## CAPACITY DEVELOPMENT

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---

### Overview: mission and principles
- Since 1964, the IMF’s Fiscal Affairs Department (FAD) has helped IMF member countries build effective fiscal policy frameworks and institutions using a demand-driven model.
- Core principles guiding FAD capacity development:
  - Agile: Responding quickly and adapting delivery modalities to best support CD needs of country authorities.
  - Integrated: Integrating CD work with the IMF’s surveillance and lending activities and coordinating CD planning and delivery across HQ and field operations.
  - Country-centered: Implementing a medium-term programmatic approach that factors in a country’s needs, absorptive capacity, and pace of reform.
  - Results-oriented: Delivering CD with clear milestones and outcomes to achieve sustainable and effective results.

### FAD capacity development model and delivery channels
- Multiyear programmatic approach focused on transformational fiscal reforms with four stages:
  - Diagnostic assessment: Innovation to develop new diagnostic tools to benchmark, identify gaps, and support effective reforms.
  - Reform strategy elaboration: Consultations with authorities, partners, and internal stakeholders to prioritize topics and elaborate reform strategy.
  - Sequenced implementation of CD interventions: Strategic recommendations and quality control from HQ staff combined with hands-on support from regional and in-country experts.
  - Evaluation and re-prioritization: Assessment of outcomes and systematic evaluation of performance to prioritize resource allocation.
- Channels for engagement and knowledge sharing:
  - Country-specific work: missions, desk reviews, and workshops.
  - Cross-country work: training and global & regional conferences.
  - Massive open online courses on PFM, RA-GAP, VITARA and revenue modeling.
  - Social media and outreach: Podcasts, IMF Blogs, PFM Blog, Twitter, Facebook, LinkedIn.
  - How To Notes, working papers, and other analytical work.

### Areas of expertise (five workstreams)
- Public Financial Management (PFM):
  - Enhancing budget frameworks, strategic budgeting, budget execution and control, fiscal risk management, asset and liability management, public investment management, and fiscal transparency.
- Expenditure Policy:
  - Rationalizing public expenditure on price subsidies, wage bill, education, health, social protection; increasing long-term sustainability of pension systems; reducing adverse impacts of subsidies on vulnerable groups.
- Tax Policy:
  - General tax policy reviews and specific advice on income tax (including international corporate taxation), value-added tax, carbon taxation, and taxation of natural resources (including oil and gas).
- Macro-Fiscal Policies and Frameworks:
  - Credible fiscal forecasts, transparent intergovernmental relationships, establishing fiscal rules, fiscal risk management, climate-related fiscal policies, and aligning fiscal policies with sustainable development and inclusive growth.
- Revenue Administration:
  - Strengthening tax and customs administration, collection of social security contributions, governance and strategic management frameworks, and modernization of core operational functions (taxpayer service, filing and payment, audit, collection enforcement, dispute resolution).

### Fiscal diagnostic tools supporting CD (selected)
- Tax Policy: Tax Expenditure Assessment (TEA); Revenue Forecasting and Analysis Course (RFAx); Fiscal Analysis of Resource Industries (FARI); World Revenue Longitudinal Database (WoRLD).
- Expenditure Policy: Expenditure Assessment Tool (EAT); Social Protection and Labor Toolkit (SPL-AT); Wage Bill Projection Tool (W-Pro); Investment and Capital Stock Database; SDG Costing Tool.
- PFM: Fiscal Transparency Evaluation (FTE); Public Investment Management Assessment (PIMA) and Climate-PIMA; Cash Forecasting and Analysis Tool (CFAT) for Fragile States and Low-Income Developing Countries; Fiscal Risk Toolkit.
- Revenue Administration: Revenue Administration Gap Analysis (RA-GAP); Tax Administration Diagnostic Assessment Tool (TADAT); RA-FIT/International Survey on Revenue Administration (ISORA); International Survey on Customs Administration (ISOCA).
- Macro-Fiscal Policies and Frameworks: Global Debt Database (GDD); Fiscal Rules Dataset 1985-2021; Fiscal Council Dataset; Fiscal Policy Responses to COVID-19; Public Finances in Modern History Database; Fiscal Monitor Methodological Statistical Appendices.
- FAD’s diagnostic tools enable benchmarking with international practices, baseline assessment before medium-term reforms, and progress monitoring.

