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Murray, Bruce, and others, 2009, “Final Report of the Independent Evaluation of the African Technical Assistance Centers” (Washington: International Monetary Fund).
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Statement by the Managing Director
On the Independent Evaluation Office Report on the IMF and Fragile States
Executive Board Meeting March 22, 2018
I welcome the report of the Independent Evaluation Office (IEO) on the IMF and Fragile States. The report recognizes that the Fund has made important contributions in restoring macroeconomic stability, building core institutions, and catalyzing donor support across a diverse range of countries in fragile and conflict situations. The IEO’s analysis and findings provide a thorough stock-taking and resonate with staff. Accordingly, I broadly support the IEO’s recommendations to make the Fund’s engagement with countries in fragile and conflict situations more impactful.
As noted in the IEO report, helping countries in fragile and conflict situations has been deemed an international priority, meriting close engagement by the Fund in its bilateral surveillance, program design and lending, and capacity development (CD). The growing attention given to the dangerous implications of persistent fragility for regional and global stability, underline the key role of the Fund in international efforts to help countries in fragile and conflict situations. The Fund is in a unique position in this effort, particularly in its proven ability to respond quickly and effectively to assist such countries.
I am pleased that the IEO report finds important contributions that the IMF has made in countries in fragile and conflict situations, including helping to restore macroeconomic stability, build core macroeconomic policy institutions, and catalyze donor support. It is also welcome that the IEO shows that the IMF is broadly acknowledged to have high impact, particularly in years soon after countries emerged from periods of violence and isolation. The findings of the IEO report confirm many identified in the June 2015 policy paper on “IMF Engagement with Countries in Post-Conflict and Fragile Situations—Stocktaking.” The paper concluded that the Fund’s engagement with countries in fragile and conflict situations is often impactful and well appreciated by country authorities, and that this vulnerable group of the membership particularly benefits from the Fund’s expertise in capacity building, financial support, and policy advice.
At the same time, I agree that there remains room to do better, while considering that engagement with countries in fragile and conflict situations is inherently challenging, given their generally limited capacity, weak governance, and often unstable political and security environment. In particular, the IEO report concludes that more could be achieved by making bolder efforts, including to: build on ongoing initiatives to develop forward-looking, holistic country strategies; provide more sustained financial support; strengthen the impact of CD; and incentivize staff work in countries in fragile and conflict situations. In making these recommendations, the IEO report recognizes that some efforts would require an increased allocation of the Fund’s financial and human resources.
In broadly supporting the findings of the IEO, I wish to highlight relevant actions that are in train or are in the work program agreed by the Executive Board. Specifically, staff are piloting a multi-year CD framework for selected countries in fragile and conflict situations that better integrates CD with surveillance and improves coordination with other assistance providers. The ongoing 2018 PRGT facilities review will provide an opportunity to assess the finding that there is a gap in the toolkit between emergency and medium-term support. The new HR strategy, currently under development, aims to strengthen incentives for staff to work on countries in fragile and conflict situations by ensuring that career development is linked to experience in working with a broad range of the membership, including in countries in fragile and conflict situations. In this context, I acknowledge and recognize the finding that the lack of field presence of staff in high-risk locations could be a limitation on effective engagement. But I believe we need to weigh this finding against the paramount objective of ensuring staff safety as set out in our 2015 security policy for missions to high-risk locations.
Response to IEO Recommendations
The IEO makes six recommendations in its report. Below is my proposed response to each of these.
Recommendation 1. Management and the Executive Board should reinforce that work on fragile states is a top priority for the IMF by issuing a statement of its importance, for IMFC endorsement, to guide the Fund’s fragile state work going forward.
I broadly support this recommendation as laid out in my responses to recommendations 2–6.
Recommendation 2. Management should give the IMF’s work on fragile states greater continuity and prominence by establishing an effective institutional mechanism with the mandate and authority to coordinate and champion such work.
I agree there is scope to better coordinate and discuss countries in fragile and conflict situations within the Fund and with a broad range of stakeholders through establishing an effective institutional mechanism. We will consider how best to structure an interdepartmental mechanism in a manner that is not duplicative and not unduly resource-intensive. This mechanism could, as proposed, review the implementation of the Staff Guidance Note on the Fund’s Engagements with Countries in Fragile Situations including whether program design has adequately taken into account the fragile characteristics of a country; and prepare broad guidance on country strategies proposed in Recommendation 3. The institutional mechanism could also provide a platform for revisiting our engagement with key international players in countries in fragile and conflict situations.
