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The World Bank Group in Mozambique, Fiscal Years 2008–21

Chapter 7 | Findings and Lessons

The World Bank supported Mozambique’s development objectives by strengthening the country’s agricultural productivity, access to basic services, governance, and climate resilience. Agriculture, the sector in which most of the country’s poor people are employed, has low productivity and provides low wages. Combined with unequal access to basic services (education, health, transport, and electricity), these factors have contributed to low standards of living. At the start of the evaluation period, the World Bank recognized the need to strengthen governance to sustain economic growth and reduce poverty. By the end of the evaluation period, the World Bank also explicitly acknowledged that weak governance drove fragility and required attention.

These major areas of the World Bank’s support were relevant to Mozambique’s development challenges. The World Bank identified constraints to agricultural productivity and climate resilience at the beginning of the evaluation period, and its support to these areas became progressively broader. The World Bank also improved targeted support to regions to improve service access disparities. The World Bank’s support for good governance was constant through the evaluation period, though the nature of this support changed along with changes to the country context, such as the discovery of gas deposits in 2010 and the uncovering of the hidden debt crisis in 2016.

The World Bank’s support to improve access to basic services and climate change resilience in Mozambique shows some positive and concrete results. The World Bank positively contributed to increasing access to basic services in rural areas during the latest strategy period. With respect to climate change resilience, the World Bank played a key role in identifying climate change as a major development challenge and supported the development of a strategic approach for building climate resilience. World Bank support has contributed to the development of an institutional framework to strengthen climate resilience and improve disaster risk preparedness through strengthened hydrological and meteorological information services and increased financial protection against disasters. In addition, the World Bank’s support has increased climate resilience in the transport, social protection, water and sanitation, education, agriculture, energy, and urban sectors.

Agricultural productivity results were disappointing for the most part, despite considerable World Bank support. The World Bank’s earlier support to agricultural productivity did not achieve its intended purpose, even though later engagements seem promising thanks to a greater focus on market access, stronger linkages between lead farmers and small-scale traditional farmers, and more attention to technology use by farmers.

World Bank support to improve governance in Mozambique focused on five areas: (i) public financial management (central government); (ii) public debt management; (iii) SOE reform; (iv) decentralization; and (v) transparent and effective management of extractives. The results achieved under these five areas are discussed in the following paragraphs.

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 PIM, 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 PIM 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, debt management and SOE 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.

This evaluation identifies the following lessons to guide future World Bank engagement in Mozambique and other countries facing similar development challenges:

  1. 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 governance constraints are also confronted. In Mozambique, this was the case with support to improve debt management where World Bank support focused only on technical and institutional capacity and was not sufficiently well adapted to reflect the underlying political economy and associated risks. Likewise, World Bank support for PIM was largely technical, with insufficient 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,” reforms often fell short in practice.
  2. Core diagnostics are essential to inform reform priorities but require deliberate and coordinated follow-up across instruments. 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 DeMPA 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 DPOs. Mozambique would also have benefited from an early and more systematic assessment of weaknesses in PIM, which, alongside the DeMPA, could have identified some of the weaknesses that contributed to the hidden debt crisis.
  3. 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 aligns with the findings from the recent IEG evaluation World Bank Support for Public Financial and Debt Management in IDA-Eligible Countries (World Bank 2021p), which found that synergies between different public financial and debt management pillars remain underexploited in many IDA 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 PIM, despite widely recognized synergies among borrowing and the quality of public investment. As a result, there were missed opportunities to enhance the growth and development impact of development spending and debt-financed public investment.
  4. The effectiveness of extension services in agricultural productivity projects in Mozambique, where there is a large proportion of smallholders, requires 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, as shown for similar approaches in Malawi and Tanzania (Ragasa 2019; Ragasa and Mazunda 2018). It is advisable to ensure that the extension services supported by the World Bank projects are properly staffed.
  5. 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 to agricultural productivity can be effective only if gender is front and center in the approach, including by collecting sex-disaggregated data.
  6. Support for climate resilience can be effectively 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, while benefits are uncertain. Before 2010, most of the government effort with respect to climate change was focused on response to and reconstruction after extreme weather events. The World Bank analysis was crucial to making the financial and fiscal case for investing in increased climate resilience by demonstrating the impact of extreme weather events, calculating the cost of adaptation needs, and convincing government authorities that ex post reconstruction was not cost-effective.