## MANAGEMENT IMPLEMENTATION PLAN – ENGAGEMENT WITH SMALL DEVELOPING STATES (Executive Summary)

## Source details

**Canonical URL:** [MANAGEMENT IMPLEMENTATION PLAN – ENGAGEMENT WITH SMALL DEVELOPING STATES (Executive Summary)](https://www.imf.org/-/media/files/publications/pp/2023/english/ppea2023011.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/pp/2023/english/ppea2023011.pdf.md)
- [Structured JSON version](/-/media/files/publications/pp/2023/english/ppea2023011.pdf.json)

---

### Overview and purpose
- Responds to Board-endorsed recommendations by the Independent Evaluation Office (IEO) on IMF engagement with Small Developing States (SDS).
- MIP actions are broad, touch all modalities of Fund engagement with SDS (surveillance, capacity development, and lending), and are designed to be comprehensive, self-reinforcing, cost-effective, and adopted as a package.
- Date on document: March 9, 2023.

### Core anchor: SDS Staff Guidance Note (SDS-SGN) update (Recommendation R1)
- Objective: a focused refresh of the 2017 SDS-SGN to reflect evolving macro-critical priorities, reference recent Fund workstreams and guidance, and provide country examples within applicable Fund policies and frameworks.
- Scope and organization:
  - Cover all engagement modalities: surveillance, CD, and lending.
  - Organized through a thematic framework based on macro-critical priorities.
  - Incorporate insights from the 2021 Comprehensive Surveillance Review and the 2022 Staff Guidance Note on Surveillance.
  - Showcase workstreams: macro-fiscal, debt, monetary and exchange rate policies, financial sector issues, climate change, digitalization, governance, diversification.
  - Provide guidance on collaboration with development partners (including the World Bank Group (WBG)), country examples, and best practices to foster traction.
- Specific R1 actions and timelines (selected):
  - R1.1: Focused update of the SDS-SGN. By: end-September 2024. Responsible: SDS-WG (Lead: SPR with Inputs/Review from other area and functional departments).
  - R1.2: Secure, at a minimum, one annual High-Level event by relevant Area Departments at the time of the Spring or Annual Meetings. By: end-Dec 2024. Responsible: AFR, APD and WHD.
  - R1.3: Conduct a survey of SDS authorities to track traction. By: end-Mar 2025. Responsible: SDS-WG (Lead: SPR).
  - R1.4–R1.6, R1.7, R1.8: Transform SDS-CG into SDS-WG; annual reporting to Management; annual meeting with Board’s Small States Working Group; launch “SDS Week”; analytical seminars. Deadlines range from end-February 2023 to end-Dec 2024.
  - R1.9: Medium-Term Review (Board paper) on Fund engagement with SDS. By: end-Dec 2028. Responsible: SDS-WG (Lead: SPR).

### Surveillance and capacity development (Recommendation R2)
- Goals:
  - Enhance traction and tailoring of surveillance and CD for SDS.
  - Leverage flexibility in core tools (consistent with Fund policy) and integrate surveillance and CD in Article IV Consultations.
- Key measures and timelines:
  - R2.1: Country Engagement Box in Article IV staff reports for all SDS once every 3 years. By: end-March 2024. Responsible: SDS-WG (SPR to lead).
  - R2.2: CMAP Review to present lessons from CCPAs and CMAP pilots and priorities for CD tools for SDS. By: end-May 2023. Responsible: FAD/SPR.
  - R2.3: Fund-wide seminar on fiscal CD and surveillance tools linked to the Fund’s climate agenda. By: end-Jun 2023. Responsible: FAD/SPR.
  - R2.4: During Phase II FSSR Donor-Funding Round in FY24, propose expansion of eligibility list for SDS to at least half of the 22 SDS not currently in the list (11 SDS). By: end-Apr 2025. Responsible: MCM.
- Operational guidance:
  - Streamline data-demanding tools (DSAs, EBA-lite), apply diagnostic tools consistent with SDS circumstances, and consider cluster/regional approaches where cost-effective.
  - Emphasize coordination with the World Bank and tailored CD aligned with SDS institutional capacity and political economy.

### Tailoring climate-related diagnostics and innovation
- Diagnostic observations:
  - CCPAs and CMAPs can require large teams and extensive inputs and may overburden SDS authorities; focused, tailored assistance can be more effective.
  - Priorities differ by SDS (e.g., public financial management for climate actions vs. resilience-building policy mapping).
- Innovation and analytics examples:
  - Nowcasting for Small States Using Big Data — Desk User Guide using high-frequency vessel traffic data.
  - PortWatch: Monitoring Disaster-Related Trade Disruptions from Space — online platform using satellite-vessel data.
  - Monthly Tourism Trends in the Caribbean — portal with high-frequency tourism indicators updated monthly for the Caribbean, Mexico and select Central America countries.
- MIP ensures lessons from CCPAs and CMAPs (including Samoa’s pilot) inform targeted support.

### Lending engagement and Resilience and Sustainability Trust (RST) (Recommendation R3)
- Objectives:
  - Strengthen Fund lending engagement with SDS, in line with applicable policy frameworks.
  - Increase focus on growth and resilience in program design, alongside adjustment, consistent with Fund policies.
  - Use RST modalities to attend to SDS needs and learn from implementation.
- Key actions and timelines:
  - R3.1: Organize one external seminar to familiarize SDS authorities with Fund lending, the UCT lending toolkit, benefits of UCT-quality programs and the RSF/RST; include peer-learning. By: end-Dec 2023. Responsible: SDS-WG (SPR to lead).
  - R3.2: 18-month interim review of the RST to include initial experiences for SDS. By: End-June 2024. Responsible: SPR.
  - R3.3: Three-year review of the RST to further analyze SDS experiences, design aspects, and catalyzing financing. By: End-December 2025. Responsible: SPR/FIN/LEG.
- Additional considerations:
  - Outreach to reduce stigma and raise awareness of UCT-quality program benefits for SDS.
  - Consider pairing RST support with UCT-quality programs while minimizing administrative burden for SDS.
  - Annex II suggests potential consideration of raising access limits under Emergency Financing (EF) instruments for large natural disasters (LNDs) in specific cases.

