Announcement of World Bank Approves Second Poverty Reduction Support Credit to Mozambique on September 13, 2005

Mozambique: World Bank Approves Second Poverty Reduction Support Credit To Mozambique Media Contacts In Washington: Herbert Boh (202) 473-3548 hboh@worldbank.org In Maputo: Rafael Sauté (258-1) 48 23 24 rsaute@worldbank.org Washington, September 13, 2005 - The World Bank’s Board of Directors today approved a US$120 million credit* to the southern African country of Mozambique to support the implementation of the Government’s Action Plan for the Reduction of Absolute Poverty (PARPA). The second Poverty Reduction Support Credit (PRSC-II) will continue to support Government initiatives to strengthen governance and public sector management to improve the delivery of basic public services particularly in health, education, and rural water and sanitation; attract investors by improving the business environment; accelerate human resource development; and improve donor coordination to increase the effectiveness of assistance. In the public sector the Government’s agenda includes accelerated reforms in building capacity and accountability through better public financial management, fighting corruption, decreasing aid dependency, and improving the monitoring and evaluation of its activities. To improve the business environment the Government is expanding infrastructure services, strengthening the financial sector and easing regulatory constraints. “With the continuance of Mozambique’s good economic performance, the second credit will deepen support for the Government’s reform agenda to accelerate growth and reduce poverty, and achieve the Millennium Development Goals,” said Gregor Binkert, World Bank Task Manger for the program. “The new President and the Government have reaffirmed their commitment to the reform agenda as articulated in the five-year program tabled in Parliament in March 2005.” The first disbursement of US$60 million is for the Government’s 2005 budget year and the second disbursement of an equal amount is expected to be released in January for the 2006 budget year. Although the Bank’s Poverty Reduction Strategy Credits (PRSC) generally have one disbursement Mozambique’s credit is designed with two disbursements to be more harmonized with other donor support as stated in the Paris Declaration on Harmonization, and to allow the alignment of future PRSCs to the budget cycle and to be based on the findings of the annual April/May Joint Review and the September Mid-Year Review. The World Bank is part of a group of 17 donors providing direct budget support against progress in implementing actions and achieving Government monitored indicators identified in the Performance Assessment Framework which was first adopted by the Government and the G17 in April 2004 and is updated every year. Since the end of the civil war in Mozambique in 1992, the country has maintained an annual average economic growth of 8 percent. Real GDP growth was robust in 2003 and 2004, when it was estimated at 7.8 percent and 7.2 percent respectively. Strong economic growth and efforts to share that growth with the poor, notably women and other marginalized groups, have contributed in reducing poverty in Mozambique from 69 percent in 1997 to 54.5 percent in 2003. * The credit is on standard International Development Association (IDA) terms, with a commitment fee of 0.5%, a service charge of 0.75%, and a maturity of 40 years, including a 10-year period of grace. For more information on the World Bank’s work in Mozambique visit: http://www.worldbank.org/afr/mz For the second Poverty Reduction Support Credit documents visit: http://web.worldbank.org/external/projects/main?pagePK=64283627&piPK=73230&theSitePK=40941&menuPK=228424&Projectid=P056201 For the Action Plan for the Reduction of Absolute Poverty documents visit: http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/MOZAMBIQUEEXTN/0,,menuPK:382146~pagePK:141132~piPK:141123~theSitePK:382131,00.html