Part I

Context

The State Budget for the year 2020 emerged in an adverse context. The outbreak and rapid spread of the COVID-19 pandemic that altered all commonly accepted economic and social paradigms, testing the country’s ability to respond to the demand for health and social protection services, aggravated the economic crisis conditions which Mozambique already faced owing to excessive public debt, slow economic growth, low purchasing power of the majority of the population living in extreme poverty, rising inflation, armed attacks in the Center and North and natural disasters whose extreme cases were cyclones Idai and Kenneth.

Initially, in macroeconomic terms, expectations of an economic upturn did not structurally show credible signs, with growth forecasts of around 2.2% in a context in which all the forecasts of the global and regional economies pointed to a recession scenario.

The domestic economy has been showing structural weaknesses, which requires efficient actions by public policy makers and managers who face social pressure in order to show visible results and immediate impact in the face of the new normal scenario.

This analysis is part of efforts to monitor public finance management and reports the execution of the State Budget in the health sector from January to September 2020. A comparative analysis is made, looking at similar periods from January to September 2019 and 2020 in terms of expenditures in the sector with regard to allocations.

Budget execution in the health sector from January to September 2020

The health sector is defined as a priority sector in resource allocation in the OE 2020, in which it is highlighted as one of the three sectors (Education, Health and Agriculture) with permission to hire new staff. Although health is part of the priority sectors, Government has not complied with the international commitment to allocate as a percentage of the total OE at least 10% to the sector, the actual amount allocated is 9%

From 2019 to 2020, resources allocated to the health sector grew from 29,106 to 31,085 million meticais, an increase of 6.8%; execution in the period from January to September 2020 increased by about 37%, that is, it increased from 50.4% in 2019 to 69% in 2020, above the average among other economic functions of the OE, which grew from 60% to 68%, respectively.

Figure 1 shows that the increase in the degree of execution from January to September 2020 was largely due to the high degree of execution of operating expenditure (78%) and the foreign investment expenditure (20%). Due to the high degree of investment expenditure, it is expected that, by the end of the year, the execution will have been complete.

In effect, in the period under review, operating expenses decreased from 83% in 2019 to 78% in 2020, a reduction of 5 percentage points. Furthermore, domestic investment expenses also decreased from 4% to 2% in the same period, while foreign investment grew significantly by 7 percentage points, from the previous 13% in 2019 to 20% in 2020.

Figure 1: Degree of execution according to functional classification

One can see that the health budget shows a decrease in the volume of external resources resulting from the donation agreement. As Table 1 illustrates, the execution of the amount of donations destined to the Common Health Fund (FC-ProSaúde) decreased by 24% in the same period from January to September (a remarkable value, taking into account that in this period the total of donations intended to cover the OE 2020 deficit grew by 89%). The weight of the value of execution of donations to FC-ProSaúde fell to 6.2% (9.1% in 2019) of the total of donations and 0.8% (2% in 2019) of the total of external resources (donations and credits).

There was a decrease in terms of the total expenditure for FC-ProSaúde. In the respective executions, from January to September, this was equivalent to a decrease of 30%. The degrees of execution of the respective budgets by September 2019 and 2020 were around 40% and 45%, respectively, an increase of 5 percentage points.

Also within the scope of the funding of the State Budget, Government requested an amount of USD 700.0 million to face the negative effects on the economy, resulting from the COVID-19 pandemic, of which there were commitments to the tune of USD 808.4 million that resulted in disbursements to the amount of USD 452.2 million (figure 1) within the National Pandemic Prevention and Response Plan [COVID-19] which, however, has not been communicated to the public.

The execution of COVID-19 expenses amounts to 16,352.3 million Meticais (USD 236.6 million), in which the funds made available through the Single Treasury Account (CUT), with the respective expenditure duly incorporated in the Module of Budget Execution, while funds made available directly to the Ministry of Health outside the State Budget (Off-Budget) and Donations in Kind, will be incorporated through balance sheets in the next quarter.

Government has not complied with the international commitment to allocate, as a percentage of the total OE, at least 10% to the health sector and thus the health sector remains with a 5% budget deficit, contrary to the initial proposal of the executive.

In real terms, the health sector received fewer resources due to the influence of macroeconomic aggregates that reduced the purchasing power of the national currency. As a result, in almost all indicators, the goals of the Strategic Plan have been compromised as regards their fulfillment.

Fig 1: Status quo of commitments to finance the COVID-19 Mitigation Plan

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