## Capacity Development Annual Report 2022 — Monetary and Capital Markets (taar2022)

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### Preface — Leadership messages and core CD framing
- Gita Gopinath (First Deputy Managing Director): CD is one of three main pillars of IMF work; MCM is a global leader in CD delivery in monetary and financial policies.
- Tobias Adrian (Financial Counsellor and Director, MCM): signs second preface section.
- Core messages:
  - CD helps member countries develop institutional and human capacity to adopt reforms, oversee the financial sector, and support achievement of the UN’s Sustainable Development Goals (SDGs).
  - MCM CD is targeted mainly to low and medium-income countries, with strong emphasis on fragile and conflict-affected states (FCS).
  - Critical support is enabled by partnerships and donor partners.
- FY2022 adaptations and delivery modes:
  - Pandemic and global disruptions affected CD in FY2022.
  - Delivery adapted to virtual missions and training, long-term resident advisors in the field, webinars, online courses, and—with travel resuming from March 2022—resumption of in-person missions and training.
  - Staff and field presence: HQ staff and 37 long-term advisors in the field, together with many hundreds of short-term experts, focused on delivery.
  - Financing: donor community financed “over 75 percent of our CD in FY2022.”
- FY2022 activity snapshot:
  - “We delivered over 800 country-tailored and demand-driven CD to close to 140 member countries and institutions.”
  - Geographic emphasis: “The AFR region is the largest recipient of MCM CD.”
  - Work composition: “Work on aspects of central banking and financial supervision forms two-thirds of the TA we deliver.”

### FY2022 activity levels, trends, and composition
- Activity counts FY2018–FY2022:
  - FY2018: 1086
  - FY2019: 1092
  - FY2020: 836
  - FY2021: 689
  - FY2022: 806
- FY22 delivery totals and coverage:
  - MCM delivered 806 engagements to 127 countries and 8 beneficiary institutions.
  - Analytical work spending increased by over 65 percent.
- Field staffing and RCDC footprint:
  - LTX staffing through RCDCs increased from 23 LTXs in FY21 to 25 in FY22.
  - As of July 2022, the number of LTX reached 37.
- Workstream shares (text and figure excerpts):
  - Financial supervision and regulation maintained the largest share: 36 percent (text).
  - Central bank operations: 21 percent (text).
  - Figure 5 percentages (as shown in figure):
    - Debt Management: 21%
    - Financial Crisis Management: 8%
    - Central Bank Operations: 11%
    - Financial Supervision and Regulation: 12%
    - Monetary and Macroprudential Policies: 36%
    - Payments and Infrastructure: 5%
    - Systemic Risk Analysis: 6%
- Fragile and conflict-affected states (FCS):
  - FCS were beneficiaries of 25 percent of MCM CD in FY22.
  - By workstream in FCS: financial supervision and regulation accounted for over a third of MCM’s total CD delivered to FCS; central bank operations were the next largest area.

### Regional distribution and beneficiaries
- Regional shares of MCM CD direct delivery spending in FY22 (text):
  - Africa: 39 percent
  - Asia and Pacific Islands: 19 percent
  - Western Hemisphere: 18 percent
  - Middle East and Central Asia: 15 percent
  - Europe: about 9 percent
- Top beneficiaries and program notes:
  - Ukraine and Cambodia remained top MCM CD beneficiaries.
  - Mozambique’s donor-funded CD program and the DRC’s FSSR were significant in Africa.
- Global intensity classification (direct-delivery dollar spending thresholds):
  - High: more than 0.5 million USD
  - Medium: 0.25–0.5 million USD
  - Low: less than 0.25 million USD

### External partners, financing, and trust funds
- External financing overview:
  - Bilateral partners and multi-partner trust funds funded over two-thirds of MCM’s direct CD delivery and knowledge product development in FY22.
  - Over half of MCM’s external financing supports CD through RCDCs.
  - Multi-partner thematic trust funds make up about one-quarter of MCM’s non-RCDC financing.
- Active externally funded MCM CD spending by partner categories and shares (figure percentages preserved verbatim):
  - 47% Non-RTAC
  - 9% AFRITAC South
  - 7.9% CARTAC
  - 7% AFRITAC East
  - 5.4% AFRITAC West 2
  - 5.1% CAPTAC
  - 4.7% SARTTAC
  - 3% AFRITAC West
  - 2.6% CCAMTAC
  - 2.5% AFRITAC Central
  - 2.4% METAC
  - 1.2% CEF
  - 2% PFTAC
  - 7.2% DMF
  - 3.8% FIRST
  - 3.4% Norway
  - 2.6% Canada
  - 2.5% SECO
  - 0.7% UK DFID
  - 0.5% MNRW
  - 0.7% Somalia TTF
  - 2% Other
  - 10.5% Japan
  - 13% FSSR
- Partner highlights:
  - Japan: longest-standing and largest bilateral partner; expanded support to debt management in Africa and CBDC CD worldwide; supports the new Digital Money CD Strategy.
  - Canada, Norway, Switzerland, and the United Kingdom: support financial stability, debt management, monetary policy implementation and operations across regions.
  - Multi-partner trust funds include: Debt Management Facility (DMF), Financial Reform and Strengthening Initiative (FIRST), Financial Sector Stability Fund (FSSF), Managing Natural Resource Wealth Thematic Fund (MNRW), and Somalia Trust Fund.
  - The FSSF share among thematic partnerships has been the largest since FY20 and is expected to grow in FY23–24.

### Strategic elements of MCM CD Strategy 2022–25 (stock-taking)
- ELEMENT 1: Demand-driven, country-tailored CD
  - CD delivered based on authorities’ formal requests; pre-mission scoping online engagements systematically used.
  - Adjustments for impediments (staff turnover, lack of resources, absorption capacity), especially in FCS.
  - Examples: currency board resilience (Bosnia and Herzegovina); CBDC scoping (Haiti, Philippines); rapid joint webinars on crypto regulations (Ukraine).
- ELEMENT 2: Highly expert and specialized CD
  - FY22 delivery combined in-house and external short- and long-term experts; periodic updates to expert pool.
- ELEMENT 3: High-quality CD output and quality control
  - Virtual modality expanded access to a wider pool of short-term experts; language barriers remain a challenge.
  - As of July 2022, LTX count was 37—the highest in five years.
- ELEMENT 4: Integration of CD with surveillance and IMF program activities
  - Introduction of CDMAP in May 2021 formalized CD prioritization with country teams.
  - Examples: Moldova and DRC FSSR reports published after authorities’ approval; Moldova FSSR TA roadmap recommendations included in IMF program memorandum of understanding.
- ELEMENT 5: Full range of modalities — blended and hybrid delivery
  - Hybrid delivery combining virtual and in-person engagements to be emphasized going forward.
- ELEMENT 6: Partnerships (external/internal)
  - FIRST supported Central Bank’s Guide to IFRS and other products; collaborations with World Bank, NGFS, Toronto Centre, and IMF departments.
- ELEMENT 7: Feedback and RBM
  - RBM catalogue updated with expanded CD areas; best practice to collect and analyze participants’ feedback and to expand RBM storytelling.

### Programmatic CD — Financial Sector Stability Review (FSSR) program
- FSSR objectives and structure:
  - Helps low and lower-middle income countries (LLMICs) strengthen financial sector infrastructures.
  - Financed by the Financial Sector Stability Fund (FSSF).
  - Consists of a diagnostic review, a TA roadmap, and follow-up TA projects agreed with authorities.
- FSSR FY22 scale and activity:
  - FSSR established in 2017; FY22 total FSSF spending on MCM CD projects stood at 11.5 percent of the total donor-funded CD work.
  - In FY22: completed four diagnostic FSSRs, initiated three diagnostic reviews, and continued follow-up TA projects in 12 countries.
  - Total bilateral FSSR CD projects: 21; of which nine are in countries classified as FCS.
- Resident LTX expansion under FSSF:
  - LTXs working under the FSSF increased to seven in 2022 from two at end-FY21.
  - The seven resident advisors to be physically located in Cambodia, Djibouti, The Gambia, Rwanda, Sierra Leone, Sri Lanka, and Uzbekistan.
  - By workstream: three LTXs specialize in bank supervision, three in macroprudential and financial stability, and one covers a broad range.

### Digital money, FMIs, and fintech CD demand and delivery
- CD demand:
  - Demand for CD on digital money increased to "over 20 countries in FY22".
  - CD requests cover retail CBDC, e-money, stable coins, crypto assets, wholesale CBDC, large-value payment systems, and other FMIs.
- Delivery approach:
  - Interdisciplinary delivery with IT and legal departments; increasing synergies with surveillance (Article IV and FSAPs).
  - CBDC-specific CD tailored by stage: early explorers, design phase, pilot/production phases.
- Ongoing analytical work and outputs:
  - Preparation of a CBDC Handbook as a foundational "live" document.
  - MCM leading a policy paper on crypto assets.
- Fintech and supervisory CD:
  - Six regional training courses with 204 individuals from 59 regulatory authorities in FY22.
  - Bilateral examples: Ukraine (3-day virtual workshop for over 200 staff); Central Bank of Iraq (EMI training); Africa Training Institute workshop (43 attendees from 22 jurisdictions).
- Cyber risk regulation and supervision (AFS–MCM joint initiative):
  - Sub-regional AFS Cyber Group: Botswana, Mauritius, Mozambique, Namibia, Zambia, Zimbabwe.
  - Activities since September 2021: three week-long regional workshops; six bilateral activities; Part B commenced June 2022 with on-site examinations planned (11 planned bilateral guided on-site examinations).
  - Outcomes: Four participating countries developed new comprehensive regulations on cyber risk; one country reviewing its regulation.

### Modernizing central bank operations — quantitative tools and frameworks
- Liquidity forecasting:
  - Framework extended to include "11 statistical models" dynamically selected based on out-of-sample performance.
  - Routinely requested by central banks; used for calibrating monetary operations and publishing forward-looking liquidity information (examples: Jordan and the UAE).
- Foreign exchange intervention framework:
  - Forecasting methods to identify intervention trigger points; best models selected dynamically via out-of-sample performance.
  - CD missions planned for delivery in "FY23".
- Stress-testing central bank balance sheets:
  - New framework first used in "Bosnia-Herzegovina CD" to assess policy solvency under macro-scenarios.
  - Innovative required capital assessment based on macro-scenario-dependent expected capital developments.
- Publications:
  - Two chapters published in the central banking Handbook covering reserve requirements and transitioning operating targets from reserve money to interest rates.

### Climate-related financial risks and CD
- Recognition and FY22 activity:
  - Climate-related financial risks pose threats to financial and price stability; MCM began delivering CD on climate risks in FY22.
  - Webinars and workshops: MCM jointly with ten RCDCs facilitated "seven workshops" from May 2021 to April 2022 with "534 participants" from "85 countries".
  - Planned ramp-up: a series of four events on climate stress testing in "FY23", covering Africa and the Middle East and Central Asia regions; first webinar took place at CARTAC in "FY22".
- Debt-for-climate swaps seminar:
  - Delivered in "April 2022"; attended by debt managers and officials from "ten countries and regional organizations".

### Local Currency Bond Market (LCBM) framework CD
- LCBM framework roll-out in FY22:
  - Diagnostic framework supported by an Excel tool; guidance note recognizing obstacles to reform implementation.
  - Pilots delivered remotely in Bhutan and Uzbekistan; in-person TA delivered to the Kyrgyz Republic in "June 2022".
  - Three regional workshops delivered jointly with MEFMI, STI and WAIFEM; presentation at the Asian Development Bank Roundtable on Local Currency Bond Markets.

### Results-Based Management (RBM) and measuring CD results
- RBM practices:
  - Each CD project includes a logical framework with objectives, outcomes, and milestones.
  - Operationalization of the IMF’s RBM Framework allowed MCM to build a database with project objectives, outcomes, and milestones.
- Measurement challenges and lessons:
  - Aggregating CD effectiveness across region/workstream/modality is challenging; harmonization of RBM catalogues and variable indicators is ongoing.
  - RBM pilots (Asia, Latin America, Africa) examined monetary policy implementation, macro stress testing, and financial sector supervision to distill lessons for CD design.
- Planned enhancements:
  - Incorporate pilot lessons into CD design, expand RBM storytelling to more projects, and more systematically disseminate RBM results internally.

