## IMPROVING THE MANAGEMENT OF NATURAL RESOURCES ## Source details **Canonical URL:** [IMPROVING THE MANAGEMENT OF NATURAL RESOURCES](https://www.imf.org/-/media/files/capacity-developement/mnrw/mnrw_tf_phase2_programdocument.pdf) ## Other formats - [Markdown version](/-/media/files/capacity-developement/mnrw/mnrw_tf_phase2_programdocument.pdf.md) - [Structured JSON version](/-/media/files/capacity-developement/mnrw/mnrw_tf_phase2_programdocument.pdf.json) --- ### Background - The Managing Natural Resource Wealth Trust Fund (MNRW-TF) was established in 2011 by the International Monetary Fund (IMF) to help countries in managing natural resource wealth. - The MNRW-TF leverages IMF expertise in integrating policy, administrative and legislative dimensions, and its standard-setting work in fiscal transparency. - Drivers of poor outcomes in resource-rich developing countries include weak national administrations, defective laws and regulations, inadequate policies, and limited capacity to deal with international extractive industries (EI) companies, producing risks of governments not receiving fair compensation and suboptimal spending of resource revenues. - Developments since 2011—most notably the fall in commodity prices—have intensified demand for technical assistance (TA): commodity price volatility has pressured exchange rate and macroprudential policies, increased urgency to diversify the revenue base, and heightened interest in energy subsidy reform and climate-change-related implications for fossil-fuel revenues. - Phase 1 funding to April 2017 amounted to US$24.7 million. Current Phase 1 partners include the European Union and the governments of Australia, Kuwait, Netherlands, Norway, Oman, and Switzerland. ### Phase 1 Achievements and Key Lessons - Scope and coverage (May 2011–February 2016): - Steering Committee approved 43 projects in 22 countries, 8 research projects and 5 conferences/workshops. - Total eligible countries: 50; Project countries: 22. - Regional eligible / project breakdown: - Africa: Number of Eligible Countries 24; Percentage of Eligible Countries 48; Number of Project Countries 13; Percentage of Project Countries 59 - Asia-Pacific: Number of Eligible Countries 11; Percentage of Eligible Countries 22; Number of Project Countries 5; Percentage of Project Countries 23 - Europe: Number of Eligible Countries 1; Percentage of Eligible Countries 2; Number of Project Countries 0; Percentage of Project Countries 0 - Middle East and Central Asia: Number of Eligible Countries 9; Percentage of Eligible Countries 18; Number of Project Countries 2; Percentage of Project Countries 9 - Latin America and Caribbean: Number of Eligible Countries 5; Percentage of Eligible Countries 10; Number of Project Countries 2; Percentage of Project Countries 9 - Most projects concentrated on EI fiscal regime design and revenue management; fewer projects on asset and liability management and statistics than envisaged. - Concrete outputs and results (Results to February 2016): - Nine countries reformed (either enacted or introduced to the governing authority) laws relating to EI fiscal regimes based on IMF advice. - Capacity to use the Fiscal Analysis for Resource Industries (FARI) model increased in 12 countries; training typically involved an average of 20 participants per workshop. - Five countries formed special staff or units within revenue administrations to administer large EI companies. - New or revised public financial management frameworks are being implemented in 11 countries. - One country reformed the governance structure and investment management of its Sovereign Wealth Fund (SWF). - Three countries improved reporting of natural resource revenues in the national accounts. - Four regional conferences on EI fiscal issues held with between 60 and 90 participants each; a Washington, DC conference produced papers used as the basis for a book on International Tax Issues for the Extractives Industries to be released in 2016. - Two handbooks released: Administering Fiscal Regimes for Extractive Industries: A Handbook; and Sovereign Asset-Liability Management Guidance for Resource-rich Countries. - A public version of the FARI model and accompanying Technical Notes and Manual were developed and released. - A new template for collecting data on government revenues from natural resources was developed and field-tested; Extractive Industries Transparency Initiative (EITI) announced collaboration with the IMF to use the template. - A draft guide on specific compilation issues for natural resources in macroeconomic statistics was completed and to be released online for comment. - Monitoring and evaluation: - A Results Based Management (RBM) methodology was used; midterm evaluation (to April 2014) rated projects very good on relevance and good on other OECD-DAC criteria. - Of 37 active projects at October 2015: 38 percent assessed as “largely” or “fully achieved”; 49 percent assessed as “partially achieved”; 14 percent assessed as “not achieved”. - Key implementation risks and lessons: - Project discontinuation often due to lack of sustained commitment by authorities, changes in key officials, or weak commitment in key ministries. - Need for greater country ownership, strengthened project design, continuity of engagement, and improved project budgeting. ### Midterm Evaluation Recommendations (summarized) - Strengthen project design, planning and TA delivery by: - Conducting scoping missions; setting focused and realistic objectives; defining outcomes, time frames, milestones and road maps; performing more in-depth risk analysis; delivering more hands-on TA; and aiming for continuity of engagement and capacity development. - Increase participation of IMF Regional Technical Assistance Centers (RTACs) and regional advisors. - Improve synergies and coordination among Fiscal Affairs Department (FAD) modules and with the IMF’s Legal Department. - Enhance the use of research projects and workshops; refine RBM by disaggregating outcomes and objectives and using one set of scores for bottom-up approaches. - Clarify process for dealing with inactive projects; enhance reporting efficiency to the Steering Committee; appoint a full-time supra-manager in FAD financed by the TF to enhance RBM standardization. ### MNRW-TF PHASE 2 (MNRW2) STRATEGY AND PROPOSAL ### Strategic rationale and funding - Vision: Build and expand on Phase 1 successes with focused support to meet intensified TA needs caused by commodity price slump, price volatility, and climate-change considerations. - Core changes in Phase 2: - Expanded scope to emphasize international tax policy and administration issues (base erosion and profit shifting by multinational companies) and TA on energy subsidy reform. - More flexible delivery modes, including intensive missions, in-country extended expert assignments, and regional long-term advisors. - Strengthened project design and planning with greater upfront engagement (scoping missions and memorandums of partnership). - Consolidation and continued use of the FARI model as a TA-enhancing tool. - Funding and time horizon: - The TF will require funding of around $30 million, covering the six-year period from mid-2016 to mid-2022, to enable deeper targeted TA engagement, some expansion of country coverage, and addressing emerging issues. ### Objectives and expected benefits - Objective: Build economic policy and administrative capacities to enable low-income countries (LICs) and lower-middle-income countries (LMICs) to derive the maximum benefit from their oil, gas, and mineral resources to facilitate economic development and poverty reduction goals. - Expected benefits for resource-rich countries: - Maximization of revenues over the life-cycle of extractive projects via balanced fiscal regimes and effective administration. - More effective spending of resource revenues to support sustainable development goals; use of budgetary mechanisms tailored to volatile and finite revenue streams. - Better governance and accountability through transparency. - More investment due to attractive, stable investment climates promoting socially responsible company behavior. - Smoother macroeconomic impact from commodity price swings to support stable growth and financial stability. - Creation of an information base on economic impacts to inform strategic policy decisions. - Expected benefits for global community, partners, and IMF: - Foster development in LICs and LMICs; enlarge secure global supply of energy and minerals; improve investment climates; provide partners with coordination mechanisms and visibility; and strengthen IMF coordination and TA delivery through a programmatic, results-oriented approach. ### Monitoring, evaluation, and results framework - Use of a strategic log frame fully consistent with the IMF’s enhanced RBM framework. - RBM system requires standardized catalog of TA project ‘objectives’ and ‘outcomes’, defined project milestones, and periodic scoring/reporting. - Independent midterm evaluation planned in FY2020. - Project-specific RBM progress reports included in annual and midyear reports; strategic log frame results included in annual reports only. ### Programmatic modular approach (five modules) - Key features: 1. Five modules cover topics along the natural resource “value chain” aligned with IMF expertise. 2. Modules defined around outcomes; countries receive an appropriate subset based on priority and achievability. 3. One module typically involves multiple missions and spans several years. 4. Modules are interconnected but can be undertaken separately. 