Mozambique - Country Assistance Strategy : chairman's concluding remarks

MOZAMBIQUE: COUNTRY ASSISTANCE STRATEGY CHAIRMAN'S CONCLUDING REMARKS Meetingof ExecutiveDirectors November 20,2003 The Executive Directors welcomed the first integrated IDA, IFC, and MIGA Country Assistance Strategy(CAS) for Mozambique, and commended the collaborativeprocess followed in the preparation of the "results-based"CAS andits strong growth orientationand emphasison private sectordevelopment and governance. Directors noted that Mozambique's performance since the last CAShasbeengood,including strong growth and high levels of foreign direct investment. They welcomed Mozambique's commitment to poverty reduction andmacroeconomic stability and the positive results that the Governmenthas achieved to date in implementing its Action Plan for the Reduction of,Absolute Poverty (PARPA), including through expanding private-sector participation in infrastructure. Directors commended the authorities for strengthening the PARPA's results orientation through preparing a prioritized performance assessment framework matrix which includes realistic performance indicators, and for promoting donor coordination around this matrix, irrespective of the financing instruments that the donors elect to use. To ensure sustainable growth, Directors urged the authorities to complete the Government's divestiture from the financial sector, accelerate legal, judicial andlandreform,and continuepursuing fiscal adjustmentthat would lessen aid dependency. Directors agreed that Mozambiqueneedsmorerapidgrowth based on agriculture andlabor- intensivemanufacturing and services to reduce poverty. They expressed support for the CAS's focus on improving the investment climate, expanding service delivery,and building public-sector capacity and accountability structures. In this context, they stressed the importance of expanding agriculture and agribusiness, increasing private sector investment, addressing regional disparities, diversifying the sources of growth, and extending the benefits of growth to allMozambicans. Directors observed that joint IDA-IFC-MIGA preparation of the CAS would help to provide more effective assistance in these critical areas. In general, Directors were supportive of the lending and non-lending program,aswellas the triggers set out in the CAS, and supportedthe proposed PovertyReduction Support Credits (PRSCs) as a means to supporting PARPA implementation and improving donor coordination around the Government's own program. Some Directors, however, suggested reducing the volume of these operations to levels morecommensurate with the circumstances, and highlighted the importanceof taking into account Mozambique's aid dependence. Directors stressed that PRSC support should be closely linked to progress in improving the Government's absorptive capacity, financial management, and transparency and accountability mechanisms.In this context, they welcomed the CAS's focus on civil service reform, decentralization, and anti-corruption activities. Directors also recognizedthatthe Bank should continueto support agriculture,basic health and education,and the fight againstHIV/AIDS. It was also suggestedthat the Government shouldaddressthe issues of human trafficking and child labor. Directorsnoted the need for further analyticwork to understandthe links between poverty, growth, gender and redistribution issues. Directors also welcomed the focus of the proposed non-lending activities on governance,rural development,and the social sectors, and looked forward to the completion of the secondnational household surveyand a new PovertyAssessment in the coming months.