### Selected country case highlights and key statistics (selected FY22 outcomes and milestones)
- Democratic Republic of the Congo:
  - Reintroduced three-month indexed T-bills in late 2019; in June 2021 authorities regularly issued three-month indexed T-bills.
  - Share of indexed securities grew to 4 percent of total government debt in March 2022.
  - FSSR pilot included gender inclusion recommendations (define internal gender policies; analyze composition of boards and management; mainstream gender in consumer protection supervision; resume reporting to the FAS).
- Ecuador — Superintendency of Banks (SBE):
  - By end-2021 revamped data and models to assess bank solvency system-wide.
  - By June 2022, outcome “Stress testing model(s) in place and used for their intended purpose(s)” had been fully achieved.
- Jordan — Liability Management Operations:
  - At end-2020, outstanding Eurobonds amounted to 21 percent of total government debt (equivalent to around 20 percent of GDP).
  - TA recommended developing an LMO policy embedded within a Debt Management Strategy.
- Chile — Money Market Funds:
  - MMF sector assets under management: about U.S. $40 billion.
  - MMFs hold around 10 percent of deposits.
  - CD recommended mark-to-market pricing of MMF portfolio assets.
- Cook Islands — Medium-Term Debt Management Strategy:
  - Debt to GDP increased to 47 percent in 2022.
  - Resident debt management advisor provided MTDS AT training; draft debt management strategy prepared.
- Kazakhstan — Bank stress testing:
  - Two corporate micro datasets used: over 1,700 companies (14 years) and corporate credit registry with more than 240 million rows (over eight years).
  - Two complementary credit risk modeling approaches developed for system stress testing.
- Panama — Macroprudential policy:
  - Recommendations to tighten link between objectives, assessments, and tools; publish macroprudential strategy; enhance communication via FSR.
- Peru — CBDC feasibility:
  - Mission in December 2021 used design thinking; next phase to develop methodology to traverse PoC stage.
- Tanzania — Transition to IRBMPF:
  - November 2021 mission guided Bank of Tanzania transition from MAT to an interest rate-based framework; follow-up TA planned for September 2022.
- United Arab Emirates — Liquidity management:
  - Virtual TA (June 28 to July 26, 2021) delivered a liquidity forecasting infrastructure using advanced statistical methods and non-linear semi-parametric modeling; authorities described mission as “the best technical assistance mission they have received so far”.
- Guinea — First market-based 5-year T-bond auction in April 2022; Basel-compliant capital adequacy reforms progressed with draft regulations finalized in June 2022.
- Small States (CARTAC):
  - New one-period solvency Stress Testing framework with six key changes (granularity, under-provisioning considerations, dynamic credit model, sovereign shocks inclusion, flexible user inputs, richer outputs) tailored to small-state constraints.

### Training, online courses, and capacity-building modalities
- Notable online courses and uptake:
  - BIS-IMF Bank Resolution Online Course (BROC): inaugural offering February–May 2022; around 260 participants from 74 countries; high participant ratings; rerun anticipated for 2023.
  - BIS-IMF Supervisory and Regulatory Online Course for Banking Supervisors.
  - Medium-Term Debt Management Strategy (MTDSx).
- Training delivery and outcomes:
  - Training formats: classroom, regional workshops, peer-to-peer platforms, LTX-supported bilateral assistance, targeted advisory sessions.
  - Training languages include French, Arabic, Portuguese.
  - Example: Training on Monetary Policy Implementation (CDOT and SARTTAC) — five segments delivered; participant survey average score 4.5 out of a maximum of 5.0; project outcome “Operational framework with a clear operational target of the monetary policy is in place” fully achieved by end January 2022.
- Role of advisors and experts:
  - LTXs and STXs critical for proximity, immersion, continuity; STXs drawn from partner central banks and institutions.
  - MCM’s CD delivery through RCDCs increased LTXs from 23 in FY21 to 25 in FY22; total LTXs reached 37 as of July 2022.

### Delivery lessons and policy recommendations (synthesized from reported lessons)
- Hybrid delivery model:
  - Preserve effective virtual-delivery practices (cost savings, inclusivity, wider reach) while resuming in-person work for confidentiality, effective communication, and engagement in difficult contexts (FCS).
  - Future delivery to emphasize blended/hybrid missions: mix of virtual preparation and shorter on-the-ground delivery; part of mission team travels while others join remotely; multi-phase projects combining on- and off-site missions.
- Country-tailored sequencing and absorption capacity:
  - Identify impediments (staff turnover, resource constraints) early; sequence CD with modular training and programmatic approaches; use diagnostics to align CD objectives with authorities’ priorities and absorption capacity.
- Integration and ownership:
  - Integrate CD with surveillance and IMF program work where feasible; secure senior authorities’ buy-in and engage stakeholders beyond direct CD recipients to ensure implementation.
- Use of resident advisors and peer learning:
  - Scale up resident LTX placements for continuity and follow-up; promote peer-to-peer learning and regional workshops to propagate best practices.
- RBM and measurement:
  - Apply RBM consistently across project life cycle; expand RBM storytelling to validate outcomes and extract operational lessons to inform CD prioritization.

*Source: Capacity Development Annual Report 2022 — Monetary and Capital Markets (taar2022).*

### PREFACE

### PREFACE

### Forewords and Leadership
- Gita Gopinath — First Deputy Managing Director, International Monetary Fund: emphasizes Capacity Development (CD) as one of the three main pillars of IMF work alongside surveillance and lending; highlights MCM as a global leader in CD delivery in monetary and financial policies.
- Tobias Adrian — Financial Counsellor and Director, Monetary and Capital Markets Department: signs the second preface section.

### Core messages on Capacity Development (CD)
- CD helps member countries develop strong institutional and human capacity, underpinning the adoption of reforms and oversight of the financial sector, and contributes to member countries’ ability to implement and achieve the UN’s Sustainable Development Goals (SDGs).
- MCM’s CD support is targeted mainly to low and medium-income countries, with a strong emphasis on fragile and conflict-affected states (FCS).
- The critical support to member countries is enabled by partnerships and support from donor partners.

### FY2022 delivery, operations, and adaptations
- Pandemic and global disruptions in FY2022: “During fiscal year 2022, the global pandemic hit MCM’s CD work, like other departments.”
- Adaptation of delivery modes: virtual missions and training, long-term resident advisors in the field, webinars, online courses, and—with travel resuming—beginning in March 2022, in-person missions and training.
- Staff response: MCM staff “rallied and adjusted quickly to continue to engage virtually with member countries.”
- Travel: “I am delighted that travel has resumed, and we are back in the field to provide even more support.”

### FY2022 activity and coverage (exact figures and characterizations)
- “We delivered over 800 country-tailored and demand-driven CD to close to 140 member countries and institutions” across traditional core CD areas and new and emerging areas such as digital money and finance, climate, gender, and fintech.
- Geographic emphasis: “The AFR region is the largest recipient of MCM CD.”
- Workstream composition: “Work on aspects of central banking and financial supervision forms two-thirds of the TA we deliver.”
- Field presence: “We also have a strong field presence with long-term experts (LTXs) stationed at the 12 regional technical assistance centers and placed bilaterally in targeted countries.”
- Staffing in the field: “Our HQ staff and our 37 long-term advisors in the field, together with many hundreds of short-term experts, are all focused on meeting the moment.”
- Financing: donor community financed “over 75 percent of our CD in FY2022.”

### Thematic evolution and new CD areas
- Core areas remain central: financial supervision, central banking, and financial market infrastructures comprise 80 percent of CD; another 15 percent in debt management; remainder in financial stability analysis, macroprudential and monetary policy, capital flows management, and financial crisis management.
- Emerging areas with growing CD efforts: climate-related financial risks, gender, fintech, digital money (including CBDC), and cyber risks.
- Examples of FY22 CD activities (regional and topic illustrations):
  - Climate risks: webinars in all IMF Regional Capacity Development Centers (RCDCs).
  - Insurance: delivered in SARTTAC countries.
  - Banking supervision: delivered in Iraq and Jamaica.
  - Securities and crypto assets: delivered in Kazakhstan and Albania.
  - Financial conglomerates: delivered in Chile.
  - Central bank liquidity forecasting: delivered to Algeria, Botswana, and Namibia.
  - Foreign exchange market development: delivered in Armenia.
  - CBDC and digital payments: webinars to the Caribbean region; technical assistance on payment systems to Bosnia and Herzegovina; oversight and supervisory framework for FMIs to the Gambia.
  - Monetary and macroprudential support: communications work for AFRITAC East (AFE) members, Guatemala, Philippines, Uruguay; FPAS to Botswana, Gambia, Malawi; near-term projection techniques to Rwanda, Tanzania; transition to inflation targeting in Angola; macroprudential policy in Panama, the Caribbean region, and Uzbekistan.

### Recognition and acknowledgements
- Leadership expresses “heartfelt thanks and gratitude to the MCM staff, long-term resident advisors in the field, and short-term experts who went beyond the call of duty.”
- Report preparation: “This report was prepared by the staff from MCM’s Technical Assistance Strategy Division under the guidance and supervision of Aditya Narain and Jennifer Elliott.”
- Core team named exactly: Maria Oliva, Kahoru Takei, Anastassiya Marina, Brenda Sylvester, Chloe Zhang, Katya Botsu, Natalia Naryshkina, and Jesseca Garcia.
- Many MCM staff provided input to the report.

*Source: PREFACE — Capacity Development Annual Report 2022, Monetary and Capital Markets Department*

### SECTION I  |  3Capacity Development Annual Report 2022  |  Monetary and Capital Markets

### SECTION I  |  3Capacity Development Annual Report 2022  |  Monetary and Capital Markets

### Major areas of CD engagement
- Monetary and financial stability policies: examples include work on the content and frequency of the Central Bank of Uruguay’s interactions with the public and options to develop tiered communications.
- Capital flows:
  - Management of capital flows became a focus as the COVID shock and higher inflation increased market volatility.
  - MCM helped member countries design capital account liberalization roadmaps and advised on conditions for capital flow management measures.
  - The IMF’s review of its “institutional view” on capital flow liberalization and management has heightened interest in this topic.
- Financial stability and systemic risk analysis:
  - Development of macro-stress testing frameworks, risk heat maps, financial stability analysis, and financial stability reports.
  - Country examples: stress testing model in Ecuador; diagnostic assessment in Aruba; heat map methodology in Chile and Turks and Caicos; support to enhance Mozambique’s banking sector stress testing capacity.
  - Collaboration with EBA finalized in the first quarter of the fiscal year.
  - New and growing work on bringing climate-related financial risk analysis into stress testing frameworks, building on FSAP work.
- Debt management and capital markets:
  - Core CD: improve institutional arrangements for debt management, develop and implement debt management strategies, develop local currency bond markets, and improve debt recording, reporting, and monitoring.
  - Support to develop formal reform plans for debt management and climate finance.
- Crisis management:
  - Support to resolution authorities and deposit insurers to strengthen bank resolution and deposit insurance regimes and enhance operational capacity to manage failing banks and financial crises.
  - Activities included design and launch of an inaugural online course on bank resolution, in-person training via IMF regional training centers (including Africa Training Institute), and bilateral support (examples: Pakistan on bank restructuring; the Bahamas on crisis management and bank resolution framework; operationalizing new bank resolution legislation in Comoros).

### Adjusting CD modalities to the new realities
- Pandemic experience changed CD modalities; MCM seeks to capture and sustain best virtual-delivery practices while resuming in-person work.
- Strengths of remote delivery:
  - Saves travel costs.
  - Expands inclusivity (simultaneous interpretation in different languages).
  - Reaches larger audiences and allows flexible, time-stretched delivery.
- Strengths of in-person delivery:
  - More confidential environment, more effective communication, less screen fatigue, friendlier time zones.
- Consensus: future will emphasize hybrid (blended) delivery combining virtual and in-person CD. Hybrid shapes include:
  - Mixing virtual and on-site engagements into a mission: extended off-site preparation and shorter on-the-ground delivery.
  - Mixing on- and off-site presence in space: part of the mission team travels, others join remotely (e.g., specialists).
  - For longer, multi-phase projects, combining on- and off-site missions to ensure flexibility and continuity.
- FY23 expected to be a transition to a new normal; flexibility and country-specific needs/constraints remain key variables in CD design.

