Mozambique - Economic and Financial Management Technical Assistance Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 18044 IMPLEMENTATION COMPLETION REPORT MOZAMBIQUE ECONOMIC AND ]FINANCIAL MANAGEMENT TECHNICAL ASSISTANCE PROJECT (CREDIT 2066-MOZ) June 23, 1998 Macroeconomics 1 Economic Management and Social Policy Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Metical (MT); pl. Meticais US$1 = 715 MT' US$1 = 11,380 MT2 WEIGHTS AND MEASURES 1 Meter (m) = 3.28 Feet 1 Square Meter (m sq.) = 10.76 Square Feet ABBREVIATIONS AND ACRONYMS BCM Banco Comercial de Mo,ambique (Commercial Bank) BOM Bank of Mozambique CDI Centro de Documenta,co e Informacao (Documentation Center) DEE Departamento de Economia e Estatistica (Economic and Statistics Department) DNPO Direc,co Nacional do Plano e Or,amento (National Directorate of Plan and Budget) ERP Economic Rehabilitation Program EFMTA Economic and Financial Management Technical Assistance Credit FSCB Financial Sector Capacity Building Credit IDA International Development Association IFAC International Federation of Accountants MOF Ministry of Finance MPF Ministry of Plan and Finance PTIP Three-Year Public Investment Plan U7NDP United Nations Development Program UTCP Unidade Tecnica Central de Projectos (Central Technical Project Unit) FISCAL YEAR OF BORROWER January 1 - December 31 Vice President Callisto Madavo Director Phyllis Pomerantz Sector Manager : Ataman Aksoy Staff Member: : Carolina Machado, Task Manager At Appraisal, July 1988 2 Current conversion rate  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT MOZAMBIQUE ECONOMIC AND FINANCIAL MANAGEMENT TECHNICAL ASSISTANCE PROJECT (CREDIT 2066-MOZ) Table of Contents Page No. Preface Evaluation Summary i-v Part I: Project Implementation Assessment A. Project Objectives 1 B. Achievement of Project Objectives 3 C. Implementation Record and Major Factors Affecting the Project 7 D. Project Sustainability 8 E. Bank Performance 8 F. Borrower Performance 8 G. Assessment of Outcome 9 H. Future Operations 9 I. Key Lessons Learned 9 Part II: Statistical Annexes Appendixes: A. ICR Mission's Aide Memoire B. Borrower' Assessment of Implementation This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  IMPLEMENTATION COMPLETION REPORT MOZAMBIQUE ECONOMIC AND FINANCIAL MANAGEMENT TECHNICAL ASSISTANCE PROJECT (C]REDIT 2066-MOZ) Preface The Economic and Financial Management Technical Assistance Project in Mozambique --Credit 2066-MOZ in the amount of SDR 16.5 million (US$21.0 million equivalent) -- assessed in this Implementation Completion Report (ICR) was approved on October 17, 1989, made effective on June 29, 1990, and closed on December 31, 1997, the original closing date. In addition, a grace period of four months was granted through April 30, 1998, to complete claims for expenditures incurred before the closing date. When final disbursement took place on May 26, 1998, a balance of US$650,000/SDR 484,000 remained. It will be canceled. Preparation having begun at the time of the Bank's final supervision/completion mission, from March 4-13, 1998, the ICR is based on materials in the project files, discussions with Government officials associated with the project, and information provided by the project coordinators. Additionally, the Borrower's comments in the form of an Assessment of Project Implementation are included as Appendix B. The ICR was prepared by Carolina Machado (AF 1 MI), and reviewed by Phyllis Pomerantz, Country Director, AFC02 and Ataman Aksoy, Sector Manager, AFTM1.  IMPLEMENTATI[ON COMPLETION REPORT MOZAMBIQUE ECONOMIC AND FINANCIAL MANAGEMENT TECHNICAL ASSISTANCE PROJECT (CREDIT 2066-MOZ) EVALUATION SUMMARY Introduction 1. Among the earliest credits to be approved for Mozambique, the Economic and Financial Management Technical Assistance Credit (EFMTA) was first identified in November 1985 as a potential means of supporting the country's transition from a centrally planned to a market economy by strengthening its management capacity with up-to-date computer technology and skilled personnel. At the time, both were lacking, and their absence represented a threat 1:o the successful .development of the Government's reforms, the Economic Rehabilitation Program (ERP). As a very new member of the Bank, Mozambique was at first unversed in its procedures, and Bank staff were largely unfamiliar with the officials who would become interlocutors and implement the project. Nevertheless, both sides recognized an urgent need to strengthen the capacity of the core economic agencies, the Ministry of Finance (MOF), the Bank of Mozambique (BOM), and the National Planning Commission to handle their new responsibilities in spurring an overall shift of economic management from direct to indirect controls. Both Government and IDA staff also recognized that manpower and technology shortcomings represented serious obstacles in the public sector to progress toward a new economic regime. 2. In view of the urgent nature of these problems, the EFMTA was at first designed as a line of credit to be used according to agreed criteria so as to allow flexible and timely responses to pressing Government needs in a number of areas. During a July 1986 mission, however, the concept evolved from a line of credit to a fully defined project for which the Government requested a Project Preparation Facility (PPF) advance. That work led to IDA approval in October 1989 of a SDR 16.5 million (US$21 million) technical assistance credit to underwrite training in economic analysis, budgeting, and accounting for the Ministry of Finance and - in the Bank of Mozambique -- to computerize banking operations, create an economic studies unit and documentation center and build up (basically from scratch) legal advisory services. Project Objectives 3. The main objective of this project was to provide institutional support for key decision-making agencies involved in the implementation of the Government's Economic Rehabilitation Program (ERP). The project sought to increase the institutional capacity  : : : X : ~~~ii: of two priority government agencies, the Ministry of Finance, which later became the Ministry of Plan and Finance (MPF), and the Bank of Mozambique (BOM), to carry out technical analyses in the areas of economic policy formulation, capital budgeting, and banking operations; to increase the supply and the effectiveness of professionals qualified to conduct economic analysis and accounting by furnishing them with training and with the basic systems and equipment needed for their day-to-day operations. As the project was implemented, in fact, the share of funds expended on systems and equipment - mostly computer hardware and software - was approximately twice that dedicated to training. (See Table 7A in Part II - Statistical Annexes) 4. As a form of technical assistance rather than policy implementation, the project did buttress the implementation of the Government's macro and sectoral reforms. Its timing, moreover, proved appropriate as a complement to the dialogue that had been started between the Government and the Bank on the need for economic reform even under the extremely difficult conditions of an on-going civil war. 5. The timing of implementation, however, was severely delayed despite the emergency nature of the project. The first noticeable gap that ran from the time the project was identified (end-1985) to credit approval (end-1989) was due to (a) delays in preparing the computerization and accountancy training subcomponents; (b) difficulties in hiring external consultants under the Project Preparation Facility (PPF); (c) changes in Bank staff responsible for the project after the 1987 Bank Reorganization; (d) deficiencies that the project design had underestimated in implementation capacity at the two beneficiary institutions. All this led to a post appraisal in June 1988. During actual implementation, moreover, coordination of and between the two beneficiary agencies and among their divisions also proved difficult because of a lack of the necessary synergy. Implementation Experience and Results 6. Project Achievements. Despite the complexities of coordinating between the two implementing agencies (BOM and MPF), the project essentially achieved its objectives. It brought sophisticated computer technology into a central bank and its provincial branch offices (Beira, Nampula) where previously outdated office equipment had been used to record transactions. Some Bank staff initially feared that the computerization effort was too ambitious in design. In practice, it has proved a success. The credit also underwrote the training of approximately 500 accountants, mostly men and women working in the private sector, through a system that has turned some trainees into trainers themselves. Additionally, it helped impart crucial skills to about 45 technical specialists who have become the core of the BOM's Department of Organization and Informatics. The staff of the Department of Economic and Statistics (DEE), initially helped by an external consultant financed by the project, have not only issued the country's first Statistical Bulletin, but converted it from a quarterly publication to a monthly one in 1995. As an indication of their sustainability, it is appropriate to note that the operations of the MPF's Technical Project Unit and the work of the BOM's Documentation Unit are all receiving continuing support under the 1994 IDA credit for financial-sector capacity building.  