5. Preference for countries undertaking several modules; single modules used to fill capacity gaps. #### Module 1 – EI Fiscal Regimes, Licensing and Contracting - Characteristics of a good EI fiscal regime: neutral; reserve major portion of possible resource rents for government; assign risk appropriately; progressive; flexible/adaptable; stable and credible. - TA scope: production sharing contracts, tax and royalty regimes, rent taxes, state participation, other taxes, licensing frameworks, transparency, fiscal decentralization; possible legal drafting by IMF Legal Department. - Limitations: TF will not directly support contract negotiations or provide direct TA on local content (implications considered where relevant). - Greater emphasis on international tax policy and administration (transfer pricing, permanent establishment rules, indirect transfers, tax treaty issues) and alignment with OECD-led BEPS developments. - TA supported by FARI modeling. #### Module 2 – EI Revenue Administration - Challenges: fragmented revenue collection, weak administrative capacity, incomplete revenue stream collection, weaknesses in fiscal and cost audits. - Recommended step: establishment of a large taxpayer office (LTO) in tax administration to collect corporate income tax and coordinate administration. - TA will draw on IMF tax and customs expertise with greater emphasis on international tax issues. #### Module 3 – EI Macro-Fiscal, PFM, and Expenditure Policy - Key macro-policy choices: split of revenues between savings and consumption; allocation of savings between financial assets abroad and domestic investment in physical and human capital. - Preference for medium-term budget frameworks based on conservative resource revenue projections and consistent with long-term fiscal sustainability. - TA activities: MTFF development, rules for allocation of resource revenues, effective public financial management systems for EI revenues. - Scope exclusions/inclusions: MNRW2 will not cover SWF asset and liability management issues but will cover SWFs under public financial management (e.g., fiscal rules on allocation). - Expansion includes energy subsidy reform; TA on carbon taxation is outside scope. - Diagnostic tool: FARI framework for fiscal regime design, revenue forecasting, quantifying fiscal rules, and integrating EI into macro frameworks. #### Module 4 – Exchange Rate Regimes and Macroprudential Policies - Challenges: commodity price volatility implications for countries with pegged exchange rate regimes, underdeveloped monetary/FX markets and financial regulation. - Financial stability implications: need for macroprudential tools to counter commodity price volatility; leaning against exchange rate and credit risks; heightened microprudential oversight. - TA objectives: assess exchange rate regime options, manage transitions to flexibility, strengthen regimes where increased flexibility is not warranted, use macroprudential policies to bolster stability, and coordinate fiscal adjustment with exchange rate and monetary policies. - Note: Building up FX reserves can indirectly worsen fiscal balance by reducing central bank profit remittances and increasing local currency cost of imports for infrastructure. #### Module 5 – Statistics for Managing Natural Resources - Element 1: Develop capacity to implement revenue template within EITI’s summary data template (SDT); pilot testing and workshop collaboration with EITI; link to Fiscal Transparency Code and IMF course on “Macroeconomic Management in Resource-Rich Countries”; support monitoring of UN Sustainable Development Goal 17 on revenue mobilization. - Element 2: Develop a Guide to Analyze Natural Resources in the National Accounts and pilot testing to provide guidelines for dissemination of analytical information on changes in resource volumes, values and prices and to aid national accounts compilation. ### Country selection, ownership, and project design - Focus: resource-rich LICs and LMICs. - Eligibility criteria include: - LICs and LMICs receiving large revenue flows from natural resources—countries with revenues from natural resources on average at least 25 percent of government revenues (or 25 percent of export earnings), using 2000-11 as the reference period. - “Prospective” natural resource producers based on ongoing exploration, including EITI Candidate or Compliant countries. - Country assistance requires SC approval; limited circumstances allow SC endorsement for countries not meeting criteria where prospective abundance, regional effectiveness, or demonstrated commitment exists. - Selection guidance emphasizes country ownership (public advocacy, commitment, civil society engagement, EITI commitment), relevancy and urgency, domestic implementation capacity, and complementarities with existing projects. - Strengthened project design and planning: greater upfront engagement, scoping missions, Memorandum of Partnership (MOP) specifying timelines, milestones, staffing, facilities, and conditions for suspension/termination; project managers to proactively address implementation risks. ### Memorandum of Partnership (Key elements) - Project description: scope, objectives, outcomes, indicators, timelines; basis for project RBM. - IMF project participation: types and timing of missions; expected outputs; TF funds allocated. - Other partners’ inputs: complementary donor inputs and coordination to avoid duplication. - Country commitment: senior official as main counterpart; liaison person; government provision of necessary data; possible steering group; assistance for long-term experts; regular reporting by government on reform progress. - Termination/suspension conditions: insufficient reform progress (e.g., no substantial action on recommendations in the previous 12 months) or external factors such as security issues. ### Research, FARI model, outreach and training - Research: continue IMF analytical work to identify best practices and distill lessons; research proposals must discuss how results inform capacity development; results to be disseminated via publications and workshops. - FARI: - FARI is a FAD-developed modeling framework to analyze sharing of project cash flows between investors and government under specified fiscal regimes and assumptions. - Analytical routines include Average Effective Tax Rate, Marginal Effective Tax Rate, progressivity, and stochastic analysis. - Phase 2 actions: refine FARI, support use in fiscal regime design and revenue forecasting, and develop FARI as a revenue administration comparison tool. - Public release milestone: FARI methodology publicly released in October 2015. - Outreach and training: - Continued horizontal and peer learning via conferences and in-country workshops. - Support for online and face-to-face courses: Macroeconomic Management in Resource-rich Countries; Energy Subsidy Reform (TF supports ongoing provision). - Online tools to scale knowledge transfer and prepare officials for TA delivery or follow-up training. - Increased training component to promote participation of women; level of women participation included as an indicator in the MNRW2 log frame. ### Integration and coordination - Integration with IMF surveillance and lending: - MNRW2 CD engagements may provide inputs for structural benchmarks in IMF lending programs or policy recommendations under Article IV consultations. - Area departments’ surveillance and lending teams help identify and prioritize CD and monitor implementation. - Full integration with other IMF CD activities and RTACs: - TF work overseen by the interdepartmental Committee on Capacity Building (CCB). - HQ-initiated TA addresses complex diagnostic and strategic issues; RTAC resident advisors and short-term experts provide implementation support. - RTACs mostly involved in modules 2 and 3. - New RBM to deliver common reporting platform for MNRW-supported TA and RTAC-delivered TA. - Coordination with other development partners: - Close collaboration with World Bank, EITI, Norway Oil for Development, SECO, Australia, UN, EC, UK DFID, and OECD on international tax issues. - With SC assent, World Bank and EITI invited as SC observers to avoid duplication and exploit synergies. - IMF participates in joint working group on international tax issues with OECD, World Bank, and UN and contributes to development of a “tax platform.” ### Gender considerations - MNRW2 CD will incorporate IMF’s broader work on gender (labor force participation, inequality, economic opportunities). - TA will ensure government policies reviewed do not have gender bias. - Training component used to enhance capacity development of women; participation of women tracked in log frame. ### GOVERNANCE, OPERATIONS, FINANCING, AND RESULTS ### Governance and operational arrangements - Multi-partner TF with a Steering Committee (SC) composed of partner representatives and IMF staff; chaired by a partner representative (possible rotation); IMF staff serve as Secretariat. - SC responsibilities include strategic guidance, setting policies/priorities, endorsing annual work plans, reviewing progress, and coordinating TA among TF, partners and stakeholders. - Meetings held annually (additional as needed); an annual (or biannual if requested) report on TF activities and project results prepared; a version will be made public. - Dissemination policies guided by IMF transparency policies: TA reports may be shared with SC members with recipient consent on a no-objection basis; IMF encourages countries to publish TA reports. - Project-level RBM: each project will have a comprehensive log frame consistent with IMF’s RBM System; TF-level strategic log frame will set top-down goals and modular indicators aggregated from project results. - Quality control: screening/selection of experts, regular supervision/backstopping from IMF headquarters, regular self-assessments against project objectives. - Partner access and reporting: project status and financial information accessible via the IMF partner portal; semi-annual SC meetings present project and portfolio progress summaries. - Independent external evaluation after no fewer than three years; expected in FY2020. ### Project management and visibility - Small dedicated TF team proposed: - One full-time program manager. - One research assistant. - One administrative assistant. - Outreach to intensify partner visibility and public profile via newsletters, conferences/press releases, publications, and systematic partner recognition in outreach activities. ### Financing and illustrative budget highlights - Estimated total cost of MNRW TA under the TF for an initial five-year phase is US$30 million; financing sought in advance for the entire five-year period to provide stability and continuity. - Illustrative budget (Table 2, US $’000) subtotals and totals: - TA Delivery total: 16,896 - Targeted TA total: 16,216 - Scoping missions total: 680 - Research and Analytical Tools total: 2,035 - Research Projects total: 1,053 - FARI Country STX Follow-up Visits total: 963 - Workshops and Training total: 6,650 - Workshops & Conferences total: 1,615 - Training total: 5,040 - Program Management total: 2,455 - Staff Costs* total: 2,070 - Independent Evaluation: 200 - Steering Committee total: 185 - Sub-total across FY17–FY22: 28,037 - TF Management Fee (7%) total: 1,960 - Total across FY17–FY22: 30,000 - FY-by-FY TA Delivery line items (examples shown in Table 2): - FY17 TA Delivery 670 - FY18 TA Delivery 3,120 - FY19 TA Delivery 3,200 - FY20 TA Delivery 3,270 - FY21 TA Delivery 3,350 - FY22 TA Delivery 3,286 - Illustrative budget breakdown by category (percent of total): - TA Delivery 60% - Research & Analytical Tools 7% - Workshops & Conferences 6% - Training 18% - Program Management and Administration 9% - Illustrative TA Delivery budget breakdown by module (percent of total TA Delivery Budget): - 1. EI Fiscal Regimes 24% - 2. Revenue Administration 29% - 3. Public Financial Management 18% - 4. Exchange Rate and Macroprudential Policies 12% - 5. Statistics 18% - Administrative arrangements: - Partner contributions made into the multi-partner MNRW subaccount under the IMF’s Framework Administered Account for Selected