## _041208

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---

### INTRODUCTION — Long view and institutional purpose
- Fund founded at the close of the Second World War to avoid human devastation following economic disasters.
- Objective: deliver economic analysis and multilateral collaboration to ensure financial stability and prosperity for all.
- Time horizon emphasized: "ten or twenty years" beyond near-term budgetary and staffing concerns.
- Need to pair a new income model with a new business model.
- Principle guiding work program: comparative advantage to focus on issues central to global debate.

### INTRODUCTION — Imperative for change: business and income models (priority areas)
- Global surveillance—with deeper analysis of macro-financial linkages, exchange rates, and spillovers, especially emanating from advanced economies and markets.
- Bilateral surveillance—with a more global perspective and cross-country experience.
- Low-income country work—emphasizing macro-financial stability and core expertise.
- Capacity building—technical assistance focused on macroeconomic issues, prioritized through a mechanism for charges, and augmented by more fund-raising.
- Modernization—governance reflecting membership, a sustainable income model, and lower administrative costs.
- Reference point: President’s January 10 statement to the Executive Board’s Budget Committee.

### INTRODUCTION — Near-term budget and staffing decisions
- Agreed additional budgetary cuts: $100 million.
- Staffing reductions: around 380 over the next three years, to pre-Asian crisis levels.
- Staff separations framework and voluntary separation incentives established; Board compromises acknowledged.
- Timeline: staff to circulate a specific set of proposals on the budget and income for approval in early April; implementation to follow at the working level.

### II. SURVEILLANCE FOR STABILITY AND GROWTH — Overview and strategic rebalancing
- Surveillance is the Fund’s premier output: global oversight, country-specific policy analysis, regulatory and data standards.
- Strategy: shift staff resources toward global and macro-financial objectives and better integrate strands of staff work (e.g., macro-financial linkages, cross-country perspectives).

### II. SURVEILLANCE — Macro-financial linkages and organizational approach
- Core mandate: understand channels between real and financial sectors and feedback loops affecting growth, inflation, exchange rates.
- Budget will provide resources to key departments; emphasis on focus and coordination across the Fund.
- Work within existing structures; use staff working groups that traverse departmental boundaries.
- Surveillance Committee to be focal point with a small secretariat.
- Budget proposal includes provision for a small macro-financial unit:
  - Staff drawn from across relevant departments.
  - Placed within an existing department to avoid new layers.
  - Led by a high-ranking staff member with direct management access.

### II. SURVEILLANCE — Financial markets and FSAP
- Need for the Fund to be a timely and well-informed source on market developments, transparency, stress testing, crisis planning, and sovereign wealth funds.
- Monetary and Capital Markets (MCM) department to work with the Financial Stability Forum on presentations for Board discussion and to propose a framework for financial market reform.
- MCM may need to scale back lower-priority activities (e.g., review of country papers, lower priority technical assistance) to find resources.

### II. SURVEILLANCE — Multilateral perspective in bilateral surveillance and engagement with emerging economies
- Bilateral surveillance remains core but must incorporate broader global/regional perspectives (e.g., current account imbalances).
- Resource allocation measures to encourage broader perspective:
  - Larger divisions grouping staff on similar countries.
  - Desk economists covering more than one country to encourage comparison and linkages.
  - Analytical groups on core issues (e.g., assessing exchange rates).
  - More regional surveillance and efforts to bring similar Article IVs to the Board at the same time (options: main report with common themes + short country papers).
- Surveillance Committee to oversee integrating global perspectives into Article IVs, especially in systemically important cases.
- Emerging economies want closer Fund engagement on macro-financial and cross-border linkages and volatile capital flows.
- Anticipated limited demand for traditional Fund programs due to self-insurance via reserves; opportunity to redeploy some program resources.
- Expedite work on developing a new liquidity instrument; draw on Executive Directors’ suggestions for a facility to help countries integrate into global capital markets.