### Staffing continuity, HR management, and in-country presence (Recommendation R4)
- Rationale: secure effective, well-tailored, and more continuous staff presence in SDS to improve traction and continuity.
- Monitoring and reporting:
  - R4.1a: MIP analysis on mission chief and country team turnover will explicitly discuss SDS experience. By: end-Dec 2023. Responsible: SDS-WG (Lead: HRD).
  - R4.1b: SDS-WG annual report to Management to update on engagement metrics (mission chief turnover, handover, rotation, mission frequency). By: end-Dec 2024. Responsible: SDS-WG (Lead: SPR).
  - R4.3: SDS-SWG report to Management will include view of Functional Departments’ support to SDS.
- Minimum physical engagement floor:
  - Area Department teams will ensure at least one physical mission to each SDS member per year (stated to be in line with pre-pandemic experience FY2015–19). Exceptions must be justified to Management in the annual report. By: end-December 2024. Responsible: ADs.
  - Supplement with virtual missions and additional physical missions when feasible.
- Incentives and career policies:
  - Consider implications for SDS in the forthcoming Review of the LIC/FCS Promotion Policy. R4.4: Review to be completed by end-December 2025. Responsible: HRD.
  - Preserve staffing practices such as FAD fiscal economist and SPR economist assignments requested to remain for two years.
- On-the-ground macroeconomic support and LTX proposal:
  - R4.6: Submit a well-costed proposal to the Committee for Capacity Building to expand macroeconomic long-term advisors (LTX) in RTACs (one additional climate and two macroeconomic LTX in PFTAC referenced). By: end-December 2023. Responsible: AFR, APD, WHD, ICD.
  - Implementation contingent on externally-financed CD budget and donor fundraising; not a binding MIP commitment.

### Coordination, monitoring, and accountability
- Governance and coordination:
  - SDS-CG expanded in July 2022 will transform into SDS-WG to implement and monitor the MIP (R1.4).
  - SDS-WG responsibilities:
    - Lead knowledge-sharing, capacity-building for Fund staff on SDS issues.
    - Produce annual progress reports to Management on MIP commitments (R1.5/R4.5).
    - Meet annually with the Executive Board’s Small States Working Group (SSWG) (R1.6).
    - Facilitate periodic interactions between the Fund and SDS authorities.
- Monitoring instruments:
  - Annual Periodic Monitoring Reports on the Status of Management Implementation Plans (PMRs) will objectively monitor SMART commitments.
  - Medium-Term Review to be completed by end-December 2028 to assess outcomes roughly five years after MIP approval.
  - Proposed survey of SDS authorities (R1.3) to feed inputs into the Medium-Term Review.
- Reporting cadence:
  - SDS-WG to report annually to Management in 2023 and 2024, with continuing annual reporting expected thereafter.

### Sequencing and complementarities with other workstreams
- MIP designed to leverage and complement existing Fund workstreams, not duplicate them:
  - Linked workstreams include: MIP on Growth and Adjustment in IMF-Supported Programs; Operational Guidance on the Review of Program Design and Conditionality; RST work; Fund’s Climate Change Strategy; Categorization of Open Actions in MIPs; evaluations on Capacity Development; IMF’s Response to the COVID-19 Pandemic.
- Sequencing highlights:
  - SDS-SGN update leads to capacity building and knowledge-sharing (SDS Week, seminars).
  - Annual monitoring and SDS authorities survey feed into the Medium-Term Review.
  - Several measures are self-reinforcing and build on one another.

### Costing and resource implications (FY23–FY28)
- Aggregate resource estimate and structure:
  - Total cost estimates in FY23–FY28 amount to about 22 full-time equivalents (FTEs) (note: later text indicates cost estimates may exceed 22 FTEs).
  - Actions under R1 currently estimated to require up to 15 FTEs.
    - SDS-SGN: 4 FTEs.
    - Medium-Term Review: over 5 FTEs.
    - Other R1 actions (SDS Week, analytical seminar, coordination mechanisms): could reach 5 FTEs in FY23–FY28.
  - Several actions assumed folded into existing departmental budgets; some are zero additional cost (e.g., high-level events, RST reviews, CMAP review).
  - Going beyond current proposals would require new permanent resources and broader Fund-wide tradeoff discussions.
- R2 and R3 budgeting:
  - Mostly folded into budgets leveraging existing efforts; specific events may be low-cost if virtual but could raise costs if physical.
- R4 resource needs:
  - Monitoring and reporting commitments and proposal preparation for LTX support will have additional costs.
  - Ensuring at least one physical mission per year to all SDS could require additional travel resources; a conservative buffer included in costing.

### Executive Board reactions and guiding principles
- Directors broadly supported a targeted recalibration rather than a major overhaul.
- Emphasis on:
  - Weighing actions against budgetary tradeoffs and leveraging complementary workstreams.
  - Many Directors saw scope for resource reallocation within existing budgets; some requested explicit carve-outs.
  - Support for a Medium-Term Review, with some preference to leverage planned reviews rather than new separate reviews.
  - Recognition that Fund engagement with SDS has stepped up over the past decade and that surveillance and CD are generally appreciated by SDS authorities.

### Implementation structure and contributors
- Prepared by the Consultative Group on Small Development States (CG-SDS) / SDS-CG with members across SPR, AFR, APD, EUR, FAD, FIN, LEG, HRD, ICD, MCD, MCM, STA, WHD under SPR management guidance.
- Annexes and supporting materials referenced: Annex I (Matrix of Proposed Actions); Annex II (IEO Recommendations and Granular IEO Suggestions); Boxes and Figure (timeline 2023–28).

