Over the last three years, the Mozambican economy has grown at an average annual rate of 9%, with  inflation broadly under control. Estimates of poverty incidence indicate a decline to below 54%, down from an incidence of about 70% in 1996/97. Maintaining a sustained path of broad based growth and poverty reduction will represent the most critical challenge for the coming years. Despite significant progress made in improving the public institutions’ capacity for economic policy analysis and management, limited institutional capacity continues to be the major constraint in implementing the economic program and reform agenda.

Switzerland's contribution to Mozambique's process of economic reform takes the following forms: general budget support, debt relief, capacity building and technical assistance, support to civil society in dialogue on economic policies, and private sector promotion. Most of the programme in the economic domain is funded by the State Secretariat for Economic Affairs (seco). Capacity building components and support to civil society organizations are also funded by SDC.

General budget support
Switzerland is one of a total of 15 donors to provide general budget support (with Belgium, Denmark, the EC, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Sweden, the UK and the World Bank). The commonly agreed program supports the development process and the poverty reduction strategy in Mozambique (PARPA) by providing additional budgetary resources and a structured dialogue between the government and the donors on key reforms and challenges for growth and poverty reduction. It increases the share of external assistance that is disbursed through the established budgetary procedures, thereby avoiding the proliferation of parallel donor-driven arrangements. Macro-financial support started in 1986 with co-financing operations with the World Bank in support of the structural adjustment programme, evolving later to balance of payments support and general budget support.

Swiss contribution	CHF 30 million
Duration	2004 – 2006
Partner	Government of Mozambique (Ministry of Plan and Finance)

Technical Assistance for Tax Reform
The program started in 1996 with support for indirect taxes reform with the introduction of the Value Added Tax. It is currently focusing on the reform of the direct taxation system, strengthening of tax administration capacity in view of the implementation of a Central Revenue Authority by 2006, integrating tax and customs operations. Within a consortium of donor partners, Switzerland finances the core component of the project (technical assistance for elaboration of legislation and policy documents, strengthening the reform unit and the administration) through a trust fund agreement with the IMF.

Swiss contribution	USD 2 millions
Duration	2002 – 2004
Partner	IMF / Government of Mozambique

Capacity Building on Economic Management
The program aims at improving the country's capacity in economic management by strengthening and building government and civil society capacities in economic and poverty analysis at national and provincial levels. It provides technical assistance and capacity building to key policy advisory units in the Ministry of Finance and to decentralised planning and budgeting in the province of Nampula. In the support to civil society it is expected that economic organisation, associations and academic institutions improve their participation in debates on development objectives and policy-making so as to enhance the effectiveness of the development process by creating a strong ownership and sustainability of the policy-making and reform processes.

Swiss contribution	CHF 1.8 million
Duration	2004-2005
Partner	Ministry of Finance (GEST, DNPO, DPPF Nampula), UNCDF, AMECOM, ETICA and CEPKA

Debt relief and debt management
Switzerland has cancelled all bilateral debts of Mozambique and supported the reduction of commercial debts through a contribution to a trust fund. Since 1997, Switzerland is financing jointly with other donor countries a capacity building program for strengthening debt management in highly indebted, poor countries (HIPCs), where Mozambique participates.

Private Sector Promotion
The programme objective is to contribute to the development and internationalisation of small and medium enterprises (SMEs) by combining investment and trade promotion instruments. On the investment side, the program will improve access of SMEs to finance by investing and providing technical assistance to a micro-finance bank. On the trade side, the program aims at promoting agricultural exports by addressing quality issues at enterprise level, institutional weaknesses for better quality management and trade policy formulation.
Main partners are the Ministry of Industry and Commerce, TechnoServe, UNIDO and SOCREMO.

For further information contact: telma.loforte@sdc.net