Child Poverty in Mozambique. A Situation and Trend ... - Unicef
Child Poverty in Mozambique. A Situation and Trend ... - Unicef
Child Poverty in Mozambique. A Situation and Trend ... - Unicef
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<strong>and</strong> importance of the budget process, creat<strong>in</strong>g costly duplication of report<strong>in</strong>g<br />
mechanisms <strong>and</strong> weaken<strong>in</strong>g the executive’s accountability to Parliament. This<br />
phenomenon also imposes more direct costs on Government, which has to issue<br />
expensive <strong>and</strong> unnecessary domestic debt because there are unused project balances<br />
sitt<strong>in</strong>g idle outside the Treasury mechanism which could be used to temporarily<br />
strengthen the Government f<strong>in</strong>ancial position (Lawson et al., 2006).<br />
This problem is most severe <strong>in</strong> the social services <strong>and</strong> <strong>in</strong>frastructure sectors s<strong>in</strong>ce<br />
they are the largest recipients of external aid. The health sector was therefore chosen<br />
to pilot a study aimed at classify<strong>in</strong>g <strong>and</strong> quantify<strong>in</strong>g off-budget funds, seek<strong>in</strong>g to<br />
outl<strong>in</strong>e the factors lead<strong>in</strong>g to their creation <strong>and</strong> recommend ways to progressively<br />
<strong>in</strong>tegrate them <strong>in</strong>to the State Budget cycle (Cabral et al., 2005). The study<br />
dist<strong>in</strong>guished between entirely off-budget funds <strong>and</strong> three categories of partially<br />
off-budget fund<strong>in</strong>g: (i) off-plan funds that are not <strong>in</strong>scribed <strong>in</strong>to the State Budget; (ii)<br />
off-Treasury funds that are not transferred via the Treasury <strong>in</strong> their execution, <strong>and</strong>;<br />
(iii) off-report funds, which are neither captured <strong>in</strong> <strong>in</strong>ternal audit <strong>in</strong>struments (budget<br />
execution reports) nor external audit <strong>in</strong>struments (CGE). In the health sector <strong>in</strong> 2003<br />
it was estimated that 29 per cent, 60 per cent <strong>and</strong> 44 per cent of funds fell <strong>in</strong>to these<br />
categories respectively. With<strong>in</strong> the off-plan category, the proportion of external funds<br />
was estimated to be 87 per cent, with sector revenues compris<strong>in</strong>g the rema<strong>in</strong><strong>in</strong>g 13<br />
per cent.<br />
In 2006, the M<strong>in</strong>istry of F<strong>in</strong>ance produced guidel<strong>in</strong>es to support donors <strong>in</strong> the<br />
<strong>in</strong>tegration of external funds <strong>in</strong>to the budget cycle (M<strong>in</strong>istry of F<strong>in</strong>ance, 2006) <strong>and</strong><br />
efforts are ongo<strong>in</strong>g to <strong>in</strong>crease this <strong>in</strong>tegration. However, key barriers still rema<strong>in</strong>,<br />
<strong>in</strong>clud<strong>in</strong>g: (i) weak <strong>in</strong>centives for sectors to cede direct control of f<strong>in</strong>ancial allocation<br />
<strong>and</strong> management decisions; (ii) limited <strong>in</strong>stitutional capacity <strong>in</strong> central agencies <strong>and</strong><br />
sectors to susta<strong>in</strong> the necessary changes, <strong>and</strong>; (iii) cont<strong>in</strong>ued use of diverse donor<br />
f<strong>in</strong>anced programmes <strong>and</strong> projects throughout the sector.<br />
Falter<strong>in</strong>g progress <strong>in</strong> align<strong>in</strong>g with Government processes may also be prejudic<strong>in</strong>g<br />
child development outcomes. For example, many <strong>in</strong>ternational partners require that<br />
aid for <strong>in</strong>frastructure projects be exempted from VAT payments, <strong>and</strong> that these be<br />
met by Government. However, the difficulties faced by the Government <strong>in</strong> budget<strong>in</strong>g<br />
for unpredictable VAT payments have hampered project implementation <strong>and</strong> led to<br />
accumulation of debts by Government agencies – a particularly big problem <strong>in</strong> the<br />
water sector, where it leads to delays <strong>in</strong> <strong>and</strong> higher costs for water <strong>in</strong>frastructure<br />
projects (see Chapter III for a more detailed discussion). The World Bank has<br />
demonstrated a potential solution to the problem – all its new agreements now<br />
acknowledge that credits may be used to pay fiscal charges <strong>and</strong> the Bank does<br />
not necessarily require state co-f<strong>in</strong>anc<strong>in</strong>g of projects. However further change <strong>in</strong><br />
this regard is likely to be slow as the rules are written <strong>in</strong>to the domestic laws <strong>and</strong><br />
procedures of <strong>in</strong>ternational partners (Orlowski, 2006). Clearly though, a more vigorous<br />
approach is needed than a commitment to “discuss<strong>in</strong>g, <strong>and</strong> contribut<strong>in</strong>g to a solution<br />
to this problem” (GoM <strong>and</strong> PAP, 2006).<br />
Even amongst the PAPs, a substantial share of project f<strong>in</strong>ance has been reta<strong>in</strong>ed <strong>in</strong><br />
portfolios, with a concomitant flat-l<strong>in</strong><strong>in</strong>g of GBS <strong>in</strong> recent years as a proportion of the<br />
budget (though <strong>in</strong>dicative commitments for 2007 suggest this situation may improve<br />
– see Figure 2.12). The proportion of project aid <strong>in</strong> PAP assistance actually <strong>in</strong>creased<br />
from 36.9 per cent to an estimated 42.3 per cent between 2004 <strong>and</strong> 2006 (Ernst <strong>and</strong><br />
Young, 2006). There is therefore a danger that, overall, the <strong>in</strong>creased focus on global<br />
implementation <strong>and</strong> performance that has accompanied harmonisation <strong>and</strong> alignment<br />
will simply add to the total burden of conditionality, rather than be<strong>in</strong>g accompanied by<br />
a reduction <strong>in</strong> the more <strong>in</strong>trusive micro-management of project aid.<br />
CHILDHOOD POVERTY IN MOZAMBIQUE: A SITUATION AND TRENDS ANALYSIS<br />
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