*Source: MANAGEMENT IMPLEMENTATION PLAN – ENGAGEMENT WITH SMALL DEVELOPING STATES (Executive Summary and Annex I excerpts), March 9, 2023.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Overview
- This Management Implementation Plan (MIP) responds to the Board-endorsed recommendations made by the Independent Evaluation Office (IEO) on the IMF Engagement with Small Developing States (SDS).
- The MIP actions are broad in scope, touch on all modalities of the Fund’s engagement with SDS (surveillance, capacity development, and lending), and are designed to be comprehensive, self-reinforcing, cost-effective, and adopted as a package.
- Date on document: March 9, 2023.

### Targeted recalibration and SDS Staff Guidance Note (SDS-SGN)
- Core anchor: a focused refresh of the 2017 Staff Guidance Note of the Fund’s Engagement with Small Developing States (SDS-SGN).
  - The update is not expected to be a full overhaul but to reflect evolving macro-critical priorities of SDS, reference recent Fund workstreams and guidance, and provide country examples while remaining in line with applicable Fund policies and frameworks.
  - The 2023 SDS-SGN will cover all engagement modalities (surveillance, CD, and lending) and be organized through a thematic framework based on macro-critical priorities surrounding SDS.
  - The SDS-SGN will:
    - Reflect insights from the 2021 Comprehensive Surveillance Review and the 2022 Staff Guidance Note on Surveillance.
    - Bring attention to structural challenges and capacity gaps faced by SDS.
    - Showcase relevant workstreams: macro-fiscal, debt, monetary and exchange rate policies, financial sector issues, climate change, digitalization, governance, diversification.
    - Provide guidance on collaboration with development partners (including the World Bank Group (WBG)), country examples, and best practices to foster traction.
- Specific MIP actions anchored to the SDS-SGN:
  - R1.1: Focused update of the SDS-SGN.
  - R1.2: Secure, at a minimum, one annual High-Level event by relevant Area Departments (ADs) at the time of the Spring or Annual Meetings.
  - R1.3: Conduct a survey of SDS authorities to track traction and provide inputs for the Medium-Term Review.
  - R1.7: Annual “SDS Week” for training on SDS-SGN and knowledge exchange (inaugural SDS Week to include Management participation).
  - R1.8: Analytical seminars to showcase innovative work on SDS and engage development partners and outside researchers.

### Surveillance and Capacity Development (CD)
- Steps to enhance surveillance and CD in SDS members include:
  - Improved guidance through SDS-SGN Update to facilitate tailored use of the surveillance toolkit and foster integration of surveillance and CD in Article IV Consultations.
  - Commitments to ensure key CD products—such as climate and financial sector diagnostics—appropriately serve SDS members.
- The SDS-SGN will incorporate work from the Fund’s recent reviews and analytical developments to strengthen surveillance and CD tailoring for SDS.

### Lending engagement and the Resilience and Sustainability Trust (RST)
- The MIP includes commitments to strengthen the Fund’s lending engagement with SDS, in line with applicable policy frameworks.
  - Emphasis on building greater awareness of the benefits of Fund-supported programs in SDS via direct engagement and peer-learning.
  - Foster greater tailoring of programs by paying due attention to growth and resilience considerations in program design, in addition to adjustment, consistent with Fund policies.
  - Ensure the RST effectively attends to SDS among other members by providing guidance in the SDS-SGN and learning from implementation.

### Staffing, continuity, and in-country presence
- Securing effective, well-tailored, and more continuous staff presence in SDS is critical.
  - Actions leverage commitments in complementary MIPs (e.g., the Categorization of Open Actions in MIPs) to reduce mission chief and staff turnover and support continuity in country teams.
  - The MIP enhances accountability through annual reporting by the SDS-WG on staffing continuity and monitoring of indicators on engagement continuity and Area and Functional Departments’ support to SDS.
  - Commitments seek to secure a minimum standard on physical engagement of Area Department teams with SDS, at least in line with pre-pandemic practices, strengthened by virtual missions.
  - Actions to strengthen on-the-ground macroeconomic technical support for SDS through innovative modalities.

### Coordination, monitoring, and knowledge-sharing
- A reinforced inter-departmental working group (SDS-WG) will be central to coordination and monitoring efforts.
  - SDS-WG responsibilities:
    - Lead on knowledge-sharing to enhance quality and focus of analytical work on SDS.
    - Provide capacity-building for Fund staff working on SDS-related issues.
    - Produce annual progress reports to Management on MIP commitments.
    - Facilitate periodic interactions with the Executive Board and entrench periodic interactions between the Fund and SDS authorities.
- MIP monitoring features:
  - Annual Periodic Monitoring Reports on the Status of Management Implementation Plans (PMRs) will objectively monitor SMART commitments.
  - A Medium-Term Review on the Fund’s engagement with SDS will provide a longer-term view on outcomes achieved by sustained MIP implementation.
  - A proposed survey of SDS authorities will feed inputs into the Medium-Term Review.

### Sequencing, complementarities, and leveraging existing workstreams
- The MIP leverages existing Fund workstreams and seeks to complement (not duplicate) other MIPs and reviews, including:
  - The MIP on Growth and Adjustment in IMF-Supported Programs.
  - The forthcoming Operational Guidance on the Review of Program Design and Conditionality.
  - Work on the RST, the Fund’s Climate Change Strategy, and other relevant MIPs (e.g., Categorization of Open Actions in MIPs; evaluations on Capacity Development; IMF’s Response to the COVID-19 Pandemic).
- Sequencing considerations:
  - SDS-SGN update will lead to capacity building and knowledge-sharing efforts.
  - Annual monitoring and the survey of authorities will inform the Medium-Term Review.
  - Several measures are self-reinforcing and build on one another.

