## ppea2021038

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### Executive summary: context and strategic challenges
- Twin challenges for the Fund:
  - Crisis response and recovery—signs of early crisis recovery are uneven across countries, and many face daunting crisis legacies.
  - Addressing longer term shifts—climate change, digitalization and increasing divergence within and between countries.
- Spring 2021 Global Policy Agenda emphasis:
  - Link crisis reverberations to strengthening capacity to support a green, resilient, and inclusive global economy.
  - Central focus on the most vulnerable and arresting divergence between and within countries.
- Staff will propose a structural augmentation for consideration by fall 2021 to be implemented over two to three years beginning in FY 23; after implementation the budget would remain stable thereafter on a real basis at a new, higher level.
- FY 22 budget stance:
  - Sustains crisis response and provides incremental resources for long-term priorities within the flat real budget envelope.
  - Built on extensive reprioritization; savings including from modernization; and a proposed temporary increase in the carry forward ceiling to address crisis needs during the FY 22 to FY 24 period.

### FY 22–24 medium-term budget framework and augmentation design
- Two-pronged strategy:
  - Baseline budget:
    - Incorporates crisis response and temporary crisis impacts within existing resource base with incremental shifts to new priority areas.
    - Continue temporary crisis staffing funded through savings (sustained lower travel and continued modernization), extensive reprioritization, and allocation of general carry forward.
    - Increased general carry forward limit proposed from 5 percent to 8 percent to support temporary needs during FY 22–FY 24.
      - General Carry Forward
        - Current limit:     5 percent      $55.2 m
        - Proposed limit:  8 percent      $88.4 m
        - Current level:      4 percent      $44 m
        - FY 21 est. underspend:            $29 m
        - Allocation in FY 22:                  $60 m
  - Targeted structural augmentation:
    - Purpose: address limited space to accommodate new initiatives after a decade of flat real budgets; allow a more strategic approach to long-term imperatives.
    - Focus areas: Climate Change; Digitalization and Macrofinancial; Fragility and Inclusion; Restoring Buffers.
    - Design:
      - Adjustment over two to three years, reverting to a flat real path at the new, higher level thereafter.
      - Funds would not be earmarked; allocation transparently reported ex ante at budget approval and ex post in output monitoring.
    - Requirements for augmentation request (Executive Board indicated):
      - Use—specify outputs and activities additional resources will support and demonstrate strategic focus and collaboration.
      - Scale—link resource levels requested clearly to objectives and outputs.
      - Need—evidence that efficiencies within the current envelope have been pursued.
      - Sustainability—confirm expenditures sustainable given income outlook; staff’s analysis concludes a material augmentation in the likely proposed range would be consistent with precautionary balance objectives.
      - Commitment to budget prudence: plan to revert to a flat real trajectory following implementation.

### Key FY 21–22 budget figures and finance position
- Net structural budget 1/: FY 21 = 1,186; FY 22 = 1,186.
- Transitional 2/: FY 21 = 38; FY 22 = 60.
- Total, including transitional 2/: FY 21 = 1,224; FY 22 = 1,246.
- Proposed net structural budget (current dollars): 1,214.
- Total, including transitional (current dollars) 2/: 1,275.
- Crisis needs and funding:
  - Gross needs: FY 21 = 112; FY 22 = 94.
  - Reprioritization/savings 3/: FY 21 = 95; FY 22 = 69.
  - Contingency funds/carry forward/other: FY 21 = 16; FY 22 = 25.
- Fund income and projections (Operational Income and Net Administrative Budget FY 21-24):
  - FY21 Projected Operational Income (current programs): 3,109
  - FY22 Projected Operational Income (current programs): 4,256
  - FY23 Projected Operational Income (current programs): 4,576
  - FY24 Projected Operational Income (current programs): 4,307
  - FY21 Percent change: -2.2
  - FY22 Percent change: 36.9
  - FY23 Percent change: 7.5
  - FY24 Percent change: -5.9
  - FY21 Projected Net Administrative Budget: 1,186
  - FY22 Projected Net Administrative Budget: 1,214
  - FY23 Projected Net Administrative Budget: 1,245
  - FY24 Projected Net Administrative Budget: 1,266
  - FY21 Percent of Income: 38
  - FY22 Percent of Income: 29
  - FY23 Percent of Income: 27
  - FY24 Percent of Income: 29
- Outlook:
  - FY 22–24 MTB, including assumptions for a material augmentation, is consistent with a projected surplus in the Fund’s medium-term income position and with continued progress towards the precautionary balance target for coming years.
  - Reserve accumulation to reach the new target of SDR 25 billion over the medium term is maintained in the scenario with new programs.
  - Conservative scenario: assuming no additional new arrangements beyond those already approved, and excluding impact of any pension-related (IAS 19) gains or losses, operational income would still cover expenses through FY 26.

### Reprioritization, savings, and past discipline
- Longstanding budget discipline: a decade of flat real budgets, with a $6 million (0.6 percent) increase for security expenditures in FY 17; otherwise real-flat budgeting.
- On average, past budgets reprioritized about 4 percent of the aggregate budget envelope.
- Examples of measures and streamlining:
  - Streamline surveillance products, introduce e-Review, discontinue comprehensive Statistical Appendix Tables in Article IVs, reassign staff in resident representative offices.
  - $20 million package in FY 16 (move policy reviews to five-year cycles, reduce frequency of program reviews, discontinue Ex-Post Assessments).
  - Management’s Advisory Group on Modernization and Streamlining measures including upper limit of 6 FTEs spending on mandatory FSAPs (or $1.5 million equivalent).
- Modernization agenda: Net steady-state savings of $10.6 million identified for 1HR, CDMAP and iData.

### Pandemic response, operational impacts, and staffing pressures
- FY 21 crisis response and achievements:
  - 83 members received support in CY20; 45 financing operations; 29 grants for debt relief; 45 countries benefitted from the DSSI; 40 remote Article IVs projected; 160 countries received virtual CD (almost 2,000 remote CD missions); 87 COVID-related notes published.
  - Creation of the Short-term Liquidity Line; temporary increase in access limits.
  - 230 staff and family relocated.
- Operational impacts:
  - With travel restrictions and the shift to virtual events, $53 million were repurposed to finance new spending.
  - Departmental travel budgets were reduced by almost 95 percent during FY 21.
  - Receipts projected to come in about $90 million below budget, largely due to lower externally financed CD receipts.
- Staffing and temporary positions:
  - 128 temporary positions were created to meet crisis demands during FY 21 beyond those initially budgeted.
  - A 3 to 4 percent underspend of the structural budget is currently projected.
- Emerging pressure points:
  - Unsustainable demands on staff: increased overtime and sharp reduction in leave usage; average mission length increased by about 25-30 percent in the virtual environment (survey of some country economists).
  - Reduced buffers: budget utilization close to 100 percent pre-crisis; carry forward resources remain available but budget space largely exhausted.
  - Rising pressures: constrained ability to absorb new priorities without additional resources.

### Integrating climate change: strategy, outputs, and resource plans
- Rationale: climate change already has a large impact on many members’ macroeconomic stability and growth prospects; countries will need rapid reforms, green investment, socially balanced transition policies, and resilience measures.
- The Fund’s Climate Strategy and work program:
  - Focus on macroeconomic and financial aspects of climate change; leave mitigation target-setting, Paris agreement monitoring, sectoral policies, and specific infrastructure projects to other institutions.
  - Timeline: informal briefing on the Fund’s role in climate change in early April followed by further engagement and costing during summer 2021.
  - CSR lays out strategy to integrate climate as a core workstream; FSAP Review proposes framework for climate risk analysis with Board presentation planned for late this year.
  - Improve climate data and review Climate Change Policy Assessments (CCPAs) to broaden beyond small states.
- Key outputs and focus areas:
  - Comprehensive coverage of macro-critical climate-related policy challenges in Article IVs; macro modeling to inform surveillance; fiscal policy advice for low-carbon transitions and resilience; greater coverage of climate risk in FSAPs.
  - CD, including CCPAs, and provision of climate change data for macroeconomic analysis and surveillance.
  - More in-depth country engagement on mitigation strategies with major emitters and assistance for countries to meet Nationally Determined Contributions.
  - Expanded coverage of adaptation and resilience building in climate vulnerable countries; extend CCPAs beyond the current two countries a year.
  - Additional considerations: a G20 initiative on climate data, consolidated reporting on Fund-relevant climate issues, and enhanced training linking macroeconomics and climate science.
  - The Fund will also reduce its own carbon footprint as it steps up policy advice.

### Box 2 — IMF’s work on climate change: scope, activities, and resourcing
- Core expertise areas:
  - Advice on mitigation through fiscal policies (carbon taxation and other carbon pricing schemes), reduced fuel subsidies, improved regulation.
  - Guidance on adaptation: monetary and financial sector policy advice to cushion climate risks on output and inflation; support infrastructure investments through fiscal policy advice, revenue mobilization, public investment management, and debt sustainability.
  - Transition support: fiscal policy advice to facilitate low-carbon transitions, update financial sector risk assessment and regulation to cover climate risks and exposure to “brown” assets, support diversification away from carbon-intensive industries and mitigate social impacts.
- Work to date:
  - Country teams across all regions have touched on climate issues in FY 20 or FY 21.
  - CCPAs for six small states jointly with the World Bank.
  - Staff developed tools to evaluate carbon pricing and other policy instruments.
  - FSAPs have often captured physical risks; more recent FSAPs explicitly assessed transition risks.
  - STA, with MCM, FAD and SPR, is developing a framework for climate change indicators including a Climate Change Indicators Dashboard (beta version to be launched before the 2021 Spring Meetings).
- Organization and staffing plans:
  - Build climate-specific skills by hiring economists and experts, supported by internal training.
  - Resources mainly sit in functional departments and provide direct country support; area departments build expertise among fungible economists and maintain central coordination.
- Resources and recent spending:
  - Estimated spending on climate-related work increased from $16 million in FY 20 to an estimated $24 million in FY 21.
  - This includes $4.5 million in externally funded CD resources in FY 20 and FY 21 earmarked for climate-related work.
  - Under the FY 22 budget, departments plan to further increase work on climate issues through internal reallocations and new resources totaling a net $4.1 million.

### Field presence, capacity development (CD), and field staffing
- Field presence composition:
  - 94 resident representative offices
  - two permanent offices
  - 17 regional capacity development centers (RCDC), mainly funded through external partners
- As of end-December 2020:
  - more than 700 personnel were posted overseas
  - including 139 non-staff resident experts in-country
  - and 457 local staff
  - accounting for 18 percent of all Fund personnel
- CD demand and budgets:
  - A rebound of CD spending is expected from low levels in FY 21 driven by restricted travel.
  - Budget incorporates a projected $165 million in externally financed activities, with a budget ceiling on such expenditures of $210 million.
  - Externally financed spending envelopes are over 50 percent higher than projected spending in FY 21 (though actual spending expected to remain lower due to travel constraints).
  - FY 22–24 expectations: continued gains in FY 23 and FY 24 as travel rebound becomes embedded.
  - Implementation of a carry forward for external funds is under review with expectation a carry forward will be proposed in the FY 23 cycle.
- CD medium-term risks and mitigation:
  - Fundraising challenges likely to persist; mitigation includes more cost-effective delivery, blended delivery modalities, launching COVID-19 CD Initiative, and potential inclusion of Fund-financed CD in a budget augmentation to improve fungibility.

