## _050715 - EXECUTIVE SUMMARY ## Source details **Canonical URL:** [_050715 - EXECUTIVE SUMMARY](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2015/_050715.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2015/_050715.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2015/_050715.pdf.json) --- ### INTRODUCTION AND CONTEXT - Review scope: examines experience in implementing lessons from the 2011 Board paper on the Fund’s engagement with countries in post-conflict and fragile situations (fragile states (FS)) and the ensuing 2012 Guidance Note. - Timeframe and data: engagement and outcomes generally compared for periods before and after issuance of the 2012 staff guidance note (i.e., 2005–11 and 2012–14). - Definition and coverage: FS defined as having either weak institutional capacity measured by the World Bank Country Policy and Institutional Assessment (CPIA) score (average of 3.2 or lower) and/or experience of conflict (presence of a peace-keeping or peace-building operation in the most recent three-year period). This identifies 39 FS, with half in Africa, and slightly under one-quarter each in Asia and the Pacific, and the Middle East and Central Asia. - Key contextual statistics and characteristics: - A half-billion people live in fragile states. - On average, per capita incomes in FS are 62 percent lower than in other countries, while poverty rates are about three times higher. - Macro indicators compared for 2005–2009 versus 2010–2014 (see source for table). ### CAPACITY BUILDING — FINDINGS - Resources and delivery: - Resources dedicated to capacity building in FS have risen in recent years. - Resources committed rose by 40 percent between FY2009 and FY2014 for TA delivery in the field to fragile states (measured by person-years). - Overall TA delivery for all members rose by 63 percent over the same period. - Quality and tailoring: - FS authorities view Fund capacity building as high quality but request more tailoring to absorptive capacity, stronger focus on training, and more support through resident advisors. - Large majority of FS respondents view Fund capacity building as of high quality and aligned to economic priorities. - Country authority survey: 55 percent of authorities view deployment of long-term resident advisors as “not at all adequate.” - Constraints and implementation: - Staff view: approaches could be further strengthened; constraints include budget constraints, security constraints, and the need for strong country ownership. - Mission chiefs: majority identify country conditions as main obstacle to uptake of TA and training — leading challenges are weak implementation capacity, commitment to reforms, and high FS staffing turnover. - TA departments and RTACs: around 80 percent of TA department survey respondents indicated more attention is being given to absorptive capacity. - Training: - Number of FS individuals participating in ICD training increased by 81 percent between FY2009 and FY2014. - Training in participation-weeks rose by 34 percent over same period (compared to 28 percent for all Fund members). - Online training pass rates: fragile states 68 percent, non-fragile states 35 percent; Zimbabwe completion rate 88 percent; Sudan completion rate 68 percent. - Examples of country TA and outcomes: - Haiti, Somalia, South Sudan summaries highlight tailored TA, multi-donor trust funds, and institution-building outcomes (see source for details). ### CAPACITY BUILDING — PROPOSALS - Pilot Capacity Building Framework (CBF): - Establish concrete institution-building goals over at least two years and potentially up to five years. - Identify immediate and planned TA and training from the Fund and other development partners, specify responsibilities, and indicate specific CB plans for the immediate year and an indicative program for outer years. - Include understanding on authorities’ readiness to commit political support, staffing, and resources. - Linkages to RBM: - CBF will build on the new results based management (RBM) framework due to be rolled out in FY16 to strengthen monitoring and reviewing of outcomes of the CBF. - Responsibilities for monitoring outcomes could be assigned to the resident representative office, in collaboration with RTAC advisors. - Traction of capacity building, including institutional benchmarks, could be reviewed on a six-monthly basis and the program fine-tuned based on outcomes. - Resource and pilot considerations: - Preliminary resource estimate per country covered by a CBF: minimum resource cost would be around $0.5 million. - Table 8 Annual resource cost estimate per country (In thousand US dollars): - TA Coordinator 300 - HQ Backstopping 2/ 114 - Travel cost for one desk 3/ 25-75 - Project management 4/ 15 - Total 454-504 - Note: cost table excludes resident advisor cost ($300,000) and additional training/TA; South Sudan Trust Fund expenditure about $1.1 million per annum (excludes trust fund management fees of about 7 percent). - Pilot over a multi-year period for a limited number of FS recommended to explore benefits while minimizing resource costs. ### FUND FACILITIES AND PROGRAM DESIGN — FINDINGS - Use and evolution of facilities: - Use of Rapid Credit Facility (RCF) by fragile states has increased, substituting in some cases for staff-monitored programs (SMPs). - Between 2010 and end-March 2015, 11 RCFs for FS were approved, of which 9 were intended to build a track record toward a UCT program and the remainder constituted a response to a specific exogenous shock. - As of end-March 2015, there are 15 active program engagements with FS, all low-income, 3 of which are RCF and 1 SMP. - Access limits and perceptions: - Annual access limit under the RCF: 25 percent of quota (increases to 50 percent where financing gaps relate to external shocks). - RCF cumulative access: 75% in 2009–2012; 100% in 2013. - Nearly three-fourths of FS authorities see Fund facilities or instruments as inadequate to meet their needs; leading concern is level of access. - Program design and outcomes: - Program design (judged by number of quantitative targets and structural benchmarks) has not changed much in recent years and is broadly comparable across fragile and non-fragile states. - Scale of program conditionality broadly similar for FS and non-FS; number of structural benchmarks slightly lower for FS. - Program outcomes: number of successful programs broadly similar across FS and non-FS, but programs that fail quickly are higher for fragile states. - For the 40 percent of LIC programs that were not successfully concluded, about one-half (or 20 percent of all programs) went off-track almost immediately (no more than one review completed). - Social spending and inclusivity: - Authorities see room for more emphasis on inclusive growth and protection of social expenditure. - Indicative targets on priority social spending missed in about one-third of cases; for FS, missed slightly more often than for non-FS (40 percent compared to 36 percent). ### FUND FACILITIES AND PROGRAM DESIGN — PROPOSALS - Expanding concessional financing: - A forthcoming paper will explore options to expand access to concessional financing for the Fund’s poorest and most vulnerable members, subject to maintaining the self-sustaining nature of the Poverty Reduction Growth and Trust (PRGT). - Staff exploring options to tilt Fund concessional resources toward the poorest and most vulnerable countries, subject to maintaining PRGT sustainability. - Timing notes: RCF concessional facilities review likely in 2018; RFI stock-taking in 2017. - Facilities review: - More substantive changes in facilities will be considered in the next facilities review. - Strengthening protection of priority social spending: - Steps proposed to strengthen program success in protecting priority social spending through more targeted specification of spending floors and adoption of contingency plans to preserve spending from fiscal shocks. - Recommendations include more parsimonious definitions of priority spending focused on safety nets and programs fostering inclusive growth, revisiting targets more frequently, and seeking World Bank expertise. ### POLICY SUPPORT — FINDINGS - Quality and tailoring: - FS authorities view the Fund’s policy support as of high quality but want Fund teams with greater FS experience to develop alternative policy solutions appropriate to FS circumstances. - Staff welcomed the 2012 staff guidance note and increased provision of training on FS-related political economy issues. - Usage and political economy: - Usage of the 