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IMF Outlines New Vision for Helping Build Capacity

Senegalese businesswoman: Demand for technical assistance in such emerging areas as mobile phone banking is rising (photo: Corbis)

CAPACITY BUILDING

IMF Outlines New Vision for Helping Build Capacity

IMF Survey online

May 4, 2012

  • IMF is developing a new strategic approach to capacity building
  • Rising demand for capacity building calls for setting priorities
  • Results-based management helps IMF measure impact of technical assistance

The IMF is changing the way it provides technical assistance and training to member countries to make it more focused, integrated, nimble, and effective, IMF Deputy Managing Director Nemat Shafik said.

Speaking to a group of donors that provide funding for capacity building, Shafik noted that the economic difficulties currently experienced in many parts of the world have generated strong demand for IMF technical assistance and training. Thanks to generous bilateral support and multilateral donor trust funds, which finance a growing share of this core IMF activity, the institution is able to meet the demand.

But as work in this area expands, the IMF has found it necessary to develop a new, more coherent approach to capacity building in order to increase its effectiveness.

“Given where we are, it is time to have a more strategic discussion with all of our donor partners,” Shafik told the April 23 gathering. “I hope this is the start of a much more ambitious partnership between us to build capacity on macroeconomic issues.”

The inaugural meeting of the Donor Consultative Group, held during the IMF-World Bank Spring Meetings in Washington, brought together close to 50 representatives of some 30 donor agencies and other development partners. Some had been supporting IMF technical assistance and training for a long time; others were just learning about how they can help other countries by supporting IMF capacity building.

Exploiting synergies

As part of the revamped strategy, the IMF has merged its technical assistance and training activities to form the Institute for Capacity Development. The new department, launched May 1, brings together the former IMF Institute and the Office of Technical Assistance Management.

“This integration of the two branches of the IMF’s capacity building will allow the institution to exploit synergies in these areas,” explained Sharmini Coorey, who heads the new department. A key role of the new department would be to further define and update the Fund’s strategy on capacity building and conduct periodic reviews to the IMF’s Executive Board.

The merger of technical assistance and training will also enhance the effectiveness of the IMF’s large global capacity building network.

The seven Regional Training Centers and training programs in Austria, Brazil, China, India, Kuwait, Singapore, and Tunisia, which supplement headquarters-based training, allow the IMF to adapt its training to local needs. The IMF also has eight Regional Technical Assistance Centers—four in Africa and the others in the Caribbean, Latin America, the Middle East, and the Pacific. An additional center in West Africa is expected to open early next year.

Over time, the aim is that these centers will provide both technical assistance and training on macroeconomic issues, rather than specializing in one or the other, Coorey said.

A “fine” strategy

The rise in demand for IMF technical assistance comes from both traditional clients—who are asking for more help with complex, cutting-edge reforms—and new ones, such as more advanced economies whose shortcomings in financial and fiscal management were exposed by the crisis.

“The demand for technical assistance is massive, but the IMF is small,” said Adrienne Cheasty, Deputy Director of the IMF’s Fiscal Affairs Department. “So we need to draw boundaries and set priorities.”

A recent internal IMF paper described the IMF’s vision for capacity building as FINE—focused, integrated, nimble, and effective. The IMF should stay focused on topics with a clear macroeconomic impact and avoid duplicating the efforts of other technical assistance providers. Capacity building should be integrated with the IMF’s surveillance and lending work. And it also needs to be nimble, Cheasty said, noting that a key strength of the IMF is its ability to respond swiftly to crises in member countries.

Finally, IMF capacity building must be effective. “The membership must be able to trust that Fund technical assistance will always provide reliable, modern, sound, cutting-edge advice,” Cheasty said.

Crisis impact

The global economic crisis has highlighted the need for capacity building in low-income countries, said Christian Mumssen, Assistant Director of the IMF’s Strategy, Policy, and Review Department. “While the global recovery weakened in 2011, prospects appear to have improved in early 2012,” said Hugh Bredenkamp, Deputy Director of the IMF’s Strategy, Policy, and Review Department.

But with more limited buffers and constrained aid envelopes, poor countries are less prepared to deal with shocks now than they were prior to the crisis, Mumssen observed. In the event of a shock, governments will have to use some of these buffers to soften the economic and social impact on the poorest segments of the population. This is why now, more than ever, technical assistance is vital to help low-income countries bolster their domestic revenue base, spend public money more efficiently, and build the capacity to manage debt.

In Africa and the Middle East, which together receive close to 50 percent of the IMF’s technical assistance, demand for capacity building far exceeds supply. Establishing priorities is key, said Antoinette Sayeh, Director of the IMF’s African Department. There is a critical need for knowledge-sharing in the area of natural resource wealth management; mobile phone banking and monetary unions are also generating much interest, she said.

“There has to be a focus on building institutions,” Sayeh stressed, adding that the IMF’s regional technical assistance centers in Africa had been effective in tailoring technical assistance to realities on the ground.

In the Middle East, capacity building should address the root causes of the uprisings that spread across several Arab countries in 2011, suggested Masood Ahmed, Director of the IMF’s Middle East and Central Asia Department.

“Going forward, the capacity building strategy for the Middle East will focus on fostering inclusive growth,” he said, “with emphasis on generating jobs, making the economies more competitive, building modern social protection systems, improving governance, and restoring fiscal sustainability.”

Showing results

Representatives of donor organizations welcomed the IMF’s recent progress toward introducing a results-based management framework for planning and monitoring the effectiveness of capacity-building activities. Monica Rubiolo of Switzerland’s State Secretariat for Economic Affairs talked about why she considers results-based management important.

“We talk about reaching the Millennium Development Goals and reducing poverty, but if we really mean this seriously, we have to become more focused and effective and make sure that resources are being used in the right way,” she said. She added that establishing a good results-based management framework helps identify which approaches are likely to achieve the intended results, a theme echoed by Rachel Turner from the UK’s Department for International Development and Paul Samson from the Canadian International Development Agency.

However, all acknowledged it is easier to illustrate progress on more tangible infrastructure projects than to show the development impact of macroeconomic capacity building.

“We are very grateful for the donor support for IMF capacity building. More than $100 million has been externally financed in fiscal year 2012,” said Roberto Rosales, Director of the Office of Technical Assistance Management. But he noted that funding needs remain large for some existing vehicles—in particular, the Middle East Regional Technical Assistance Center—as well as new initiatives.

Udaibir Das, Assistant Director in the IMF’s Monetary and Capital Markets Department, explained one such initiative: a planned multi-donor trust fund to help countries devise sustainable debt strategies.

“This trust fund will help countries to increase their analytical capacity to better assess, monitor, and manage risk associated with public debt,” Das said. “It will also help improve the capacity to formulate and implement funding strategies that are consistent with maintaining debt sustainability over the medium term and advance the deepening of domestic debt markets.”


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