US embassy cable - 04MAPUTO148

UNCLAS MAPUTO 000148 
 
SIPDIS 
AF/S AND AF/EPS 
E FOR ANNE PENCE, EB/IFD/OIA FOR MARTHA KELLEY OR TIM HAUSER 
INL/C FOR DAVID LUNA OR JOHN BRANDOLINO 
YAOUNDE FOR MALABO JIM PANOS 
BRUSSELS FOR USEU 
E.O. 12958: N/A 
TAGS: EAID, ECON, EINV, ETRD, PGOV, MZ, KCOR 
SUBJECT: MOZAMBIQUE AS PILOT COUNTRY FOR EVIAN 
ANTICORRUPTION/TRANSPARENCY INITIATIVE 
 
REF: A. A) SECSTATE 16100 
B. B) MAPUTO 83 
 
1. Post welcomes the opportunity for consideration as a 
candidate pilot country under the Evian 
Anti-corruption/Transparency initiative and submits results 
of initial internal discussions below. The GRM has 
demonstrated a commitment to combating corruption and has 
worked closely with the IMF and the donor community to 
improve transparency in public financial management and 
government budgeting and procurement. Inclusion as a 
non-extractive pilot country would prove a useful and welcome 
augmentation of GRM efforts already getting underway. The 
GRM has been responsive to donors and IFIs to concentrate on 
these issues and understands their importance for 
consideration under MCA and NEPAD criteria, as well as to 
Mozambique's continued political and economic development. 
Direct budget support constitutes over 50 percent of the GRM 
budget. On the corruption front, some substantive first 
steps have been taken (reftel B), including the formation of 
the Attorney General's Anti-Corruption Unit in November 2002, 
mainly with USG support. USAID mission has followed closely 
the GRM-IMF strategy for improved financial accountability. 
 
2. The GRM Technical Unit for the Reform of Public Financial 
Management (UTRAFE) is now in the second year of 
implementation of its action and budget plan, named SISTAFE 
(Public Financial Administration System). UTRAFE and the 
Technical Unit for Public Sector Reform (UTRESP) are integral 
elements of the GRM's Strategic Plan for the Reduction of 
Absolute Poverty (PARPA). PARPA is the centerpiece of the 
GRM government budget and includes elements aimed at raising 
health and education spending above the levels dictated by 
MCA criteria. Awareness is high among GRM officials of the 
adverse effects on foreign investment caused by excessive 
bureaucracy and the corruption climate. The Finance Ministry 
and UTRAFE are moving from intent to implementation. 
 
3. The overall objectives of SISTAFE, as established in 
October 2002, are as follows: 1) to establish and harmonize 
rules and procedures for programming, execution, control, and 
evaluation of public financial resources; 2) to develop 
subsystems that produce timely and reliable information about 
the budget execution and asset management in all state 
organs; 3) to establish, implement and maintain an accounting 
system controlling budget execution and asset acquisition; 
and 4) to establish, implement, and maintain an effective and 
internationally accepted internal control and audit system. 
The tender for roll-out and operation of all systems is 
scheduled for April 2004 and implementation of the asset 
management system is expected in the second half of the year, 
with general roll-out to all government sectors and 
municipalities in 2005, and state enterprises in 2006. 
 
4. As part of the USAID six-year strategy, Democracy and 
Governance efforts will include a focus on four to five 
municipalities to provide USG assistance in increasing 
capacity for good governance, transparency, and sound 
financial management, with the target of supporting GRM 
decentralization efforts. While we recognize more details of 
the Pilot Country Initiative have yet to be developed, we 
already see a potential for a pilot program that could work 
in a few key municipalities to help Mozambique develop the 
best implementation mechanism for SISTAFE and also complement 
our six-year development strategy. 
 
5. Inclusion of Mozambique as an Evian pilot country would 
build upon assistance already provided or planned, upon 
pressure and encouragement from other donors, and upon the 
SISTAFE program with the IMF. 
LA LIME