iii 7. Training of BOM and MPF staff, which reached a larger number of beneficiaries than originally planned, was a key component of the project successfully carried out by visiting instructors whose method included teaching students to become local trainers. Although in a technical assistance project it is difficult to really measure the impact of outcomes, it can be said that the project has had a positive impact in: * Institutional Strengthening through (a) establishing and helping maintain the Ministry of Plan and Finance's technical unit (UTCP) to plan public investment and budget administration, including the setting up and use of information systems; (b) providing computerization at the Bank of Mozambique and, before it was privatized, its commercial subsidiary; (c) creating a Documentation Center at BOM for the use of BOM staff and the general public; (d) strengthening the capacity of the BOM Legal Department by promoting the hiring of qualified staff and providing incentives in terms of additional training; (e) midwifing the Project Implementation Unit, which trained BOM staff in matters of project execution, including procurement, utilization of project proceeds, and general administrative matters. - Capacity Building at the two institutions in the areas of economic analysis, finance, accounting, banking. 8. Implementation Record and Major Factors Affecting the Project. As noted above, the project experienced many delays during its first years. Credit effectiveness was dependent on the hiring of an external consultant as General Project Coordinator, a process that took longer than expected. Issues related to the salary and benefits of the candidate delayed contract approval by IDA. Other factors in delaying project implementation included (a) the effect of the civil war and of the language requirement in shrinking the pool of international consultants to be recruited; (b) the unfamiliarity of the Borrower, a relatively new Bank member, with the institution and its procedures; (c) the division of responsibility between two implementing agencies, which at times made coordination more complex and time consuming. That initial complication receded over time as the system evolved and grew simpler, putting the BOM Coordinator and the General Coordinator in charge of overall project execution. Fortunately, most of the BOM and MPF managers in charge of project subcomponents were committed to project objectives and took advantage of what the project had to offer in terms of training and technical assistance. 9. Disbursements. The project disbursed 97 percent of its funds, leaving a balance of US$0.6 million equivalent. Estimates for the first years of the project had been overly optimistic. Disbursements picked up speed especially in FY93, after the Mid-Term Review in July 1992 and when most large contracts had been signed.  iv 10. Project Sustainability. Technical assistance financed by the project helped introduce new and more efficient procedures in both beneficiary institutions. These management tools have been adopted and consistently used in: (a) the process of computerizing the BOM with resulting improvements in efficiency; (b) the preparation of the public investment program and budget administration at the Planning Directorate at MOF by the UTCP; (c) the creation of a Documentation Center at BOM. These actions are being supported by the ongoing Financial Sector Capacity Building (FSCB) project. The project's support for training accountants has also acted as a catalyst to efforts by Mozambicans to create a national Association of Accountants, a professional body that could subsequently join the International Federation of Accountants (IFAC). Progress in that area now depends on Government backing for the initiative. 11. Bank Performance Although the Bank's performance has been largely satisfactory, Bank staff could have shown greater sensitivity from the last appraisal of the project through the first two years of its implementation to the problems arising from a new Borrower's understandable lack of familiarity with Bank procedures. Over time communications between the Bank and the Borrower improved considerably. Supervision was done on a regular basis, providing adequate support to the Borrower. 12. Borrower Performance was also satisfactory. Most individual coordinators were sincerely committed to the project goals and related actions. BOM and MOF were especially supportive of the computerization program and the creation of a technical unit, respectively. The Borrower complied with the requirement of yearly audits of project accounts, and audits were submitted on a timely basis and without qualifications. Future Operations 13. Although no follow-on project to this operation is envisioned, a number of activities launched but unfinished under the Credit are being supported by the Financial Sector Capacity Building (FSCB) Credit. Lessons Learned for Subsequent Operations 14. Project implementation teaches several broad key lessons and two narrow ones: * Success in capacity building depends in large part on the commitment evinced by the beneficiaries. This was evident in the BOM computerization; the creation and implementation of the Technical Unit in the MOF Directorate of Plan; various training actions. To generate that commitment from the start and insure the best level of execution, borrowers should be actively involved in project preparation and design.  v * Technical assistant (TA) consultants should be required when they are selected to commit themselves to transfer their own skills through on-the-job training. Skills transfer was successfully achieved in the case of two main subcomponents: the computerization at BOM and the creation of the UTCP at MPF. * The shorter the length and more limited the scope of a subproject (i.e. BOM computerization) the faster will be the results and the easier to measure. * The Bank should value the IDFs which started in July 1992 as instruments available to provide immediate, flexible resources to governments embarking on the initial stages of reform which seeks to produce drastic change in the cultural and institutional environment. In the case of this project a technical assistance credit was sought because there was no other instrument available at the time. * In Mozambique, given the civil war being fought as the credit was launched, a more realistic implementation timetable should have been set, especially in connection with recruiting TA consultants. - Also in Mozambique, after the war ended, the improved political, economic, and institutional environment had a positive effect on the project and on the Borrower's increasing desire and ability to take advantage of the types of technical assistance being offered.  PART I: Project Implementation Assessment A. Project Objectives 1 The major purpose of the US$21 million IDA credit was to give two vital institutions - the Ministry of Plan and Finance and the Bank of Mozambique - the institutional strength and expertise to back up key decision-making agencies involved in the implementing the then-Government's Economic Rehabilitation Program (ERP). Supported by IMF Structural Adjustment Facility and the first two IDA Rehabilitation Credits, the ERP was a policy reform initiative meant to abolish economic distortions and structural imbalances through measures to stabilize the fiscal and external situation, establish a realistic foreign exchange value, and reduce administrative controls over foreign exchange and trade management. The policy goals were clear. The institutions vital to translating ERP priorities into reality, however, were weak. They required strengthening both in the short and the long term. 2. During the project design phase, the Government and IDA identified the area of financial and statistical information as one needing the greatest attention, with management training requiring almost as much assistance. Government officials at the time saw the poor performance of public enterprises as the result of inexperienced and weak management which they wished to correct through intensive training in accounting and other management techniques. During a March 1986 mission the Government indicated that it urgently needed help in the areas of statistics, economic research, information systems, accounting, and management training. The institutions designated for technical assistance were the Bank of Mozambique (BOM), the Ministry of Finance (MOF) and the National Planning Commission (CNP) which merged with the MOF into the Ministry of Plan and Finance (MPF) when the civil war ended and a newly elected Government came to power. 3. Based on the above perceptions, the project was designed to equip those two key government institutions to function effectively and carry out the job of elaborating reforns and to train the relevant government staff. Specifically, the project sought to increase the institutional capacity of BOM and MPF to: a) carry out technical analyses in the areas of economic policy formulation, capital budgeting (including selection, analysis, programming, and monitoring of projects), and banking operations; b) define specific needs and prepare a program of institutional support as the basis for immediate and long-term action; c) increase the supply of qualified professional accountants and economic analysts; and  2 d) increase the productivity and effectiveness of the two priority institutions, by furnishing them with the basic systems and equipment needed for their day-to- day operations, particularly in financial systems and production of basic economic information. (Although this was only one of four elements in the project design, it was the most expensive single area, with BOM equipment costs absorbing roughly three fifths of the total credit.) 4. The project was divided between two main components: a) Assistance to the MPF to improve its collection and analysis of economic information for economic policy formulation at the Economic Analysis and Price Department in the National Treasury Directorate; to improve capital budgeting at the National Budget Directorate; and to institute an accounting training program. b) Assistance to BOM to strengthen the Economic Research Department so as to improve data collection, economic analysis, and policy formulation including the establishment of a Documentation Center; to improve banking operations by computerizing banking systems and introducing modem equipment; and to strengthen the skills of the internal BOM legal staff, especially regarding drafting of banking regulations and contract negotiations with creditors. 