### Clients, coverage, and intensity
- Over the past year, FAD provided technical advice and training to over 160 countries across all regions and income levels.
- Recipients of CD (% of CD Delivery):
  - Low-Income Developing Countries: 51%
  - Emerging Markets: 43%
  - Fragile and Conflict-Affected States: 21%
  - Countries with Lending Commitments: 38%

### Staff, resources, and funding
- Staffing and expert pool:
  - 300+ HQ-based fiscal experts from 85 countries.
  - 80+ resident and regional advisors working in-country or at Regional Capacity Development Centers (RCDCs).
  - A pool of 1,100 experts representing 120 nationalities, available for short-term assignments.
- FAD CD spending by funding source (US$ in millions): Fund-Financed, Bilateral Arrangements, RCDCs, Thematic Funds (time series shown for 2013–2023).

### Partnerships and the Global Public Finance Partnership (GPFP)
- FAD partners with other CD providers and the international donor community to design and deliver fiscal reforms collaboratively.
- Donor-provided resources finance CD work through contributions to Thematic Funds, the Fund’s network of RCDCs, and bilateral support for major fiscal projects.
- Launched in January 2024 with donor financial support, the Global Public Finance Partnership (GPFP) is the IMF’s new main vehicle for providing fiscal CD support to member countries, with a primary focus on low-income countries and fragile and conflict-affected states.
- The five-year GPFP initiative aims to:
  - Foster strong revenue mobilization policies and well-functioning revenue administrations.
  - Promote expenditure policies focused on spending well and sound public financial management practices.
  - Integrate macro-relevant themes such as climate change, gender and inclusion, and GovTech for digitalizing fiscal operations.

### Governance, fiscal risk management, and tools
- Governance & Anti-Corruption:
  - Good governance and transparency are essential for macroeconomic performance and development; corruption undermines tax collection and efficient expenditure choices.
  - During the COVID-19 crisis, FAD emphasized “keeping the receipts” while increasing expenditures and participated in governance diagnostic missions with other IMF departments.
  - Since 2018 (when the IMF adopted the Framework for Enhanced Fund Engagement on Governance), FAD (together with other departments) has conducted 17 governance diagnostic exercises to examine corruption vulnerabilities and set prioritized engagement strategies.
- Strengthening analysis and management of fiscal risks:
  - Comprehensive analysis, disclosure, and management of fiscal risks are needed to ensure sound public finances and macroeconomic stability.
  - The IMF’s Fiscal Risk Toolkit includes practical analytical tools on fiscal stress tests, state-owned enterprises, fiscal implications of climate change and natural disasters, and government guarantees.
  - The IMF has worked with over 40 countries applying these tools to support decision-making, monitoring, management, and disclosure of fiscal risks.
  - The Fiscal Risk Management Portal brings together analytical tools, guidance materials, and research to help policymakers better understand and manage fiscal risks.

### Mobilizing revenues: policy, administration, and country examples
- Revenue mobilization objectives:
  - Formulate and implement medium-term revenue strategies (MTRS) as high-level road maps for tax system reform covering policy, administration, and legal frameworks.
  - Undertake applied research on taxation impacts (investment, work, gender, consumption, environment), international tax spillovers, taxation of high net wealth individuals, digitalization impacts on taxation, and fiscal regimes for extractive industries.
  - Maintain tools, country reports, technical notes, working papers, webinars, online courses, and the Revenue Portal for dissemination.
- Tax policy CD focuses:
  - Improving value-added taxes; ensuring efficiency and equity of personal and corporate taxes; increasing effectiveness of property taxes; designing taxation of financial instruments and institutions; strengthening fiscal regimes for extractive industries; designing environmental taxes including carbon; improving tax policy transparency through Tax Expenditure Assessment; training in revenue modeling, forecasting, and policy assessment; maintaining revenue and tax policy parameter databases.
- Revenue administration CD focuses:
  - Enhancing management and governance (strategic planning, legal frameworks, human resources, IT and data analytics); improving administration of VAT, customs duties, excises, income taxes, and social security contributions; administering revenues from extractive industries; strengthening taxpayer compliance management (tax gap and compliance risk analysis); implementing compliance strategies by taxpayer segment; strengthening customs’ role linking tax collection and trade facilitation.
- Case studies: Formulating Medium-Term Reforms in Egypt and Rwanda
  - Challenge: Many developing countries have tax-to-GDP ratios below levels necessary to achieve the SDG; Egypt and Rwanda formulated MTRS to improve tax capacity and secure additional revenue needed toward meeting the SDGs.
  - Approach: FAD led assistance throughout MTRS formulation, including brainstorming workshops, gap analysis, diagnostic assessments, legal drafting, and stakeholder engagement.
  - Egypt:
    - Prior to COVID-19, Egypt developed an MTRS that identified institutional reforms and tax and customs policy changes to increase revenue by 2 percent of GDP over four years.
    - The MTRS was revised to reflect the post-COVID-19 fiscal outlook and was endorsed by the Council of Ministers on December 31, 2020.
    - Results: Enactment of a new unified tax procedures code, a new small and medium enterprises law, and a revised customs law; development of a new draft income tax law; revenue administration reforms including organization design and staffing changes, and large investments in IT systems for tax and customs administration.
  - Rwanda:
    - FAD helped formulate the first phase of the MTRS to raise revenue to finance pressing health and social needs arising from the pandemic.
    - MTRS-1 was formulated in March 2021 covering the three-year period 2021/22 to 2023/24; implementation commenced in May 2022.
    - Results: Revenue administration reforms aided by gains in digitalization; tax policy and administration measures sequenced to provide initial relief and raise revenues later through changes to the personal income tax rate schedule, comprehensive corporate tax reforms, and groundwork for critical reforms in an MTRS-2 to be implemented starting in 2023.

