Chapter 6. Capacity Building: Technical Assistance and Training
- Parmeshwar Ramlogan, and Bernhard Fritz-Krockow
- Published Date:
- April 2007
Capacity building is provided by the IMF to member countries mostly in the form of advice and training provided by IMF staff, headquarters-based technical assistance experts, and experts in the field employed by the IMF. Requests for technical assistance arise from the authorities’ initiatives to identify and correct weaknesses in policy formulation or implementation. They may also result from discussions in the context of IMF surveillance or lending operations or as follow-up on FSAP and ROSC exercises.
Role of Capacity Building
Technical assistance is a crucial aspect of the IMF’s operations and helps members in strengthening their policy formulation and implementation, and the legal, institutional, and market frameworks within which they operate. It also constitutes an important complement to IMF surveillance and lending operations in member countries. In surveillance and lending operations, IMF staff work with country authorities to identify the policies and reforms required to correct particular macroeconomic and structural problems. Technical assistance, on the other hand, focuses on the implementation of these policies and reforms.99 Thus technical assistance enhances the effectiveness of the IMF’s surveillance and lending operations in member countries, and there is emphasis on better integrating it with these operations. In addition, by increasing the likelihood that economic programs will be fully and successfully implemented, technical assistance strengthens members’ capacity to repay the IMF and thus helps preserve the revolving character of the IMF’s loan resources.
Technical assistance is provided by the IMF to member countries mostly in the form of human resources. The human resources comprise IMF staff, headquarters-based consultants, and experts hired by the IMF, who provide their services to member countries in response to specific requests for assistance from the authorities. These requests for assistance may originate in the context of surveillance discussions or lending operations, ROSC exercises, or the work of regional technical assistance centers (RTACs). They may also stem from the authorities’ own initiative to identify and correct weaknesses in policy implementation.
The IMF provides technical assistance only upon request by members. However, demand for technical assistance from the IMF is strong, as it confers substantial benefits at a modest cost or no cost to most member countries and is provided without conditionality. Under current procedures, most technical assistance is provided free of charge and charges for technical assistance account for less than one percent of the cost of IMF technical assistance.100
From the member country’s perspective, technical assistance satisfies an immediate or short-run need for technical skills to support the policy dialogue and formulation and to implement specific macroeconomic policies and structural reforms. It also helps to develop long-term national capacity to design and implement economic policies and reforms. Technical assistance also constitutes a channel for learning from the experiences of other countries, and ensuring that legal and institutional frameworks meet international standards and strengthen national ownership of economic programs and policies.
In these ways technical assistance helps to address resource constraints, improves national economic management and governance, and contributes to macroeconomic stability and economic growth in member countries. It is a particularly valuable resource for developing, transition, and post-conflict countries, where institutional weaknesses are important constraints on policy design and implementation. In post-conflict countries, technical assistance is helpful in the reconstruction of economic institutions and may pave the way for IMF financial support.
The IMF, principally through the IMF Institute, delivers training that enhances the ability of member country officials to analyze economic developments and formulate and implement effective economic policies. It is an important aspect of capacity building that supports and complements the IMF’s surveillance, lending, and technical assistance activities, emphasizing practical applications of theory to real-world policy issues that academic institutions often treat in the abstract. IMF training is heavily demanded by the membership, as—like technical assistance—it offers countries sizeable benefits at little cost to them.
Types of Technical Assistance and Training
The main IMF departments providing capacity building services in the IMF are the Fiscal Affairs Department (FAD), the IMF Institute (INS), the Monetary and Capital Markets Department (MCM), the Statistics Department (STA), and the Legal Department (LEG).101
The Fiscal Affairs Department provides advice on tax policy advice in the areas of income tax, value-added tax, and taxation of natural resources, and support for the design and implementation of strengthened tax and customs administration, social security contribution collection, and major tax policy changes. Advice in public financial management includes legal and regulatory frameworks, budget management, cash management, accounting, reporting, and debt management. Advice also covers expenditure policy, macro-fiscal management, public private partnerships and fiscal risks, and fiscal decentralization.
