## This paper proposes a strengthened country contributions policy for capacity-building services

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### Background and purpose
- Builds on Executive Board discussions on capacity-building reforms and proposals to use charges (country contributions) to improve effectiveness and efficiency of the Fund’s capacity-building activities.
- Management intends to issue a staff guidance note on implementation and to publicize the policy to members and other recipients of Fund capacity-building activities.
- Historical practice: contributions for Fund-financed long-term expert assignments have existed since the beginning of TA; current framework established for TA in 1996 and amended in 2001. Members have not been required to contribute towards other TA activities or training under the current framework.

### Rationale and objectives
- Using price signals will help measure the value recipients attach to services and ensure services respond to their needs.
- Requiring recipients to contribute:
  - helps discipline demand;
  - increases incentives for efficient use of services;
  - signals ownership and commitment by recipients;
  - provides input for prioritization of scarce resources;
  - enhances transparency and accountability.
- The strengthened policy is intended not primarily as a revenue-generating measure but to rationalize demand, enhance ownership, create incentives for efficient use, and increase internal accountability.

### Coverage, differentiation, and rates
- Applies to:
  - TA provided by the Fund and training of officials taking place at Fund headquarters.
  - Such TA and training provided to Fund members and nonmembers (subject to exclusions).
- Contribution rates differentiated by per capita income group (rates effective in the strengthened framework):
  - low-income countries: 10 percent
  - lower middle-income countries: 30 percent
  - upper middle-income countries: 50 percent
  - high-income countries: 100 percent
- Income group definitions (current groups, effective July 1, 2008):
  - low-income countries: US$935 or less
  - lower middle-income countries: US$936-3,705
  - upper middle-income countries: US$3,706-11,455
  - high-income countries: US$11,456 or more
- Dependent territories of members will be charged in accordance with the income grouping of the member.

### Exceptions, de minimis threshold, and exclusions
- Exemptions include:
  - assessments under the Financial Sector Assessment Program (FSAP) or Reports on the Observance of Standards and Codes (ROSCs);
  - donor-financed capacity-building services (including proposed topical trust funds) and activities of RTACs and RTCs primarily financed by donors and recipient countries;
  - TA to program countries;
  - TA interventions falling under a de minimis threshold and regional TA seminars, workshops and conferences.
- De minimis threshold:
  - Based on FY2009 costs, would be US$11,200. Example: would cover about ten days of TA delivery at Fund headquarters.
- Cross-participation in other international organizations’ TA missions: extent of contributions will depend on the nature of participation as specified in Attachment I.

### Interaction with prioritization and mitigation measures
- Country contributions policy integrated into existing prioritization process:
  - RSN/RAP process allocates internal and donor-provided resources and will allocate the implicit subsidy provided through the differentiated rate of charge.
- Expected mitigation of impact on developing countries:
  - Stepped up fundraising, exploring new RTACs and bundling capacity building in topical trust funds (e.g., for fragile states or public debt management).
  - Focused assistance to low income and lower-middle income countries via RTACs and trust funds to ease supply constraints and reduce the share of capacity building subject to charging.

### Expected incidence and illustrative simulations
- Only about 16 percent of TA delivered to low- and lower middle-income countries in FY2008 would have been subject to country contributions, given the predominance of Fund-supported programs and donor financing.
- For training: based on the INS program for FY2009, almost one-quarter of training for low- and lower-middle income countries would be subject to contributions; because about one-quarter of total Fund training has been delivered outside the INS program and would not be subject to contributions, the share of total training requiring contributions is expected to be lower than 25 percent.
- Selected figures from Text table 1 (simulation based on FY2008 composition of TA and training) as presented in source:
  - Total revenue170.3227.78,960         240.9
  - net of collection costs6.70.8
  - Memorandum item
  - Net revenue as percent of internal budget 5/9.12.2
- Notes from the simulation:
  - Based on FY2008 TA field delivery data (a proxy for TA output) using average personnel and travel costs. Regional TA, totaling 16 person years, has not been attributed to income groups and is not included in the total. Estimated contribution assumes no demand response, but a reduction in Fund-financed TA by 20 percent as per the medium-term budget.
  - Projection for FY2009 INS training program, assuming unchanged country composition of participants from FY2008.
  - CARTAC provides externally-financed TA to some high-income Caribbean countries and territories which significantly reduces the proportion of TA to high-income countries subject to contributions.
  - FY2008 budget for TA and training, excluding externally-financed activities, governance, and Fund-wide costs for facilities and support. Includes the cost of training outside the INS program.