Recommendation 3. For work on individual fragile states, the IMF should build on ongoing area department initiatives to develop forward-looking, holistic country strategies that integrate the roles of policy advice, financial support, and capacity building as part of the Article IV surveillance process. These strategies would provide a platform for more actively involving concerned Executive Directors and a more robust framework for collaborating with development partners.
I concur with the usefulness of country strategies that integrate Fund activities across our various roles into the Article IV process. However, the resource costs of developing holistic long-term country strategies could be significant, and their useful lifespan limited by uncertainties inherent to countries in fragile and conflict situations. Therefore, requirements for such strategies will need to be flexible and adaptive, to avoid creating a “box-checking” exercise, and will need to be lean so as not to overburden the Article IV process.
Recommendation 4. The IMF should adapt its lending toolkit in ways that could deliver more sustained financial support to fragile states, including for those challenged to meet the requirements of upper-credit-tranche conditionality, and should proactively engage with stakeholders to mobilize broad creditor support for FCS with outstanding external arrears to official creditors, including the IMF.
I support this recommendation insofar as I see definite merit in reassessing the IMF’s lending toolkit from the perspective of the needs of countries in fragile and conflict situations. But we should be clear from the outset on the constraints imposed by the IMF’s funding model: we borrow money from some member countries to lend to other member countries. Even with the interest rate at zero percent, IMF funding today adds to countries’ debt burden in the medium term. Countries in fragile and conflict situations typically already carry significant debt burdens and face elevated economic uncertainty; they need grant aid from development partners, rather than rely heavily on external loans to help meet immediate financing needs.
This is not an argument against the provision of any Fund financing. As the IEO report underscores, IMF financing in fragile situations has been catalytic, playing a critical signaling role in providing the donor community with a degree of assurance “that donor financial assistance would be used in a transparent and sustainable macroeconomic framework.” Countries in fragile and conflict situations benefit from entering into arrangements with the IMF not primarily because of the volume of IMF funding, but rather the volume of donor funding that is catalyzed by IMF loans.
IMF staff are examining whether/how the Fund should modify its toolkit to accommodate the needs of countries in fragile and conflict situations in the context of the 2018 Review of Facilities for Low-Income Countries (the conclusions of this examination could also be relevant for the support of middle-income countries in fragile and conflict situations). The IEO’s suggestion that the Fund consider the case for shorter (say one-year) arrangements is an interesting proposal that warrants careful examination in the facilities review: we will also look at the case for raising access limits for the rapid financing facilities (RFI/RCF). However, I do not see a convincing case for extending the repayment period for loans under the PRGT (which currently extends out to 10 years); our mandate is to provide short-to-medium-term finance to countries to tackle balance of payments needs, not longer-term financing (the space filled by the development banks). Absent some new trust funding targeted explicitly at countries in fragile and conflict situations, an extension of the term of PRGT loans would have to cover all low-income countries—a move that would threaten the current financing model for PRGT lending.
As noted in the report, establishing a facility specially tailored to the needs of countries in fragile and conflict situations for grant funding and long-term loans would require the establishment of a large trust fund dedicated to this purpose. The proposal has appeal, providing that we can ensure maintaining uniformity of treatment of the Fund’s membership. But I cannot see it obtaining the levels of financial support from our membership that would make it viable over time, and it would also involve fundraising efforts in the same space as IDA, with the risk that it would simply shift grant funding between the Bretton Woods Institutions rather than generate additional resources.
Finally, I agree that the Fund should respond speedily to windows of opportunity to achieve a comprehensive clearance of arrears with members that have long been in arrears to the international community. That said, comprehensive debt settlements require the consent of all external bilateral creditors, which may not be easy to achieve.
Recommendation 5. The IMF should take practical steps to increase the impact of its capacity development support to fragile states, including increasing the use of on-the ground experts, employing realistic impact assessment tools, and making efforts to ensure that adequate financial resources are available for capacity development work in these countries.