The IMF Institute delivers, in collaboration with other IMF departments, courses and seminars on macroeconomic management in general and on policies related to the financial sector, the budget, and the balance of payments, including how to strengthen the statistical, legal, and administrative framework in these areas. INS offerings encompass long-standing courses such as financial programming and policies and newer, more specialized courses is such areas as macroeconomic diagnostics, inflation targeting, financial markets, and debt, while other departments deliver training within the INS program to complement their technical assistance activities.
The Monetary and Capital Markets Department provides advice on central banking and currency arrangements, monetary and exchange policy operations, public debt management, reserves management, financial market development, exchange systems and currency convertibility, payments systems, bank supervision and regulation and financial market integrity, bank restructuring and banking safety nets, and the implementation of international standards. In the area of capital markets, MCM provides advice on market access, asset and liability management, financial instruments, investor relations programs, corporate sector’s needs and vulnerabilities, investment climate issues, and local capital markets.
The Statistics Department provides advice on balance of payments, international investment positions, and external debt statistics, reserve assets and foreign currency liquidity, and external debt statistics, government finance statistics, monetary and financial statistics, financial soundness indicators, national accounts and price statistics, and data dissemination standards.
The Legal Department provides technical assistance primarily relating to the review or drafting of laws or regulations in the areas of tax and fiscal matters; central banking, commercial banking (including bank insolvency and deposit protection schemes); payments systems; creditor rights (corporate insolvency and restructuring, secured transactions, and enforcement of financial claims); foreign exchange; and on combating money laundering and the financing of terrorism.
Capacity Building Priorities
As the demand for technical assistance and training from the IMF outstrips the supply, the IMF prioritizes assistance to allocate its available resources.102 The IMF provides technical assistance and training mainly in the areas that are within its core mandate and only provides technical assistance and training in the areas of secondary priority where it would have a significant macroeconomic impact, and in other areas only in exceptional circumstances. Following the assessment by the Independent Evaluation Office (IEO) of the IMF’s technical assistance, and reinforced by the Medium-Term Strategy, the focus has shifted away from the previous use of prioritization filters to a much closer integration between technical assistance and the IMF’s surveillance and lending operations, and a greater role of area departments.103 Other important factors are the macroeconomic criticality of the problem, the track-record of implementation by the authorities, and the extent to which other technical assistance providers are able to provide follow-up assistance to help implement reform programs and action plans developed by the IMF’s technical assistance.
Sources and Uses of Capacity Building Resources
About three-quarters of technical assistance provided during 2002-2006 is financed out of the IMF’s own resources (Table 6.1). The remainder is financed through contributions from bilateral or multilateral donors through accounts established at the IMF for the administration of such resources. To facilitate the opening of such accounts, the IMF has set up an umbrella Framework Administered Account for Technical Assistance Activities (FAA). Japan provides about half of the externally provided resources.
(in effective person-years)1/
|IMF technical assistance budget||268.8||262.2||262.1||283.4||341.1|
|External technical assistance resources||77.8||93.5||105.3||97.2||88.1|
|United Nations Development Program||9.6||9.6||8.1||5.8||5.0|
|Total technical assistance resources||346.6||355.7||367.4||380.6||429.2|
|Technical assistance regional delivery 2/||280.0||286.5||291.1||301.4||290.9|
|Asia and Pacific||63.1||67.5||69.0||68.2||59.8|
|Middle East & Central Asia||--||--||40.1||45.1||56.3|
|Regional and Interregional||31.7||35.1||36.0||33.9||14.4|
|Technical assistance management and administration 3/||66.6||69.2||76.4||79.2||138.3|
|Total technical assistance delivery||346.6||355.7||367.4||380.6||429.2|
|Total technical assistance delivery by department||346.6||355.7||367.4||380.6||429.2|
|Monetary and Financial Systems Department||115.5||120.0||122.0||127.0||125.7|
|Fiscal Affairs Department||97.5||94.3||95.6||99.5||100.2|
Modes of Delivery of Capacity Building
There has been a movement away from ad-hoc stand-alone short-term staff visits and from long-term resident experts towards greater use of short-term experts, and in particular peripatetic support (series of expert visits). There is also growing emphasis on regional approaches to technical assistance delivery through the establishment of regional technical assistance centers. There has likewise been a shift toward delivering training through a network of regional training centers.