### Cost base, payment, and administrative arrangements
- Cost base for TA:
  - All TA project-related costs, including associated backstopping, management and administrative support.
  - In discussions with authorities, cost estimates will be provided ahead of delivery. Any cost overrun will be borne by the Fund; savings will revert to the authorities.
- Cost base for training at headquarters:
  - Participant travel and living expenses, and other participant-related costs.
  - Will be established by management once a year based on the projected average cost for the program year across all participants.
- Payment and administration:
  - Advanced payment will be required for TA delivery to ensure administrative simplicity and avoid arrears.
  - Staff exploring the option of an administered account for country contributions to allow recipients to deposit funds; a trust fund management fee would be applied to defray the Fund’s costs of administering these accounts.
  - A simple payment mechanism will be devised to facilitate payment for training.
- Systems and practices:
  - Necessary systems and work practice changes are being implemented as part of the new framework for donor-financing, including upgrading the Fund’s time reporting system; developing standards for costing and procedures for closing projects; and reviewing systems for tracking contributions and financial reporting.

### Definitions, coverage, and costing — Technical assistance (TA)
- TA defined as advice provided by Fund staff and experts through modalities including staff missions of limited duration; assignment of experts and/or resident advisors; TA seminars and workshops; desk-based analysis and advice. Training is treated separately.
- Country contributions policy will apply to TA provided to a recipient, except the listed exemptions (FSAP/ROSC, TA to program countries, donor-financed TA, de minimis cases, regional TA seminars/workshops/conferences, certain cross-participation cases).
- Costing and administration for TA:
  - Cost base for billing purposes will be all TA project-related direct costs.
  - Costs determined on the basis of actual time spent by staff and experts on TA delivery, backstopping, management, and administrative support using a methodology specified by the Managing Director.
  - At present, actual time of staff and long-term experts will be priced at the mid-point of the relevant salary grade multiplied by the prevailing benefit coefficient; all other costs, including short-term experts, travel, and TA seminars and workshops, will be the actual expenses incurred by the Fund.
  - Staff and expert time associated with inter-departmental review will not be included in the cost base.
  - Costs of participation of officials of another international organization in a Fund mission will be included in the cost base, comprising the actual amount paid by the Fund to the other organization.
  - Recipient authorities will be given a cost estimate; cost overruns will be covered by the Fund.
  - The Managing Director will specify the methodology for cost determination and threshold calculations.

### Definitions, coverage, and costing — Training
- Training defined as courses for officials to strengthen analytical and technical capacities within the Fund’s mandate; offered at headquarters, regional training centers, regional TA centers, through collaborators, and via the IMF Institute’s distance learning.
- Country contributions policy will apply to all training offered at Fund headquarters, other than training funded or co-funded by donors; all other training activities will be excluded.
- Cost base for billing purposes for training will be the average participant costs irrespective of participant origin.
  - Participant costs include travel, per diems, accommodation, and other miscellaneous participant-related costs.
  - Staff costs, and course delivery and development costs will be excluded.
  - A standard weekly participant cost base will be established once a year by the Managing Director, based on the projected average cost for the program year across all participants.
- The average participant cost per week, based on FY2009 costs, would be US$1,300.
- Payment of the participant fee will be the responsibility of the member country.

### Implementation timetable, governance, billing, and arrears
- Management intends to make effective the policy on May 1, 2009 for TA and training for both members, and nonmembers and international organizations.
- The Managing Director has authority, in consultation with the Executive Board, to establish the policy set out in Attachment I with respect to members; Executive Board endorsement is required to apply the country contributions policy to requests for TA and training from nonmembers and international organizations.
- Management proposes that future changes to the country contributions policy as applicable to nonmembers and international organizations be decided by Management in consultation with the Executive Board.
- Management intends to bring the country contributions policy to recipients’ attention, publish it on the Fund’s external website, issue a staff guidance note (circulated for information to the Executive Board), and undertake outreach including in the context of the Annual Meetings.
- Management intends to bring to the Board a review of the implementation of the revised framework in the beginning of FY2011 and stands ready to modify the framework if necessary.
- Billing and payment modalities:
  - Based on the Executive Board discussion, members will be billed ex post for capacity building services rendered.
  - Where arrears occur, further delivery of the type of service to which the arrears relate (i.e., TA or training) will require the clearance of the arrears, and the advance payment of charges for such services for a certain period of time.
  - In planning a TA activity, Fund staff will provide a cost estimate indicating the total estimated cost and the contribution to be paid by the recipient based on the applicable rate of charge. If the cost estimate is accepted, advance payment will be required before the TA can be undertaken (with limited waiver authority for exceptional circumstances).
  - Following completion of TA, a statement of expense will be furnished and unspent resources reconciled.
  - For training, members, nonmembers, and international organizations will be billed ex post for training; if arrears occur with respect to training, further delivery of training will require clearance of arrears and advance payment for a certain period.

