Public Information Notice No. 08/58

Public Information Notice: IMF Executive Board Discusses Reforms to Enhance the Impact of Fund Technical Assistance

May 22, 2008

On May 12, 2008, the Executive Board of the International Monetary Fund (IMF) discussed reforms to enhance the impact of Fund technical assistance (TA).

Background

Technical Assistance (TA) is a core activity of the Fund. The IMF provides TA in the areas of its expertise, namely, macroeconomic policy, tax policy and revenue administration, expenditure management, monetary policy, the exchange rate system, financial sector stability, legislative frameworks, and macroeconomic and financial statistics. Fund TA is fully integrated with the institution's surveillance and lending functions.

IMF TA brings immediate benefits to recipient countries by helping them design and implement better economic policies. Through reducing individual countries' vulnerabilities, IMF TA also contributes to the building of a more robust and stable global economy. About 80 percent of IMF TA goes to low- and lower-middle-income countries. TA has also been directed to building capacity to design and implement poverty-reducing and growth programs, helping heavily indebted poor countries (HIPCs) better manage expenditures and debt-reduction programs.

As part of the Managing Director's refocusing exercise, the Fund is currently engaged in ambitious reforms to enhance the impact of its TA. Substantial changes are being made to make Fund TA more effective, ensure that TA resources are allocated more efficiently, and that Fund TA is better coordinated with recipient countries and other providers. Reforms aim to (1) enhance the integration of TA with surveillance and Fund lending operations to provide better analysis for policymaking and build institutional capacity; (2) improve prioritization by better aligning TA with strategic objectives of the recipient country and the Fund set out a medium-term TA agenda and by introducing a charging regime, graduated by country income, which provides a market test for Fund TA; (3) better integrate TA into the Fund's medium-term budget, which makes priority-setting easier and allows TA to be more responsive to changes in priorities; (4) widen the dissemination of TA findings, which will permit sharing of lessons learnt and facilitate coordination with donors and other TA providers; (5) make TA evaluations more systematic through Fund-wide introduction of performance indicators; and (6) better cost TA projects to help ensure efficient allocation of resources, better inform management decisions and enhance accountability.

Partnering with donors is instrumental for Fund TA. External financing has helped meet Fund TA demands, particularly as membership was expanding. Partnership has also intensified collaboration, which increased the effectiveness of TA for other providers as well as the Fund. Partnering also integrates Fund TA in a more inclusive dialogue with a coherent development framework. As part of its partnerships, the Fund has gradually expanded TA delivery through its Regional TA Centers (RTACs). Depending on the type of assignment, support is often provided through staff missions sent from headquarters (HQ) or experts or resident advisors placed in the field for periods ranging from a few weeks to several years. RTACs were found to be effective and efficient in delivering TA complementary to HQ-based missions and the Fund is increasingly using its six RTACs—in the Pacific; the Caribbean; East, West, and Central Africa; and the Middle East—to provide TA in the form of technical and diagnostic studies, training, seminars, workshops, and online.

The Fund will strengthen its partnerships with donors. External financing for TA will be facilitated by bundling TA in product lines, which better highlight links to donor development strategies. Partnerships will be developed on a broader, longer-term, and more strategic basis, focused on topical trust funds such as for fragile states and Anti-Money Laundering/Combating of Financing of Terrorism and on expanding TA delivery through RTACs, including the opening of new centers.

Executive Board Assessment

Executive Directors welcomed the opportunity to discuss reforms to enhance the impact of the Fund's TA, and to consider how the provision of TA—a core activity of the Fund—should be adapted in light of the strategic directions in the medium-term budget. Directors noted that Fund TA has been widely appreciated and demanded by the membership, and that it has been of high quality and broadly effective in helping member countries develop and strengthen their institutional capacity, acting as a complement to the Fund's surveillance and financial support. Directors saw the proposed reforms as comprehensive, substantive, and broadly appropriate. The reforms involve enhanced transparency and accountability, further integration of TA with surveillance and lending operations, and improved prioritization of TA in line with the strategic objectives of both the recipient countries and the Fund. Directors considered that, if fully implemented, these reforms should go a considerable way toward enhancing the effectiveness of Fund technical assistance.

Directors generally agreed that area departments should play the leading role in preparing TA strategies, as they are the primary link between the Fund and member countries, and accordingly are well placed to integrate the reform agenda of countries with the Fund's own policy and surveillance perspectives, drawing on the technical expertise of TA departments. Directors agreed that Regional Strategy Notes (RSNs) are a useful vehicle for prioritizing TA across countries in the region over the medium term. At the same time, they emphasized the need to take into account country-specific circumstances and priorities to ensure that the Fund is able to respond quickly and flexibly to TA needs as they arise in individual countries. Directors noted that more work is needed to make RSNs fully operational, including as a tool for facilitating coordination with country authorities, other TA providers, and regional institutions.

Directors welcomed the ongoing efforts to integrate TA resource planning more fully into a medium-term framework, including by making TA more responsive to changes in priorities and resources. They stressed that in translating country and regional strategies into dollar budgets and aligning the TA planning cycle with the medium-term budget preparation cycle, short- and medium-term considerations will need to be balanced carefully. In this context, many Directors, while acknowledging that management has broad authority to make operational decisions on TA, stressed that the Board should have a greater role in TA strategic decisions, particularly TA policy design, priorities, and budget allocations, and the overall effectiveness and management of TA in general. There was broad support for triennial TA reviews that would provide the framework for periodic Board guidance and review, with the first such review taking place in 2011. A few Directors, however, suggested that the first review should be conducted within a year following the implementation of the reforms. Some Directors also called for periodic reports on TA activities, possibly in the context of the annual budget discussions.

