Abstract

Sound economic policymaking and implementation require know-how and effective institutions of government. Many developing countries, in particular, need help to build up expertise in economic management and advice about what policies, reforms, and institutional arrangements are appropriate and have worked well elsewhere. Help of this kind is provided by the IMF through technical assistance. This is a benefit of IMF membership, provided at no charge except for countries that can afford to reimburse the IMF. (The framework used to allocate resources for technical assistance is outlined in Box 6.1.)

Sound economic policymaking and implementation require know-how and effective institutions of government. Many developing countries, in particular, need help to build up expertise in economic management and advice about what policies, reforms, and institutional arrangements are appropriate and have worked well elsewhere. Help of this kind is provided by the IMF through technical assistance. This is a benefit of IMF membership, provided at no charge except for countries that can afford to reimburse the IMF. (The framework used to allocate resources for technical assistance is outlined in Box 6.1.)

The IMF’s technical assistance aims partly to help countries strengthen their policymaking capacity—both human skills, and institutional organization and procedures—and partly to help with the design of particular polices, including reforms. Macroeconomic policy reform may involve reform of public expenditure, overhaul of the budget and tax systems, improvements to the management of money and credit, a change in the exchange rate regime, or help in the area of international standards and codes of transparent policymaking. Training is provided to strengthen the skills of officials in the institutions responsible for policymaking, such as finance ministries and central banks.

Member countries attach great importance to the role of technical assistance in reinforcing the effectiveness of the Fund’s work both in surveillance and crisis prevention, and in crisis management and resolution, including its lending operations. For example, many governments in low-income countries are developing poverty reduction strategies but need technical assistance to draw up an operational plan and put it into effect. Such strategies can pinpoint capacity-building needs and help mobilize adequate technical assistance. And crucial for lasting poverty reduction is that local expertise be developed, especially in the management of public resources.

The IMF has also given considerable technical assistance to countries and territories that have had to reestablish government institutions following severe civil unrest or war. Recently, countries or territories receiving this kind of help include Afghanistan, Albania, Bosnia and Herzegovina, Kosovo, and Timor- Leste (East Timor).

External Financing for Technical Assistance

The IMF finances its technical assistance mainly from its own resources, but external financing is also an important source of support. Such external financing is provided as grant contributions mainly under the IMF’s Framework Administered Account for Technical Assistance Activities, but also through cost-sharing arrangements under United Nations Development Program (UNDP) projects and, in a small number of cases, direct reimbursement arrangements. There were 12 active subaccounts under the umbrella Framework Account in FY2003, including two new multidonor subaccounts to support the Pacific Financial Technical Assistance Center (PFTAC) and the two Africa

A Framework for Selecting Projects

The IMF’s Executive Board in FY2001 put in place a formal framework to allocate resources for technical assistance more effectively and better align technical assistance with policy priorities. Under this framework, IMF technical assistance is divided into five “main program areas”: crisis prevention, poverty reduction, crisis resolution and management, post-conflict/ post-isolation cases, and regional/multilateral arrangements. These program areas are complemented by three categories of “filters,” as follows

  • Target filters: the technical assistance must fall within the IMF’s core areas of specialization, support a limited number of key program areas, or buttress policy priorities.

  • Effectiveness filters: the technical assistance must be deemed to have a substantial impact and be effectively supported and implemented by the recipient country. It also should be sustainable in terms of financing and lasting in its effect.

  • Partnership filters: technical assistance requests have preference when delivered regionally, benefit several recipients, draw on multiple financial sources, or complement third-party assistance.

New Technical Assistance Subaccounts

The Pacific Financial Technical Assistance Center (PFTAC) Subaccount was established in May 2002 to administer contributions from donors to finance activities of PFTAC that seek to enhance the capacity of Pacific island countries and territories to formulate and implement policies in the Fund’s core areas. Contributions have been received from Australia (S1 million), New Zealand ($0.4 million), and the Asian Development Bank ($0.4 million).

The Africa Regional Technical Assistance Centers (AFRITACs) Subaccount was established in August 2002 to administer contributions from donors to finance activities of the AFRITACs that support the PRSP process in sub- Saharan African countries through fostering their capacity for sound macroeconomic management, strong fiscal institutions and financial systems, and timely and accurate collection and dissemination of economic data, including training and activities that strengthen the legal and administrative framework in these core areas. Eleven donors have committed just over $12 million—African Development Bank, Canada, France, Germany, Italy, Luxembourg, the Netherlands, Norway, Russia, Sweden, and the United Kingdom.

