The World Bank Group in Mozambique, Fiscal Years 2008–21
Key Findings and Lessons
This Country Program Evaluation reviews World Bank Group engagement in and support to Mozambique during fiscal years (FY)08–FY21. It assesses the extent to which the Bank Group’s support was relevant to the country’s main development challenges and drivers of fragility and the evolution and adaptation of support over time. The evaluation delves into four themes of particular relevance to Mozambique’s pursuit of the Bank Group’s twin goals of poverty reduction and shared prosperity: (i) low agricultural productivity; (ii) unequal access to basic services; (iii) weak institutions and governance; and (iv) vulnerability to climate change and natural disasters. The evaluation presents findings related to each of the four themes and distills lessons from the Bank Group’s experience in Mozambique to inform future strategies and engagements.
Average overall development outcome ratings for World Bank–supported projects that closed during the evaluation period were moderately satisfactory. Just more than half of projects and operations were rated moderately satisfactory, and one in five were rated satisfactory, which was similar to the Eastern and Southern Africa Region. The Independent Evaluation Group rated the development outcome of the FY08–11 World Bank–supported Country Partnership Strategy for Mozambique as moderately unsatisfactory and the Country Partnership Strategy FY12–16 as moderately satisfactory.
Mozambique’s deteriorating fragility over the evaluation period was increasingly acknowledged in World Bank–supported strategies but was reflected in operations with a lag. World Bank operations downplayed the country’s fragility until the outbreak of conflict in the north in 2019–20. Between FY08 and FY21, the World Bank described the prevailing atmosphere optimistically, fueled by strong economic growth and the discovery of large gas reserves. At the same time, resource management, accountability, and access to basic services by poor people were deteriorating, and decentralization had stalled.
With regard to the first theme of the evaluation, low agricultural productivity, World Bank assistance to increase agricultural productivity in Mozambique focused on the critical areas identified in analytical work produced both internally and by academics and practitioners. With most of the poor people living in rural areas, increasing agricultural productivity was appropriately seen as key for reducing rural poverty. Six areas were identified and supported by the World Bank during the evaluation period: (i) use of modern technologies; (ii) rural infrastructure; (iii) access to markets; (iv) natural resource management; (v) land policies and administration; and (vi) gender disparities. The World Bank’s portfolio focused initially on technology and irrigation, but results were inadequate. In the second half of the review period, support expanded to include market access, forestry, land administration, and rural roads, but it is too early to assess the effectiveness of that support.
With regard to the second theme, unequal access to basic services, World Bank–supported projects helped improve access to basic services, such as education, health, transport, and electricity in rural areas. There were positive outcomes in the delivery of education, health, transport, and (in part) electricity services. The latest household survey (2019–20) also shows improvements in access to these services among rural populations during the evaluation period. However, it was only in the latter half of the evaluation period that the World Bank began to directly target the poorest areas.
With regard to the third theme of weak institutions and governance, World Bank support to Mozambique focused on five areas: (i) public financial management (central government); (ii) public debt management; (iii) state-owned enterprises (SOEs) reform; (iv) decentralization; and (v) transparent and effective management of extractives.
- The World Bank contributed to improved public financial management by supporting an increase in the coverage of the financial management information systems and strengthening internal and external control functions at the central level. However, World Bank support for budget preparation and execution did not enhance budget credibility. Despite clear weaknesses in public investment management, it was only in the wake of the hidden debt crisis in 2016 that the World Bank made concerted efforts to intensify support. Despite progress “on paper,” institutionalization of public investment management reforms is lagging.
- The World Bank had a modest impact on improving debt management and advancing SOE reform. Support was focused on building technical and institutional capacity but did not adequately take into account the context of weak governance. By and large, SOE and debt management challenges were seen as problems that could be addressed through technical and institutional capacity building. Although this may have been a necessary condition to improve outcomes, underlying governance shortcomings also needed to be addressed. On balance, once the hidden debts were revealed, tangible progress was made as the appetite for increased control of corruption increased and a compelling case for SOE reform and debt management was made.
- The World Bank contributed to increased subnational capacity but was not effective at supporting the establishment of a coherent decentralization policy framework. Political economy constraints rendered World Bank support for decentralization ineffective. Implementation of public financial management reforms at the subnational level faced significant challenges, but many of these were addressed successfully using Program-for-Results financing. World Bank–supported projects contributed to tangible improvements in municipal revenue collection.