Fund Activities (“SFA Instrument”); all funds commingled. - Financial arrangements governed by a Letter of Understanding and subject to Subaccount and SFA terms and conditions. - Procurement above threshold (currently US$50,000) requires competitive bidding with at least three bids. - IMF charges project-related costs on the basis of actual cost plus a trust fund management fee of 7 percent. - Partners receive reports on subaccount expenditures and commitments; subaccount operations subject to annual audits. ### Logical framework: strategic objectives, targets and verifiable indicators (selected highlights) - Strategic objective: Assist low and lower-middle income countries to derive maximum benefit from their oil, gas and mineral resources. - Selected Impact indicators: - Impact 1: Increased resource revenues for low and low-middle income countries (examples: Average resource revenues as a share of GDP increases in MNRW-TF countries; Average potential government take for a standard resource revenue project in MNRW-TF countries (WoRLD 1/; Project managers; FARI Model)). - Impact 2: Better management of EI revenues (examples: majority implement reforms such as medium term expenditure estimates; coverage/comparability of in-year budget reports; budget classification; information on revenue collections; consolidation of cash balances; reporting of contingent liabilities and fiscal risks). - Impact 3: Effective exchange rate and macroprudential policies (examples: exchange rate that responds to supply/demand changes; macroprudential policy body with legal framework). - Impact 4: Improved statistics for natural resources (examples: publishing EI revenue data in line with IMF template; publishing resource and non-resource GDP separately). - Selected program results targets (preserved numeric targets and wording): - OBJECTIVE 1: IMPROVED EI FISCAL REGIMES - Result 1.1: 10 participating countries have amended their fiscal regimes broadly in line with IMF advice. - OBJECTIVE 2: ENHANCED EI REVENUE ADMINISTRATION AND COLLECTION - Result 2.1: 8 participating countries with a clear organizational structure along functional lines and/or taxpayer segments established and operating for the EI sector. - Result 2.2: 8 participating countries that have compliance risks identified, assessed, ranked, and quantified for the EI sector; 8 participating countries that have compliance improvement program in place. - OBJECTIVE 3: BETTER MANAGEMENT OF EI REVENUES - Result 3.1: 10 participating countries that have revised or introduced a credible medium-term fiscal framework integrated with the budget that includes EI revenues; 10 participating countries with better controls over EI revenues and expenditure commitments and payments. - Result 3.2: 10 participating countries that have budget classifications and charts of accounts incorporating specific EI details in line with international accounting standards. - Result 3.3: The EI revenues and expenditures are progressively conducted through a treasury single account consistent with international best practices in 10 participating countries; 10 countries that disclose and manage contingent liabilities and other fiscal risks related to EI operations more comprehensively. - OBJECTIVE 4: EFFECTIVE EXCHANGE RATE AND MACROPRUDENTIAL POLICIES - Result 4.1: 4 participating countries in which the exchange rate fluctuates with supply and demand and have appropriate instruments and procedures for FX intervention; transition plans appropriately sequenced and prudential regulations developed. - Result 4.2: 4 participating countries in which legislation is enacted to establish an institutional framework granting mandate and powers over macroprudential tools; systemic risk monitoring frameworks established and implemented. - OBJECTIVE 5: IMPROVED STATISTICS FOR NATURAL RESOURCES - Result 5.1: Participating countries have charts of accounts and budget classifications providing detail necessary to complete the EITI summary data template in line with GFSM 2014 recommendations. - Result 5.2: Pilot countries have developed capacity for compiling national accounts covering natural resource industries; a workshop conducted with EITI counterparts to support monitoring of UN Sustainable Development Goal 17 on strengthening domestic resource mobilization. - OBJECTIVE 6: TOPICAL RESEARCH AND ANALYTICAL WORK - Result 6.1: 3 publications are produced setting out good or best practices and lessons learned related to managing natural resource wealth. - OBJECTIVE 7: CAPACITY DEVELOPMENT THROUGH LEARNING OPPORTUNITIES - Result 7.1: Number of participants from MNRW eligible countries in online or face-to-face IMF courses; number of women, and percentage of participants who are women. - Result 7.2: At least one regional/international conference or workshop per year for MNRW eligible countries. ### Phase 1 case studies (selected outcomes) - Mauritania — Module 1 (2011–2014): - A withholding tax at 15 percent levied in 2013 on transactions involving non-residents limited profit shifting, raising revenue equivalent to 0.33 percent of GDP in 2013. - March 2014 parliamentary approval changed the mining code to make mining companies subject to standard VAT (a zero rate for exporters), removing VAT exemptions. - Tax revenue performance (excluding natural resources) improved by around 13 percent between 2010 and 2015. - Project provided a forecasting model of resource revenue; key enabler was strong political support. - Guinea — Module 1 (2012–2015): - Complete review, redrafting, and adoption by National Assembly of Mining Code fiscal provisions, plus redrafted Fiscal Regulations and Model Agreement; VAT regime for mining companies strengthened. - Public financial management project produced initial results including strategy for fiscal forecasting and budgeting for expected mining resource surge, framework to strengthen fiscal governance and transparency, and implementation of VAT refund system for the mining sector. - Key enablers: strong ministerial and presidential support; main challenge: weak capacity. - Kenya — Module 1 (2013–2016): - Reforms include a schedule in a new model production sharing contract, a revised income tax law for extractive industries now in force, and a draft Mining Bill incorporating project suggestions. - FARI model supported reform development and capacity building via workshops. - Resulting demand for further MNRW-TF engagement in revenue management and revenue administration. - Mongolia — Module 3 (ongoing since 2013): - Expansion of medium-term fiscal framework (MTFF) scope and sophistication; cash flow forecasting models developed; support in drafting a sovereign wealth fund law leading in early 2016 to parliamentary agreement to create such a fund. - Ministry of Finance strongly supported reforms; main headwind included political pressures to increase spending. *Source: MNRW-TF program document (Phase 1 achievements and Phase 2 proposal).* ### 1. IMPROVING THE MANAGEMENT OF NATURAL RESOURCES ________________________________ 7 ### 1. IMPROVING THE MANAGEMENT OF NATURAL RESOURCES ### A. Background - The Managing Natural Resource Wealth Trust Fund (MNRW-TF) was established in 2011 by the International Monetary Fund (IMF) to help countries in managing natural resource wealth. - The MNRW-TF leverages the IMF’s expertise in integrating policy, administrative and legislative dimensions, and its standard-setting work in fiscal transparency. - Many resource-rich developing countries fail to realize the full development potential of their natural resources, particularly those with significant extractive industries (EI)—oil, gas, and mineral resources—giving rise to the “resource curse.” - Drivers of poor outcomes include weak national administrations, defective laws and regulations, inadequate policies, and limited capacity to deal with international EI companies; poor governance can lead to governments not receiving fair compensation and to suboptimal spending of resource revenues. - The recent Addis Tax Initiative (ATI) emphasized the critical need for revenue mobilization (RM) and extensive technical assistance (TA) for low-income countries (LICs) to finance the Post-2015 Development Agenda. - Developments since 2011—most notably the fall in commodity prices—have intensified the need for TA: commodity price volatility has pressured exchange rate and macroprudential policies, increased urgency to diversify the revenue base, and heightened interest in energy subsidy reform and climate-change-related implications for fossil-fuel revenues. - Phase 1 of the TF was extended until April 2017; the amount contributed to Phase 1 is US$24.7 million. Current partners to the TF are the European Union and the governments of Australia, Kuwait, Netherlands, Norway, Oman, and Switzerland. ### B. MNRW-TF Phase 1 Achievements and Lessons - Scope and coverage: - From commencement in May 2011 to February 2016 the Steering Committee (SC) approved 43 projects in 22 countries, 8 research projects and 5 conferences/workshops. - Table of eligibility and participation: - Total eligible countries: 50 - Project countries: 22 - Regional breakdown (eligible / project): - Africa: Number of Eligible Countries 24; Percentage of Eligible Countries 48; Number of Project Countries 13; Percentage of Project Countries 59 - Asia-Pacific: Number of Eligible Countries 11; Percentage of Eligible Countries 22; Number of Project Countries 5; Percentage of Project Countries 23 - Europe: Number of Eligible Countries 1; Percentage of Eligible Countries 2; Number of Project Countries 0; Percentage of Project Countries 0 - Middle East and Central Asia: Number of Eligible Countries 9; Percentage of Eligible Countries 18; Number of Project Countries 2; Percentage of Project Countries 9 - Latin America and Caribbean: Number of Eligible Countries 5; Percentage of Eligible Countries 10; Number of Project Countries 2; Percentage of Project Countries 9 - Most projects concentrated on EI fiscal regime design and revenue management; fewer projects on asset and liability management and statistics than envisaged. - Concrete outputs and results (Results to February 2016): - Nine countries reformed (either enacted or introduced to the governing authority) laws relating to EI fiscal regimes based on IMF advice. - Capacity to use the IMF’s Fiscal Analysis for Resource Industries (FARI) model increased in 12 countries; training typically involved an average of 20 participants per workshop. - Five countries formed special staff or units within revenue administrations to administer large EI companies. - New or revised public financial management frameworks are being implemented in 11 countries. - One country reformed the governance structure and investment management of its Sovereign Wealth Fund (SWF). - Three countries improved reporting of natural resource revenues in the national