2012 staff guidance note: As an occasional reference guide 61%; As a frequent reference guide 18%; Do not refer to the guidance note at all 14%; As a one-off training product for new recruits 7%. - Political economy training: recent Internal Economics Training (IET) offerings included two two-day courses on political economy issues in FY14/15 and single-day seminars. - Staffing, security, and incentives: - Recruitment challenges: average number of applicants for a FS desk economist vacancy was two in AFR and three Fund-wide (compared to nearly six for all Fund desk economist vacancies). - Average applicants for resident representative positions in FS and/or HRLs: four on average for FS and/or HRLs, compared to eight for other countries. - Mission chiefs identify perceived impact on career prospects, security concerns, and lack of financial incentives as main obstacles to hiring for FS assignments. - Security and career incentives affect staff deployment and retention. ### POLICY SUPPORT — PROPOSALS - Training and knowledge sharing: - Continue training on political economy issues relevant to FS; ICD to continue multi-day courses and refresh seminar offerings. - Foster knowledge-sharing across teams working on fragile states, including through a new intranet-based FS thematic site and establishment of a community of practice led by SPR with AFR, MCD, and the World Bank. - Staffing incentives and security: - Address staff security concerns through updated Security and Business Continuity Accountability Framework (SAF) fourth edition and mission-specific security measures (pre-deployment briefings, specialized equipment/transport, Mission Security Consultants). - Interdepartmental WG led by HRD proposed measures on career and financial incentives; Management approved specific measures including strengthened Rest and Recuperation (R&R) benefits and proposals to ensure diverse FS work experience is recognized for professional mobility and advancement. - Operational practices: - Encourage desk economist participation in TA missions and TA experts’ involvement in area department missions to improve follow-up and cross-departmental collaboration, subject to budgetary considerations. ### CONCLUSIONS AND NEXT STEPS (HIGHLIGHTS) - Capacity building: pilot CBF linked to RBM (FY16 rollout) to improve goal-setting, coordination of TA and training, and outcome monitoring; potential wider application if successful. - Fund facilities and program design: forthcoming paper on expanding concessional financing subject to PRGT sustainability; next facilities review to consider substantive changes; targeted spending floors and contingency plans to protect priority social spending. - Policy support: continue political economy training, improve FS thematic knowledge-sharing, address security and career incentives for staff on FS assignments. - Issues for discussion posed to Directors include support for strengthening engagement, putting capacity building front and center, strengthening outcomes for priority spending targets, and strengthening training and knowledge sharing. ### KEY STATISTICS AND DATA POINTS (exact figures preserved) - FS coverage: 39 countries. - Mission chief survey responses: 28 responses (28 current and 2 former mission chiefs participated overall as inputs). - Country authority survey responses: 11 responses out of 39. - TA department survey responses: responses from 17 divisions. - RTAC survey responses: responses from 4 RTACs. - ICD training increase for FS individuals: 81 percent between FY2009 and FY2014. - Training participation-weeks increase for FS: 34 percent between FY2009 and FY2014. - Online training pass rates: fragile states 68 percent; non-fragile states 35 percent. - As of end-March 2015: 15 active program engagements with FS, all low-income, 3 RCF and 1 SMP. - RCF approvals between 2010 and end-March 2015: 11 RCFs for FS; 9 intended to build track record toward UCT-quality program. - RCF annual access limit: 25 percent of quota (increases to 50 percent where financing gaps relate to external shocks). - RCF cumulative access: 75% in 2009–2012; 100% in 2013. - TA delivery resource change: resources committed rose by 40 percent between FY2009 and FY2014 for TA delivery in the field to fragile states. - Overall TA delivery increase for all members: 63 percent over same period. - Social/priority spending targets missed: about one-third of cases overall; FS 40 percent compared to non-FS 36 percent. - For LIC programs not successfully concluded: 40 percent of LIC programs were not successfully concluded; about one-half of those (20 percent of all programs) went off-track almost immediately. - Preliminary CBF annual resource cost estimate per country: Total 454-504 (thousand US dollars). - Resident advisor estimated cost (not included in Table 8 totals): $300,000. - South Sudan Trust Fund expenditure: about $1.1 million per annum (excludes trust fund management fees of about 7 percent). *Source: IMF staff report “IMF Engagement with Countries in Fragile Situations” (excerpt provided).* ### EXECUTIVE SUMMARY ### _050715 - EXECUTIVE SUMMARY ### INTRODUCTION AND CONTEXT - Review scope: examines experience in implementing lessons from the 2011 Board paper on the Fund’s engagement with countries in post-conflict and fragile situations (fragile states (FS)) and the ensuing 2012 Guidance Note. - Timeframe and data: engagement and outcomes generally compared for periods before and after issuance of the 2012 staff guidance note (i.e., 2005–11 and 2012–14). - Definition and coverage: FS defined as having either weak institutional capacity measured by the World Bank Country Policy and Institutional Assessment (CPIA) score (average of 3.2 or lower) and/or experience of conflict (presence of a peace-keeping or peace-building operation in the most recent three-year period). This identifies 39 FS, with half in Africa, and slightly under one-quarter each in Asia and the Pacific, and the Middle East and Central Asia. - Key contextual statistics and characteristics: - A half-billion people live in fragile states. - On average, per capita incomes in FS are 62 percent lower than in other countries, while poverty rates are about three times higher. - FS macroeconomic comparisons (2005–2009 versus 2010–2014): table summarized in source showing indicators including Real GDP growth, Real GDP growth per capita, Real GDP per capita (US$, average), Real GDP growth (average volatility), Inflation (%), Current account balance (% of GDP), Debt (% of GDP), Net ODA (% of GDP), Net ODA per capita (US$). - Main inputs to the review: mission chief survey (response by 28 current and 2 former mission chiefs of 39 FS), TA department survey (responses from 17 divisions), country authorities survey (responses from 11 FS authorities out of 39), RTAC survey (responses from 4 RTACs), mission chief interviews (6 FS mission chiefs), ICD data on capacity building, MONA data on program design and implementation. - Caveat: relatively low response rate (less than 30 percent) on the FS authorities survey noted. ### CAPACITY BUILDING — FINDINGS - Resources dedicated to capacity building in FS have risen in recent years. - FS authorities view Fund capacity building as high quality but request: - More tailoring to absorptive capacity. - Stronger focus on training. - More support through resident advisors. - Staff views: - General concurrence that capacity building approaches could be further strengthened. - Constraints identified: budget constraints, security constraints, and the need for strong country ownership of institution-building. - Empirical inputs: trends in technical assistance delivery FY2009–FY2014 and ICD data informed assessment. ### CAPACITY BUILDING — PROPOSALS - Pilot Capacity Building Framework (CBF): - Establish goals for institution building. - Identify immediate and planned TA and training from the Fund and other development partners. - Allow fine-tuning of support based on evolving needs of FS. - Linkages to RBM: - The proposed CBF will build on the new results based management (RBM) framework due to be rolled out in FY16 to strengthen monitoring and reviewing of outcomes of the CBF. - Potential scope if pilot successful: - Broader FS usage. - Application in selected non-FS low-income countries where capacity building is critical. ### FUND FACILITIES AND PROGRAM DESIGN — FINDINGS - Use of Rapid Credit Facility (RCF) by fragile states has increased, as envisaged in the 2011 Board paper, substituting in some cases for staff-monitored programs (SMPs). - FS authorities