The Sweden Technical Assistance Subaccount was established in November 2002 to enhance the capacity of members, also in the Fund’s core areas. The initial contribution of 10 million kronor ($1.2 million) provided by Sida, the Swedish International Development Cooperation Agency, is to finance the IMF’s technical assistance work in Afghanistan in the areas of monetary, exchange, and financial policies and operations.

Regional Technical Assistance Centers (AFRITACs).1 Box 6.2 describes the new subaccounts set up in the past financial year.

In FY2003, external financing accounted for about 30 percent of total assistance delivered by the IMF. Japan remained the largest single donor, providing some 70 percent of this external financing. Other bilateral donors included Australia, Canada, Denmark, France, Germany, Italy, Luxembourg, the Netherlands, New Zealand, Norway, Russia, Sweden, Switzerland, the United Kingdom, and the United States. Multilateral donors included the Asian Development Bank, the Inter-American Development Bank, the UNDP, and the World Bank.

IMF technical assistance is coordinated and supervised by the Office of Technical Assistance Management in the Office of the Managing Director. A more complete description of the goals, scope, and operational methods of the IMF’s technical assistance is available in a number of documents, including the Policy Statement on IMF Technical Assistance, available on the IMF’s website.

Recent Developments

At its June 2002 meeting to review IMF technical assistance policy and experience, the Executive Board endorsed measures to (1) introduce an institution-wide methodology for monitoring and evaluating technical assistance activities, and for implementing a formal three-year rolling program of evaluations; and (2) set up a comprehensive financial accounting system to capture the full cost of technical assistance delivery, both in the field and at headquarters.

By the end of FY2003, progress had been made in these areas as follows:

  • Institution-wide methodology for monitoring and evaluation. Work neared completion on a comprehensive approach that takes into account international best practices and, where appropriate, builds on existing systems.

  • Evaluation program for FY2004-FY2005. Ten projects have been identified for the program, focusing on the three main policy issues—the link between technical assistance and the IMF’s surveillance and policy work; the contribution of regional assistance centers and the regional approach to technical assistance delivery; and activities designed to respond to new initiatives and calls for international assistance.

  • Resource management. A three-year resource management project will begin implementation in early FY2004. The accountability and transparency of technical assistance will be improved by this new financial accounting system.

In response to a request made by African heads of state for enhanced IMF support in fostering capacity building, the IMF in FY2003 worked with donor partners and participating African countries to establish two Africa Regional Technical Assistance Centers (AFRITACs). Drawing on positive experience in the Pacific and the Caribbean regions, the centers take a regional approach to building capacity by maximizing technical assistance delivery among neighboring countries with similar needs. The first—covering six countries in East Africa (Eritrea, Ethiopia, Kenya, Rwanda, Tanzania, and Uganda) and based in Dar es Salaam—was inaugurated in October 2002. The second—covering ten countries in West Africa (Benin, Burkina Faso, Côte d’Ivoire, Guinea, Guinea-Bissau, Mali, Mauritania, Niger, Senegal, and Togo)—was inaugurated in May 2003. Originally planned for Abidjan, it was temporarily relocated to Bamako because of civil unrest in Côte d’Ivoire.

A team of resident experts at each center cover the core areas of the IMF’s competence. They assist member countries to develop and implement their capacity-building programs, guided by each country’s Poverty Reduction Strategy Paper (PRSP). They help to carry out and monitor ongoing technical assistance programs, facilitate donor coordination of ongoing capacity-building activities, and provide technical advice.

Each center will work under the policy guidance of a Steering Committee consisting of representatives of member countries and donors. This is intended to ensure, on the one hand, full ownership of activities by countries and, on the other, accountability to and close coordination with donor partners. After the first two centers are independently evaluated, the IMF will consider whether to establish three additional centers to cover the rest of sub-Saharan Africa.

Technical Assistance Delivery in FY2003

One way the IMF measures its technical assistance is by tracking the time spent helping countries. In FY2003, the IMF provided the equivalent of 356 person-years of technical assistance. This was some 2½ percent higher than in FY2002 and about 100 person-years higher than a decade earlier (262.6 person years in FY1994).

Reflecting new needs within program areas, in FY2003 technical assistance increased for post-conflict/isolation cases (see Box 6.3), regional initiatives, and crisis prevention. Anti-money laundering and terrorism emerged as very high priorities in FY2003. IMF technical assistance to fight money laundering and to combat the financing of terrorism (AML/CFT), as well as its continuing work on offshore financial centers, more than doubled. Technical assistance also rose for standards and codes and for the implementation of Financial Sector Assessment Program (FSAP) recommendations (see Table 6.1).