### Costing and resource implications
- The commitments in the MIP entail additional costs to be absorbed into existing budgets.
  - Total cost estimates of the MIP proposals in FY23–FY28 amount to about 22 full-time equivalents (FTEs).
  - Many near-term actions (e.g., SDS-SGN update) will need to be folded into the budget by reallocating resources from other areas.
  - Some actions proposed for later stages (e.g., the Medium-Term Review) have protracted timelines that facilitate eventual budget integration but still require prioritization.
  - Implementation as designed will present non-negligible tradeoffs for staff and management; going beyond current proposals would require new permanent resources and broader Fund-wide tradeoff discussions.

### Executive Board reactions and guiding principles
- Executive Directors welcomed the IEO Evaluation and broadly supported pursuing a targeted recalibration (Recommendation 1, R1).
  - Directors noted the Fund substantially stepped up engagement with SDS over the past decade and that SDS authorities appreciated Fund surveillance and CD as high quality and well-tailored.
  - Directors emphasized:
    - No major overhaul needed; targeted recalibration preferred.
    - Actions should be weighed against budgetary tradeoffs and leverage ongoing complementary workstreams to aid cost-effectiveness.
    - Many Directors saw scope for resource reallocation within existing budgets; a few requested explicit carve-outs of SDS in other reviews.
    - Support for a Medium-Term Review, with some Directors preferring to leverage planned reviews rather than new separate reviews.

### Implementation structure and contributors
- The MIP was prepared by the Consultative Group on Small Development States (CG-SDS) with members across multiple departments (SPR, AFR, APD, EUR, FAD, FIN, LEG, HRD, ICD, MCD, MCM, STA, WHD) and under the supervision and guidance of SPR management.
- Annexes and supporting materials included in the full document:
  - Annex I: Matrix of Proposed Actions.
  - Annex II: IEO Recommendations and Granular IEO Suggestions.
  - Boxes: 1. Updating the SDS-SGN; 2. Innovation and Analytics in SDS.
  - Figure: 1. MIP: Illustrative Timeline 2023–28.

*Management Implementation Plan – Engagement with Small Developing States (Executive Summary), March 9, 2023.*

### 14.      In attending R1, the MIP also seeks to energize existing coordination mechanisms,

### ppea2023011 - 14.      In attending R1, the MIP also seeks to energize existing coordination mechanisms,

### Coordination, monitoring, and accountability (Recommendations under R1)
- The long-standing Working Group on SDS was expanded in July 2022 to include all Fund departments and now forms the Consultative Group on SDS (SDS-CG), which prepared this MIP.
- The SDS-CG will transform into a formal Working Group (SDS-WG) shortly after the MIP is endorsed by the Executive Board to help usher implementation and monitoring of the MIP going forward (R1.4).
- The SDS-WG will:
  - Report annually to Management on progress on MIP commitments (R1.5).
  - Meet annually with the Executive Board through its Small States Working Group (SSWG) (R1.6).
- The MIP proposes a Medium-Term Review on the Fund’s engagement with SDS five years after MIP adoption to strengthen accountability and continuous improvement (R1.9).
  - The proposed “Medium-Term Review” would be completed by end-December 2028, allowing observation approximately five years after approval of the MIP, and about four years after completion of the SDS-SGN.

### SDS Staff Guidance Note update (SDS-SGN) — purpose and scope
- The SDS-SGN Update is the vehicle to make many IEO recommendations actionable, energize internal coordination, and disseminate SDS knowledge.
- The 2017 SDS-SGN (an update of a 2014 version) identified five thematic areas around the G.R.O.W.TH. framework:
  - (1) Growth and job creation
  - (2) Resilience to shocks
  - (3) Overall competitiveness
  - (4) Workable fiscal and debt sustainability options
  - (5) Thin financial sectors
- The SDS-SGN Update will:
  - Gauge continued relevance of the GROWTh thematic approach and complement it with elements such as climate change, digitalization, inclusion, governance, diversification, and others as determined by the Fund’s approach.
  - Maintain structure around the three main areas of engagement: surveillance, capacity development (CD), and lending.
  - Provide guidance on:
    - (i) how to integrate climate CD tools into Fund engagement;
    - (ii) the use of toolkits in the SDS context and how best to leverage flexibility embedded in them for countries with institutional and capacity constraints (a sub-recommendation in R2);
    - (iii) best practices to improve traction (as guided by the 2021 Comprehensive Surveillance Review);
    - (iv) strengthening engagement and building trust with SDS members.
  - Absorb Operational Guidance Note and relevant MIP commitments on growth and adjustment to help foster improved tailoring in Fund lending (R1.1).

### Enhancing surveillance and CD traction (Recommendation 2, R2)
- Executive Directors generally supported R2 and emphasized:
  - Better leveraging flexibility in core tools for the SDS context while remaining consistent with Fund policy frameworks (e.g., the Integrated Surveillance Decision).
  - Diagnostic tools are useful in SDS and tailoring will increase their impact.
  - Need for further collaboration with the World Bank Group (WBG) in surveillance.
  - Country Engagement Strategies (CES) for SDS should be rolled out on an “as-needed” basis for non-fragile SDS.
  - Flexibility in prioritizing Fund CD; cluster approaches may be explored when cost-effective.
- Specific MIP measures:
  - The SDS-SGN update (R1.1) will provide guidance and country case-examples on applying flexibility in core surveillance tools, including debt-sustainability frameworks and tools underpinning the External Sustainability Assessment (ESA).
  - Guidance will issue to feature a Country Engagement Box in Article IV staff reports once every three years for all SDS (R2.1), offering a streamlined alternative to full CES.
    - Rationale: aligns with Article IV’s medium-term perspective; reduces staff burden and costs while ensuring consistent coverage.
  - CMAP Review will feature relevant considerations and next steps for SDS regarding climate-related diagnostics and how fiscal CD tools can be applied (R2.2).
  - A Fund-wide seminar will disseminate fiscal CD and surveillance tools linked to the Fund’s climate agenda (R.2.3).
  - Commitment to request further funds in Phase II of the Financial Sector Stability Reviews (FSSRs) Donor-Funding Round to expand eligibility to at least half of the 22 SDS not currently in the list (11 SDS) (R.2.4).
- Directors noted CD-specific issues identified by the IEO may apply more broadly and will be considered in the forthcoming IEO Evaluation on CD.

