Technical Assistance

IMF Country Contribution Policy for Capacity Building

Last Updated: 2009-05-29

Introduction

The IMF will implement a new policy for country contributions for capacity building (technical assistance and training). Reflecting the outcome of the Executive Board discussion, the proposal on the policy for country contributions for capacity building was modified. The supplement reflects the final version of the policy, which will become effective May 1, 2009 for training. The policy will become effective for TA in January 2010.

To facilitate transition to the new regime, we have put together frequently asked questions (FAQ) and also a calculator, which you might find helpful to get an idea of the approximate costs of Technical Assistance interventions.

Frequently Asked Questions

Country Contributions for Capacity Building

As part of broader efforts to enhance the impact of the Fund's capacity building services, the Executive Board on August 8, 2008, endorsed changes to the Fund's policy on country contributions for capacity building. This note provides information about the Fund’s new country contribution policy for capacity building.

• Why is the Fund now requiring country contributions for technical assistance and training?
• Is the Fund trying to generate revenue in light of budgetary constraints?
• Will the policy changes prevent access of poorer countries to TA and training?
• What is the rate of charge my country would have to pay?
• Are there Exemptions from the Country Contribution Policy?
• How is it determined which TA requests should be sent to HQ and which to the RTAC?
• Would all TA requests be met as long as countries are willing to pay?
• How will the country contribution policy be administered?
• What happens if a country fails to pay for TA or training?
• What is the cost base for country contributions?
• Can you provide an example of what a typical service would costs?
• How will dependent territories, nonmember countries and international organizations be charged?

Why is the Fund now requiring country contributions for technical assistance and training?

First, it is not new that the Fund requires country contributions for its capacity building activities. In fact, this practice has been in place since the beginning of the Fund's technical assistance (TA) program. Until now, under the country contributions framework, countries have been charged for Fund-financed long-term expert assignments according to a graduated scale based on the recipient country's per capita income. In some cases, recipient countries have voluntarily paid the full cost of long-term TA advisors. However, as Fund-financed TA delivery has gradually shifted away from long-term expert assignments to short-term and peripatetic expert assignments, there is a need to adapt the country contributions framework to the new pattern of delivery.

Second, the Fund wants to put its capacity building activities — which include TA and training — to a market test. A price mechanism will help to ensure that the supply of capacity-building services is responsive to the needs of recipients and aligned with their priorities. This, in turn, provides an important input into the Fund's prioritization of scarce resources, and enhances transparency and accountability in the provision of our TA and training. Willingness to pay also provides a signal of ownership, because recipients would pay only for TA and training if it is aligned with their priorities and would likely be more involved in setting the modalities of TA, thus resulting in a better fit. While the country contribution policy will apply only to Fund-financed capacity building, there is also a market test for externally financed capacity building—the willingness of donors to finance it. Moreover, many recipient countries also contribute to externally financed capacity building such as the Fund's RTACs—in one case by as much as 70 percent—and some of the regional training centers (RTCs).

Is the Fund trying to generate revenue in light of budgetary constraints?

Revenue generation is not the objective of this policy. It is estimated that the new country contribution policy would generate about US$7½ million in revenue (excluding collection costs), assuming no change in demand. This net revenue will be channeled back to increase the Fund's provision of capacity building services.

Will the policy changes prevent access of poorer countries to TA and training?

We do not expect this to happen:

• First, the incidence of the new framework of charges is relatively low for poorer countries. For low-income countries, only about 10 percent of current Fund TA would be subject to the country contribution policy and for lower middle income countries about 20 percent. About 25 percent of current training for these two country groups would be subject to contribution, but with a narrower cost base than that for TA.
• Second, the contribution rate is relatively low for poorer countries: 10 percent for low-income countries and 30 percent for lower-middle income countries.
• Third, the Fund is substantially stepping up its fundraising, which likely will benefit in particular low and lower middle income countries. Fundraising will be mostly for new Regional Technical Assistance Centers, a menu of topical trust funds, and Regional Training Centers.¹

Fund staff will closely monitor the impact of the new policy, and there will be a Board review of experience early in FY 2011.

What is the rate of charge my country would have to pay?

Charging rates will be differentiated by per-capita income (see below). To find the rate applicable to your country, please see the list in the appendix.

Text Table 1. Rate of charge
Income group 1/	Percent of cost base
Group I : Low income	10
Group II : Lower middle icome	30
Group III : Upper middle income	50
Group IV : High income	100
1/ The groups are based on GNI per capita as estimated by the World Bank and adjusted each year on july 1.

The income groups will be established once a year by the Managing Director on July 1, and will apply to TA requests approved and training for which invitations are sent after that date. The current groups, effective July 1, 2008, are defined as follows: low-income countries: US$935 or less; lower middle-income countries: US$936-3,705; upper middle-income countries: US$3,706-11,455; and high-income countries: US$11,456 or more.

Are there Exemptions from the Country Contribution Policy?

