Chapter

Fiscal Technical Assistance

Author(s):
International Monetary Fund
Published Date:
January 1979
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A common characteristic of the Fund’s members is a large and growing fiscal sector. Financial programs that the Fund helps its members to formulate, and that are sometimes supported by use of the Fund’s resources, almost always include adjustments, and often call for improvements, in fiscal structure and practices. Moreover, through years of consultation with member countries, it has become clear that the management of government finances requires special attention from the Fund and the member concerned, since balance of payments problems often originate in the fiscal sector.

With the creation in 1964 of a Fiscal Affairs Department staffed by fiscal specialists, the Fund was ready to provide member countries with a regular service of technical assistance in public finance. It is a limited and closely monitored service. From 1964 until the end of 1978, such technical assistance was provided to 91 member countries and 6 intergovernmental organizations. (See Chart 2 for further details.)

Chart 2.Number of Countries Receiving Fiscal Technical Assistance in the Field, 1964–781

1 Includes assistance rendered to Fund members and their territories and dependencies, and excludes assistance rendered to regional organizations.

2 Includes technical assistance rendered to Fund members, their territories and dependencies, and regional organizations.

Although the program is small, it has covered a wide range of topics. Advice has been given on reform of countries’ tax structures, specific forms of taxation, tax rate structures, investment incentive codes, and organization of fiscal research units.

Advice has also been given on the reorganization of tax departments, on improving assessment and collection procedures, and on implementation of new taxes. The last has involved drafting legislation in collaboration with the Legal Department, training staff, organizing public education programs, preparing instruction manuals, and providing advice on related matters. Some assistance has been given in highly specialized areas, such as the introduction of the Nomenclature of the Customs Cooperation Council, the application of the Brussels Definition of Value to customs duties, the use of electronic data processing, and the training of tax officials in techniques of fraud investigation and enforcement of tax legislation.

1 Countries in this category include those receiving assistance through the Central Bank of West African States (BCEAO), the Bank of Central African States (BEAC), the East Caribbean Currency Authority (ECCA), and the West African Economic Community (WAEC).

In regard to budgetary matters, the program has provided general fiscal advisors to assist with policy issues; advisors on budget preparation; experts on budget classification for better social and economic policy; experts on the planning-programming-budgeting system and its applicability in developing countries; and specialists on auditing, expenditure control, and government accounting systems.

Technical assistance assignments in the fiscal field also vary considerably in duration, ranging from several weeks to several years. When a member country seeks advice on a new tax or changes in tax systems, the assignment may last only a few weeks, following which recommendations are submitted to the authorities. When the implementation of a new tax or an improved budgetary or accounting procedure is involved, the assignment may be for an initial period of one year, which is subject to extension. The normal practice is to limit the stay of an expert in a particular country to two years, but he may be succeeded by another expert with modified terms of reference.

Basic Features of Technical Assistance

The Fund’s technical assistance program is not intended to compete with other programs of fiscal technical assistance but rather to complement them. Consequently, before it extends assistance to a member, the Fund must ascertain whether the country is already receiving assistance from other sources.

Most short-term assignments are carried out by Fund staff members, and long-term assignments of six months or more are usually carried out by members of the panel of fiscal experts. The international panel includes experienced government officials, currently serving or retired, and professional economists who specialize in public finance. In addition to checking on references, Fund officials interview candidates for the panel to assess their expertise and suitability. The inclusion of an expert in the panel does not commit his government to release him, nor does it commit the individual to accept a particular assignment; rather, the panel constitutes a reservoir of specialized talent on which the Fund can draw to meet requests as quickly as possible. It sometimes takes a considerable time to arrange the release of a well-qualified person from his duties so that he may serve as a fiscal expert in a member country.

All fiscal experts serve in an advisory, rather than an executive, capacity—unlike central banking experts, who may serve in either capacity. The rationale behind this policy is that it would neither be desirable nor feasible for persons who are responsible to, and under the sole direction of, the Fund to assume operational responsibilities in public finance matters that are closely linked with the political objectives and processes of a member’s government.

Requests for Technical Assistance and the Review Process

Technical assistance is extended only when a specific request is received from an appropriate authority. Most requests originate either in the course of a Fund consultation mission, when a public finance need is disclosed, or in informal discussions at the Fund’s Annual Meeting. Requesting authorities often make preliminary soundings before making a formal request.

All requests are discussed fully within the Fund and, where appropriate, with the World Bank and other international organizations. These discussions help to reveal the problems confronting the country and to determine whether it is already receiving assistance from another source.

