Presentation by H.E. Luisa Diogo The Role of IDA: Responding to Evolving Country Needs The Case of M

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Presentation by H.E. Luisa Diogo
The Role of IDA Responding to Evolving Country
Needs The Case of Mozambique

• IDA-15 Replenishment Meeting, Maputo
• June 29, 2007

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IDA in MozambiqueResponding to Evolving Country
Needs

• 1984-1992 War, Economic Crisis, Reforms Begin
  
• 1993-1997 Post-conflict Reconstruction and
  Reform
• 1998-2007 Sustained Growth
• Progress since the War
• IDA in Perspective

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IDA in Mozambique A Story that can become a
Success

• Mozambiques track record of good results over
  the past 25 years is due to a variety of factors,
  but especially
• Strong leadership and vision by Government
• Clear and effective Poverty Reduction Program
• Fulfillment of the commitment
• Donor coordination and long-term international
  partnership specially with IDA, which has
  provided continuity and consistency to the
  process of development

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I. 1984-1992 War, Economic Crisis, Reforms
BeginContext

• 1984
• Country at war since 1976
• Centrally-planned economy (started in 1977)
• Deep crisis
• Mozambique joins IBRD/IDA and IMF (1984)
• 1987
• Economic reforms begin opening of forex market,
  liberalization of imports, elimination of price
  controls, reduction of fiscal imbalances
• Transformation of Eastern Europe
• Peace a priority
• UN leads humanitarian assistance, supported by
  bi-laterals and NGOs
• 1992
• Peace agreement signed

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1984-1992 War, Economic Crisis, Reforms
BeginRole of IDA

• Main IDA roles -- convener (CGs), early mover,
  strong financier
• Analytic work and financial support help
  government undertake reform and plan
  transformation to market economy
• Investment operations restore basic services even
  during war urban rehabilitation, health
  services, schools
• Confidence building and close partnership built
  between government, IDA and international
  community
• Leadership by IDA on economic policy dialogue
  other donors focus on humanitarian issues

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1984-1992 War, Economic Crisis, Reforms
BeginIDA Support

• Focus of Lending
• Economic reform
• Infrastructure rebuilding
• Reinforcing basic services
• Average annual lending
• 106 m (851 m IDA total)

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1984-1992 War, Economic Crisis, Reforms
BeginChoices Facing Government

• How to manage reforms in a context of war
• Tight dialogue with the Bank (field office)
• Confidence building
• Commit only on what is possible
• Define the leading technical team (Finance,
  Central Bank, Minister for Economy)
• Keep on track

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1984-1992 War, Economic Crisis, Reforms
BeginLessons Learned

• Spend the necessary time for preparation and
  negotiations
• Define what comes first, what comes later
• Keep fiscal discipline (despite the war)
• Do not use the principle of one size fits all
  (positive lesson of SNAAD)
• Prepare for the transition to peace

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II. 1993-1997 Post-conflict Reconstruction
ReformChallenges and Transitions

• Serious challenges
• Resettlement of 6 m internal and external
  refugees and reintegration of 100,000 combatants
  from both sides
• Reconstruction of infrastructure and basic
  services
• High level of extreme poverty very limited
  agricultural activity, including food production
• Complex transitions
• War to peace
• Single party system to multi-party democracy
• Centrally-planned to market economy
• Humanitarian assistance to reconstruction support

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1993-1997 Post-conflict Reconstruction
ReformRole of IDA

• Convening power
• Chairs Consultative Group meetings (from 1989),
  which mobilize donor resources and coordinate
  donor and government policies
• Provides framework to shift assistance to
  post-war reconstruction
• Encourages investor confidence (e.g., Maputo
  Corridor, Mozal)
• Financing power
• Large projects for reconstruction of highways,
  ports and railways
• Rehabilitation of health and education
  infrastructure
• Training programs to improve human capital
• Knowledge base and policy advice
• Multi-sectoral expertise (e.g., needs assessment
  for reconstruction)
• Sector-wide approach introduced (e.g., in roads)
• Policy advice instrumental for difficult reforms
  (e.g., privatization, banking)

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1993-1997 Post-conflict Reconstruction
ReformIDA Support

• Focus of lending
• Half for economic reform
• Increasing share for health and education
• Infrastructure support still large
• Average annual lending
• 187 m (936 m total IDA)

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1993-1997 Post-conflict Reconstruction
ReformChoices Facing Government

• Define priorities
• Rural/urban
• Recurrent and investment
• Defence, education and health, police
• Areas for de-mining
• Move from emergency and humanitarian aid to
  post-war reconstruction
• In-depth reforms

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1993-1997 Post-conflict Reconstruction
ReformLessons Learned