### Capital budget, cloud strategy, and modernization savings
- FY 22 capital budget proposal:
  - Overall capital budget proposal (including IT cloud capital equivalent) is $79 million.
  - Components:
    - Building facilities: US$23.5 million
    - Information Technology: US$46.0 million
    - IT Cloud Capital Equivalent: US$9.5 million
- FY 22 capital proposal notes:
  - FY 22 proposal is $19.7 million less than FY 21’s budget and $8.9 million lower than last year’s FY 22 projection.
  - Estimated carry-forward balance from FY 21 is about $60 million versus $45 million in FY 20.
- Key IT modernization projects and FY 22 amounts:
  - Key Modernization Projects total $30.7 million in FY 22.
    - 1HR: modernization of HR services (FY 22 expenditures accommodated within proposed capital budget).
    - CDMAP: $3.6 million in FY 22.
    - iData: $6.6 million in FY 22.
    - KM: $8.5 million in FY 22.
    - iDW: $2.0 million for scoping in FY 22.
    - Prerequisites: Corporate Data Warehouse ($2.4 million) and IAM Replacement ($1.5 million) in FY 22.
  - Lifecycle replacements and IT infrastructure: $6.1 million for FY 22.
- Modernization savings estimates:
  - 1HR will provide a net $6.5 million in annual savings (after ongoing license and related costs). Savings captured in structural budget since FY 21; $2 million in transitional resources to support FY 22 implementation.
  - CDMAP will deliver net annual savings of $3.4 million beginning in the fourth quarter of FY 22; full structural benefit reflected in FY 22 with transitional funding offset.
  - iData will reduce annual administrative costs by a net $0.7m with benefits beginning in FY 24.
  - First iDW module will deliver $0.4 million in annual savings.
- Cloud treatment and governance:
  - Shift from capital-intensive on-premise IT to cloud subscription-based solutions.
  - Staff propose recording and reporting cloud subscriptions separate from the administrative budget and presenting cloud subscription costs with the capital budget each year (IT Cloud Capital Equivalent).
  - Cloud costs to follow CIF rigor and governance, including decision-making, reporting and oversight; build robust cloud financial management practices and tools.

### Budget risks, mitigation, and decision framework
- Elevated budget risks above risk acceptance levels include:
  - Uncertainty around demand for Fund programs and staffing needs.
  - Future donor funding for CD.
  - Pandemic-related staff health and safety and occupational health-related spending.
  - Information security risks due to WFH shift.
  - Business transformation implementation risks that could absorb personnel and reduce envisaged savings.
- Risk classification and actions:
  - Minor Risks (<$3 million): departments make internal reallocations; draw on Fund-wide contingency.
  - Moderate Risks ($3–10 million): internal reallocation and contingency; intradepartmental reallocations as needed.
  - Major Risks ($10–32 million): departments identify contingency measures for reallocation.
  - Critical Risks (>$32 million): request to the Board for increased budgetary resources if other efforts insufficient.
- OBP will update the Board on evolving cost estimates for risk events; first response is reallocation, second response reductions in non-country work, final resort seek temporary resources.

### Proposed Executive Board decisions and FY 22 appropriation summary
- Decision 1: Administrative Budget for the Fund, FY 2022
  - Approve appropriations for net administrative expenditures for FY 2022 in the total amount of US$1213.5 million, of which:
    - up to US$76.4 million for OED administrative expenditures;
    - up to US$6.9 million for IEO administrative expenditures;
    - up to US$1130.2 million for other administrative expenditures of the Fund.
  - Authorize carry forward of amounts appropriated for FY 2021 not spent by April 30, 2021, to be used in FY 2022 in a total amount of up to US$103.9 million, with sub limits:
    - US$14.9 million for OED;
    - US$0.5 million for IEO;
    - US$88.4 million for other administrative expenditures.
  - Approve a limit on gross administrative expenditures in FY 2022 in the total amount of US$1562.4 million, with sub limits:
    - US$92.9 million for OED;
    - US$7.4 million for IEO;
    - US$1462.1 million for other administrative expenditures.
  - Appropriations for “other administrative expenditures of the Fund” and the “limit on gross administrative expenditures” for FY 22 will be increased by the amount of:
    - (i) the OED excess underspend above individual office CF limits and underspend from OED central resources from FY21; and
    - (ii) the IEO underspend above the CF limit, as determined in FY 21 year-end closure.
- Decision 2: Budgetary Treatment of Cloud Subscription Costs
  - The budgetary treatment of cloud subscription costs within the Capital Budget Framework shall be as set out in paragraph 4 of Annex V.
- Decision 3: Capital Budget Appropriations for FY 2022
  - Approve appropriations for capital projects underway or beginning in FY 2022 in the total amount of US$79 million, applied to:
    - (i) Building Facilities: US$23.5 million
    - (ii) Information Technology: US$46 million
    - (iii) IT Cloud Capital Equivalent: US$9.5 million

### Additional operational and implementation notes
- Roadmap and structure:
  - Section II: medium-term issues shaping budget outlook.
  - Section III (and Annex III): initial review of FY21 developments.
  - Section IV: detailed FY 22 budget through four lenses.
  - Section V: capital budget and proposed cloud treatment (Annex V).
  - Section VI: budget risks.
  - Section VII: FY 22 proposed decisions.
- Next steps and timing:
  - FY 22 budget does not include a specific augmentation; additional time used to consult membership and engage Board in summer on contours and parameters.
  - Formal request for endorsement of overall scale, phasing and uses will be made in the fall; with endorsement staff will incorporate augmentation into budget requests beginning in FY 23.
  - The proposed FY 22 budget reflects the baseline only, maintaining a flat real structural envelope and calling for an increase in the general carry forward limit to 8 percent.
- Press release draft key facts:
  - Approved net administrative budget for FY 2022: US$1,214 million.
  - FY 2022 capital budget: US$79 million.
  - Temporary increase in maximum carry forward from 5 to 8 percent approved.

*Prepared by an Office of Budget and Planning team led by Maria Albino and Andrea Salerno under the supervision of Axel Schimmelpfennig (March 26, 2021).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context and Strategic Challenges
- Amidst the unfolding COVID-19 crisis, the Fund faces twin challenges:
  - Crisis response and recovery—signs of early crisis recovery are uneven across countries, and many face daunting crisis legacies.
  - Addressing longer term shifts—climate change, digitalization and increasing divergence within and between countries demand stepped up effort by the Fund within its areas of expertise and in partnership with others.
- The Spring 2021 Global Policy Agenda emphasizes linking crisis reverberations to strengthening capacity to support a green, resilient, and inclusive global economy, with a central focus on the most vulnerable and arresting divergence between and within countries.

### FY 22–24 Medium-Term Budget Framework (Overview)
- Staff will propose a structural augmentation for consideration by fall 2021 to be implemented over two to three years beginning in FY 23; after implementation the budget would remain stable thereafter on a real basis at a new, higher level.
- The FY 22 budget sustains crisis response and provides incremental resources for long-term priorities within the flat real budget envelope.
- The budget is built on extensive reprioritization; savings including from modernization; and a proposed temporary increase in the carry forward ceiling to address crisis needs during the FY 22 to FY 24 period.
- Capital budget: large-scale business modernization programs continue to be rolled out; staff propose a change in the budgetary treatment of cloud-based IT expenses; facilities investment will focus on updates, repairs, and modernization to prepare for a post-crisis hybrid office environment.

### Budget Sustainability and Income Position
- The FY 22–24 medium-term budget framework, including assumptions for a material augmentation, is consistent with a projected surplus in the Fund’s medium-term income position and with continued progress towards the precautionary balance target for coming years.

### Budget Risks
- Risks to the budget remain elevated and above risk acceptance levels, including:
  - Uncertainty around the level of demand for Fund programs and ensuing staffing needs.
  - Future donor funding for CD.
- Enterprise risk management continues to be strengthened with this budget.

### Key Observations on Past Discipline and Current Pressures
- Longstanding budget discipline: a decade of flat real budgets, with a $6 million (0.6 percent) increase for security expenditures in FY 17; otherwise real-flat budgeting while enhancing work in CD, macrofinancial and macrostructural issues, governance, and external sector issues.
- Staffing increase during the last decade mainly reflects CD-related hiring funded through external resources and regularization of long-serving contractual employees as staff as part of a 2016 Categories of Employment (CoE) Reform; pre-crisis staffing otherwise largely flat.
- Emerging pressure points:
  - Unsustainable demands on staff: increased overtime and sharp reduction in leave usage; average mission length increased by about 25-30 percent in the virtual environment (survey of some country economists); temporary staff increases were funded during FY 21 through crisis-related reallocations dependent on carry forward resources.
  - Reduced buffers: budget utilization close to 100 percent pre-crisis; carry forward resources remain available but budget space to address emerging issues in a comprehensive and sustained manner has largely been exhausted.
  - Rising pressures: constrained ability to absorb new priorities without additional resources.

### Two-Pronged Budget Strategy for FY 22–FY 24
- Baseline budget (first prong):
  - Incorporates crisis response and temporary crisis impacts on Fund operations within the existing resource base, with incremental shifts to new priority areas.
  - Continued fiscal prudence: continuation of temporary crisis staffing funded through savings (sustained lower travel and continued modernization), extensive reprioritization, and allocation of general carry forward.
  - Increased carry forward limit: propose temporary increase in the general carry forward limit from 5 percent to 8 percent to support temporary needs during the FY 22–FY 24 period.
    - General Carry Forward
      - Current limit:     5 percent      $55.2 m
      - Proposed limit:  8 percent      $88.4 m
      - Current level:      4 percent      $44 m
      - FY 21 est. underspend:            $29 m
      - Allocation in FY 22:                  $60 m
- Targeted structural augmentation (second prong):
  - Purpose: address limited space to accommodate new initiatives following a decade of flat real budgets; allow a more strategic, less piecemeal approach to long-term imperatives.
  - Focus areas:
    - Climate Change
    - Digitalization and Macrofinancial
    - Fragility and Inclusion
    - Restoring Buffers
  - Design:
    - Adjustment over two to three years, returning to a real flat path at the new, higher level thereafter.
    - Funds would not be earmarked; allocation would be transparently reported ex ante at budget approval and ex post in output monitoring.
  - Requirements for augmentation request (as indicated by the Executive Board):
    - Use—specify outputs and activities that additional structural resources will support, demonstrate strategic focus on the Fund’s mandate and collaboration with partners.
      - Board discussions planned: informal briefings on climate and digital money strategy (April) and follow-on meetings (summer); CSR and FSAP Review discussions; strategy for engagement with FCS and work on inclusive growth and gender (summer).
      - Discussion of New Ways of Working (NWOW) and modernization to consider post-COVID hybrid workforce impacts and the Fund’s DC and overseas footprint, including potential costs and savings and Future of Work planning.
    - Scale—demonstrate that resource levels requested link clearly to objectives and outputs.
    - Need—evidence that efficiencies within the current envelope have been pursued; Box 1 documents extensive reprioritization over the past decade and continued practice during the crisis.
    - Sustainability—confirm expenditures are sustainable given income outlook; staff’s analysis concludes a material augmentation in the likely proposed range would be consistent with objectives for buildup of precautionary balances.
    - Commitment to ongoing budget prudence: plan to revert to a flat real budget trajectory following implementation of the increase.

### Operational and Programmatic Notes
- The Fund moved swiftly to assist membership in response to the pandemic despite remote work; efforts will continue to focus on differing paces from crisis management to recovery and addressing crisis legacies.
- Early action is critical to build capacity to contribute on climate change and digitalization, integrating these issues into surveillance, lending and CD, and ways of working.
- The needs of the most vulnerable and limiting divergence are central imperatives; the Fund should focus on areas where it is best placed to support membership and defer to other organizations on issues outside its expertise.

*Prepared by an Office of Budget and Planning team led by Maria Albino and Andrea Salerno under the supervision of Axel Schimmelpfennig (March 26, 2021).*

### 5.       Next Steps and FY22 Budget.  Notwithstanding  the  importance of moving swiftly to ramp

### 5. Next Steps and FY22 Budget

### FY22 budget stance and process
- The FY 22 budget does not include a specific augmentation request; additional time will be used to consult the membership on strategies and outputs and to engage the Board this summer on contours and parameters of a structural augmentation.
- A formal request for endorsement of overall scale, phasing and uses will be made in the fall; with endorsement, staff will incorporate the augmentation into budget requests beginning in FY 23.
- The proposed FY 22 budget reflects the baseline only, maintaining a flat real structural envelope and calling for an increase in the general carry forward limit to 8 percent.
- The budget includes continued temporary provisions to meet crisis needs, funded through both reprogramming of existing structural resources and use of carry forward.