identify inadequate levels of IMF financing as the key shortcoming of existing Fund facilities/instruments, with access under the RCF particularly low. - Program design (judged by number of quantitative targets and structural benchmarks) has not changed much in recent years and is broadly comparable across fragile and non-fragile states. - Program outcomes: - Number of successful programs broadly similar across FS and non-FS. - Number of programs that fail quickly is higher for fragile states. - Social spending and inclusivity: - Authorities see room for more emphasis on inclusive growth and protection of social expenditure. - Indicative targets on priority social spending missed in about one-third of cases. ### FUND FACILITIES AND PROGRAM DESIGN — PROPOSALS - Expanding concessional financing: - A forthcoming paper will explore options to expand access to concessional financing for the Fund’s poorest and most vulnerable members, subject to maintaining the self-sustaining nature of the Poverty Reduction Growth and Trust (PRGT). - Facilities review: - More substantive changes in facilities will be considered in the next facilities review. - Strengthening protection of priority social spending: - Steps proposed to strengthen program success in protecting priority social spending through: - More targeted specification of spending floors. - Adoption of contingency plans to preserve spending from fiscal shocks. ### POLICY SUPPORT — FINDINGS - FS authorities view the Fund’s policy support as of high quality but want Fund teams with greater FS experience to develop alternative policy solutions appropriate to FS circumstances. - Staff reactions: - Staff welcomed the 2012 staff guidance note and increased provision of training on FS-related political economy issues. - Mission chiefs emphasize challenges in recruiting desk economists and resident representatives motivated and skilled for FS assignments. - Security and incentives: - Security concerns and career incentives for staff considering FS assignments affect staff deployment and retention. ### POLICY SUPPORT — PROPOSALS - Continue training on political economy issues relevant to FS. - Foster knowledge-sharing across teams working on fragile states, including through a new intranet-based FS thematic site. - Address staff security concerns through new security policies. - Ensure staff working on FS assignments share the same strong career prospects as peers in non-FS positions. ### CONCLUSIONS AND NEXT STEPS (HIGHLIGHTS) - Capacity building: pilot CBF linked to RBM (FY16 rollout) to improve goal-setting, coordination of TA and training, and outcome monitoring; potential wider application if successful. - Fund facilities and program design: forthcoming paper on expanding concessional financing subject to PRGT sustainability; next facilities review to consider substantive changes; targeted spending floors and contingency plans to protect priority social spending. - Policy support: continue political economy training, improve FS thematic knowledge-sharing, address security and career incentives for staff on FS assignments. *Prepared by the African, Middle Eastern and Central Asia, and Strategy, Policy, and Review Departments; lead author Ms. Bouza (SPR), with contributions from AFR, MCD, SPR and others as listed in the source document.* ### Box 1. Staff Guidance Note on the Fund’s Engagement with Countries in Fragile Situations 1/ ### Box 1. Staff Guidance Note on the Fund’s Engagement with Countries in Fragile Situations 1/ ### Seven principles of engagement - More explicit consideration of the political context. - Understanding the socio-political constraints faced by the authorities is crucial in finding the appropriate and feasible set of policy advice. - Design policy measures that could increase social cohesion or, at a minimum, avoid placing undue stress on the political and social fabric. - A well-tailored pace of macroeconomic adjustment. - Institutional capacity constraints need to be kept in mind when tailoring quantitative objectives. - Given the signaling and catalytic role of IMF programs, overambitious timelines could quickly hamper development success. - Opportunities for “quick wins.” - Focus on the sequencing of reforms, particularly favoring short-term objectives that can deliver early successes. - Building public support for reform early on can have a positive impact on development and growth. - Inclusive growth and protection of social expenditure. - Explicit attention to inclusive growth, job creation, and social safety nets to safeguard and promote peace and stability. - Secure a smooth transition out of fragility with strategies addressing low-skilled, unemployed youth. - Financial implications should be reflected in the fiscal program and collaboration with other IFIs intensified, while keeping the Fund’s central mandate. - Well-tailored structural reforms. - Tailor structural reforms to strictly priority sectors and socially critical sectors. - Adjust expectations to feasible implementation timetables given low capacity and institutional weakness. - Integrated capacity building. - Adoption and effective implementation of key structural or institutional measures can be supported by targeted and timely TA and training. - Contingency planning. - Economic and financial programs should provide adequate room for maneuver given political volatility and potential instability. - Contingency planning can include approaches to maintain continuous engagement when a Fund-supported program has veered off-track and the design of specific contingency measures. *See IMF (2012), “Staff Guidance Note on the Fund’s Engagement with Countries in Fragile Situations.”* ### Recommendations from the June 2011 Board Paper and status updates (Table 3) - For LIC FS, fuller use of RCF to support more flexible approach to adjustment and reforms where needed; RCF would continue to serve as a bridge to ECF arrangements. - RCF use among LIC FS has increased in the last 2 years (see Figure 6). Nine RCF disbursements since 2010 were designed to build a track record for a future UCT-quality program (Table 5). - For MIC FS, establishment of a unified, RCF-like non-concessional facility for emergency assistance. - In 2011 the Executive Board approved reforms consolidating Emergency Natural Disaster Assistance and Emergency Post-Conflict Assistance under the Rapid Financing Instrument (RFI). The RFI may be used to support a full range of urgent balance of payments needs. So far, the RFI has been used just once—for St. Vincent and the Grenadines in August 2014. - Moderate increase in the cumulative access limit of RCF and comparable access limits for the nonconcessional facility for emergency assistance. - In 2013 the RCF annual/cumulative limit was increased from 25/75% of quota to 25/100% of quota; and in case of a sudden exogenous shock, it was increased from 50/100% to 50/125% of quota. - Greater flexibility built into program design to reflect limited implementation capacity of FS and need to deliver “quick wins.” - Majority of mission chiefs and review departments allow for greater flexibility in FS program design, though more can be done (see Tables 4 and 6). - Promotion of mechanisms to strengthen the catalytic role of Fund engagement (e.g., MDTFs with budget support linked to Fund programs). - Current review has not covered changes in donor financing practices. FS programs are typically closely coordinated with development partners that provide budget support. - Fuller attention to the political context in FSs where program design is better tailored to the political and social context. - Majority of mission chiefs and review departments pay much closer attention to political context in FS, but authorities report more can be done (see Table 6; Figure 19). - Closer coordination with donors, particularly in the field to better prioritize objectives, identify quick wins, and assess financial implications. - A great majority of mission chiefs indicated they regularly consult with donors, in particular the World Bank and local development partners; a key development partner noted desire for strengthened interaction in some areas (see ¶28–¶29). - Continued efforts to plan for technical assistance over a medium-term horizon and provide support in the field. - Recent programmatic capacity building engagement with Somalia and South Sudan are cited as good examples (Box 2). - Some mission chiefs mentioned TA may focus excessively on ambitious medium-term goals at expense of short-term measures; better balance recommended. Authorities and mission chiefs agree on large unmet demand for resident advisors (see ¶9 and Figure 3). - Attention to staff resources devoted to FSs. - In February 2015, an interdepartmental working group (WG) led by HRD proposed financial and career incentives as well as enhanced security measures for staff working on FS, High Risk Locations (HRLs) and Low-Income Countries (LICs). Management asked WG to further develop proposals on career incentives (see ¶41). *See IMF (2011), “Macroeconomic and Operational Challenges in Countries in Fragile Situations.”