* In Mozambique donors have shifted focus project aid to budget support in an effort to reform the public sector and 'justice, legality and public order'.
* While budget support has increased state capacity and helped Mozambique's donor community find common ground, it has had a negative Impact on some aspects of democratic governance.
* While in some areas vertical accountability has increased (donors--Mozambique) horizontal accountability (state--society) has not.
* Budget support has increased state- capacity without providing Support for the non-state actors required for democracy to function.
* Within the frames of the PARPA, the government is not required to report on donor contributions, which clearly undermines the transparency and accountability of donor funding mechanisms.
In Mozambique, the shift away from project aid towards providing aid in the form of budget support brought a greater coherence to the whole aid agenda and strengthened the capacity of state institutions and thus improved governance in general. This is now the most important source of aid money for Mozambique accounting for nearly half of the state budget. However, paradoxically this improvement in governance has come at the price of a weakening of the political processes and institutions that are required for effective democracy.
Budget support and aid for governance
The expectation from donors is that budget support increases government ownership of the development process, and creates mechanisms of mutual accountability between donors and the government, to bring about greater harmonization, co-ordination and information sharing amongst donors, and to unite donors in the support of a common goal. In the case of Mozambique the goal is poverty alleviation. Mozambique's Poverty Reduction Strategy Paper (known by its Portuguese acronym PARPA), which broadly defines governance as public sector reform and 'justice, legality and public order', provides both the foundation for the government's five year poverty reduction plan and the framework around which budget support is structured.
The shift to budget supports has had two important effects on democracy aid in Mozambique. First it has influenced the kind of things donors are willing to support. In particular it has reinforced a focus of the government in developing the capacity of the state to plan and manage public expenditure, which is key in achieving the poverty reduction goals set out in the...