Budget support is an innovation in Belgian development cooperation
6 December 2001
At 17:30 today, Mozambique's Assistant Minister of Foreign Affairs, Frances Rodrigues, and Secretary of State for Development Cooperation Boutmans jointly signed an agreement for 7.747 million Euros (312 million BEF) of financial support for the budget of Mozambique.
Mozambique is the newest partner country in the Belgian development co-operation programme (list revised in 2000). In May 2001, Belgium and Mozambique signed a general agreement for cooperation with one of the poorest countries in the world. The 7.7 million Euros will be invested in the reconstruction of health care infrastructure. Successive floods in 2000 and 2001 caused enormous damage in several provinces in Mozambique. The Belgian aid is intended to enable the government of Mozambique to reconstruct the unified health-care system in the most heavily affected provinces. Preference will be given to the smallest health-care stations in the countryside.
The form in which this aid is being provided is also significant. It consists of a direct injection into the federal budget, instead of setting up and financing individual projects. The traditional approach of project-based aid sometimes creates new problems and in any case has its limitations. For instance, projects often drain professional staff from government services, are insufficiently aligned with sectoral governmental policies and in many cases fail to adequately ensure the required level of durability and optimum impact. The objective of the innovative technique of budgetary aid is thus to improve the quality, transparency and durability of the provided support.
With budgetary support, or 'aid via the budget', a financial donation is sold in the form of foreign exchange on the internal money market of the partner country. The equivalent value of this foreign exchange in local currency is allocated to public expenditures in the recipient partner country. An increasing number of aid donors are changing over to this form of assistance for developing countries that have reasonable forms of government and policies that are aimed at fighting poverty, as is the case with Mozambique.
By providing assistance in this manner, donors can simplify the management of the aid stream for the recipient country, reduce transaction and administrative costs, improve the dialogue with the partner country with regard to policy priorities and better attune their collaboration to other donors and the partner country. Furthermore, both the donor and the partner country obtain a clearer view and better understanding of the impact of foreign aid. A number of aspects that are scarcely addressed with project-based aid - such as whether the budget reflects poverty priorities, the actual management capacity of government services, the question of whether there is sound macro-financial management and how the government goes about achieving durability - receive more attention and visibility with budgetary support.
Collaboration with the Netherlands also forms part of the Mozambique - Belgium programme. This includes, among other things, carrying out common 'value for money' audits. Transparency and control are thus inherent features, while at the same time the management capacities of the Mozambique agencies will be strengthened in these areas. In addition, the Belgian Technical Cooperation organisation will be asked to support both monitoring and capacity reinforcement (by means of training, for example) within the involved agencies of the Mozambique government.
More information: cabinet of development cooperation
Dirk Depover (spokesperson)
+32(0)476 95 95 04
+32(0)2 549 09 50