### Strengthening Public Financial Management (PFM)
- Rationale: Strong PFM systems are essential for efficient delivery of public policies and services, sustainability of public finances, management of uncertainties, fiscal transparency and accountability, and fighting corruption.
- FAD support in PFM focuses on:
  - Comprehensive assessments via standardized tools: Fiscal Transparency Evaluations (FTE), Public Investment Management Assessments (PIMA), the Fiscal Risk Assessment Tool (FRAT), and Public Expenditure Financial Accountability (PEFA).
  - Improving core PFM systems: fiscal frameworks, budget preparation and execution reporting, financial management information systems, and audit.
  - Adoption of advanced PFM practices: medium-term fiscal and budget frameworks, fiscal rules, fiscal councils, performance-based budgeting, accrual accounting, fiscal risk management, efficient public investment, spending reviews, and balance sheet analysis.
  - Strengthening PFM legal frameworks and organization of ministries of finance, state treasuries, and independent fiscal institutions.
  - Adapting PFM practices to support climate and gender priorities through Green PFM and gender budgeting, and supporting digitalization of PFM systems and GovTech.

### Strengthening Infrastructure Governance: The Public Investment Management Assessment (PIMA)
- PIMA and C-PIMA:
  - The PIMA tool serves as a framework for assessing infrastructure governance.
  - The IMF has completed PIMAs in over 80 countries; these assessments often provide the catalyst for ambitious reform programs.
  - A climate module complements the PIMA (C-PIMA) to assess climate-responsive investment across planning, coordination, project appraisal and selection, budgeting and portfolio management, and risk management phases.
  - To date, more than 20 C-PIMAs have been conducted across all income levels.
  - The IMF’s Infrastructure Governance Portal brings together analytical tools, country reports, and guidance materials.

### Spending Well — Expenditure Policy Capacity Development
- Focus: ensure public spending levels are fiscally sustainable and enhance spending adequacy and efficiency.
- FAD support includes:
  - Broad-based expenditure rationalization reforms across economic and functional classifications.
  - Reform of public pension systems to restore financial sustainability while protecting equity and poverty alleviation objectives.
  - Energy subsidy reforms to reduce fiscal cost, design automatic pricing, and identify mitigating social measures.
  - Government wage bill management consistent with efficient service delivery and fiscal sustainability.
  - Projection of public health and pension spending over the medium term for integration into medium-term budget frameworks.
  - Assessment of spending needs to achieve high performance in selected Sustainable Development Goals (SDGs).

### Costing and Financing SDGs in Cambodia
- FAD analysis indicates Cambodia needs about 7½ percent of GDP of additional spending in 2030 to meet SDG targets in five core areas.
- Of these additional needs, about two-thirds are in education and health services; the remainder are in infrastructure sectors (water and sanitation, electricity, and roads).
- The pandemic and its scarring effects are expected to increase financing needs by a further 3.4 percent of 2030 GDP.
- Without additional resources to offset the costs of COVID-19, achievement of the SDGs will be delayed by one year.