5. As a form of technical assistance rather than policy implementation, the project contributed important assets to the implementation of the Government's macro and sectoral reforms. Its timing, moreover, proved appropriate as a complement to the dialogue that had been started between the Government and the Bank on the need for economic reform even under the extremely difficult conditions of an on-going civil war. 6. Although meant to address certain urgent institutional capacity needs, however, the project got off to a slow start. The time elapsed from the end of 1985 when those needs were first identified until the credit was approved toward the end of 1989 hardly corresponds to an emergency response. That loss of initial momentum can be explained by delays in preparing the computerization and accountancy training components and by difficulties in hiring external consultants to be financed under the Project Preparation Facility (PPF). In addition, Bank staff initially associated with the project had left following the 1987 Bank reorganization and the project had to undergo a post-appraisal in June 1988. 7. Another time-consuming problem arose out of the project's design. Structured to fill specific short to medium term gaps in two separate beneficiary institutions, it proved occasionally difficult to coordinate and create synergy between the activities of the two components and their respective subcomponents. The project's design, moreover, did not give enough consideration to the very problem it was meant to address - the enfeebled implementation capacity of the two institutions.  3 B. Achievement of Project Objectives 8. Project organization required a joint implementation effort from BOM and MPF, with the BOM coordinator assigned responsibility both for general coordination and for channeling communications with IDA. The two coordinators were supported by a Project Coordinator Assistant (PCA), but responsibility for day-to-day implementation fell to the heads of departments responsible for each project subcomponent, a multi-level division of labor into management committees that only added complexity. At the time of appraisal this complicated organizational arrangement was designed to develop administrative and management capacity, with a view to greater managerial integration of both institutions. The subsequent hiring of the PCA, as an external consultant and in accordance with Bank guidelines for selection of consultants, was a prolonged process which delayed project effectiveness. In eventual practice the BOM coordinator and, to a great extent, the PCA took on responsibility for project execution with varying degrees of commitment on the part of the department heads managing the subcomponents. Where - as was generally the case -- those new department heads responded to the project by taking advantage of what it had to offer in terms of training and other technical assistance, especially in the latter years, the project proved successful in attaining its objectives. Below is a summary of project execution by component. 9. Ministry of Plan and Finance - Economic Analysis and Policy Formulation. The objective of this component called for providing on-the-job and formal training for staff in the National Treasury Directorate to enable them properly to monitor the Economic Recovery Program (ERP). A long-term Advisor was hired and assisted the National Director in the preparation of fiscal information, negotiations with the IMF, etc. While formal training was provided as envisioned, the Advisor failed to provide on-the- job training to counterpart staff. The program of Distance Learning financed under the Credit consisted of preparatory courses (Diploma) as a condition for acceptance in a Masters Degree Program in Economics and Finance. Given in English and reaching beneficiaries in Beira as well as Maputo, the courses were organized and taught by University of London faculty who also trained Mozambican trainers. There was great demand for the courses, the quality and content of which won high praise from those enrolled. 10. Ministry of Plan and Finance - Assistance to the National Budget Directorate. This component has been one of the most successfully implemented, in terms of institutional capacity strengthening within the Ministry of Plan and Finance (MPF). It aimed at organizing, developing and supporting a Technical Unit (UTCP) to become an integral part of the MPF's National Directorate of Plan and Budget after the two ministries merged in 1995. With the support of project financed long-term advisors, the unit has (a) provided assistance in preparing the Three-Year Public Investment Plan (PTIP) in coordination with the preparation and management of the Budget at the central and provincial levels; (b) developed information systems to monitor investment projects; and (c) provided training, including on-the job training of counterpart staff. The only negative factor, outside the project orbit, has been some difficulty in retaining counterpart  4 staff at the central level. In more than one instance, staff have left after training to take better job offers in the private sector and elsewhere. This situation is expected to improve after a public sector reform which will include restructuring of career and staff salary conditions at MPF. For the time being, the two external advisors will be retained and financed by the ongoing Financial Sector Capacity Building (FSCB) credit. 11. Ministry of Plan and Finance - Accountancy Training. Initially the objective was to strengthen the audit and accounting functions of the National Tax and Audit Directorate and other parastatals through intensive accounting training for about 500 lower-, mid-, and higher level staff. The terms of reference were subsequently revised to include the creation of an Association of Accountants and an Accounting Institute. As envisaged at appraisal, 500 accountants, the majority from the private sector, participated in the courses which received mixed reviews. Although most students and the firms sponsoring them considered course content to be good, classes often included students with different levels of knowledge and experience. The least qualified acted in those situations as a drag on the enthusiasm and motivation of the more advanced students. Additionally, the courses did not deliver the hoped-for formal, international accreditation, a certification which can only be obtained through membership in the International Federation of Accountants (IFAC). Only a national Association of Accountants with ties to similar associations in other countries and to members of IFAC would set Mozambique on the path to IFAC membership. At the credit closing date, since no such association had yet been formally created, a certain amount of controversy persists regarding the achievement of objectives under this component. 12. Bank of Mozambique - Economic Studies and Documentation Center. This component set out to expand the capacity of the BOM's Economic and Statistics Department (DEE) to collect and analyze economic and financial information and formulate economic, monetary and financial policy. In order to achieve these objectives the Credit financed both a long-term advisor and short term advisors; helped renovate space and train staff (up to a Masters level in Economics and in other specialized short courses), equip, and provide consulting services for a Documentation Center for use by BOM and other institutions. 13. The component was initially dogged by delays in hiring long and short term consultants willing to work in a country undergoing a civil war and able to speak and work in Portuguese. It should be noted that the situation in the country and in BOM, with the separation of the commercial and central banks, had changed from the time the project had been designed. Consequently the terms of reference for technical assistance advisors, which had been elaborated at the time of appraisal, became somewhat outdated. At the time of appraisal qualified staff were more scarce in the DEE (then burdened by many responsibilities that were later reassigned to other BOM departments), and the prevailing "commercial bank culture" stressed operational aspects of the bank at the expense of appropriate central bank concern for monetary and macroeconomic issues.  5 14. An advisor in monetary policy hired in 1995 and funded by the project led a departmental team in preparing and publishing economic papers and other selected actions. Earlier in the project another consultant financed under this component had been successful in overseeing the work of computerizing routine procedures in several departments of the Bank of Mozambique (e.g. Caixa do Estado) as well as in the Treasury Department in the Ministry of Finance. This pioneering work at BOM resulted in the first publication of the Statistical Bulletin, issued first on a quarterly basis and since 1995 every month. The consultant in question proved extremely effective in on-the-job training and successful in motivating the staff at both institutions. The project also financed purchase of needed equipment (personal computers, one overhead projector, printers, etc.). 15. Also with project financing, the coordinator of this component decided to invest in English-language training for himself and his staff, upgrading skills in the department to the point that a degree of proficiency in English became one requirement to work at DEE. That linguistic capability proved useful during interchanges with other central banks in the region, as well as for participation in Consultative Group (CG) and Paris Club meetings. DEE and other BOM staff also took part in the University of London economics training mentioned above. 