Macro-economic support and poverty reduction

Supporting economic development and growth to reduce poverty

The strategy chosen for co-operation in Mozambique is to support achievement of the two-fold objectives of the government's poverty reduction strategy (PARPA II), i.e. to decrease the incidence of poverty and to promote fast, sustainable and broad-based growth. Mozambique’s macroeconomic situation is structurally weak and the country still cannot generate the internal resources required to achieve the desired reduction in the level of poverty, therefore it needs external support. The Commission is providing this by means of General Budget Support, a direct contribution to the Mozambique government’s state budget. This macroeconomic support will help the country to implement its poverty reduction strategy in a stable macroeconomic environment, enabling the pattern of public expenditure needed to ensure progress towards the Millennium Development Goals. The EC is paying specific attention to expenditure in the social sectors, such as health and education, as well as to the ongoing public finance management reform. Issues such as equity, quality of service delivery, budget allocation and implementation in priority sectors, and cross-cutting aspects such as HIV and gender, are part of the regular exchange of information and opinions between the government and the group of budget support donors, the G19 Programme Aid Partners – a dialogue that culminates in the annual Joint Reviews. The EC is the third biggest budget support donor amongst the 19 donors providing General Budget Support, after DFID and the World Bank. Its 2009 disbursement commitment, amounting to EUR 47 million, represented around 14.7% of the total general budget support provided for the Mozambique government by the G19.

The specific nature of the budget support instrument advises long-term predictability and the avoidance of stop-go practices. In the light of that, on 4 June 2009 the government and the Commission signed the Millennium Development Goals contract (MDG-contract) for a total of EUR 303 million. This contract aims to provide predictable financing over a period of six years.

Since 2001, Mozambique has received general budget support from the EC under three successive programmes. During this time, the EC has disbursed a total amount of EUR 396.6 million in general budget support.

The EC has chosen budget support as its preferred aid modality as it has proved to be one of the most efficient forms of development aid, in terms of aid delivery, global impact, sustainability and quality dialogue with the government. This form of aid aims at ensuring greater government ownership while avoiding systems parallel to government administration. It supports the aid-effectiveness agenda and the achievement of the Paris Declaration commitments, to which the EC signed up.

Back to Technical and financial cooperation