Strong institutions and operational skills are essential for monetary and financial stability, and hence for economic growth. Even where there is full commitment to sound policies, a country may not succeed in achieving its objectives if the right institutions are not in place, or if the necessary skills are not available to implement the policies. In short, in order to achieve their stability objective, central banks and regulatory agencies need to have comprehensive and up-to-date operational and institutional capacity.

There is substantial literature on what constitutes an appropriate monetary policy to best foster economic growth, as well as on what institutional structures best provide the conditions for appropriate policies to be chosen. Once determined, however, policies still need to be properly implemented, and this is by no means always straightforward. To give one single example, a country may decide to adopt a floating exchange rate while remaining uncertain about how to ensure that the foreign exchange market functions smoothly in the process. Often, country authorities find it useful to share experiences and review the way other countries have addressed this type of issue. In this regard, TA can play a critical role. It is a principal purpose of this volume to provide examples where such assistance has been brought into play.

Globalization, diversification of markets, and greater understanding of monetary and financial risks and vulnerabilities, all have complicated the implementation of monetary and financial policies. Also, views on the key elements of the monetary and financial infrastructure (for instance, on independence, accountability, and governance of the responsible institutions) have continued to evolve. Likewise, the concept of “best practices” in the operation of monetary and financial policies has changed rapidly in recent years. While many countries have implemented the necessary institutional and policy reforms on their own, others may seek outside assistance. The IMF has contributed to this process—and thus to countries’ institutional and capacity building—through its TA programs.

IMF involvement in TA derives from several of its mandates. First, it has a global responsibility regarding macroeconomic policies and developments, including those pertaining to monetary and financial stability. This mandate is exercised through IMF surveillance, extended to all member countries. TA is a natural concomitant to surveillance for those member countries unsure about introducing recommended policy measures on their own, or wishing to draw on wider international experience before they implement their reforms. Second, the IMF’s lending role often requires technical support. For instance, lending to low-income countries directly ties a country’s economic program to the achievement of growth, and hence is contingent on the development of institutions and capacity to implement policies to deliver growth. Thirdly, the IMF has additional mandates that underpin its involvement in TA. These include its role as assessor of international standards;² as provider of finance for countries in temporary payments difficulties; and as a cooperative institution providing mutual support across the membership. Overall, the strength of the IMF’s role in delivering TA, and a reason why it is frequently recipient countries’ preferred provider, is that TA is set as part of a comprehensive economic relationship with the recipient country, ensuring that the TA is consistent with the country’s economic policies and programs as a whole. Against this background, in his report on the implementation of the IMF’s Medium-term Strategy, the Managing Director defined capacity building as one of the core responsibilities of the IMF.³

The nature of the IMF’s TA varies across the membership.⁴ It is very broad for those countries that still need to develop basic infrastructure, or where infrastructure has been destroyed by conflict. It is more focused when the monetary and financial infrastructure is largely in place, but there are problems in implementation. For instance, particular issues may arise from the regular surveillance process or from the country’s participation in the IMF/World Bank Financial Sector Assessment Program (FSAP).⁵ Finally, it can be very specific and collaborative where cutting-edge topics or conjunctural issues are on the table.

Originally, technical support in the monetary and financial areas frequently placed the IMF in the role of confidential advisor to the central bank governor. More recently, there is much greater emphasis on transparency, on disseminating the nature and the results of the assistance in order to better assess what worked and what did not, and on using past experience to provide useful lessons for other countries. This volume is a reflection of this trend. The studies presented here should help disseminate more widely—to other countries, other providers, and, more generally, the international community—the lessons from these experiences.

Demand for IMF TA is far greater than the available resources. Responses to country requests are therefore carefully prioritized, on the basis of a range of criteria, including that the request relates to a subject at the core of the IMF’s responsibilities, that it is appropriate for the country at its existing stage of economic development, and that there is a high expectation of implementation of staff recommendations.

This volume provides a series of case studies that seek to illustrate the wide range of IMF involvement in assistance/cooperation with its member countries on monetary and financial issues. The first part, “Starting to Build Institutions,” provides examples where IMF assistance has focused on building basic capacity in countries where capacity is limited or has been destroyed. The second part, “Implementing Monetary and Financial Policies,” covers some cases where the assistance related to particular policy changes, such as the adoption of inflation targeting, the move from fixed to floating exchange rates, or the creation of a modern bank supervisory regime. Finally, the last part, “Advanced Topics in Technical Assistance,” deals with cases where IMF assistance has been sought on more advanced, and more specific, issues or where IMF staff has identified critical issues for discussion.

This volume is intended to contribute to an understanding of the interrelationships between policy formulation, operational implementation, and the achievement of monetary and financial stability. The case study approach aims at providing insights on how, by focusing on developing the institutional infrastructure and ensuring the sound implementation of policies, a country can achieve its policy objectives. Although country experiences are highly diverse, a common thread is that increased technical interaction withbut collapsed. The Rwandese government the international community—whether through TA or collaboration—can help a country move toward monetary and financial stability and thus enhance its overall economic prospects.

The book covers both the substance of the issues under discussion (for instance, the design of an inflation target framework) and the modalities for delivering the technical support underlying the implementation of the required changes. The case studies illustrate the variety of ways (for instance, TA “missions”, expert visits, workshops, seminars, or in-house reviews of draft legislation) through which the IMF has delivered technical advice.