accounts. - Four regional conferences on EI fiscal issues were held (East Africa, Asia-Pacific, Andean region (two conferences)) with between 60 and 90 participants each. - A Washington, DC conference produced papers used as the basis for a book on International Tax Issues for the Extractives Industries to be released in 2016. - Two handbooks released: Administering Fiscal Regimes for Extractive Industries: A Handbook; and Sovereign Asset-Liability Management Guidance for Resource-rich Countries. - A public version of the FARI model and accompanying Technical Notes and Manual were developed and released. - A new template for collecting data on government revenues from natural resources was developed and field-tested; the Extractive Industries Transparency Initiative (EITI) announced collaboration with the IMF to use the template. - A draft guide on specific compilation issues for natural resources in macroeconomic statistics was completed and to be released online for comment. - Monitoring and evaluation: - A Results Based Management (RBM) methodology was used to measure and monitor progress; Appendix 1 presents overall performance and lessons. - The midterm evaluation (to April 2014) rated projects very good on relevance and good on other OECD-DAC criteria. - Key lessons about risks and project implementation: - Not all projects succeeded; lack of sustained commitment by authorities, changes in key officials, or weak commitment in key ministries often led to discontinued projects. - The Phase 1 experience underscored the importance of greater country ownership, strengthened project design, and continuity of engagement. ### C. Midterm Evaluation Recommendations (summarized) - Strengthen project design, planning and TA delivery: - Conduct scoping missions, set focused and realistic objectives, define outcomes and time frames, define milestones and road maps, perform more in-depth risk analysis, deliver more hands-on TA, and aim for continuity of engagement and capacity development. - Increase participation of IMF Regional Technical Assistance Centers (RTACs) and regional advisors. - Improve synergies and coordination among Fiscal Affairs Department (FAD) modules and with the IMF’s Legal Department. - Consider providing TA support on monetary and capital markets and statistics under non-TF IMF TA. - Enhance the use of research projects and workshops to achieve TF objectives. - Enhance the RBM as a monitoring tool by disaggregating outcomes and objectives in the log frame and using one set of scores for the bottom-up approach. - Clarify the process for dealing with inactive projects. - Enhance the efficiency of reporting to the SC. - Improve project budgeting to reduce over-costing. - Appoint a full-time supra-manager in FAD financed by the TF to enhance standardization of the RBM system and distill lessons across projects. ### D. Phase 2 Strategic Direction and Rationale - Vision for Phase 2 (MNRW2): - Build and expand on Phase 1 success with focused support in key areas to meet intensified TA needs due to commodity price slump, price volatility, and climate-change considerations. - Core elements of Phase 2 engagement: - Targeted and intensive TA engagement with three broad changes: - Expanded scope to include additional emphasis on international tax policy and administration issues (base erosion and profit shifting by multinational companies) and TA on energy subsidy reform. - More flexible delivery modes allowing more intensive missions, assigning experts to remain in-country for an extended period, or using in-country or regional long-term advisors. - Strengthened project design and planning with greater upfront engagement from country authorities through scoping missions and memorandums of partnership with authorities. - Consolidation and continued use of the Fiscal Analysis for Resource Industries (FARI) model as a TA-enhancing tool. - Continued analytical work with stronger focus on dissemination and learning through on-line and face-to-face training, and horizontal learning (conferences, workshops). - A refined modular design retaining most modules from Phase 1 but replacing the module on asset and liability management with a module on exchange rate regimes and macro-prudential policies in resource-rich countries. - Primary focus on low- and lower-middle-income resource-rich countries; Steering Committee may expand eligible countries to include some upper-middle-income countries or a region where appropriate. - Funding and time horizon: - The TF will require funding of around $30 million, covering the six-year period from mid-2016 to mid-2022, to enable deeper targeted and intensive TA engagement, some expansion of country coverage, and addressing emerging issues. *Source: MNRW-TF program document (Phase 1 achievements and Phase 2 proposal).* ### 2. MNRW-TF Phase 2 Proposal ### 2. MNRW-TF Phase 2 Proposal ### A. Objectives and Benefits - Objective: Phase 2 (MNRW2) will build economic policy and administrative capacities to enable LICs and lower-middle-income countries (LMICs) to derive the maximum benefit from their oil, gas, and mineral resources, so as to facilitate their economic development and poverty reduction goals. - Continued focus: Support the proper management of natural resource wealth among developing countries. - Broader effects and expected benefits: - Improved development prospects of beneficiary countries will provide a useful demonstration to their peers. - Better management of natural resources will have important benefits for global commodity markets. - The work of the trust fund will yield analytical and policy lessons that will represent a global good. - These lessons will help strengthen the effectiveness of both development partners and the IMF. - Relationship to prior work: The expected benefits build on the achievements under Phase 1 of the trust fund and the broader objectives of the trust fund. *MNRW-TF Phase 2 Proposal, IMF* ### Box 3. Expected Benefits of the MNRW2 ### Box 3. Expected Benefits of the MNRW2 ### Expected benefits for resource-rich countries - Maximization of revenues over the life-cycle of extractive projects, thanks to a fiscal regime that balances government and industry interests, and an effective administration for collecting revenues. - More effective spending of resource revenues, which can assist countries in meeting their sustainable development goals, such as in education and health, with the help of budgetary mechanisms tailored to the large size of resource revenue, and its volatile and finite nature. - Better governance throughout the government by enhancing accountability through transparency in the public service dealing with resource revenues. - More investment in the natural resource sector thanks to an attractive, stable investment climate that induces socially responsible behavior by companies. - Smoother impact on the economy of potentially large and unpredictable swings in commodity prices, in order to support stable economic growth and financial sector stability. - Creation of an information base on the economic impact of natural resources exploitation to inform strategic policy decisions. ### Expected benefits for the global community - Foster economic and social development in low-income countries (LICs) and lower-middle-income countries (LMICs) by using aid money to leverage the development impact of natural resource revenues. - An enlarged and more secure global supply of energy and minerals. - Improved climates for investment and production so that international resource companies can operate consistently with their corporate social responsibility standards and with their home countries’ development policies. ### Expected benefits for partners - A mechanism for coordinating partner assistance in the area of natural resource wealth management and RM. - The opportunity to participate in discussion of IMF-led analytical and diagnostic tools sponsored by the TF. - Enhanced visibility and greater impact on the ground from leveraging a multi-donor trust fund. ### Expected benefits for the IMF - Improved coordination and knowledge exchange with other TA providers. - IMF’s TA delivery will benefit from the programmatic approach used in the TF and the governance structure emphasizing results orientation and accountability. ### Monitoring, evaluation, and results framework - A strategic log frame will be used to measure and monitor results; it builds on Phase 1 and is fully consistent with the IMF’s enhanced RBM framework. - The RBM system involves: definition of a standardized catalog of TA project ‘objectives’ and ‘outcomes’; requirement to define project milestones; and a framework for periodic scoring of, and reporting against, all three. - The log frame for MNRW2 aims at reporting results at a strategic level and complements and aggregates project-specific RBM indicators. - Monitoring and evaluation of the MNRW2 will be continuous and overseen by the SC. - An independent midterm evaluation is planned in FY2020. - Project-specific RBM progress reports will be included in both the annual and midyear reports; strategic log frame results will be included in the annual reports only. - Further refinements to the log frame will be done in consultation with the SC. ### Scope and nature of MNRW2 - Focus: extractive industries—oil, gas, and mining—reflecting common policy approaches (tax design, revenue administration, macroeconomic management) and unique features (large sunk costs, long production periods, substantial “rents,” dominance of tax revenues, non-renewable resource wealth). - Continued funding of capacity development (TA and training) within the IMF’s macro-economic and financial mandate: EI fiscal regime design, EI revenue administration, EI macro-fiscal policies and public financial management, and statistics for natural resources. - Modified scope to cover new/enhanced work areas: energy subsidy reform in resource-rich countries; more focused engagement on international tax issues; and exchange rate regimes and macro-prudential policies in resource-rich countries. - Transparency emphasis: use of the IMF’s Guide on Resource Revenue Transparency and support from a new Pillar IV of the IMF’s Fiscal Transparency Code (development and implementation costs of Pillar IV have to date been borne by the IMF and are not intended to be funded by the MNRW2). - TA delivery modalities to individual countries: - Headquarters staff missions. - Headquarters based desk reviews and backstopping. - Short-term expert missions. - In-country workshops and seminars. - Additional flexibility in TA delivery under Phase 2: options for more intensive TA where needs and commitment are strong, including longer or greater number of missions; short-term experts in-country for extended periods (e.g., 2-3 months); use of in-country or regional long-term advisors. - TF-funded TA will be additional to the IMF’s internally funded TA; IMF will continue to provide a limited amount of TA on natural resource wealth management from its own resources to complement the TF. - Lessons learned from TF-funded TA projects will be disseminated and integrated into the IMF’s TA through project manager experience, presentations, peer review of TA reports, and research and analytical work. ### Programmatic modular approach - Key features: 1. Five modules cover topics along the natural resource “value chain” aligned with IMF expertise. 