I support most elements of this multi-pronged recommendation while also stressing the critical issue of absorption capacity that can critically limit the impact of CD in countries in fragile and conflict situations, particularly in small states, which face a unique set of challenges. I agree that the Fund should find ways to make more flexible use of CD funding contributed by donors—efforts are already underway and will continue to enhance flexibility, though the degree of existing inflexibility should not be overstated. In addition to the pilot initiatives for the CD Framework mentioned above, efforts include: (i) additional technical advisors deployed during FY17–18 in several countries in fragile and conflict situations, and; (ii) additional responsibilities for some regional technical assistance centers to cater to countries in fragile and conflict situations through long-term advisors hired specifically for that purpose.
I share the view that the impact of CD can also be enhanced through the implementation of results-based assessments. I concur that there may be scope for a multi-donor trust fund dedicated to CD for use by countries in fragile and conflict situations, provided that we can make a business case to donors and ensure that this would not undercut funding for RTACs. On charging for CD, a 2015 change in the Fund’s charging policy envisaged that “use of internal Fund resources for technical assistance to high-income countries be limited to critical needs (e.g., crisis cases) where no external funding can be found,” establishing an expectation that such countries would pay for their own technical assistance in most cases. However, recent staff work on cost-recovery for externally-financed activities has found such charges would not raise much additional finance, while introducing cumbersome administrative procedures including for procurement, and possibly reducing broader traction of policy advice.
As regards the recommendation for formal coordination mechanisms with other providers, they have proved to be cumbersome and not flexible enough in responding quickly to emerging needs. While the Platform for Collaboration on Tax provides a good example of interagency cooperation, it is a labor-intensive exercise and it is too early to assess whether it should be replicated in other areas. In this context, Executive Directors’ support on coordination with their respective aid agencies is welcome.
Recommendation 6. The IMF should take steps to incentivize high-quality and experienced staff to work on individual fragile states, ensure that adequate resources are allocated to support their work, and find pragmatic ways of increasing field presence in High-Risk Locations while taking necessary security arrangements even at high cost.
I recognize the human resources challenges involved in staffing fragile and conflict situation country teams, and I concur with the need to offer more robust incentives for staff working on these countries in the context of the ongoing HR strategy. However, as regards increasing field presence, our paramount objective is staff safety as set out in our security policy for missions to high-risk locations.
The Managing Director’s Position on IEO Recommendations
The Managing Director’s Position on IEO Recommendations
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|
|
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|---|---|---|
| (i) | Management and the Executive Board should reinforce that work on fragile states is a top priority for the IMF by issuing a statement of its importance, for IMFC endorsement, to guide the Fund’s fragile state work going forward. | SUPPORT |
| (ii) | Management should give the IMF’s work on fragile states greater continuity and prominence by establishing an effective institutional mechanism with the mandate and authority to coordinate and champion such work. | SUPPORT |
| (iii) | For work on individual fragile states, the IMF should build on ongoing area department initiatives to develop forward-looking, holistic country strategies that integrate the roles of policy advice, financial support, and capacity building as part of the Article IV surveillance process. | SUPPORT |
| (iv) | The IMF should adapt its lending toolkit in ways that could deliver more sustained financial support to fragile states, including for those challenged to meet the requirements of upper credit-tranche conditionality, and should proactively engage with stakeholders to mobilize broad creditor support for FCS with outstanding external arrears to official creditors, including the IMF. | SUPPORT |
| (v) | The IMF should take practical steps to increase the impact of its capacity development support to fragile states, including increasing the use of on-the ground experts, employing realistic impact assessment tools, and making efforts to ensure that adequate financial resources are available for capacity development work in these countries. | SUPPORT |
| (vi) | The IMF should take steps to incentivize high-quality and experienced staff to work on individual fragile states, ensure that adequate resources are allocated to support their work, and find pragmatic ways of increasing field presence in high risk locations while taking necessary security arrangements even at high cost. | QUALIFIED SUPPORT |
The Managing Director’s Position on IEO Recommendations
|
|
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|
|---|---|---|
| (i) | Management and the Executive Board should reinforce that work on fragile states is a top priority for the IMF by issuing a statement of its importance, for IMFC endorsement, to guide the Fund’s fragile state work going forward. | SUPPORT |
| (ii) | Management should give the IMF’s work on fragile states greater continuity and prominence by establishing an effective institutional mechanism with the mandate and authority to coordinate and champion such work. | SUPPORT |
| (iii) | For work on individual fragile states, the IMF should build on ongoing area department initiatives to develop forward-looking, holistic country strategies that integrate the roles of policy advice, financial support, and capacity building as part of the Article IV surveillance process. | SUPPORT |
