## 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

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### 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.*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [Policy](https://www.imf.org/en/news/search)
- [Mozambique and the IMF](http://www.imf.org/external/country/MOZ/index.htm)
- [IMF approves PSI for Mozambique](http://www.imf.org/external/np/sec/pr/2007/pr07135.htm)
- [Poverty reduction strategy](http://www.imf.org/external/pubs/cat/longres.cfm?sk=20350.0)
- [IMF TA overview](https://www.imf.org/external/pubs/ft/survey/so/2007/POL1126A.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/socar1126c_