* ### Fund engagement: Capacity building (Section A) — findings and trends - Capacity building is central to effectiveness of Fund engagement with fragile states; significant progress achieved. - Delivery has been scaled up, including dedicated programs for FS with exceptional needs. - Expanded role of RTACs has allowed more responsiveness and drawing on cross-country experience. - TA and training increasingly aligned to program objectives and area department priorities. - New Results Based Management (RBM) framework to be rolled out in FY16 aims to strengthen monitoring and outcomes. - Areas for further progress: - Better align capacity building to FS needs and capacities. - Track and discuss implementation shortcomings with FS authorities. - Use in-depth institutional knowledge of TA departments to strengthen policy advice and program design. - Coordinate Fund capacity building with other development partners. - TA delivery trends (FY2009–FY2014): - Resources committed rose by 40 percent between FY2009 and FY2014 for TA delivery in the field to fragile states (measured by person-years). - Overall TA delivery for all members rose by 63 percent over the same period. - Security conditions (notably for MCD countries) and the Ebola outbreak affected recent TA delivery in some cases. - Very significant amounts of TA prioritized for individual FS such as Somalia and South Sudan. ### IMF Technical Assistance for Fragile States — Box 2 country summaries - Haiti: - TA tailored to reform agendas within Fund-supported programs (2006–2010 and 2010–2014). - Coverage: tax policy, revenue administration, public financial management, financial sector development and statistics; strengthen reliability and accuracy of key program data. - TA closely coordinated with donors; surge coordination after post-earthquake. - Effectiveness limited by low implementation capacity and stakeholder opposition (e.g., Treasury Single Account slowed by resistance; resident advisor placement in June 2014 sped up reforms). - Drain of qualified staff to nongovernment institutions and changes in Minister of Finance delayed reforms; some draft laws not enacted due to difficult political context. - Somalia: - Active engagement since recognition in April 2013 despite ineligibility to use Fund financial resources because of arrears. - TA in central bank operations; financial governance and accounting; currency reform; fiscal policy and budget preparation; statistical systems. - December 2014: orientation program launched for newly appointed Central Bank of Somalia Board of Directors. - Milestones: preparation of first national budget; development of initial GDP and external sector estimates; preparation of central bank financial statements. - February 2015: three-year multi-donor Trust Fund for Somalia launched with donor financial support. - South Sudan: - 2012: five-year capacity building program established; guided by a Steering Committee (authorities, donors, IMF staff). - Program operates under a results-based management framework; interrupted between December 2013 and September 2014 due to civil conflict. - Program goals: develop integrated macroeconomic framework; set up full central bank; modernize tax and customs administration; strengthen oil revenue management; build capacity for basic macroeconomic data. - Support delivered via short-term and long-term advisors, headquarters missions, and training. - Recent outcomes: foreign reserves management guidelines and strengthened central bank accounting procedures; establishment of a pilot customs program at main customs post; monthly publication of monetary data in International Financial Statistics. *Prepared by AFR, MCD, and WHD.* ### Training for fragile states — trends and Box 3 examples - Training delivery: - IMF training mainly via regional courses with equitable enrollment efforts. - Number of FS individuals participating in ICD training increased by 81 percent between FY2009 and FY2014. - Training measured in participation-weeks rose by 34 percent over same period (compared to 28 percent for all Fund members). - Slight shift toward MCD participants and corresponding decline for APD. - Country-specific courses provided where only government officials from the country participate, addressing weak capacity by training an interinstitutional cohort. - Staffing and financial constraints limit frequency of country-specific courses. - Online training uptake: - Zimbabwe and Sudan among top 10 countries in number of government officials completing online courses in first year of online training program. - Completion rates: Zimbabwe 88 percent, Sudan 68 percent. - Average pass rate: fragile states 68 percent, non-fragile states (NFS) 35 percent. - Difference in pass rates highest for MCD and APD countries; security constraints may make online training more attractive. - Box 3 country examples: - Central African Republic (2014): AFC workshop on budget preparation and implementation; 30 officials attended; action plan of short-term measures adopted. - Myanmar (2013–15): APD and ICD’s STI provided integrated macroeconomic policy training and TA via resident macroeconomic advisor at IMF’s Thailand Technical Assistance office; program components include 3-4 macroeconomic training courses per year, building macroeconomic frameworks, and TA to apply training materials; funded by grants from Japan and successor project agreed. - South Sudan (2012): FPP training offered jointly with AFR as first component of capacity building; lectures tailored to capacity and country characteristics; course in Kenya followed by presentation in South Sudan. - Zimbabwe (2013–14): Series of three training events financed by DFID, led by ICD and STA with AFR participation; courses covered macroeconomic analysis, policies, fiscal statistics; aimed to create interdepartmental group of economists; STA-led event complemented ICD courses. *Prepared by AFR, APD, and ICD.* ### Country authority views on adequacy of Fund capacity building - Large majority of FS respondents view Fund capacity building as of high quality and aligned to economic priorities. - Significant portion of respondents want capacity building better tailored to absorption capacity and administrative constraints. - Large unmet demand for long-term resident advisors: - 55 percent of authorities view deployment of long-term resident advisors as “not at all adequate.” - Respondents seek: - More training elements in TA. - More frequent follow-up on implementation progress. - TA better aligned to FS members’ capacity to absorb advice. - More timely delivery of support. - Anecdotal observation: many FS struggle to find time and staffing to manage ambitious and uncoordinated capacity building programs offered by development partners. *Country authority survey results reflect 11 responses received out of 39.* *Prepared by IMF staff as presented in the source document.