate stronger efforts in the fight against corruption and eliminate the perception of impunity at higher levels.
    - Avoid potential conflict of interest between public officials’ responsibility and their commercial interests.
    - Establish an adequate monitoring system that regularly produces data on administrative measures in public service, as well as cases taken to court.
    - Adjust national legislation to the ratified international conventions.

*Source: _cr09117 - 23. In general, the performance of the social protection sector was positive. A total of*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09117.pdf_