- World Bank support helped improve governance in the extractives sector, but major challenges remain. The World Bank contributed to the establishment of a regulatory framework for managing the extractives sector and complying with transparency standards. However, World Bank support for the implementation of a fiscal rule and sovereign wealth fund for managing revenues from the extractives sector did not lead to tangible outcomes.
With regard to the fourth theme, vulnerability to climate change and natural disasters, the World Bank contributed to the development of an institutional framework for strengthening climate resilience and improving disaster risk preparedness through strengthened hydrological and meteorological information services and increased financial protection against disasters. World Bank support contributed to increased climate resilience in the transport, social protection, water and sanitation, agriculture, education, energy, and urban sectors.
This evaluation identifies the following lessons to guide future World Bank engagement in Mozambique; these lessons may also interest other countries facing similar development challenges.
- In contexts characterized by corruption and state institutions being run for the benefit of high-status groups, technical solutions to public financial and debt management are unlikely to achieve desired results unless key underlying governance constraints (risks) are also confronted. In Mozambique, this was the case with SOE reform and debt management, where World Bank support focused mainly on technical and institutional capacity and was not sufficiently adapted to the underlying political economy and associated risks. Likewise, World Bank support for public investment management was largely technical, with less attention given to the implementation of risk-based approaches to identify and analyze corruption risks throughout the investment cycle. Although progress was achieved “on paper,” implementation of reforms often fell short in practice.
- Core diagnostics are essential to inform reform priorities but require deliberate and coordinated operational follow-up. Although the World Bank undertook several public financial and debt management diagnostics, it did not use the findings in a timely manner to set reform priorities and inform its work program. This was most noteworthy with respect to the 2008 Debt Management Performance Assessment findings, which flagged serious shortcomings in debt reporting and recording. However, little attention was given to address these shortcomings until the hidden debt crisis, including through prior actions in the subsequent programmatic series of development policy operations. Mozambique would also have benefited from an early and more systematic assessment of weaknesses in public investment management, which—alongside the Debt Management Performance Assessment—could have identified some of the weaknesses that contributed to the hidden debt crisis.
- The quality and impact of World Bank support for public financial and debt management can be enhanced by improving internal World Bank coordination and prioritization. This lesson is aligned with findings from the recent Independent Evaluation Group evaluation World Bank Support for Public Financial and Debt Management in IDA-Eligible Countries (World Bank 2021p), which found that synergies among different public financial and debt management pillars remain underexploited in many International Development Association countries. In the case of Mozambique, the World Bank provided significant support for upstream aspects of debt management (for example, preparation of debt management strategies), with only late attention for downstream aspects (debt reporting and recording, cost and risk analysis, and debt processes and procedures). Moreover, for most of the evaluation period, support for debt management was not systematically accompanied by efforts to improve public investment management, despite widely recognized synergies among borrowing and the quality of public investment. As a result, opportunities to enhance the growth and development impact of development spending and debt-financed public investment were missed.
- The effectiveness of agricultural extension services in raising agricultural productivity requires paying greater attention to the adequacy of staffing. Extension services play a critical role in increasing agricultural productivity in Mozambique, yet such support risks being undermined by staffing shortfalls given the large proportion of smallholders. In Mozambique, extension services in the Sustenta project were spread thin, with each extension worker responsible for, on average, about 3,900 farmers, compared with 3,000 in Malawi and 1,170 in Tanzania.
- In situations where women dominate a disadvantaged group, such as in subsistence farming, sector-based support (for example, to enhance agricultural productivity) requires gender considerations to be fully integrated into strategies and projects. In Mozambique, women are particularly disadvantaged in benefiting from extension services, with fewer than one-third of women being reached by such services (USAID 2018). Support for agricultural productivity can be more effective if it puts gender front and center in the approach, including by collecting sex-disaggregated data.
- Support for climate resilience can be enhanced through the use of credible analytics to persuade policy makers about the costs of inaction. Persuading policy makers to pursue climate resilience policies can be challenging because the costs of implementing such policies are real, but benefits are uncertain. Before 2010, most government efforts with respect to climate change were focused on response to and reconstruction after extreme weather events. World Bank analysis was crucial to making the financial and fiscal cases for investing in increased climate resilience by demonstrating the impact of extreme weather events, pricing adaptation needs, and convincing government authorities that ex post reconstruction was not cost-effective.