### Climate Change — FAD Support Aligned with IMF Climate Change Strategy
- Organization: three pillars — Mitigation Support; Public Financial Management; Macro-fiscal Analysis and Adaptation Support.
- Mitigation Support:
  - Climate Policy Assessment Tool (CPAT) assesses impacts of carbon pricing and mitigation policies for over 200 countries.
  - Additional tools: Vehicle Feebates Model, Border Carbon Adjustment Model, Fossil Fuel Subsidy Database, and NDC conversions.
  - For fossil fuel exporters, FAD combines upstream mitigation measures and fiscal regime reforms to support the energy transition.
- Public Financial Management:
  - Green PFM mainstreams climate objectives into PFM architecture; used in Rwanda, Serbia, and Turks and Caicos.
  - FAD works with Georgia, Armenia, and Rwanda to quantify long-term impacts of rising temperature scenarios and disasters on macro variables and government balance sheets (ex. PPP contracts and SOEs).
  - Guidance on managing and disclosing environmental fiscal risks is being prepared.
  - C-PIMA, used in over twenty countries, identifies reforms to make PIM more climate-responsive.
- Macro-fiscal Analysis and Adaptation Support:
  - Climate Macroeconomic Assessment Program (CMAP) provides assessments of mitigation, adaptation, financing strategy, and related PFM systems.
  - Two pilots were conducted—in Samoa and in Madagascar—and plans exist to launch after review of the pilots.
  - A database of historical observations of climate variables and future scenarios supports assessment of trends and extreme events.
  - The Climate Change 101 course upskills staff and external stakeholders.

### Gender — Fiscal Work from a Gender Perspective
- Activities:
  - Capacity development activities, seminars/training, and analytical work on gender and fiscal issues.
  - Bilateral CD on gender budgeting provided to Albania, Cambodia, Cameroon, Costa Rica, Egypt, Ethiopia, Lesotho, Togo, and South Africa.
  - Planned CD includes upwards of 20 gender-focused CD activities per year in the coming years.
  - Multilateral activity: 19 workshops on gender budgeting and several podcasts on gender and revenue administration.
  - Forthcoming training: gender budgeting courses and a course on macroeconomics and gender.
- Analytical program highlights:
  - Cross-country analysis of gender budgeting covering the G7 and G20 countries.
  - A coauthored note with UN Women on Gender Equality and COVID-19: Policies and Institutions for Mitigating the Crisis.
  - Ongoing work on fiscal policy shocks and gender employment gaps; expenditure policy to improve female economic empowerment; a gender budgeting diagnostic framework; guidance on gender impact assessments, preparing gender budget statements and gender call circulars; revenue administration good practices from a gender perspective; development of an implicit bias assessment tool in labor income taxation and gender.

### GovTech — Digital Transformation in Fiscal Areas
- Benefits and risks: digitalization can produce better and timelier public services at lower costs but requires strategies to address cyber security risks, privacy, and digital divides.
- FAD expertise supports:
  - PFM: improve fiscal management information systems, build transparency portals, adopt innovative government payment systems.
  - Revenue Administration: digital transformation of registration, filing, payment, and anti-fraud/tax evasion through ITAS and data analytics.
  - Fiscal Policy Design: diagnostic tools for readiness for government-to-person mobile payment systems and estimates of digital infrastructure investment needs; assistance in taxing incomes of highly digitalized multinationals, peer-to-peer economy transactions, and cross-border sales of digital services and online purchases.

### Fragile and Conflict-Affected States (FCS)
- Gradual CD approach aligned with local implementation and absorption capacity:
  - Stage 1: focus on simplicity in tax policy design and basic revenue administration processes, basic budget preparation, and cash payment systems.
  - Stage 2: introduce more complex taxation and PFM systems, such as medium-term revenue strategies, expenditure frameworks, and fiscal reporting.
- CD delivery model incorporates implementation advice from resident advisors and long-term experts into headquarters-designed strategies.
- Online training courses support practical knowledge and skills development.
- Recent CD examples: strengthening public finances in Sierra Leone, Somalia, South Sudan, and Libya.
- CD continued in politically uncertain environments, including Burkina Faso (tax and customs administration), Yemen (tax administration) and Haiti (cash management).

### Contact, publications, and training
- Channels for further engagement include the Fiscal Monitor, Staff Discussion Notes, Technical Notes and Manuals, “How To” Notes, IMF Staff Climate Notes, publications, data series, and training catalogs.

*Fiscal Affairs Department (FAD), IMF, CAPACITY DEVELOPMENT | 2024.*

### Section 1

### CAPACITY DEVELOPMENT

### Overview: mission and principles
- Since 1964, the IMF’s Fiscal Affairs Department (FAD) has helped IMF member countries build effective fiscal policy frameworks and institutions, supporting the development of institutional and human capacities based on a demand-driven model.
- Core principles guiding FAD capacity development:
  - Agile: Responding quickly and adapting delivery modalities to best support CD needs of country authorities.
  - Integrated: Integrating CD work with the IMF’s surveillance and lending activities and coordinating CD planning and delivery across HQ and field operations.
  - Country-centered: Implementing a medium-term programmatic approach that factors in a country’s needs, absorptive capacity, and pace of reform.
  - Results-oriented: Delivering CD with clear milestones and outcomes to achieve sustainable and effective results.