2. Modules are defined around sets of outcomes; countries receive an appropriate subset based on priority and achievability. 3. Application of one module typically involves multiple missions and other TA interventions and therefore typically takes several years. 4. Modules are interconnected but can be undertaken separately. 5. TF will favor countries undertaking several modules, but single modules will fill capacity gaps in other countries. - The TF will offer five modules corresponding to IMF areas of expertise. ### Module 1 – EI Fiscal Regimes, Licensing and Contracting - Characteristics of a good EI fiscal regime: - Neutral: not distort investment and production decisions. - Reserve the major portion of possible resource rents for the government. - Assign risk to government and investors depending on their abilities to bear risk. - Progressive: lead to higher payments to government as underlying profitability increases. - Flexible or adaptable to changing circumstances. - Stable and credible regulatory environment. - TA scope: different EI fiscal instruments (e.g., production sharing contracts, tax and royalty regimes, rent taxes, state participation); other taxes (income, indirect); framework for awarding licenses and contracts; transparency of the fiscal regime; fiscal decentralization; possible legal drafting by the IMF’s Legal Department. - Limitations: TF will not directly support contract negotiations; MNRW-TF will not provide direct TA on local content though implications will be considered where relevant. - Greater emphasis on international tax policy and administration issues, including transfer pricing in the EI sector, permanent establishment rules, taxation of indirect transfers of interest in natural resource licenses, and tax treaty issues; work will build on prior MNRW-TF efforts and take account of OECD-led BEPS developments. - TA on fiscal regimes will be supported by the IMF’s FARI modeling. ### Module 2 – EI Revenue Administration - Challenges: fragmentation of revenue collection across government departments; weak administrative capacities; incomplete collection of resource-related revenue streams; weaknesses in fiscal and cost audits. - Recommended step: establishment of a large taxpayer office (LTO) in tax administration to collect corporate income tax and coordinate administration. - TA will draw on IMF expertise in tax and customs administration and place greater emphasis on international tax issues. ### Module 3 – EI Macro-Fiscal, PFM, and Expenditure Policy - Key macro-policy decisions for resource-rich countries: - How to split revenues between savings and consumption. - How to divide investment of savings between financial assets abroad and physical and human capital at home. - Preference for spending decisions within a medium-term budget framework based on conservative projections of resource revenues and consistent with long-term fiscal sustainability. - Specific challenges: revenue sharing with sub-national governments; subsidies stabilizing domestic petroleum product prices; infrastructure investment financed from resource revenues. - TA activities: - Developing capacity for medium- and long-term macroeconomic projections for the EI sector. - Making rules for allocation of resource revenues to the budget or savings. - Ensuring effective public financial management systems for EI revenues. - Scope exclusions and inclusions: - MNRW2 will not cover asset and liability management issues related to sovereign wealth funds (SWFs) but will cover SWFs under public financial management (e.g., fiscal rules on allocation to budget and SWFs). - Diagnostic tools: - Use of the FARI framework for fiscal regime design, revenue forecasting, analysis of revenue management issues (including quantification of fiscal rules), and integration of the EI sector into macroeconomic frameworks. - Expansion to include energy subsidy reform in resource-rich countries; TA on carbon taxation is outside MNRW2’s scope. ### Module 4 – Exchange Rate Regimes and Macroprudential Policies - Challenges from commodity price volatility for countries with pegged exchange rate regimes and underdeveloped monetary policy frameworks, FX and money markets, and financial regulation; fiscal strains from weak commodity prices can impede transitions. - Financial stability implications: need for macroprudential tools to counter commodity price volatility, including leaning against exchange rate and credit risks and heightened microprudential oversight. - TA objectives: - Options for appropriate exchange rate regimes (fixed, managed float, or market-based flexibility). - How to manage transition to greater exchange rate flexibility where desirable. - Strengthening existing regimes if increased flexibility is not warranted. - Using macroprudential policies to bolster monetary and exchange rate instruments and financial stability. - Interaction between fiscal policy adjustment and exchange rate and monetary policies. - Note: Building up FX reserves can indirectly worsen the fiscal balance by reducing central bank profit remittances to the government and increasing the local currency cost of imports for infrastructure development. ### Module 5 – Statistics for Managing Natural Resources - First element: develop capacity in select countries for implementing the compilation of the revenue template within the EITI’s summary data template (SDT); support through pilot testing and a workshop in collaboration with EITI counterparts; linkages to the IMF’s Fiscal Transparency Code and the IMF course on “Macroeconomic Management in Resource-Rich Countries”; support for compiling and disseminating data to monitor the UN’s Sustainable Development Goals, particularly Goal 17 on strengthening revenue mobilization. - Second element: develop a Guide to Analyze Natural Resources in the National Accounts and pilot testing in a number of countries; the guide will provide guidelines for dissemination of key analytical information on macroeconomic impacts of changes in natural resource product volumes, values and prices, and aid national accounts compilation by revealing errors, omissions and inconsistencies; pilot testing will develop capacity for compiling national accounts covering natural resource industries. ### Country selection and ownership - Focus: resource-rich LICs and LMICs. - Eligibility criteria broadly similar to Phase 1: - LICs and LMICs already receiving large revenue flows from natural resources—countries with revenues from natural resources on average at least 25 percent of government revenues (or 25 percent of export earnings), using 2000-11 as the reference period. - Countries considered “prospective” natural resource producers based on ongoing exploration, including EITI Candidate or EITI Compliant countries. - Appendix 3 sets out an indicative list of countries meeting these criteria but does not preclude other countries being proposed to the SC. - A country can only receive assistance if approved by the SC. - Limited circumstances for SC endorsement of funding for countries not meeting eligibility criteria, with considerations including: - Prospective resource abundance. - Synergy and complementarities with similar or neighboring countries with MNRW-TF projects. - Demonstrated commitment to EITI or other initiatives such as the Natural Resource Charter. - Regional effectiveness of TA (e.g., deep-sea mining in the Pacific). - Selection guidance for SC to maximize results from the trust fund portfolio: - Country ownership: evidence of public advocacy of reform; commitment to act on a reform agenda; accountability in relevant agencies; civil society engagement; demonstrated commitment to the EITI; stakeholders informed and agreeing with objectives; good track record implementing past IMF TA recommendations. - Relevancy and urgency: project linked to government’s broad reform strategy to improve efficiency of natural resource wealth. - Domestic implementation capacity: authorities allocate sufficient human resources for project support and reform implementation. - Complementarities: preference for modules that complement projects under Phases 1 or 2 to allow deeper engagement and enhance sustainability. - Approval process: - IMF will propose project proposals to the SC setting out purpose, objectives, outcomes, and proposed budget based on country TA requests and suitability for a program of ongoing TA work. - SC will take account of selection guidelines and available budget. - Strengthened project design and planning to maximize country commitment: - Greater upfront engagement with country authorities, including scoping missions for detailed upfront assessments. - Project arrangements to be agreed and formalized with country authorities, potentially via a memorandum specifying timelines, milestones, Phase 2 resource commitments, counterpart staffing, facilities and other project resources, and circumstances that would trigger suspension/termination. - Project managers to proactively address implementation risks with country authorities to keep projects “on-track.” *IMF — MNRW2 Program Document, Box 3. Expected Benefits of the MNRW2.