Table 6.1

Technical Assistance Program Areas

(Field delivery in person-years)1

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Source: IMF Office of Technical Assistance ManagementNote: FSAP = Financial Sector Assessment Program, HIPC = Heavily Indebted Poor Countries Initiative, AML/CFT = Anti-Money Laundering and Combating the Financing of Terrorism.

Excludes headquarters-based activities related to technical assistance.

IMF Technical Assistance in Post-Conflict Recovery: Afghanistan

In 1995, the IMF extended its policy on emergency technical assistance to include countries recovering from war and civil strife. About 20 percent of total IMF field assistance in recent years has been delivered in post-conflict situations, including in Burundi- Timor- Leste, Kosovo, Bosnia and Herzegovina, Sierra Leone, Republic of Congo, Tajikistan, Rwanda, and, most recently, Iraq.

In the Islamic State of Afghanistan in 2002, an estimated seven million people faced famine and millions more were displaced from their homes. After more than 20 years of conflict, the key economic institutions of state—treasury, tax collection and customs, statistics, civil service, and judicial systems—were in disarray or simply missing. The central bank (Da Afghanistan Bank) was a makeshift institution attempting to reconstruct a shattered monetary system operating completely in cash. The Taliban kept few records and reportedly took millions of dollars when they fled in November 2001. With three national currencies, foreign currencies, and barter systems simultaneously in use, the incoming interim government had no idea of the amount of money actually in circulation.

IMF technical assistance teams and the Afghan authorities began working together in January 2002. The Fund provided approximately six person-years (equivalent to $1.4 million) of direct assistance by the end of FY2003. Support was provided in core areas of IMF strength, with an emphasis on capacity building in the Ministry of Finance/Treasury, Da Afghanistan Bank, and the Central Statistical Office.

  • Financial sector. Strengthening Afghanistan’s banking system started, literally, with vault repairs and refurbishment of security doors. The rudimentary banking system was functioning mostly without benefit of licenses, regulations, or supervision. Decisions were needed on which currencies to use, exchange rates, and how to ensure liquidity and build confidence in a new national currency, the afghani. The basics of monetary control, banking laws and regulations, bank supervision, and licensing all needed to be strengthened or reestablished. A payments system was needed to facilitate commercial transactions and essential services of the government.

  • Fiscal strengthening. In contrast to the central bank, the Ministry of Finance had basic systems, laws, and procedures that could be used over the near term but needed to be made operational. The role of the IMF was to provide a framework for fiscal management covering public expenditure management and detailed revenue policy and administration recommendations. The authorities subsequently worked with other donors to implement these recommendations. As a result, the ministry developed a computerized treasury system that includes expenditure control and reporting. On the revenue side, the IMF is working with both the authorities and donors on customs legislation and its implementation, and the development of a tax administration.

  • Statistics. Statistical systems in Afghanistan were underdeveloped, with an urgent need for data. IMF technical assistance helped to compile and disseminate the macroeconomic and financial data necessary for fiscal and monetary management. Technical assistance involved setting up systems for accounts, GDP calculations, consumer price indices, and data relevant to the balance of payments.

It will take many years to complete the groundwork for sustainable growth. However, by the end of FY2003, IMF staff and the Afghan authorities were well on their way to developing and implementing a coordination plan for the many technical assistance initiatives in macroeconomic management and for cooperation among development partners.

Geographically, sub-Saharan Africa continued to receive the largest, and an increasing, share of IMF technical assistance. This reflects the continuing priority of poverty reduction and capacity building in the region, also exemplified by the two new Africa Regional Technical Assistance Centers. Technical assistance also increased and has remained high in the Asia-Pacific region reflecting assistance for post-conflict cases, such as Cambodia and Timor-Leste, and support for reforms in China, Indonesia, and Mongolia. As it has over the past five years, technical assistance to European countries continued to decline, as most of the European transition economies no longer require the large amounts of technical assistance that were delivered to them a decade ago. Technical assistance to other geographical regions, as well as for interregional projects, remained broadly the same as over the past five years (see Table 6.2 and Figure 6.1).

Table 6.2

Technical Assistance Sources and Delivery, FY1999-FY2003

(In effective person-years)1

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Source: IMF Office of Technical Assistance Management.

An effective person-year of technical assistance is 260 days. New definitions used since 2001; data adjusted retroactively.

Indirect technical assistance, including technical assistance policy, management, evaluation, and other related activities.

Includes the Policy Development and Review Department, the Technology and General Services Department, and the Office of Technical Assistance Management.