* ### 10. A significant majority of mission chiefs see country conditions as the main obstacle to ### 10. A significant majority of mission chiefs see country conditions as the main obstacle to ### Mission chiefs’ views on technical assistance (TA) and capacity building - A significant majority of mission chiefs identify country conditions as the main obstacle to successful uptake of TA and training; the leading challenge is weak implementation capacity, followed by commitment to reforms and high FS staffing turnover. - One-third of mission chiefs saw TA as not well tailored to FS needs. - Mission chiefs reported that TA often focused excessively on ambitious medium-term goals at the expense of short-term measures, including “quick wins,” though TA teams were said to be ready to add shorter-term goals when requested. - About 60 percent of mission chiefs saw scope for better alignment between TA agendas, program priorities, and structural benchmarks. - Mission chiefs recommended: - More hands-on training as part of each TA exercise. - More missions to review TA uptake. - Greater use of resident advisors to help support authorities with TA implementation. - Country teams noted that the effectiveness of Fund policy advice is hampered by data availability; improving the quality of macroeconomic statistics should be an important goal for the Fund’s engagement with FS. - Some staff cautioned that global data initiatives (e.g., GFSM01, BPM6) stretch the capacity of FS data compilers and suggested focusing TA on basic data production. ### TA departments and RTACs: delivery, tailoring, and absorptive capacity - TA departments report ongoing efforts to meet FS needs; around 80 percent of survey respondents indicated that more attention is being given to absorptive capacity when providing support to FS. - Governance of the Fund’s capacity development (CD) activities has been strengthened in line with the Executive Board’s review of the Fund’s CD strategy in June 2013. - TA departments reported limited progress in fostering peer learning among members and identified scope to further strengthen the role of RTAC Steering Committees in improving donor coordination of capacity building. - The Fiscal Affairs Department (FAD) emphasized the need to balance quick wins with development of longer-term capacities and institutions, and noted efforts to link TA to complementary capacity building and training via country-specific seminars, regional workshops, technical courses (in coordination with ICD), and seminars. - RTACs similarly see weak absorptive capacity, staffing turnover and commitment to reform in recipient countries as main obstacles to effective TA uptake. - RTACs emphasize regional workshops and follow-up missions that track TA implementation and provide hands-on skills transfer; they view sustained investments in institution building with strong training as a way to reduce long-term dependency on TA. - RTACs and resident representative offices should work closely to ensure TA alignment with FS reform priorities and absorption capacity; RRs and country teams can monitor TA traction and coordinate with development partners. - Some RTACs noted security problems can complicate capacity building by reducing interactions with authorities and raising TA delivery costs at alternative mission sites. - RTACs did not view the number of long-term Fund advisors as a constraining factor for effective TA delivery. ### Fund facilities, program design, and perceived adequacy - About one-half of FS are implementing Fund-supported programs, typically under an ECF arrangement. - For FS seeking to build a track record of policy implementation, the rapid credit facility (RCF) is replacing staff-monitored programs (SMPs) in many cases. - Advantages and limitations of the RCF: - The RCF provides financing, but access limits are seen as low relative to FS perceived needs. - The annual access limit is 25 percent of quota; the annual access ceiling increases to 50 percent of quota where financing gaps relate to external shocks. - RCF cumulative access was 75% in 2009–2012 which increased to 100% in 2013. - RCF supports repeated disbursements but a member may not receive more than two RCF disbursements in any 12-month period and a cumulative limit of 100 percent of quota (125 percent of quota for drawings under the shocks window). - Nearly three-fourths of FS authorities see Fund facilities or instruments as inadequate to meet their needs, with the leading concern relating to the level of access. - SMPs do not provide Fund financing; their shorter timescale (rarely longer than 18 months) is not well-suited to multi-year adjustment programs; the SMP option is limited following the abolition of “signaling” SMPs. - Mission chiefs noted that for some members, the concept of “staff monitoring” is viewed as a stigma. - Quotas in percent of GDP for FS have been eroding, highlighting a case for revisiting access levels under Fund-supported programs. - Sequential disbursements under the RCF could, in principle, support a multi-year engagement, but this approach has not been widely adopted to date. ### Program outcomes, conditionality, and early failure rates - The scale of program conditionality is broadly similar for FS and non-FS members: the number of program targets is similar, while the number of structural benchmarks has been slightly lower for FS members. - Apart from abolition of structural performance criteria for all members, there has been no major change in the number of quantitative targets or structural benchmarks for FS since the 2011 review of Fund engagement and the 2012 staff guidance note. - FS authorities generally find the level of ambition of structural benchmarks to be appropriate. - Program success and early failure: - During 2005–2014, FS programs successfully concluded all scheduled reviews only slightly less often than for non-FS peers. - For the 40 percent of LIC programs that were not successfully concluded, about one-half (or 20 percent of all programs) went off-track almost immediately (defined as programs for which no more than one review was completed). - No significant difference in the rate of early program failure between FS and non-FS was observed for MIC programs. - Where programs go off track, they tend to do so more quickly for FS than for non-FS. ### Pace of adjustment, fiscal ambition, and social spending - Most FS authorities saw program goals as appropriate overall. - About 30 percent of respondents considered that targets for deficits, spending and revenues had been overly ambitious. - About 10 percent thought that targets for foreign reserves and fiscal revenue were not ambitious enough. - FS authorities see room for more emphasis on inclusive growth and protection of social expenditure: - More than one-half of respondents recognized that these issues received at least some attention, but one-third did not consider the emphasis on these goals as adequate. - FS members look for more support on inclusive growth and social protection but note limits in the Fund’s expertise and the need to coordinate with other development partners, including the World Bank. - In recent programs, indicative targets for social and priority spending were missed about one-third of the time; for FS, the targets were missed slightly more often than for non-FS (40 percent compared to 36 percent of cases). - Missed social/priority spending targets tended to occur when such targets represented a higher share of total government spending and were therefore difficult to safeguard when budget revenue shortfalls occurred. ### Key statistics and data points (from source text) - Mission chief survey reflects 28 responses. - About 60 percent saw scope for better alignment between TA agendas, program priorities, and structural benchmarks. - One-third of mission chiefs saw TA as not well tailored to FS needs. - Around 80 percent of TA department survey respondents indicated more attention is being given to absorptive capacity. - A significant number (40 percent) of TA department respondents saw scope to further strengthen RTAC Steering Committees’ role. - As of end-March 2015, there are 15 active program engagements with FS, all low-income, 3 of which are RCF and 1 SMP. - Between 2010 and end-March 2015, 11 RCFs for FS were approved, of which 9 were intended to build a track record toward a UCT program and the remainder constituted a response to a specific exogenous shock. - Annual access limit under the RCF: 25 percent of quota (increases to 50 percent where financing gaps relate to external shocks). - RCF cumulative access: 75% in 2009–2012; 100% in 2013. - Nearly three-fourths of FS authorities see Fund facilities/instruments as inadequate to meet their needs. - Country authority survey reflects 11 responses received out of 39 for several questions; some questions were answered by only 5 respondents. - The 40 percent of LIC programs that were not successfully concluded: about one-half (20 percent of all programs) went off-track almost immediately. *Source: Mission chief survey results and Fund staff analysis as presented in the supplied document.