* ### Box 4. Key Elements of Memorandum of Partnership ### Box 4. Key Elements of Memorandum of Partnership ### Memorandum of Partnership (MOP): purpose and timing - The Memorandum of Partnership (MOP) will be a formal agreement of cooperation between the IMF and the country authorities. - The MOP should be agreed before the project commences and be discussed during the scoping mission, if undertaken. - The MOP is envisaged to include the elements listed below. ### Project Description - Project scope, objectives, outcomes, indicators, and timelines. - This should be the basis for the project’s RBM. ### IMF Project Participation - Nature and scope of proposed technical assistance (TA) from the IMF, including: - Types of missions (e.g., headquarters missions, short-term expert visits, and long-term experts). - Number and possible timing of the missions. - Expected outputs (e.g., TA report, training). - Reference to the amount of funds allocated by the TF for the project. ### Other Partners’ Inputs and Participation - Inclusion of any complementary input by bilateral donors to specific country projects. - Reflection of partner operations on the ground or any additional assistance (e.g., complementary TA or training). - Purpose: enhance partner coordination and avoid duplication. ### Country Commitment - Identification of a senior official (e.g., Minister, Deputy Minister or Permanent Secretary) as main government counterpart. - Identification of a liaison person for organizational and administrative arrangements. - Government commitment to provide all available data necessary for the project. - Possible establishment of a steering group to oversee the project so recommendations are properly considered. - For long-term experts, authorities expected to assist with entry permits and provide work facilities. - Inclusion of regular reporting by the government on reform progress as part of the MOP. ### Termination and Suspension of the Project - Specification of circumstances for suspension or termination, including: - Insufficient reform progress by the authorities (e.g., no substantial action on recommendations in the previous 12 months). - External factors, such as security issues, that make it difficult for the project to continue. ### Research and Analytical Work (Phase 2) - Phase 2 will continue to support the IMF’s leading research and analytical work on managing natural resource wealth to identify good or best practice approaches and distill lessons from experiences. - Research proposals should include a discussion on how research results will inform the design of subsequent capacity development interventions. - Results will be disseminated widely to policy practitioners, development partners, and other stakeholders via publications, and regional and international workshops and conferences. ### FARI Model - FARI is a modeling framework developed by FAD to perform EI fiscal analysis. - FARI analyses how annual project cash flows over the life of an EI project are shared between investors and the government, through detailed modeling of: - A particular fiscal regime. - A set of economic and financial assumptions. - An EI project example (e.g., a petroleum field or mine). - Analytical routines include Average Effective Tax Rate, Marginal Effective Tax Rate, progressivity, and stochastic analysis. - FAD used the model extensively in providing TA during Phase 1 of the TF. - Phase 2 actions: - Continue to refine FARI and its uses to meet the needs of developing countries. - Support the use of FARI as a tool for assisting in the design of EI fiscal regimes and revenue forecasting. - Support development of FARI as a revenue administration tool for comparing actual revenues with model results. - Public release milestone: the FARI methodology was publicly released in October 2015. - Growing demand noted from LICs and LMICs. ### Outreach and Training (Phase 2) - Horizontal and peer learning opportunities will continue to disseminate issues, practices and policies for managing natural resource wealth. - Lessons from Phase 1: - Successful conferences and workshops, both regional and in-country, undertaken in TF-eligible countries. - International events facilitate exchange of views and experiences and learning from international experts. - In-country workshops enhanced capacity in project countries. - Phase 2 design priorities: ensure workshops and conferences are cost-effective and well-targeted to provide best value-for-money. - Support for additional training methods: - Development and ongoing provision of on-line training courses and face-to-face courses relating to managing natural resources wealth. - Two courses envisaged: Macroeconomic Management in Resource-rich Countries; and Energy Subsidy Reform (the latter course has already been developed, so the TF will only support the ongoing provision of the course). - Online tools intended to scale up knowledge transfer to a broader group, including the public. - Courses to prepare officials in advance of TA delivery or follow-up training to promote sustainable capacity development. - External mid-term evaluation of the MNRW-TF noted the importance of this training approach. ### Integration and Close Coordination for Success - Integration of TF operations with other IMF activities and coordination with other development partners is essential for effectiveness and efficiency. ### A. Integration between Capacity Development and IMF Surveillance and Lending - MNRW2 capacity development will continue to be integrated with the IMF’s other two core activities, surveillance and lending. - Capacity development is demand-driven and seeks full involvement and buy-in of recipient countries. - Expected synergies: - MNRW2 capacity development engagements may provide inputs for structural benchmarks (for IMF lending programs) or policy recommendations (under Article IV consultations). - Area departments’ surveillance and lending teams help identify and prioritize capacity development and monitor implementation of MNRW2 TA advice. - IMF comprehensive capacity development services include policy diagnostics and evaluation, policy design, legal drafting, support for implementation, and follow-up through regular surveillance or program consultations. - In countries with IMF lending programs, TA advice often informs the design of the fiscal component of the program. - IMF specialists advise on reform agendas, support implementation, advise area departments on technical issues, and contribute to institutional knowledge in core expertise areas. ### Gender - Capacity development under the TF will incorporate the IMF’s broader work on gender, focusing on labor force participation, inequality and economic opportunities. - While MNRW2 TA would not be expected to directly address gender issues given its macro-fiscal, statistical, and macro-financial focus, TA will ensure that government policies reviewed do not have a gender bias. - The increased training component of MNRW2 provides opportunity to enhance capacity development of women through active promotion of their participation in face-to-face and online training courses. - The level of women participation will be included as an indicator in the MNRW2 log frame. ### B. Full Integration with Other IMF Capacity Development Activities, including through RTACs - Work under the TF is an integral part of the IMF capacity development work program overseen by the interdepartmental Committee on Capacity Building (CCB), chaired by a Deputy Managing Director. - Every fall, the CCB reviews capacity development priorities and feeds conclusions into IMF-wide planning and budget discussions. - Work plans are developed guided by CCB priorities; part of these plans are delivered by the TF after the trust fund SC’s endorsement. - Headquarters-based staff deliver TA directly and oversee/backstop IMF-hired short-term and long-term advisors, including RTAC advisors, to ensure quality and consistency. - Division of responsibilities: - HQ-initiated TA addresses complex diagnostic and strategic issues. - RTAC resident advisors and short-term experts provide practical support in implementation. - In the MNRW-TF context, RTACs are mostly involved in TA related to revenue administration and revenue management (modules 2 and 3). - Project managers will continue to ensure no overlap or inconsistency between MNRW-TF and RTAC TA through close coordination and communication. - The new RBM will deliver a common platform for reporting on both MNRW-supported TA reforms and TA delivered by RTACs to ensure complementary and synchronized TA efforts. ### C. Coordination with Other Development Partners - Phase 2 will continue to develop synergies with development partners active in the area. - IMF staff and external experts seek to work closely with other development partners operating in beneficiary countries, consulting them before missions and engaging them throughout reform processes. - Close collaboration with the World Bank to avoid overlap and ensure synergies: - IMF approaches MNRW issues from a macro-fiscal and macro-financial perspective; World Bank from a sector-specific perspective. - The World Bank established the Extractive Global Programmatic Support (EGPS) multi-donor trust fund to support EITI implementation and other Bank EI work. - With the SC’s assent, MNRW2 will invite a participant from the World Bank and the EITI to attend as observers of SC meetings to avoid fragmentation and duplication and exploit synergies. - Continued collaboration with other TA providers: Norway Oil for Development Programme, Switzerland State Secretariat for Economic Affairs (SECO), Australia, United Nations (UN), the European Commission (EC), and UK Department for International Development. - Collaboration with the OECD on international tax issues: - IMF participates in a joint working group on international tax issues with the OECD, World Bank, and UN. - Work in progress to develop a “tax platform” jointly by the IMF, OECD, UN and the World Bank to help coordinate development of toolkits and guidance for developing countries on international tax matters. - Consultation with other stakeholders, such as the private sector and civil society organizations (CSOs), will continue; project managers customarily meet with private sector and CSO representatives to obtain their perspectives on EI issues. *Source: IMF MNRW-TF Phase 2 program document.* ### 4. Governance and Operational Arrangements ### 4. Governance and Operational Arrangements ### Governance Structure - Multi-partner trust fund (TF) designed to enhance synergies, coordination, uniformity of global reach, agility in TA-funding administration, and partner visibility. - Steering Committee (SC): - Composed of partner representatives and IMF staff. - Chaired by a partner representative, with possible rotation of chairmanship among partners. - IMF staff serve as the Secretariat to the SC. - Meetings held annually, with additional meetings as necessary; other stakeholder organizations may be invited as observers when appropriate. - Secretariat to ensure regular information flow and informal consultations with the SC as needed. - An annual (or biannual if requested by the SC) report on TF activities and project results will be prepared; a version of the report will be made public. - SC functions: - Provide strategic guidance and set policies and priorities, including endorsement of an annual work plan. - Review progress under the work plan and performance under the program. - Coordinate TA on managing natural resource wealth among TF, partners, and other stakeholders; TF will share mission-planning information with the SC. ### Work Plan - Projects initiated within an annual work plan subject to prior SC approval. - Project selection and TA delivery are demand-driven, based on identified needs and country requests; IMF area departments work with member countries and TA departments to identify needs. - TA prioritization criteria: - Country need and authorities’ commitment to reform. - Distribution across regions and modules. - TA organized into projects