### Resource implications and budgetary effects
- The cost of introducing the revised country contributions policy is small.
- Additional costs to be absorbed in the FY2009 budget related to preparation of staff guidelines, setting up payment mechanisms and adapting existing financial systems, and outreach are estimated at US$0.2 million for both TA and training.
- Estimated collection costs are about US$1.1 million per year for TA and training; these collection costs will be covered by the additional revenue generated under the policy.
- The remaining revenue will offset some of the cuts in the Fund’s internal capacity-building funding (SM/08/97).

*Source: IMF staff paper — “This paper proposes a strengthened country contributions policy for capacity-building services.”*

### 1.      This paper proposes a strengthened country contributions policy for capacity-building

### This paper proposes a strengthened country contributions policy for capacity-building services

### Background and purpose
- Builds on Executive Board discussions on capacity-building reforms and proposals to use charges (country contributions) to improve effectiveness and efficiency of the Fund’s capacity-building activities.
- Management intends to issue a staff guidance note on implementation and to publicize the policy to members and other recipients of Fund capacity-building activities.
- Historical practice: contributions for Fund-financed long-term expert assignments have existed since the beginning of TA; current framework established for TA in 1996 and amended in 2001. Members have not been required to contribute towards other TA activities or training under the current framework.

### Rationale and objectives
- Using price signals will help measure the value recipients attach to services and ensure services respond to their needs.
- Requiring recipients to contribute:
  - helps discipline demand;
  - increases incentives for efficient use of services;
  - signals ownership and commitment by recipients;
  - provides input for prioritization of scarce resources;
  - enhances transparency and accountability.
- The strengthened policy is intended not primarily as a revenue-generating measure but to rationalize demand, enhance ownership, create incentives for efficient use, and increase internal accountability.

### Coverage, differentiation, and rates
- The revised country contributions policy will apply to:
  - TA provided by the Fund and training of officials taking place at Fund headquarters.
  - Such TA and training provided to Fund members and nonmembers (subject to exclusions below).
- Contribution rates differentiated by per capita income group (rates effective in the strengthened framework):
  - low-income countries: 10 percent
  - lower middle-income countries: 30 percent
  - upper middle-income countries: 50 percent
  - high-income countries: 100 percent
- Income group definitions (current groups, effective July 1, 2008):
  - low-income countries: US$935 or less
  - lower middle-income countries: US$936-3,705
  - upper middle-income countries: US$3,706-11,455
  - high-income countries: US$11,456 or more
- Dependent territories of members will be charged in accordance with the income grouping of the member.

### Exceptions and limits
- The framework will not apply to:
  - assessments under the Financial Sector Assessment Program (FSAP) or Reports on the Observance of Standards and Codes (ROSCs).
  - donor-financed capacity-building services (including proposed topical trust funds) and activities of RTACs and RTCs that are primarily financed by donors and recipient countries.
  - TA to program countries.
  - TA interventions falling under a de minimis threshold and regional TA seminars, workshops and conferences.
- De minimis threshold:
  - Based on FY2009 costs, would be US$11,200. Example: would cover about ten days of TA delivery at Fund headquarters.
- Cross-participation in other international organizations’ TA missions: extent of contributions will depend on the nature of participation as specified in Attachment I.

### Interaction with prioritization and mitigation measures
- Country contributions policy integrated into existing prioritization process:
  - RSN/RAP process allocates internal and donor-provided resources and will allocate the implicit subsidy provided through the differentiated rate of charge.
- Expected mitigation of impact on developing countries:
  - Stepped up fundraising, exploring new RTACs and bundling capacity building in topical trust funds (e.g., for fragile states or public debt management).
  - Focused assistance to low income and lower-middle income countries via RTACs and trust funds to ease supply constraints and reduce the share of capacity building subject to charging.

