Chapter

II Postconflict Technical Assistance for Rebuilding Fiscal Institutions

Author(s):
Rina Bhattacharya, Benedict Clements, Sanjeev Gupta, Shamsuddin Tareq, Alex Segura-Ubiergo, and Todd Mattina
Published Date:
December 2005
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The International Monetary Fund has provided a considerable amount of technical assistance to post-conflict countries in recent years. Postconflict assistance as a proportion of total technical assistance provided by the IMF Fiscal Affairs Department increased from about 15 percent in 1995 to about 23 percent in 2004 (Table 2.1). A total of 27 postconflict countries and territories have received IMF assistance through its Fiscal Affairs Department.1

Table 2.1.IMF Technical Assistance to Postconflict Countries on Fiscal Issues, FY1995–2004(In person years)
Area1995199619971998199920002001200220032004
Public expenditure management6.16.47.38.77.28.69.77.67.58.9
Revenue policy and administration8.410.610.512.99.69.915.511.114.912.8
Other0.01.01.10.00.01.20.80.60.50.3
Total14.418.019.021.616.819.726.119.322.922.0
(In percent of total IMF fiscal affairs technical assistance)15.318.318.220.915.418.523.319.824.323.1
Memorandum items:
Number of countries and territories15191616161821232124
Source: IMF Fiscal Affairs Department (FAD) database.Notes: Data cover technical assistance from the IMF’s Fiscal Affairs Department to 27 postconflict countries and territories. See footnote 1 in this chapter for the complete list.
Source: IMF Fiscal Affairs Department (FAD) database.Notes: Data cover technical assistance from the IMF’s Fiscal Affairs Department to 27 postconflict countries and territories. See footnote 1 in this chapter for the complete list.

Postconflict countries were selected on the basis of having endured a major conflict as defined by the Stockholm International Peace Research Institute. The definition was supplemented by information on the “mag” index from the Armed Conflict and Intervention Project of the Center for Systemic Peace at the University of Maryland.2 The countries selected met two criteria: (i) the conflicts started after 1970 and were resolved or ongoing over the period from 1990–2003; and (ii) the conflicts scored at least 3 on the “mag” index of social disruption. Conflicts that met both criteria but where state institutions remained relatively unaffected were excluded. In addition, three countries (Albania, Guinea-Bissau, and Yemen) for which the “mag” index was lower than 3, but which were declared eligible for IMF postconflict assistance, were included.

During the past three years, IMF technical assistance to these 27 countries and territories on fiscal issues has averaged about 21 person-years annually. Major recipients in FY2004 included Afghanistan, Cambodia, Democratic Republic of the Congo, Lebanon, Mozambique, and Rwanda. Considerable assistance was also provided to Iraq in FY2004. More than half such technical assistance to these countries was for revenue policy and administration, reflecting the urgent need to mobilize revenue to finance rehabilitation and reconstruction. The bulk of the remaining assistance was in public expenditure management.

IMF technical assistance to postconflict countries on fiscal issues has ranged from providing policy advice to helping countries build technical and institutional capacity through short-term missions, training, and the provision of resident advisors. The IMF provides assistance only at the request of the authorities, which helps promote country “ownership” of the reforms undertaken. Progress in implementing technical assistance recommendations is given significant weight in sustaining the assistance over time.

In general, IMF technical assistance to postconflict countries on fiscal issues has focused on the design of the overall strategy for rebuilding or establishing fiscal institutions. A first step in the process has been to field an assessment mission to evaluate existing fiscal institutions and procedures and identify areas requiring technical assistance. Donors have typically participated in such missions, which has facilitated agreement among the key technical assistance providers on a common strategy of fiscal management. This has been followed up with smaller, more specialized missions by the IMF, other multilateral institutions, and donors directed toward specific areas of assistance. In the initial stages, assistance often has been provided through long-term advisors.

Establishing or rebuilding fiscal institutions also depends on successful implementation of reforms in other areas, especially strengthening a nation’s central bank and central statistics office. Particularly in newly formed countries, it is critical to develop an efficient banking system capable of providing nationwide cashier and payment facilities to assist in the effective delivery of government services.

Donor Coordination

As noted above, IMF technical assistance to post-conflict countries has been provided in the context of overall support provided to these countries by the international community. Postconflict assistance from the IMF is usually smaller and more focused than large-scale interventions by other bilateral and multilateral donor agencies. In some cases, the effectiveness of IMF assistance has depended crucially on complementary support from other donors, such as those that provide long-term advisors and computer equipment. This highlights the need for close coordination among assistance providers.

Coordination of donor technical assistance is a challenge in any country, but particularly in postconflict countries, owing to the large number of providers involved. Proper coordination is needed to avoid duplication of efforts and to ensure the appropriate sequencing of technical assistance. Such coordination also helps avoid placing unnecessary burdens on the weak administrative capacity of postconflict countries and ensures that technical and financial assistance is channeled in accordance with the priorities established by the national authorities.

In some post-conflict countries, such as Cambodia, Mozambique, and Yemen, the IMF has taken the lead role in coordinating technical assistance. Whenever the authorities have requested it, comprehensive medium-term action plans for provision of technical assistance have been drawn up based on a series of diagnostic and assessment missions. These plans identify the objectives, types and amount of assistance required, costs and potential funding sources, government commitment and counterparts, management and administrative arrangements, implementation benchmarks and performance indicators, and reporting and evaluation requirements. Such plans provide a framework for prioritizing technical assistance needs and building country ownership and commitment, as well as for mobilizing and coordinating donor support for technical assistance.

The 27 countries and territories are the Islamic Republic of Afghanistan, Albania, Algeria, Angola, Bosnia and Herzegovina, Burundi, Cambodia, Democratic Republic of the Congo, Republic of Congo, Croatia, El Salvador, Ethiopia, Guinea-Bissau, Iraq, Kosovo, Lebanon, Liberia, Mozambique, Nicaragua, Rwanda, Serbia and Montenegro, Sierra Leone, Sri Lanka, Tajikistan, Timor-Leste, West Bank and Gaza, and the Republic of Yemen.

Documentation on the “mag index” can be found at http://members.aol.com/cspmgm/warlist.htm. The index measures the magnitude of a societal-systemic impact of a conflict on a scale from zero (lowest) to 10 (highest). Detailed information on the Armed Conflict and Intervention Project can be found at http://www.cidcm.umd.edu/inscr.

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