### II. SURVEILLANCE — New practices to reduce paper intensity and speed delivery
- Reduce unnecessary review and production delays; restrict departmental review to earlier briefing stages and streamline clearance for Board papers.
- Maintain Article IV consultations generally on a 12-month cycle, but:
  - Use less extensive consultation reports in alternate years focusing on core issues.
  - Present concise materials (short reports, slide presentations) based on staff concluding statements and authorities’ reactions.
  - Explore holding Board discussions closer to mission completion.
- Extend vulnerability exercise to advanced economies for early-warning signals.
- Use Multilateral Consultations and convene discussions among groups of members with reports to the Board and IMFC.

### II. SURVEILLANCE — Budgetary orientation (qualitative)
- Do more: macro-financial linkages, coverage of financial issues, international linkages and spillovers, cross-country analysis.
- Do less: standard consultations with wide coverage; selected issues papers in non-core areas; program work in emerging market economies.

### III. A CHANGING ROLE IN LOW-INCOME COUNTRIES — New landscape and focus
- Emphasize: policy responses to capital inflows, commodity price booms and busts, financial market development, and debt sustainability.
- Emerging market experience to inform cross-country work.
- Continued importance of Fund financial support in catalyzing external support.
- Even if some resources free up as debt relief winds down, substantial resources should remain devoted to LIC work.

### III. LICs — Focus, coherence, institutional arrangements, and paper reduction
- Fund's core role: building stable macroeconomic frameworks; not a development agency.
- Shift away from structural issues outside core mandate; exchange information and engage donors to generate external financing for capacity building.
- Revive management-chaired interdepartmental Committee on Low-Income Countries with a secretariat.
- Budget provides for a small unit within an existing department, led by a high-ranking staff member with direct management access, to coordinate LIC work.
- Make more selective use of Ex-Post Assessments while preserving their independent assessment role.
- Explore streamlining mid-year reviews of PRGFs and Policy Support Instruments.
- Review involvement in Joint Staff Advisory Notes (JSANs).

### III. LICs — Budgetary orientation (qualitative)
- Do more: engagement with donors, coordination on low-income issues, building on lessons from emerging economies.
- Do less: frequency/scale of Ex-post Assessments, JSANs, and some HIPC/MDRI-related work.

### IV. CAPACITY BUILDING — Demand-driven approach and charging framework
- TA and training are in high demand and often the Fund’s best or only source of advice.
- Proposal: framework of charges when TA is provided to countries without Fund arrangements, graduated by member income.

### IV. CAPACITY BUILDING — External fundraising, coordination, and operational adjustments
- Office of Technical Assistance Management to step up fundraising, including bundling products in topical trust funds (e.g., TA for fragile states, public debt management).
- Consider changes in TA coordination to promote external financing while preserving quality and integration with surveillance and program work.
- Budget assumes lower expenditure deployed under current framework until charging/fundraising policies are in place.
- Departments to decide on TA requests based on relevance to core mandate, comparative advantage, and overlaps with other providers.
- Modifications to TA delivery:
  - RTACs: scope for increased TA delivery through regional centers.
  - ROSCs: FAD will reduce number of new fiscal transparency ROSCs; STA will slim down the ROSC data module program.
  - FSAPs: MCM will take a more risk-based approach to updates.
  - Training: INS will shift more courses from HQ to co-financed locations abroad; increase cost recovery for HQ courses; rely more on electronic means for internal economics courses.
  - AML/CFT: Focus on assessments of systemically important or acute-risk countries (including emerging and middle-income economies); seek additional external financing to supplement internal TA resources.

### IV. CAPACITY BUILDING — Budgetary orientation (qualitative)
- Do more: TA/Training through RTACs; TA/Training (External-Financed).
- Do less: ROSCs (new fiscal transparency ROSCs reduced), Fund-financed TA/Training, some AML/CFT work (narrower focus).