### Tailoring climate-related and diagnostic work for SDS
- Observations on diagnostics:
  - Joint World Bank-IMF Climate Change Policy Assessments (CCPAs) and Climate Macroeconomic Assessment Program Diagnostics (CMAPs) require large teams and extensive inputs and may overburden SDS authorities.
  - Experience with CCPAs (conducted exclusively for SDS) suggests focused, tailored assistance may be more effective than comprehensive diagnostics in all dimensions.
  - Examples of priorities differ by SDS: developing public financial management to support climate actions vs. identifying resilience-building policies and mapping financing needs.
- The MIP will ensure lessons from CCPAs and CMAPs (including Samoa’s pilot) inform targeted support.

### Innovation, analytics, and data for SDS
- SDS face data and capacity constraints; Fund staff should explore creative approaches and high-frequency indicators to complement traditional statistics.
- Recent innovation examples intended to support surveillance, lending, and CD:
  - Nowcasting for Small States Using Big Data — Desk User Guide using high-frequency vessel traffic data to generate trade/activity indicators.
  - PortWatch: Monitoring Disaster-Related Trade Disruptions from Space — online platform monitoring trade disruptions and spillovers via satellite-vessel data and big data analytics; winner of the Climate Innovation Challenge.
  - Monthly Tourism Trends in the Caribbean — portal with high-frequency tourism indicators updated monthly for the Caribbean, Mexico and select Central America countries.
- The Fund’s Climate Innovation Challenge and other initiatives promote combining new data and technology to address climate-related macroeconomic and financial implications in SDS.

### Lending framework and tailoring (Recommendation 3, R3)
- Directors broadly supported exploring how UCT-quality programs may be better tailored to SDS, increasing focus on growth and resilience.
  - Some Directors noted institutional constraints in SDS; others saw scope to use existing flexibilities in Fund lending policy frameworks.
  - Importance of raising awareness of the benefits of Upper-Credit Tranche (UCT)-quality Fund-supported programs among SDS.
  - Need to leverage RST financing for SDS given climate-related vulnerabilities.
  - Possible modifications to Emergency Financing toolkit to be considered in separate broader discussions (including forthcoming IEO Evaluation of the IMF Response to the COVID-19 Pandemic).
- MIP commitments and actions:
  - Enhance consideration of growth and resilience in Fund-supported programs, leveraging the 2018 Review of Program Design and Conditionality (ROC) and an Operational Guidance Note planned for early 2023; SDS-SGN Update will absorb relevant guidance (R1.1).
  - SDS-SGN will lay out RST modalities, design, eligibility, and initial experience designing conditionality under the Resilience Sustainability Facility (RSF) based on climate-related diagnostics (R1.1).
  - The envisaged 18-month interim review of the RST will reflect on initial experiences including lending to SDS (R3.2).
  - The formal three-year RST review will further analyze needs and experiences with SDS (R3.3).
  - Outreach efforts to increase awareness of the Fund’s lending toolkit, reduce stigma associated with IMF programs in SDS, and showcase practical examples and country cases in the SDS-SGN Lending section (R3.1).
- Evidence: the IEO evaluation shows SDS-requested Fund-supported programs tend to be completed at a more successful rate than for non-SDS.

### HR management, staffing continuity, and budgetary commitments (Recommendation 4, R4)
- Directors emphasized improving incentives to work on SDS assignments, reducing turnover, avoiding gaps in coverage, minimizing handover disruptions, and strengthening continuity of engagement.
  - Some Directors suggested extending promotion policy developed for fragile and conflict-afflicted states (FCS) to all SDS.
  - Flexibility in departmental decisions on incentives and staffing solutions is needed given regional diversity.
  - Calls for innovative, practical ways to increase Fund field presence.
- Ongoing Fund-wide measures:
  - MIP on Open Actions is progressing to address excessive staff turnover; results will take time to observe.
  - Recruitment guidelines revised in April 2022 to limit intra-departmental hiring of candidates for mission chiefs who have not met the minimum tenure of two years in current assignments.
  - Since June 2022, Area Departments report twice a year to HRD on intra-departmental moves with less than two years’ tenure; cases are compiled in a report to Management.
  - Since June 2022, monitoring and accountability of mission chief turnover enhanced via Accountability Framework discussions that include turnover metrics emphasizing SDS and FCS.
  - An operational target for the median tenure for mission chiefs at 2.7 years has been established, with the expectation of reaching a three-year average tenure.

*Source: MANAGEMENT IMPLEMENTATION PLAN – ENGAGEMENT WITH SMALL DEVELOPING STATES (excerpt).*

### 28.      This MIP on SDS Engagement seeks to build upon these actions to help ensure more

### MANAGEMENT IMPLEMENTATION PLAN – ENGAGEMENT WITH SMALL DEVELOPING STATES

### Continuous support and staffing actions
- R4.1a enhances an earlier commitment in MIP on the Board Endorsed Recommendations on Categorization of Open Actions (R1.5) to report an analysis on issues surrounding mission chief and country team turnover to the Board; the updated commitment clarifies this will explicitly discuss the experience for SDS members.
- R4.1b and R4.5: This MIP includes further actions to monitor and report on engagement by ADs, reflecting metrics on issues such as mission chief turnover and team rotation, as well as the frequency of engagement missions (physical and virtual) to SDS.
- R4.3: The SDS-SWG report to Management will include a view of support by Functional Departments (FDs) to SDS through modalities such as direct CD efforts with members, participation in AD missions, technical support to AD teams, and review.
- R4.2: Monitoring will be anchored by clearly identifying the mechanisms by which each FD supports SDS; mechanisms may differ across FDs and do not need to be new.
- Example staffing practices preserved in the MIP text:
  - FAD fiscal economist assignments and SPR economists assigned to AD teams are requested to remain for two years.