### Expected incidence and illustrative simulations
- The predominance of Fund-supported programs and donor financing for low- and lower middle-income countries means only about 16 percent of TA delivered to these countries in FY2008 would have been subject to country contributions.
- With respect to training, based on the INS program for FY2009, it is expected that almost one-quarter of training for low- and lower-middle income countries would be subject to contributions. Since about one-quarter of total Fund training has been delivered outside the INS program and would not be subject to contributions, the share of total training that would require contributions is expected to be lower than 25 percent.
- Text table 1 (simulation based on FY2008 composition of TA and training) includes the following figures (as presented in source):
  - Total revenue170.3227.78,960         240.9
  - net of collection costs6.70.8
  - Memorandum item
  - Net revenue as percent of internal budget 5/9.12.2
  - Source: Fund staff estimates.
  - Notes from the simulation:
    - Based on FY2008 TA field delivery data (a proxy for TA output) using average personnel and travel costs. Regional TA, totaling 16 person years, has not been attributed to income groups and is not included in the total. Estimated contribution assumes no demand response, but a reduction in Fund-financed TA by 20 percent as per the medium-term budget.
    - Projection for FY2009 INS training program, assuming unchanged country composition of participants from FY2008.
    - CARTAC provides externally-financed TA to some high-income Caribbean countries and territories which significantly reduces the proportion of TA to high-income countries subject to contributions.
    - FY2008 budget for TA and training, excluding externally-financed activities, governance, and Fund-wide costs for facilities and support. Includes the cost of training outside the INS program.

### Cost base, payment, and administrative arrangements
- Cost base for TA:
  - All TA project-related costs, including associated backstopping, management and administrative support.
  - In discussions with authorities, cost estimates will be provided ahead of delivery. Any cost overrun will be borne by the Fund; savings will revert to the authorities.
- Cost base for training at headquarters:
  - Participant travel and living expenses, and other participant-related costs.
  - Will be established by management once a year based on the projected average cost for the program year across all participants.
- Payment and administration:
  - Advanced payment will be required for TA delivery to ensure administrative simplicity and avoid arrears.
  - Staff exploring the option of an administered account for country contributions to allow recipients to deposit funds; a trust fund management fee would be applied to defray the Fund’s costs of administering these accounts.
  - A simple payment mechanism will be devised to facilitate payment for training.
- Systems and practices:
  - Necessary systems and work practice changes are being implemented as part of the new framework for donor-financing, including upgrading the Fund’s time reporting system; developing standards for costing and procedures for closing projects; and reviewing systems for tracking contributions and financial reporting.

*Source: IMF staff paper — “This paper proposes a strengthened country contributions policy for capacity-building services.”*

### 15.      Management intends to make effective the policy on May 1, 2009 for TA and

### _072208 - 15.      Management intends to make effective the policy on May 1, 2009 for TA and

### Implementation timetable and governance
- Management intends to make effective the policy on May 1, 2009 for TA and training for both members, and nonmembers and international organizations.
- The Managing Director has authority, in consultation with the Executive Board, to establish the policy set out in Attachment I with respect to members; Executive Board endorsement is required to apply the country contributions policy to requests for TA and training from nonmembers and international organizations.
- Management proposes that future changes to the country contributions policy as applicable to nonmembers and international organizations be decided by Management in consultation with the Executive Board.
- Management intends to bring the country contributions policy to recipients’ attention, publish it on the Fund’s external website, issue a staff guidance note (circulated for information to the Executive Board), and undertake outreach including in the context of the Annual Meetings.
- Management intends to bring to the Board a review of the implementation of the revised framework in the beginning of FY2011 and stands ready to modify the framework if necessary.

### Billing, payment modalities, and arrears
- Based on the Executive Board discussion, members will be billed ex post for capacity building services rendered.
- Where arrears occur, further delivery of the type of service to which the arrears relate (i.e., TA or training) will require:
  - the clearance of the arrears, and
  - the advance payment of charges for such services for a certain period of time.
- Staff will devise a payment system that is administratively simple both to the Fund and to recipient countries and workable given national procurement rules.
- In planning a TA activity, Fund staff will provide a cost estimate indicating the total estimated cost and the contribution to be paid by the recipient based on the applicable rate of charge. If the cost estimate is accepted, advance payment will be required before the TA can be undertaken (with limited waiver authority for exceptional circumstances).
- A simple payment process will be developed; where administered accounts are used, a trust fund management fee will be applied to defray the Fund’s costs of administering accounts established for this purpose.
- Following completion of TA, a statement of expense will be furnished and unspent resources reconciled.
- For training, the final version of the policy will be amended to provide that members, nonmembers, and international organizations will be billed ex post for training; if arrears occur with respect to training, further delivery of training will require clearance of arrears and advance payment for a certain period.

### Scope of policy and rate of charge
- Country contributions will be required of members for TA and training as specified in Attachment I.
- Contribution rate will be graduated according to the recipient country’s per capita income level (GNI).
- Countries will be placed into four income groups; these are the minimum rates and recipient authorities are encouraged to exceed them.
- Income groups and Percent of cost base:
  - Group I:  Low income — 10
  - Group II:  Lower middle income — 30
  - Group III:  Upper middle income — 50
  - Group IV:  High income — 100
- The income groups for members, nonmembers and international organizations will be established once a year by the Managing Director on July 1, and will apply to TA requests approved and training received after that date.
- Dependent territories of member countries will be charged according to the rate applied to the member.
- Nonmember countries and jurisdictions will be subject to contributions according to their GNI per capita; international organizations will be subject to contributions according to the unweighted average GNI per capita of the organization’s member countries.