| (iv) | The IMF should adapt its lending toolkit in ways that could deliver more sustained financial support to fragile states, including for those challenged to meet the requirements of upper credit-tranche conditionality, and should proactively engage with stakeholders to mobilize broad creditor support for FCS with outstanding external arrears to official creditors, including the IMF. | SUPPORT |
| (v) | The IMF should take practical steps to increase the impact of its capacity development support to fragile states, including increasing the use of on-the ground experts, employing realistic impact assessment tools, and making efforts to ensure that adequate financial resources are available for capacity development work in these countries. | SUPPORT |
| (vi) | The IMF should take steps to incentivize high-quality and experienced staff to work on individual fragile states, ensure that adequate resources are allocated to support their work, and find pragmatic ways of increasing field presence in high risk locations while taking necessary security arrangements even at high cost. | QUALIFIED SUPPORT |
The Chairman’s Summing Uu
IEO Evaluation—the IMF and Fragile States
Executive Board Meeting 18/23 March 22, 2018
Executive Directors welcomed the report by the Independent Evaluation Office (IEO) on the IMF and Fragile States. Directors agreed that helping countries in fragile and conflict situations is a global priority, meriting close engagement by the Fund in its bilateral surveillance, program design and lending, and capacity development (CD). They were pleased with the IEO’s assessment about the Fund’s critical role and important contributions to these countries, including by helping them to restore macroeconomic stability, build core macroeconomic policy institutions, and catalyze donor support. Directors welcomed the Managing Director’s broad support for the IEO recommendations and agreed that more could be achieved through further efforts, taking into account the unique circumstances and challenges facing these countries.
Directors broadly supported Recommendation 1, calling for the Managing Director and the Executive Board to issue a statement on the importance of the Fund’s work on countries in fragile and conflict situations that could be endorsed by the IMFC. Directors noted that such a statement would need to be accompanied by concrete steps, with greater value placed on such work within the Fund.
Directors broadly agreed with Recommendation 2, and most Directors welcomed the intention to establish an effective institutional mechanism to better coordinate the work by the Fund and other stakeholders. In this context, some Directors cautioned that such a mechanism should not be duplicative or unduly resource intensive, while a few suggested that the mechanism be chaired by management, and some others would appreciate regular reporting to the Board on staf’s work in countries in fragile and conflict situations. A few Directors held the view that greater continuity and prominence could also be achieved within the existing procedures.
Directors also broadly supported Recommendation 3 to develop forwardlooking, holistic country strategies that integrate the roles of policy advice, financial support, and capacity building as part of the Article IV surveillance process. They stressed that requirements for such strategies would need to be flexible and adaptive, to avoid being a bureaucratic administrative requirement, and should not overburden the Article IV process.
Directors expressed different views regarding how the Fund should deliver financial support to countries in fragile and conflict situations as proposed in Recommendation 4. They welcomed the Managing Director’s commitment to consider modifications to the Fund’s lending toolkit in the context of the 2018 Review of Facilities for Low-Income Countries. Most Directors saw merit in or were open to considering suggestions to raise the access limit for the RFI/ RCI and introduce shorter upper-credit tranche financial arrangements, while a number of Directors emphasized that higher access to Fund resources may not be helpful to countries that mainly need grants. A number of Directors cautioned against reducing the strength of program conditionality, while recognizing that program design should be calibrated to domestic implementation capacity. A few Directors suggested that for those countries with weaker implementation capacity, consideration could be given to lengthening program duration to allow for more time to implement policies and strengthen capacity. A number of Directors were skeptical about the case for an extension of the repayment period of loans under the PRGT and the need for a special financial facility for countries in fragile and conflict situations. Directors emphasized that countries in fragile and conflict situations would benefit from entering into Fund arrangements primarily because of the catalytic role of these arrangements in mobilizing financial support from other development partners.
Directors supported Recommendation 5 to take practical steps to strengthen the impact of Fund CD support to countries in fragile and conflict situations, including increasing the use of on-the-ground experts, employing realistic impact assessment tools, and making efforts to ensure that adequate financial resources are available for CD work in these countries. They noted that weak absorption capacity and governance in fragile and conflict situations could limit CD effectiveness, which warrant particular attention. In this context, most Directors saw merit in the idea of gathering support for a multi-donor trust fund dedicated to such CD, provided that a business case could be made to donors and this would not undermine funding for the Regional Technical Assistance Centers. Directors agreed on the importance of effective coordination with other CD providers and better tailoring CD work to the specific conditions and long-term needs of countries in fragile and conflict situations.
