|
| Sector budget support in practice: Agriculture sector in Mozambique |
| November 2009 |
Acknowledgements: FANRPAN acknowledges Overseas Development Institute (ODI) as the source of this document. |
|
This report summarises the findings of a desk study on the experience with sector budget support
(SBS) in the agriculture sector in Mozambique. The desk study forms part of a broader study
commissioned by the Strategic Partnership with Africa Task Team on Sector Budget Support which
covers ten sector case studies from six different countries. The purpose of the study is to draw
together experience of SBS to guide future improvements in policy and practice by partner
countries and donors.
Sector Context
Agriculture sector performance for the last decade has been mixed. Since the end of the civil war
agricultural production has been recovering but pre-Independence production per capita levels are
still far from being restored. Some crops have recently experienced high rates of production growth
and productivity has been gradually improving although it is still significantly below Southern Africa
regional averages. Moreover, and despite progress, more than half of the rural population remains
poor and food insecure.
By the end of the 1990s Mozambique was a major recipient of development cooperation and was
battling with problems of aid coordination and absorption. Institutional capacity weaknesses in the
public sector were significant, particularly in an area like agriculture which had throughout the
1990s suffered from a major disinvestment, fruit of structural adjustment policies which demanded
privatisation of state functions and a reduced role for the state in the productive sectors.
Mozambique’s National Programme for Agricultural Development (PROAGRI) was developed in
the mid-to-late 1990s as an attempt to address this coordination failure, and develop a common
vision for national agricultural development. Under the first and second phase of PROAGRI there
has been a significant increase in aid to the sector. A disproportionate share of these resources
has been allocated to institutional development activities and not service delivery. Whilst progress
has been made in strengthening institutions in the sector, there has been little or no expansion in
service delivery as a result of this increase in public resources. MINAG has been through periods
of significant instability and has suffered considerable losses in terms of qualified human
resources. These have had an impact in terms of capacity to generate good policies and sustain
the quality of policy dialogue with sector stakeholders. More recently, the GoM has started to
make ad hoc, and more interventionist, policy pronouncements.
It is reasonable to conclude that public sector interventions in the agriculture sector have done little
to address the challenges facing the sector. Little has been done to assist the development of input
and output markets. Inadequate extension services have been some of the causes of low
productivity, the low level of agricultural input use and limited access to technology. Weak
progress on establishing and promoting inter-sectoral linkages, have contributed towards the lack
of rural infrastructure and associated high transactions costs, absence of formal financial services
in rural areas and a weak regulatory framework. This underlies poor market development in the
sector.
Yet, over this period, the agriculture sector in Mozambique has benefited from forms of budgetary
support to the sector ministry. A common funding mechanism was developed and adopted by a
number of donors to support of PROAGRI, and various dialogue mechanisms were established
alongside the common fund. This was largely effective in addressing the challenge of
fragmentation and lack of coordination of development cooperation in the sector, but has not yet
contributed to improving agriculture sector outcomes. Since 2005, however the aid environment
has begun to become more fragmented.
The Nature of Sector Budget Support
The PROAGRI basket fund, which meets this study’s definition of sector budget support, was
introduced in 1999. It mobilised a significant amount of discretionary external assistance to support
MINAG in pursuing its development policy for the sector. A total of US$ 207 million had been
disbursed by donors by 2006 and an additional US$ 126 million were committed for the period
2007-09. The main objective of this funding arrangement was to improve the effectiveness of
public agricultural programmes and institutions in order to promote equitable growth in rural areas,
reduce poverty and improve food security. Most of this was to be achieved, initially, through a
significant investment in improving institutional capacities of the Ministry of Agriculture and putting
it in the driver’s seat of development interventions in the sector. A reformed and streamlined
ministry with a reduced set of core functions was expected to emerge from this capacity building
process.
The development of the common funding arrangement has been through three main phases,
marked by the signature of Memoranda of Understanding between GoM and its external funding
partners: (i) an initial phase, between 1999 and 2000, when the mechanism was introduced and
started being developed; (ii) a second phase, between 2001 and 2006, when the Common Flow of
Funds Mechanism (CFFM) was consolidated and a number of additional donors joined the
arrangement; and (iii) a third phase, which started in 2007, when the concept of sector budget
support was first introduced and alignment with country systems was further strengthened.
Two types of modalities have been provided – the first was called a common basket fund, and the
second sector budget support. In practice both are forms of sector budget support, and main
differences concern the degree of earmarking and the focus of policy dialogue and conditions built
into the funding arrangement. One modality is budgetary support earmarked broadly to MINAG to
support its policies and systems. The other one corresponded to specifically earmarked funding
provided by a reduced number of donors to strengthen support to specific sub-sectoral areas or
activities. Despite this specific earmarking, which is related to the focus of the agencies’ country
programmes, these funds have been disbursed into the common basket fund and followed the
commonly agreed financial management procedures.