### Incentives, recruitment, and career continuity
- The MIP considers steps to support incentives to work in SDS through staff support, Fund-wide visibility, and securing Management involvement (e.g., R1.7–R1.8).
- R4.4: The MIP includes the IEO’s proposal that the forthcoming Review of the LIC/FCS Promotion Policy, to be completed by end-2025, should explicitly consider the implications for SDS, including on recruitment, and make further recommendations.

### Strengthening physical/on-the-ground engagement
- The MIP recognizes increased fluidity of interactions with SDS via remote meetings and missions, but notes variation by region and connectivity and the dependence on authorities’ broader needs.
- Minimum engagement floor:
  - Area Department teams will ensure at least one physical mission to each SDS member per year.
  - This frequency is stated to be well in line with pre-pandemic experience (FY2015–19), particularly for surveillance-only members.
  - Mission frequency will be reported to Management through the annual report on MIP progress by the SDS-WG (R4.5).
  - Specific circumstances preventing travel or limiting authorities’ readiness to receive a mission (e.g., the pandemic, natural disasters, social/political events) would need to be justified to Management in the context of the report.
  - AD teams are encouraged to supplement with in-between virtual missions/engagements or additional physical missions when feasible.
- Boosting on-the-ground macroeconomic support:
  - SDS are expected to benefit from budget augmentation as the Climate Strategy and the FCS Strategy are rolled out, including greater support for RTACs and one additional climate and two macroeconomic long-term advisors (LTX) in PFTAC.
  - R4.6: Commitment to submit a well-costed proposal to the Committee for Capacity Building to expand macroeconomic LTX to SDS; such LTX would work in close coordination with AD teams.
  - Implementation would have resource implications (guidance, backstopping, engagement) and, given stringent budget constraints, would need to be accommodated within the externally-financed CD budget and require proactive donor fundraising.
  - Implementation of the proposal is not a commitment in the MIP because it is contingent on stakeholders outside the IMF.

### Monitoring
- SDS-WG will report to Management annually on MIP Implementation progress via a memorandum; annual reporting by the SDS-WG is an MIP action monitored in 2023–24 and expected to continue thereafter (R4.5).
- Staff will complete an IMF Board Paper reviewing progress in MIP implementation and engagement with SDS some five years following the finalization of the SDS-SGN.
- Repeated actions (e.g., “annual” or “bi-annual”) are intended to remain permanent efforts reflecting good practices of IMF engagement with SDS.
- Metrics used will be consistent with those utilized by HRD in the context of the MIP of Open Actions, for full comparability.
- FDs already provide significant assistance to SDS from headquarters; FDs that are TA providers also do so through long-term experts (LTX) in the field via the RTACs (particularly CARTAC and PFTAC).

### Costing and resource implications
- Cost estimates of the MIP in FY23–FY28 may exceed 22 FTEs, including managerial resources.
- Several proposed actions are already part of departments’ work programs and are considered zero additional cost to avoid double-counting (e.g., high-level events, RST reviews, CMAP review).
- Other items assumed to be folded into the budget envelope will entail important tradeoffs and require prioritization over time; some commitments (such as the SDS-SGN) may require significant reallocation of resources.
- Going beyond current proposals would require new permanent resources and discussion beyond the MIP’s scope.
- R1 resource needs:
  - Actions under R1 are currently estimated to require up to 15 FTEs.
  - Bulk of R1 need comes from the SDS-SGN (4 FTEs) and the Medium-Term Review (over 5 FTEs).
  - Other actions (e.g., “SDS Week”, analytical seminar, setting up internal coordination and reporting mechanisms) could reach 5 FTEs in FY23–FY28, given periodic implementation.
- R2 and R3: Mostly folded into the budget by leveraging existing efforts; specific events such as a Seminar to familiarize membership with the Fund’s lending toolkit could be low-cost if virtual but could raise costs significantly if held physically.
- R4 resource needs:
  - Monitoring and reporting commitments by departments to SDS may require additional resources.
  - Preparation of the proposal to boost on-the-ground LTX support to RTACs will have additional costs.
  - Securing at least one physical mission per year to all SDS would be in line with pre-pandemic practices but could require additional resources given tight travel budgets; a conservative buffer has been included in the costing.