Directors supported Recommendation 6 that the Fund should take steps to adapt its human resources strategy to provide robust incentives for high-quality and experienced staff to work on individual countries in fragile and conflict situations, and to ensure that adequate budgetary resources are allocated to support their work. They called on the upcoming review of the HR strategy to proactively consider ways of providing stronger recognition of the staff ‘s work in these countries to reduce turnover and attract more experienced staff, and to consider changes to recruitment practices. Some Directors expressed openness to considering enhanced financial and non-financial incentives to staff for work on countries in fragile and conflict situations. A number of Directors called on the Fund to consider best practices of other development institutions regarding interaction, continuous security assessment, and increased field presence in countries in fragile and conflict situations. Directors noted, however, that an increase in field staff presence in high-risk locations should be weighed against the paramount objective of protecting staff safety.
In line with established practices, management and staff will carefully consider today’s discussion in formulating a follow-up implementation plan, including approaches to monitor progress.
Completed and Ongoing IEO Work Program
Evaluation Reports
Evaluation of Prolonged Use of IMF Resources
Completed 08/02
The IMF and Recent Capital Account Crises: Indonesia, Korea, Brazil
Completed 05/03
Fiscal Adjustment in IMF-Supported Programs
Completed 08/03
Evaluation of the IMF’s Role in Poverty Reduction Strategy Papers and the Poverty Reduction and Growth Facility
Completed 07/04
The IMF and Argentina, 1991–2001
Completed 07/04
IMF Technical Assistance
Completed 02/05
The IMF’s Approach to Capital Account Liberalization
Completed 05/05
IMF Support to Jordan, 1989–2004
Completed 11/05
Financial Sector Assessment Program
Completed 01/06
Multilateral Surveillance
Completed 03/06
The IMF and Aid to Sub-Saharan Africa
Completed 03/07
IMF Exchange Rate Policy Advice
Completed 05/07
Structural Conditionality in IMF-Supported Programs
Completed 12/07
Governance of the IMF: An Evaluation
Completed 05/08
IMF Involvement in International Trade Policy Issues
Completed 06/09
IMF Interactions with Member Countries
Completed 12/09
IMF Performance in the Run-Up to the Financial and Economic Crisis: IMF Surveillance in 2004–07
Completed 01/11
Research at the IMF: Relevance and Utilization
Completed 06/11
International Reserves: IMF Concerns and Country Perspectives
Completed 12/12
The Role of the IMF as Trusted Advisor
Completed 02/13
IMF Forecasts: Process, Quality, and Country Perspectives
Completed 02/14
Recurring issues from a Decade of Evaluation: Lessons for the IMF
Completed 06/14
IMF Response to the Financial and Economic Crisis
Completed 10/14
Self-Evaluation at the IMF: An IEO Assessment
Completed 09/15
Behind the Scenes with Data at the IMF: An IEO Evaluation
Completed 03/16
The IMF and the Crises in Greece, Ireland, and Portugal
Completed 07/16
The IMF and Social Protection
Completed 07/17
The IMF and Fragile States
Completed 03/18
IMF Financial Surveillance
In progress
IMF Advice on Unconventional Monetary Policy
In progress
Evaluation Updates
Prolonged Use of IMF Resources: Revisiting the 2002 IEO Evaluation
Completed 07/13
Fiscal Adjustment in IMF-Supported Programs: Revisiting the 2003 IEO Evaluation
Completed 07/13
IMF Technical Assistance: Revisiting the 2005 IEO Evaluation
Completed 03/14
Revisiting the IEO Evaluations of The IMF’s Role in PRSPs and the PRGF (2004) and The IMF and Aid to Sub-Saharan Africa (2007)
Completed 08/14
The IMF’s Approach to Capital Account Liberalization: Revisiting the 2005 IEO Evaluation
Completed 02/15
Multilateral Surveillance: Revisiting the 2006 IEO Evaluation
Completed 02/17
IMF Exchange Rate Policy Advice: Evaluation Update
Completed 10/17
Structural Conditionality in IMF-Supported Programs: Evaluation Update
In progress
Governance of the IMF: Evaluation Update
In progress
The evaluation follows similar recent efforts by the evaluation units of other multilateral institutions to assess the effectiveness of their engagement with fragile states (e.g., OPEV, 2012; IEG, 2013, 2016).
https://www.oecd.org/dac/conflict-fragility-resilience/docs/38368714.pdf. The OECD principles highlighted, among other things, the need for “sound political analysis” to “adapt international responses to country and regional context” as well as to “agree on practical coordination mechanisms between international actors.”