### V. MODERNIZATION AND EFFICIENCY — Priorities and measures
- Revamp administrative processes, automation, and outsourcing to modernize operations.
- Key areas: human resources, information technology, administration.
- TGS to expand global sourcing model and increase outsourcing of translation services.
- Automation will entail temporary offsetting costs (investment in new technologies) but yield medium-term savings.
- Larger division sizes to economize on supervisors and assistants and encourage cross-country and functional synergies.
- Reduce publications, increase web outreach.
- Cut non-staff expenses: non-essential travel, seminars, and certain subsidies.

### 21. Staff overseas — Key decisions and rationale
- Each person in the field costs about two staff positions at HQ.
- Priority: concentrate resources in program countries and in countries of systemic importance.
- Management intention: recommend a cut in staff overseas by nearly one-third.
- In cases where resident representatives and overseas offices are maintained in non-program countries, area departments will consult host-country authorities regarding the scope for contributions from them to maintain the offices.
- Several countries have already indicated their willingness to support IMF offices in this way.

### 21. Staff overseas — Implementing the strategy and organizational aspects
- Many reforms require formal Board approval and will be brought for the Board’s consideration in due course.
- Management must work closely with senior staff to ensure financial and cross-country perspectives are reflected in work.
- Role of cross-departmental groups (such as the Surveillance Committee and the Committee on Low-Income Countries) will be strengthened to integrate staff work and follow through on strategic priorities.
- Creation of two small units—within existing structures—to serve as secretariats for strategic follow-through.

### 21. Staff overseas — Budgetary savings: overview and composition
- Proposed staff reduction of 380 would return Fund personnel to a level that existed prior to the onset of the Asian crisis.
- Staff resource savings will be achieved through:
  - targeting efficiency gains (including larger divisions, improved work practices, and outsourcing);
  - less review and greater delegation of responsibilities;
  - rationalizing the resident representative program;
  - streamlining administrative, human resource, and budgetary systems;
  - reduction in overlaps in Fund-financed capacity building.

- Composition of Savings (In millions of 2008 dollars)
  - Personnel Savings 67
    - Efficiency gains and other 27
    - Fewer programs, less review, fewer layers 16
    - Fewer resident representative/overseas staff 7
    - Streamline systems and administrative processes 7
    - Refocus capacity building 5
    - Refocus LIC work 2
    - Refocus surveillance 2
    - Eliminate policy overlaps 1
  - Nonpersonnel Savings 33
    - Travel related expenses 10
    - Less resident representative/overseas office costs 9
    - Increased leasing of HQ2 5
    - Funding investment office through SRP 2
    - Annual meetings’ savings 2
    - IT services 2
    - Elimination of subsidies 2
    - More revenues (Concordia) 1
  - Total 100

### 21. Staff overseas — Budgetary shifts: expenditure allocation and priorities
- Expectation: devote a larger amount — not just a larger share — of resources to key surveillance priorities such as regional and multilateral analysis.
- Relationships with many emerging market and low-income countries will naturally shift toward surveillance as their need for Fund-supported programs lessens, while remaining fully engaged in program activities where necessary.
- Decline in capacity building reflects a lower Fund contribution, although outputs could be higher if more external funding is secured.

- Expenditure Allocation, 2008–11 (Real percent change)
  - Surveillance
    - Multilateral surveillance +9
    - Bilateral surveillance -13
      - of which: systemic countries +20
    - Regional surveillance +18
  - Country Programs -15
  - Fund-financed Capacity Building -19
  - Overhead -13

### 21. Staff overseas — Final thoughts and institutional implications
- Implementing the proposed medium-term budget will be demanding and involve painful staff separations.
- The budget is a mechanism for setting priorities: more focus on the Fund’s mandate, greater edge in responding to new developments, and a more prominent role as guardian of international financial stability.
- The vision depends on completion of other elements: reform of quotas and voice and the new income model to place finances on a sustainable path.
- Only when these elements are complete would the building blocks of an institution that meets the needs of the membership be in place.

*Source: _041208 - INTRODUCTION*

### INTRODUCTION

### INTRODUCTION

### The long view and institutional purpose
- Fund founded at the close of the Second World War to avoid human devastation following economic disasters.
- Objective: deliver economic analysis and multilateral collaboration to ensure financial stability and prosperity for all.
- Time horizon emphasized: "ten or twenty years" beyond near-term budgetary and staffing concerns.

