Structured Abstract
| Document Title: | The Global Fund tracking study: Macroeconomics and sector background paper. MOZAMBIQUE. May 2004. |
| Institution: | London School of Hygiene and Tropical medicine (LSHTM) |
| Authors: | Sally Lake |
| Study commissioned by: | A team from the Department of Public Health and Policy at the London School of Hygiene and Tropical Medicine and funded by: Danish Agency for Development Assistance, the UK Department for International Development, Development Cooperation Ireland (DCI), and the Netherlands Directorate-General for International Cooperation (DGIS). |
| Objectives: |
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| Methods: | Combination of methods: document review, in-country fieldwork, separately commissioned desk studies on specific areas. This document is the draft output of a desk-based study, and as such has been limited by the number and type of documents available to the consultant. Particular problems relating to the Mozambique case study arose from the number of relevant documents which have been prepared only in Portugese. This descriptive qualitative study forms part of a series of four country background papers in order to support an 18-month Tracking Study. |
| Results: | The paper describes the macroeconomic situation in Mozambique, the government budgetary framework, including details on health sector organisation, planning and financing, both generally and in relation to the Global Fund target disease-related activities. It discusses issues specifically related to the Global Fund proposals in the country, in terms of potential levels of funding and the macroeconomic impact, and in terms of sectoral effects and their relationship to existing strategies. Key issues, and specific areas for the second phase of the tracking study to follow up, are then presented. (see original Summary of key issues and areas for Phase Two tracking). |
Summary
SUMMARY OF KEY ISSUES AND AREAS FOR PHASE TWO TRACKINGMozambique is considered a success story within the region both in terms of recent economic performance, and in terms of the degree of donor harmonisation achieved in past years.
Economic performance following initial post-Independence has been strong, averaging over 10% per annum in the late 1990s. The floods in 2000 severely disrupted the economy but there has been a good recovery since. Social spending is among the highest in the region, made possible both by debt relief and sustained high levels of external support to the country.
The fiscal position is relatively weak, and there are substantial problems with public expenditure management. The deficit before grants is very high, reaching 19% of GDP in 2002, and even after taking into account the substantial grants the deficit remained over 7% of GDP. A prudent fiscal policy is therefore in place, and has been given priority within the Plan to Reduce Absolute Poverty in Mozambique (the Poverty Reduction Strategy Paper equivalent).
General budget support is well-established in the country, with the "Group of 10" bilateral partners and the EC providing support under a common framework, the Joint Donor Programme, agreed in 2000. Other key bilateral partners support a more progressive move towards GBS through sector support, with an emerging Sector-Wide Approach in the health sector which builds on a number of common funds for particular items/levels within the sector, the most recent one of which, the General Common Fund, is expected to be relatively fully integrated in government financial systems.
External funding for the Global Fund target diseases is currently provided through a combination of integrated programmes and vertical project support. The approved funding through the Global Fund totals US$155m over five years, and will be channelled through the common funds in the Ministry of Health and the National AIDS Council, thereby helping to consolidate efforts made in the sector to develop a comprehensive planning and budgeting system, and to reduce the inefficiencies fostered by multiple and parallel funding channels.
Macroeconomic issues for follow-up
Among the indicators to be monitored through the remainder of the study are:- Fiscal deficit, before and after grants, as a % of GDP
The high fiscal deficit is a concern both in relation to broader economic growth, through its impact on the interest rate faced by private sector borrowers, and as interest payments on borrowing to fund such a deficit have first claim on available resources, thereby reducing the envelope available for poverty-reducing expenditures.
- Real GDP growth The targets for reduced public expenditure as a share of GDP, required as part of fiscal policy, depend on Mozambique being able to maintain high levels of real GDP growth in order to ensure a steadily increasing resource envelope and therefore maintain the political feasibility of such a reduction.
- Domestic revenue performance as a share of GDP
The Mozambican government has an ambitious projection for domestic revenues as a proportion of GDP as part of the strict fiscal policy aimed at reducing the fiscal deficit. Given the very high levels of public expenditure which have been enabled by an extraordinary level of external aid, this indicator will be an important determinant of the potential for maintaining activities which are initiated with the Global Fund funding.
- General budget support as a % of total revenues within the budget
- Loans of grants
Sectoral issues for follow-up
- Timing and level of the Global Fund funds
In the context of a concerted effort to improve the comprehensiveness of sectoral planning and budgeting, and in linking the planning and budgeting process with overall sectoral priorities and objectives, monitoring the timing and level of the Global Fund funding will be important to determine the extent to which this particular funding source aids or hampers this effort.
- Share of the Global Fund funding in the sectoral budget
Although existing levels of spending in the Mozambican health sector are high relative to other countries, the share of the Global Fund funding is projected to be significant, at up to 39% of the total . This could distort sectoral priorities and activity, particularly in a situation where human resources are already stretched, capacity is constrained, and future disbursements depend on performance. How this might be monitored in the context of the current weak financial management systems is not clear, but ideally the various proposals for strengthened internal MOH systems will be implemented.
- Disbursement as % of budget
The channelling of the Global Fund monies through the General Common Fund should hopefully minimise distortions by enabling other resources to be more flexibly programmed in relation to a comprehensive plan and budget. However, this will depend on the programmed resources actually flowing as planned, and actual disbursement should therefore be compared with budget.
- Proportion of resources flowing to districts (or at least sub-national level)
In the context of decentralisation, an analysis of the extent to which the new funding is channelled, directly or indirectly, to the operational level, the district, should be monitored, as should absorption capacity at that level. This might require more detailed tracking studies than currently envisaged under the study.
- Additionality
Mozambique does not yet appear to have explicit ceilings for individual sectors even for domestic resources, and the value of external funds fluctuates, so it is likely to be difficult to determine the extent to which the Global Fund funds are "additional". However, monitoring the health sector share of the total budget, and any real increase in absolute value (ideally compared with other priority sectors) would help determine this. This needs to be checked - I could be wrong but haven't seen anything referring to hard (medium-term) budget ceilings as exist, for example in Uganda
- Share of tradeables in the Global Fund proposals
More information is required on the share of the different component budgets which is tradeable and therefore exchange-rate neutral.