*Source: MANAGEMENT IMPLEMENTATION PLAN – ENGAGEMENT WITH SMALL DEVELOPING STATES, INTERNATIONAL MONETARY FUND.*

### Annex I. Matrix of Proposed Actions

### Annex I. Matrix of Proposed Actions

### Recommendation 1 — Targeted recalibration of overall approach for engagement with SDS
- Board Response / Summing Up:
  - Directors broadly supported pursuing a targeted recalibration to strengthen value added and impact of Fund work with SDS.
  - Support for a focused refresh of the SDS Staff Guidance Note (SDS-SGN) to account for current global context and evolving macro-critical priorities.
  - Several Directors support formalized IMF-WB collaboration on critical SDS workstreams, with IMF focusing on core areas and external partners complementing/filling gaps.
  - Many Directors emphasized the importance of tailored communication with SDS countries through active outreach.
  - Many Directors supported the proposal for a review of Fund engagement with SDS within five years.
- Proposed Actions (selected):
  - R1.1 Update the 2017 SDS-SGN and its Quick Reference Card for Reviewers to enhance engagement with SDS across modalities. Update will include guidance for:
    - Surveillance: focused and well-tailored surveillance for SDS based on the 2022 Surveillance Guidance Note (SGN), assessment of macro-critical structural issues, and providing granular policy advice.
    - CD: guidance to help ensure strong integration of CD with surveillance and lending.
    - Lending: guidance, in line with applicable Fund policies, on tailoring Fund-supported programs, including by paying greater attention to growth and resilience objectives and reforms, and including RSF implementation as applicable.
    - CMAPs/CCDRs (and other climate diagnostics): guidance on integrating climate diagnostics with surveillance and lending, including into RSFs, in collaboration with the WB and in line with established policies.
    - Use of Toolkits: guidance on leveraging flexibility embedded in the MAC DSA, LIC DSF, and EBA-lite for countries facing data and capacity constraints.
    - Coordination with partners: cross-reference existing frameworks and guidance on coordination with partner institutions (e.g., Guidance Note on Information Sharing between the IMF and World Bank Staff; coordination frameworks for RSF arrangements).
    - Traction: emphasize multi-dimensional concept of traction (2021 Comprehensive Surveillance Review), continuity of engagement, and building trusted partner relations across modalities.
    - Accountability and Timeline: By: end-September 2024. Responsible: SDS-WG (Lead: SPR with Inputs/Review from other area and functional departments).
  - R1.2 AFR, APD, and WHD to each hold an annual High-Level Regional Engagement Event with SDS in their constituencies, in person, hybrid or virtual, during Spring or Annual Meetings.
    - By: end-Dec 2024. Responsible: AFR, APD and WHD.
  - R1.3 Run one survey of SDS country authorities to assess traction across engagement modalities.
    - By: end-Mar 2025. Responsible: SDS-WG (Lead: SPR, with inputs/review by the rest of the SDS-WG).
  - R1.4 Convert SDS-CG into an enhanced staff working group (SDS-WG) by preparing TORs and submitting to Management; SDS-WG to add FDs (FAD, FIN, ICD, LEG, MCM, STA) to earlier working group composition.
    - By: end-February 2023. Responsible: SDS-CG (Lead: SPR with review/inputs from other area and functional departments).
  - R1.5 SDS-WG will report to Management on progress on MIP Implementation via a memorandum to Management annually in 2023 and 2024.
    - By: end-Dec 2024. Responsible: SDS-WG (Lead: SPR with Inputs/Review from others).
  - R1.6 SDS-WG to meet with the Board’s Small States Working Group (SSWG) once a year, in each 2023 and 2024.
    - By: end-Dec 2024. Responsible: SDS-WG (Lead: SPR with Inputs/Review from others).
  - R1.7 Launch an “SDS Week” internal learning and capacity-building event for staff working with SDS (opening event with OMD presence; onboarding program including SDS-SGN presentation; tour of SDS Knowledge Exchange site; intranet story).
    - By: end-December 2024. Responsible: SDS-WG (Lead: SPR, with Inputs/Review from others in SDS/WG + COM support).
  - R1.8 Launch and run a new analytical seminar on SDS (internal), with sessions twice per year dedicated to SDS-relevant issues and research, presenting IMF and external speakers.
    - By: end-Dec 2024. Responsible: SDS-WG.
  - R1.9 Prepare a Medium-Term Review, delivered through a Board paper, on the Fund’s engagement with SDS, including on implementation of commitments in the MIP on the Fund and SDS.
    - By: end-Dec 2028. Responsible: SDS-WG (Lead: SPR with Inputs/Review from others).

### Recommendation 2 — Enhance focus and traction in surveillance and capacity development (CD)
- Board Response / Summing Up:
  - Directors generally support steps to enhance focus and traction of IMF work on SDS in surveillance and CD.
  - Agreement that actions should better leverage flexibility in core tools for SDS; surveillance SGN should include guidance on this.
  - EDs emphasized diagnostic tools are useful in SDS and tailoring will increase impact; surveillance and related toolkits must remain consistent with Fund policy frameworks.
  - Directors highlighted need to collaborate with the World Bank.
  - Many EDs consider Country Engagement Strategies (CES) could be rolled out “as-needed” for non-fragile SDS.
  - Many EDs support flexibility in prioritizing Fund surveillance and CD (including FSAP/FSSR, CMAPs) and are open to cluster or regional approaches where cost-effective.
- Proposed Actions (selected):
  - R2.1 Publish guidance for Area Departments to include a concise “Country Engagement” Box for all SDS in Article IV staff reports once every 3 years, outlining policy priorities and key considerations under engagement modalities as applicable.
    - By: end-March 2024. Responsible: SDS-WG (SPR to lead, with inputs/review of other departments).
  - R2.2 The CMAP Review will explicitly consider implications for supporting SDS’ climate agenda by presenting in a dedicated box for SDS: (i) lessons learned from CCPAs and CMAP pilots; and (ii) priorities for application of CD tools for SDS going forward.
    - By: end-May 2023. Responsible: FAD/SPR.
  - R2.3 Hold a Fund-wide seminar on fiscal CD and surveillance tools (as per the Fund’s Climate strategy) to disseminate engagement modalities with members, including recent experience with CD pilots.
    - By: end-Jun 2023. Responsible: FAD/SPR.
  - R2.4 During the Phase II FSSR Donor-Funding Round in FY24, propose expansion of the eligibility list for SDS to at least half of the 22 SDS not currently in the list.
    - By: end-Apr 2025. Responsible: MCM.
- Additional operational and CD measures referenced in Annex II (granular suggestions):
  - Provide selective attention to current/emerging SDS issues that are macro critical, including those viewed macro-critical by authorities.
  - Apply diagnostic tools consistent with SDS circumstances by streamlining data-demanding tools (DSAs, EBA-lite) and increasing access to CMAPs, FSAPs, and FSSRs (including cluster/regional approaches).
  - Prepare tailored strategy engagement notes for non-FCS SDS (pilot basis possible).
  - Place greater attention to SDS’ institutional capacity constraints and political economy in CD by: ex-ante assessments of institutional capacity and ownership; linking allocation and provision of CD to implementation and ownership; using Resource Budget Management (RBM) to increase transparency on CD progress as it evolves; increasing hybrid CD presence; and deepening CD coordination with external partners.