16. Now in operation, the Documentation Center is used by BOM staff as well as outside customers among the general public. The project financed computer equipment and software, in addition to printers which are used for internal BOM publications. Under project financing as well an advisor specialized in library services was hired and remained for four years personally training CDI staff in library records management, information management, etc., and promoting participation of the staff in seminars, intemships at the Central Bank of Brazil, and other formal short-term training. 17. Project financing planned to rehabilitate the physical facilities of the CDI were never utilized because no final decision was taken before the project closed regarding the site to be occupied by the Documentation Center (CDI) as part of general renovation work and office moves in the Central Bank. As a result additional purchases of books, periodicals, furniture, etc. have been put off, but a civil works category has been added to the ongoing Financial Sector Capacity Building (FSCB) project to cover the physical rehabilitation of the CDI, including purchase of furniture and equipment, additional training, and a possible short term consultancy. 18. Bank of Mozambique - Banking Operations/Computerization. The computerization of Bank of Mozambique was the largest and most ambitious component, representing roughly 60 percent of the total project cost. After a rather uncertain start, with long delays in selecting technical assistance consultants and procurement of hardware and software, results as originally envisaged were generally achieved. When the project was designed, BOM functioned as a central bank and a commercial bank, with both parts benefiting from the Credit until separation and privatization of the commercial bank (BCM). The project provided the banks with basic tools for sustainable expansion,  6 provided training both formally and on-the job. Some knowledgeable Bank staff regarded the computerization portion of the project as far too ambitious, since it was to start from nothing and finish with the adoption of advanced information technology. In practice, however, and despite the need for constant adjustments to match changes in the country's economic and financial structures, the introduction and operation of computer systems has proved a success. 19. As a result of the project, the Department of Organization and Infornatics (DOI) at BOM now boasts a capable and dynamic team of about 45 technical specialists led by the director, also the project coordinator, whose dedication helped in the execution and, it is hoped, will help assure future sustainability. The technical assistance provided by the technology advisor under this component proved especially productive and collegial in relations with the coordinator of the component. In the case of the initial and large scale technical assistance provided by a firm of consultants, however, timing proved a problem. In retrospect, it is considered that time and money were wasted when those consultants were brought on board too early in the project, even before equipment had been procured. Once the civil war ended, however, the project actually moved a step beyond the appraisal estimates by achieving a national-level start of communications that linked Maputo operations with newly opened agencies in Beira and Nampula. To guarantee the investment's sustainability, however, it is still necessary to consolidate the gains obtained so far by strengthening organizational capacity in banking operations. 20. Bank of Mozambique - Support to Legal Department. This small component of the EFMTA credit and a number of related actions have been picked up over time by another credit, the Financial Sector Capacity Building (FSCB), which also had a legal component. Even though its scope was limited, the project significantly improved the technical capacity of the BOM's Legal Department by promoting the hiring of qualified staff and providing additional incentives, such as on-the-job training and fellowships, for recent law graduates to join the department. Also, the development of a twinning arrangement with a reputable foreign law firm provided a unique opportunity for Mozambican lawyers to familiarize themselves with other legal systems and institutions. This is of particular importance in a country where lawyers were extremely rare, where the Law School had been closed for over five years, and where a major transformation of the legal framework was under way. The strengthening of legal skills facilitated an in- house resolution of complex legal issues raised through the restructuring of BOM and the privatization of some of its commercial functions. 21. The Legal Department has expanded in the last four years in terms of staff and the general assessment of the investment under the Credit is positive in terms of both beneficiary ownership and sustainable development objectives. 22. Project Implementation Unit. Finally, the Credit financed the creation of an implementation unit for overall coordination of the project. In addition to an accountant and a secretary whose salaries are paid by BOM, a General Coordinator paid out of the proceeds of the credit provided liaison between the project coordinators and IDA, as well  7 as assisting other coordinators in matters of procurement and disbursements, selection of consultants, issuance of terms of reference, and general advice related to project matters. The two general coordinators who served during the life of the project were instrumental in helping implement project objectives by providing necessary connections and communications among the various subcomponents. The accountant in the unit, moreover, maintained up-to-date records of the project that simplified preparation of project audits, and, together with the unit secretary, provided excellent back-up support to general project coordination and administration. C. Implementation Record and Major Factors Affecting the Project. 23. Once the initial and significant delays had been overcome, the project moved well toward implementation and the satisfactory achievement of its central objectives. As noted above, both the installation of sophisticated computer technology and the delivery of training in accountancy, economic analysis and legal techniques have strengthened the capacity of two important institutions to contribute productively to Mozambique's progress toward economic reform. Nevertheless, there is no gainsaying the slowness in bringing together many of the principal components of the project during its first years. First, it proved difficult to hire a General Project Coordinator, without whom the project could not be declared effective and IDA consent to the contract be obtained. Although the Borrower identified a suitable candidate, issues regarding salary, benefits and consultant status (international vs. local) took an excessive amount of time to resolve. Second, it proved difficult to recruit other consultants with both the desired expertise and proficiency in Portuguese. Third, because the Borrower was new to the Bank and unfamiliar with its procurement and disbursement procedures, all the large contracts dealing with BOM computerization, training in accounting, and the establishment of the UTCP ate up unusually large amounts of time. 24. Another factor that complicated and slowed execution was the reality of two implementing agencies: the Bank of Mozambique and the Ministry of Finance. The former was supposed to be the lead agency carrying the main burden of implementation, but the effective division of responsibility made coordination at times extremely complex and time consuming. 25. The project had a good disbursement performance. At the close, 97 percent of the funds had been utilized despite the initial divergence between the optimistic disbursement estimates at appraisal and the slow, early performance. In fact, disbursements picked up in FY93, after the Mid-Term Review (July 1992) and especially after large contracts were signed. 26. Project costs and financing. Actual project costs and financing were in accordance with appraisal estimates. There was no cost overrun. The differences shown in Table 7A of the Statistical Annex are the result of the weakening of the dollar in relation to the SDR. The initial dollar equivalent (US$21.0 million) of the credit became over US$22.97 by the time the project ended. The project included no cofinancing, but  8 estimates of the Government's contribution to local costs, including salaries, office space, import taxes, etc. indicate an amount close to US$2.0 million equivalent. 27. Audits Compliance. The Borrower complied with the DCA covenant requiring the submission of annual Audit Reports not later than six months after the end of each calendar year. The Audits submitted have been timely. There are not at this time any pending actions resulting from audits. D. Project Sustainability 28. Through the computerization component, the project has helped strengthen institutional capacity at the Bank of Mozambique and, by making possible the creation of a Technical Unit (UTCP), has made a similar contribution at the Ministry of Plan and Finance. These investments should produce returns far into the future. In the case of the UTCP, for instance, the advisors performed successfully in transferring skills to counterpart staff, and their contract will continue for at least another year with financing from the FSCB project. The coordinator of the computerization program has indicated that additional technical assistance to upgrade organizational capacity is required to consolidate the investment gains. In the training of accountants the project acted as a catalyst. Sustainability will depend on further steps to create an Association of Accountants at the national level and subsequently to connect it to the International Federation of Accountants (IFAC). During the completion mission of this project the Borrower submitted a detailed Operations Plan for each component, showing performance indicators and expected impact. E. Bank Performance 29. Bank performance was satisfactory for most of the project's life. In the first years of implementation, in particular, Bank staff could have been more sensitive to the Borrower's special needs as a new member and to its general unfamiliarity with Bank procedures. Those difficulties in mutual understanding diminished considerably over time. Supervision proceeded on a regular basis, and lines of communication were always open between the Borrower and the Bank. F. Borrower Performance 30. Despite some variations in the degrees of commitment on the part of the coordinators of the different components, Borrower conduct and achievement were also satisfactory. BOM and MPF provided important support to the computerization program and the creation and implementation of the UTCP, respectively. Both institutions also showed enthusiasm for the training opportunities and technical assistance provided by the project. General coordination by the BOM through the office of the Project Coordinator was highly satisfactory. It made the project's success possible.  