* ### introduction of indicative targets on social and priority spending in the context of the 2009 reform of PRGT facilities) ### introduction of indicative targets on social and priority spending in the context of the 2009 reform of PRGT facilities ### Social spending floors and program performance - Proportion of responses on contingency planning advice provided by the Fund: - Nearly 70 percent of FS authorities indicated the Fund provided advice on contingency planning only “to some extent”. - Proportion of country teams reporting absence of contingency plans: - More than one-third of Fund country teams indicated the absence of such plans. - Social spending floor outcomes (chart indicators preserved as presented): - 0, 10, 20, 30, 40, 50, 60, 70, 80, 90, 100 (proportion scale shown). - Countries listed with social spending targets missed: Afghanistan, Burundi, Cote d'Ivoire, Guinea, Guinea-Bissau, Haiti, Liberia, Malawi, Mali, Sao Tomé & Príncipe, Sierra Leone, Solomon Islands. - Proportion of Social Spending Targets Missed (visual data points preserved in source figure). ### Contingency planning and program design - Mission chiefs’ qualitative observations: - Difficulty of designing in advance useful alternative scenarios or contingency plans in FS due to frequent and unpredictable shifts in the political economy and limited Fund staff resources. - Ex post adjustment of program design in the event of shocks was generally seen as more practical. - One bilateral aid agency suggested faster and more visible Fund response to policy setbacks could help reform momentum. - Staff view: careful diagnosis of policy slippage is typically needed to design appropriate corrective actions which can take time. - Table 6 (Mission Chief Views on Team Engagement with Fragile States) — selected items and exact percentages: - Gave more explicit consideration to the political context: 46% / 50% / 4% (To a great extent / To some extent / Not at all). - Tailored and prioritized structural reforms to reflect low capacity: 44% / 52% / 4%. - Designed a well-tailored pace of macroeconomic adjustment: 58% / 31% / 12%. - Developed specific TA agendas that were closely linked to program priorities and structural benchmarks: 52% / 36% / 12%. - Fund engagement focused on early successes (quick wins) to build support for the process of reform: 29% / 46% / 25%. - Included contingency planning to cope with setbacks under alternative scenarios: 8% / 56% / 36%. ### Country cases: engagement examples and outcomes - Afghanistan: - Maintained close engagement despite delayed reviews under the 2011–14 ECF arrangement. - Agreement on informal quantitative targets; maintained macroeconomic stability; continued structural reforms and donor support. - Structural priorities: banking sector reform after the Kabul Bank crisis, revenue mobilization, AML and CFT. - Quick wins: revitalization of the banking supervision department; assistance on a new banking law submitted to parliament in February 2013; new AML and CFT laws in 2014 improved compliance with FATF standards. - Chad: - Engagement increased substantially since 2013; resident representative placed in 2014. - SMP in 2013 catalyzed development partner support and provided basis for an UCT arrangement under the ECF. - Non-oil primary balance improved by nearly 4 percentage points of non-oil GDP between 2012 and 2014. - Structural focus: public financial management improvements, limiting emergency spending procedures, enhancing debt management, improving budget transparency. - Government committed to targets on poverty-reducing expenditures. - Capacity building: IMF Central Africa Technical Assistance Center and enhanced coordination with development partners. - Guinea-Bissau: - Increased engagement after the 2012 coup; maintained momentum with transitional government. - Progress: implementation of the Treasury Committee, phasing out fuel tax exemptions, decline in unbudgeted expenditures. - IMF engagement with CSOs, NGOs, and donors; assistance in microfinance; capacity building in tax administration, public financial management, and statistics. - Myanmar: - Engagement intensified since political and economic reforms in 2011; SMP in 2013 supported macroeconomic and financial stability and unlocked development partner support. - Resident representative office opened in 2013; IMF annual Article IV consultations supplemented with regular staff visits. - Myanmar expected to be the largest recipient of IMF TA in 2015. - Key TA priorities: monetary and exchange rate policy tools, bank regulation and supervision, tax policy and administration, budget preparation and execution, macroeconomic statistics. - Timor-Leste: - Close IMF engagement since independence in 2002; support included macroeconomic management, payments authority, banking and payment systems, and creation of the Petroleum Fund. - Petroleum Fund assets amount to around three times GDP. - Continued elevated surveillance engagement, TA and training to develop central bank, fiscal capabilities, and promote inclusiveness. - IMF engagement also in the context of g7+ membership. ### Response to public health disasters: Ebola case - Economic impact summary: - Real GDP growth declined; revenues undercut; spending needs to contain epidemic increased, creating large fiscal financing gaps; poverty and food insecurity increased. - IMF financial support provided: - Fund provided a total of US$290 million in concessional loans to Guinea, Liberia, and Sierra Leone since September 2014. - The Fund created in February 2015 the Catastrophe Containment and Relief (CCR) Trust to provide grants for immediate debt relief to countries hit by public health disasters with international spillover potential. - CCR Trust used to provide some US$100 million to Guinea, Liberia and Sierra Leone. - CCR Trust eligibility: limited to the poorest and most vulnerable countries (38 members). - Ongoing support: - Fund to provide continuing TA and program-based support as Ebola-affected countries rebuild. ### Policy support quality, guidance note usage, and political economy capacity - FS authorities’ views on Fund mission teams (selected exact percentages from Figure 17): - Team’s overall level of experience: 82% (Fully adequate). - Team’s effectiveness in communicating your needs to IMF: 64% (Fully adequate). - Readiness of teams to listen to your views: 64% (Fully adequate). - Familiarity of teams with the economic challenges you face: 55% (Fully adequate). - Quality of the team’s policy advice, given the country’s situation and needs: 55% (Could be improved). - Readiness of teams to consider innovative approaches to tackling economic problems: 27% (Fully adequate) / 45% (Could be improved) / 27% (Significant shortcomings) — preserved as presented across categories. - Usage of the 2012 staff guidance note (Figure 18 exact percentages): - As an occasional reference guide: 61%. - As a frequent reference guide: 18%. - Do not refer to the guidance note at all: 14%. - As a one-off training product for new recruits to the country team: 7%. - Political economy understanding and training: - Good policy advice partly depends on understanding political economy; some Fund teams explicitly invest in this, but not uniformly. - Expansion of internal training on political economy issues welcomed. - Internal Economics Training (IET) offerings in FY14/15: - Two two-day courses on political economy issues: “Political Economy in Action” (taught by Policy Practice) and “Understanding and Fighting Corruption” (taught by Prof. Klitgaard). - Single-day courses/seminars included lectures by Arvind Subramanian, Charles Calomiris, and Philippe Aghion. ### Staffing, incentives, and capacity constraints - Staff experience and assignment challenges: - One-in-two FS country authorities believe deeper staff experience could help teams better understand fragility. - General depth of experience seen as more important than length of country assignment. - Demand for more frequent missions and role of resident representative offices highlighted. - Recruitment statistics and comparisons (period 2011–2014 and five-year averages preserved exactly): - Average number of applicants for a FS desk economist vacancy: - Two in AFR. - Three Fund-wide. - Compared to nearly six for all Fund desk economist vacancies. - Average applicants for resident representative positions in FS and/or High Risk Locations (HRLs): four on average for FS and/or HRLs, compared to eight for other countries. - Mission chiefs’ view on obstacles to hiring (Table 7 summary as presented): - Main obstacles: perceived impact on career prospects, concerns about security, and lack of financial incentives. - Fragile States authorities’ views on what would improve staff understanding and engagement (Figure 19 exact percentages mapped to items): - Staff expertise in countries in fragile situations: 55%. - Longer or more frequent missions: 36%. - Additional dialogue in the context of TA: 36%. - More contacts of IMF staff with non-government parties: 36%. - Longer assignments of