IMF Survey: Budget Reform Holds Promise in Mozambique
IMF News, November 26, 2007
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Bibliographic details
- Authors: Teresa Dabán, Mario Pesoa IMF Fiscal Affairs Department November
- Published: November 26, 2007
Overview and key outcomes
- Since the end of its civil war in 1992, Mozambique implemented wide-ranging structural reforms that contributed to an average annual growth rate of 8 percent between 1996 and 2006.
- A donor-funded public financial management reform program, backed by the IMF, is identified as a cornerstone of Mozambique's reconstruction and a model of successful post-conflict reform.
- The reform program progressed through a virtuous circle of strong country ownership, sustained donor support, and intensive IMF technical assistance under the Poverty Reduction and Growth Facility and the IMF's Policy Support Instrument.
Stepping stones and institutional reforms
- 1996: Public financial management reform program presented by the authorities at a Consultative Group meeting.
- Program objectives included:
- Modernization of the budget legal framework.
- Upgrading of budget-treasury operations.
- Introduction of a well-designed accounting and reporting system.
- Adoption of an integrated and computerized financial management system.
- Enhancement of internal and external controls.
- Prior actions and milestones before and during SISTAFE/e-SISTAFE:
- 1998: Elaboration of a Medium-Term Fiscal Framework.
- 2001: Strengthening of planning capacity for the elaboration of the first Poverty Reduction Strategy Paper.
- 2002: Promulgation of the government-wide organic budget law (Lei do Sistema de Administração Financeira do Estado, SISTAFE).
e-SISTAFE project milestones (chronological)
- 2002
- Promulgation of SISTAFE.
- Recruitment of an IMF-backstopped long-term resident expert on information technology (IT).
- Approval of the model for managing the reforms of public financial management.
- 2003
- Approval of the procurement manual.
- Recruitment of procurement staff and IT consultants for software development.
- Initiation of consolidation of government's accounts in commercial banks.
- 2004
- Introduction of a virtual electronic Treasury Single Account (e-TSA) by consolidating several treasury bank accounts.
- Execution of the government's financial payments through the e-SISTAFE.
- Recruitment of an IMF-backstopped long-term resident expert on budget formulation.
- 2005
- Use of the e-SISTAFE for centralized execution of line ministries' expenditure at the level of the Ministry of Finance.
- Rollout of the e-SISTAFE on a pilot basis to three ministries (finance, planning, and education).
- Establishment of a full-fledged TSA and a new chart of accounts.
- Departure of the IMF-backstopped long-term expert on IT.
- 2006
- Rollout of the e-SISTAFE to 22 line-ministries.
- Training programs on the use of e-SISTAFE for decentralized budget execution.
- Implementation of the pilot version of the budget formulation module.
- 2007
- Departure of the FAD-backstopped long-term expert on budget formulation.
- Use of the budget formulation module for the preparation of the 2008 draft budget.
- Development of module pilots on asset management, payroll, tax collection and multi-currency TSA.
- Finalization of the e-SISTAFE rollout planned for end-2007.
Donor coordination and implementation arrangements
- 2002: Donors (Belgium, Denmark, Norway, Sweden, the United Kingdom, and the European Union) agreed to pool resources in a common fund to support public financial management reforms.
- Government created UTRAFE within the Ministry of Finance to implement the reforms.
- Monitoring mechanisms established included a Steering Committee of senior Ministry of Finance officials and a Quality Assurance Group composed of international public financial management experts.
IMF role and technical contributions
- The IMF acted as executing agency of donors' funds during 2002-06, responsible for designing the work program and recruiting two long-term resident experts on public financial management.
- IMF Fiscal Affairs Department responsibilities included continuous technical support, diagnostic and inspection missions, and close coordination with the IMF's African Department.
- IMF contributions to e-SISTAFE technical and institutional design included:
- Design of the accounting system.
- Design of the treasury single account.
- Design of budget formulation and execution modules.
- Development of SISTAFE law regulations.
- Establishment of a management model for UTRAFE and the e-SISTAFE implementation plan.
Progress, setbacks, and capacity issues
- Overall progress described as good despite setbacks caused by:
- UTRAFE's limited capacity.
- Lengthy approval of SISTAFE law regulations.
- Difficulties establishing the treasury single account and uploading past budget records into the system.
- Overcoming of these hurdles attributed to the authorities' strong commitment, sustained donor support, and high-quality assistance from IMF long-term resident experts.
Remaining challenges and next steps
- Critical extensions scheduled for implementation during 2007-09:
- Completion of system rollout to all government entities, including local entities and donor-funded activities.
- Development of additional modules on asset management, payroll, pensions, and tax revenue collection.
- Transition plan and sustainability issues:
- After several years of IMF involvement, Mozambican authorities have developed sufficient capacity to continue progress with donor support and for the IMF's role to switch to periodic advice.
- Major challenges for sustainability include securing continued international community support and gradual replacement of external consultants by local civil servants.
IMF Survey: Budget Reform Holds Promise in Mozambique — By Teresa Dabán and Mario Pesoa, IMF Fiscal Affairs Department, November 26, 2007.