### FAD capacity development model and delivery channels
- Multiyear programmatic approach focused on transformational fiscal reforms with four main stages:
  - Diagnostic assessment: Innovation to develop new diagnostic tools to benchmark, identify gaps, and support effective reforms.
  - Reform strategy elaboration: Consultations with authorities, partners, and internal stakeholders to prioritize topics and elaborate reform strategy.
  - Sequenced implementation of CD interventions: CD delivery combines strategic recommendations and quality control from HQ staff and hands-on support from regional and in-country experts.
  - Evaluation and re-prioritization: Assessment of outcomes and systematic evaluation of performance provide feedback to help prioritize resource allocation.
- Channels for engagement and knowledge sharing:
  - Country-specific work: missions, desk reviews, and workshops.
  - Cross-country work: training and global & regional conferences.
  - Massive open online courses on PFM, RA-GAP, VITARA and revenue modeling.
  - Social media and outreach: Podcasts, IMF Blogs, PFM Blog, Twitter, Facebook, LinkedIn.
  - How To Notes, working papers, and other analytical work.

### Areas of expertise (five workstreams)
- Public Financial Management (PFM):
  - Enhancing budget frameworks, strategic budgeting, budget execution and control, fiscal risk management, asset and liability management, public investment management, and fiscal transparency.
- Expenditure Policy:
  - Rationalizing public expenditure on price subsidies, wage bill, education, health, social protection; increasing long-term sustainability of pension systems; reducing adverse impacts of subsidies on vulnerable groups.
- Tax Policy:
  - General tax policy reviews and specific advice on income tax (including international corporate taxation), value-added tax, carbon taxation, and taxation of natural resources (including oil and gas).
- Macro-Fiscal Policies and Frameworks:
  - Credible fiscal forecasts, transparent intergovernmental relationships, establishing fiscal rules, fiscal risk management, climate-related fiscal policies, and aligning fiscal policies with sustainable development and inclusive growth.
- Revenue Administration:
  - Strengthening tax and customs administration, collection of social security contributions, governance and strategic management frameworks, and modernization of core operational functions (taxpayer service, filing and payment, audit, collection enforcement, dispute resolution).

### Fiscal diagnostic tools supporting CD (selected)
- Tax Policy: Tax Expenditure Assessment (TEA); Revenue Forecasting and Analysis Course (RFAx); Fiscal Analysis of Resource Industries (FARI); World Revenue Longitudinal Database (WoRLD).
- Expenditure Policy: Expenditure Assessment Tool (EAT); Social Protection and Labor Toolkit (SPL-AT); Wage Bill Projection Tool (W-Pro); Investment and Capital Stock Database; SDG Costing Tool.
- PFM: Fiscal Transparency Evaluation (FTE); Public Investment Management Assessment (PIMA) and Climate-PIMA; Cash Forecasting and Analysis Tool (CFAT) for Fragile States and Low-Income Developing Countries; Fiscal Risk Toolkit.
- Revenue Administration: Revenue Administration Gap Analysis (RA-GAP); Tax Administration Diagnostic Assessment Tool (TADAT); RA-FIT/International Survey on Revenue Administration (ISORA); International Survey on Customs Administration (ISOCA).
- Macro-Fiscal Policies and Frameworks: Global Debt Database (GDD); Fiscal Rules Dataset 1985-2021; Fiscal Council Dataset; Fiscal Policy Responses to COVID-19; Public Finances in Modern History Database; Fiscal Monitor Methodological Statistical Appendices.
- FAD’s diagnostic tools enable benchmarking with international practices, baseline assessment before medium-term reforms, and progress monitoring.

### Clients, coverage, and intensity
- Over the past year, FAD provided technical advice and training to over 160 countries across all regions and income levels.
- Recipients of CD (% of CD Delivery):
  - Low-Income Developing Countries: 51%
  - Emerging Markets: 43%
  - Fragile and Conflict-Affected States: 21%
  - Countries with Lending Commitments: 38%

### Staff, resources, and funding
- Staffing and expert pool:
  - 300+ HQ-based fiscal experts from 85 countries.
  - 80+ resident and regional advisors working in-country or at Regional Capacity Development Centers (RCDCs).
  - A pool of 1,100 experts representing 120 nationalities, available for short-term assignments.
- FAD CD spending by funding source (US$ in millions): Fund-Financed, Bilateral Arrangements, RCDCs, Thematic Funds (time series shown for 2013–2023).