Figure 6.1
Figure 6.1

Technical Assistance by Region, FY2003

(As a percent of total resources, in effective person-years)

The IMF’s Monetary and Financial Systems Department 2 remained the IMF’s largest technical assistance provider, increasing its delivery to some 120 person-years, reflecting the increase in activities linked to the emergence of the new international financial architecture. The Fiscal Affairs Department, the IMF’s second-largest technical assistance provider, decreased its delivery to 94 person-years. The Statistics and Legal Departments both stepped up technical assistance by some 5 person-years each. The increase by the Legal Department was mainly a result of its involvement in anti-money laundering and combating the financing of terrorism (see Table 6.2 and Figure 6.2).

Figure 6.2
Figure 6.2

Technical Assistance by Function, FY2003

(As a percent of total resources, in effective person-years)

IMF Institute

Through a rich offering of courses and seminars, the IMF Institute trains officials from member countries in core areas—macroeconomic management and financial, fiscal, and external sector policymaking. These are delivered by Institute staff or by staff from other IMF departments, and occasionally by outside academics and experts. Training is delivered at IMF headquarters in Washington, D.C., and at various overseas locations. Some preference in acceptance is given to officials from developing and transition countries.

With the assistance of other departments, the IMF Institute delivered 119 courses, attended by over 3,800 participants, in FY2003 (see Table 6.3). About two-thirds of the courses and about half the participant-weeks were provided through the IMF’s six regional institutes and programs, which are located in Austria, Brazil, China, Côte d’Ivoire, 3 Singapore and the United Arab Emirates (see Table 6.4). Training in Washington remained important, generally offering longer courses and accounting for about 40 percent of participant-weeks. Training outside Washington and the IMF regional network was typically offered through ongoing collaborations between the IMF Institute and national or regional training programs.

Table 6.3

IMF Institute Training Programs for Officials, FY1999-FY2003

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Source: IMF Institute.

Includes Joint Vienna Institute (established in 1992), IMF-Singapore Regional Training Institute (1998), IMF-AMF Regional Training Program in United Arab Emirates (1999), Joint Africa Institute in Côte d’Ivoire (1999), Joint China-IMF Training Program (2000), and Joint Regional Training Center for Latin America in Brazil (2001). Data for the Joint Africa Institute include courses delivered by the African Development Bank and the World Bank. Data for the Singapore Institute include a course for it delivered by the World Bank in FY2002 and FY2003.

Excluded from the total course count below because the residential segment is included in the headquarters training activity

Those participants who were invited to the residential part of the courses are included both here and under headquarters training.

Includes only participant-weeks for the distance part of the course. Participant-weeks for the residential part are included in headquarters training.

Table 6.4

IMF Institute Regional Training Programs

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A number of other European countries and the European Union, although not formal sponsors of the JVI, provide financial support

Following a number of years of increases, the level of training in FY2003 stabilized to that in FY2002. In part, this reflected the planned completion of the IMF’s network of regional training institutes in FY2002 (see Annual Report 2002, page 77), but also that a number of training activities were cancelled in FY2003 as a result of the security situation in Côte d’Ivoire, the war in Iraq, and the outbreak of Severe Acute Respiratory Syndrome (SARS) in Asia.

The IMF Institute continues to strengthen its curriculum. In FY2003, new courses were delivered on such topics as anti-money laundering, assessing financial system stability, fiscal sustainability and transparency, macroeconomic forecasting, and safeguards assessments for central banks. In Washington and its regional institutes and programs, the Institute provides high-level officials with short seminars tailored to their needs. Topics covered in FY2003 include current developments in monetary and financial law, exchange rate regimes and policies, financial market globalization, globalization in historical perspective, and the New Economic Partnership for Africa’s Development (NEPAD).

An independent market research firm was contracted in FY2003 to assess the effectiveness and demand for training courses. A survey of national authorities indicated high satisfaction with the present training program as well as high unmet demand for more courses in Washington and regional locations.

1

The bilateral subaccounts comprise: The Japan Advanced Scholarship Program Subaccount, the Australia-IMF Scholarship Program for Asia Subaccount, the Switzerland Technical Assistance Subaccount, the French Technical Assistance Subaccount, the Denmark Technical Assistance Subaccount, the Australia Technical Assistance Subaccount, the Netherlands Technical Assistance Subaccount, the UK-DFID Technical Assistance Subaccount, the Italy Technical Assistance Subaccount, and the Sweden Technical Assistance Subaccount.

2

Formerly the Monetary and Exchange Affairs Department (renamed as of May 1, 2003).

3

In early 2003, in view of the security situation in Côte d’Ivoire, the Joint Africa Institute was moved temporarily to Tunisia.

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    Technical Assistance by Region, FY2003

    (As a percent of total resources, in effective person-years)

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    Technical Assistance by Function, FY2003

    (As a percent of total resources, in effective person-years)