### Definitions, coverage, and exemptions — Technical assistance (TA)
- TA: advice provided by Fund staff and experts through modalities including staff missions of limited duration; assignment of experts and/or resident advisors; TA seminars and workshops; desk-based analysis and advice. Training is treated separately.
- The country contributions policy will apply to TA provided to a recipient, except the following exemptions:
  - Assessments under the FSAP or ROSC programs (classified as surveillance activities).
  - TA to program countries: no charges for TA requests approved during the period in which the member (i) has a Fund financial arrangement in place, or (ii) is implementing a program supported through approval of outright purchases (e.g., Emergency Post Conflict Assistance and Emergency Natural Disaster Assistance). The exemption applies during the period of the program as specified or as determined by the Managing Director at the time of the request.
  - Donor-financed TA, including that provided through the regional TA centers (RTACs).
  - De minimis cases: no contribution required where total cost is below a standard threshold established by the Managing Director once a year. The threshold applies to each individual request and is not cumulative.
    - At present, the threshold will be based on the cost (rounded up to nearest US$100) of 10 working days of an A15 staff (mid-point of A15 salary grade, including the prevailing benefit coefficient).
  - Regional TA seminars, workshops and conferences (classified as TA) will not be covered by the country contributions policy.
  - Cross-participation in other international organizations’ TA missions: cost of participation by another organization’s official in a Fund mission will be included in the cost base only if the Fund pays for that participation; participation of Fund staff in other organizations’ TA missions will not be subject to contributions from the recipient.
- It will not apply to TA activities that are not part of a specific TA project performed for a recipient (e.g., TA-related outreach and general research and policy work; staff participation in general donor and TA-provider meetings and conferences; policy development; TA evaluation and general oversight; TA program management unrelated to specific projects).

### Costing and administration — Technical assistance
- The Fund’s cost base for billing purposes will be all TA project-related direct costs.
- Costs will be determined on the basis of actual time spent by staff and experts on TA delivery, backstopping, management, and administrative support using a methodology specified by the Managing Director.
  - At present, actual time of staff and long-term experts will be priced at the mid-point of the relevant salary grade multiplied by the prevailing benefit coefficient; all other costs, including short-term experts, travel, and TA seminars and workshops, will be the actual expenses incurred by the Fund.
  - Staff and expert time associated with inter-departmental review will not be included in the cost base.
  - Costs of participation of officials of another international organization in a Fund mission will be included in the cost base, comprising the actual amount paid by the Fund to the other organization.
- Recipient authorities will be given a cost estimate; cost overruns will be covered by the Fund.
- The Managing Director will specify the methodology for cost determination and threshold calculations.

### Definitions, coverage, and costing — Training
- Training: courses for officials to strengthen analytical and technical capacities within the Fund’s mandate; offered at headquarters, regional training centers, regional TA centers, through collaborators, and via the IMF Institute’s distance learning.
- The country contributions policy will apply to all training offered at Fund headquarters, other than training funded or co-funded by donors; all other training activities will be excluded.
- The cost base for billing purposes for training will be the average participant costs irrespective of participant origin.
  - Participant costs include travel, per diems, accommodation, and other miscellaneous participant-related costs.
  - Staff costs, and course delivery and development costs will be excluded.
  - A standard weekly participant cost base will be established once a year by the Managing Director, based on the projected average cost for the program year across all participants.
- Payment of the participant fee will be the responsibility of the member country.
- Detailed information on the standard weekly participant fee and payment process will be provided on the IMF Institute’s website and in the Annual Training Catalog, and specified in letters to prospective participants and sponsors at invitation time.
- The average participant cost per week, based on FY2009 costs, would be US$1,300.

### Resource implications and budgetary effects
- The cost of introducing the revised country contributions policy is small.
- Additional costs to be absorbed in the FY2009 budget related to preparation of staff guidelines, setting up payment mechanisms and adapting existing financial systems, and outreach are estimated at US$0.2 million for both TA and training.
- The cost of administering the policy has not been included in the medium-term budget. Estimated collection costs are about US$1.1 million per year for TA and training; these collection costs will be covered by the additional revenue generated under the policy.
- The remaining revenue will offset some of the cuts in the Fund’s internal capacity-building funding (SM/08/97).

*https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2008/_072208.pdf*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2008/_072208.pdf_