### Partnerships and the Global Public Finance Partnership (GPFP)
- FAD partners with other CD providers and the international donor community to design and deliver fiscal reforms collaboratively.
- Donor-provided resources finance CD work through contributions to Thematic Funds, the Fund’s network of RCDCs, and bilateral support for major fiscal projects.
- Launched in January 2024 with donor financial support, the Global Public Finance Partnership (GPFP) is the IMF’s new main vehicle for providing fiscal CD support to member countries, with a primary focus on low-income countries and fragile and conflict-affected states.
- The five-year GPFP initiative aims to:
  - Foster strong revenue mobilization policies and well-functioning revenue administrations.
  - Promote expenditure policies focused on spending well and sound public financial management practices.
  - Integrate macro-relevant themes such as climate change, gender and inclusion, and GovTech for digitalizing fiscal operations.

### Deeper dive: governance, fiscal risk management, and tools
- Governance & Anti-Corruption:
  - Good governance and transparency are essential for macroeconomic performance and development; corruption undermines tax collection and efficient expenditure choices.
  - During the COVID-19 crisis, FAD emphasized “keeping the receipts” while increasing expenditures and participated in governance diagnostic missions with other IMF departments.
  - Since 2018 (when the IMF adopted the Framework for Enhanced Fund Engagement on Governance), FAD (together with other departments) has conducted 17 governance diagnostic exercises to examine corruption vulnerabilities and set prioritized engagement strategies.
- Strengthening analysis and management of fiscal risks:
  - Comprehensive analysis, disclosure, and management of fiscal risks are needed to ensure sound public finances and macroeconomic stability.
  - The IMF’s Fiscal Risk Toolkit includes practical analytical tools on fiscal stress tests, state-owned enterprises, fiscal implications of climate change and natural disasters, and government guarantees.
  - The IMF has worked with over 40 countries applying these tools to support decision-making, monitoring, management, and disclosure of fiscal risks.
  - The Fiscal Risk Management Portal brings together analytical tools, guidance materials, and research to help policymakers better understand and manage fiscal risks.

### Mobilizing revenues: policy, administration, and country examples
- Revenue mobilization objectives:
  - Formulate and implement medium-term revenue strategies (MTRS) as high-level road maps for tax system reform covering policy, administration, and legal frameworks.
  - Undertake applied research on taxation impacts (investment, work, gender, consumption, environment), international tax spillovers, taxation of high net wealth individuals, digitalization impacts on taxation, and fiscal regimes for extractive industries.
  - Maintain tools, country reports, technical notes, working papers, webinars, online courses, and the Revenue Portal for dissemination.
- Tax policy CD focuses:
  - Improving value-added taxes; ensuring efficiency and equity of personal and corporate taxes; increasing effectiveness of property taxes; designing taxation of financial instruments and institutions; strengthening fiscal regimes for extractive industries; designing environmental taxes including carbon; improving tax policy transparency through Tax Expenditure Assessment; training in revenue modeling, forecasting, and policy assessment; maintaining revenue and tax policy parameter databases.
- Revenue administration CD focuses:
  - Enhancing management and governance (strategic planning, legal frameworks, human resources, IT and data analytics); improving administration of VAT, customs duties, excises, income taxes, and social security contributions; administering revenues from extractive industries; strengthening taxpayer compliance management (tax gap and compliance risk analysis); implementing compliance strategies by taxpayer segment; strengthening customs’ role linking tax collection and trade facilitation.
- Case studies: Formulating Medium-Term Reforms in Egypt and Rwanda
  - Challenge: Many developing countries have tax-to-GDP ratios below levels necessary to achieve the SDG; Egypt and Rwanda formulated MTRS to improve tax capacity and secure additional revenue needed toward meeting the SDGs.
  - Approach: FAD led assistance throughout MTRS formulation, including brainstorming workshops, gap analysis, diagnostic assessments, legal drafting, and stakeholder engagement.
  - Egypt:
    - Prior to COVID-19, Egypt developed an MTRS that identified institutional reforms and tax and customs policy changes to increase revenue by 2 percent of GDP over four years.
    - The MTRS was revised to reflect the post-COVID-19 fiscal outlook and was endorsed by the Council of Ministers on December 31, 2020.
    - Results: Enactment of a new unified tax procedures code, a new small and medium enterprises law, and a revised customs law; development of a new draft income tax law; revenue administration reforms including organization design and staffing changes, and large investments in IT systems for tax and customs administration.
  - Rwanda:
    - FAD helped formulate the first phase of the MTRS to raise revenue to finance pressing health and social needs arising from the pandemic.
    - MTRS-1 was formulated in March 2021 covering the three-year period 2021/22 to 2023/24; implementation commenced in May 2022.
    - Results: Revenue administration reforms aided by gains in digitalization; tax policy and administration measures sequenced to provide initial relief and raise revenues later through changes to the personal income tax rate schedule, comprehensive corporate tax reforms, and groundwork for critical reforms in an MTRS-2 to be implemented starting in 2023.

