Initiative of minister Herfkens
Minister Eveline Herfkens played a pivotal role in introducing the general budget support modality for Mozambique. This shift aimed to replace the fragmented and often donor-driven project support, which was criticized for being paternalistic and placing a heavy administrative burden on Mozambican institutions. Under the new modality, the Mozambican government could integrate the budget support into its annual State Budget and allocate it to priorities approved by the Mozambican Parliament. The Parliament also assumed the central role of overseeing the use of these funds. Reporting requirements for international donors were streamlined, but Mozambique had to demonstrate good performance in financial management, governance, and socio-economic policies. It was expected that this support, combined with debt relief, would help reduce poverty and contribute to achieving the Millennium Development Goals (MDGs) (IOB 2012, summary).
Quick start
Starting in 1999, general budget support, based on national poverty reduction strategies, became the dominant aid modality for Mozambique. Herfkens succeeded in getting ten donors to join the initiative, even though Mozambique had not yet met all the required conditions for financial management, governance, and socio-economic performance. The expectation was that the budget support mechanism would help improve these criteria (IOB 2008, page 171). The rapid approval of budget support also helped compensate for delays in implementing other new policies in Dutch bilateral aid to Mozambique.
Substantial amount
General budget support already peaked in 2001, with €36 million allocated, including funds for reconstruction following the Limpopo floods (IOB 2008, page 171; IOB 2012, page 52). Over the course of 12 years, the total amount of general budget support from the Netherlands to Mozambique amounted to €259 million (derived from IOB 2012, figures 3.5, 3.4, and 3.3).
Challenges
Herfkens' push for budget support faced significant opposition in the Dutch Parliament and even within her own ministry, primarily due to concerns about Mozambique’s governance record. Several evaluations (Batley et al., 2006; IOB 2008) concluded that decisions regarding the support were made hastily, without fully addressing governance concerns. These concerns included the high-profile assassinations of critical journalist Carlos Cardoso and bank director António Siba-Siba Macuácua in 2000 and 2001, which were linked to corruption investigations (Open University).
Evaluation
In 2012, the Dutch Ministry of Foreign Affairs' internal evaluation service (IOB) assessed the budget support instrument (IOB 2012). Mozambique was not among the six countries selected for case studies, but evaluations of other countries revealed positive impacts on public services, particularly in education. However, the impact on poverty reduction was considered minimal, with contributions amounting to only a few euros per inhabitant annually.
Over time, as donors demanded more attention to Good Governance, the budget support modality faced increasing scrutiny. The instrument was eventually phased out in most countries due to political and governance challenges. The end of budget support was not due to doubts about the effectiveness of poverty reduction strategies, but rather due to political changes in the Netherlands, where there was growing opposition to unconditional aid. Additionally, the transaction costs of the budget support instrument were relatively high compared to other macroeconomic instruments.
References
Batley R. L. Bjornestad, A. Cumbi (2006). Joint evaluation of General Budget Support 1994-2004; Mozambique Country Report; University of Birmingham/IDD
IOB (2008a). Het Nederlandse Afrika beleid 1998 – 2006; Evaluation Report 308; (Mozambique often mentioned, country description page 170-171)
IOB (2012). Budget support: Conditional Results; IOB Policy Review No 369; mainly page 52 and fig 3.5, 3.4 and 3.3
Original text 20/12/2024 D. Bouman