If there is a need for further identification of specific problems and the type of expertise required, a Fund staff member visits the country to review the requirements and to agree on a work program. The review and the resulting program help to establish realistic objectives and to assist the Fund in monitoring progress. The preliminary review also identifies the recipient country’s commitments to undertake changes or adopt measures in order to achieve the objectives of the assignment. For example, it is generally required that counterparts to an advisor be designated as a means of providing practical training for local officials who will carry on when the advisor leaves. The review also indicates whether technical assistance can more appropriately be provided by Fund staff or an expert from the fiscal panel.

It is considered important that the program remain small, both to maintain high quality and to permit proper monitoring by the Fund. In the majority of cases, therefore, a single expert is assigned to a country, although more than one expert may be used if necessary. The assignment of a team of experts working under a leader has occasionally been found to be effective.

Special attention is given to requests from newly independent countries, which often have serious problems and a shortage of experienced staff. Other criteria that have been considered include whether a request is for help in implementing advice already given by the Fund, whether the country has demonstrated ability on an earlier occasion to absorb Fund technical assistance, and whether the aim is a program of structural reform that the country is embarking on with the support of financial resources made available under the extended Fund facility4.

Assignment of Panel Experts

Once the review process is complete, recommendations are made to the Fund’s management. If it is agreed to provide assistance through the use of a panel expert, a suitable person is identified and his candidacy proposed to the government, which is provided with a summary of his qualifications and experience and an outline of the proposed administrative terms and conditions. Frequently a letter incorporating the agreed objectives of the assignment is also sent to the government.

Once he has been accepted, the expert comes to Fund headquarters for a thorough briefing before he takes up his assignment in the field. The purpose of the briefing is to acquaint the expert with the organizational structure of the Fund and its methods of operation and to set forth the terms of reference for the assignment. The expert is briefed on the substantive issues by the staff of the Fund and, as necessary, by the staff of the World Bank

Short-Term Assignments

Fund staff members (sometimes in collaboration with experts from the fiscal panel) carry out short-term technical assistance assignments, such as surveys of the tax system and the potential revenue to be expected from reform, reviews of financial management practices, and the development of financial reporting systems. Detailed reports on the problems, the options available in each case, the manner and phasing of implementation, cost and manpower implications of the options, and the range of benefits or improvements that can be expected from the proposals are submitted to the authorities as a basis for decision making.

If, after studying a technical assistance report, the authorities of the member decide to adopt some or all of its recommendations, they may request assistance in implementation. When the Fund agrees to give such assistance, it may provide for short visits by staff members or, occasionally, by panel experts or for a long-term assignment of one of the latter. These field activities may be supplemented at Fund headquarters by the preparation of draft legislation or regulations in collaboration with the Fund’s legal staff.

Operational Control and Assessment of Results

The operational control of fiscal technical assistance activities is a continuous process. Advisors assigned to member countries are required to submit progress reports at intervals of not longer than one month. Although advisors are expected to use their own judgment in offering advice on day-to-day problems, on more substantive issues they are required to report to Fund headquarters the alternatives that appear feasible, as well as the basis for their recommendations, so that comments can be made, questions can be raised, and the experience of other countries with similar problems can be examined.

Backstopping and operational controls are supplemented by inspection visits planned to coincide with a critical period in the technical assistance assignment or at a time when an extension is being considered. During these visits, the Fund staff and the country’s authorities assess the extent to which proposals have been carried out and schedules adhered to, call attention to any factors that are likely to affect the ultimate results of the assignment, and offer proposals on action that might be taken. Attempts are made to analyze the main successes and failures of the assignment and to determine the causes, pinpointing responsibilities where this is appropriate. The member government’s success or failure in meeting its obligations to provide counterparts to work with advisors is one topic that is frequently discussed. The authorities are informed about the findings of a Fund inspection visit and the Fund staffs consequent proposals.

Debriefing and Follow-Up Action

Responsibility for a fiscal technical assistance assignment does not end with its formal closure in the field, but extends for an appropriate period afterwards. At the end of the assignment, a panel expert returns to Washington for debriefing, in the course of which a full discussion of the results achieved and the problems still to be tackled provides the Fund staff with an opportunity to assess the need for, and timing of, any follow-up action. While member countries are expected to be the prime movers in initiating follow-up action, the Fund acts as a catalyst, where appropriate, by expressing its readiness to render further technical assistance if needed.

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