Short-Term Visits by Staff and Headquarters-Based Consultants
Short-term visits usually last two to three weeks, at the end of which the staff or consultants write a report setting out their analysis, conclusions, and recommendations. There may be follow-up visits to assist with and monitor the implementation of the recommendations. Most short-term technical assistance visits cover a specific subject within a given economic sector. However, the Statistics Department also undertakes multi-sector missions.
Where the member country would need on-site advice and assistance over an extended period of time to implement reforms, the IMF posts an advisor in the country. Advisors are usually posted in the central bank, Ministry of Finance, or statistical office, for periods ranging from six months to three years. They may also be regional advisors, covering two or more countries in a region or working with regional institutions. They collaborate closely with headquarters-based staff and submit periodic reports on their activities.
Regional Technical Assistance Centers
Increasingly, technical assistance is delivered through regional technical assistance centers (RTACs). RTACs have resident staff, and work closely with the regional governments in identifying technical assistance needs and in designing and implementing technical assistance programs. They are a cost effective way of providing technical assistance to a group of countries, maximizing the use of local expertise, and tailoring assistance and advice to local conditions. RTACs provide about 17 percent of all of the IMF’s technical assistance.104
There are five regional technical assistance centers: the Pacific Financial Technical Assistance Center (PFTAC) in Suva, Fiji, established in 1993; the Caribbean Regional Technical Assistance Center (CARTAC) in Bridgetown, Barbados, established in 2001; the East-African Regional Technical Assistance Center (East-AFRITAC) in Dar es Salaam, Tanzania established in 2002; the West-African Regional Technical Assistance Center (West-AFRITAC) in Bamako, Mali, established in 2003; and the Middle-Eastern Regional Technical Assistance Center (METAC), established in Beirut, Lebanon in 2004. A Central-AFRITAC will be opened in Libreville, Gabon in early-2007. The AFRITACs were established under the umbrella of the IMF’s Africa Capacity-Building Initiative, which was launched in 2002 in response to a request by African Heads of State for enhanced IMF support (Table 6.2).105
|Number of seminars held||33||4||11||11||3||62|
|Number of seminar participants||879||87||227||448||54||1,695|
|Number of countries/territories served||20||15||6||10||10||61|
|Number of resident advisors||6||4||4||6||5||25|
The IMF Institute’s strategy emphasizes delivery of training in participants’ own regions. This allows it to tailor the training more closely to regional needs and foster collaboration and mutual learning within regions. Regional delivery of training is also generally more cost effective, as participant travel costs are lower than for travel to and from IMF headquarters in Washington. Most of this overseas training is conducted though the IMF’s regional training programs (Table 6.3). This strategy has attracted substantial donor support which has enabled the IMF Institute to expand training considerably over the past decade. Courses are also conducted in collaboration with regional training institutions, in large member countries, in countries with special training needs, and through distance learning. Close to one-third of training continues to be delivered in Washington, to address needs that cannot be met satisfactorily through the regional programs. Training is delivered in Arabic, English, French and Spanish, with interpretation into Chinese, Russian and other languages where relevant.
|FY 2002||FY 2003||FY 2004||FY 2005||FY 2006|
|Regional training institutes and programs2/|
|Other overseas training|
|Total course weeks||250||249||258||271||284|
|Total participant weeks||8,354||8,432||8,570||8,925||9,402|
Cooperation with Other Technical Assistance Providers
The IMF actively cooperates with other technical assistance providers to exploit synergies and bring in additional inputs that the IMF does not provide (such as office and computer equipment, training equipment and other materials) or where it does not have a comparative advantage, thus leveraging the IMF’s limited technical assistance resources and avoiding duplication of effort or inconsistent technical advice. Such cooperation takes various forms, such as exchange of information, provision of complementary forms of technical assistance, and joint approaches to the delivery of technical assistance. Some joint approaches have already been mentioned above: the coordination, mobilization, and financing of efforts to combat money laundering and terrorism financing; international efforts in the area of standards and codes; and the regional technical assistance centers. In addition, the IMF joined the African Capacity Building Foundation (ACBF), which is the implementing agency of the Partnership for Capacity Building in Africa (PACT), as part of the IMF’s Africa Capacity Building Initiative.106 The IMF also joined the Financial Sector Reform and Strengthening (FIRST) Initiative in April 2002. The FIRST Initiative is a channel for funding the involvement of the private sector in technical assistance to the financial sector.