9 G. Assessment of Outcome 31. The project has produced a satisfactory outcome, measurable in three specific ways. First, both the BOM and the MPF have bolstered their institutional capacity through formal and on-the-job staff training. Second, the BOM has been computerized and is on the right path to consolidating this technological advance through additional assistance in the operational area. And third, the Technical Unit established in the MPF has been providing invaluable support in the elaboration of the Three Year Investment Program in coordination with the preparation and management of the Budget at the central and provincial levels. H. Future Operations 32. There is no follow-on project to this operation. However, as mentioned before, a number of actions unfinished under the Credit are being picked up by an ongoing operation, the Financial Sector Capacity Building (FSCB) Credit. 1. Key Lessons Learned. 33. Among the key lessons learned from project implementation, the following general observation ranks as fundamental: a Borrower beset by civil war and economic near collapse is not likely to attach a high priority to projects aimed at strengthening financial management and the institutions responsible for it. Once the political, economic and institutional environment improves, however, a synergistic effect gives such technical assistance higher value. In the case of this project, the Borrower's sense of ownership grew significantly as the civil war ended and relative stability produced a positive effect on both the project and its implementers. Other lessons include the following: * Success in capacity building depends in large part on the commitment evinced by the beneficiaries. This was evident in the BOM computerization; the creation and implementation of the Technical Unit in the MOF Directorate of Plan; various training actions. To generate that. commitment from the start and insure the best level of execution, borrowers should be actively involved in project preparation and design. * When technical assistant (TA) consultants are selected, they should be required to commit themselves to transfer their own skills through on-the-job training. Skills transfer was successfully achieved in the case of two main subcomponents: the computerization at BOM and the creation of the UTCP at MPF. * The shorter the length and more limited the scope of a subproject (i.e. BOM computerization) the faster will be the results and the easier to measure. * The Bank should value the IDFs which started in July 1992 as instruments available to provide immediate, flexible resources to governments embarking on the initial  10 stages of reformn which seeks to produce drastic change in the cultural and institutional environment. In the case of this project a technical assistance credit was sought because there was no other instrument available at the time. * In Mozambique, given the civil war being fought as the credit was launched, a more realistic implementation timetable should have been set, especially in connection with recruiting TA consultants.  PART II - Statistical Annexes  Table 1: SUMMARY OF ASSESSMENTS A. Achievement of Objectives Substantial Partial Negligible N/A Macroeconomics Policies . ----------------------- --- ----- ------ ----- ------ -- ------ --- --- ---- --------- -- ----------------------- ector Policies Financial Objectives -- ~ ~ . . -- - - -- - - - -- - - - -- - - - -- - - - -----~- -V-r-- ------- - - - - - - - - - - - - - - - - - - - - - - - - Institutional Development v sical Objectives I PoveReduction vy er oncerns er Social Objectives I __________________________________________ --________________-_______________---------------- --I-------T------- En-viromnmental Objectives ________ _____ ___ __co _ge __ ____________ _t ------------------- ------- --- ----T------- ---------------- ------ -------- --- PulcSector Management I ------__------------------ __--------- ___-- ---- _------ _----------- __---- _____-------------------- --------T------- Private Sector Development I_ B. Project Sustainability Likely Unlikely Uncertain C. Bank Performance Highly Satisfactory Deficient Satisfactory Identification Preparation Assistance v Appraisav Supervision v D. Borrower Performance Highly Satisfactory Deficient Satisfactory Preparation Ipemenation Covenant Compliance V Operation_v E. Assessment of Outcome Highly Satisfactory Unsatisfactory Highly Satisfactory Unsatisfactory V'  Table 2: RELATED BANK OPERATIONS Credit Title Purpose Fiscal Status Year Preceding Operations Rehabilitation Program To rehabilitate and maintain investments and 1985 Completed economic services expected to generate an immediate production response. Second Rehabilitation To support policy and institutional reforms; to 1988 Completed provide foreign exchange to finance essential imports; and to assist the Government develop an agenda for longer-term policy changes. Third Rehabilitation To improve the allocation of foreign exchange 1989 Completed system, budgetary policy and price policy; and to review and reform of trade tariff structure. Parallel Operations Economic Recovery To support the early phase of financial sector 1992 Completed (ERC) reform -- particularly the separation of Banco de Mocambique and BCM; and to also support further integration and liberalization of the exchange rate Second Economic To support macroeconomic stabilization 1994 Completed Recovery (SERC) through the strengthening of key elements of fiscal and monetary policy while supporting an interlinked program of enterprise and financial sector reform - - -- - - - - -- - -- - - - I - - -- -- I - - -- - -I - -- - --I - - - -- -I - -- -- - - - - - - -- -- - -- - -- - -- - -- - -- - -- - -- - -- -- - - - - -- - - - -- -- - - - - -- - -- - --- -- - ---~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Financial Sector To develop and strengthen the financial sector, 1994 Under Capacity Building including training of central and commercial implementation banks staff and legal professionals at BOM and MOF. Following Operations Third Economic To support measures to improve macro- 1997 Under Recovery (TERC) economic management through financial and implementation fiscal reform, and to stimulate the supply response. Fourth Economic Main elements currently being identified -- 1998 Under Recovery (FERC) likely to be further fiscal reform elements and identification trade reform issues.  Table 3: PROJECT TIMETABLE Steps in Project Cycle D)ate Planned Date Actual Identification NA November 1985 Preparation NA March 1986 Appraisal July 1986 October 1987 Post-Appraisal NA June 1988 Negotiations September 1986 August 14, 1989 Board Presentation April 1987 October 17, 1989 Signing NA December 1, 1989 Effectiveness August 1987 June 29, 1990 Mid-Term Review NA July 27, 1992 Project Completion December 31, 1997 December 31, 1997 Closing Date December 31, 1997 December 31, 1997 Table 4: CREDIT DISBURSEMENTS: Cumulative Estimated and Actual (US$ Million) FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 Appraisal Estimate 3.4 5.9 4.2 2.8 2.1 1.8 0.7 0.1 Appraisal Estimate 3.4 9.3 13.5 16.3 18.4 20.2 20.9 21.0 (cumulative) I Actual 1.6 0.8 2.9 5.5 4.1 4.1 2.1 1.8 Disbursements Actual - 1.6 2.4 5.3 10.8 14.9 19.0 21.1 22.9 Disbursements (cumulative) Actual as % of 0 17 17 32 58 73 90 96 97 Estimate  Table 5: SCHEDULE OF ACTIVITIES IN PROJECT IMPLEMENTATION Key Implementation Activities in SAR Appraisal Estimate Actual Proiect Management and Administration =, Appointment of Project Coordinators August 1989 January 1990 > Contract Project Coordinator Assistant December 1989 June 1990 > Establish Management Committees September 1989 November 1990 Ministry of Finance Economic Analysis and Policy Formulation =* Contract Long-Term Advisor April 1990 June 1991 > Recruit Short-Term Advisors April 1990 June 1992 > Propose Procurement of Equipment January 1990 April 1991 - v Prepare TrainingPlans/-Select Participants Ja uary 1990 Apr-i 1991 - Prepare Design/TOR for Technical Unit December 1989 I st quarter 1991 z> Establish the Technical Project Unit December 1989 November 1990 => Contract Long-Term Advisor April 1990 July 1992 => Recruit Short-Term Advisors April 1990 July1993 Propose Procuremnent of Equipment January 1990 Septemvber 1992 Accounting in SOEs and OtherAgencies => Revise Training Program/Schedule November 1989 January 1993 => Invite Bids for Training Firm March 1990 March 1991 Bank of Mozambigue Econonic Analysis/Policy Formulation => Contract Long-Term Advisor May 1990 February 1995 > Recruit Short-Term Advisors January 1990 January 1995 =, Propose Procurement of Equipment January 1990 Jabuary 1996 => Prepare Training Plans February 1990 Jabuary 1994 Documentation Center > Select and Appoint New Staff December 1989 March 1996 . Contract Long-Term Advisor April 1990 September 1995 => Complete First Phase of Of fice Renovation November 1989 => Propose Proc. Equipment/Library Material. January 1989 December 1997 => Prepare