• Importance of the Household Survey
• Pursue the broader based growth
• Role of civil society for inclusiveness
• Decentralization
• Avoid dogmas in partnership
• Keep fiscal and budgetary discipline
• Prioritize investment
• Cashew-nut case (spend the necessary time to
  prepare the reform)

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III. 1998-2007 Sustained GrowthSignificant
Achievements

• Strong macroeconomic performance
• GDP growth rate averages 8
• Agriculture grows on average at 6
• Inflation is moderate at around 9
• Devastating floods (2000-01) only temporary
  set-back
• New sources of growth
• Maputo-Witbank corridor financed through a
  public-private partnership
• Minerals (aluminum smelter, titanium, coal)
  natural gas energy tourism trade (ports)
• Re-opening of Zambezi valley with roads and Sena
  railway
• Emphasis on inclusive growth
• Poverty reduced from 69 (1997) to 54 (2003)
• Improved education and health indicators

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1998-2007 Sustained GrowthRole of IDA

• Supports governments poverty reduction strategy
  and continued rehabilitation of infrastructure,
  social services
• Leads HIPC (2000), enhanced HIPC (2003) and MDRI
  (2006)
• Helps strengthen country systems in public
  financial management, procurement and governance
• Moves to donor harmonization and alignment with
  government
• General budget support MoU for PRSCs (2004),
  Sector MoUs
• Supports regional initiatives
• Transfrontier parks, transportation links,
  natural gas pipeline
• Decentralizes operations to Country Office
• Advocacy and support to government on use of
  Natural Resources

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1998-2007 Sustained GrowthIDA Support

• Focus of lending
• Increasing emphasis on infrastructure
• Introduction of budget support
• Share for health and education remains stable
• Average annual lending
• 164 m (1.6 b total IDA)

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1998-2007 Sustained Growth Choices Facing
Government

• Define a 65 of budgetary resources for priority
  areas
• Second wave of reforms
• Do deeper reforms
• Necessary attention to the judiciary
• Consolidate the financial sector reform

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1998-2007 Sustained Growth Lessons Learned

• Scale-up support for governance, human capital
  and economic development
• Recognize the regional role of Mozambique
• Support regional projects
• Promote public-private partnership and use a
  combination of WB windows (IDA, IFC and MIGA)

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IV. Progress since the WarA Story that Can
Become a Success Some Summary Statistics
2006 data 2003 data
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Progress since the WarGrowth and Poverty
Reduction
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Progress since the WarEconomic Development
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Progress since the WarHealth and Education
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V. IDA in PerspectiveFinancial Role

• Total commitments in 1984-2006 3.4 billion
• Annual average commitments
• 1985-1992 106 million
• 1993-1997 187 million
• 1998-2006 164 million
• IDA is a key player
• 23 of total ODA in past decade 18 in 2005.
  (Total 1,300 m ODA makes up around 50 of
  government budget.)
• IDA led HIPC and MDRI IDAs part in HIPC and
  MDRI debt relief was 2.2 billion and it
  facilitated 1.1 billion in non-IDA debt relief
• Government and partners rely on IDA analytical
  and advisory work, e.g., mining fiscal regime,
  Cahora Bassa financing (2006-07)

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IDA in PerspectiveMore than IDA The Bank
Support to Mozambique, FY04-07

• Total transfers 2,460 m
• IDA commitments 683 m
• MIGA and IBRD guarantees 311 m and 30 m
• Repayment to IDA 48 m
• IMF and ADB MDRI debt relief 1,091 m

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IDA in PerspectiveChallenges IDA Faces

• Listening more and more
• Addressing better governance issues (skills,
  priorities, leverage), and building demand for
  good governance
• More co-financing to leverage resources, more
  resources, and link to other WBG products
• Paris Declaration Challenge the Bank business
  model, focus on results and less on processes
• Simpler projects/activities to fit implementation
  capacity
• Stronger and more strategic selection of field
  staff in accordance with the priorities of the
  country
• More decentralization
• Accessible policy for SMEs.

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IDA in PerspectiveChallenges for Mozambique

• Sustain leadership and ownership
• Strengthen human capital
• Move beyond mega projects, local development,
  job creation, SMEs
• Policy framework for developing untapped
  potential energy, minerals, tourism,
  agrobusiness, trade
• HIV/AIDS
• Governance corruption, judiciary, public
  institutions
• Increased regional integration for trade,
  transport, energy

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IDA in PerspectiveWhat IDA Could do Better

• Listen more
• Be open to new and simple solutions
• Aid
• Debt
• Trade
• Be open to other factors of development
• Expansion of financial institution to rural areas
• Local entrepreneurs
• Local Development Banks
• Gender
• THANK YOU FOR YOUR KIND ATTENTION!