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The Political Economy of the Budget Process in Mozambique

Author: T Hodges and R Tibana
Date: 2004
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Summary

After a devastating civil war, high levels of external aid have helped to rebuild Mozambique, financing a large expansion of public infrastructure and services. But has this aid also weakened the government’s policy-making and budgeting, and reduced the incentive to steward resources efficiently? This paper examines the nature of the budget process in a highly aid-dependent developing country with weak institutions. Is the executive more accountable to foreign donors than to the Mozambican society?

In Mozambique, three key features of the budget process stand out. Firstly there is no single budget allocated according to government policies, but a range of partially overlapping budget systems, with much of the external aid spending off-budget. With poor data on the available resources, and so much of the allocation predetermined by donors, there is little incentive or ability to formulate a budget that does anything more than apply an incremental approach to expenditure.

Secondly, the consequences of traditional project assistance reinforce these budgetary weaknesses. Since projects are negotiated directly between donors and line ministries, executive accountability to parliament is weakened. The third factor is the lack of pressure exerted on the government by Mozambican society. A complex and confusing presentation of the budget is compounded by generally low levels of education and literacy, and a lack of interest from the media.

The behaviour of government, civil society organisations (CSOs), and donors is affected by both their interest and their capacity:

• The executive’s main interest is in maintaining the function of the state apparatus, with minimum disruption to public services. There is little incentive to think strategically about resource allocation or efficiency.
• The lack of highly qualified personnel within the treasury, combined with poor salaries and performance recognition leads to an inadequate, poorly motivated staff, unable to effectively challenge line ministries.
• Besides being ‘against’ the governing party, the RENAMO party has few distinctive policies, and provides an ineffective opposition. With little academic or professional expertise to challenge budgetary decisions, the economic debate is disregarded in favour of a focus on micro issues and local agendas.
• Interest from CSOs is low – there is little concept of ‘tax-and-spend’, since the economy is under developed and the donor contribution so large. The small private sector benefits from political patronage, and has little interest in articulating alternative policies.
• Donors have a responsibility to limit fiduciary risk, and have traditionally protected their aid investment by robust project management. New thinking on aid effectiveness is now influencing donors to move funds on-budget, and work more in partnership with government.

The almost complete absence of a domestic demand from government for improvements in the budget is due to deeply rooted structural features of the Mozambican situation, which will improve only gradually.

• The huge amount of external, off-budget aid has had the effect of absolving the government of responsibility for resource allocation.
• Incentive for greater government responsibility will only rise radically if much more external aid is placed within general budget support (GBS), and common funds at sectoral level.
• It is unlikely that many donors will increase GBS funding, accepting both the greater fiduciary risk and the loss of control over priority setting and resource allocation.
• Capacity development, rather than just short-term technical assistance, is required to strengthen human resources, and address financial methodologies and procedures.
• A more effective parliament which is able to place real pressure on the executive is necessary before a policy driven budgetary process can emerge.
• The empowerment of the mass population, in order that they can have access and influence to budgetary decisions, is a crucial factor. Such positive developments are likely to result from reductions in poverty, illiteracy and vulnerability.

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Source: Hodges, T. and Tibana, R., 2004, 'The Political Economy of the Budget Process in Mozambique', Oxford Policy Management, Oxford
Author: Oxford Policy Management (OPM), http://www.opml.co.uk