The framework will apply to TA provided by the Fund and training of officials taking place at Fund headquarters. This said, there are important exemptions, as follows:

1. Program Countries

The new policy exempts program countries with a financial arrangement from the Fund from the country contribution policy. The reason is that TA provides an important input into the success of programs by assisting countries strengthen their institutions and implement program conditionality, which—in turn—helps safeguard Fund financial resources. Specifically, the exception is for countries:

• under a Fund financial arrangement, namely a Stand-by Arrangement (SBA) — including arrangements treated as precautionary, or an arrangement under the Extended Fund Facility (EFF), the Poverty Reduction and Growth Facility (PRGF) or the Exogenous Shocks Facility (ESF) is exempt from the country contribution policy. The requested TA would have to be approved during the period of the arrangement and the exemption would apply even (i) if the program is off track; and/or (ii) the TA is delivered after the expiration of the arrangement.
• implementing a program supported by outright purchases, namely purchases under the Fund's policies on Emergency Post Conflict Assistance (EPCA) or an Emergency Assistance for Natural Disasters (ENDA). If no program period has been specified (as is sometimes the case), the Managing Director will determine the period during which the exemption will apply when the TA request is made.
• The exemption for program countries does not apply to nonfinancial programs, namely the Policy Support Instrument (PSI) or Staff Monitored Programs (SMP).
• The exemption from the country contribution policy of program countries does not apply to training, as headquarters training is not directed at short-term objectives and therefore not an important input into the success of a current program.

2. Specific Exempt TA Activities

• Financial Sector Assessment Programs (FSAPs) and Reports on the Observance of Standards and Codes (ROSCs) because they are considered as surveillance activities.
• Donor-financed TA, because it has already passed a market test (approved by a donor) and it would be too costly and time-consuming to administer (approval by both a donor and the recipient would take too much time). This includes the activities of the regional TA centers (RTACs) activities financed under existing bilateral and multilateral subaccounts and activities under the planned topical trust funds.
• TA interventions falling under a de minimis threshold of US$11,200,² regional TA seminars, workshops and conferences and cross participation in other international organizations' TA missions.

3. Specific Training Exemptions

• Training outside of headquarters as such training has substantial funding from training partners and other donors.
• Donor-financed training at headquarters.

How is it determined which TA requests should be sent to HQ and which to the RTAC?

TA requests can be accommodated by the RTAC if they fall within the work plan of the RTAC, which has been approved by the RTAC's Steering Committee.

Would all TA requests be met as long as countries are willing to pay?

No. TA requests have to be within the Fund's core expertise. In terms of prioritization, requests will be considered in the context of a Fund-wide TA strategy, which is reflected in Regional Strategy Notes. These notes, which are shared with the Executive Board, outline medium-term TA priorities for an entire area departments and for each country in the departments so that the Fund's TA is integrated with our surveillance and lending operations. Through a consultative and iterative process, the country-specific strategies in the notes are expected to reflect a joint agenda that countries as well as area and TA departments subscribe to. Discussions with country authorities would take place in the context of the Fund's regular surveillance or policy dialogue to help identify TA needs.

How will the country contribution policy be administered?

For TA: Fund staff will provide to the recipient a cost estimate indicating the total estimated cost, and the contribution to be paid by the recipient, based on the applicable rate of charge. The cost estimate is an upper limit, and cost overruns will be covered by the Fund. TA will be provided after the recipient has accepted the cost estimate. Following the completion of the TA, a statement of expense will be furnished to the recipient authorities and payment will be required within a period of time specified by management.

For training: Detailed information on the standard weekly participant fee and payment process will be provided on the IMF Institute's website and in the Annual Training Catalog. The required country contribution will also be specified in the invitation letters to prospective course participants and their sponsors. Upon completion of the training, the agency sponsoring the participant will receive payment instructions.

We are currently working out the operational details of the administration of the country contribution policy, including:

• the charging procedures, including the format of agreements with recipients; and
• the reporting and billing process

What happens if a country fails to pay for TA or training?

Where arrears in the payment of charges for capacity building services do occur, and only in those cases, further delivery of the type of service to which the arrears relate (i.e., TA or training) will require the clearance of the arrears, and the advance payment of charges for such services for a certain period of time. For example, arrears on the payment for TA would prevent delivery of new TA, but not of new training, and vice versa.

What is the cost base for country contributions?

For TA: The cost base will be all project-related direct costs: Costs will be determined on the basis of actual time spent by staff and experts on TA delivery, backstopping, management, and administrative support. Actual time of staff will be priced at the mid-point of the relevant salary grade (including benefits). All other costs, including for short-term and long-term experts, travel,³ and TA seminars and workshops, will be the actual expenses incurred by the Fund. (Overhead cost and the cost of interdepartmental review will be excluded from the cost base.)

For training: The cost base for billing purposes will be the average participant costs irrespective of where the participant comes from. Participant costs will consist of travel, per diems, accommodation, and other miscellaneous participant-related costs; staff costs, course delivery, and development costs will be excluded.

Can you provide an example of what a typical service would costs?

The full direct costs of some typical capacity building services are below (subject to the relevant rate of charge):

• A full-fledged diagnostic TA mission would cost US$80,000-100,000.
• A typical one-person mission would cost US$30,000-40,000.
• A one-year assignment of a long-term expert would cost US$300,000-400,000.
• Participation in a six-week course at headquarters would cost $7,800.

If you would like to automatically calculate costs on your country's rate of charge, please use the calculator.

How will dependent territories, nonmember countries and international organizations be charged?

Unless the TA and training activities fall under the exempt activities as described above:

• Dependent territories of member countries will be charged according to the rate of charge applied to the member.
• Nonmember countries and jurisdictions will be subject to contributions according to their GNI per capita.
• International organizations and regional supranational bodies (e.g., regional central banks) will be subject to contributions according to the level of the unweighted average GNI per capita of the organizations' member countries.

• Key Issue: Technical Assistance
• Factsheet: Technical Assistance
• Factsheet: Regional Technical Assistance and Training Centers
• Calculate the cost of the TA intervention