Directors stressed that measuring performance of Fund TA is a critical aspect of institutional accountability and governance. They supported the move toward results-focused management of TA projects, whereby project success would be assessed against benchmarks on outputs and outcomes, in line with international best practice. Standardizing TA evaluations across departments using results-focused project management will allow for more systematic review and comparison, thereby fostering a culture of continuous improvement. Directors acknowledged that implementation of such a shift to assessing tangible outcomes will require time and resources, particularly to further refine output indicators. They underlined the importance of the careful implementation of the revisions to the Fund's Technical Assistance Information Management System (TAIMS) going forward, in order to increase the reliability and effectiveness of the system in providing meaningful underlying project data for evaluations, consistent with results-focused management. Greater standardization and transparency in the selection process for TA advisors are also desirable, particularly since there is a stepped up donor fund-raising effort.

Directors saw merit in making TA evaluation policies and practices more systematic. Integrating internally-financed TA into results-based management would help in this regard. Directors agreed that evaluations of donor-financed TA should continue to be done externally, but saw a need to develop a conceptual framework for evaluating Fund TA projects, drawing on international best practice. This would include self-assessments, evaluation ratings, and the participation of TA recipients and area departments. Directors also encouraged staff to explore the possibility of ex post evaluations of internally-financed TA being conducted by units that do not provide TA directly, but cautioned that the tradeoff between TA evaluation and delivery should be weighed carefully.

Directors stressed that refinement of the costing and billing of TA projects is a priority for ensuring an efficient allocation of resources. Better costing would also raise awareness among TA stakeholders of the absolute and relative costs of providing TA. Directors emphasized that transparent accounting of both internal and external resources will be a prerequisite for sound TA management, requiring significant changes in work and reporting practices.

Directors supported a more proactive approach to mobilizing new resources for TA, given pressures on Fund finances at the current juncture. At the same time, they cautioned that any financing options must take into account the unique nature of Fund TA, which not only contains elements of a public good benefiting the international economy, but also enhances the effectiveness of aid flows generally and allows the Fund to leverage its own resources. Directors pointed out that the availability of external financing should not drive the setting of priorities for Fund TA.

Directors took note of management's intention to strengthen the Fund's "country contributions" or charging policy for TA. Such a policy should not be seen as a revenue-generating measure. Rather, most Directors agreed that charging would help rationalize demand, enhance ownership of TA projects, and create incentives for TA recipients to use the Fund's services more efficiently, while at the same time increasing accountability for resource use within the Fund. Most Directors supported the idea of introducing differentiated charges for short-term TA to non-program countries according to the level of per capita country income. Many Directors were of the view that the charge imposed on low-income countries should be lower than that proposed by the staff, or be fully financed by donor resources, with some believing that these countries should continue to receive Fund TA free of charge. Some Directors suggested lowering the charging schedule for developing countries in general. A range of views were expressed on the desirability or feasibility of exempting from charges specific types of TA activities that could be said to benefit mainly the international community. Questions were also raised as to whether the same charging structure should not be applied to all countries, regardless of financing source, program status, and/or income level. All in all, Directors stressed that a strengthened charging scheme should be designed in a way that avoids overburdening the administrative capacity of member countries, and ensures that TA is not unduly rationed for those countries that need it most. Directors called for carefully monitoring and reviewing the experience with the charging regime, with the Fund standing ready to modify it if necessary. Directors supported an extensive outreach effort to explain the new system.

Directors concurred that raising external finance to help meet demand for Fund TA will be a key priority going forward. The Fund's coordination with donors has been positive, leading to intensified collaboration and increased effectiveness of both Fund TA and that of other providers. Some Directors emphasized that donors' receptiveness to provide financing would be enhanced with the Fund's approach of strengthening its comparative advantage and staying within its core mandate. Directors emphasized that the Fund should maintain its independence and strategic priorities in providing TA, and that highlighting the coherence of Fund TA with donors' development strategies would help make Fund TA more "marketable," and would be consistent with the international community's commitment to enhance harmonization among donors. In this context, most Directors welcomed the bundling of TA into topical trust funds for fund-raising purposes and an expansion of TA delivery through RTACs. Umbrella arrangements covering broad TA categories would help minimize administrative costs and replicate the successful governance structure of multidonor subaccounts. Some Directors would have favored a single consolidated fund for its greater flexibility in the allocation of resources for TA. Directors generally welcomed the expansion of delivery through RTACs, including through opening new centers, which ensures better traction in recipient countries and lower costs. They highlighted as a key advantage of the regional centers the more hands-on approach focused on capacity building.

Directors agreed that wider dissemination of Fund TA-related information will help reinforce, inter alia, coordination with donors and other TA providers. They took note of management's intention to streamline and strengthen Fund TA procedures for facilitating more systematic and effective dissemination of information, while safeguarding confidential information and the candidness of Fund advice. The planned publication of guidelines on the dissemination of Fund TA information will inform the Board and country authorities of new procedures.

As to next steps, Directors noted that the staff's work program in the period ahead will require some reallocation of resources and changes in the Fund's business model. This includes a fine-tuning of RSNs to better align TA with strategic priorities and the medium-term budget, the development of a conceptual framework for evaluating TA projects, and a review of TAIMS entries and performance planned for October 2008. The staff's work program will also encompass refining the costing and billing of TA projects, an outreach program, and, most important, the full design of a strengthened charging policy, the details of which will be reviewed by management in light of today's discussion. A number of Directors suggested that, in a follow-up meeting, the Board will need to determine whether a strengthened charging policy is to be adopted by the Board or by management. Guidelines on the dissemination of TA-related information will be issued by management and circulated to the Board for information before publishing on the Fund's external website. Staff will also start conversations with donors on the topical trust fund menu and on the opening of new RTACs.