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Crisis Boosts Demand for IMF Expertise

Harvesting rice in Myanmar, one of the newest recipients of Japanese-financed technical assistance from the IMF (photo: Sam Diephuis, Corbis)

IMF-WORLD BANK ANNUAL MEETINGS

Crisis Boosts Demand for IMF Expertise

IMF Survey online

October 13, 2012

  • Support from Japan has enabled IMF to deliver more technical assistance
  • Closer monitoring of results will ensure that money is well spent
  • Listening to outside perspectives is key to improving effectiveness

As demand for its expertise rises in the current crisis period, the IMF is now keeping closer tabs on the impact of its capacity development work in order to make its technical assistance and training as effective as possible, IMF Deputy Managing Director Nemat Shafik said at a seminar.

Demand for IMF technical expertise in such areas as public financial management and financial sector supervision and regulation has been growing as countries have had to manage the impact of weak world growth, the crisis in Europe, and volatile oil and commodity prices.

Thanks to an increase in financial support for its technical assistance and training activities—which together comprise capacity development—the IMF has been able to expand its work in this area, Shafik told the gathering at IMF-World Bank Annual Meetings in Tokyo.

Because of supporters such as Japan—the largest contributor to IMF capacity building and the host of this year’s meetings—the IMF was able to deliver 17 percent more technical assistance in FY 2012 than in the previous year.

This closer partnership with donors has prompted the IMF to seek better ways of monitoring the impact of its capacity development work, Shafik said at the October 10 seminar, which drew an audience of close to 400.

“Donors want evidence that the Fund’s work is efficient, focused, and accountable,” she said.

Drivers of their own development

The objective of the IMF’s capacity development work is to help member countries sustain growth through effective economic policies and financial management, Shafik explained.

“Recipient countries are the main drivers of their own development, and that is as it should be,” Shafik said. Capacity development efforts must thus be country-specific and practical, based on local agendas and priorities, she added. “It’s all about empowerment,” noted Ma. Dolores Yuvienco, Assistant Governor of the Central Bank of the Philippines.

Masatsugu Asakawa, Senior Deputy Director-General in the Japanese Finance Ministry’s International Bureau, agreed. In his opening remarks, he said the IMF should continue to encourage strong recipient country ownership of its technical assistance—in assessing needs, in deciding what technical assistance to request, and in carrying out recommendations.

But as economies evolve, policymakers in recipient countries must continually increase their capacity to “digest” technical assistance—which is where training comes in, Asakawa observed. For this reason, he said, Japan fully supports the IMF’s recent decision to integrate its work on technical assistance and training in the new Institute for Capacity Development.

Achieving results

At the seminar, the panelists—including representatives from recipient countries, donor countries, and academia—exchanged views on how the IMF’s capacity building could achieve better and longer-lasting results. They provided the following recommendations, some of which reflect goals the IMF has already adopted.

• Focus more on the actual implementation of technical assistance. Samura W. M. Kamara, Sierra Leone’s Minister of Finance and Economic Development, observed that “fly in, fly out TA,” where the technical assistance expert spends a brief time in the country and produces a report but doesn’t stay to ensure the recommendations are properly implemented, is less than ideal.

• Make a clear diagnosis of the recipient institution’s baseline capacity so that technical assistance is pitched at the right level. Capacity in low-income countries is often low, so it is important to determine at the outset the level of understanding of people in the institution—or else the effort will be fruitless, observed Emilia Pires, Finance Minister of Timor-Leste. “You have to ensure that people are able to absorb the knowledge you’re trying to give.”

• Take advantage of synergies. If synergies—for example, between IMF capacity building and Japan’s own bilateral official development assistance—are exploited, the result will be greater than the sum of its parts, noted Takashi Miyahara, Director of the International Organization Division in the International Bureau of Japan’s Finance Ministry. This view was echoed by Yuba Raj Khatiwada, Governor of the Nepal Rastra Bank, who highlighted the need to better coordinate bilateral providers.

• Recognize the distinction between individual capacity and organizational capacity. “It is important to make the distinction between the individual’s own capacity and the organizational capability of an institution,” said Lant Pritchett, Professor of the Practice of International Development at Harvard University’s Kennedy School of Government, noting that a restrictive political or social environment can adversely affect the performance of individuals, however talented. A key aspect of capacity development is to boost the ability of public agencies to stand up to political pressures, he said.

• Use a “programmatic approach”—that is, a longer-term, multi-year perspective—to technical assistance. “Reforms take time,” said Miyahara. “That is why a long-term programmatic approach is more desirable than short-term projects.”

• Place more emphasis on regional capacity development. Carlo Cottarelli, Director of the IMF’s Fiscal Affairs Department, noted that certain issues—tax competition and incentives for investment, for example—are better addressed at a regional level than at a country level. The IMF is already heading in this direction, Asakawa noted, citing the opening of a new office in Bangkok to support IMF technical assistance in that region.

• Put in place a system of “results-based management.” Several speakers stressed the need to show tangible results so that donor governments can defend their support of IMF technical assistance to taxpayers. The challenge, said Shafik, is to strike the right balance between the slow process of achieving lasting results and the reality of having to demonstrate short-term deliverables.

After the panelists weighed in, Sharmini Coorey, Director of the IMF’s Institute for Capacity Development, pointed out why capacity development is as essential to the IMF’s mission as its other core activities, surveillance and lending.

“We provide resources to countries that have balance of payments problems. But we also help these countries overcome their problems in a sustainable way by building capacity,” Coorey said. In that way, capacity development strongly complements the institution’s other work.

All panelists from recipient countries thanked Japan for its financial support.


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