### Key FY 21–22 budget figures (Millions of FY 21 U.S. dollars, unless otherwise noted)
- Net structural budget 1/: FY 21 = 1,186; FY 22 = 1,186.
- Transitional 2/: FY 21 = 38; FY 22 = 60.
- Total, including transitional 2/: FY 21 = 1,224; FY 22 = 1,246.
- Proposed net structural budget (current dollars): 1,214.
- Total, including transitional (current dollars) 2/: 1,275.
- Crisis needs and funding:
  - Gross needs: FY 21 = 112; FY 22 = 94.
  - Reprioritization/savings 3/: FY 21 = 95; FY 22 = 69.
  - Contingency funds/carry forward/other: FY 21 = 16; FY 22 = 25.
- Footnotes in table:
  - 1/ April 21 budget. $69m repurposed for crisis needs during FY 21.
  - 2/ FY 22 transitional incl. crisis needs funded by carry forward ($17m).
  - 3/ FY 22 total reprioritization/savings of $103m, of which $69m is applied to crisis needs.

### Budget discipline: reprioritization and savings
- On average, past budgets reprioritized about 4 percent of the aggregate budget envelope, releasing space for expansion in core areas.
- Examples of past measures and streamlining:
  - Yearly exercises since the early 2010s to streamline surveillance products, introduce e-Review, discontinue comprehensive Statistical Appendix Tables in Article IVs, and reassign staff in resident representative offices.
  - A $20 million package of measures as part of the FY 16 medium-term budget, including moving most regular policy reviews to five-year cycles, reducing frequency of program reviews, discontinuing Ex-Post Assessments, and limiting internal funding for CD available to advanced economies.
  - Dropping Chapter 2 of the WEO and the October conjunctural chapter of the Fiscal Monitor; reducing GFSR page count; integrating the spillover report into the WEO.
  - Management’s Advisory Group on Modernization and Streamlining (mid-2018) and endorsement of measures such as an upper limit of 6 FTEs spending on mandatory FSAPs (or $1.5 million equivalent) and modernization of CD.
- Modernization agenda: Net steady-state savings of $10.6 million have been identified for 1HR, CDMAP and iData.

### Pandemic response and department-level reforms
- Response to the pandemic:
  - Immediate crisis response largely met through reprioritization, delays of non-crisis work and streamlining of operational procedures.
  - About 62 staff were reallocated on an informal and temporary basis to provide direct support to teams in area departments, FIN, and SPR.
  - Most Article IVs and FSAPs were placed on a six-month hold; major policy reviews were delayed.
  - Processes for review and approval were streamlined to expedite emergency financing; the staff Annual Talent Management Exercise was significantly simplified.
- Department-level reforms included:
  - Country Operations: reduced selected issues papers; freed up space from the end of the Poverty Reduction Strategy Paper process; more frequent use of Lapse-Of-Time process; moving more Article IVs to a 24-month cycle; increased cross-departmental coordination; CD reports streamlined or replaced by presentations; increased online training.
  - Internal Support: adoption of self-service and automated translation tools; vendor contract renegotiation; hospitality and mail service reductions; investments in energy efficient equipment; automation and streamlining of financial operations; initiatives to cut waste and IT costs; modernization and digitalization of Board documents.

### Roadmap and structure of the report
- Section II looks at key medium-term issues shaping the Fund’s budget outlook, including longer-term issues underlying the need for a structural augmentation.
- Section III (and Annex III) provides an initial review of FY21 budget developments.
- Section IV details the proposed FY 22 budget overall and through four lenses: savings and reprioritization in the current cycle, allocations in terms of outputs, implications for funding priorities, and distribution of resources across departments.
- Section V looks at the capital budget, including FY 21 projected outturn and proposed FY 22 budget, initial implementation of the updated Capital Investment Framework, and a proposal (with Annex V) to address the budget impact of a shift to a cloud-based model for IT-intensive capital investment.
- Section VI considers budget risks; Section VII presents FY 22 proposed decisions.

### Medium-term outlook: context and needs
- Tradition of agility: the Fund has adapted across multiple historical episodes to define a role consistent with its mandate and to collaborate with partners.
- FY 22–24 needs: twin challenges of navigating a safe exit from the crisis and supporting a transformational recovery that addresses longer-term forces (climate change, digitalization, etc.).

### Navigating a safe exit from the crisis
- COVID-19 impacts: Many countries may not return to the pre-COVID path of economic activity for several years; uncertainty remains exceptionally high.
- Financial support and program complexity:
  - As of early March, 12 UCT arrangements have been approved in the year since the pandemic hit.
  - Another 38 members have expressed interest in new UCT programs.
  - 15 members are seeking emergency financing, for a total pipeline of 53 new Fund operations as of early March that are expected to come for Board approval over the next year.
  - Comparisons: 27 arrangements during the Global Financial Crisis and a peak of 22 during the Ebola crisis.
- Broader country engagement:
  - Bilateral surveillance and FSAP delivery have resumed; virtual CD has focused on crisis-related needs.
  - Departments are preparing to scale up in-country surveillance, lending and CD delivery as soon as feasible as part of a hybrid delivery model incorporating strengthened virtual delivery capacity.
  - Baseline budgets in the FY 22–24 period continue to prioritize crisis-related needs, generally through temporary reprioritization and use of carry forward.
  - Remaining resources will support incremental investments in debt, trade, digitalization, governance, social spending, and climate change.
- Analytical and policy work:
  - Deepening work on debt issues, insolvency and debt restructuring.
  - For FY 22, policy work will include review of financing operations (e.g., the CCRT) and the lending toolkit.
  - CSR and the FSAP Review (scheduled for end FY 21 and early FY 22 respectively) will shape surveillance for the next decade.
  - A guidance note for Surveillance under Article IV Consultation and internal training are planned for FY 22; FSAP tools and technical notes will be disseminated.
  - Continued work on the Integrated Policy Framework (IPF) to provide country teams staff and tools.
- Fund finances and resources:
  - Work is underway to prepare the case for a new SDR allocation.
  - Work will continue in the context of the 16th General Review of Quotas.
  - Staff proposes meeting temporary crisis needs and ongoing core work through reprogramming of existing structural funds and use of carry forward.
  - Some flexibility will be needed (e.g., over a 3 to 5-year period) to ensure recovery is well embedded before withdrawing all related resourcing.
  - Resource requirements related to the CSR and FSAP review will be outlined in those reports; some elements of reforms may be embedded in the proposed augmentation and others covered through normal reprioritization.

### Supporting a transformational recovery and proposed augmentation focus
- Rationale: climate change and digitalization are driving fundamental structural changes; a targeted augmentation of structural resources would advance capacity to deliver at scale while maintaining efficiency and prioritization.
- Structural Augmentation: Focus
  - Integrating climate change considerations into the Fund’s core work.
  - Retooling to address the changing financial landscape in the digital age.
  - Addressing vulnerabilities and exclusion, including in FCS.
  - Restore buffers to ensure the Fund is well positioned to respond to unexpected developments.

### Integrating climate considerations into the Fund’s core work
- Imperative: climate change already has a large impact on many members’ macroeconomic stability and growth prospects; countries will need rapid reforms, green investment, socially balanced transition policies, and resilience measures.
- The Fund’s Climate Strategy:
  - Ongoing investments in climate-related issues as membership recognizes the critical impact.
  - The Fund focuses on macroeconomic and financial aspects of climate changes, leaving mitigation target-setting, Paris agreement monitoring, sectoral policies, and specific infrastructure projects to other institutions.
  - Timeline: An informal briefing on the Fund’s role in climate change in early April will be followed by further engagement on the strategy and its costing during summer 2021.
- Policy reviews and tools:
  - The CSR lays out the strategy to integrate climate as a core Fund workstream, including a background paper on integrating climate change into Article IVs.
  - The FSAP Review proposes a framework for climate risk analysis—with a Board presentation planned for late this year.
  - Ongoing work on improving climate data and a review of Climate Change Policy Assessments (CCPAs) to broaden them beyond small states.
- Key outputs and focus areas:
  - Comprehensive coverage of macro-critical climate-related policy challenges in Article IVs; macro modeling to inform surveillance; fiscal policy advice for low-carbon transitions and resilience; monetary and financial sector policy advice to cushion climate risks on output and inflation, including greater coverage of climate risk in FSAPs.
  - CD, including CCPAs, and provision of climate change data for macroeconomic analysis and surveillance.
  - More in-depth country engagement on mitigation strategies with major emitters and assistance for countries to meet Nationally Determined Contributions.
  - More routine and explicit consideration of climate-related risks in FSAPs via development of scenarios for physical and transition risks, stress tests, and related advice.
  - Expanded coverage of adaptation and resilience building in climate vulnerable countries, including extending CCPAs beyond the current two countries a year, backed by an expanded review function for quality and even-handedness.
  - Additional considerations under discussion include a G20 initiative on climate data, consolidated reporting on Fund-relevant climate issues, and enhanced training linking macroeconomics and climate science.
  - The Fund will also reduce its own carbon footprint as it steps up policy advice on climate-related issues.

*International Monetary Fund — Excerpt from "5. Next Steps and FY22 Budget" (FY 2022–FY 2024 Medium-Term Budget)*

### Box 2. The IMF’s Work on Climate Change

### Box 2. The IMF’s Work on Climate Change

### IMF role and areas of core expertise
- Advice on mitigation measures to contain and reduce emissions through fiscal policies such as carbon taxation and other carbon pricing schemes, reduced fuel subsidies, and improved regulation.
- Guidance on adaptation: support financial and institutional resilience to natural disasters through monetary and financial sector policy advice to help cushion the impact of climate risks on output and inflation—including through covering climate risks in FSAPs. Support infrastructure investments to cope with warming-related phenomena through fiscal policy advice (revenue mobilization, public investment management, debt sustainability).
- Transition to a low-carbon economy: fiscal policy advice to facilitate and support the transition, updates to financial sector risk assessment and regulation to cover climate risks and exposure to “brown” assets, and helping countries diversify away from carbon intensive industries while mitigating the social impact on affected communities.

### Work to date — analytic, surveillance, and capacity-building activities
- Country work
  - Country teams across all regions have touched on climate issues in FY 20 or FY 21 in analytic and policy work.
  - Policy advice is provided mainly through surveillance supported by CD, including CCPAs for six small states jointly with the World Bank.
  - Staff has developed tools to evaluate carbon pricing and other policy instruments for meeting countries’ mitigation objectives.
  - FSAP risk analysis has often captured physical risks in countries prone to natural disasters, with insurance risks also being assessed in systemic countries. More recent FSAPs have explicitly assessed transition risks.
  - Climate-related materials are being developed as part of a book and online course on inclusive growth.
  - Training modules on integrating climate into macro policies are under development for external audiences.

- Multilateral surveillance and policy
  - The Fund has helped facilitate global dialogue, including through the flagships, and engagement in multilateral fora such as the Coalition of Finance Ministers for Climate Action and the Network for Greening the Financial System (NGFS).
  - The Fund has proposed a carbon price floor arrangement and guidance on how climate change could be priced in financial assets.
  - The Fund is co-leading a workstream in the NGFS on Bridging Data Gaps and working with international standard setters and IFIs to promote climate-related financial disclosures.

- Data
  - STA, in cooperation with MCM, FAD and SPR, is developing a framework for climate change indicators that will track carbons emissions; government expenditures for environmental policies; taxes and subsidies, and financing such as green bonds, including through a Climate Change Indicators Dashboard (beta version to be launched before the 2021 Spring Meetings).

- Training Fund staff
  - The internal economics training (IET) curriculum, run by ICD, features seminars by external academics and experts and includes a course on climate change developed by FAD.
  - Training modules to support integrating climate into surveillance are under development for both internal audiences.
  - ICD, FAD, RES, and SPR are also working on a Fundwide course on climate change.