Although the funding modalities have remained essentially unchanged over the years, there has
been an evolution on several fronts. Procedures for managing the basket fund have become
increasingly aligned with country systems – for example, the planning and budget calendar was
progressively aligned with that of the State Budget and the PROAGRI procurement manual was
replaced by the government procurement code in 2007. Performance assessment was introduced
and a matrix of indicators and target developed to track government performance in agriculture.
The link between the sector budget support arrangement and general budget support has been
reinforced, through coordination in performance assessments and dialogue with government.
The Effects of Sector Budget Support
What were the main effects of SBS?
- Sector policy, planning, budgeting and M&E processes: channels for policy dialogue
between GoM and donors were established as a result of the move to SBS. This led to
strong ownership of PROAGRI and some improvements in agricultural laws and regulations
(e.g. land management), although a clear role for the public sector in service delivery was
never established and widely agreed. Dialogue, and technical assistance associated with
SBS supported the establishment of integrated planning and budgeting framework (PAAO)
with a bottom-up methodology. SBS funding contributed towards the mobilisation of a
considerable amount of external funding to the sector, although a major share of this was
allocated to institutional development, and not the delivery of services. Recently, the
ownership of PROAGRI has waned on both the government and donor side, and the GoM
has taken policy decisions with little consultation, taking agriculture policy in a more
interventionist direction.
- Procurement, expenditure control, accounting and audit processes: the establishment of
SBS contributed to the establishment of the Common Fund Flow Mechanism in 2001. This
established a set of common procedures (for procurement, accounting and auditing)
covering a significant share of sector resources, thereby reducing GoM’s transaction costs
in managing external funds. These common procedures were progressively aligned with
those of the whole of government. Another achievement has been support to the
development of systems which allow the generation of detailed information about public
spending and some improvements in systems and capacities in the areas of procurement
and auditing. A key question is whether the concentration of resources on building internal
management systems is justifiable in a sector where there are huge challenges to be
addressed at the service delivery level.
- Capacity of sector institutions and systems for service delivery: PROAGRI resulted in both
a decentralisation of sector resources and a significant concentration of resources on
capacity building activities. Decentralised levels had an increased role in sector planning.
There were improvements in staff capacities and systems in the areas of planning and
financial management. However the focus was on building the capacity of existing staff,
rather than expanding the capacity of institutions to deliver increased volumes of services.
- Domestic ownership, incentives and accountability in the sector: The role of Ministry of
Agriculture as sector coordinator and regulator was significantly strengthened, relative to
the situation of the mid 1990s. Early on there was improved government ownership (not
only by the MoA but also by Ministry of Finance) as a result of achievements in alignment of
aid management with country systems (CFFM). However later on ownership was eroded
as PROAGRI failed to deliver results in the agriculture sector.
In terms of outcomes in the sector, there is little or no evidence that public service provision at field
level has improved as result of the investments made in building institutional capacity of the sector
ministry. Nor is there evidence that public sector actions in the agricultural sector have improved
sector outcomes. It is reasonable to conclude that SBS in the agriculture sector has therefore not
contributed towards improvements in agriculture sector outcomes.
Conclusions and Recommendations
The current dominant perception is one of disappointment, by both government and donors, about
the experience with the funding arrangement developed to support the agriculture sector in
Mozambique. Government has expressed disappointment over the lack of concrete outcomes from
the significant investments made over the years in improving capacity of the Ministry of Agriculture.
Donors have expressed disappointment over the fragility of the relationship with GoM and the fact
that they are being left out of key policy processes, as illustrated by the recent policy directions
taken by Government on agriculture policy matters.
Despite the high degree of scepticism and uncertainty about the future of the PROAGRI funding
mechanism it is undeniable that budgetary support provided to MADER/MINAG over the past 10
years has had an impact in sector policies and processes. Through the provision of discretionary
funding, dialogue, technical assistance and strengthened donor coordination, the funding
mechanism has produced important effects on the relationship of external assistance and sector
processes which have led to changes in sector policy, spending and management systems.
The mechanism has created the conditions for the Ministry of Agriculture to carry out a number of
improvements to internal management systems and capacity. For example, it has, through the
establishment of integrated planning and joint funding, improved the comprehensiveness of
planning and budgeting processes at sector level, increasing GoM’s control over the use of
external resources flowing to the sector.
Outstanding outputs include improvements in financial management systems at sector level and
strengthened government ownership and leadership of the sector which became clearly reinforced
in comparison to the situation in the mid-1990s. It also needs to be recognised that the PROAGRI
funding arrangement and the processes associated with it pioneered important changes in the
ways of working within government - namely the relationship between the sector and the Ministry
of Finance on planning, budgeting and financial management - and these have had an impact
beyond the agriculture sector.