### Strengthening Public Financial Management (PFM)
- Rationale: Strong PFM systems are essential for efficient delivery of public policies and services, sustainability of public finances, management of uncertainties, fiscal transparency and accountability, and fighting corruption.
- FAD support in PFM focuses on:
  - Comprehensive assessments via standardized tools: Fiscal Transparency Evaluations (FTE), Public Investment Management Assessments (PIMA), the Fiscal Risk Assessment Tool (FRAT), and Public Expenditure Financial Accountability (PEFA).
  - Improving core PFM systems: fiscal frameworks, budget preparation and execution reporting, financial management information systems, and audit.
  - Adoption of advanced PFM practices: medium-term fiscal and budget frameworks, fiscal rules, fiscal councils, performance-based budgeting, accrual accounting, fiscal risk management, efficient public investment, spending reviews, and balance sheet analysis.
  - Strengthening PFM legal frameworks and organization of ministries of finance, state treasuries, and independent fiscal institutions.
  - Adapting PFM practices to support climate and gender priorities through Green PFM and gender budgeting, and supporting digitalization of PFM systems and GovTech.

*Source: IMF Fiscal Affairs Department — Capacity Development at a Glance (2024).*

### Section 2

### Strengthening Infrastructure Governance: The Public Investment Management Assessment (PIMA)

### PIMA and C-PIMA
- The PIMA tool serves as a framework for assessing infrastructure governance.
- The IMF has completed PIMAs in over 80 countries; these assessments often provide the catalyst for ambitious reform programs.
- A climate module complements the PIMA (C-PIMA) to assess strengths and weaknesses of climate responsive investment during planning, coordination, project appraisal and selection, budgeting and portfolio management, and risk management phases, with ensuing recommendations for their improvement.
- To date, more than 20 C-PIMAs have been conducted across all income levels.
- The IMF’s Infrastructure Governance Portal brings together analytical tools, country reports, and guidance materials.

### Spending Well — Expenditure Policy Capacity Development
- Focus: ensure public spending levels are fiscally sustainable and enhance spending adequacy and efficiency.
- Public spending is evaluated through benchmarking tools comparing expenditure levels, spending composition, and spending efficiency with country peers and established good practices.
- FAD support in expenditure policy includes:
  - Broad-based expenditure rationalization reforms across economic and functional classifications to ensure spending is adequate, efficient and fiscally sustainable.
  - Reform of public pension systems to restore financial sustainability while protecting equity and poverty alleviation objectives.
  - Energy subsidy reforms to reduce fiscal cost, design automatic pricing, and identify mitigating social measures.
  - Government wage bill management, including compensation and employment measures consistent with efficient service delivery and fiscal sustainability.
  - Projection of public health and pension spending over the medium term to facilitate integration into medium-term budget frameworks.
  - Assessment of the spending needs to achieve a high performance in selected Sustainable Development Goals (SDGs).

### Costing and Financing SDGs in Cambodia
- FAD analysis indicates Cambodia needs about 7½ percent of GDP of additional spending in 2030 to meet SDG targets in five core areas.
- Of these additional needs, about two-thirds are in education and health services; the remainder are in infrastructure sectors (water and sanitation, electricity, and roads).
- The pandemic and its scarring effects are expected to increase financing needs by a further 3.4 percent of 2030 GDP.
- Without additional resources to offset the costs of COVID-19, achievement of the SDGs will be delayed by one year.

### Climate Change — FAD Support Aligned with IMF Climate Change Strategy
- FAD climate support is organized through three pillars: Mitigation Support; Public Financial Management; Macro-fiscal Analysis and Adaptation Support.

- Mitigation Support:
  - The Climate Policy Assessment Tool (CPAT) assesses environmental, fiscal, economic, and distributional impacts of carbon pricing and mitigation policies for over 200 countries.
  - Additional tools include the Vehicle Feebates Model, Border Carbon Adjustment Model, Fossil Fuel Subsidy Database, and NDC conversions.
  - For fossil fuel exporters, FAD combines advice on upstream mitigation measures and fiscal regime reforms to support the energy transition.