- Collaboration
  - This work will continue to be done in collaboration with other institutions to leverage expertise and maintain the Fund’s focus and build its expertise on macroeconomic and financial stability implications.
  - The approach reflects the IEO’s recent recommendations to both build in-house expertise and support effective collaboration with the World Bank, recognizing that collaboration with partners itself requires resourcing.

### Organization, staffing, and capacity-building plans
- Organization
  - The Fund will need to build climate specific skills to deliver this ambitious agenda.
  - This would largely occur by hiring economists and experts to bring in staff with relevant background, supported by internal training.
  - These resources would mainly sit in functional departments and provide direct country support through participation in bilateral surveillance and CD.
  - Area departments will build expertise among fungible economists and have a central capacity to coordinate climate work and bridge to functional departments.

- Resources and recent spending on climate-related work
  - Estimated spending on climate-related work, based on initial departmental estimates (and subject to uncertainty), has increased from $16 million in FY 20 (FY 20 outturn paper) to an estimated $24 million in FY 21.
  - This includes $4.5 million in externally funded CD resources in FY 20 and FY 21 earmarked for climate-related work.
  - Under the FY 22 budget, departments plan to further increase work on climate issues through internal reallocations and new resources totaling a net $4.1 million.

*Source: ppea2021038 - Box 2. The IMF’s Work on Climate Change*

### 24.      Field Presence. The Fund’s field presence, including experts, has grown steadily in recent

### 24.      Field Presence

### Field presence: scope and recent growth
- The Fund’s field presence comprises:
  - 94 resident representative offices
  - two permanent offices
  - 17 regional capacity development centers (RCDC), mainly funded through external partners
- As of end-December 2020:
  - more than 700 personnel were posted overseas
  - including 139 non-staff resident experts in-country
  - and 457 local staff
  - accounting for 18 percent of all Fund personnel
- RCDCs have almost doubled in the last ten years.
- Footnote: Does not include about 200 FTEs of short-term experts annually that support the Fund’s field-based CD operations.

### Review of framework and planned reviews
- The current crisis and lessons on remote delivery provide an opening to reassess scale, location, and forms of field-based operations.
- Key considerations:
  - The update to the Fund’s strategy for FCS provides an early opportunity to consider the balance of HQ and field-based staff across the Fund’s functions for operations in these countries.
  - HRD plans to review the model for field-based employment over the next 2 years, recognizing benefits of stocktaking after rapid growth under a wide range of employment arrangements.
  - Broader implications to consider include facilities, security, IT infrastructure and the role of external financing.

### Resources and operational implications
- Reconsideration of how and where the Fund operates could provide:
  - more flexibility to staff
  - more efficient use of office space
- This will require investment in:
  - IT and remote working support
  - audio visual capabilities
  - new space arrangements to support a hybrid workforce expected to grow in the near term with a changing mix between HQ and field operations
- CSF and HRD are leading work to consider balance of needs and timing, ensuring member needs are met cost-effectively while maintaining the Fund as a leading workplace.

### Capacity Development (CD): demand, budgets, and priorities
- Strong CD demand:
  - A rebound of CD spending is expected from the low levels in FY 21 that were driven in large part by restricted travel.
  - Rebound reflects continued strong demand, crisis-related needs (including expected increase in programs-related CD), and expectations that travel restrictions will be lifted over time.
  - Rising program engagements will increase pressure on Fund-financing for CD.
- FY 22 budget and externally financed spending:
  - The FY 22 budget (particularly on the IMF02 side) provides space for a ramp up in CD spending as circumstances allow.
  - Externally financed spending envelopes are over 50 percent higher than projected spending in FY 21, albeit with actual spending expected to remain lower, mainly due to continued travel constraints.
  - The budget incorporates a projected $165 million in externally financed activities, with a budget ceiling on such expenditures of $210 million.
- FY 23-24 expectations:
  - Continued gains are expected in FY 23 and FY 24 as the travel rebound becomes more embedded.
  - Implementation of a carry forward for external funds could provide additional flexibility; a carry forward is currently under review with an expectation that a carry forward will be proposed in the FY 23 cycle.
- CD priorities:
  - Support for increased integration in program engagement, as program conditionality often requires complementary CD support.
  - Demand in traditional areas remains strong, alongside emerging priorities such as governance and climate change.
  - Strengthening prioritization and allocation to activities with the highest impact, drawing on improved data and tools from ongoing implementation of CDMAP and the strengthened CD governance framework.

### CD medium-term risks and mitigation
- Medium-term risks:
  - Fundraising challenges likely to persist into the medium-term, with significant competing demands for donor resources.
- Risk mitigation measures include:
  - More cost-effective delivery through rigorous results-based prioritization and shifting to blended delivery modalities with savings from some reduction in travel.
  - New financing instruments with greater flexibility, including launching of the COVID-19 CD Initiative to increase agility across existing CD funding vehicles.
  - Consideration of the scale and balance of CD within the overall Fund budget and the size of external financing, adjustments to delivery modalities and staffing approaches.
  - An augmentation of the Fund’s envelope would include space for Fund-financed CD in the areas covered by the augmentation and would help overcome fragmentation of external funding through higher fungibility of CD resources.

### Risk management: enterprise risk management strategy
- The crisis accelerated strengthening of the Fund’s risk monitoring and management functions.
- The Board is receiving quarterly updates on key crisis risks and discussed OIA’s review findings and recommendations on Enterprise Risk Management in Fall 2020.
- Actions underway:
  - Consideration of next steps based on OIA findings.
  - Elevation of leadership of the risk management function to the B5 level.
  - Allocation of resources to support assessment of options in response to OIA recommendations.
  - Further resourcing needs are being assessed as a priority.

### Fund’s income position and budget projections
- The FY 22–24 budget is consistent with:
  - a projected surplus in the Fund’s medium-term income position
  - continued progress towards the precautionary balance target
- Income projections remain well above spending under a scenario that envisages new Fund programs (projected by country desks).
- Given the relative scale of income to the Fund’s net administrative budget:
  - 10 percent of the current budget base is equivalent to about 3 percent of current income.
- Precautionary balances target:
  - Reserve accumulation to reach the new target of SDR 25 billion over the medium term is maintained in the scenario with new programs.
- Conservative scenario:
  - Assuming no additional new arrangements beyond those already approved, and excluding impact of any pension-related (IAS 19) gains or losses, operational income would still cover expenses through FY 26.
- Tableed projections (Operational Income and Net Administrative Budget FY 21-24):
  - FY21 Projected Operational Income (current programs): 3,109
  - FY22 Projected Operational Income (current programs): 4,256
  - FY23 Projected Operational Income (current programs): 4,576
  - FY24 Projected Operational Income (current programs): 4,307
  - FY21 Percent change: -2.2
  - FY22 Percent change: 36.9
  - FY23 Percent change: 7.5
  - FY24 Percent change: -5.9
  - FY21 Projected Net Administrative Budget: 1,186
  - FY22 Projected Net Administrative Budget: 1,214
  - FY23 Projected Net Administrative Budget: 1,245
  - FY24 Projected Net Administrative Budget: 1,266
  - FY21 Percent of Income: 38
  - FY22 Percent of Income: 29
  - FY23 Percent of Income: 27
  - FY24 Percent of Income: 29
  - Sensitivity (10% change in budget): 121 (FY21), 125 (FY22), 127 (FY23)
  - Sensitivity Percent of Income: 2.9 (FY21), 2.7 (FY22), 2.9 (FY23)

### FY 21 — crisis response, achievements, and budget impacts
- Agile crisis response and redeployment:
  - Beginning March 2020, the Fund responded to COVID-19 with unprecedented support while staying within the flat real budget envelope.
  - Staff were redeployed within and across departments; operational teams supported remote work arrangements.
  - Savings from travel and deferred activities were redeployed to ramp up staffing and address crisis-related needs.
- Country operations and financing (key achievements in FY 21 / CY20):
  - 83 members received support in CY20
  - 45 financing operations
  - 29 grants for debt relief
  - 45 countries benefitted from the DSSI
  - 40 remote Article IVs projected
  - 160 countries received virtual CD
    - Almost 2,000 remote CD missions
  - 87 COVID-related notes published
- Multilateral surveillance and analytic work:
  - Crisis-focused flagships and a policy tracker; special CD-related analytical notes on fiscal, monetary and financial, statistics, and legal policies.
- Policies and internal support:
  - Creation of the Short-term Liquidity Line
  - Temporary increase in access limits
  - Annual and Spring Meetings hosted virtually with record participation
  - CDMAP, Workday, and Collaboration tool introduction
  - Crisis-related staff support (IT; HR; facilities)
  - 230 staff and family relocated
- Internal operational impacts and costs:
  - WFH required swift enhancements to IT platforms and equipment; HR emergency measures allowed relocation of field-based staff and families.
  - Safety and health protocols implemented; broadcast, video and language services scaled for virtual missions and meetings.
  - These measures reinforced operational continuity but temporarily increased service costs.

### FY 21 CD delivery and budgetary impacts (projected)
- FY 21 CD Delivery (Projected):
  - $ million; % of budgeted; % change FY 20-FY 21
  - Overall: 255; 73; -16
    - Fund financed: 122; 85; -12
    - Externally financed: 133; 65; -20
      - Of which Travel: 4; 9; -92
      - ST Experts: 23; 63; -23
- Memorandum items (Impact, $ million):
  - Management Fees: -5
  - Chargebacks: -4
- Reasons for FY 21 CD spending fall:
  - Restricted travel and impact on hiring short-term experts
  - Absorption constraints for members
  - Travel-related underspend most marked in the externally financed budget due to less flexible nature of these resources
  - As reported to the Board, lower expenditure led to a shortfall in trust fund management fees and chargebacks for an overall estimated impact of around $9 million on the FY 21 administrative budget.

### Other crisis-related financial effects and staffing
- Vendor support and lost revenue:
  - Temporary arrangements negotiated with long-term vendors (on-site childcare, food services and fitness services) led to $3 million in FY 21 costs.
  - Revenues lower than projected due to WFH and travel suspension (e.g., Concordia, parking) amounted to $5 million.
  - These are expected to be largely mitigated with return to normal operations, though NWOW will have permanent impacts on some services and revenue streams.
- Maintenance of flat real budget in FY 21:
  - Crisis needs met through extraordinary reallocation within the real flat budget.
  - Savings covered 86 percent of crisis needs:
    - Just less than half met through repurposing of travel and events resources
    - 37 percent through department-level reprioritization and savings
    - Remaining 15 percent funded through emergency buffers and allocation of carry forward (about 1 percent of the structural budget)
- Temporary staffing:
  - 128 temporary positions were created to meet crisis demands during FY 21 beyond those initially budgeted.
  - Bulk of these positions allocated in November; hiring is under way and expected to continue into FY 22.
- Projected utilization and underspend:
  - A 3 to 4 percent underspend of the structural budget is currently projected, with most attributable to the general accounts and about 0.5 percent to IEO and OED together.
  - Key driver: moratorium on travel; about 70 percent of travel-related resources were reprogrammed.
  - Personnel spending was higher than projected in April due to intra-year staff increases linked to the crisis.
  - Crisis-related IT spending increased, but net spending was below budget due to delays, deferral of non-priority work, and vendor credits.
- Carry forward recommendation:
  - Staff recommends a temporary increase in the carry forward limit from 5 to 8 percent of the general administrative budget to allow full capture of projected underspend; this is consistent with experience in the global financial crisis.

*Source: Office of Budget and Planning, FY 2022–FY 2024 Medium-Term Budget (excerpts).*

### Box 3. Carry Forward

### Box 3. Carry Forward

### Carry forward policy and purpose
- Carry forward (CF) of administrative expenditures was introduced in FY 10 as part of crisis response and has been in place since, allowing approved resources to be spent beyond an annual cycle.
- Purposes: reduces incentives for inefficient end-year spending, provides flexibility in timing, and allows targeted support for transitional needs.
- Limits on sustained CF reduce risks of entrenching temporary needs.
- The policy has helped improved pre-crisis utilization to near 100 percent.
- CF limits are set for the IEO, OED, and general level and are implemented automatically in successive years until the Board approves a change.