### Imperative for change — business and income models
- Need to pair a new income model with a new business model.
- Principle guiding work program: comparative advantage to focus on issues central to global debate.
- Areas emphasized for greater attention:
  - Global surveillance—with deeper analysis of macro-financial linkages, exchange rates, and spillovers, especially emanating from advanced economies and markets.
  - Bilateral surveillance—with a more global perspective and cross-country experience.
  - Low-income country work—emphasizing macro-financial stability and core expertise.
  - Capacity building—technical assistance focused on macroeconomic issues, prioritized through a mechanism for charges, and augmented by more fund-raising.
  - Modernization—governance reflecting membership, a sustainable income model, and lower administrative costs.
- Reference point: President’s January 10 statement to the Executive Board’s Budget Committee.

### Near-term budget and staffing decisions
- Agreed additional budgetary cuts: $100 million.
- Staffing reductions: around 380 over the next three years, to pre-Asian crisis levels.
- Staff separations framework and voluntary separation incentives established; Board compromises acknowledged.
- Timeline: staff to circulate a specific set of proposals on the budget and income for approval in early April; implementation to follow at the working level.

---

### II. SURVEILLANCE FOR STABILITY AND GROWTH

### Overview and strategic rebalancing
- Surveillance is the Fund’s premier output, spanning global oversight, country-specific policy analysis, and regulatory and data standards.
- Strategy: shift staff resources toward global and macro-financial objectives at the front of the list and better integrate strands of staff work (e.g., macro-financial linkages, cross-country perspectives).

### Macro-financial linkages
- Core mandate: understand channels between real and financial sectors and feedback loops affecting growth, inflation, exchange rates.
- Budget will provide resources to key departments; emphasis on focus and coordination across the Fund.
- Organizational approach: work within existing structures, use staff working groups that traverse departmental boundaries.
- Surveillance Committee to be focal point with a small secretariat.
- Budget proposal includes provision for a small macro-financial unit:
  - Staff drawn from across relevant departments.
  - Placed within an existing department to avoid new layers.
  - Led by a high-ranking staff member with direct management access.

### Financial markets and Financial Sector Assessment Program (FSAP)
- Need for the Fund to become a timely and well-informed source on market developments, transparency, stress testing, crisis planning, and sovereign wealth funds.
- Monetary and Capital Markets (MCM) department to work with the Financial Stability Forum on presentations for Board discussion and to propose a framework for financial market reform.
- MCM may need to scale back lower-priority activities (e.g., review of country papers, lower priority technical assistance) to find resources.

### Multilateral perspective in bilateral surveillance
- Bilateral surveillance remains core but must incorporate broader global/regional perspectives (e.g., current account imbalances).
- Resource allocation measures to encourage broader perspective:
  - Larger divisions grouping staff on similar countries.
  - Desk economists covering more than one country to encourage comparison and linkages.
  - Analytical groups on core issues (e.g., assessing exchange rates).
  - More regional surveillance and efforts to bring similar Article IVs to the Board at the same time (options: main report with common themes + short country papers).
- Surveillance Committee to oversee integrating global perspectives into Article IVs, especially in systemically important cases.

### Engagement with emerging economies
- Emerging economies want closer Fund engagement on macro-financial and cross-border linkages and volatile capital flows.
- Anticipated limited demand for traditional Fund programs due to self-insurance via reserves; opportunity to redeploy some program resources.
- Continued preparedness to respond quickly; continue to explore adequacy of instruments and access with membership and regional groupings.
- Expedite work on developing a new liquidity instrument; draw on Executive Directors’ suggestions for a facility to help countries integrate into global capital markets.