### CD delivery in FY2022 — activity levels and trends
- Activity and coverage:
  - MCM delivered 806 engagements to 127 countries and 8 beneficiary institutions.
  - CD continued to be broad-based with short-term engagements and sequenced hand-holding follow-up.
  - Analytical work to support CD significantly expanded, with spending increasing by over 65 percent.
  - MCM developed tools, Handbook references, and frameworks supporting core and new growth areas in FY22.
- FY18–FY22 number of CD activities (from figure):
  - FY2018: 1086
  - FY2019: 1092
  - FY2020: 836
  - FY2021: 689
  - FY2022: 806
- Note: FY22 activity count includes direct delivery, management and administration, and analytics and development activity categories. The IMF adopted a new administrative system (CDMAP), introducing methodological changes that create a data series structural break. Spending after FY21 cannot be easily compared to prior years.

### Regional distribution and beneficiaries
- Regional shares of MCM CD direct delivery spending in FY22 (text):
  - Africa: 39 percent
  - Asia and Pacific Islands: 19 percent
  - Western Hemisphere: 18 percent
  - Middle East and Central Asia: 15 percent
  - Europe: about 9 percent
- Geographic observations:
  - Preference for in-person CD by some authorities, especially in Asia, partially explained a drop (relative to prior periods).
  - CD to Latin American countries expanded significantly (up from 14 percent of FY19 MCM CD).
- Top beneficiaries and notable programs:
  - Ukraine and Cambodia remained top MCM CD beneficiaries.
  - In Africa, Mozambique’s donor-funded CD program and the DRC’s FSSR played a big role.
- Global intensity mapping in FY22 classed countries by direct-delivery dollar spending thresholds:
  - High: more than 0.5 million USD
  - Medium: 0.25–0.5 million USD
  - Low: less than 0.25 million USD

### CD by workstream and service composition
- By workstream (text summary):
  - Financial supervision and regulation maintained the largest share: 36 percent.
  - Central bank operations: 21 percent.
  - Demand for CD on financial stability risk analysis, payment systems, and monetary policy frameworks increased relative to FY21 levels.
- Figure 5 (percentages as shown in figure):
  - Debt Management: 21%
  - Financial Crisis Management: 8%
  - Central Bank Operations: 11%
  - Financial Supervision and Regulation: 12%
  - Monetary and Macroprudential Policies: 36%
  - Payments and Infrastructure: 5%
  - Systemic Risk Analysis: 6%

### Fragile and conflict-affected states (FCS)
- FCS were beneficiaries of 25 percent of MCM CD in FY22 (broadly in line with FY21).
- Challenges: hands-on and continued engagement is particularly difficult in the virtual environment for FCS.
- By workstream in FCS:
  - Financial supervision and regulation accounted for over a third of MCM’s total CD delivered to FCS.
  - Central bank operations were the next largest area.
  - High demand also for monetary policy frameworks and tools and development of sovereign debt markets.
- Observation: In-person CD is particularly important for FCS; core CD work remains critical.

### Training, learning, and delivery resources
- Training role and formats:
  - Ranges from traditional classroom to bilateral/regional workshops, peer-to-peer platforms, long-term advisors supported by HQ staff, and targeted advisory sessions for high-level officials.
  - Regional coverage expanding to all Regional Capacity Development Centers and Regional Training Centers.
  - MCM training offered in multiple languages (e.g., French, Arabic, Portuguese).
  - “Learning by offering” online courses and “How-to” knowledge products promoted.
- Notable online courses:
  - BIS-IMF Bank Resolution Online Course
  - BIS-IMF Supervisory and Regulatory Online Course for Banking Supervisors
  - Medium-Term Debt Management Strategy (MTDSx)
- Training topics include: supervision and regulation, bank resolution, debt management, stress testing, central bank operations, payment systems, capital flow management, exchange rate arrangements, and emerging topics such as cyber risk supervision, cross-border digital payments, e-money and mobile payments, regulation of fintech and digital money, central bank digital currency, cash and debt management, and frontier methods to model central bank systemic liquidity.
- Role of advisors and experts:
  - Long-term resident advisors (LTXs) and short-term experts (STXs) are critical.
  - LTXs engaged in each RCDC and serve country groups; they provide region-wide training and bilateral assistance, offering proximity, immersion, and continuity.
  - STXs drawn from partner central banks, debt management offices, ministries of finance, supervisory agencies, and individual consultants expand delivery capacity.
- LTX staffing:
  - MCM’s CD delivery through RCDCs increased from 23 LTXs in FY21 to 25 in FY22.

### Delivery composition and resource mix
- Composition of CD activity (figure on TA vs. training):
  - Note: FY22 CDMAP data does not provide a breakdown of TA and training; data was proxied using multi-country CD data.
  - Historical splits (FY18–FY22): TA dominated overall CD activity in prior years (percentages shown in figure).
- Externally funded experts:
  - Externally funded experts deliver a significant share of MCM CD activities (direct delivery).
  - Externally funded direct delivery occurs across all regions; LTX counts reflect regional footprints.

### External partners and financing
- External financing:
  - Bilateral partners and multi-partner trust funds helped fund over two-thirds of MCM’s direct CD delivery and knowledge product development in FY22.
  - Over half of MCM’s external financing supports CD delivered through RCDCs; multi-partner thematic trust funds make up about one-quarter of MCM’s non-RCDC financing.
- Active externally funded MCM CD spending by partner categories and shares (figure percentages):
  - 47% Non-RTAC
  - 9% AFRITAC South
  - 7.9% CARTAC
  - 7% AFRITAC East
  - 5.4% AFRITAC West 2
  - 5.1% CAPTAC
  - 4.7% SARTTAC
  - 3% AFRITAC West
  - 2.6% CCAMTAC
  - 2.5% AFRITAC Central
  - 2.4% METAC
  - 1.2% CEF
  - 2% PFTAC
  - 7.2% DMF
  - 3.8% FIRST
  - 3.4% Norway
  - 2.6% Canada
  - 2.5% SECO
  - 0.7% UK DFID
  - 0.5% MNRW
  - 0.7% Somalia TTF
  - 2% Other
  - 10.5% Japan
  - 13% FSSR
- Partner highlights (Box 3):
  - Japan: longest-standing and largest bilateral partner; expanded support to debt management in Africa and central bank digital currency CD worldwide; supports the new Digital Money CD Strategy.
  - Canada, Norway, Switzerland, and the United Kingdom: committed partners supporting financial stability, debt management, monetary policy implementation and operations in regions including the Caribbean, Ethiopia, Mozambique, and Ukraine.
  - Multi-partner trust funds supporting MCM CD include: Debt Management Facility (DMF), Financial Reform and Strengthening Initiative (FIRST), Financial Sector Stability Fund (FSSF), Managing Natural Resource Wealth Thematic Fund (MNRW), and Somalia Trust Fund.
  - The FSSF share among thematic partnerships has been the largest since FY20 and is expected to grow further in FY23–24 as FSSR follow-up projects advance.
- Clarifying notes on partner funding:
  - Bilateral partners finance single-country CD programs deemed priority by the IMF, partners, and CD recipients.
  - Multi-partner TFs support single-country broad CD or thematic CD across countries, including RCDC-provided CD.
  - MCM’s project under MNRW was completed by end-FY22.
  - The FIRST partnership in Phase IV will end in December 2022.

*Source: SECTION I  |  3Capacity Development Annual Report 2022  |  Monetary and Capital Markets (taar2022).*

### SECTION I

### SECTION I

### Progress Against Goals
- MCM CD delivery is informed by MCM’s mandate and Fund CD policies, the IMF Managing Director’s Global Policy Agenda (GPA), and the IMF’s internal, interdepartmental Committee on Capacity Building regular reviews.
- Recommendations from the Independent Evaluation Office (IEO), Triennial MCM Capacity Development Strategies (since 2011), and periodic external evaluations have been critical in strengthening MCM CD design and delivery.
- Recipient authorities’ feedback during CD bilateral meetings at the Annual and Spring Meetings helps shape MCM work.
- A new CD Strategy 2022–2025 "Supporting Financial Sector Resilience Through Disruption and Change" was published in February 2022.
- Testimonial (excerpt): Koba Gvenetadze, Governor, National Bank of Georgia—MCM CD contributed to strengthening financial stability framework, macroprudential strategy, policy communication, stress testing (COVID-19 shock modeling), foreign exchange policy framework communications, and CBDC scoping.

### Key Elements of MCM CD Strategy 2022–25 — Stock Taking
- ELEMENT 1: Demand-driven, country-tailored CD
  - MCM delivers CD based on authorities’ formal requests to ensure buy-in and implementation.
  - Pre-mission scoping online engagements are systematically used to understand country context.
  - MCM identifies impediments to reforms (e.g., staff turnover, lack of resources, absorption capacity, especially in FCS) and adjusts advice, materials, pace, and modality with sequential CD, training modules, and programmatic approaches.
  - Examples: assistance to Central Bank of Bosnia and Herzegovina on currency board resilience; Central Bank of Haiti exploring retail CBDC implications; Bangko Sentral ng Pilipinas CBDC scoping leading to TA on wholesale CBDC in FY23; regional stress testing training for CARTAC countries adjusted for high staffing turnover.
  - Rapid targeted engagements: joint MCM-Legal webinar on crypto regulations for Ukraine; NEXT-UA project assistance on capital and organized commodities markets reforms; mission assessed feasibility study and advised the National Bank of Ukraine (NBU).

- ELEMENT 2: Highly expert and specialized CD across key financial sector topics
  - FY22 delivery combined in-house and external short- and long-term experts, with periodic updates to the expert pool.
  - Testimonials and course/webinar evaluations (e.g., regional webinars on unwinding COVID measures) show appreciation for quality.
  - MCM is expanding expertise in emerging and growth areas; subsequent section highlights initial achievements.

- ELEMENT 3: High-quality CD output via experienced staff and quality control
  - MCM relies on staff and resident/short-term advisors with practical expertise in monetary and financial stability workstreams.
  - As of July 2022, the number of LTX reached 37—the highest in the past five years.
  - Virtual modality during COVID-19 expanded access to a wider pool of short-term experts; language barriers remain a challenge in some cases.
  - Examples of successful LTX onboarding during the pandemic: CDOT MCM Central Bank Operation LTX (started March 2021) with National Bank of Cambodia; AFRITAC West financial regulation and supervision LTX supporting regional demands.

- ELEMENT 4: Integration of CD with surveillance and IMF program activities
  - Introduction of CDMAP in May 2021 formalized CD prioritization between CD delivery departments (CDDs) and country teams.
  - CD documentation (briefing papers, TA reports) is reviewed by country teams and relevant CDD divisions; TA recommendations are sometimes highlighted in surveillance and lending work.
  - Successful CD-surveillance integration seen especially in FCS and LIC with the FSSR; Moldova and DRC FSSR diagnostic reports were published on the IMF website after authorities’ approval.
  - Moldova FSSR TA roadmap recommendations are included in the authorities’ memorandum of understanding under the IMF program and are in the process of implementation.
  - Ukraine: remote two-part mission to develop NBU strategic planning for banking supervisory function, including organizational restructuring and recommendations comparing NBU approach with international standard; facilitated technical discussions with De Nederlandsche Bank (DNB) on emergency liquidity support (ELA) and legal base as secured creditor in bank withdrawal/liquidation.

- ELEMENT 5: Full range of CD modalities for maximum impact
  - COVID-19 mainstreamed flexible, blended, hybrid engagement modalities.
  - MCM expanded training outreach via regional workshops and large-scale online courses (e.g., FIRST-funded Bank Resolution Online Course).
  - Knowledge management products and toolkits developed (e.g., Cybersecurity Supervisory Toolbox funded by FIRST; TA handbook for monetary policy framework and central bank operations).
  - Small-scale CD engagements used as agile, flexible modalities and often as post-mission “aftercare” support.
  - Example: progress on Sao Tome and Principe’s foreign exchange legislation supported by regular expert calls.