economists and mission chiefs: 27%. - Staff expertise in political economy issues: 27%. - Other: 27%. - Larger IMF teams: 9%. - More intensive and timely technical assistance: percentage shown among items preserved in figure. ### Institutional engagement with fragile-state constituencies - Engagement with g7+: - Fund has increased engagement with the g7+ group; g7+ established in 2010 and includes 19 of the 39 countries covered by the review. - Management met with g7+ delegations at recent Spring and Annual Meetings; Fund organized seminars on fragility in 2012, 2014, and 2015 with g7+ and other fragile-state participation. *Prepared from the IMF chapter “introduction of indicative targets on social and priority spending in the context of the 2009 reform of PRGT facilities)”* ### 28. The Fund actively engages with development partners on FS country and thematic ### 050715 - 28. The Fund actively engages with development partners on FS country and thematic ### Engagement with development partners and country offices - The Fund has been working with the OECD and provided detailed inputs into their annual Fragility Reports. - Collaboration at country level is typically close between resident representatives and local representatives of the development partner community, including official aid agencies, the World Bank and regional development banks. - Outreach to selected development partners suggests engagement is good, albeit with preferences for strengthened interaction in some areas. Development agencies place a very high value on the analytical and coordinating role played by resident representative offices in FS. - The absence of resident representatives in a few countries that have recently undergone conflict, reflecting residual security concerns as assessed by the Fund’s security policy, has raised concerns about the quality of engagement by some partners in the development community. - Survey-style indicators reported: - Promotion/career opportunities 48% 48% 4% 0% - Security concerns 46% 38% 8% 8% - Lack of financial incentives 41% 33% 15% 11% - Lack of data 11% 41% 33% 15% ### Next steps and conclusions — Overview - Focus areas: capacity building, Fund facilities and program design, and policy advice. - Emphasis on strengthening traction, coordination, monitoring, and follow through on capacity building in fragile situations (FS). ### A. Capacity Building — findings - Effectiveness of Fund’s capacity building (CB) activities in FS could be further strengthened. - Generic problem with “absorption capacity”: investments in capacity building seen as falling short in delivering real and lasting institutional change. - Factors hampering traction: - Need to strengthen country ownership and resources dedicated to institution building by country authorities. - HQ-based TA sometimes seen as overly ambitious, insufficiently practical, and not adequately backed up by training. - Resident advisors and RTACs often follow up on TA but this does not happen routinely. - Country teams could play a stronger role in monitoring impact on institution building, especially where there is a resident representative office. - Multiplicity of CB activities by the Fund and development partners can overwhelm FS officials’ resources, hampering implementation. - More effective CB can strengthen macroeconomic performance and reduce poverty; institutional capacity decisive for sustaining strong income growth and requires multi-year investments. ### A. Capacity Building — proposed multi-year Capacity Building Framework (CBF) - Institution-building goals: - Define concrete goals for strengthening macroeconomic institutions over at least two years and potentially up to five years. - Priorities agreed between FS authorities, Fund, and other TA providers based on comparison of macroeconomic goals and institutional capacity (e.g., revenue mobilization, expenditure control, financial sector oversight). - CBF could be spelled out as an agreed CB strategy. - FS authorities’ role: - Include an understanding on authorities’ readiness to commit political support, staffing, and resources to achieve agreed goals, contingent on tailored capacity building support from partners. - CB investments: - Indicate Fund intentions to support CB over the period, taking into account other development partners’ intentions. - Specify respective responsibilities of each CB institution and of RTACs relative to HQ-based teams. - Indicate specific CB plans for the immediate year and an indicative program for outer years consistent with institution-building goals. - Outcome monitoring: - The new RBM initiative would be an integral part of the CBF. - Responsibilities for monitoring outcomes could be assigned to the resident representative office, in collaboration with RTAC advisors. - Recruiting an additional person dedicated to managing the CBF would be required given existing RR team responsibilities. - Traction of capacity building, including institutional benchmarks, could be reviewed on a six-monthly basis and the program fine-tuned based on outcomes. - Documentation: - CBF reviews could be documented and shared with authorities; options for publication could be explored with authorities’ consent. - Departmental roles: - Country teams would lead in developing the CBF with FS authorities and lead in monitoring overall outcomes, supported by the new CBF manager. - TA-providing departments and RTACs would participate closely in design and retain lead in delivering TA and training. - Country teams, TA departments, and RTACs would jointly discuss updates to the CBF in light of RBM outcomes. ### A. Capacity Building — lessons and examples - South Sudan: multi-year capacity building program financed by a dedicated donor trust fund (Box 2). - Somalia: a three-year multi-donor trust fund has just been established to support capacity building. - DFID-financed five-year regional project “Enhancing Engagement with Conflict and Fragile States” placed long-term advisors in Afghanistan, Iraq, Libya, Sudan, West Bank-Gaza, and Yemen. - Mozambique: a TA coordinator was recruited by the Fund, funded by development partners. - Emphasis in these examples: coordination across TA providers, ensuring adequate resources, and outcome monitoring. ### A. Capacity Building — resilience and resource implications - CBF must be resilient against setbacks; sustained CB support required despite periodic political, security, or other setbacks. CBF may need revisiting if setbacks are significant and sustained. - Preliminary resource estimate per country covered by a CBF: minimum resource cost would be around $0.5 million (Table 8). - Largest cost: recruit a locally-based CBF manager (would do more than coordinating, possibly sited in the resident representative office). - HQ back-stopping for the CBF manager needed; greater participation by area department economists in TA delivery recommended. - Cost estimates do not provide for increase in overall TA provision or expansion in the number of resident advisors; increasing CB activity under CBF would raise overall cost envelope. - Costs could be met by reprioritizing across countries within existing Fund budget or by identifying new external resources. - Pilot option: pilot over a multi-year period for a limited number of FS to explore benefits while minimizing resource costs; pilot lessons could inform broader roll out. - Comparative figures: - Expenditure under the South Sudan Trust Fund: about $1.1 million per annum, including five long-term advisors; excludes trust fund management fees of about 7 percent of the total cost. - Table 8 Annual resource cost estimate for proposed capacity building framework per country (In thousand US dollars)1/ (focuses on Fund areas of competency only): - TA Coordinator 300 - HQ Backstopping 2/ 114 - Travel cost for one desk 3/ 25-75 - Project management 4/ 15 - Total 454-504 - Note: Table 8 footnotes include: - 1/ Does not include cost of resident advisor ($300,000) and additional need for training/TA. - 2/ Support from headquarters by area departments and functional departments. - 3/ Additional travel cost for one country desk to participate in 1–3 TA mission. - 4/ Does not include possible trust fund management costs. ### B. Fund facilities and program design — access to Fund financing - Proposals in the 2011 Board paper on introducing greater flexibility in the use of concessional and non-concessional assistance to FS have been broadly satisfactory. - Further consideration needed on design of Fund’s instruments for FS that face potentially