### Historical and recent limits
- General CF limit history:
  - Rose to 6 percent following the GFC (during a period of higher structural buffers).
  - Reverted to 3 percent in FY 12.
  - In April 2020, the Board approved an increase in the general carry forward limit to 5 percent for three years in response to emerging crisis needs.
- IEO CF limit:
  - Raised to 8 percent in April 2020.
- OED CF treatment:
  - In line with streamlining, OED’s central carry forward has been discontinued and the CF limit set at a maximum of 20 percent (or two FTE advisors for each of the offices).

### Carry forward in budget execution and FY 21–22 projections
- CF reduces incentives for end-year spending and provides temporary resources to address crisis needs during the medium-term budget period.
- Current projected underspend is $40 million (3.3 percent) relative to the structural budget, mainly from the general administrative budget.
- An increase of the general carry forward limit temporarily from 5 to 8 percent is proposed to provide temporary resources to address crisis needs during the medium-term budget period.
- Projected OED underspend beyond the OED carry forward limits would be made available for the Fund’s FY 22 general administrative budget under the framework established for OED resources in FY20.
- Staff propose to mirror this treatment for the IEO underspend above its carry forward limit, in line with the proposed IEO Budget for FY22.
- Deflator: The Fund’s global external deflator is 2.3 percent for FY 22. The published value for the U.S. CPI in the January WEO Update is used for budget calculations.

### Carry forward figures and breakdown (relative to structural budget)
- Aggregate projected underspend and carry forward (FY22 proposal context):
  - Total: Underspend $40 m; Carry Forward $87 m; Carry Forward Limit $101 m
  - General: Underspend $29 m; Carry Forward $74 m; Carry Forward Limit $88 m
  - OED: Underspend $10 m; Carry Forward $12 m; Carry Forward Limit $12 m
  - IEO: Underspend $0.3 m; Carry Forward $0.5 m; Carry Forward Limit $0.5 m
- Note labels from source:
  - 1/ Relative to structural budget.
  - 2/ Includes FY20 carry forward.

### Role in financing FY 22 additional needs
- The proposed net FY 22 administrative budget of $1,214 million in current prices remains flat in real terms.
- Structural demands of $41 million (in constant FY 21 dollars) are offset by reallocations and savings efforts of the same amount, with additional expenditures to be funded through use of carry forward.
- Carry forward resources are explicitly identified as a funding source for additional expenditures in FY22, subject to limits and Board-approved changes.

### Operational treatment and governance
- CF limits are implemented automatically in successive years until the Board approves a change.
- Projected underspend above departmental CF limits (OED and IEO) may be made available to the Fund’s general administrative budget under established frameworks.
- Policy adjustments (e.g., temporary increases in limits) have been used in crisis periods to provide flexibility and support transitional needs.

*Source: Office of Budget and Planning.*

### 45.       Non-CD functional. FIN plans to channel new

### 45.       Non-CD functional. FIN plans to channel new resources to crisis workstreams, including implications for the Fund’s lending toolkit, securing availability of resources for member countries, and Sudan’s debt relief

### Allocation of new resources and departmental use
- FIN plans to channel new resources to crisis workstreams, including implications for the Fund’s lending toolkit, securing availability of resources for member countries, and Sudan’s debt relief.
- RES will leverage new resources mainly for pandemic-related work, covering new forecasting tools, assessment of the long-term impact of the crisis, and macro policies mix for the recovery phase.
- SPR will receive new resources for lending operations, including support to area departments, as well as COVID-related multilateral surveillance and work on climate change, FCS, and governance among others.
- COM will target new resources at:
  - maintenance and revamp of the policy tracker,
  - boosting regional media outreach,
  - increased writing needs,
  - resuming non-COVID work and a broader range of operations, including support to Article IVs and UCT lending programs, in addition to ongoing crisis work.

### Projected financial operations in FY 22 — allocation of net needs (Millions of U.S. Dollars)
- AFR: 19
- APD: 3
- EUR: 3
- MCD: 7
- WHD: 12
- Source: Area Departments
- Note: Figures may not add to totals due to rounding.

### Budget adjustments by department, FY 21–22 (selected figures preserved)
- Table context: Table 5. Budget Adjustments by Department, FY 21-22 (Millions of FY 21 U.S. dollars, unless otherwise noted). Sources: OBP estimates and department submissions.
- Aggregate totals:
  - Total (Approved Budget): 1,186.2
  - Transitional Funds: 37.9
  - New Structural Spending: 41.2
  - Structural Savings: 33.1
  - Net Structural Needs: 8.1
  - Transitional Funds (Crisis): 43.6
  - Area Departments Crisis Funds (sum reported): 58.8
- Select department lines (Approved Budget | Transitional Funds | New Structural Spending | Structural Savings | Net Structural Needs | Transitional Funds | Crisis Funds):
  - Area: 310.9 | 8.9 | 3.0 | 1.0 | 1.9 | 10.0 | 15.4
  - AFR: 93.6 | 2.2 | 1.2 | 0.1 | 1.1 | 1.8 | 5.8
  - APD: 45.7 | 1.3 | - | 0.0 | (0.0) | 1.5 | 2.1
  - EUR: 67.9 | 2.2 | 0.5 | 0.5 | - | 1.0 | 1.8
  - MCD: 53.3 | 1.9 | 1.3 | 0.2 | 1.1 | 2.1 | 2.0
  - WHD: 50.5 | 1.4 | - | 0.3 | (0.3) | 3.5 | 3.6
  - Functional Non-CD: 168.1 | 4.5 | 14.5 | 13.6 | 1.0 | 3.8 | 14.4
  - COM: 38.8 | 0.4 | 0.7 | 0.8 | (0.1) | 0.5 | 0.8
  - FIN: 36.1 | 0.8 | 3.7 | 3.5 | 0.2 | 0.9 | 4.6
  - RES: 36.9 | 0.9 | - | - | - | 0.7 | 3.5
  - SPR: 56.3 | 2.5 | 10.1 | 9.2 | 0.9 | 1.6 | 5.6
  - Functional CD 3/: 267.6 | 5.1 | 13.3 | 12.8 | 0.5 | 8.3 | 12.7
  - FAD: 63.0 | 1.3 | 1.2 | 3.2 | (2.0) | 4.1 | 6.0
  - ICD: 35.6 | 0.4 | 3.8 | 4.1 | (0.3) | 1.2 | -
  - LEG: 29.4 | 0.9 | 1.4 | 1.2 | 0.1 | 0.6 | 2.8
  - MCM: 88.3 | 2.3 | 6.0 | 3.2 | 2.8 | 1.3 | 3.8
  - STA: 51.2 | 0.3 | 0.9 | 1.0 | (0.1) | 1.2 | -
  - Support: 291.6 | 16.4 | 3.3 | 2.6 | 0.8 | 7.0 | 9.1
  - CSF: 103.0 | 1.8 | 0.8 | 0.8 | - | 1.1 | 5.0
  - HRD: 40.7 | 5.7 | 0.2 | 0.2 | - | 2.9 | 0.9
  - ITD 3/: 109.7 | 8.8 | 1.3 | 0.7 | 0.7 | 2.2 | 1.3
  - OBP: 5.3 | - | 0.3 | 0.3 | - | 0.7 | 0.3
  - OIA: 5.3 | - | - | - | - | - | 0.4
  - ORM: 3.2 | 0.1 | 0.6 | 0.5 | 0.1 | - | 0.5
  - SEC: 24.4 | - | - | - | - | - | 0.8
  - Small Offices: 27.3 | 1.4 | 0.7 | 0.1 | 0.6 | 1.0 | -
  - Other (OED, IEO, Center) 4/: 120.8 | 1.5 | 6.4 | 3.1 | 3.3 | 13.5 | 7.1
- Central Savings and Other 5/: 8.1 | (8.1) | (42.2)
- Grand Total:
  - Approved Budget: 1,186.2
  - Transitional Funds: 37.9
  - New Structural Spending: 41.2
  - New Structural Spending (Grand Total column): 41.2
  - Transitional Funds (Crisis): 43.6
  - Crisis Funds (Grand Total column): 16.6
- Memorandum items:
  - Estimated carry forward: 86.6
  - General (with 8% limit): 73.8
  - OED: 12.3
  - IEO: 0.5

### FTE changes by department, FY 21–22 (selected figures preserved)
- Table context: Table 6. FTE Changes by Department, FY 21-22 (FTEs). Source: OBP estimates and department submissions.
- Aggregate totals:
  - Total (excl. donor financed) (Approved Structural FTEs): 2,876.5
  - Transitional FTEs: 68.0
  - New Structural FTEs: 99.5
  - Structural Reductions: 90.0
  - Net Structural Needs: 9.5
  - Transitional FTEs (Crisis): 56.7
  - Crisis FTEs: 135.0
  - Grand Total (including donor financed): 2,974.2 | 68.0 | 99.5 | 90.0 | 12.9 | 56.7 | 135.0
- Select department lines (Structural FTEs | Transitional FTEs | New Structural FTEs | Structural Reductions | Net Structural Needs | Transitional FTEs | Crisis FTEs):
  - Area: 779.7 | 19.8 | 5.0 | 4.2 | 0.8 | 19.6 | 46.0
  - AFR: 223.9 | 5.8 | 3.0 | - | 3.0 | 3.0 | 18.0
  - APD: 113.4 | 3.3 | - | 0.2 | (0.2) | 3.0 | 7.0
  - EUR: 175.4 | 4.6 | - | 3.0 | (3.0) | 3.0 | 5.0
  - MCD: 134.5 | 2.8 | 2.0 | 1.0 | 1.0 | 4.0 | 6.0
  - WHD: 132.5 | 3.3 | - | - | - | 6.6 | 10.0
  - Functional Non-CD: 498.5 | 12.0 | 50.0 | 46.9 | 3.1 | 10.9 | 45.0
  - COM: 90.0 | 1.3 | 1.0 | 1.0 | - | 1.0 | 1.0
  - FIN: 126.5 | 1.3 | 13.1 | 13.1 | 0.0 | 2.0 | 14.0
  - RES: 111.5 | 2.3 | - | - | - | 3.0 | 11.0
  - SPR: 170.5 | 7.1 | 35.9 | 32.8 | 3.1 | 4.9 | 19.0
  - Functional CD 3/: 725.2 | 11.1 | 40.6 | 36.0 | 4.6 | 13.6 | 38.0
  - FAD: 160.5 | 1.3 | 4.0 | 3.0 | 1.0 | 2.0 | 18.0
  - ICD: 123.5 | 1.3 | 13.8 | 13.9 | (0.1) | 3.3 | -
  - LEG: 83.2 | 2.0 | 3.0 | 3.0 | - | 1.0 | 8.0
  - MCM: 223.3 | 6.5 | 17.6 | 13.0 | 4.7 | 4.9 | 12.0
  - STA: 134.8 | - | 2.2 | 3.2 | (1.0) | 2.3 | -
  - Support: 533.0 | 21.9 | 3.0 | 3.0 | - | 8.6 | 6.0
  - CSF: 162.2 | 1.3 | 1.0 | 1.0 | - | 1.0 | -
  - HRD: 110.0 | 20.3 | - | - | - | 6.6 | -
  - ITD 3/: 153.1 | 0.3 | - | - | - | - | -
  - OBP: 15.7 | - | 1.0 | 1.0 | - | 1.0 | 1.0
  - ORM: 10.0 | - | 1.0 | 1.0 | - | - | 2.0
  - SEC: 66.0 | - | - | - | - | - | 3.0
  - Small Offices: 63.5 | 3.3 | 1.0 | - | 1.0 | 2.0 | -
  - Other (OED, IEO, Center): 276.7 | - | - | - | - | 2.0 | -
  - Donor financed: 97.7 | - | ... | ... | 3.4 | ... | ...
  - Grand Total: 2,974.2 | 68.0 | 99.5 | 90.0 | 12.9 | 56.7 | 135.0

### CD departments and functional adjustments (paragraph 46)
- FAD will receive transitional resources to expand work in tax and expenditure policy and continue work on Sustainable Development Goals.
- ICD repurposed resources, including from HQ-based training, to revamp its training program and ramp up country-tailored TA for strengthening macroeconomic forecasting and policy analysis and will receive resources for a FCS coordinator as well as transitional resources to lead the CDMAP Project.
- LEG will receive resources related to the enhanced governance framework and work on fintech.
- New funds will help MCM provide direct and policy support to area departments on crisis-related topics, prioritizing debt issues, financial surveillance/FSAPs with focus on crisis-related risks, cybersecurity, fintech (including digital currencies), the IPF, and climate change.
- STA will receive new resources to address statistical challenges arising from the crisis, deepen methodological work, step up work on climate and iData, support the new G7/G20 international data initiative, and meet CD needs, including in FCS.