reflecting the modules described in section 2.C. - Work plan includes applied research, conferences, workshops, and training to disseminate broader-interest findings. - The IMF will report on execution of previously endorsed work plans at each SC meeting. ### Dissemination Policies - Guided by the IMF’s transparency policies. - TA reports: - May be shared with SC members with consent of the TA recipient on a no-objection basis, with confidentiality expectations. - Sharing with non-SC development partners determined case-by-case based on legitimate interest (e.g., engagement in related activities in the beneficiary country). - IMF will continue to encourage countries to publish TA reports. - Operational guidelines for the SC and clarification of SC members’ and Secretariat roles to be discussed and agreed at the first SC meeting. ### Accountability and Results Based Management (RBM) - Project-level arrangements: - Each project will have at outset a comprehensive log frame consistent with the IMF’s new RBM System and module designs in section 2.C. - Log frames define inputs, country-level objectives and outcomes, verifiable indicators, and intermediate milestones drawn from IMF’s RBM log frame catalog. - TF-level arrangements: - A strategic log frame will set goals and monitor portfolio progress (see Appendix 2). - Establishes strategic (top down) impact indicators for the trust fund and modular (bottom up) indicators for each module. - Two types of strategic indicators: - Results directly attributable to TF work (e.g., implementation of reforms). - Results that may only partially reflect TF effects (e.g., resource revenue as a share of GDP). - Modular outcomes aligned with project-level objectives; indicators based on aggregation of project results. - Quality control and supervision: - IMF TA departments supervise, carry out, and backstop TA delivery under the TF to maintain quality and consistency. - Operational quality-control mechanisms: - (a) Screening and selection process for experts. - (b) Regular supervision and backstopping support from IMF headquarters. - (c) Regular self-assessments against pre-defined project objectives and outcomes. - Area Departments’ role: - Monitor beneficiary countries’ progress in implementing TF-supported reforms within IMF-supported programs and surveillance activities. - Partner access and reporting: - Project status and financial information accessible to Partners via the IMF’s partner portal (including legal documentation, project documents, progress reports, project status, self-assessments). - Accountability via semi-annual SC meetings presenting summaries of progress at project and portfolio levels. ### Independent Evaluation - An independent evaluation by outside experts will be conducted after no fewer than three years of operation. - The evaluation is expected to take place in FY2020. - Purpose: assess effectiveness and sustainability and formulate recommendations to inform operations for the remainder of the six-year phase and beyond. ### Visibility - TF outreach to be intensified to enhance public profile and partner visibility. - IMF to develop operational guidelines on partner visibility and communications for externally-funded capacity development (common framework for recognition of external funding sources). - Outreach mechanisms under Phase 2: - Expand beyond publications to include newsletters, conferences/press releases. - Supplement existing tools (website, booklets, partner debriefings). - Systematic recognition of partners in outreach activities, with acknowledgment in publications. ### Project Management - Establish a small dedicated TF team to manage scaled-up operation with functions to: - Monitor performance of country programs. - Ensure high-quality reporting against the RBM framework and to the SC. - Strengthen synergies and coordination with other TA providers. - Enhance visibility of Phase 2 partners. - Proposed TF team composition: - One full-time program manager (overall coordination responsibility). - One research assistant. - One administrative assistant. ### Financing and Administrative Issues - Financing: - Estimated total cost of MNRW TA under the TF for an initial five-year phase is US$30 million. - Financing sought in advance for the entire five-year period to provide stability and continuity. - Tables and figures provide illustrative budgets for six years and module budget distributions. - Illustrative budget highlights (Table 2, US $’000): - TA Delivery total: 16,896 - Targeted TA total: 16,216 - Scoping missions total: 680 - Research and Analytical Tools total: 2,035 - Research Projects total: 1,053 - FARI Country STX Follow-up Visits total: 963 - Workshops and Training total: 6,650 - Workshops & Conferences total: 1,615 - Training total: 5,040 - Program Management total: 2,455 - Staff Costs* total: 2,070 - Independent Evaluation: 200 - Steering Committee total: 185 - Sub-total across FY17–FY22: 28,037 - TF Management Fee (7%) total: 1,960 - Total across FY17–FY22: 30,000 - FY-by-FY line items shown in Table 2 (e.g., FY17 TA Delivery 670; FY18 TA Delivery 3,120; FY19 TA Delivery 3,200; FY20 TA Delivery 3,270; FY21 TA Delivery 3,350; FY22 TA Delivery 3,286). - Budget breakdowns (figures): - Illustrative budget breakdown by category, percent of total: - TA Delivery 60% - Research & Analytical Tools 7% - Workshops & Conferences 6% - Training 18% - Program Management and Administration 9% - Illustrative TA Delivery budget breakdown by module, percent of total TA Delivery Budget: - 1. EI Fiscal Regimes 24% - 2. Revenue Administration 29% - 3. Public Financial Management 18% - 4. Exchange Rate and Macroprudential Policies 12% - 5. Statistics 18% - Administrative arrangements: - All partner contributions made into the multi-partner MNRW subaccount under the IMF’s Framework Administered Account for Selected Fund Activities (“SFA Instrument”). - An operating unit for Phase 2 established under the Subaccount to receive contributions and finance activities; all funds commingled. - Financial arrangements governed by a Letter of Understanding and subject to Subaccount and SFA instrument terms and conditions. - IMF administers and accounts for partner contributions in accordance with its financial regulations and applicable practices and procedures. - Recruitment of outside consultants and experts follows IMF normal procedures. - Procurement of goods and services beyond a threshold amount (currently US$50,000) requires a competitive bidding process with at least three competitive bids per IMF regulations. - IMF charges all project-related costs of TA on the basis of actual cost, including IMF staff time, plus a trust fund management fee of 7 percent. - Partners receive reports on subaccount expenditures and commitments; operations and transactions through the subaccount subjected to annual audits. - Separate reporting on TF budget execution provided at each SC meeting and via the IMF partner portal. ### Appendix 1 — Key High-Level Results and Lessons from MNRW-TF Phase 1 - Overview: - MNRW-TF Phase 1 results summarized across objectives; total of 56 projects activated during 2011–2016. - Project composition: - 43 country projects in 22 countries: - 30 currently active projects. - 9 projects completed—8 evaluated by independent midterm evaluation: 6 assessed as “very good” and 2 as “good.” - 2 projects terminated (Mongolia module 1; Niger module 1) due to lack of commitment/fragmented responsibilities. - 2 projects never made active due to lack of commitment (Iraq module 4; Uganda module 4). - 8 research projects—5 still active; 3 completed resulting in publications or input to other work. - 5 conferences—4 undertaken. - Results by objective: - Objective 1 (EI fiscal regimes): - Nine countries reformed (either enacted or introduced to governing authority) laws relating to EI fiscal regimes based on IMF advice. - Capacity to manage resource wealth increased in 12 countries using the IMF’s FARI model; training in workshops with an average of 20 participants per workshop. - Four regional conferences held with between 60 and 90 participants each. - A Washington, DC conference produced papers used as basis for a book on International Tax Issues for the Extractives Industries to be released in 2016. - Public version of the FARI model developed and released with Technical Notes and Manual. - Objective 2 (Revenue collection/administration): - Five countries formed special staff/units within revenue administration to administer large EI companies. - Release of Administering Fiscal Regimes for Extractive Industries: A Handbook, translated into French and Spanish. - Washington DC conference with 70 participants from 12 eligible countries on revenue administration risks and strategies. - Objective 3 (Public Financial Management): - New or revised PFM frameworks being implemented in 11 countries to better manage natural resource revenues. - Objective 4 (Sovereign asset-liability management): - One country reformed SWF governance and investment management. - Release of a handbook on Sovereign Asset-Liability Management Guidance for Resource-rich Countries. - Objective 5 (Statistics): - Three countries improved reporting of natural resource revenues in national accounts. - New template for collecting government revenue data from natural resources developed and field-tested; EITI to collaborate with IMF in using template. - Draft Guide to Analyze Natural Resources in the National Accounts released online for comment. - RBM outcomes and lessons: - Of 37 active projects at October 2015: - 38 percent assessed as “largely” or “fully achieved”; - 49 percent assessed as “partially achieved”; - 14 percent assessed as “not achieved”. - Success factors: - Strong political and institutional commitment. - Good cooperation among government ministries/agencies. - Timely and relevant TA, combining policy, modeling, and legal drafting skills. - Causes of underperformance: - Delays due to security (Mali), health crises (Ebola in Sierra Leone and Guinea). - Lack of authority commitment/responsiveness. - Midterm Evaluation lessons incorporated into Phase 2 design: - Need for better project design, planning, and TA delivery (focused/realistic objectives, milestones, road maps, risk analysis, hands-on TA, continuity). - Increased participation of RTACs and regional advisors. - Improved synergies among FAD modules and with IMF Legal Department. - Enhanced use of research projects and workshops. - Enhanced RBM as monitoring tool. - Clarify process for inactive projects. - More efficient reporting to the SC. - Improved project budgeting to reduce over costing. *IMF — Managing Natural Resource Wealth Topical Trust Fund (MNRW-TF) Phase 2 program document.