protracted weak capacity, specifically level of access under concessional facilities. - Financing modalities for FS will be taken up in a forthcoming Board paper on PRGT access as part of the Fund’s contribution to the 2015 Financing for Development (FfD) conference in Addis Ababa in July 2015. - Work ongoing to explore options to increase Fund financial support to FS to better assist institution building and tackle urgent financing needs (e.g., natural disasters). - Staff exploring options to tilt Fund concessional resources toward the poorest and most vulnerable countries, subject to maintaining the self-sustained lending capacity of the PRGT. - Timing notes: - For RCF, the concessional facilities review is likely going to be in 2018. - For the RFI, staff will take stock of the need for a review in 2017 and inform the Board of its views at that time (three-years after the last review). ### B. Fund facilities and program design — targets for priority spending - Further consideration should be given to setting targets on social or priority spending. - In some cases, these targets extend to a large share of overall spending and safeguarding outlays under fiscal pressures is difficult. - Recommendations: - Consider more parsimonious definitions of priority spending focused on safety nets for the poorest and/or programs fostering inclusive growth. - Revisit and revise these targets more frequently than current practice. - Seek expertise from the World Bank and other development partners. - Fund teams should identify contingency measures to focus needed spending cuts outside priority areas. - Strengthened country ownership of targets and increased efforts to improve the quality of fiscal data are critical. ### C. Policy support — tailored advice and institutional commitments - Importance of policy advice that is tailored, flexible, and attuned to political economy circumstances. - Requires strong, experienced teams and institutional commitment to meeting needs of FS members. - Complementary factor: ensuring a strong institutional profile for FS work to motivate staff to join FS teams. - Proposed steps focus on incentives, creating and sharing knowledge, and resource needs. ### C. Policy support — incentives for FS assignments - Steps being taken to strengthen incentives for staff taking FS assignments: - Interdepartmental working group led by Human Resources Department (HRD) examined options to address staff concerns about disadvantages of working on FS, HRLs, and LICs. - Specific measures approved by Management. - To tackle stress for resident representatives and long-term experts in HRLs and duty stations with highest hardship classification (levels 6 and 7), usage of Rest and Recuperation (R&R) benefits will be strengthened. - Current cash allowance will be replaced by a two-tiered enhanced R&R benefit with required certification of travel. - HRD is looking further at ensuring professional advancement is not a factor deterring staff from FS, HRL and LIC assignments. - Proposals will be developed to ensure diverse work experience is recognized positively for professional mobility and advancement. - Importance of communicating new policies and monitoring implementation and outcomes (e.g., number of applicants for FS assignments). ### C. Policy support — security and practical support - Security concerns addressed via the Fund’s Security and Business Continuity Accountability Framework (SAF); a fourth edition will be published in the coming months to provide a more comprehensive framework for engaging with higher-risk countries. - Updated SAF will provide clearer guidance on role of mission chiefs, and potential support measures depending on risk levels: - Pre-deployment security briefings - Specialized equipment and transport arrangements - Mission-specific security assessments - Deployment of Mission Security Consultants - Decisions on mission location (in-country vs alternative locations) will consider criticality of planned activity and importance of field activities. - For HRLs, engagement will be underpinned by Country Engagement Plans. ### C. Policy support — training, knowledge sharing, and travel - Staff training on political economy issues: - ICD will continue to offer multi-day courses in the coming year and seminar offerings are being refreshed continuously. - Internal Economics Training (IET) has considered expanding multi-day course program; recent courses have been undersubscribed. - Building a community of practice: - Steps being taken to establish a community of practice for staff working on fragile states, with SPR taking the lead, working closely with AFR, MCD, and the World Bank. - Internal website on fragile states issues being established on the Fund’s Knowledge Exchange to provide access to analytical materials, guidance notes, Board papers, good practice examples, training materials, databases, and links. - Target community: country teams, SPR and other reviewers, staff in capacity building functions and World Bank staff working on FS. - Meetings of the FS community of practice to provide venue for in-reach on principles of engagement, help emphasize policy implementation constraints, identify alternative tailored solutions, and encourage reviewing staff support drawing on functional expertise. - Travel resources: - More frequent travel would help build closer relationships with FS authorities but must be weighed against costs, especially where resident representatives provide an alternative. - Targeted approach could make it standard practice for a desk economist to participate in Fund TA missions and for TA experts to participate in area department missions. - Budgetary implications noted; expected benefits: strengthen cross-departmental collaboration on institution building, improve follow up on TA implementation during surveillance or program missions, and deepen skill set and career prospects for desk economists. ### Issues for discussion (as posed to Directors) - Do Directors support further strengthening Fund engagement on fragility issues, in particular to support capacity building and resilience, both through more coordination with development partners as well as through regular consultation with representative fragile states bodies such as the g7+? - Do Directors support efforts to put capacity building more “front and center” in the Fund’s engagement with fragile states? Do Directors see merit in staff’s proposals for a multi-year capacity building framework that would provide a more structured approach involving more emphasis on institution-building goals, closer involvement of area departments, and strengthened results based management? - Do Directors see a need to strengthen outcomes for priority spending targets, including through more parsimonious specification of protected spending and use of contingency plans designed to better safeguard such spending from budget shocks? - Do Directors agree that steps to strengthen training and knowledge sharing by Fund staff working on FS can play an important role in ensuring high quality policy support to FS? ### Appendix I — List of Countries in Fragile Situations (selected data points) - Total Countries 39 - Examples of country entries (columns include Country, Region, IMF PRGT-eligible Group 1/, WB Income, Avg. CPIA 2011-2013, Peacebuilding/ Peacekeeping/ WB FY15 flags where present). Sample entries as listed: - Angola * AFR MIC 2.69 - Burundi AFR Y LIC 3.20 PY - Central African Republic AFR Y LIC 2.66 PY - Chad AFR Y LIC 2.51 Y - Comoros AFR Y LIC 2.73 Y - Congo, Republic of * AFR MIC 3.00 - Congo, DRC AFR Y LIC 2.75 Pk Y - Cote d'Ivoire AFR MIC 3.04 Pk Y - Eritrea AFR Y LIC 2.08 Y - Guinea AFR Y LIC 2.86 - Guinea-Bissau AFR Y LIC 2.66 PY - Liberia AFR Y LIC 3.07 Pk Y - South Sudan AFR Y MIC 2.11 Pk Y - Sudan MCD Y MIC 2.35 Pk Y - Afghanistan MCD Y LIC 2.67 P/Pk Y - Somalia MCD Y LIC - P Y - Yemen MCD Y MIC 2.99 Y - Haiti WH D Y LIC 2.88 Pk Y - (Additional country listings follow in the source appendix.) - Notes: - Source: World Development Indicator, World Bank. - Note: * These countries dropped off the World Bank fragile states list in FY14 or FY15 because they no longer receive IDA allocations. - 1/ Middle-income countries (MIC) have per capita annual income of between $1,046 and $12,745, Low-income countries (LIC) of $1,045 or less based on the World Bank Atlas method updated July 2014. *Source: IMF staff report “IMF Engagement with Countries in Fragile Situations” (excerpt provided).* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2015/_050715.pdf_