### New practices to reduce paper intensity and speed delivery
- Reduce unnecessary review and production delays; restrict departmental review to earlier briefing stages and streamline clearance for Board papers.
- Maintain Article IV consultations generally on a 12-month cycle, but:
  - Use less extensive consultation reports in alternate years focusing on core issues.
  - Present concise materials (short reports, slide presentations) based on staff concluding statements and authorities’ reactions.
  - Explore holding Board discussions closer to mission completion.
- Extend vulnerability exercise to advanced economies for early-warning signals.
- Use Multilateral Consultations and convene discussions among groups of members with reports to the Board and IMFC.

### Budgetary orientation for surveillance (qualitative)
- Rebalancing staff work to do more on macro-financial linkages, coverage of financial issues, international linkages and spillovers, and cross-country analysis.
- Do less: standard consultations with wide coverage; selected issues papers in non-core areas; program work in emerging market economies.

---

### III. A CHANGING ROLE IN LOW-INCOME COUNTRIES

### New landscape and focus
- Fund’s engagement in LICs to emphasize: policy responses to capital inflows, commodity price booms and busts, financial market development, and debt sustainability.
- Emerging market experience to inform cross-country work.
- Continued importance of Fund financial support in catalyzing external support.
- Even if some resources free up as debt relief winds down, substantial resources should remain devoted to LIC work.

### Focus, coherence, and institutional arrangements
- The Fund is not a development agency; core role is building stable macroeconomic frameworks.
- Shift away from structural issues outside core mandate; do not attempt to coordinate donors but exchange information and engage donors to generate external financing for capacity building.
- Revive management-chaired interdepartmental Committee on Low-Income Countries with a secretariat.
- Budget provides for a small unit within an existing department, led by a high-ranking staff member with direct management access, to coordinate LIC work.

### Paper reduction and selective practices
- Make more selective use of Ex-Post Assessments while preserving their independent assessment role.
- Explore streamlining mid-year reviews of PRGFs and Policy Support Instruments.
- Review involvement in Joint Staff Advisory Notes (JSANs); consultations with World Bank President Zoellick noted.

### Budgetary orientation for LIC work (qualitative)
- Focus more on engagement with donors, coordination on low-income issues, building on lessons from emerging economies.
- Reduce frequency/scale of Ex-post Assessments, JSANs, and some HIPC/MDRI-related work.

---

### IV. CAPACITY BUILDING

### Demand-driven approach and charging framework
- Technical assistance (TA) and training are in high demand and often the Fund’s best or only source of advice.
- Proposal: framework of charges when TA is provided to countries without Fund arrangements, graduated by member income.

### External fund raising and coordination
- Office of Technical Assistance Management to step up fundraising, including bundling products in topical trust funds (e.g., TA for fragile states, public debt management).
- Consider changes in TA coordination to promote external financing while preserving quality and integration with surveillance and program work.
- Potential to leverage Fund resources and catalyze more TA and training.

### Capacity building in the budget and operational adjustments
- Budget assumes lower expenditure deployed under current framework until charging/fundraising policies are in place.
- Departments to decide on TA requests based on relevance to core mandate, comparative advantage, and overlaps with other providers.
- Modifications to TA delivery:
  - RTACs: scope for increased TA delivery through regional centers.
  - ROSCs: FAD will reduce number of new fiscal transparency ROSCs; STA will slim down the ROSC data module program.
  - FSAPs: MCM will take a more risk-based approach to updates.
  - Training: INS will shift more courses from HQ to co-financed locations abroad; increase cost recovery for HQ courses; rely more on electronic means for internal economics courses.
  - AML/CFT: Focus on assessments of systemically important or acute-risk countries (including emerging and middle-income economies); seek additional external financing to supplement internal TA resources.

### Budgetary orientation for capacity building (qualitative)
- Do more: TA/Training through RTACs; TA/Training (External-Financed).
- Do less: ROSCs (new fiscal transparency ROSCs reduced), Fund-financed TA/Training, some AML/CFT work (narrower focus).

---

### V. MODERNIZATION AND EFFICIENCY

### Modernization priorities and expected savings
- Revamp administrative processes, automation, and outsourcing to modernize operations.
- Key areas: human resources, information technology, administration.
- TGS to expand global sourcing model and increase outsourcing of translation services.
- Automation will entail temporary offsetting costs (investment in new technologies) but yield medium-term savings.