The International Dialogue on Peacebuilding and Statebuilding was officially created in 2008 to develop a set of peacebuilding and state-building objectives and an action plan for effective engagement in fragile states. It involves a group of fragile states (the so-called g7+ group), a group of donor countries and multilateral institutions (the International Network on Conflict and Fragility), and a group of civil society organizations (the Civil Society Platform for Peacebuilding and Statebuilding).
https://www.pbsbdialogue.org/en/new-deal/new-deal-principles/. While the IMF is a member of the International Network on Conflict and Fragility, a constituent group within the International Dialogue, it has not formally subscribed to the New Deal Principles.
http://www.un.org/ga/search/view_doc.asp?symbol=A/RES/70/1&Lang=E. The SDGs were adopted in September 2015 under the auspices of the United Nations to serve as guiding posts for development until 2030.
http://www.iadb.org/en/news/news-releases/2007–10-20/development-banks-commit-to-closer-collaboration-working-in-fragile-situations,4092.html. The subsequent years saw several multilateral development banks adopt institutional strategies or facilities specially designed for fragile states (e.g., AfDF, 2008; ADB, 2007, 2012; IDA, 2007).
The IMF’s 2008 list was not based on the current approach. It consisted of (i) countries that had appeared on the World Bank’s list of low-income countries under stress (LICUS) at least twice during 2000–05; (ii) countries in conflict in any year during 1995–2005; and (iii) countries that had received Emergency Post-Conflict Assistance from the IMF during 1995–2005. The list excluded non-IMF member countries.
De Las Casas (2018). The overall response rate was 19 percent. The overwhelming majority of survey respondents (i.e., 211 out of 283) had worked on FCS during their IMF careers, a pattern that indicates they were more interested in expressing their views than were their colleagues without FCS experience.
IDA is a concessional arm of the World Bank. It provides loans and grants to the world’s poorest countries.
A country is assigned an annual CPIA rating from 1 (low) to 6 (high) against a set of 16 criteria in 4 clusters: economic management, structural policies, policies for social inclusion, and public sector management and institutions.
In addition, the World Bank uses a “Harmonized Average,” which is an average of its CPIA score and the CPIA score produced by the Asian or African Development Bank for the country concerned. For 2015, the IMF list had 39 fragile states whereas the World Bank list had 35.
As explained in footnote 8, the 2008 staff review (IMF, 2008a) also included a list of fragile states, but this was not based on the current definition.
Of these 26 countries, 5 were classified as fragile because of the presence of peacekeeping/building operations.
About half of these countries are post-conflict states from which peacekeeping/building operations were withdrawn.
Throughout this report, LICs are defined as those eligible for IMF concessional financing; MICs are those classified by the IMF’s World Economic Outlook (WEO) as emerging market and developing countries (EMDCs) but excluding LICs.
None of these qualitative observations change if the median numbers are used instead of the mean.
From its inception in 2010 through 2017, the RCF had 10 FCS and 7 non-FCS LIC borrowers.
In nearly 40 percent of the Extended Credit Facility (ECF)–supported arrangements with fragile states between 2010 and 2016, the access level was 20–40 percent below the applicable norms, while in most ECF arrangements with non-FCS during the same period the access level was on par with the applicable norm. By contrast, in 2017, access levels for FCS arrangements exceeded the applicable norms.
UCT refers to access above the first 25 percent of a member’s quota; it requires higher standards of conditionality.
SMPs are approved by IMF management but do not require Executive Board approval. Under an SMP, countries formulate a macroeconomic policy framework to be monitored by staff. In addition, the IMF maintains another non-financing instrument called the Policy Support Instrument (PSI), which functions as a signaling device of good economic performance to facilitate a country’s access to external financing. This requires Board approval.
