WASHINGTON, July 13, 2022 — The World Bank’s Board of Directors today approved a $300 million grant to support the Mozambique Economic Transformation and Institutional Development Policy Financing (DPF) operation. It is the first in a series of three programmatic operations and supports a robust set of reforms aimed at strengthening institutions and laying the foundations for sustained growth and economic transformation.
“This operation supports the country’s recovery from COVID-19 and structural reforms to foster sustained growth, while providing much-needed financing to ease recent fiscal constraints,” Noted Idah Z. Pswarayi-Riddihough, World Bank Country Director for Mozambique, Madagascar, Comoros, Mauritius and Seychelles. “This operation could not come at a better time as Mozambique’s economy is still reeling from the combined effects of COVID-19, the protracted downturn triggered by the hidden debt crisis and the devastation caused by tropical cyclones. of 2019”.
The operation supports the authorities in their reform efforts to promote sustainable and inclusive economic growth. The reforms supported by this DPF are organized around three pillars:
The first pillar supports structural reforms to strengthen budgetary institutions and transparency. It consists of two prior actions: strengthening the regulatory and institutional framework for sound and transparent resource revenue management; and improving governance and transparency in public procurement. Together, these measures will address critical transparency and institutional weaknesses that undermine governance and the management of limited public resources. Transparency measures under this pillar include enshrining in law recent measures taken to increase transparency, such as the publication of fiscal risk statements and debt reports covering liquefied natural gas (LNG) and debt. related to public enterprises, to name a few.
The second pillar deals with the business environment and financial access constraints to support private sector development. It includes two prior actions: simplifying legal and regulatory requirements for opening and operating businesses, improving the investment climate and encouraging business development and job creation; and the lifting of legal and regulatory restrictions to promote access to financial services. Specifically, this pillar includes a revision of the 1993 Investment Law and the 2005 Commercial Code, which could result in further simplification and digitization of procedures, which should speed up approval processes. The DPF is also supporting legislative changes to simplify identification requirements for low-income, low-financial-risk individuals wishing to open a bank account. Reforms should expand access to financial services, particularly for low-risk micro, small and medium-sized enterprises and for women, while maintaining a clear and robust framework to guard against illicit activities.
The third and final pillar builds on Mozambique’s climate change commitments to support a more resilient and greener growth trajectory, by addressing constraints in the public services sector that limit Mozambique’s productive potential. It has three prior actions: reforms that strengthen public investment management (PIM) systems by introducing a climate-smart PIM framework, promoting greener and more resilient investments; introduce measures to support the development of a tariff methodology and a new tariff structure to improve the financial viability of the public service and reduce uncertainty for private investors; and improving financial sustainability, service delivery and resilience in the water sector.
“The DPF leverages and complements ongoing and planned World Bank Group (WBG) funded projects and operations in Mozambique, including the Prevention and Resilience Allocation (PRA), which aims to help Mozambique to fight against the factors of conflict throughout the country. All prior actions and triggers are anchored in ongoing World Bank technical assistance and knowledge, including the findings of the country’s recently released Economic Memorandum,” added Fiseha Haile, World Bank Senior Economist and Operation Team Leader.
This operation is in line with the WBG’s overall country partnership framework with Mozambique and is closely synchronized with the Mozambican government’s five-year development plan and national development strategy (2022-2032). It specifically supports three elements of the plan: (i) governance and inclusion; (ii) greater private sector participation to improve job creation and productivity; and (iii) sustainable management of natural resources and the environment.
* The World Bank’s International Development Association (IDA), established in 1960, helps the world’s poorest countries by providing grants and loans at low or no interest rates for projects and programs that stimulate economic growth, reduce poverty and improve the lives of the poor. IDA is one of the largest sources of aid to the world’s 75 poorest countries, 39 of which are in Africa. IDA resources bring positive change to the 1.5 billion people who live in IDA countries. Since 1960, IDA has supported development work in 113 countries. Annual commitments have averaged about $18 billion over the past three years, with about 54% going to Africa.
PRESS RELEASE No.: 2023/003/AFE