It is also undeniable, however, that with PROAGRI a significant volume of public resources to
agriculture ended up being diverted towards MADER/MINAG internal management processes
doing little to address constraints at service delivery level, transform the ministry or indeed improve
analytical capacities and the ability to generate evidence-based policies. Evidence of impact at the
outcomes level is scarce and the various evaluations carried out on PROAGRI are consistent in
concluding that PROAGRI has been all about processes and procedures and very little about
development results on the ground.
In judging the experience and the suitability of the SBS mechanism, it needs to be recognised
however that agriculture is a peculiar sector within the public sector machinery. Foster et al. (2001)
warned about the dangers of providing budgetary support to a sector like agriculture where: the
state and the line ministry should in principle have a smaller and different role than in other sectors,
government and donors disagree on the state role in the sector, the most important government
roles in supporting agriculture are not about public expenditure at all but about policy making and
regulation, and the most important public expenditures for supporting agriculture may not be in the
agricultural sector (e.g. investments in rural roads).
The main implication from this analysis is to advise caution in applying SBS to support a sector like
agriculture. Funding mechanisms, such as the form of SBS in use in Mozambique, can help to
address problems of aid fragmentation and be an important source of revenue to overcome
institutional capacity constraints. But to what extent is budgetary support earmarked to the
agriculture sector a useful instrument to address 21st century challenges in developing countries’
agricultures – namely, streamlining the state, promoting sector coordination, improving policy and
regulatory frameworks, removing distorting state interventions? The volumes of funding involved
with the basket and sector funding PROAGRI were arguable far in excess of what was needed to
address these challenges. If there had been a clear drive to expand and improve service delivery
– for example extension services – then the funding levels would have been appropriate. This was
not the case.
In the absence of a consensus over the need to expand government services in agriculture, it is
important to question the suitability of budgetary support mechanisms to the development
cooperation purpose in the Mozambique Agriculture sector. As Foster et al. suggested back in
2001, the core message should be to ensure a good diagnosis of the nature of the challenges in
the sector, as well as in the aid relationship, and develop a development cooperation approach
which is locally appropriate.
The future of PROAGRI is uncertain. Many donor agencies are committed to increasing the
proportion of programmatic forms of aid and there is also a strong interest in maintaining support to
the agriculture sector. GoM is on its part keen to receive increasing proportions of discretionary
funding through budgetary support but it has also shown signs of less openness to discuss policy
options with donors (or indeed other players). This has left many donors apprehensive and, in the
agriculture sector, is starting to raise questions about the sustainability of the sector budget support
modality. Some donors are already thinking in risk spreading alternatives, including increasing
earmarking of funding, working with other parts of government or even reverting to more traditional
forms of development cooperation (i.e. project assistance).
In moving forward it is essential that the experience to date is carefully reviewed and that success
conditions are identified and discussed. There are at least five key success conditions to bear in
mind:
- Partners need to work towards the establishment a unified agriculture sector policy
framework, embracing the new policy directions which have political backing from key
government counterparts. At the moment is seems that the Presidency and the duo MoFMPD
are important drivers of agricultural policy processes, including resource allocation to
the sector. It is therefore essential to secure these actors’ engagement in the arrangement.
Even if donors are unhappy with the policy direction and feel they are unable to support it
financially, it is important that they play a constructive role and support such a process.
This will ensure an entry point into key decision-making processes in the sector.
- Consensus on basic principles/philosophy underlying the financing agreement in support of
any new agriculture policy should be established, particularly on the roles of the state vis-àvis
other sector stakeholders. This is especially important if donors feel they cannot support
the overall agriculture policy that emerges. For example, if donors feel they can support the
expansion of extension services in the sector, then this should be explicit. If there is no
clear agreement on the role of the sector in service delivery, then the funding should be
scaled back to levels commensurate with institutional development objectives. Such issues
need to be resolved or at least discussed openly if the arrangement is to be sustained in the
future. Unlike the previous ones, the current MoU is vague in relation to underlying
philosophy of the financing arrangement.
- Involvement of all major sources of funding. In order for policy dialogue to be meaningful
and to ensure the integrity of the planning and budgeting processes, all major sources of
funding (donors) need to be involved in the sector programme, irrespective of the funding
modalities used. It is therefore essential that donors providing sectoral budget support
create the incentives for other donors (particularly those providing a large proportion of
external funding to the sector) to be involved in the PROAGRI policy fora.
- Resolving capacity limitations in the critical area of monitoring and evaluation. The
performance of the funding arrangement can not be tracked and assessed properly without
a reliable M&E system in place, particularly one which links SBS with government
performance (service delivery and investments) and sector performance. This is a crucial
area which can not be left unattended for any longer.
- Reaching out to the sector. One of the main limitations of PROAGRI to date has been the
inability to reach out to sector operators at field level (NGOs, the private sector and
farmers). The lack of sector level outcomes is partly the consequence of failing to involve
these key sector players.
|
|
Full Version (473Kb ~ 1 min)