- ELEMENT 6: Building on external and internal partnerships
  - External partnerships expanded CD knowledge products and coverage complementary to MCM mandate.
  - FIRST supported: Central Bank’s Guide to IFRS; Guidance Note for developing local debt markets; CB Legislation Framework and database.
  - TA handbook on monetary policy implementation is being developed with MNRW support; JSA COVID Window supports production of the CDBC TA handbook.
  - Collaborations with World Bank and NGFS in FSSR and climate-related financial risks webinars.
  - Internal collaborations with communications, fiscal, legal, STA, and information technology departments used frequently.
  - Partnering with Toronto Centre and STA enabled gender-inclusive work in an FSSR (DRC) for the first time.

- ELEMENT 7: Utilizing feedback processes for continuous improvement
  - RBM catalogue updated with newly expanded CD areas (e.g., capital flow management) and coverage.
  - Best practice recommended: collect and analyze participants’ feedback for training courses and workshops (e.g., CARTAC stress testing seminar incorporated past feedback).
  - Annual MCM LTX workshops provide candid exchanges on improvements; Annual Report stories reference CD design and challenges.
  - RBM framework applied across CD project life cycle.

### Programmatic Approach to CD — FSSR (Financial Sector Stability Review) Program
- FSSR overview:
  - FSSR helps low and lower-middle income countries (LLMICs) strengthen financial sector infrastructures.
  - Financed by the Financial Sector Stability Fund (FSSF), a dedicated multi-donor trust fund.
  - FSSR consists of: a diagnostic review of key components of financial sector architecture (including prudential frameworks and safety nets), a TA roadmap to address gaps, and follow-up TA projects agreed with authorities.
  - Scoping work determines coverage; each FSSR is tailored to recipient agencies and focuses on capacity/institutional gaps. Authorities play a key role.
- FSSR scale and FY22 activity:
  - Established in 2017; FSSR has become a main MCM CD program aligned with Fund-wide CD priorities and MCM CD strategy.
  - The FSSF is currently the largest external funding vehicle of MCM CD activities; FY22 total FSSF spending on MCM CD projects stood at 11.5 percent of the total donor-funded CD work.
  - As of FY22, FSSR activities spread across all regions.
  - In FY22, MCM teams completed four diagnostic FSSRs, initiated three diagnostic reviews, and continued follow-up TA projects in 12 countries at various implementation stages.
  - Total bilateral FSSR CD projects: 21; of which nine are in countries classified as FCS.
  - Remote delivery dominated FSSR work, but hybrid delivery is likely effective given FSSR sequencing design.
- Resident LTX expansion under FSSF:
  - Number of MCM LTXs working under the FSSF increased to seven in 2022 from two at end-FY21.
  - With easing travel restrictions, all LTXs are to be physically located in central banks of CD-receiving countries to facilitate close follow-up, ongoing support, and smoother interactions without remote communication technology challenges.
  - The seven resident advisors will be in Cambodia, Djibouti, The Gambia, Rwanda, Sierra Leone, Sri Lanka, and Uzbekistan.
  - By workstream: three LTXs specialize in bank supervision, three in macroprudential and financial stability, and one covers a broad range of responsibilities.

### FSSR Activities — Geographic Coverage (as reported)
- Countries mentioned in relation to completed or ongoing diagnostic FSSR activities include:
  - Completed diagnostic and ongoing diagnostic activities spanned countries such as Nicaragua, Sierra Leone, Democratic Republic of the Congo, Guinea, Uzbekistan, Moldova, Kosovo, West Bank and Gaza, The Gambia, Cabo Verde, Zimbabwe, Djibouti, Uganda, Tajikstan, Vietnam, Nepal, Rwanda, Lesotho, Sri Lanka, Cambodia, Bangladesh.

### Box 4 — Democratic Republic of the Congo FSSR and Gender Inclusion
- The DRC FSSR covered gender inclusion in the financial sector for the first time in any FSSR; MCM used this FSSR as a pilot.
- Partnering with the Toronto Centre and the Statistics Department (STA) permitted incorporating gender-inclusive work and the use of the Financial Access Survey (FAS), which includes gender-disaggregated data since 2017.
- The partnership involved experts engaging in two days of virtual meetings with central bank experts/managers, banking association, banks, microfinance institutions, and mobile money firms.
- FSSR recommendations adjusted for BCC’s limited capacity and competing priorities; BCC staff awareness of other African countries’ measures helped discussions.
- Final FSSR recommendations included:
  - (i) defining the BCC’s internal gender policies;
  - (ii) analyzing information that the BCC already holds on the composition of boards and management bodies of financial services providers and incorporating this into the supervision process;
  - (iii) mainstreaming gender in the upcoming supervision of consumer protection; and
  - (iv) completing the internal review of gender-aggregated data collection and resuming reporting to the FAS.
- These recommendations are expected to be supported by MCM CD in partnership with the Toronto Centre and STA.

### Reintroducing Government Securities in the DRC After a 30-year Break (Case Summary)
- Background:
  - DRC ceased issuing government securities in 1991 due to accumulation of arrears; government relied on external issuance and non-marketable domestic borrowing.
  - Mid-2010s: debt management became a priority; AFRITAC Central regional advisor helped prepare a roadmap in early 2015, endorsed by authorities.
  - A working group (Ministry of Finance, Debt Management Office, Treasury Directorate, Central Bank) oversaw the project.
- CD provided (over four years) included:
  - Issuance policies and procedures for primary market;
  - Infrastructure for settlement and custody of government securities;
  - Governance framework for securities issuance;
  - Strategy for launching the domestic issuance program;
  - Training on issuance techniques, characteristics, pricing of T-bills and bonds, and investor relations.
- Peer-to-peer learning enabled four Congolese officials to learn from Tunisia’s experience in developing local currency securities market.
- Outcome:
  - In late 2019, authorities reintroduced three-month T-bills, diversifying funding sources.
  - COVID-19 constrained local domestic currency liquidity and led to significant FX depreciation, deterring participation in T-bill market in a dollarized economy.
- Follow-up tailored TA and innovations:
  - Resident advisor proposed introduction of new currency-indexed (to the USD) securities to address dollarization and liquidity issues.
  - Debt Management Facility financed follow-up TA to prepare policies, systems, and processes for indexed-security issuance, including settlement and repayment at maturity, and integration into auction and debt recording systems.
  - Complementary training provided on pricing, launching the new instrument, and educating market participants.

*Source: SECTION I, Capacity Development Annual Report 2022 — Monetary and Capital Markets*

### SECTION II

### SECTION II

### Government debt instruments and indexed T-bills (Democratic Republic of the Congo)
- Since June 2021, the authorities have been regularly issuing three-month indexed T-bills.
- New maturities introduced to gradually reduce refinancing pressures.
- Central Bank work on the monetary policy front, in coordination with the IMF, supported these efforts.
- As a result of these integrated efforts, the share of indexed securities has grown steadily to 4 percent of total government debt in March 2022.

### Testimonial (Nicolas Kazadi Kadima-Nzuji, Ministre des Finances)
- Réactivation en 2019, après plus de 20 ans d’interruption, des opérations d’émission des Bons du Trésor et des Obligations du Trésor.
- Transition des titres non indexés aux titres indexés et à des titres à remboursement par amortissement.
- Ces instruments ont été déterminants pour le succès des émissions dans un pays fortement dollarisé.
- Le Gouvernement compte sur l’accompagnement d’AFRITAC CENTRE pour relever les défis du développement du marché.

### Securities market development and regulatory reform (CARTAC region and ECCU)
- Most businesses in CARTAC member countries rely on the banking sector for financing; securities market development remains an important objective.
- CARTAC regional advisor support since 2019 has focused on:
  - Introduction of new securities legislation in Belize and drafting regulations following enactment of the Belize Securities Industry Act, 2021.
  - Enhancing regulatory and supervisory oversight in the Eastern Caribbean Currency Union (ECCU), Jamaica, and Trinidad and Tobago.
  - Reviewing and updating the Securities Bill and Investment Funds Bill in the ECCU to align with international standards and training ECSRC staff.
- Expected and observed outcomes:
  - New securities legislation and accompanying regulations in Belize are expected to provide an adequate level of protection for market participants, introduce disclosure requirements, and facilitate licensing and effective supervision of market participants and intermediaries.
  - The ECCU’s revised Securities Bill has been enacted in five of the eight ECCU member countries and the Investment Funds Bill in four territories.
  - The revised legislation aims to facilitate greater participation by individuals and corporates.
  - In February 2022, the Eastern Caribbean Securities Regulatory Commission (ECSRC) became an Associate Member of the International Organization of Securities Commissions (IOSCO).

### Five-year reflection on Capacity Development delivery (SARTTAC) — key lessons and outcomes (by Jacques Loubert)
- Assignment overview:
  - Scoping mission to six SARTTAC countries in March–April 2017 prior to joining SARTTAC.
  - SARTTAC established in 2017; CD focused on financial sector supervision and regulation (FSR).
  - CD delivery relied on hands-on working sessions, field presence, short-term experts, and MCM HQ staff.
- COVID-19 impact and adaptation:
  - Pandemic impacted CD delivery for almost two years; priorities shifted to short-term crisis response.
  - SARTTAC pivoted to webinars and virtual engagements based on MCM-prepared COVID-19-related policy notes.
  - Webinars covered insurance supervision, cybersecurity, and primarily banking supervision and regulation.
- Tangible achievements:
  - In-person missions resumed in May 2022 with two missions in Bangladesh and the Maldives a few weeks before the assignment ended.
  - Insurance supervision CD in the Maldives and Bhutan contributed to implementing a risk-based supervision (RBS) framework; the project is ongoing.
  - Publication of new corporate governance regulations aligned with international practices in two countries.
  - Publication of risk management guidelines in three countries.
  - One member country’s central bank finalized an RBS framework during the last mission and agreed on an action plan to complete a pilot program by December 2022.
- Lessons learned:
  - Capacity building requires sustained energy and passion from long-term experts.
  - Weak institutional frameworks and limited supervisory resources can hamper reform momentum.
  - Establishing foundations (the “tree has been planted”) is necessary; continued support is required for growth and sustainability.

### Inaugural Online Course on Bank Resolution (BROC)
- Context:
  - Bank resolution frameworks and safety-net arrangements gained prominence after the Great Financial Crisis.
  - The Financial Stability Board’s Key Attributes (KA) for Effective Resolution Regimes for Financial Institutions define essential features of resolution regimes.
- BROC objectives and scope:
  - The BROC explains core components of bank resolution and deposit insurance frameworks and arrangements needed to make resolution powers operational.
  - Specifically, it:
    (i) Explores the common drivers for bank failures and introduces participants to the KA.
    (ii) Enhances understanding of the main resolution tools and helps to develop skills on how these can be best utilized.
    (iii) Introduces the most important elements of resolution planning, including in a cross-border context, and enhances awareness about the roles of both home and host authorities in this process.
    (iv) Familiarizes participants with international standards on deposit insurance by IADI and the Basel Committee on Banking Supervision and their potential interplay with resolution frameworks; and,
    (v) Fosters a greater understanding of key aspects that need to be in place to make bank resolution operational, including mechanisms for resolution funding and valuing failing banks’ assets.
- Delivery and uptake:
  - Inaugural offering took place in February–May 2022.
  - Attracted around 260 participants from 74 countries, most with backgrounds in prudential supervision or resolution.
  - Participants highly rated the course; a rerun is anticipated for 2023.
  - The BROC is expected to pave the way for further bespoke and targeted CD delivery.

