[{"bbox": [97, 153, 1135, 234], "category": "Text", "text": "The GoM demonstrates strong commitment to carry out PFM diagnostics (Governance, Corruption and Transparency report 2019, Fiscal Transparency Evaluation, 8 PEFAs -Central PEFA with EU support, Health PEFA with Enable's support and 6 subnational PEFAs with WB, AFD and EU support)."}, {"bbox": [97, 259, 1135, 551], "category": "Text", "text": "With EU and IMF support, the GoM expects to finalise the PFM Strategy in 2024 that has been elevated from a 5 years PFM Plan approved by the MEF to a 10 year PFM Strategy approved by the Council of Ministers. The draft PFM Strategy is relevant as it covers the entire budget cycle, addresses identified weaknesses and seeks a balance between fiscal discipline and efficient service delivery, transparency and accountability. It is also credible, as it is coherent and results oriented, including a hierarchy of results and indicators divided into 7 pillars, 25 measures and a set of reform actions to guide implementation. Acknowledging the State's limited capacities, it also considers a sequenced approach, with the first phase focusing on stabilization, getting the basics right and preparing the next phase. It clarifies monitoring and dialogue mechanisms at technical and strategic levels - internally to the Government as well as with civil society and development partners. This is expected to facilitate Development Partner (DP) coordinated financing as well as to set enabling conditions for an increased use of country mechanisms."}, {"bbox": [97, 577, 1135, 763], "category": "Text", "text": "When it comes to the institutional framework, in 2020 the responsibility of the coordination of the PFM reform was transferred from the CEDSIF, Public Institute that keeps the mandate of developing the Integrated Information Management System, to the MEF. This provides an opportunity for the PFM reform not to be conceived as a technical IT issue. Finally, considering exposure to climate shocks, to which Mozambique is increasingly vulnerable³, the MEF is responsible for Climate Financing action to improve resilience and access new sources of finance. The updated Nationally Determined Contribution for 2020-2025 estimated its financial needs to a total of USD 7,6 billion for its implementation."}, {"bbox": [97, 789, 1093, 843], "category": "Text", "text": "The European Union is a long-standing supporter of the PFM reform and has become a key stakeholder, as it finances key reforms and co-chairs the Public Finance Management with the IMF."}, {"bbox": [85, 903, 341, 934], "category": "Section-header", "text": "## 2.2 Problem Analysis"}, {"bbox": [97, 949, 1135, 1348], "category": "Text", "text": "**The Mozambican public finances are going through a deep macro-fiscal crisis that severely reduces the State's financial autonomy, making it difficult to respond to growing service delivery and public investment needs.** The discretionary part of the budget that can be allocated to social sectors drastically reduced, requiring to improve the efficiency of public expenditures 'to do more with less'. To this aim, it is imperative to accelerate the implementation of reforms to ensure a well-functioning PFM system. This will help achieve macro-fiscal consolidation and establish the conditions to access innovative sources of finance such as climate finance in the short to medium term, while ensuring prudent management of LNG revenues in the long term. In will also improve budget credibility and value for money of pro-poor expenditures by addressing budget execution bottlenecks, transparency, and accountability that can translate into more inclusive gender and human rights based approaches to basic service delivery. In doing so, a well functioning PFM system would help consolidate conditions for increased use of country mechanisms and increase fiscal space. Yet, overcoming capacity gaps and keeping the implementation of the Strategy on track in a volatile context will require concerted efforts at all levels of government. Building buy-in for reform implementation at all levels, strengthening monitoring and evaluation mechanisms and ensuring expertise to identify hands on solutions in times of crisis will be key to achieve fiscal stability and resilience."}, {"bbox": [97, 1381, 1135, 1595], "category": "Text", "text": "**Protecting minimum levels of social expenditures is urgent and requires improving planning and budgeting processes/tools from central down to local level:** The macrofiscal crisis has led to an unsustainable fiscal position for social sectors that is expected to remain until the GoM can yield LNG revenues -2030 the earliest-. Fiscal and cash management constraints compromise both, results achieved in the last decade in the coverage and quality of service delivery in the social sectors as well as the positive outlook for the future. Recurrent budgets only cover basic salaries. The lack of maintenance and operating budget has led to the accumulation of payment arrears that impacts significantly service delivery (e.g. arrears with the payment of extra hours for teachers results in an increased pupil/teacher ratio; lack of transport budget means that books do not reach schools; failure to settle bills)"}, {"bbox": [85, 1621, 190, 1644], "category": "Footnote", "text": "³ NDC 2021"}, {"bbox": [1038, 1681, 1144, 1707], "category": "Page-footer", "text": "Page 6 of 24"}]