Mozambique - Poverty Reduction Strategy Paper Annual Progress and Joint IDA-IMF Staff Assessment of the PRSP Annual Progress Report : chairman's summing up

MOZAMBIQUE CHAIRMAN'S SUMMING UP Poverty Reduction Strategy Paper Annual Progress Report and Joint IDA-IMF Staff Assessment Meeting of Boardof Executive Directors ofIDA July 6,2004 The Executive Directors considered the Annual Progress Report on the implementation of the Poverty Reduction Strategy Paper (PRSP-PR) prepared by the Government of Mozambique, and the Joint IDA-IMF Staff Assessment (JSA) of the PRSP-PR. Directors commended the Government of Mozambique on its continued commitment to poverty reduction and on the progress that has been made in implementingthe PRSP. They noted, in particular, the strong economic growth that has been achieved despite the floods in 2000, and the consequent sharp reduction in the poverty headcount. Despite considerable achievements, Directors noted that important weaknesses and vulnerabilities remain, particularly in the rural sector. They highlighted the importanceof giving high priority to capacity building at all levels. They recognized the progress made in improving educational outcomes and access to health services, while noting that there has been less progressin reducing malnutrition, reducing the maternal mortality rate, and the effects of malaria. They also underscored the importance of fighting HIV/AIDS. Directors urged for a deeper understanding of the relationship between growth and reducing poverty. Directors also suggested the need for greater focus on gender issues. Directors supported the Government's use of the Poverty Observatory to consult with civil society on the PRSP annual report, and encouraged the Government to continue to use this instrument to involve civil society, Parliament and the donor communityin public policy planning and monitoring. The Directors welcomed the Joint Review process, and expressed the hope that ways will be found to reduce the Government'sreporting burden by consolidatingthe discussions on the Joint Review and those on the PRSP/JSA. Furthermore, they noted with appreciationthe consolidation and streamlining of Government documents that is under way. They expressed concern about the lack of accurate data on government expenditures and certain sectoral outcomes, and urged the Government to work with the Bankin their efforts to improvethe statistical system. Directors noted favorably the Government's efforts in decentralization and in public sector reform. They expressed concern, however, at the slow progress in increasing the efficiency and transparency of the legal system. Directors underscored the need for continued public sector reforms in order to address weak fiscal management capacity and ensure efficient and more effective use of budgetary resources. While recognizing that the financial system is on a firmer footing now than a year ago, the Directors stressed the importance of addressing the remaining vulnerabilities in the sector in order to achieve sustainable economic growth. Directorsalso emphasizedthe need to addressthe existing constraints on private sector development, and in particular those relating to the cost of doing business. The need for diversification into other sectors such as tourism, as well as support for Small and Medium- Sized Enterprises (SMEs) was underscored. It was also suggested that the potential for internationaltrade should be further explored. Finally, Directors concurred with staff that the PRSP strategy continues to provide a credible poverty reduction framework for IDA's continued concessionalassistance to Mozambique.