### Support departments (paragraph 47)
- CSF: New resources mainly to address crisis response through vendor support for increased video and multimedia services, business continuity and health screenings, copyright issues; balancing revenue shortfalls from the Concordia, parking, and tenant leases; resources also provided for third party risk management.
- ITD: Resources to continue support of WFH modalities, and move towards an improved service delivery model based on managed service providers.
- HRD: Resources to enable completion of CCBR implementation, enhancements to 1HR, consolidation of the new integrated service delivery model, and continued support for the sharp increase in crisis-related hiring.
- SEC: Focus on promoting effective membership engagement, including strategic and efficient Board interactions, implementing hybrid meeting approaches, and successful 2021 Annual Meetings and 2022 Spring Meetings.

### FY 22 Capital Budget — overview (paragraphs 48–50 and Box 4)
- Capital spending remains high by historic standards but has declined from peaks associated with HQ1 renewal.
- FY 21 spending split (as reported):
  - IT-related: $56.3 million
  - Facilities-related: $42.4 million
- IT:
  - Large-scale IT-intensive projects and prerequisite projects represent the bulk of current IT capital spending.
  - Modernization expected to enhance productivity and generate savings that can be rechanneled to core operations, with savings from 1HR and CDMAP coming online in FY 21 and FY 22, respectively.
  - Following heightened modernization investment, IT-linked capital expenditures expected to decline in the steady state, with a portion of costs replaced by cloud-based subscriptions.
  - ITD is advancing restructuring to better meet future needs and a more agile, cost-effective delivery model.
- Facilities:
  - Focus shifted from HQ1 renewal to timely updates, repair, and modernization (incorporating energy-efficient and sustainable investments where possible).
  - FY 21 execution affected by COVID-19 shutdown and supply chain delays.
  - New investments to be lower in the next year to complete delayed projects and allow CSF to focus on crisis-related needs.
  - Future improvements will incorporate lessons from remote work experience, NWOW, and questions around DC and overseas footprint.
- Capital Investment Framework (CIF):
  - CIF approved in FY 21; updates classification of investment projects and refines governance, procedures, and reporting.
  - Implementation advances by OBP, ITD and CSF; advisory group initiated for facilities-related priorities.
  - CIF elements implemented:
    - Board Oversight: Board endorsement of CBAs pre-implementation for large projects; periodic updates on modernization programs.
    - Governance Mechanisms: Operationalized for IT and facilities; clarified roles for CBIT and a corporate Program Management Office; launched Corporate Services Facilities Strategic Advisory Committee (December 2020).
    - Prioritization Framework: Standardized criteria including Strategic fit, Financial costs and benefits, Institutional risk mitigation, IT Enterprise Architecture consistency, and Capacity to Deliver.
    - Costs/Benefits: Systematic assessment of upfront and ongoing costs/benefits; CBAs monitored and updated.
    - Targeted monitoring and rebalancing of capital portfolio to reprioritize as needed.
    - Risk and Change Management: OIC and OIA involvement in readiness assessments and project risk reporting.
- Budget and the Cloud (proposal highlights):
  - Cloud subscription costs will be presented with the capital budget each year to allow tracking of overall capital and cloud costs.
  - The scale of cloud subscription costs relative to the IT capital envelope will inform deliberations on sizing the overall IT capital envelope.
  - Capital investments in IT expected to decline over time as cloud adoption increases.
  - Cloud costs will follow CIF rigor and governance, including decision-making, reporting and oversight.
  - Proposal to be implemented within a framework of strong Fund cloud financial management, forecasting, and reporting practices.
- Figure and annex references: Figure 15. Capital Spending, FY 03-24 (Millions of U.S. Dollars) and Annex V referenced; FY 21 estimated, FY 22-24 projected. Does not include the IT cloud capital equivalent.

*Source: IMF FY 2022-FY 2024 Medium-Term Budget (excerpts provided).*

### 51.      Proposed budget. The overall capital budget proposal (including the IT cloud capital

### 51.      Proposed budget

### Overall proposal
- The overall capital budget proposal (including the IT cloud capital equivalent defined below and Annex V) is $79 million (Table 7).
- The FY 22 proposal is $19.7 million less than FY 21’s budget and $8.9 million lower than the projection for FY 22 in last year’s budget.
- This represents a reduction of about $18.9 in facilities and $0.8 million in IT-related expenses versus FY 21, respectively.
- Estimated carry-forward balance from FY 21 is about $60 million versus $45 million in FY 20, under provisions allowing use of capital funds over a three-year period.
- The proposal is based on estimated spending and staff will reallocate within the portfolio as required by emerging needs or changes.

### C. Facilities Capital — crisis response and FY 22
- Crisis-driven reprioritization in FY 21: delaying non-critical projects, accelerating some back-of-house and high staff impact construction projects, and prioritizing pandemic-response investments.
- Net impact: lower-than-budgeted spending in FY 21 and higher balance carried forward (about $60 million).
- Proposed FY 22 facilities budget: $23.5 million.
  - $18.9 million less than the FY 21 budget.
  - $2.5 million lower than projected FY 21 spending.
  - $11.9 million lower than was estimated for FY 22 last year.
- FY 22 planned facilities lifecycle investments include:
  - Standard audio-visual equipment replacements.
  - First phase of HQ1 elevator refurbishment.
  - Remediation of HQ1 air/humidity issues.
- FY 22 new investments include:
  - Acoustics remediation in conference rooms for virtual meetings.
  - Increased shower/locker amenities for bikers as part of the greening effort.
  - Configuration of unused space in HQ1 (descoped during the HQ1 Renewal project).
- A portion of the budget earmarked for recurring tenant renovations is being reprioritized to support the “future of work” effort; contingency funds to address immediate needs until a longer-term space use strategy is formulated.
- Medium-term outlook: estimated facilities capital budget reflects a return to pre-pandemic levels (Annex VI); amounts are indicative due to pandemic-related uncertainties. Previously indicated workplace improvement projects (relocation of HQ1 Bistro, new Visitor’s Entrances, HQ1 Auditorium renovation) are on hold.

### D. IT Capital — FY 22 proposal and key projects
- Proposed IT capital budget appropriation for FY 22 is $46 million.
  - $10.3 million lower than in the FY 21 budget.
  - On par with the projected FY 21 spend.
  - $6.5 million lower than was expected at the time of last year’s budget.
- Large modernization programs and pre-requisite projects expected to drive FY 22 spending.
- Key FY 22 needs — Key Modernization Projects (and pre-reqs) total $30.7 million in FY 22:
  - 1HR (total project entries show 46.1 in Approved in Previous Years, Estimated Spending at Year End 46.1, Remaining estimated approved budget 0.0): modernizes HR services; two Releases implemented in March and November 2020; Release 2 being recalibrated; an updated CBA reflecting additional resource needs will be presented to the Board in April 2021. FY 22 expenditures will be accommodated within the proposed capital budget request.
  - CDMAP ($3.6 million in FY 22): single platform for management and administration of CD operations; Release 2 planned for April 2021 and Release 3 for August 2021; project expected to conclude on time in fall 2021.
  - iData ($6.6 million in FY 22): modern economic data lifecycle management platform; implementation commenced after CBA approval in July 2020; program consists of six phases concluding in Q3 FY 24.
  - KM ($8.5 million in FY 22): new document management system and enterprise search; Enterprise Search implementation completed; KM implementation expected to be completed by Q3 FY 23.
  - iDW ($2.0 million for scoping in FY 22; overall costs being assessed): restructured initial focus on teamwork in a virtual environment; five modules; overall CBA to be presented to the Board in Q2 of CY 21.
  - Prerequisite projects include: Corporate Data Warehouse ($2.4 million in FY 22) and IAM Replacement ($1.5 million in FY 22).
- Lifecycle replacements and IT infrastructure total $6.1 million for FY 22: upgrades of remote office infrastructure, network equipment, servers and storage capacity, and replacement of a portion of personal computers.

### Modernization benefits and budget savings
- Modernization programs deliver financial and non-financial benefits: improved productivity, reduced risks, and some direct budget savings that can be reallocated.
- Specific savings estimates:
  - 1HR will provide a net $6.5 million in annual savings (after ongoing license and related costs). These savings have been captured in the structural budget since FY 21, with $2 million in transitional resources to support program implementation in FY 22 and similar project costs through the program period. Additionally, $1.7 million in gross ITD savings will be delayed due to changes in the 1HR program schedule.
  - CDMAP will deliver net annual savings of $3.4 million from administrative efficiencies and capturable productivity gains, beginning in the fourth quarter of FY 22. For budget purposes, the full structural benefit is reflected in FY 22, with offsetting transitional funding for the first part of the year.
  - iData will reduce annual administrative costs by a net $0.7m through efficiency improvements and decommissioning of the legacy solution; benefits begin to be captured in FY 24.
  - The first iDW module (collaboration tools) will deliver $0.4 million in annual savings through streamlining of tools and licenses. The full iDW CBA will be presented in FY 22 Q1.

### Key budget risks and mitigations
- Overall: Fall 2020 survey indicated a continued uptick in budget risks, perceived as moderate relative to Spring 2020. Significant residual risk remains due to external drivers.
- Staff health and safety:
  - Pandemic ongoing with high case numbers; mitigation includes continuation of WFH until safe opening conditions; evacuations for overseas staff; cleaning, touchless entrances/exits, temperature scanning in place.
  - The crisis will affect spending via higher occupational health-related spending.
- Program activity:
  - Large uncertainties on pandemic duration and impact on demand for Fund services.
  - Departments project baseline program work to remain elevated, with Fund lending shifting from emergency financing towards more complex UCT programs.
  - Program requests beyond budget projections would require further reallocation of staff and budget resources.
  - Mitigations: periodic ORM updates on program activity scenarios, incorporation of risk into budget planning, and risk-based resource allocation.
- Information security:
  - Elevated cyber-attack risks due to crisis and WFH shift.
  - New Chief Information Security Officer focusing on Governance, Risk, and Compliance (GRC) programs and Advanced Threat Protection (ATP) programs encompassing the Digital Security Strategy.
- Business transformation:
  - Implementation issues in transformational modernization projects could absorb personnel resources and reduce envisaged savings.
  - Mitigations: strong internal controls, close PMO monitoring, OIC change management support, governance oversight by the CBIT and steering committees, implementation of Third-Party Risk Management (TPRM) to identify and monitor procurement-stage and residual risks.
- CD fundraising:
  - Competing donor demands could lead to fundraising shortfalls, notably for regional CD centers.
  - Mitigations: engage donors to increase flexibility of trust fund use and make provisions for budget shortfalls; some reduction in CD delivery may be needed if shortfalls persist.
- Staffing for crisis work:
  - Increasing staff levels may take longer-than-envisaged; mitigation includes maintaining a pool of identified potential candidates.
  - Delays in hiring risk Fund’s crisis response and create persistent staff pressures; from a budget perspective, materialization of this risk would temporarily create budget space, while unwinding crisis-level staffing requires careful workforce planning.

*Source: ppea2021038 - 51.      Proposed budget.*

### 59.      Risk mitigation activities embedded in the budget will help to reduce risk, but

### 59.      Risk mitigation activities embedded in the budget will help to reduce risk, but significant residual risk remains.