* ### Box 5. MNRW-TF Phase 1 Case Studies ### Box 5. MNRW-TF Phase 1 Case Studies ### Mauritania — Module 1 (2011–2014) - A withholding tax at 15 percent was levied in 2013 on any transaction involving non-residents to limit profit shifting through subsidiaries, raising revenue equivalent to 0.33 percent of GDP in 2013. - In March 2014, parliament approved changes to the mining code making mining companies subject to standard VAT (a zero rate for exporters), avoiding their VAT exemptions. - These law modifications are expected to reinforce tax revenue performance (excluding natural resources), which improved by around 13 percent between 2010 and 2015. - The project provided a forecasting model of resource revenue to the Mauritanian authorities. - Key enabler: strong political support and management commitment from key ministries. ### Guinea — Module 1 (2012–2015) - Fiscal regime design work resulted in a complete review, redrafting, and adoption by the National Assembly of the Mining Code fiscal provisions, plus preparation of redrafted Fiscal Regulations and Model Agreement. - The VAT regime for mining companies was significantly strengthened. - Roughly half of the mining projects were modeled; remaining projects depended on data to be provided by mining companies. - Commencement of the public financial management project (module 3) in 2014 produced initial results including: - Formulation of a strategy for developing capacities related to fiscal forecasting and budgeting for an expected surge of mining resources. - A framework to strengthen fiscal governance and transparency of parastatals and governmental entities involved in natural resource management. - Implementation of a VAT refund system for the mining sector. - Key enablers: very strong support from all relevant ministers and the President; high-level and technical commitment despite political/economic headwinds and the Ebola crisis. - Ongoing challenge: weak capacity being addressed by the authorities. ### Kenya — Module 1 (2013–2016) - Reforms delivered include: - Development of a schedule in the new model production sharing contract. - A revised income tax law for extractive industries now in force reflecting much of the project’s policy and legal advice. - A draft Mining Bill incorporating project suggestions. - The FARI model critically supported reform development; workshops transferred model use to local officials. - High-profile exposure at the “Kenya Rising” conference (Nairobi, September 2013) and the EAC workshop on fiscal management of oil and gas in East Africa (January 2014). - Key enablers: strong commitment of senior government officials, lateral communication among agencies, and strong relationships with Cabinet Secretaries and Principal Secretaries. - Capacity constraints remain; addressed via workshops and close liaison with the World Bank’s large TA program in Kenya. - The project combined policy, modeling, and legal drafting skills to meet authorities’ needs timely. - Resulting demand: authorities requested an MNRW-TTF project on revenue management (module 3) and showed interest in a revenue administration project (module 2). ### Mongolia — Module 3 (macro-fiscal and PFM) (ongoing since 2013) - Despite commodity price falls and production slowdown, the project achieved: - Significant expansion in scope and sophistication of the medium-term fiscal framework (MTFF), including focus on quantifying fiscal risks and measures to manage them. - Development of cash flow forecasting models to manage seasonal variations in highly volatile revenues. - Support in drafting a sovereign wealth fund law aimed at inter-generational savings, leading in early 2016 to final agreement by Parliament to create such a fund; complementary to the asset and liability management (module 4) project. - The Ministry of Finance has been a strong supporter of reforms. - Main headwind: strong political pressures to increase spending given infrastructure needs in a large, sparsely populated country. - Project cooperation: close collaboration with the World Bank on MTFF enhancements and with the U.S. Treasury Department on cash management. --- ### MNRW-TF Phase 2 Strategic Logical Framework — Key Objectives and Verifiable Indicators - Strategic objective: Assist low and lower-middle income countries to derive maximum benefit from their oil, gas and mineral resources. Objective-level impacts and indicators: - Impact 1: Increased resource revenues for low and low-middle income countries - Indicator examples: - Average resource revenues as a share of GDP increases in MNRW-TF countries. - Average potential government take for a standard resource revenue project in MNRW-TF countries (WoRLD 1/; Project managers; FARI Model). - Impact 2: Better management of EI revenues in MNRW-TF countries - A significant majority of participating countries implement reforms to improve management of EI revenues by having: - Medium term expenditure estimates; - Coverage and comparability of in-year budget reports; - Budget classification; - Information on revenue collections; - Consolidation of cash balances; - Reporting of contingent liabilities and other fiscal risks. - Source: Project managers. - Impact 3: Effective exchange rate and macroprudential policies in MNRW-TF countries - A significant majority of participating countries have improved exchange rate regimes and macroprudential policies by: - Having an exchange rate that responds to changes in supply and demand, with tools and procedures to facilitate price discovery while managing financial stability risks; and - Establishing a macroprudential policy body with a legal framework. - Source: Project managers. - Impact 4: Improved statistics for natural resources - A significant majority of participating countries have improved natural resource statistics by: - Publishing EI revenue data in line with the IMF template; - Publishing resource and non-resource GDP separately, in line with the IMF’s Statistics Manual and Compilation Guide. - Source: Project managers. --- ### Selected Program Results Targets and Verifiable Indicators (preserved wording and numeric targets) - OBJECTIVE 1: IMPROVED EI FISCAL REGIMES - Result 1.1: Adoption of amended EI fiscal regimes - 10 participating countries have amended their fiscal regimes broadly in line with IMF advice. - Using the FARI model, estimated EI revenue potential is improved due to fiscal regime reforms in participating countries. - OBJECTIVE 2: ENHANCED EI REVENUE ADMINISTRATION AND COLLECTION - Result 2.1: Organizational arrangements - 8 participating countries with a clear organizational structure along functional lines and/or taxpayer segments established and operating for the EI sector. - Result 2.2: Risk management for the EI sector - 8 participating countries that have compliance risks identified, assessed, ranked, and quantified for the EI sector. - 8 participating countries that have compliance improvement program in place to mitigate identified risks for the EI sector. - OBJECTIVE 3: BETTER MANAGEMENT OF EI REVENUES - Result 3.1: MTFF and budget integration - 10 participating countries that have revised or introduced a credible medium-term fiscal framework integrated with the budget that includes EI revenues. - 10 participating countries with better controls over EI revenues and expenditure commitments and payments. - Result 3.2: Fiscal reporting and accounts - 10 participating countries that have budget classifications and charts of accounts incorporating specific EI details in line with international accounting standards. - Result 3.3: Asset and liability management - The EI revenues and expenditures are progressively conducted through a treasury single account consistent with international best practices in 10 participating countries. - 10 countries that disclose and manage contingent liabilities and other fiscal risks related to EI operations more comprehensively. - OBJECTIVE 4: EFFECTIVE EXCHANGE RATE AND MACROPRUDENTIAL POLICIES - Result 4.1: Exchange rate flexibility - 4 participating countries in which: - The exchange rate fluctuates—within the bounds of any explicit policy on leaning against short-term volatility—with changes in the demand and supply of FX, and appropriate instruments and operational procedures exist for the conduct of FX intervention. - The transition plan to a more flexible exchange rate regime is appropriately sequenced, and prudential regulations are developed to ensure FX risks are adequately monitored and managed in the financial sector. - Source: CD-PORT. - Result 4.2: Macroprudential framework - 4 participating countries in which: - Legislation is enacted to establish an institutional framework granting the mandate and powers over tools to conduct macroprudential policy to a particular body or committee. - A systemic risk monitoring framework is established and implemented, and the authorities have established a framework to map the assessment of risk into policy action. - Source: CD-PORT. - OBJECTIVE 5: IMPROVED STATISTICS FOR NATURAL RESOURCES - Result 5.1: Government revenue data quality - Participating countries have charts of accounts and budget classifications that provide the detail necessary to complete the EITI summary data template in line with GFSM 2014 recommendations. - Result 5.2: National accounts capacity - Pilot countries have developed capacity for compiling national accounts covering natural resource industries. - A workshop conducted in collaboration with EITI counterparts to support monitoring of the UN’s Sustainable Development Goals, particularly Goal 17 on strengthening domestic resource mobilization. - Sources: Project managers; CD-PORT. - OBJECTIVE 6: TOPICAL RESEARCH AND ANALYTICAL WORK - Result 6.1: Identification of good/best practices and lessons learned - 3 publications are produced setting out good or best practices and lessons learned in relation to topics related to managing natural resource wealth. - Source: CD-PORT. - OBJECTIVE 7: CAPACITY DEVELOPMENT THROUGH LEARNING OPPORTUNITIES - Result 7.1: IMF training participation - Number of participants from MNRW eligible countries in online or face-to-face IMF courses relating to management of natural resource wealth. - Number of women, and percentage of participants who are women, participating in these courses. - Source: ICD Training Statistics. - Result 7.2: Shared learnings by senior officials - At least one regional/international conference or workshop per year for MNRW eligible countries to exchange views and experiences in managing natural resources wealth. - Source: Project managers. --- ### MNRW-TF Summary Reporting on Outputs (enumerated items) - Number of TA missions completed (total and by module). - Number of TA reports produced (total and by module). - Number of workshops completed. - Number of research papers published. - Number of people trained (disaggregated by online and face-to-face and by sex and region). --- _Source: https://www.imf.org/-/media/files/capacity-developement/mnrw/mnrw_tf_phase2_programdocument.pdf_