### Supervision and regulation CD on fintech
- Scope of CD requests in FY22:
  - Topics covered: regulation of crypto assets, BigTech, electronic money, SupTech, and regulatory sandboxes.
- Regional training and reach:
  - MCM delivered six regional training courses during the past year, working with 204 individuals from 59 regulatory authorities.
  - Courses included core modules on the impacts of fintech on financial stability.
- Bilateral engagements and examples:
  - Ukraine: MCM and LEG provided a three-day virtual CD workshop covering (i) prudential and conduct regulation of crypto assets, (ii) regulation supporting financial integrity including anti-money laundering and counter financing of terrorism, and (iii) in-depth discussions to share ideas and information. Over two hundred staff of the NBU and the National Securities and Stock Market Commission participated.
  - Central Bank of Iraq: Training on regulation and supervision of e-money institutions (EMI) with staff from Bank Supervision, Payments, Information Technology and Non-Bank Financial Institutions Supervision Department; training covered EMI regulatory framework and offsite/onsite supervisory procedures, with daily quizzes to evaluate effectiveness.
- Regional workshop example:
  - Four-day virtual workshop with the Africa Training Institute: 43 attendees from 22 jurisdictions.
  - Covered jurisdictional fintech developments, global fintech developments, supervisory responses, prudential regulation of e-money institutions, crypto assets, BigTech risks, RegTech and SupTech, blockchain networks, and crypto asset regulatory challenges.

### Cyber risk regulation and supervision CD (AFS and MCM joint initiative)
- Design and rationale:
  - Initiative established in 2021 to develop and implement a comprehensive regulatory and supervisory framework for cyber risk with a regional approach.
  - Emphasizes regional consistency due to inter-linked banking firms and the borderless nature of cyber risk.
- Participants and structure:
  - Sub-regional AFS Cyber Group of six AFS member countries: Botswana, Mauritius, Mozambique, Namibia, Zambia, and Zimbabwe.
  - Initiative has two parts:
    - Part A: Cyber risk regulation development — assist countries to develop new or updated cyber risk prudential regulations.
    - Part B: Cyber risk supervision framework development — support prudential supervisors on off-site and on-site assessment of cyber risk, data collection and analysis, and on-site examination.
- Activities and timeline:
  - Since September 2021:
    - Three week-long regional training workshops (two virtually and one in-person) covering cyber risk regulation development and cyber risk supervision.
    - Six bilateral activities addressing development and enhancement of cyber risk prudential regulations in line with international best practice.
  - Part B commenced in June 2022 with an in-person workshop including the six participating countries.
  - Followed up with the first of 11 planned bilateral guided cyber risk on-site examinations.
- Outcomes to date:
  - Four participating countries have developed new up-to-date, comprehensive regulations on cyber risk; these new regulations are currently going through industry consultations.
  - One participating country is reviewing its regulation, which is under internal consideration.
- Success factors:
  - The initiative’s success rests on:
    (i) sub-regionality, providing sufficient scale while enabling hands-on tailored reform;
    (ii) strategic and executive focus and commitment from participating countries; and
    (iii) structuring and implementing CD work via agreed medium-term CD plans.

_Italic: Source — taar2022 - SECTION II (Capacity Development Annual Report 2022 | Monetary and Capital Markets)_

### SECTION III

### taar2022 - SECTION III

### Digital money and Financial Market Infrastructures (FMIs): capacity development (CD) demand and delivery
- Demand for CD on digital money increased to "over 20 countries in FY22".
- CD requests cover advanced economies, emerging market economies, and lower-income countries.
- Scope of CD requests includes: retail central bank digital currency (CBDC), e-money, stable coins, crypto assets, wholesale CBDC, large-value payment systems, and other FMIs.
- Typical country requests and topics:
  - Identifying pros and cons of digital innovations and alternatives.
  - Devising wholistic national payment strategies and upgrading FMIs.
  - Quantifying macrofinancial implications (on monetary policy transmission, financial stability, financial market structure, and capital flows).
  - Designing and running pilots to ascertain effects.
- MCM CD delivery approach:
  - Interdisciplinary delivery with information technology and legal departments.
  - Tailored, actionable, innovative, and sound policy advice grounded in analysis and field lessons.
  - Increasing synergies with surveillance (Article IV and FSAPs).
  - Ultimate objective: avoid a digital divide and improve safety, cost, access, and efficiency of payment systems and FMIs while managing risks and international monetary system implications.
- Bilateral CD focus areas:
  - Modernizing payment systems: medium-term payment strategies, payment system regulations and rules, reviewing access by non-banks, enhancing public-private cooperation.
  - Oversight capacity: adopting the Principles for Financial Market Infrastructure (PFMI) on governance, risk management, and operational resilience.
- CBDC-specific CD:
  - For early explorers: discussion of drivers, purpose, pros and cons, and alternatives.
  - For countries in design phase: selecting design features (e.g., tiered wallets, data management, offline functionality), public-private partnerships, adequacy of legal and regulatory frameworks.
  - For countries in pilot/production: fine-tuning governance and risk management arrangements and implementation considerations.
  - Increasing number of countries investigating macrofinancial implications of digital money.
- Regional training and workshops:
  - PFMI training provided to regional centers in Asia, Africa, and the Middle East.
  - Regional workshops and training courses on CBDC, crypto assets, and e-money in all major regions; well attended and wide-ranging coverage including policy, macrofinancial, legal, technology, interoperability, and pilot experiences.
- Ongoing analytical work:
  - Preparation of a CBDC Handbook intended as a foundational, "live" document with chapters added/updated regularly.
  - Exploratory/novel topics to be covered initially in Fintech Notes, Staff Discussion Notes, and Policy Papers.
  - MCM leading a policy paper on crypto assets to lay out elements for effective crypto policies.
- Planned new CD on digital money:
  - (i) expand country coverage;
  - (ii) shift into higher value-added CD tailored to country circumstances and anchored in empirical and analytical work;
  - (iii) review pilots before launching CBDC;
  - (iv) ramp up peer-to-peer learning;
  - (v) strengthen synergies with surveillance.
- Planned new CD on FMIs:
  - (i) deep dives on select principles and risks (e.g., governance and operational risks with new "decentralized FMIs");
  - (ii) oversight of new central bank payment schemes (e.g., CBDC);
  - (iii) oversight of regional cross-border arrangements (e.g., interoperable faster payment schemes).

### Modernizing CD on central bank operations: quantitative tools and frameworks
- FY22 focus areas: liquidity forecasting, foreign exchange intervention, and stress-testing central bank balance sheets.
- Liquidity forecasting framework:
  - Extended to include "11 statistical models" which are dynamically selected based on out-of-sample performance.
  - Developed in collaboration with ITD and academics; used in several central bank missions.
  - Routinely requested by central banks to calibrate monetary operations or to publish forward-looking liquidity information (supported by TA reports such as Jordan and the UAE).
- Foreign exchange intervention framework:
  - Applies forecasting methods to inform FX intervention and identify possible intervention trigger points by obtaining a short-term forecast of the distribution of the exchange rate.
  - Includes several forecasting models customized to each country by adding locally relevant variables.
  - Best models selected via a dynamic process assessing out-of-sample performance and robustness.
  - CD missions discussed and planned for delivery in "FY23".
- Stress-testing central bank balance sheets:
  - New stress-testing framework developed and first used in "Bosnia-Herzegovina CD".
  - Objective: assess policy solvency—whether a central bank, under different macro-scenarios over the medium-term, is projected to have the financial resources necessary to achieve its policy mandate.
  - Assesses interest rate, foreign exchange, and credit risks; recognizes increased financial risks on central bank balance sheets.
  - Innovative element: required capital assessment based on macro-scenario-dependent expected capital developments rather than static current capitalization levels.
- Publications:
  - Two chapters published in the central banking Handbook covering reserve requirements and transitioning operating targets from reserve money to interest rates.

### Climate-related financial risks: awareness, CD, and events
- Recognition: climate-related financial risks pose threats to financial stability and price stability; the journey to tackle them has just started.
- FY22 activities and plans:
  - MCM began delivering CD on climate risks; this is a growth area on the MCM agenda.
  - Plans to continue raising awareness and step up CD on incorporating climate risks into regulatory, supervisory, and stability frameworks.
  - A series of webinars on climate stress testing planned to ramp up in "FY23" with "four events" covering Africa and the Middle East and Central Asia regions; first webinar took place at CARTAC in "FY22".
- Workshops (May 2021 to April 2022):
  - MCM, jointly with ten IMF Regional Capacity Development Centers (RCDCs), facilitated "seven workshops" on climate risks from May 2021 to April 2022.
  - Workshops had "534 participants" from "85 countries" across Africa, the Caribbean, the Middle East, Pacific Islands, Central America, and South Asia.
  - Objectives: raise awareness of climate-related risks and emerging supervisory standards/practices, facilitate experience sharing, and build capacity to implement initiatives to incorporate climate risks into supervisory frameworks.
  - Agenda highlights:
    - Representatives from the Basel Committee and the Network for the Greening of the Financial System (NGFS) provided overviews of international initiatives, emerging supervisory practices, and progress/challenges in integrating climate-related risks into prudential frameworks.
    - Several authorities shared experiences and approaches to supervision of climate-related risks and practices within supervised entities.
  - Pre-event survey and workshops helped assess country progress and identify capacity gaps for supervising climate risks.
- Debt-for-climate swaps seminar:
  - CARTAC and MCM delivered an online debt-for-climate swaps seminar in "April 2022" focused on mobilizing or redirecting financing for climate objectives while keeping debt at sustainable levels.
  - Panels discussed practical steps, preconditions, challenges, and country experiences (Belize, Antigua and Barbuda, Barbados, and others).
  - Seminar highlighted that debt-for-climate swaps remain a niche instrument due to alignment requirements, suitable projects, and need for guarantees or third-party funding.
  - The seminar was attended by debt managers and officials from "ten countries and regional organizations".

### Local Currency Bond Market (LCBM) framework CD
- MCM, in collaboration with the World Bank, began rolling out the LCBM framework in FY22.
- Framework features:
  - Diagnostic framework supported by an Excel tool for comprehensive assessments of domestic debt market development stages to inform policy actions to deepen markets.
  - Guidance note goes beyond best practices by recognizing obstacles that hamper LCBM reform implementation.
- Pilots and delivery:
  - Piloted remotely in Bhutan and Uzbekistan through remote TA missions.
  - In "June 2022", the IMF delivered in-person TA to the Kyrgyz Republic.
  - In 2022, three regional workshops delivered jointly with MEFMI, STI and WAIFEM and a presentation made to the Asian Development Bank Roundtable on Local Currency Bond Markets.
  - Further workshops and TAs planned for the fiscal year to continue rolling out activities on the framework.

### Measuring CD results: Results-Based Management (RBM) data and country CD stories
- RBM as the framework for monitoring CD impact and feedback for CD design is ingrained in MCM CD work.
- Each CD project includes a logical framework (log frames) outlining objectives, outcomes, and milestones.
- Documentation alignment: briefing papers, back-to-office reports, and TA reports are systematically aligned with RBM objectives discussed with authorities at project onset.
- Monitoring and evaluation:
  - Regular self-stocktaking through donor-funded CD reporting and mid-term and ex-post evaluations help assess progress and identify improvements in CD design.
  - Operationalization of the IMF’s RBM Framework allowed MCM to build a database with project objectives, outcomes, and milestones.
  - Where available, assessments and external and MCM evaluations provide circumstantial background and qualitative dimensions around multi-year projects and quantitative ratings by mission managers.
- Measurement challenges:
  - Aggregating CD effectiveness across region, workstream, or modality is challenging and requires consistency between quantitative and qualitative measurement tools and in-depth project understanding.
  - MCM continues contributing to harmonization of RBM catalogues—especially variable indicators—to allow for more meaningful aggregation across RBM topics in the future.

