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IMF POLICY PAPER

BUDGET AUGMENTATION FRAMEWORK

May, 2022

IMF staff regularly produces papers proposing new IMF policies, exploring options for reform, or reviewing existing IMF policies and operations. The following documents have been released and are included in this package:

• The Staff Report on the Budget Augmentation Framework was prepared by the IMF staff and completed on November 12, 2021 for the Executive Board’s consideration on December 1, 2021.

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

Electronic copies of IMF Policy Papers are available to the public from

http://www.imf.org/external/pp/ppindex.aspx

International Monetary Fund

Washington, D.C.

©2021 International Monetary Fund

Title Page

BUDGET AUGMENTATION FRAMEWORK

November 12,2021

EXECUTIVE SUMMARY

Context. The membership and, in turn, the Fund face an inflection point as we work to emerge from the COVID-19 crisis and address the profound macroeconomic and financial implications of longer-term global challenges. The membership has called on the Fund to step up its work on identifying and managing the macro-critical impact of climate change, digitalization, inequality, and fragility, in close collaboration with partners. The Fund has a long history of agility, adapting in a cost-effective way to shifting needs, and is prepared to do so again, as highlighted in the Fall 2021 Global Policy Agenda. After a decade of real flat budgets, the IMFC has recognized the need to explore the appropriate budget envelope to ensure that the Fund has the staff and skills to continue to carry out its mandate in a changing global context.

New imperatives. Following the 2021 Comprehensive Surveillance Review (CSR) and the 2021 FSAP Review, strategies for the Fund’s engagement on climate change, digital money, fragile and conflict-affected states (FCS), as well as inclusion and gender were presented to the Board during April-October 2021. Likewise, the Executive Board reaffirmed the importance of redoubling efforts to strengthen macro-financial surveillance. The strategies identified deliverables and related resource implications for the Fund to address these new imperatives, squarely focused on the Fund’s mandate and expertise, and working in close collaboration with other institutions.

Budget augmentation proposal. To support these efforts and taking on board input from Directors in informal engagements, staff proposes a budget augmentation to be implemented through annual increases in the real net administrative budget averaging 2 percent each year during FY 23 to FY 25 relative to FY 22, returning to a flat real budget trajectory thereafter. The proposed augmentation allows for a ramp up in new areas while ensuring appropriate resources remain in place for existing workstreams. The Fund will continue to exercise strict budget discipline through robust annual savings and reprioritization exercises, even as it builds up new workstreams. The augmentation proposal is consistent with projected income dynamics.

Implementation. Following endorsement of an overall framework for the three-year ramp-up in resourcing, resource allocations will be set out in the annual budgets approved by the Board, starting in FY 23. Carefully calibrated workforce planning and recruitment will support the implementation of the issue strategies. To ensure transparency and accountability, staff will regularly report to the Board on progress in implementing the strategies for the individual issue areas.

Approved By

Michele Shannon

Contents

• SECTION I. INTRODUCTION

• SECTION II. OVERVIEW

• A Strategic Context

• B. Budget Context

• SECTION III. PROPOSED AUGMENTATION

• A Overview

• B. Affordability

• SECTION IV. IMPLEMENTATION

• A Workforce Planning

• B. Talent Sourcing

• SECTION V. RISKS

• BOXES

• 1. Past Shifts in the Fund’s Budget

• 2. New Ways of Working

• 3. Costing

• 4. Impact of Augmentation in Fund-Financed CD

• FIGURES

• 1. Net Administrative Budget, FY 03–22

• 2. FY22 Budget Allocations

• 3. Extensive Reprioritization in Last Decade

• 4. Average Overtime Rate and Annual Leave

• 5. Multi-Year Budget Shift

• 6. Overall Allocation by Topic

• 7. Allocation and Outputs by Department Type

• 8. Operational Income and Expenses

• TABLES

• 1. Issue-Specific Strategies and Resourcing

• 2. Operational Income and Net Administrative Budget, FY 22–25

• ANNEXES

• I. Climate Strategy

• II. Digital Money Strategy

• III. Macrofinancial Surveillance Strategy

• IV. Fragile and Conflict-Affected States Strategy

• V. Inclusion and Gender Strategy

• References