### Risk assessment and mitigation framework
- OBP will continue to update the Board on evolving cost estimates for risk events specific to the budget.
- First response to unforeseen costs: seek reallocation. Second response: reductions in non-country work.
- Final resort if multiple risks materialize: seek further temporary resources.
- Similar action would be needed if the unit cost of mission travel increases.
- Classification of Impact of Risks and Mitigating Actions:
  - Minor Risks (<$3 million): Departments make internal reallocations and trade-offs; as a second line of defense, draw on Fund-wide contingency.
  - Moderate Risks ($3–10 million): Internal reallocation and contingency, plus some intradepartmental reallocations; departments identify areas of underspending within the year to facilitate reallocation.
  - Major Risks ($10–32 million): Fund would request departments identify contingency measures for reallocation to affected areas.
  - Critical Risks (>$32 million): Impacts greater than the available carry forward resource pool would require a request to the Board for increased budgetary resources; such a request only if other efforts prove insufficient.

### Key statistics and limits (from Table 10 / related text)
- Net administrative budget (Total): 1,213.5
  - General (other administrative expenditures): 1,130.2
  - OED: 76.4
  - IEO: 6.9
- Receipts (Total): 245.0
  - General: 243.5
  - OED: 1.5
  - IEO: 0.0
- FY 21 carry forward (upper limit) (Total): 103.9
  - General: 88.4
  - OED: 14.9
  - IEO: 0.5
- Total gross expenditures (limit) (Total): 1,562.4
  - General: 1,462.1
  - OED: 92.9
  - IEO: 7.4
- Capital budget (Total): 79.0
  - Building facilities: 23.5
  - Information Technology: 46.0
  - Cloud: 9.5
- Memorandum items:
  - Net administrative budget in mil. of FY21 U.S. dollars (Total): 1,186.2
    - General: 1,104.8
    - OED: 74.7
    - IEO: 6.7
  - Carry forward, upper limit (in percent) shown: 8.0 for General, 20.0 for OED, 8.0 for IEO; n.a. for Total.

- Notes and special items:
  - The current projected total carry forward based on projected underspend for FY21 is $87 million. The precise amount will be determined when end-year financial books are closed.
  - Total gross expenditure limit to increase by an estimated $8.3 million from OED and IEO excess savings above their carry forward limit for underspend of FY21 resources. Precise amount will be determined when FY21 end-year financial books are closed.
  - Adjusted to reflect proposed carry forward limit increase from 5 percent to 8 percent.
  - The actual amount that can be carried forward is the lesser amount of the underspend in the current year or the specified ratio (shown in the table) of the current year's net administrative budget.

### Summary proposal for FY 22 (appropriations and ceilings)
- Separate appropriations and expenditure ceilings proposed for:
  - Offices of the Executive Directors (OED)
  - Independent Evaluation Office (IEO)
  - Other administrative expenditure in the Fund
- Capital budget components: building facilities, information technology, and IT cloud capital equivalent.

### Proposed decisions submitted to the Executive Board
- Decision 1: Administrative Budget for the Fund, FY 2022
  - A. Approve appropriations for net administrative expenditures for Financial Year 2022 in the total amount of US$1213.5 million, of which:
    - up to US$76.4 million may be used for administrative expenditures of the Offices of Executive Directors;
    - up to US$6.9 million may be used for administrative expenditures of the Independent Evaluation Office;
    - up to US$1130.2 million may be used for other administrative expenditures of the Fund.
  - B. Authorize carry forward of amounts appropriated for FY 2021 not spent by April 30, 2021, to be used in FY 2022 in a total amount of up to US$103.9 million, with sub limits:
    - US$14.9 million for the Offices of Executive Directors;
    - US$0.5 million for the Independent Evaluation Office;
    - US$88.4 million for other administrative expenditures of the Fund.
  - C. Approve a limit on gross administrative expenditures in Financial Year 2022 in the total amount of US$1562.4 million, with sub limits:
    - US$92.9 million for OED administrative expenditures;
    - US$7.4 million for IEO administrative expenditures;
    - US$1462.1 million for other administrative expenditures of the Fund.
  - D. The appropriations for “other administrative expenditures of the Fund” and the “limit on gross administrative expenditures” for FY 22 set out in paragraphs A and C will be increased by the amount of:
    - (i) the OED excess underspend above the individual office carry forward limits and underspend from OED central resources from FY21; and
    - (ii) the IEO underspend above the carry forward limit, as determined in the FY 21 year-end closure of the Fund’s financial books.

- Decision 2: Budgetary Treatment of Cloud Subscription Costs
  - The budgetary treatment of cloud subscription costs within the Capital Budget Framework shall be as set out in paragraph 4 of Annex V.

- Decision 3: Capital Budget Appropriations for Financial Year 2022
  - Approve appropriations for capital projects underway or beginning in FY 2022 in the total amount of US$79 million, applied to:
    - (i) Building Facilities: US$23.5 million
    - (ii) Information Technology: US$46 million
    - (iii) IT Cloud Capital Equivalent: US$9.5 million

### Budget concepts and carry forward mechanics (Annex I)
- Financial year (t): May 1(t-1) to April 30(t). Example: FY 22 = May 1, 2021 to April 30, 2022.
- Administrative budget relationship:
  - Gross (total spending envelope) - Receipts (donor funding + revenue) = Net (spending that needs funding)
- Total Available Resources = Net + Carry Forward
- Carry forward (CF):
  - Right to spend budget allocations beyond 12 months.
  - CF limits set for IEO, OED, and general level for other administrative expenses.
  - Historical CF changes: rose to 6 percent following the GFC, reverted to 3 percent in FY 12; in 2020 Board approved increase in general CF limit from 3 to 5 percent and IEO’s CF limit from 5 to 8 percent for the following three years; OED central carry forward discontinued and OED CF limit set at a maximum of 20 percent (or two FTE advisors for each of the offices).
  - CF calculation: CF_t = min(U_t, x B_t), where:
    - U_t = underspend in current FY (B_t + CF_{t-1} – E_t)
    - B_t = net administrative budget in current FY
    - CF_{t-1} = carry forward from previous FY
    - E_t = net expenditures in current FY
    - x = ratio limit of CF
- Global external deflator: Starting in FY 21, the global external deflator is the U.S. CPI projection as published in the most recent WEO which is the January WEO Update.
- Capital budget: finances investments in information technology and building improvements and repairs; available for a period of three years, after which unspent appropriations lapse.
  - Project inclusion criteria:
    - acquisition of building or IT equipment;
    - construction, major renovation, or repairs;
    - major IT software development or infrastructure projects.

### FY 21 projected outturn, reprioritization, and crisis response (Annex III)
- FY 21 required rapid shift in core priorities to address the crisis, generating new demands and additional resource needs.
- Departments identified gross crisis needs of $112 million in FY 21.
  - Departments identified $43 million in reprioritization and related savings, offsetting about 40 percent of the gross needs.
  - Remaining net needs: $69 million, including 128 additional positions.
  - Net needs covered through repurposing travel and events resources, maintaining smaller buffers than planned, and higher prospects of using the carry forward.
- FY 21 actions and staffing:
  - 128 positions created:
    - 74 positions for direct country support in area departments and functional departments (FAD, MCM, SPR).
    - 42 positions for reviewing country documents and policy/analytical crisis work.
    - 10 positions in SEC and small offices for crisis-related pressures.
    - 2 positions to support enterprise risk management.
  - Crisis positions allocated in October; hiring under way but not all positions expected to be filled by end of financial year.
- Externally financed spending:
  - Externally financed CD spending projected to fall by about 20 percent to $133 million, or 65 percent of budget.
  - Expected impact on Fund-financed budget: around $9 million ( $5 million from lower trust fund management fees and $4 million from lower chargebacks).
- Preliminary estimates of FY 21 outturn suggest significant underspend with risks in both directions:
  - Underspending driven by pace of hiring for crisis positions and remaining travel budget allocation.
  - Corporate and IT services, building maintenance, and the virtual Annual Meetings also contributed to underspending.
- Shifts in work focus:
  - First half of FY 21: shifted towards lending and multilateral surveillance and away from bilateral surveillance and CD delivery.
  - Many workshops and conferences canceled or postponed; some FSAPs temporarily delayed and resources redirected to direct country support.
  - Bilateral surveillance gradually resumed in second half of fiscal year.
- Projected execution and receipts:
  - Expected aggregate under execution of about 3 percent, driven by lower spending in non-personnel categories.
  - Personnel spending projected to exceed the structural budget due to additional crisis resources; covered by savings from reduced travel and increased carry forward allocation.
  - Vacancy rate higher due to expected lags in ramping up crisis-related hiring.
  - Receipts from externally funded CD activities expected to be about 23 percent lower than FY 20 levels ($199 million).

*Source: Office of Budget and Planning, FY 2022–FY 2024 Medium-Term Budget (excerpt).*

### 10.       With travel restrictions and the shift to virtual events, $53 million were repurposed  to

### ppea2021038 - 10.       With travel restrictions and the shift to virtual events, $53 million were repurposed  to

### Travel, virtual events, and repurposed funds
- $53 million were repurposed to finance new spending due to travel restrictions and the shift to virtual events.
- Departmental travel budgets were reduced by almost 95 percent during FY 21.
- 15 percent of the overall travel budget was held centrally in case travel could have resumed in the second half of the year.
- Virtual Annual Meetings contributed to overall savings and provided ideas for increased virtual events in the future.

### Building operations, IT, contractual services, and projected underspends
- Overall spending on building operations and other expenditures is projected to be below the structural budget by about $14 million.
- Continued shift to WFH arrangements (began during the last quarter of FY 20) affects FY 21 spending.
- Continued lower building occupancy is expected to decrease spending by $2 million, mostly due to reduced costs for utilities.
- An underspend of $3 million is projected for IT services due to a change in vendor services; support to staff for IT equipment to WFH will slightly offset the decrease in IT spending.
- Spending on contractual services is well within the approved budget allocation and has been affected by virtual format of the Annual and Spring Meetings.
- The projected outturn of other cost categories is broadly in line with the budget.

### Staff, vacancy, and FTEs (summary findings)
- Vacancy rate trends are presented for FY 12–21 (percent, relative to total FTEs) with FY 21 (Proj.) shown relative to structural and working vacancy measures.
- Total Budgeted Staff Positions vs Projected Outturn by Department Type, FY 21 (FTEs, Fund and Donor Financed) indicates budget vs projected outturn differences by area and functional type.
- Selected numeric FTE comparisons (FY 21 budget vs projected outturn, as displayed): Total 208 211 212 198 (Budget / Outturn / Budget / Proj. outturn across categories shown in source figures).

### Security spending
- Security spending is projected at about $42 million in FY 21—an uptick in spending of about $3 million from last year.
- Drivers of higher field security spending: evacuations, in-country security needs in High Risk Locations (HRL), and heightened international security surveillance.
- Business Continuity saw a marginal increase reflecting demands due to COVID-19.
- Increases were offset by reduced security needs at HQ and lower IT security costs due to vacancy lags and reductions in security monitoring and licensing costs expected to return to historical levels next year.
- Note: Starting FY 19, recalibration of IT security categories.

### Receipts and revenue shortfalls
- Receipts are projected to come in at about $90 million below budget, largely driven by the drop in externally financed activities.
- A decrease of over 20 percent in receipts from externally financed CD activities, relative to FY 20 levels ($133 million), is expected in FY 21.
- Drivers of revenue losses: travel ban and demands from recipient countries leading to lagged externally financed CD; suspended parking fees at headquarters; rent forgiveness for the retail tenant; sharply lower utilization of the Concordia hotel due to suspension of travel.
- Policy to mitigate Concordia utilization loss: staff traveling to Washington D.C. are required to utilize the Concordia to maximize utilization.

