PRSC 3

closed

The proposed Third Poverty Reduction Strategy Credit (PRSC 3) is the first in a new PRSC series designed to assist the Government of Mozambique (GoM) to implement key policy actions outlined in its Second Action Plan for the Reduction of Absolute Poverty (known as PARPA I1 by its Portuguese acronym) and in the Performance Assessment Framework agreed by the Government and the 18 external partners that provide general budget support (GBS) to GoM. PARPA I1 is mainly focused on shared growth and on the need for decentralization. Within this context, PRSC 3 is expected to help the GoM in: (a) the consolidation and deepening of the institutional reforms in the area of macroeconomic management; (b) reforms in governance by supporting decentralization to enhance public investments and service delivery at the provincial and district level, and by supporting public sector reform; and (c) economic development by improving the investment climate, removing constraints to growth, such as infrastructure, and promoting agricultural growth. The operation will help the Government maintain macroeconomic stability while it continues to pursue a reform agenda that cannot be fully financed from domestic sources. The reforms would enable Mozambique to make further progress in reducing absolute poverty, improving the delivery o f services and achieving the Millennium Development Goals. One set of risks is concerned with the potential for macroeconomic instability. A second set of risks concerns weak administrative capacity to implement reforms. A third set of risks concerns a deterioration in governance that could compromise economic reforms and poverty reduction efforts. A final set of risks concerns the potential impact of HIV/AIDS in reducing human and institutional capacity to deliver public services and may pose a contingent liability regarding the future costs of treating this disease.