### Organizational efficiency measures
- Larger division sizes to economize on supervisors and assistants and encourage cross-country and functional synergies.
- Reduce publications, increase web outreach.
- Cut non-staff expenses: non-essential travel, seminars, and certain subsidies.

*Source: _041208 - INTRODUCTION*

### 21.      Staff overseas. The reduction in Fund programs affords an opportunity to reduce

### _041208 - 21.      Staff overseas. The reduction in Fund programs affords an opportunity to reduce

### Staff overseas — key decisions and rationale
- Each person in the field costs about two staff positions at HQ.
- Priority: concentrate resources in program countries and in countries of systemic importance.
- Management intention: recommend a cut in staff overseas by nearly one-third.
- In cases where resident representatives and overseas offices are maintained in non-program countries, area departments will consult host-country authorities regarding the scope for contributions from them to maintain the offices.
- Several countries have already indicated their willingness to support IMF offices in this way.

### Implementing the strategy — organizational aspects
- Many reforms require formal Board approval and will be brought for the Board’s consideration in due course.
- Management must work closely with senior staff to ensure financial and cross-country perspectives are reflected in work.
- Role of cross-departmental groups (such as the Surveillance Committee and the Committee on Low-Income Countries) will be strengthened to integrate staff work and follow through on strategic priorities.
- Creation of two small units—within existing structures—to serve as secretariats for strategic follow-through.

### Budgetary savings — overview and composition
- The proposed staff reduction of 380 would return Fund personnel to a level that existed prior to the onset of the Asian crisis.
- Staff resource savings will be achieved through:
  - targeting efficiency gains (including larger divisions, improved work practices, and outsourcing);
  - less review and greater delegation of responsibilities;
  - rationalizing the resident representative program;
  - streamlining administrative, human resource, and budgetary systems;
  - reduction in overlaps in Fund-financed capacity building.

- Composition of Savings (In millions of 2008 dollars)
  - Personnel Savings 67
    - Efficiency gains and other 27
    - Fewer programs, less review, fewer layers 16
    - Fewer resident representative/overseas staff 7
    - Streamline systems and administrative processes 7
    - Refocus capacity building 5
    - Refocus LIC work 2
    - Refocus surveillance 2
    - Eliminate policy overlaps 1
  - Nonpersonnel Savings 33
    - Travel related expenses 10
    - Less resident representative/overseas office costs 9
    - Increased leasing of HQ2 5
    - Funding investment office through SRP 2
    - Annual meetings’ savings 2
    - IT services 2
    - Elimination of subsidies 2
    - More revenues (Concordia) 1
  - Total 100

### Budgetary shifts — expenditure allocation and priorities
- Expectation: devote a larger amount — not just a larger share — of resources to key surveillance priorities such as regional and multilateral analysis.
- Relationships with many emerging market and low-income countries will naturally shift toward surveillance as their need for Fund-supported programs lessens, while remaining fully engaged in program activities where necessary.
- Decline in capacity building reflects a lower Fund contribution, although outputs could be higher if more external funding is secured.

- Expenditure Allocation, 2008–11 (Real percent change)
  - Surveillance
    - Multilateral surveillance +9
    - Bilateral surveillance -13
      - of which: systemic countries +20
    - Regional surveillance +18
  - Country Programs -15
  - Fund-financed Capacity Building -19
  - Overhead -13

### Final thoughts — institutional implications
- Implementing the proposed medium-term budget will be demanding and involve painful staff separations.
- The budget is a mechanism for setting priorities: more focus on the Fund’s mandate, greater edge in responding to new developments, and a more prominent role as guardian of international financial stability.
- The vision depends on completion of other elements: reform of quotas and voice and the new income model to place finances on a sustainable path.
- Only when these elements are complete would the building blocks of an institution that meets the needs of the membership be in place.

*Source: _041208 - 21. Staff overseas. The reduction in Fund programs affords an opportunity to reduce*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2008/_041208.pdf_