In 2009, all concessional facilities were placed under the umbrella of a single trust (PRGT), and streamlined into three: the ECF, the SCF, and the RCF (replacing the Emergency Natural Disaster Assistance (ENDA), Emergency Post-Conflict Assistance (EPCA), and the rapid access component of the Exogenous Shocks Facility) (IMF, 2009a, 2009b, 2009c). In 2015, the Catastrophe Containment and Relief Trust was introduced.
An effective person-year of field delivery is defined as 260–262 working days of staff or expert time.
Currently, interest rates charged by the ECF and RCF under the PRGT are set at zero with a grace period of 5.5 years and a repayment period of up to 10 years. The SCF also carries a zero interest, but its grace and repayment periods are shorter at 4 and 8 years, respectively.
As of November 2017, the average outstanding credit balance of 23 FCS borrowers was 20 percent of the access limit under the PRGT’s UCT facilities.
At present, only Somalia and Sudan remain in protracted arrears to the IMF. The Fund cannot lend to a member in arrears.
The case study on Afghanistan (Chapter 1, Takagi and others, 2018b) documents how corruption played a role in the Kabul Bank crisis.
See IMF (2017d) for a fuller discussion of the IMF’s approach to corruption and other governance-related issues.
The review process, in which the successive drafs of a policy note or staff report are subjected to comment and scrutiny by various departments, ensures that IMF policies are uniformly applied across the institution and that quality is maintained regardless of who is originating the work. SPR plays a critical role in this process by clearing all documents for management approval.
According to the Acting Chair’s summing up of the Board discussion, while “many” directors saw merit in the proposal for a new arrangement (termed the “Economic Recovery Assistance Program”), designed to allow a medium-term, systematic, and graduated IMF engagement, “a number of other Directors questioned the need for a separate financial instrument for fragile states,” noting that “financing for development should be lef to institutions with developmental mandates.” International Monetary Fund, BUFF/08/42, March 31, 2008.
As of November 2017, the average outstanding credit balance of ten FCS borrowers under the RCF was 22 percent of quota, compared to the cumulative access limit of 75 percent.
Since 2015, access under the RCF has normally been limited to 18.75 percent of quota annually and 75 percent of quota cumulatively, but the annual limit is increased to 37.5 percent for the exogenous shocks window and 60 percent for the large natural disaster window. Access under the RFI is limited to 37.5 percent of quota annually and 75 percent of quota cumulatively, while normal access under the ECF is 75 percent of quota annually and 225 percent of quota cumulatively. See IMF (2017e).
One prominent external expert stressed the importance of tying the provision of grants to meeting conditions within the context of an IMF-supported program. To implement such a proposal, a trust fund would need to be established to allow the IMF to provide grants. Such trust funds were established following the Haitian earthquake and the Ebola crisis that affected three West African countries.
Such an approach is consistent with the Staff Guidance Note, which encourages the use of the RCF as facilitating “sustained engagement, avoiding a ‘stop-and-go’ pattern that might result from targeting overambitious policies under a UCT arrangement.”
At present, the IMF operates a network of 15 regional technical assistance centers located in the Africa, Asia-Pacific, Europe/Central Asia, Middle East, and Western Hemisphere regions. Their activities are funded by member and host countries, external development partners, and the IME See Kim (2018b).
The IEO learned from various interviewees about cases in which multiple TA missions had visited a country towards the end of an IMF fiscal year, overwhelming the capacity of the country to receive them. As another example, a sophisticated financial sector mission was suggested to a country where there was no financial sector to speak of.
For example, analytical support to the Group of Twenty is provided as technical assistance.
It is instructive in this context to note that the volume of TA to South Sudan remained significant despite the suspension of mission travel to that country (the IMF security risk rating for South Sudan was HRL2). See Table 7.
IMF staff does not share the view that the lack of flexibility in external funding has adversely affected the volume of TA to fragile states. Rather, rising external funding has allowed total TA volume to expand in the environment of a tightening internal budget constraint.
Consulting Base (2015), rating the “overall effectiveness” of IMF TA in tax policy and administration on a scale of 1–4, gave average scores of 2.5 for 5 countries classified by the World Bank as fragile at any time during 2011–14 and 3.4 for 3 countries never classified as such during the same period. DevTech Systems (2015), likewise rating the “overall performance” of IMF TA on managing natural resource wealth on a scale of 1–7, gave average scores of 4.7 for 6 countries classified by the World Bank as fragile at any time during 2011–14 and 4.5 for 10 countries not classified as such during the same period. See Kim (2018b).
