After independence, Mozambique relied on international solidarity and managed donor relations well. Donor dependency entailed loss of agency, allowing donors to challenge government capacity but never its authority. During the 2010s, donors expressed disappointment with reforms and challenged government legitimacy — not only due to developments in Mozambique. Donors are less enthusiastic about harmonised development cooperation and less concerned with aid effectiveness. Aid budgets are under pressure and development finance links more to other foreign policy concerns. Mozambique should expect increasing instrumentalisation of aid budgets. Institutions Mozambique developed to deal with donors are not well suited to present challenges. They focus on less relevant areas of the relationship with foreign countries, which often serve other agendas. Reforms could start with strengthening Mozambique’s Foreign Service as a genuine coordinator of foreign relations and the establishment of greater discipline around national plans and strategies. Institutionalising strong links between the foreign ministry and key economic ministries under the leadership of the prime minister could help.

In this chapter we focus on the intended and unintended side effects of Chinese development finance, which we address from two different angles, both at the country level and at subnational scales. In the first part of this chapter, we investigate whether and to what extent Chinese-financed aid and debt affect recipient countries’ propensity for civil conflict and environmental degradation. We then turn to the question of how Chinese-funded projects might affect the quality of governance in recipient countries and regions. China claims to follow a policy of non-interference in the domestic affairs of sovereign governments, which implies that its allocation decisions are made without considering the quality of governance, so that Chinese funds might prop up rogue regimes and delay much-needed governance reforms. The second part of this chapter turns to the popular claim that significant financial support from China impairs the effectiveness of aid from Western donors and lenders. Specifically, we investigate whether the effects of World Bank aid differ in countries or subnational regions that receive large volumes of Chinese support compared to other recipients.

This chapter examines the effectiveness of Chinese development finance. At the recipient-country level, we test the impact of Chinese development finance on economic growth, infant mortality, and the spatial concentration of economic activity. We then move below the country level and investigate the economic development effects of China’s development finance at the subnational level using luminosity data at fine spatial resolution (in addition to infant mortality and spatial concentration). We disentangle differences between Chinese aid and debt and compare these effects to those of World Bank funding. In addition, this chapter analyzes whether the motivational forces that shape the provision of Chinese development finance affect downstream development outcomes in recipient countries and regions. The empirical evidence presented in the chapter shows that, irrespective of political bias, Chinese aid and debt improve socio- economic outcomes at both national and subnational scales. However, these impacts vary significantly across jurisdictions. We also find that socio-economic impacts of Chinese development projects are comparable, if not superior, to those generated by the World Bank.

Chapter 7 considers the implications of the book's analysis for the study of foreign aid effectiveness as well as policy-making. It establishes a link between political economies and the different kinds of outcomes that donor officials prioritize. Donor governments that outsource aid delivery in countries with bad governance may achieve greater success in providing immediate relief to the poor through easily implementable health interventions than donor governments that continue to engage in institution building in collaboration with the state. However, outsourcing in foreign aid delivery might hamper or even undermine donor efforts to build up a state capable of managing its own development – an objective that ranks high for donor governments who prefer a tactic of greater engagement with the government in the developing country. The book further suggests that the proliferation of neoliberal governance beliefs puts increasing pressure on statist regimes to change their metric, a process, which may come at the expense of efforts to strengthen the capacity of the state abroad. Finally, my book opens up future avenues for research.