*Source: taar2022 - SECTION III (Capacity Development Annual Report 2022 | Monetary and Capital Markets)*

### SECTION IV

### SECTION IV

### Results-Based Management (RBM) in MCM Capacity Development
- Africa is the largest recipient of MCM CD and has the largest number of rated outcomes.
- A large number of outcomes remain rated as partially achieved, implying many reforms are still in process.
- Time-series rating data on FCS’s CD outcomes indicate that countries in fragile situations need a longer time to achieve results from CD.
- The dip in the FY21 count of outcomes is explained by recipient priorities shifting from medium-term capacity building to urgent policy advice and financing at the onset of the COVID-19 pandemic, and the Fund’s CD administration transition to CDMAP. The renewed interest in CD and more granular CD design in CDMAP explain the relatively sharp increase in the FY22 count of rated outcomes.
- RBM project pilots (Asia, Latin America, Africa) examined monetary policy implementation, macro stress testing, and financial sector supervision to:
  - Get a better sense of results translated into ratings.
  - Distill lessons to inform strategic CD prioritization and subsequent country CD design and implementation.
- Key lessons from RBM pilots:
  - Close collaboration with authorities is essential — senior authorities’ and technical teams’ buy-in throughout engagement is essential.
  - Engage early to ensure the project meets needs and is tailored to the circumstances on the ground.
  - Maintain ongoing collaboration until project end to identify implementation challenges and avoid periods of inaction.
  - Integrate RBM CD work with surveillance for holistic country engagement.
  - RBM data complemented by qualitative “stories” can guide CD design on:
    - Granularity and sequencing of result targets.
    - Financial and human resources needed to attain similar results.
    - CD delivery and engagement approaches that proved successful (for example, conducting diagnostics to align CD objectives with authorities’ strategic priorities and absorption capacity early).
- Planned enhancements to RBM integration in MCM CD delivery:
  - Incorporate lessons from pilots and RBM work into CD design to operationalize good RBM practices.
  - Expand RBM storytelling to more country CD projects for outcome ratings validation and additional learning extraction.
  - More systematically disseminate RBM quantitative results and stories internally in MCM and the IMF.

*Sources: CDMAP data and IMF Staff.*

### Training on Monetary Policy Implementation (CDOT and SARTTAC; Philippines beneficiary)
- Course design and delivery:
  - Regional course of quarterly virtual training segments developed by CDOT and SARTTAC, open to central banks under monetary and FX operations CD programs and the Philippines.
  - Five segments covered to date:
    - (i) Interest rate corridor, August 2021
    - (ii) Liquidity monitoring and forecasting, October 2021
    - (iii) Central bank collateral framework, January 2022
    - (iv) Emergency Liquidity Assistance (ELA), April 2022
    - (v) Reserve Requirements, July 2022
  - Frequency and participation:
    - Delivered in quarterly segments with key topical lectures, country cases, and panel discussions.
    - Fifty to eighty central bank staff have participated in each segment.
  - Planned continuation:
    - Two more segments planned: Reference exchange rates (October 2022) and FX operations (January 2023).
- CD results:
  - By end January 2022, the project outcome “Operational framework with a clear operational target of the monetary policy is in place” had been fully achieved.
  - Participant survey on main objective scored an average of 4.5 out of a maximum of 5.0.
  - National Bank of Cambodia introduced the overnight marginal lending facility—ceiling of the interest rate corridor—after the interest rate corridor segment and follow-up TA.
- Learnings to inform future CD design and implementation:
  - Design training based on current practices and latest developments; peer country presentations and IMF staff/guest speakers were effective.
  - Adapt CD to authorities’ absorption capacity by concentrating on one topic at a time to allow detail and Q&A.
  - Follow up virtual training with bilateral technical engagements; participants valued in-person TA to adapt theory and country experiences to their operations.
- Selected participant testimonials (representative comments):
  - “This training is really helpful for my job.”
  - “Requirement of interest rate corridor for central banks and its importance along with country specific case examples were helpful…”
  - “The course provided an overview on how to monitor and forecast liquidity, which is very helpful and applicable to central bank work.”
  - “The topics are very relevant and appropriate in that context that most of the developing countries are on the path of modernizing their monetary policy framework…”

### Ecuador’s Superintendency of Banks (SBE): Revamping Stress Testing Models
- CD delivery and scope:
  - In 2021, MCM provided virtual CD to the SBE focused on development and implementation of stress testing models of credit and liquidity risk.
  - CD covered three areas:
    - (i) compiling supervisory data to estimate fundamental credit risk parameters,
    - (ii) developing satellite and core models to assess bank solvency under alternative macroeconomic scenarios,
    - (ii) implementing a model to assess liquidity risk using the Basel Liquidity Coverage Ratio.
  - Implementation approach:
    - SBE and MCM agreed the implementation plan early in 2021, aligning objectives with authorities’ strategic priorities and existing supervisory data.
    - Frequent virtual meetings with the SBE (two times a week) throughout the year facilitated gradual development of models under MCM advice; this long-term engagement enabled learning-by-doing and ownership of tools.
    - Bilateral meetings with risk modeling units of supervised banks were included to discuss banks’ internal models and projected credit-portfolio quality.
- CD results:
  - By end-2021, the SBE had completely revamped the data and models used to assess bank solvency and financial stability at the system level.
  - By June 2022, the project outcome “Stress testing model(s) in place and used for their intended purpose(s)” had been fully achieved.
  - Ongoing priorities:
    - Translating annual stress test models into quarterly frequency tests.
    - Refining modules used to estimate interest rate risk under alternative macroeconomic scenarios.
    - Developing a new supervisory template to collect bank liquidity data to set the basis for subsequent implementation of the Basel-recommended Liquidity Coverage Ratio.
- Learnings to inform future CD design and implementation:
  - Engage with CD recipients on CD design and implementation as early as possible and maintain continuous engagement during and post-CD.
  - Engage other stakeholders beyond direct CD recipients to explain reforms and secure buy-in (e.g., bank representatives, Central Bank, Financial Stability Council).
  - Build upon and complement previous CD and apply learning-by-doing modality in CD delivery.

### Reserve Bank of Zimbabwe (RBZ): Strengthening Banking Supervision
- Background and CD scope:
  - MCM’s FSSR conducted in November 2018 identified reforms and capacity needs; a TA roadmap was agreed with the RBZ.
  - A TA project financed by the Financial Sector Stability Fund was planned to run through April 2024.
  - CD objectives included strengthening the legislative framework, enhancing risk-based supervision and implementation of Basel II/III standards, strengthening consolidated supervision, and building capacity in RBZ Banking Supervision Division staff.
- Country circumstances and implementation:
  - When the TA project started in spring 2019, the banking sector faced severe macroeconomic imbalances: deep economic contraction, very high inflation, extreme local currency volatility (including two re-denominations in two years), and serious drought.
  - TA began with support to enhance the legislative framework (RBZ Act, Banking Act, Deposit Protection Corporation Act) and shifted focus to banking supervision issues in fall 2019.
  - Several TA missions focused on enhancing supervisory capacity, institutional setup, and off-site/on-site supervision approaches.
  - Training provided to all supervisors (over 50 supervisors).
  - Two TA missions helped finalize Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) regulations.
  - A workshop with representatives of all banks (over 100 participants) helped disseminate importance of implementing international liquidity standards.
- CD results by end of fiscal year:
  - Three project outcomes remained partially achieved:
    - “Strengthened institutional structure and operational and procedures for RBS implementation”
    - “Supervisors monitor banking groups and their prudential ratios on consolidated basis”
    - “Legislation/regulations on liquidity developed/strengthened including maintaining adequate liquidity positions to withstand crises and shocks in short-term and to retain stable funding resources to finance their longer-term assets”
  - Progress noted:
    - RBZ introduced more structure to supervision, including a new approach to annual planning.
    - Enhanced on-site and off-site supervisory processes and procedures.
    - Improved identification of current and emerging risks.
    - Increased focus on building capacity of supervisors.
    - RBZ is progressing toward launching an approval process of new regulations under the new liquidity framework.
- Learnings to inform future CD design and implementation:
  - Conduct in-depth review of key financial sector vulnerabilities and authorities’ capacity prior to planning a medium-term CD project; the FSSR TA roadmap provided a structured framework for prioritization.
  - Adapt CD to authorities’ absorption capacity and country circumstances; the project design and advice were pragmatic and tailored to the fragile conditions.
  - Ensure close collaboration through continuous engagement with CD recipients; missions agree purposes, tasks, agendas, and expected results with RBZ senior management to set expectations and monitor readiness to implement recommendations.
  - Use blended modalities (targeted training and extensive discussions) to secure ownership of reforms.
  - Deploy experienced experts with deep practical and theoretical knowledge who engage closely with supervisors.

_Italic: Content derived from SECTION IV of the Capacity Development Annual Report 2022 (Monetary and Capital Markets)._

### SECTION V

### SECTION V CD COUNTRY CASES

### CHILE: FINANCIAL REGULATORY EFFORTS AND MONEY MARKETS FUNDS
- Context and scale:
  - Chile’s financial sector: financial assets at 300 percent of GDP.
  - Chile ranks amongst the 29 FSB-monitored countries with the highest dependence on nonbank financial institutions (NBFIs)’ funding.
  - Chile’s MMF sector assets under management: about U.S. $40 billion.
  - MMFs hold around 10 percent of deposits, playing an important role in medium-sized banks financing.
- Background and motivation:
  - Global financial crisis highlighted risks in mutual funds and MMFs; international standard setters (IOSCO, FSB) evolved best practices.
  - Comisión para el Mercado Financiero (CMF) requested a work-at-home review of the regulatory framework for MMFs in Chile.
  - Mission coordinated with the FSAP to avoid overlaps and ensure consistency.
- Findings:
  - The Chilean regulatory regime is robust in many features, both in regulatory framework and supervisory practices.
  - Areas for improvement were identified related to the financial stability of the Chilean financial system and MMF interconnectedness.
- Recommendations and expected impact:
  - CD recommended changes, including mark-to-market pricing of MMF portfolio assets.
  - Mark-to-market pricing is expected to add resilience by reducing the risk of shock amplification through the MMF sector.
- Engagement and publication:
  - High level of engagement from authorities; authorities willing to publish the TA report on their own website.
  - Publication expected to inform peer countries seeking to upgrade MMF regulation.

### COOK ISLANDS: FORMULATING A MEDIUM-TERM DEBT MANAGEMENT STRATEGY
- Context:
  - Public debt management in the Cook Islands is in its infancy; policies, frameworks, and capacity vary.
  - Debt stock doubled as a result of the COVID-19 pandemic, with debt to GDP increasing to 47 percent in 2022.
  - Recent graduation to high-income status may reduce financing options and increase funding costs.
- Technical assistance provided:
  - Resident debt management advisor at PFTAC provided capacity development in October 2021 using the Medium-Term Debt Management Strategy Analytical Tool (MTDS AT).
  - Training focused on analyzing country debt data, preparing data for MTDS AT, analyzing cost-risk characteristics, and identifying potential financing sources.
  - MTDS AT used to run scenarios and produce cost-risk outputs to identify a preferred debt strategy and prepare a strategy document for publication.
- Outputs and next steps:
  - Authorities produced a draft debt management strategy with a preferred strategy articulated within a cost-risk framework.
  - Strategy provides a formalized plan for debt financing, including debt portfolio cost-risk indicators for performance management in debt reporting.
  - Government identified alternative financing sources to reduce cost of debt and align portfolio to target risk indicators.
  - The first debt management strategy is expected to be finalized and published in the very near future.

### JORDAN: STRENGTHENING CAPACITY ON LIABILITY MANAGEMENT OPERATIONS
- Context and risks:
  - Jordan was hit by the COVID shock and changes in financial conditions; IMF-supported EFF arrangement remained on track.
  - Rollover risks from Eurobond redemptions are large: at end-2020, outstanding Eurobonds amounted to 21 percent of total government debt (equivalent to around 20 percent of GDP).
- Technical assistance provided (remote mission, May 26–June 4, 2021):
  - Introduced a simplified qualitative and quantitative framework to Ministry of Finance (MoF) and Public Debt Department (PDD) staff to evaluate LMO options ex-ante.
  - Considered options including buy-back of existing Eurobond(s) ahead of redemption, complemented by traditional refinancing under specific pricing and timeline assumptions.
- Findings and recommendations:
  - TA helped authorities understand usefulness and technicalities of LMOs.
  - Authorities need to develop a policy document setting out an LMO framework embedded within an overall Debt Management Strategy.
  - The LMO framework should specify modalities and cost-risk objectives and be prepared in consultation with financial and legal advisors.
  - Once developed, Jordan will be able to use LMO operations for future management of refinancing risks.

