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Partnerships Mozambique continues receive external assistance for the financing its public expenditure, including for its development agenda such as poverty reduction and achieving the MDG (Photo: UN Moz)

Mozambique continues receive external assistance for the financing its public expenditure, including for its development agenda such as poverty reduction and achieving the MDG. The level of assistance required has been decreasing over the years as the country makes progress in the collection of internal revenue. Thus the use of external sources for budget implementation decreased from an average of 50% prior to 2006 to 49.7% in 2006 and in subsequent years to  45.7%, 43.9% and 45.4%, 44.1%, 42.3%, 41.4% and 32.8%,

For financing the budget deficit the Government has resorted to concessionary external loans as well as internal loans to meet the investment needs in crucial socio-economic infrastructures for development. The internal debt of Mozambique is made up of public debt certificates that have played an important role, not only for financing the State Budget deficit, but also for the promotion of public savings, the macroeconomic equilibrium and to stimulate the functioning of the Financial Market in general and the Capital Market in particular.

Constraints on the achievement of the targets for 2015

External assistance flows can be unpredictable and at medium-term may decrease in real terms. An investment-favourable business environment needs to be consciously created, which includes, among other aspects, the efficiency of the judicial system. The creation of adequate infrastructures is also challenge (for example, roads and the reliable supply of utility goods, such as water and electricity). Other challenges include compliance with the standards of the external markets and the trade policy. In the scope of debt management: the Government should continue to improve its vision taking measures to maintain debt sustainability with a view to economic growth, and prepare a debt strategy that includes a risk analysis and debt sustainability limits and indicators.

Recommendations for the achievement of the targets for 2015

Improve the effectiveness, transparency and predictability of disbursements of external assistance, harmonizing the Cooperation Partners’ assistance with Government priorities and the harmonization and improvement of the planning, budgeting, PES review (BdPES) and mutual accounts rendering cycles in the spirit of the Paris Declaration. Increase support to the productive sectors of the economy to alleviate the constraints on the supply side (for example, poor production capacity, poor quality of infrastructures, high cost of transport, unreliable supply of utility goods, etc.) that impede trade competitiveness. Ensure the strengthening of technical analysis and negotiation capacity regarding regional and international trade issues. The has to be a consolidation of the diversified industrial use of the energetic potential created by the extraction of natural gas.

 

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