### Recommendation 3 — Use of lending framework to better address SDS needs and vulnerabilities
- Board Response / Summing Up:
  - EDs generally agree there is room to explore how UCT-quality programs may be better tailored to SDS, including greater focus on growth and resilience objectives in line with the MIP for the IEO Evaluation on Growth and Adjustment.
  - EDs note need to build awareness of benefits of UCT-quality programs in SDS.
  - EDs generally agree the RST should address needs of all eligible members, including SDS, and support first allowing RST operations to begin then reflect on lessons during its initial review.
  - Many EDs noted need to consider how to leverage RST financing to address structural constraints and build resilience in SDS.
  - A number of EDs emphasized the planned 18-month interim review should assess whether the RST is providing and catalyzing meaningful support to SDS and adjust as necessary.
  - Many EDs support increasing access limits under the LND window of the EF instruments; many other EDs do not support raising access limits.
- Proposed Actions (selected):
  - R3.1 Organize one external seminar (in person or virtual) to familiarize SDS authorities with Fund lending, including the UCT lending toolkit, benefits of UCT-quality programs and the RSF/RST; seminar to include peer-learning with SDS success cases.
    - By: end-Dec 2023. Responsible: SDS-WG (SPR to lead, with inputs/review of other departments).
  - R3.2 The 18-month interim review of the RST will include initial experiences on implementation of the Trust, including for SDS.
    - By: End-June 2024. Responsible: SPR (with inputs/review of other departments).
  - R3.3 The three-year review of the RST will further consider SDS experiences, design aspects, interactions with the lending toolkit, and ability to catalyze additional financing.
    - By: End-December 2025. Responsible: SPR/FIN/LEG (with inputs/review of other departments).
- Annex II recommendations (granular):
  - Increase focus on growth and resilience outcomes in UCT-quality programs with SDS, drawing from external expertise and MIP commitments.
  - Implement RST taking into account SDS needs and constraints by exploiting CMAPs and ensuring pairing RST with a UCT-quality program does not deter SDS use (lower administrative burden, provide ground support).
  - Consider raising access limits under Emergency Financing (EF) instruments for large natural disasters (LNDs) for countries with robust macroeconomic frameworks and governance standards.

### Recommendation 4 — HR management and budgetary commitments to increase continuity and effectiveness of staff engagement with SDS
- Board Response / Summing Up:
  - EDs agreed on need to improve incentives to work on SDS assignments, reduce turnover, avoid gaps in coverage, minimize handover disruptions, and strengthen continuity of Fund engagement with SDS.
  - EDs noted these issues are also concerns for non-SDS members.
  - EDs welcomed the MIP on the Board Endorsed Recommendations on Categorization of Open Actions and agreed that MIP should progress before considering SDS-specific measures in this area.
- Proposed Actions (selected):
  - R4.1a The MIP analysis on mission chief and country team turnover will explicitly discuss the experience for SDS members.
    - By: end-Dec 2023. Responsible: SDS-WG (Lead: HRD with Inputs/Review from others).
  - R4.1b The SDS-WG annual report to Management (see R1.5) will update on engagement by Area Departments including mission chief turnover, handover, team rotation, and frequency of missions with SDS.
    - By: end-Dec 2024. Responsible: SDS-WG (Lead: SPR with Inputs/Review from others).
  - R4.2 Functional Departments (FDs) to identify mechanisms to support AD teams on SDS-related issues and report them to Management (mechanisms may be department-specific and established via memoranda to OMD).
    - By: end-June 2023. Responsible: FAD, FIN, LEG, MCM, SPR, STA, ICD.
  - R4.3 Monitor support to SDS by FDs, including metrics on: (i) CD/TA provision in different modalities (including RTACs); (ii) physical and/or virtual participation in Area Department Missions; (iii) other support including review of country papers; reported as part of Annual Memo to Management on MIP Implementation.
    - By: end-December 2023. Responsible: FAD, ICD, LEG, MCM, SPR, STA.
  - R4.4 Review the LIC/FCS promotion policy two years after full implementation, with implications for SDS explicitly considered.
    - By: end-December 2025. Responsible: HRD.
  - R4.5 Area Department teams to hold at least one physical mission per year to SDS (including staff visits), in line with pre-pandemic practices; exceptions to be justified in Annual Monitoring Report by SDS-WG to Management.
    - By: end-December 2024. Responsible: ADs.
  - R4.6 Submit for consideration of the Committee for Capacity Building a well-costed proposal for Management to expand the number of long-term macroeconomic experts (LTX) in RTACs, dedicated to support SDS in close coordination with Area Department teams.
    - By: end-December 2023. Responsible: AFR, APD, WHD, ICD.
- Annex II suggestions (granular):
  - Commitment to reduce SDS mission chief turnover and avoid gaps in assignments.
  - Stronger incentives to work in SDS; consider extending LIC/FCS promotion policy to all SDS depending on experience.
  - Limit use of co-desk assignments except when both positions are in the same division.
  - Encourage greater use of functional department staff and limit use of other departmental staff to fill mission teams.
  - Increase use of research assistants (RAs) and research officers (ROs) to gather data.
  - Consider adding SDS experience to promotion-eligible requirement list in the new career framework for fungible macroeconomists, depending on experience over next two years.
  - Expand number of macroeconomists in regional offices and RCDCs.
  - Note: Footnote clarifies exclusion of METAC, which only serves one SDS, Djibouti.

*International Monetary Fund — Management Implementation Plan excerpts from Annex I. Matrix of Proposed Actions*

---


_Source: https://www.imf.org/-/media/files/publications/pp/2023/english/ppea2023011.pdf_