### KAZAKHSTAN: BANK STRESS TESTING
- Context and data:
  - Stability of Kazakhstan’s financial system materially dependent on corporate sector health.
  - Two corporate micro datasets explored:
    - Balance sheet and profit and loss (P&L) statements for over 1,700 companies over 14 years.
    - Corporate credit registry data with more than 240 million rows of loan-level information on companies, over eight years.
- Challenge and methodological approach:
  - Key challenge: developing an approach to combine the rich but different datasets for financial stability analysis.
  - Two complementary approaches developed:
    - Prediction of the probability of default for each firm in the corporate balance sheet and P&L database.
    - Prediction of credit status for each borrower in the credit registry.
- Outputs and application:
  - Two credit risk modeling approaches produced two methods for projecting credit losses of the Kazakh banking system linked to corporate exposures.
  - Credit loss projections enabled a robust scenario-based financial system stress testing framework to project losses under different adverse macro-economic conditions.
- Policy relevance and future work:
  - Framework pivotal for informing financial policymaking, calibrating capital buffers, and measuring financial sector stability.
  - Need for regular updates, customization of macroeconomic scenarios for global and domestic developments, and broadening scope to include households and sovereign portfolios.
  - NBK team operationalized the new framework during TA and is incorporating results into the upcoming financial stability report.

### PANAMA: STRENGTHENING MACROPRUDENTIAL POLICY IMPLEMENTATION
- Context and objectives:
  - Panama is tightly connected with the international financial system; authorities sought support to strengthen regulatory and supervisory framework in line with international standards.
  - FY22 work focused on enhancing macroprudential policy framework and designing additional instruments.
- Technical assistance activities:
  - First mission (August 2021) assisted Superintendency of Banks of Panama (SBP) in developing a macroprudential policy roadmap.
  - Recommendations included:
    - Tighten link between policy objectives, assessments, and tools.
    - Produce and publish a macroprudential strategy clarifying indicators and tools corresponding to policy objectives.
    - Enhance communication using the Financial Stability Report (FSR).
  - End-2021 follow-up mission provided feedback on progress and commended SBP’s comprehensive approach and ownership.
- Specific support on borrower-based measures and data:
  - Further recommendations on design, implementation, and communication of borrower-based measures, drawing on experiences from Ireland, Portugal, Romania, and Slovenia, and Panama’s circumstances.
  - Emphasized filling remaining data gaps to support analysis and regular updating of statistics to assess policy needs and communicate decisions with supporting evidence.
  - Authorities were trained on the IMF’s Macroprudential Policy Survey and iMaPP database for cross-country information.

### PERU: CENTRAL BANK DIGITAL CURRENCY
- Context and motivation:
  - Banco Central de Reserva del Peru (BCRP) seeks safe, convenient, and efficient access to digital payments and reduced dependence on cash.
  - Nearly half the population is unbanked; uptake of digital payment systems is low.
  - Demand-side challenges: high informality, low financial literacy, unperceived costs of cash, distrust in the financial system.
  - Supply-side challenges: limited mobile and internet coverage, limited ATMs and POS terminals in rural areas, high merchant fees, lack of interoperability.
- Technical assistance (December 2021 mission):
  - Provide guidance on feasibility of issuing a central bank digital currency (CBDC) and develop approach, frameworks, and tools for assessment.
  - Adopted design thinking and creative, iterative methods in a virtual environment using tools (mural, creative lab).
- Research and stakeholder engagement:
  - Two parallel research studies captured stakeholder perspectives and payment behaviors.
  - Findings highlighted concerns for high costs, preference for informality, low ubiquity of solutions, and low perceived benefits of digital solutions.
  - Example stakeholder quote on indirect costs: “The lady from the bank told me that they had an app, but my cell phone doesn’t have much storage. Also, if I wanted to download it, I would have to purchase an internet plan on my cell phone.”
- Recommendations and next steps:
  - Increase digital payment adoption by ensuring key pre-conditions (foundational enablers and catalytic factors) are in place.
  - Adopt an agile, iterative, and experimental approach: move from proof-of-concept (PoC) to prototypes to pilots before production.
  - Emphasize stakeholder inclusion, involvement, and commitment to resolving the digital divide.
  - Next phase: partner with BCRP to develop a methodology for traversing the PoC stage.

### SMALL STATES (CARTAC): STRENGTHENING STRESS TESTING PRACTICES
- Context and TA design principles:
  - Building strong financial stability units in small states requires thoughtful TA design given small, understaffed FS units and high staff turnover.
  - Emphasis on sustainable TA: knowledge transfer, manuals, refreshment courses to build institutional memory.
  - Analytical tools and templates tailored to authorities with limited capacity and data and to dynamic private sector financial sectors that operate across borders.
- Stress testing framework development:
  - CARTAC developed a new bank solvency Stress Testing (ST) framework and launched related trainings.
  - Key changes in the new one-period solvency ST framework:
    1. More granularity of data and alignment with Basel II Pillar 1 regulation (e.g., differentiates between investments in the banking and investment book).
    2. Consideration of several sources of initial under-provisioning or overestimation of initial buffers (misclassification of loans, failure to comply with provisioning rules, improperly accounting for investments’ credit rating, related lending, and double gearing).
    3. Inclusion of a dynamic credit model linking non-performing loans to GDP growth to calibrate the size of an NPL shock.
    4. Incorporation of sovereign shocks to account for banks’ large sovereign exposures in the region.
    5. Flexibility allowing user-specified assumptions and inputs as an alternative to in-built calculations.
    6. Production of numerous graphs and tables to help assess results (decomposition of impact on the capital adequacy ratio (CAR), results).
- Purpose and benefits:
  - Framework and tools aim to enhance financial stability assessments, tailored to small-state needs and data constraints.
  - Training and templates aimed at building institutional capacity and ensuring continuity despite staffing challenges.

*Source: SECTION V, Capacity Development Annual Report 2022 | Monetary and Capital Markets*

### SECTION V

### SECTION V

### Systemic risk training and template use
- Training familiarized participants with the new template, systemic risk analysis, scenario selection, credit risk modeling, shock calibration, and the treatment of sovereign risk in ST.
- Despite remote delivery difficulties, the mix of presentations and exercises and the intensive use of the template made the training successful and greatly appreciated by participants.
- One country (Guyana) received a follow-up TA mission to further the work.
- As travel resumes, online trainings, webinars, and peer-to-peer exchanges are to remain important CD modalities; authorities highly value peer learning.

### TANZANIA: Transitioning to an interest rate-based monetary policy framework (IRBMPF)
- Background and drivers:
  - November 2021 mission guided the Bank of Tanzania (BoT) in transitioning from monetary aggregate targeting (MAT) to an IRBMPF.
  - Transition partly driven by the deadline for full harmonization of East African Community (EAC) monetary policy frameworks in the fiscal year 2023/24.
  - Challenges with MAT included unpredictability of the velocity of money and the money multiplier, influenced by financial sector innovations, causing divergence in money supply growth and inflation.
- Current operational observations:
  - BoT introduced facilities to manage systemic liquidity and meet banks’ liquidity needs that have stabilized short-term money market rates.
  - Concerns remained about downward stickiness of bank lending rates despite liquidity easing measures.
  - FX regime regarded as free-floating, though BoT has intervened to deal with shocks and maintain exchange rate stability; BoT does not have an official FX intervention policy.
- Preconditions and capacity needs:
  - A key requirement for complete transition to IRBMPF is setting a monetary policy rate to reflect stance, anchor interbank pricing, and facilitate transmission, provided operations are conducted at the policy rate and financial markets develop.
  - Precondition: strengthen internal modeling and forecasting capabilities and enhance exchange rate flexibility. The modeling upgrade was conducted separately through another EAC-led CD activity delivered in February 2022.
  - Further steps: formalize the internal policy rate and publish it to introduce functional standing facilities.
- Implementation approach and lessons:
  - Mission parked solutions to understand problems and interrogate remaining hurdles, resulting in greater buy-in and expanded stakeholder engagement.
  - Project not yet finalized; TA to be provided during September 2022 to assist BoT with formalizing an FX intervention policy.
  - Main learning: be prepared with relevant information/data prior to missions; engage all stakeholders during and after missions; involve member countries in regional workshops for peer learning and follow-up engagement.

### GUINEA: First market-based T-bond auction and Basel-compliant capital adequacy reforms
- Debt market development and first auction:
  - AFW-supported Reform Plan aimed to improve the domestic market for government securities and move T-bond issuance to market-based auctions to facilitate domestic financing.
  - TA in 2020–21 reviewed legal framework, developed issuance processes, drafted operating procedures for T-bond auctions, and trained Debt Directorate, Treasury, and Central Bank staff.
  - Military coup of September 2021 forced postponement; CD resumed in 2022 with virtual TA for issuance strategy, investor communication, market consultation, training on bond auctions, and two test auctions using the Central Bank platform.
  - The Treasury successfully carried out its first 5-year T-bond auction in April 2022.
  - Ongoing CD: support for producing a periodic auction calendar for bills and bonds and its regular publication.
- Implementation of Basel framework–compliant capital adequacy ratio:
  - Reform motivation: align supervision frameworks to West African Monetary Zone (WAMZ) common rules and Basel framework; strong BCRG Governor engagement facilitated reform.
  - Timeline and delivery:
    - Revision began in 2019 with review of definition of own funds by the resident advisor.
    - In FY22, resident advisor stepped up support using regular virtual engagements due to COVID-19 constraints.
  - Operational constraints:
    - Supervisory resources at BCRG were tight while implementing structural reforms (e.g., IFRS 9) and routine supervision.
    - Operational capacity of the banking sector to comply and initial reported data quality complicated impact assessment.
    - Resident advisor facilitated explanation of new rule to banks and added a mission to assess reform impact.
  - Outcomes:
    - Draft regulations considered finalized after the impact study and consideration of comments from the banking industry in June 2022.
    - Work focused on calculation of risk-weighted assets and categorizing exposures, adapting Basel definitions, determining risk weights, and detailing eligible guarantees.
    - Impact study highlighted operational risk representing 18 percent of total capital requirements due to limited lending activity in some banks.
    - New framework expected to improve alignment between risks and capital requirements and strengthen banks’ solvency.
  - Remaining tasks:
    - Fine-tune IT tools to collect prudential reports and update internal procedures for processing, controlling, and analyzing reports (e.g., annual rating and Supervisory Review Process).
    - Develop methodologies to calibrate countercyclical and systemic buffers and set individual Pillar II guidelines and requirements if necessary.
  - Key success factors:
    - High-level managers’ support, team involvement, reform ownership, flexibility of CD providers, and early engagement with the banking industry to ensure timely implementation.
- Testimonial (original French):
  - “La relation entre Banque Centrale de la République de Guinée (BCRG) et AFRITAC de l’Ouest continue de se renforcer et de produire de très bons résultats à la satisfaction des deux parties, particulièrement dans le domaine de la supervision bancaire où nous avons découvert et apprécié les compétences spécifiques de M. NORMAND Jean Jacques.”
  - “Nous notons sans réserve que la finalisation dans un délais rapide et acceptable des travaux sur le nouveau ratio de solvabilité est une preuve éloquente de l’efficacité de M. NORMAND.”

### THE REPUBLIC OF NORTH MACEDONIA: Upgrading the monetary operational framework
- Objectives and conceptual basis:
  - CD engagement assessed three requirements for the monetary operational framework: (1) define suitable monetary instruments, (2) ensure interactions among instruments are aligned with objectives and facilitate clear communication, and (3) organize and calibrate instruments using high-quality liquidity forecasts.
  - Mission used the conceptual framework from the MCM TA Handbook chapter "Reserve Requirements" and the Monetary Operations and Instruments Database (MOID).
- Reserve requirements and operational reform:
  - Recommendations to simplify and streamline reserve requirements to minimize costs and distortions, aligning parameters with the primary role for monetary policy and international practices.
- Liquidity forecasting toolkit:
  - NBRNM among the first TA recipients to fully implement the new liquidity forecasting toolkit.
  - Toolkit comprises a suite of state-of-the-art models and quantitative tools to prepare timely forecasts for autonomous liquidity factors for varied horizons, conduct aggregation and validation, and identify suitable model suites for country-specific dynamics.
  - Expected benefits: sufficiently accurate, consistent, and unbiased liquidity forecasts that can be published to help financial institutions assess liquidity conditions and enhance monetary policy effectiveness.
- Broader impacts:
  - Improvements expected to deepen monetary policy transmission, better support stability of the Macedonian denar, improve NBRNM communication on monetary policy, and advance transparency practices as indicated by The CB Transparency Code Review.

