Improving budget management inMozambique requires a set of actions in the area of fiscalpolicy at the macroeconomic level, as well as specificmeasures to deal with contingent liabilities and to addressissues related to intergovernmental fiscal relations. At thesame time, a new round of reforms in the way the budget isformulated, executed, controlled, and accounted for is alsorequired to improve efficiency, transparency, andaccountability in the use of public resources. This reportis organized as follows: The first part of this reportoffers an analysis of fiscal topics at the aggregate leveland discusses cross-cutting issues--recent trends of fiscalpolicy, medium-run sustainability, contingent liabilitiesand intergovernmental fiscal relations. Part 2 deals withthe budget management system, covering budget formulation,execution, evaluation, and audit. Issues related to publicaccounting, reporting, cash management, and internal controland auditing are reviewed in this context. It describes thecurrent system, highlights the major issues, describesgovernment's efforts to address them and proposesconcrete recommendations for further action.