Training Plans January 1990 February 1996 Banking Operations/Computerization => Hire Counterpart Staff December 1989 September 1990 => Contract Long-Term Adivisor Aprii 1990 June 1991 t Propose Procurement of Equipment March 1990 April 1991 > Review Bid Documents June 1989 April 1991 => Designate/Prepare Facilities Computer Ctr. December 1989 May 1991 > initiate Bids for Hardware/Software December 1989 June 1991 => Initiate Bids for Technical Assistance December 1989 > Select Supplier/Procure Equipment June 1990 November 1991 > Select Provider of Technical Assistance June 1990 December 1991 Legal Advisory Services => Recruit Short-Term Advisors September 1990 July 1991 > Prepare Training Plans September 1990 July 1991 * Select Fellowvship Participants June 1990 September 1991 => Propose Proc. of Equipment/Materials October 1990 July 1991  Table 6: KEY INDICATORS IN PROJECT OPERATION Description of Indicators Appraisal Estimate Actual Ministrv of Finance National Treasury Directorate Recruit new staff and provide them with formal A long-term advisor was hired but failed to Expand and redefine functions of two and on-the-job training for proper monitoring and provide on-the-job training. Staff had access to recently merged departments (Economic implementation of the ERP. Masters Program in Economics/Finance through Analysis & Prices and International distance training financed by project and provided Cooperation). by University of London. Problems in retaining qualified staff after training. National Budget Directorate Hiring of extemal TA consultants to help set up Urnit created in 1990. From the start, difficulties Creation of a Central Technical Project Unit the Unit with counterpart staff. TA to include in retaining skilled staff. Good quality on-the-job (UTCP). UTCP to be responsible for the training, formal and on-the-job. training in spite of obstacles. Also formal formulation and application of procedures training was developed to reach larger audience, for project preparation, evaluation, and including other sectors and the provinces. monitoring. National Tax and Audit Directorate Training of 500 lower, mid, and higher level staff Two levels of training in accounting had the Strengthening the audit and accounting by consulting firm, which would phase in participation of about 500 individuals, most of functions of the Directorate and other State Mozambican instructors within a 5-year period. them from the private sector. This action Enterprises received mixed reviews, although course content was considered good by most of the students and the accounting firms sponsoring those students. Training was provided by a firm of consultants which also employed Mozambican instructors. Bank of Mozambique Econonic Research Dept. (DEE) a) Hiring of Economic Advisor to assist in a) A Monetary Policy advisor was hired and led Capacity strengthening for the collection economic analysis and policy formulation, review the work of DEE staff in the elaboration of and analysis of economic and financial statistics, etc., and short term consultants for economic papers. A short-term consultant was informnation, and formulation of economic, specific studies and other specialized services. also hired and worked with DEE staff and others monetary and financial policy. b) Establishment of a Documentation Center to at BOM on the computerizing routine procedures. serve the needs of BOM and related institutions, b) The Documentation Center became including space renovation, training, consulting operational, although rehabilitation work of the services. physical facilities/acquisitio of furniture still c) Training of staff at the Masters level in remain to be completed. Economics ard other specialized short courses c) Distance training in Economics Banking Operations a) Procurement of equipment and vehicles Although there were delays at start, BOM has Capacity strengthening, including the b) Design of an operation and information system been computerized and the project financed the Commercial Bank. to be computerized, including the procurement acquisition of hardware/software and technical and installation of hardware and software assistance, including on-the-job training. sufficient to enable BOM to operate the Chart of Accounts developed with the help of the IMF. To be done in 2 phases of TA: (i) diagnostic assessment of BOM's special needs; and (ii) instal lation of hardware and software and training of staff. Legal Advisory Services Seminars on legal/intemr banking issues; Training actions, including internships in the legal Strengthen BOM's Legal Dept. to enable it fellowships; short term training on banking departments of other central banks, participation to provide legal advice to other operations and donor negotiations; para-legal staff of staff in legal seminars; also creation of departments, including in matters of training. Computer equipment financing to computerized data base of existing legislation. international finance process standard legal texts/compile legal reference data on banking regulations. Project Unit Day-to-day administration of project Done Creation of Project Unit consisting of a implementation, direct communication with IDA Project Coordinator and support staff  Table 7A: PROJECT COSTS (US$ million equivalent) Item Appraisal Estimate Latest Estimate Foreign Local Total Foreign Local Total Ministry of Finance Econ. Analysis/Policy Form. 1.24 0.06 1.30 1.67 0.15 1.82 Budgeting (Technical Unit) 1.19 0.06 1.25 2.88 0.21 3.09 Accounting in SOEs/Others 1.05 0.10 1.15 2.99 0.08 3.07 Subtotal 3.48 0.22 3.70 7.54 0.44 7.98 Bank of Mozambique Econ. Studies/Doc.Center 1.75 0.37 2.12 1.03 0.07 1.10 Banking Operations 11.42 0.76 12.18 13.61 1.30 14 91 Legal Advisory Services 0.43 0.30 0.73 0.18 0.03 0.21 Subtotal 13.60 1.43 15.03 14.82 1.40 16.22 Project Management 0.71 0.03 0.74 0.61 0.13 0.74 Physical Contingencies 0.70 0.07 0.77 Price Contingencies 2.53 0.24 2.77 TOTAL COSTS 21.020 1.99 23.01 22.97 1.97 24.94 Table 7B: PROJECT FINANCING (US$ million equivalent) Source Appraisal Estimate Latest Estimate _ Foreign Local T Total Foreign Local Total IDA 21.0 21.0 22.97 22.97 Government of Mozambique 2.0 2.0 1.97 1.97 Total 21.0 J 2.0 23.0 22.97 1.97 24.94  Table 8: STATUS OF LEGAL COVENANTS Loan Agreement Section Description of Covenant Comments 3.01 Borrower shall carry out project in accordance with Implementation Program set forth in schedule 6 of Credit Agreement by: (a) Appointing Project Coordinators for BOM/MOF Complied with components; (b) Hiring Project Coordination Assistant with Complied with qualifications and managerial experience acceptable to IDA, to assist Project Coordinators, and report directly to the Project Coordinator, BOM (c) Establishing Managing Committees at BOM/MOF to Complied with review annual work programs of each subcomponent, advise on execution of subcomponents, review progress and annual project review reports. (d) Establishing with the National Budget Directorate of Complied with. TA consultants MOF a Central Technical Project Unit (UTCP) on board since August 1992 Training program started on June 3.03 Borrower shall implement the Accounting Training 27, 1994 Program in accordance with a timetable agreed with IDA 3.04 Borrower shall install and operate the computerized Contract with supplier of systems on terms and with a timetable to be agreed with hardware/software signed IDA. September 8, 1993. 3.05 Borrower shall not later than November 30, 1990, and Complied with. not later than November 30 of each year, until project completion, conduct with IDA an annual implementation review to: monitor progress; exchange information among staff responsible and propose solutions to any current problems; and update timetables and cost estimates. 4.01 Submission of yearly Audit Report, not later than six 1990-96 Audit reports generally months after the end of each year submitted on time Last Audit Report (1997-98) due . on 6/30/98)  Table 9: Bank Resources - Actual Staff Inputs1 Stage of Project Cycle Staff Weeks US$'0002 Preparation to Appraisal 14.0 33.5 Appraisal 79.0 197.7 Negotiations through Board Approval 8.0 21.5 Supervision 151.0 472.0 Completion 12.0 32.8 TOTAL J 264.0 J 757.5 Source: MIS Report (COSR2) - Staff Time Use and Schedule, in Staff Weeks and Dollars. 2 Includes travel and labor costs.  Table 10: BANK RESOURCES - MISSIONS Stage of the Month/ No. of Days Specialized Staff Performance Types of Project Cycle Year persons in Skills Represented Ratings Problems Field Impl. Devel. Status Impact Identification 11/85 1 5 COF Preappraisal 1 3/86 2 15 COF, TAO 2 8/86 2 10 COF, TAO 3 1/87 1 4 TAO 4 4/87 1 7 TAO Appraisal 10/87 3 15 TAP, OPA,CON Post Appraisal 6/88 2 15 PSM, OPA Supervision 1 4/90 1 9 PSM S S PM, PR 2 11/90 1 10 OPA S S PM, PR 3 2/91 2 10 PSM, LEG S S TR, PM 4 July 1991 1 10 OPA S S TR 5 3/92 1 5 PSM S U TR 6 7/92" 2 18 PSM, OPA S U TR,PR 7 2/93 1 5 OPA S S PR 8 6/93 1 12 OPA S S PR 9 6/94 2 22 OPA, LEG, PCA S S 10 2/95 2 12 OPA,SFA S S 11 12/95 1 12 OPA S S 12 7/96 1 10 OPA S S 13 2/97 1 9 OPA S S Completion 3/98 1 9 OPA S S KEY Types of Skills Types of Problems Ratings COF Country Officer FA Funds Availability S Satisfactory LEG Lawyer FP Financial Performance HS Highly Satisfactory OPA Operations Analyst LC Covenants Compliance U Unsatisfactory PSM PSM Specialist PM Progress Management TAO TA Officer PR Procurement Progress PCA Procurement/Computerization TA TA Progress SFA Sr. Financial Analyst (Acctg.) TR Training Progress 3 Mid-Term Review.  Appendix A CREDIT 2066-MOZ ECONOMIC AND FINANCIAL MANAGEMENT TECHNICAL ASSISTANCE IMPLEMENTATION COMPLETION MISSION AJIDE MEMOIRE 1. A mission consisting of Carolina Machado (Operations Analyst - AFTM 1) visited Mozambique from March 4 through 13, 1998 in preparation of the Implementation Completion Report (ICR) of the Economic and Financial Management Technical Assistance (EFMTA) credit. The mission wishes to thank the Bank of Mozambique (BOM) and Ministry of Plan and Finance (MPF) officials for their support, in particular Mr. Joao Pais, the General Project Coordinator (GPC), and his office staff. A list of officials met is attached to this Aide Memoire. 