### UNITED ARAB EMIRATES: Strengthening liquidity management and forecasting
- Context and framework changes:
  - Over 2020 and 2021, the Central Bank of the United Arab Emirates (CBUAE) revamped its monetary policy implementation under the Dirham Monetary Framework.
  - Implemented a floor interest rate corridor system to steer the overnight interbank rate towards the policy rate set consistent with the currency peg.
  - Conducts open market operations (OMOs) to drain structural liquidity surplus and support money market development.
- MCM virtual TA mission (June 28 to July 26, 2021):
  - Reviewed the new operational framework and assisted in design and calibration of: (i) central bank bills’ issuance, (ii) various fine-tuning monetary instruments, and (iii) reserve requirements.
  - Delivered a complete liquidity forecasting infrastructure using cutting-edge statistical methods to project the three main central bank autonomous factors.
- Methodological innovations and tools:
  - Integrated forecasting risks to anticipate large swings in liquidity conditions, improving liquidity management.
  - Modeled demand for bank reserves using non-linear semi-parametric methods with cross-validation to identify impacts of short-run market-driven fluctuations and the reserve requirements regime.
  - Approach estimates the optimal overnight liquidity surplus target CBUAE should maintain to maximize monetary policy traction and support money market development.
  - Provided a quantitative framework to calibrate the operational mix between different liquidity absorption instruments.
  - Investigated functioning and structure of UAE money markets.
- Expected contribution:
  - Implementation of TA will contribute to overall enhancement of liquidity management, money market development, and the effectiveness of monetary policy operations.

*Source: Capacity Development Annual Report 2022 — Monetary and Capital Markets, SECTION V*

### SECTION V  |  69Capacity Development Annual Report 2022  |  Monetary and Capital Markets

### SECTION V  |  69Capacity Development Annual Report 2022  |  Monetary and Capital Markets

### UAE: Strengthening monetary policy implementation and liquidity management
- Objectives of the TA engagement with the Central Bank of the UAE (CBUAE):
  - Expand appropriate monetary instruments for fine-tuning operations while ensuring overall consistency with the operational framework.
  - Buildup a robust short-term liquidity forecasting framework to calibrate:
    - the optimal size of the overnight liquidity surplus,
    - the optimal size of reserves requirement,
    - the operational mix across the different instruments.
  - Provide transparent guidance to support CBUAE staff in day-to-day work and ensure robustness and consistency over time to the new Dirham monetary framework.
- Broader relevance:
  - The TA engagement will inform future CD on liquidity management and forecasting under a fixed exchange rate arrangement and capital mobility in other member countries.
- Main learnings from the engagement:
  - Close collaboration with the authorities is key:
    - In-depth discussions with the authorities ahead of the mission on scope and tasks are critical to motivate data and information requests.
    - Close collaboration throughout the mission, including in-depth discussions of findings and recommendations, is key to gauge absorption capacity, secure ownership of the reforms, and maintain traction during and after the mission.
  - Successful capacity development (CD) lies in blended modalities:
    - An appropriate mix of extensive discussions with authorities and targeted training ensures good absorption of technical knowledge and policy decisions.
    - Delivery of an open-source software infrastructure, where applicable, facilitates quick adoption of recommendations and achievement of CD objectives and outcomes.
  - Experts’ inputs can be leveraged by combining academic and professional backgrounds:
    - Use of highly capable experts with deep practical and theoretical knowledge, and willingness to understand the CBUAE’s idiosyncratic issues, ensured engagement and strong results.
- Authorities’ response:
  - The authorities qualified this technical assistance mission as “the best technical assistance mission they have received so far”.
  - They subsequently agreed on the publication of the full TA report.

### WEST BANK AND GAZA: Improving frameworks for financial crisis management and bank resolution
- Background:
  - The 2018 Financial Sector Stability Review (FSSR) for West Bank and Gaza (WBG) recommended improvements to frameworks for financial crisis preparedness and management, including upgrading the toolkit for handling distressed banks and establishing a special resolution regime.
  - Revisions of the Banking Law under preparation encompassed establishment of a special resolution regime providing the Palestine Monetary Authority (PMA) resolution tools.
- FY22 TA delivered by MCM:
  - Three TA missions to the PMA on bank resolution and financial crisis management, consistent with the multi-year TA road map in the FSSR:
    - (i) An MCM-Legal (LEG) department joint virtual mission reviewed resolution-related amendments to the Banking Law; followed by a second mission by LEG experts to support PMA experts in drafting draft legislation.
    - (ii) TA on the governance of the new resolution function of the PMA, including separation between existing banking supervisory tasks and new resolution responsibilities.
    - (iii) TA on developing a financial crisis management plan.
- Implementation modalities and outcomes:
  - Delivery modalities evolved from short-term virtual engagements early in the COVID-19 pandemic to longer missions; prior in-person relationships helped ensure continuity when borders closed.
  - PMA officials showed strong buy-in, commitment, and flexibility; top senior management and IMF short-term experts showed exceptional commitment.
  - Progress achieved by the PMA:
    - More expert staff allocated to resolution on both legal and operational sides.
    - Completion of the new resolution regime.
    - Start of preparation of resolution plans for the systemic domestic banks.
    - Improved coordination with the deposit insurance scheme, which is empowered to support resolution measures under the statutory regime.
  - Future work:
    - Future missions will continue to implement the work program outlined by the FSSR.
- Letter from the Governor to the Managing Director of the IMF (excerpt):
  - “In particular the PMA highly appreciates the IMF’s contribution to the Financial Stability Review, technical assistance missions related to the development of the Recovery and Resolution Regime, and Crisis Management. The MCM support has immensely contributed to the growth and development of the PMA policies and future strategies, as well as played a major role in strengthening financial stability in Palestine.”

### Appendices highlights: Regional centers, long-term placements, and MCM contacts
- APPENDIX I. IMF Regional Capacity Development Centers (selected entries preserved verbatim):
  - AFRITAC Central (Central Africa Regional Technical Assistance Center) — Libreville, Gabon — Burundi, Cameroon, Chad, Central African Republic, Congo, Democratic Republic of the Congo, Gabon, Equatorial Guinea, and Sao Tome and Principe.
  - AFRITAC South (Regional Technical Assistance Center for Southern Africa) — Ebene Cybercity, Mauritius — Angola, Botswana, Comoros, Eswatini, Lesotho, Madagascar, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Zambia, and Zimbabwe.
  - AFRITAC West (West Africa Regional Technical Assistance Center) — Abidjan, Côte d’Ivoire — Benin, Burkina Faso, Cote d’Ivoire, Guinea, Guinea-Bissau, Mali, Mauritania, Niger, Senegal, and Togo.
  - AFRITAC West II (second African Regional Technical Assistance Centre in West Africa) — Accra, Ghana — Cabo Verde, The Gambia, Ghana, Liberia, Nigeria, and Sierra Leone.
  - East AFRITAC (Regional Technical Assistance Center for East Africa) — Dar es Salaam, Tanzania — Eritrea, Ethiopia, Kenya, Malawi, Rwanda, South Sudan, Tanzania, and Uganda.
  - PFTAC (Pacific Financial Technical Assistance Centre) — Suva, Fiji — The Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Republic of Marshall Islands, Nauru, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, Tokelau, Tonga, Tuvalu, Vanuatu.
  - SARTTAC (South Asia Regional Training and Technical Assistance Center) — New Delhi, India — Bangladesh, Bhutan, India, Maldives, Nepal, and Sri Lanka.
  - IMF Capacity Development Office in Thailand (CDOT) — Bangkok, Thailand — Myanmar, Lao P.D.R., Cambodia, and Vietnam.
  - METAC (Middle East Regional Technical Assistance Center) — Beirut, Lebanon — Afghanistan, Algeria, Djibouti, Egypt, Iraq, Jordan, Lebanon, Libya, Morocco, Sudan, Syria, Tunisia, West Bank and Gaza, and Yemen.
  - CCAMTAC (Caucasus, Central Asia, and Mongolia Technical Assistance Center) — Almaty, Kazakhstan — Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan, Turkmenistan, and Uzbekistan.
  - CARTAC (Caribbean Regional Technical Assistance Centre) — Bridgetown, Barbados — Anguilla, Antigua and Barbuda, Aruba, The Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands, Curacao, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Sint Maarten, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago, and Turks and Caicos Islands.
  - CAPTAC-DR (Central America, Panama and the Dominican Republic Regional Technical Assistance Center) — Guatemala City, Guatemala — Costa Rica, The Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Panama.
- APPENDIX II. MCM Long-Term Resident Expert Placement (as of April 30, 2022) — selected entries preserved verbatim:
  - AFRITAC Central — Gabon — Banking Supervision and Regulation — Multi-Donor
  - AFRITAC Central — Gabon — Debt Management — DMF
  - AFRITAC East — Tanzania — Banking Supervision and Regulation — Multi-Donor
  - AFRITAC East — Tanzania — Forecasting and Policy Analysis Systems — Multi-Donor
  - AFRITAC East — Tanzania — Monetary and Foreign Exchange Operations, and Financial Market Infrastructures (FMIs) and Payments — Multi-Donor
  - AFRITAC South — Mauritius — Banking Supervision and Regulation — Multi-Donor
  - AFRITAC West — Cote D’Ivoire — Banking Supervision and Regulation — Multi-Donor
  - AF RITAC West 2 — Ghana — Banking Supervision and Regulation — Multi-Donor
  - Bank of Mozambique — Mozambique — Central Bank Modernization — Norway
  - Bank of Sierra Leone — Sierra Leone — Banking Supervision and Regulation — FSSF
  - Central Bank of Sri Lanka — Sri Lanka — Macroprudential Policy and Stress Testing — FSSF
  - National Bank of Cambodia — Cambodia — Banking Supervision and Regulation — Japan
  - PF TAC — Fiji — Banking Supervision and Regulation — Multi-Donor
  - SAR T TAC — India — Monetary and Foreign Exchange Operations — Multi-Donor
  - Note: “The position was filled in end-FY22; the expert officially started on July 5, 2022.”
- MCM TA main contact points (names, phones, and emails preserved verbatim):
  - Director Tobias Adrian — T. +(1) 202.623.5372 — tadrian@IMF.org
  - Deputy Director Miguel Savastano — T. +(1) 202.623.8545 — msavastano@IMF.org
  - Technical Assistance Strategy Division Chief Jennifer Elliott — T. +(1) 202.623.8804 — jelliott@IMF.org
  - Deputy Division Chief Veronica Bacalu — T. +(1) 202.623.4816 — vbacalu@IMF.org
  - Deputy Division Chief Sipho Makamba — T. +(1) 202.623.4729 — smakamba@IMF.org
  - Deputy Division Chief Joannes Mongardini — T. +(1) 202.623.8569 — jmongardini@IMF.org
  - Regional Advisor—Africa and Western Hemisphere John Nelmes — T. +(1) 202.361.1835 — jnelmes@IMF.org
  - Regional Advisor—Middle East, and Central Asia Sumiko Ogawa — T. +(1) 202.623.4288 — sogawa@IMF.org
  - Regional Advisor—Europe and Asia and Pacific Udaibir Das — T. +(1) 202.623.6330 — udas@IMF.org
  - Mailing Address: Monetary and Capital Markets Department, International Monetary Fund, 700 19th Street, NW, Washington, DC 20431
- MCM TA Team (names preserved verbatim):
  - MOSES KITONGA — Financial Sector Expert
  - ANASTASSIYA MARINA — Senior Financial Sector Expert
  - ADITYA NARAIN — Deputy Director
  - MIGUEL SAVASTANO — Deputy Director
  - VERONICA BACALU — Deputy Division Chief
  - KAHORU TAKEI — Senior Financial Sector Expert
  - SANGEETA NAMBI — Technical Assistance Officer
  - NATALIA NARYSHKINA — Administrative Assistant

*Source: TAAR 2022 — Capacity Development Annual Report 2022 | Monetary and Capital Markets (section content as provided).*

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_Source: https://www.imf.org/-/media/files/publications/technical-assistance-annual-report/taar2022.pdf_