The HIPC Initiative, launched in 1996 by the IMF and the World Bank, involves two steps for countries seeking debt relief: (i) meeting certain conditions to become eligible (Decision Point) and (ii) showing progress under the agreed framework, including an IMF-supported program (Completion Point). For details, see http://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/16/11/Debt-Relief-Under-the-Heavily-Indebted-Poor-Countries-Initiative.
Staff highlighted the risk that the Chadian authorities, in a security-challenged region, might be tempted to use the oil revenue to boost military spending, and suggested that military spending be benchmarked to non-oil GDP; a quantitative performance criterion on wage spending included the military.
In some cases, senior staff mentioned that mission chiefs could be “more ambitious” than SPR reviewers in responding to requests from reform-minded authorities wishing to bolster their agenda.
In discussing this issue, some staff members pointed to the constraints imposed by limits on the length of staff reports. Arguably, some of the more mechanical and detailed elements of program content could be delegated to annexes, where there are no page limits, leaving more scope for the body of the report to concentrate on a fuller development of the overall strategy.
All but six countries on the 2015 fragile states list currently have an IMF resident representative or a regional representative (see Appendix 1).
Even in a low-capacity country, effective collaboration can still take place when the head of a ministry or an agency is an exceptionally qualified person. In such instances, collaboration often ceases to be effective once the person leaves the office.
See Afghanistan case study on the Kabul Bank crisis (Chapter 1 in Takagi and others, 2018b).
In Afghanistan, for example, steering committees among donors were created, with the appointment of a high-level independent project manager, to coordinate donor efforts. In Bosnia and Herzegovina, the IMF played a leading role in developing the overall strategy for rebuilding fiscal institutions, with a substantial amount of support provided for implementation by major bilateral donors (Gupta and others, 2005). In Timor-Leste, the responsibility to manage a multi-donor trust fund for development purposes was given to the World Bank and the Asian Development Bank.
Each TTF involves a steering committee that meets regularly where IMF staff provides an update of the progress being made and consensus decisions are made. However, this does not solve the problem of coordination between TTF-funded IMF TA and TA provided by other agencies in similar areas.
For example, in October 2007, the IMF and MDBs reached understanding that they would agree “on country-level division of labor” in technical assistance. See http://www.iadb.org/en/news/news-releases/2007–10-20/development-banks-commit-to-closer-collaboration-working-in-fragile-situations,4092.html.
Within the IMF, the B1–B5 designations are for senior managerial staff, while the A11–A15 designations are for other professional staff; B5 (department director) and B4 (deputy director) are the designations for senior supervisors.
At the end of 2017, work on 10 of the 39 countries on the fragile states list was led at the B level, 25 at A15, and 4 at A14 (see Appendix 1). For economist careers in area departments and most functional departments, A14 refers to senior economist, A15 to deputy division chief, and B1 to division chief/advisor.
The IMF’s general staffing policy is to aim for a three-year tenure in country assignments in area departments. The target length for FCS assignments has been shortened to two years in AFR and MCD in view of the hardships that can be involved in missions to these countries. See the next subsection.
The Economist Program is an entry-level recruitment scheme in which economists under the age of 33 are hired typically out of graduate school.
A single A15-level mission chief vacancy can attract dozens of A14 applicants.
Fragile state vacancies have thus become a frequent point of entry for mid-career economists seeking positions in the IMF.
For the purposes of this analysis, a staff member is considered to have worked on a fragile state if he or she had spent at least 30 percent of total working hours on such a country during a given year.
Of the 11 promotions, AFR accounted for 4.
Residual risk is the risk remaining after all reasonable mitigating measures have been taken.
In addition, mission travel can temporarily be suspended to any country in the event of a temporarily elevated security threat, an epidemic, or a natural disaster.
The Islamic Development Bank continues to maintain some field presence in Somalia and Yemen.
The World Bank, the OECD, the African Development Bank, and the Islamic Development Bank are among the institutions that have established separate units dedicated to fragile state work.
This was launched by the IMF, the OECD, the UN, and the World Bank in response to a 2016 call from Group of Twenty finance ministers. The platform is being implemented in Indonesia and Uganda.
See background papers for details (Takagi and others, 2018a, 2018b).