2. This aide-memoire, to be included in the ICR as an annex, and a preliminary draft of Part I (Project Implementation Assessment) resulting from discussions with the project coordinators, have been left with the GPC and the other coordinators for their comments. Also attached to this Aide Memoire is a draft Plan of Operations, prepared for the Borrower by the GPC for the operational phase of the project, including performance indicators of the sustainability of the investment under the project. 3. The EFMTA credit closed on December 31, 1997, as estimated at appraisal. Disbursements under the credit until April 30, 1998 will probably amount to about 94 percent of the total credit amount. Undisbursed funds remaining after April 30 will be canceled. The non utilization of these funds was due to a number of factors: (a) lack of definition on the part of BOM as to a site of the Documentation Center, thus precluding purchase of equipment, furniture, texts, in addition to civil works for rehabilitation of the building; (b) cancellation of the Commercial Bank (BCM) subcomponent as a result of its privatization after separation from BOM; (c) savings in some of the long-term contracts; (d) dropping out of the Balance of Payments subcomponent. 4. The credit's main objective, at the time of Appraisal in October 1987/July 1988, was to provide institutional support to the Ministry of Finance and Bank of Mozambique, in the form of technical assistance. This assistance included long and short-term advisory services, extensive training, and purchase of equipment and vehicles. Since the objectives of the credit consisted entirely of technical assistance in very specific areas and excluding any implementation of policy, overall impact of the credit will be difficult to assess. The amount of the investment (SDR 16.5/US$21 million equivalent) was relatively small and financing was aimed at specific targets: computerization of the Bank of Mozambique, advisory services in certain areas of BOM and MPF, training of staff at both institutions. In fact, the project was firstly designed, in the mid 1980's, as a line of credit to be used according to agreed criteria, in order to respond in a flexible manner to  -2- urgent needs of the Government in a number of areas of the then main economic agencies (Ministry of Finance, Bank of Mozambique, and the National Planning Commission). 5. The mission concurs with the view that the overall result of the project is satisfactory. Major accomplishments under the project were: * Creation of a technical unit at the MFP, Unidade Tecnica de Coordenacao de Projectos (UTCP), which provides assistance in the preparation of the Three- Year Public Investment Plan (PTIP), in coordination with the preparation and management of the Budget at the central and provincial levels. Also, under the EFMTA project the work of the UTCP has been computerized and systems were created for data management, in coordination with various sectors (Health, Education, Agriculture, Construction, Water Supply). Financing of technical assistance at UTCP, which now operates at the National Directorate of Plan and Budget, will continue under the ongoing Financial Sector Capacity Building (FSCB) project. * Computerization of Bank of Mozambique, initiated under the project and including BCM prior to its separation from BOM and subsequent privatization. The project provided the banks with basic tools for sustainable expansion, provided training both formally and on-the job. Just prior to privatization of BCM, funds under this component were used exclusively for expansion of the Central Bank computerization. This included the start of communications at the national level, including its newly opened agencies at Beira and Nampula. The coordinator of this component, who was involved in the computerization project from start, considered her involvement was a positive and real learning experience. The computerization project has been audited by a consulting firm (with BOM funds). Preliminary conclusions indicate that there are gaps in the area of organization and methods. The project coordinator agrees and indicated to the mission that, in order to consolidate the investment in terms of its sustainability, additional technical assistance in the organizational area is still required. * Distance training in Economics and Finance which benefited a reasonable number of staff in the MOF and BOM, in addition to staff from other ministries and institutions in both Maputo and Beira. The project financed specifically a course (Diploma) which prepared candidates for Master Degree programs in Economics and Finance. This "course of transition", a requirement to access to a Masters program, has been subsequently adopted by other countries (Cambodia, Vietnam, Namibia, Botswana, Zambia), using many of the methodologies created in the ambit of the EFMTA project. The ongoing FSCB project has continued to finance participation in Masters programs in Economics and Finance.  -3- As envisaged at appraisal, 500 accountants were given intensive training in accounting. The training provided under the project received mixed reviews, although course content was considered highly satisfactory by most of the students and the firms sponsoring those students. One reason for a less than good review was the fact that classes at the first level had students with different levels of knowledge and experience, resulting in lack of motivation on the part of the more advanced students. Another negative aspect relates to the failure of the courses to provide in the end formal/international accreditation. Part of this component included the creation of an Association of Accountants in Mozambique. This has yet to happen. At first, the reason for the delay had been the reluctance of an existing similar association (in Beira, Sofala province) to join a new association at the national level. This issue has now been resolved and there is an ongoing initiative on the part of private individuals, some of which attended the courses financed by the project, to go ahead with such an association at the national level. In case the MPF agrees to sponsor this initiative and requests Bank financing, this action may be funded under the FSCB, upon receipt of an action plan, cost estimates, etc. The creation of such an association at the national level would allow for linkage with similar organizations in other countries which are members of IFAC (International Federation of Accountants), enabling graduates of accountancy courses to obtain international accreditation upon completion of course work in Mozambique. Other actions with a positive impact, financed by the Credit, included: intensive training in English of the staff at the Department of Economic Studies (DEE); computerization work in the Legal Department library, including creation of a data base for existing legislation; short courses in the area of banking; high level short-term seminars for policy makers in BOM, MPF, other ministries. 6. Audits of the project were unqualified and submitted on a timely basis every year. The office of the General Project Coordinator (the project implementation unit), created when the Credit became effective, kept the accounts of the project in a manner which greatly facilitated the work of the auditors. In addition, the GPC office provided invaluable support to project execution, in terms of helping with procurement/disbursement processes, etc.. As a result, capacity in project management has been created within BOM. 6. With the additional information collected during the mission, Part I of the ICR will be updated for the Borrower's comments on the ICR and the project in general, after the World Bank's internal clearance. March 1998  Attachment CREDIT 2066-MOZ ECONOMIC AND FINANCIAL MANAGEMENT TECHNICAL ASSISTANCE IMPLEMENTATION COMPLETION MISSION LIST OF OFFICIALS MET Bank of Mozambique H.E. Adriano Maleiane, Governor Mr. Samuel Canor, Advisor Bank of Mozambique - Project Coordination Office Mr. Joao Pais, General Coordinator Ministry of Plan and Finance - Ecomomic Analysis Mr. Manuel Chang, National Director of the Treasury Ms.Otilia Santos, National Vice-Director of the Treasury Mr. Manuel Paulo, Administrative Coordinator (Distance Training - Diploma) Mr. Alberto S. Simao, Administrator, University of London Training Program Ministry of Plan and Finance - Technical Unit (UTCP) Mr. Domingos Lambo, National Vice-Director of Plan Mr. Paulo Macamo, Accountant, Department of Investments and Development Ministry of Plan and Finance - Intensive Training in Accounting Mr. Ismael Panachande, Chief of Audits Department Bank of Mozambique - Legal Assistance Mr. Abel Chicalia, Director, Legal Department Bank of Mozambique - Banking Operations Mrs. Maria Luiza Aragao, Director, Department of Organization and Data Processing Mr. Alfredo Lopes, Computerization Advisor Bank of Mozambique - Economic Studies/Statistics and Documentation Center Mr. Antonio Pinto de Abreu, General Manager Mrs. Ilda Elizabeth Comiche, Division ChiefEconomic Studies Department Mrs. Carmelia Langa, Director, Documentation Center Others Mr. Jorge Salvador, previous Project Coordinator Mr. Eduardo Nhamposse, Coordinator of the (future) Accountants' Association/Institute  Borrower' Assessment of Implementation (Sumimary Translation) Although the overall assessment is that the objectives of the project were successfully achieved, it should be mentioned that the project was designed at a critical time for Mozambique, because of the country economic and political situation. Also, the institutions implementing the Economic Rehabilitation Program lacked qualified staff, basic equipment, and external support. The Government' role in attaining the project objectives was evident in view of: * the political will to implement the