- Public Financial Management:
  - The green PFM framework mainstreams climate objectives into PFM architecture; used in Rwanda, Serbia, and Turks and Caicos to help integrate climate concerns into budgets.
  - FAD works with Georgia, Armenia, and Rwanda to quantify long-term impacts of rising temperature scenarios and disasters on macroeconomic variables, fiscal positions, and government balance sheets (ex. PPP contracts and SOEs).
  - Guidance on managing and disclosing environmental fiscal risks is being prepared.
  - C-PIMA, used in over twenty countries, is the climate module of PIMA; completed independently or with a full PIMA or PIMA update, C-PIMAs help identify reforms to make PIM more climate-responsive, notably in investment planning, resource allocation, and project implementation.
  - Both Green PFM and C-PIMA can inform RSF reform measures.

- Macro-fiscal Analysis and Adaptation Support:
  - The Climate Macroeconomic Assessment Program (CMAP) provides assessments of policies including mitigation, adaptation, financing strategy, risk management and related PFM systems.
  - Two pilots were conducted—in Samoa and in Madagascar—and plans exist to launch after review of the pilots.
  - A database of historical observations of climate variables and future scenarios helps countries assess trends and extreme events.
  - The Climate Change 101 course, developed with other departments, upskills staff and external stakeholders.

### Gender — Fiscal Work from a Gender Perspective
- FAD’s program includes capacity development activities, seminars/training, and analytical work on gender and fiscal issues.
- Bilateral CD on gender budgeting has been provided to Albania, Cambodia, Cameroon, Costa Rica, Egypt, Ethiopia, Lesotho, Togo, and South Africa.
- Planned CD includes upwards of 20 gender-focused CD activities per year in the coming years.
- Multilateral activity: FAD has carried out 19 workshops on gender budgeting and several podcasts on gender and revenue administration.
- Forthcoming training: gender budgeting courses and a course on macroeconomics and gender.
- Analytical program highlights:
  - Cross-country analysis of gender budgeting covering the G7 and G20 countries.
  - A coauthored note with UN Women on Gender Equality and COVID-19: Policies and Institutions for Mitigating the Crisis.
  - Ongoing work on fiscal policy shocks and their impact on gender employment gaps; expenditure policy to improve female economic empowerment; a gender budgeting diagnostic framework; guidance on gender impact assessments, preparing gender budget statements and gender call circulars; revenue administration good practices from a gender perspective; and development of an implicit bias assessment tool in labor income taxation and gender.

### GovTech — Digital Transformation in Fiscal Areas
- Digitalization can produce better and timelier public services at lower costs but requires well-designed strategies to address cyber security risks, privacy, and digital divides.
- FAD expertise supports digital transformation in public financial management, revenue administration, and fiscal policy design.
  - Public Financial Management: support to improve fiscal management information systems, build transparency portals, and adopt innovative government payment systems.
  - Revenue Administration: support for digital transformation of core functions—registration, filing, payment, and anti-fraud/tax evasion—through ITAS (Integrated Tax Administration System) and data analytics.
  - Fiscal Policy Design: development of diagnostic tools to assess readiness for government-to-person mobile payment systems and to estimate digital infrastructure investment needs; assistance in taxing incomes of highly digitalized multinationals, peer-to-peer economy transactions, and cross-border sales of digital services and online purchases.

### Fragile and Conflict-Affected States (FCS)
- FAD supports exit and recovery from fragility through a gradual CD approach aligned with local implementation and absorption capacity.
- Stage 1: focus on simplicity in tax policy design and basic revenue administration processes, basic budget preparation, and cash payment systems.
- Stage 2: introduce more complex taxation and public financial management systems, such as medium-term revenue strategies, expenditure frameworks, and fiscal reporting.
- CD delivery model incorporates implementation advice from resident advisors and long-term experts into headquarters-designed strategies.
- Online training courses support practical knowledge and skills development in fiscal policy and reform implementation.
- Recent CD examples: strengthening public finances in Sierra Leone, Somalia, South Sudan, and Libya.
- CD continued in politically uncertain environments, including Burkina Faso (tax and customs administration), Yemen (tax administration) and Haiti (cash management).

### Contact, Publications, and Training
- Publications, data series, and training are highlighted as channels for further engagement, including the Fiscal Monitor, Staff Discussion Notes, Technical Notes and Manuals, “How To” Notes, and IMF Staff Climate Notes.
- Resources and training catalogs are referenced for publications, data, revenue portal, ICDTC training catalog, and IMF climate site.

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_Source: https://www.imf.org/-/media/files/topics/fiscal/fiscal-affairs-capacity-development-brochure-sm24.pdf_