Key receipts table figures (FY 20 Outturn, Budget, FY 21 Proj. outturn)
- Total: 204.3, 242.8, 154.2
- Externally financed capacity development (direct cost only): 168.1, 205.8, 133.2
- General receipts: 36.2, 37.0, 21.0
- Of which: Administrative and trust fund management fees 1/: 11.8, 14.4, 9.3
- Publications income: 0.8, 2.7, 0.1
- Fund-sponsored sharing agreements 2/: 2.3, 3.5, 2.4
- HQ2 lease 3/: 2.3, 1.3, 0.5
- Concordia: 2.8, 3.8, 0.5
- Parking: 2.6, 3.4, 0.1
- Corporate, Travel and P-cards rebates/bonuses: 1.3, 0.4, 0.2

Notes from receipts table:
- 1/ Trust fund management fee of 7 percent under the new financing instrument.
- 2/ Includes reimbursement principally provided by the World Bank for administrative services provided under sharing agreements.
- 3/ Lease agreement with the World Bank expired. FY 20 includes Credit Union and retail tenants.

### Selected policy reviews and budgetary implications (Annex IV summary)
- Multiple reviews and evaluations scheduled or ongoing in CY 20–21 with budgetary impacts largely to be considered as part of the FY 22 or FY 23 budget processes.
- Examples:
  - Comprehensive Surveillance Review: formal review scheduled for April 2021; cost implications would likely impact FY 23 budget once guidance note is prepared.
  - FSAP Review: formal review scheduled for May 2021; proposed ramping up of macrofinancial and climate/digital payments work would be included in proposed structural budget augmentation.
  - Toward an Integrated Policy Framework: budget impact reflected in FY 22 departmental demands; additional impacts to be determined for FY 23.
  - Review of Debt Sustainability Framework for Market Access Countries: proposes new methodology; increased automation expected to keep changes broadly cost neutral.
  - Many lending, COVID-19 response, access limits, and concessional financing reviews: budgetary impacts to be considered as part of the annual budget process.

### Shift to cloud-based IT strategy and OIA recommendations (Annex V)
Findings and industry trends:
- The Fund is shifting from capital-intensive, on-premise IT development to cloud subscription-based solutions.
- Box 1 industry trends (as cited by OIA):
  - By 2024, more than 45 percent of IT spending on system infrastructure, infrastructure software, application software and business process outsourcing is expected to shift from traditional solutions to the cloud.
  - The global public cloud infrastructure market is expected to grow 35 percent in 2021.
  - In 2020 Cloud vendors reported high year-over-year growth, with customers leaning heavily on the cloud to help adapt to the new reality post pandemic.
  - By 2022, over 90 percent of enterprises worldwide will be relying on a mix of on-premises/dedicated private clouds, multiple public clouds, and legacy platforms to meet their infrastructure needs.
  - An April 2020 survey of 50 CIOs found respondents expected to see the proportion of total workload done on-premise drop from 59 percent in 2019 to 38 percent in 2021, a reduction of 41 percent.

OIA advisory recommendations and staff proposal:
- OIA provided advisory recommendations to better manage cloud costs: improve transparency, decision-making and oversight over cloud costs; strengthen alignment with the Board-approved Capital Investment Framework.
- OIA proposed establishing a distinct funding category for cloud subscriptions and licenses (presented together with the capital budget) to better equip the Fund’s budgeting model for cloud investments.
- Benchmarks: seven out of eight IFIs surveyed reserve funds to pay for ongoing cloud cost commitments; World Bank model conceptually aligned; only 25 percent of surveyed IFIs have started building specialized tools for cloud financial management.
- Staff proposal (in keeping with OIA recommendations):
  - Record and report cloud subscriptions separate from the administrative budget and present cloud subscription costs with the capital budget each year to allow tracking of overall capital and cloud costs.
  - Specifically, cloud subscription costs will be identified as IT Cloud Capital Equivalent and included as a sub-category within the capital budget, along with Facilities and Information Technology.
  - Cloud costs would follow the rigor and governance of the capital investment framework, including decision-making, reporting and oversight.
  - The framework will combine a multi-year portfolio approach and, at the project level, ex-ante consideration of the budgetary impact of cloud subscriptions; capital investments and cloud licenses will be considered in an integrated manner at investment approval.
  - Monitor expected increase in cloud subscription costs at portfolio and individual project levels to ensure sustainability; build robust cloud financial management practices and tools to support forecasting, capturing, and reporting of cloud costs and spends.
  - Continue full operationalization of the updated Capital Investment Framework including roles and responsibilities, prioritization, oversight and reporting.

*Source: Office of Budget and Planning.*

### Annex VI. Long-Term Capital Plans

### Annex VI. Long-Term Capital Plans

### Overview
- The long-term facilities capital plan (LTP) covers the portion of the budget that relates to the replacement of equipment, critical building systems and renovations for HQ1, HQ2 and Concordia.
- LTP projects are a subset of the overall facilities capital budget; other facilities improvement projects are planned within a shorter timeframe.
- The LTP is informed by third-party Facilities Condition Assessments (FCA) conducted every three to five years.
- FCAs consider the age of the assets and best practice assumptions on the useful life to establish broad parameters for replacement costs.
- As end-of-life milestones are reached, engineering and other feasibility studies are performed to confirm condition and need to replace the asset.
- The requested appropriation for a given year is based on actual needs and may reflect an acceleration or delay compared to assumptions in the LTP.

### Facilities: lifecycle timing and projections
- Updated projections for facilities lifecycle replacements show an increase in FY 25 in anticipation of HQ2 end of life replacements and updates.
- FY 25: HQ2 will be 20 years old; updates to building systems and finishes, which will have reached the standard life expectancy, will begin.
- Higher occupancy during the HQ1 renewal has also impacted the condition of systems and furnishings.

### IT: long-term plan and trends
- The IT infrastructure long term plan covers network equipment, servers, storage, and end-user devices.
- The updated LTP indicates an overall reduction in the medium-term, mainly resulting from migrations to cloud platforms.
- This reduction is somewhat offset by higher costs for technologies that provide network security services.
- FY 22-24 medium-term budget (MTB) includes a refresh of the remote office infrastructure, personal computer (PC), and Mobile devices.
- After FY 23, the plan reflects a rolling 5-year lifecycle replacement schedule for PCs and a reduction in remote office infrastructure related to cloud initiatives.
- Migration of applications and the business continuity center to the cloud have reduced server and storage expenditures; these impacts are quantified in cost-benefit analyses of relevant capital projects.

### Facilities Capital Plan (illustrative timeline)
- The source includes a Facilities Capital Plan, FY 22-36 (Millions of U.S. dollars) showing the FY21 Plan and FY22 Plan over FY22–FY36 with lifecycle items such as HQ2 systems replacements and furniture replacement. (Chart present in source.)

### Capital expenditures: selected figures from Table 6, FY 15–21
- FY 15
  - New appropriations (11): 22.0; 29.8; 0.0; 0.6; 3/ 52.4
  - Total funds available (12) = (10)+(11): 41.2; 42.6; 313.1; 0.6; 397.4
  - Expenditures (13): 10.5; 29.3; 95.7; 0.3; 135.8
  - Lapsed funds (14): 0.6; 0.3; 0.0; 0.3; 1.2
  - Remaining funds (15) = (12)-(13)-(14): 30.1; 12.9; 217.4; 0.0; 260.4
- FY 16
  - New appropriations (16): 14.4; 27.7; 132.0; 4/ 174.1
  - Total funds available (17) = (15)+(16): 44.5; 40.6; 349.4; 434.5
  - Expenditures (18): 14.6; 25.8; 90.1; 130.5
  - Remaining funds (20) = (17)-(18)-(19): 29.4; 14.7; 259.2; 303.4
- FY 17
  - New appropriations (21): 32.5; 28.0; 0.0; 60.5
  - Total funds available (22) = (20)+(21): 62.0; 42.7; 259.2; 363.9
  - Expenditures (23): 17.9; 27.9; 76.3; 122.1
  - Lapsed funds (24): 5.4; 0.2; 0.0; 5.6
  - Remaining funds (25) = (22)-(23)-(24): 38.7; 14.6; 182.9; 236.2
- FY 18
  - New appropriations (26): 31.4; 35.0; 0.0; 66.4
  - Total funds available (27) = (25)+(26): 70.1; 49.6; 182.9; 302.6
  - Expenditures (28): 22.3; 31.4; 62.3; 116.0
  - Remaining funds (30) = (27)-(28)-(29): 47.4; 18.2; 120.6; 186.3
- FY 19
  - New appropriations (31): 35.5; 35.9; 0.0; 71.4
  - Total funds available (32) = (30)+(31): 82.8; 54.1; 120.6; 257.5
  - Expenditures (33): 28.7; 30.9; 81.6; 141.2
  - Lapsed funds (34): 5.9; 0.0; 0.0; 5.9
  - Remaining funds (35): 48.1; 23.2; 39.0; 110.4
- FY 20
  - New appropriations (36): 40.8; 45.0; 0.0; 85.8
  - Total funds available (37) = (35)+(36): 88.9; 68.2; 39.0; 196.2
  - Expenditures (Est.) (38): 41.8; 42.2; 22.8; 106.8
  - Lapsed funds (34): 1.8; 0.0; 0.0; 1.8
  - Remaining funds (39) = (37)-(38): 45.4; 26.0; 16.2; 87.6
- FY 21
  - New appropriations (40): 42.4; 56.3; 0.0; 98.7
  - Total funds available (41) = (39)+(40): 87.8; 82.3; 16.2; 186.3
  - Expenditures (Est.) (42): 26.0; 46.0; 1.0; 73.0
  - Remaining funds (Est.) (45) = (41)-(42): 61.8; 36.3; 15.2; 113.3

### Key operational and budgeting practices highlighted
- Life-cycle replacements are planned long-term, reviewed and revised regularly based on new assessments and updated strategy.
- Third-party FCAs performed every three to five years inform replacement timing and cost parameters.
- Cost-benefit analyses quantify the impacts of cloud migration and other IT capital decisions on server and storage expenditures.
- The LTP appropriation requests are driven by actual needs and may accelerate or delay relative to long-term assumptions.

*Source: Annex VI. Long-Term Capital Plans, FY 2022–FY 2024 Medium-Term Budget (excerpt).*

### Appendix I. Draft Press Release

### Appendix I. Draft Press Release

### Approval and context
- On April [23], 2021, the Executive Board of the International Monetary Fund (IMF) approved the IMF’s administrative and capital budgets for financial year (FY) 2022, beginning May 1, 2021, and took note of indicative budgets for FY 2023–24.
- The FY 2022 budget is set in the context of a global economic outlook marked by high uncertainty and the likelihood of uneven recovery, with many countries facing daunting crisis legacies.
- The budget provides for continued Fund support for its membership with the immediate crisis response and to navigate a safe exit from the crisis.

### FY 2022 net administrative budget — key statistics and features
- Approved net administrative budget for FY 2022: US$1,214 million.
- Net administrative budget definition: covers all administrative expenses less receipts (primarily from external sources to help support capacity building activities and excluding lending income).
- The approved FY 2022 budget:
  - Sustains crisis response and provides incremental resources for long-term priorities.
  - Is within an unchanged resource envelope in real terms for the tenth year in a row, measured relative to the IMF’s budget deflator (with the exception of a small (0.6 percent) increase in FY 2017 to meet rising information and physical security costs).
  - Is built on extensive reprioritization and savings—including from modernization.

### Carryforward flexibility
- In light of immediate crisis-related needs, the Executive Board approved a temporary increase in the maximum amount of unused budget resources that can be carried forward from previous years from 5 to 8 percent of the underlying budget.

### FY 2022 capital budget and IT modernization
- FY 2022 capital budget: US$79 million.
- Capital budget purpose: provides financing for building facilities and information technology capital projects, including projects to modernize digital platforms and tools.
- In response to the industry shift towards cloud-subscription based information technology solutions, the Board approved a change in the budgetary treatment of these expenses.

### Additional information
- Additional information can be found in the staff paper.

*IMF — Appendix I. Draft Press Release (PR/YY/XX)*

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_Source: https://www.imf.org/-/media/files/publications/pp/2021/english/ppea2021038.pdf_