project; * the involvement of qualified staff and their support in face of the changes in the environment; * the close connection which developed between the project's general coordination and individual managers of the various subcomponents. Since the project was designed to provide assistance in specific areas it was expected that contracts and other procurement actions would be processed rapidly. Taking into account the scarcity of qualified staff, it was assumed that tasks would be delegated to mid-level staff. Yet it was rather difficult at the start of the project to do so because of Government staff constraints, difficult communication with IDA counterparts at the time, and the need to learn new procurement procedures. The complexity of problems encountered and resulting delays in disbursement were such that the World Bank even considered canceling the credit. It became necessary for the Government to take action to remedy this situation and to establish a better. system of communication with its counterparts at the Bank. Constraints to implementation at the time could be summarized as follows: * Delay in effectiveness (6 months) dependent on having a Project Coordination Assistant on board; * Slow progress in creating working committees; lack of definition of strategies on the part of the subcomponents coordinators, including submission of work plans and  2 related budgets. Both the Task Manager and the Project Coordination Assistant, financed by the Credit, were not clear as to how implement the project. * Difficulties in establishing a dialogue with the Task Manager, a fact common in other Bank projects at the time. * Weak capacity of staff, especially in terms of World Bank procedures, as well as poor communication among the departments responsible for project implementation (i.e. follow up on disbursements and the special account). * Time constraints on the part of the project coordinators. * Difficulties in recruiting Portuguese speaking consultants with the required profile. * Emphasis on the computerization of the commercial aspect of Bank of Mozambique in detriment of central bank operations. Acceleration of implementation was achieved after the Mid-Term Review. Improved and steady communication with IDA counterparts was helped by a change in task manager. Other factors included procurement/disbursement seminars, frequent supervision missions, and the establishment of a Resident Mission in Maputo. The office of the Project Coordinator, established for the day-to-day implementation and administrative work, supported the execution of the following: 7- Creation of the Technical Unit (UTCP) at the National Budget Directorate for the preparation, evaluation, and implementation of sector programs (water, agriculture, health, education). - Introduction to distance training programs for Master's degrees in Economics and Finance. => Start of the Intensive Training in Accounting program. => Hiring of technical assistance advisors and training of staff at the National Directorates of Treasury and Budget (Ministry of Plan and Finance), and Departments of Economic Studies/Statistics, Organization/Informatics, Legal Affairs, and Documentation Center (Bank of Mozambique). => Contract approval for the supply of hardware and software in the computerization of Bank of Mozambique. 7 Seminars, other training programs for Bank of Mozambique, Ministry of Plan and Finance staff. 7 Other courses 7 Acquisition of equipment, books, publications, periodicals for the Documentation Center => Improvement in communications and other systems at Bank of Mozambique  3 = Introduction of electronic mail (internal/external) at Bank of Mozambique Comments on the Implementation Completion Report (ICR) prepared by the Bank The ICR reflects in an accurate manner the two phases of the project and offers recommendations which are appropriate to eventual support in the same areas of the project. As mentioned before, the Government's recognition of what the project had to offer and the total commitment of the staff involved with the project, helped increase the quality and efficiency of the staff at the two institutions through training, acquisition of equipment, etc.. The Ministry of Plan and Finance and the Bank of Mozambique are nowadays regarded as institutions with a significant role in fiscal matters, which ensure financial discipline in the Government and financial institutions. As it is important to consolidate the project's achievements the Government agreed that the Bank continue to provide similar assistance through the ongoing Financial Sector Capacity Building project.  Appendix B iBxdr Page I of 4 CONTRIBUIQAO DO GOVERNO AO RELAT6RIO FINAL (PROJECT COMPLETION REPORT) DO PROJECTO DE ASSISTSNCIA TECNICA A GESTAO ECONOMICA E FINANCEIRA - MINISTtRIO DO PLANO E FINANQ;AS E BANCO DE MO0;AMBIQUE Embora seja opiniAo generalizada que os objectivos do Projecto foram, de uma maneira geral, conseguldos importa referir qua o seu Inicto deu-se numa fase bastante critica da vida do Pais, caracterzada por um declinio acentuado da economia como reflexo da guerra e outros factores adversos tais como, fraqueza das Instituig6es encarregues de implementar o Programa de ReabilitaclSo Econ6mica e Social (MPF e BM) par faita de quadros qualificados, equipamentos b4sicos do trabalho do dia-a-dia e apoios externos. Para este sucesso contribulu, de urna maneira decisisva, a observancia, por parte do Govemo, dos seguintes pressupostos iniciais: * Vontade poiltics de implementar o Projecto. * Envolvimento do quadros capazes e sus motivapho para as mudan9as que se impunham. * LigaAo estreita entre a coordena;Ao geral e os gestores das subcomponentes. Tratando-se do um Projecto de assistoncia direccionado para areas concretas impunha-se, tamnb6m, qua, tendo em aten9Ao a exiguidade de tecnicos com formagao adequada e a sobreposi^o de tarefas descmpenhadas pelos poucos gestores existentes, fossom delegadas compet6nclas para quadros m6dios, a burocracia intema e extema eliminada, os contratos aprovados com celerdade a os concursos para a aquisicao de equipamentos Ianpados atempadamente. Nio foi ficil, na parts inidal do Projecto, realizar estas acq6es dada a pressao do trabalho diArio, comunicaq&o deflciento e dificil com o Task Manger e implementa9ao de outros projectos financiados polo Banco Mundial e por outros doadores, cada um deles com procedimentos especificos mesmo quando se tratava de apolar o mesmo programa. A complexidade dos problemas a o ritmo bastanto desacelerado dos desembolsos foram tais quo o Banco Mundial aventou a possibilidade de cancelar o Projecto. Era urgente, pols, qua o Governo pusesse em pratica os pressupostos inicials acima indicados, bem como o estabelecimento de um diAlogo construtivo com o Banco Mundial. Estes constrangimentos podom ser rosumidos no seguinte: * Atraso de cerca de 6 meses na declarapAo da efectividade do credito, motivado pela demora na contrata;ao do Assistente do Coordenador Geral. . Lentidlo na cdag&o de equipes de trabalho e sua responsabilizagAo, falta de deoinicho de estrategias por pane das sub--componentes, elabora,co de planos de trabalho o respectivos orcamentos. Foi not6rio, tambem, rque tanto o Task manager como o assistante contratado para a coordena9Ao nao tinham a clareza necessaria sobre como implementar ests Projecto. * Dificuldade de articulago com o Task Manager. Este facto caracterizou de uma maneira signlficativa a fass inicial dos operac6es do Banco Mundial em curso no Pals.  A& ^Appendix B iof" sz Page 2 of 4 * Fraquezas por parte dos quadros no dominio dos procedimentos do Banco Mundial, bem como deficiente articulagao intema dos Departamentos que deveriam proceder ao acompanhamento das contas especiais e desembolsos. Exiguidade de tempo por parte de responsaveis das sub-componentes. afectos, de uma maneira geral, a diversas tarefas de caracter inadiavel. * Dificuldade de selec;io de consultores fluentes na lingua Portuguesa corn o perfil desojado pars as tarefas preconizadas * Concentrac3io inicial do projecto de informatizagAo e forma;6o de tecnicos de informltica na area comercial do Banco de Mocambique (actual Banco Comercial de Mogambique) em detrimento das operag6es do Banco Central. Do dialogo constante com o Banco Mundial, mudanca do Task Manager, realizao do mid-term review, do primeiro sominArio sobre procurement e desembolsos por t6cnicos do Banco Mundial, miss6es de supervisao, bom como o estabelecimento da Missao Residente desta Institui;Ao em Maputo foram criadas as condigaes para um arranque definitivo do Projecto. o Gabinete do Apolo ao Coordenwdor, criado pars acompanhar o trabalho dlAnio, tovo, pot natureza das suss funq6os, quo *mpreender um esforpo organizativo maior quo c das estruturas administrativas envolvidas, o ac96es concretas come;aram a ganhar forms, nomeadamente: * CraCIo da UTCP (Unidade T6cnica de Coordena9io de Projectos) junto da Direc,ao Nacional do Orcamento (MPF), sua capacitag&o para elaborasao, acompanhamento e avaliacAo dos diversos programas sectorials (Aguas, agricultura, saude, educa;ao, etc...). * Introdu$3o de Cursos de Mestrado A distincla em economia e finangas ministrados pela Universidade de Londres, born como forma9co intensiva em Ingl6s para os quadros Inscritos. * Inicio dos curso de formagao acelerada em Contabilidade destinada a 500 tecnicos de Minist6rios, Empresas e outras Institui9oes com vista a uma melhor apresentasio de contas para efeitos de auditoria pela Direc;ao Nacional do Impostos e Auditoria. * ContratagAo de assist6ncia t.cnlca e formagio de quadros das Direcqes Nacionais de Tesouro e do Or9amento, Departamentos de Estudos Econ6micos a Estatistica, Organizar,9o e Informatica, Assuntos Juridicos e Centro de DocumentagAo e Informacio do BM. * Aprovario dos contratos de fomecimento de hardware e software para o Banco de Mo$ambique. * EstAgios, seminArios no Pais e no estrangeiro para quadros do BM, MPF e outras institul;oes. * Cursos intensivos de Ingles para quadros do DEE e do MPF.