IMF Capacity Development

February 28, 2020

The IMF provides technical assistance and training to help countries build effective economic institutions that can implement the right policies. These capacity development efforts help countries achieve their growth and development objectives and are an important contribution to countries’ progress toward their Sustainable Development Goals (SDGs). Capacity development is one of the three core functions of the IMF and accounts for around a third of its spending.

Strong economic institutions foster effective policies that lead to economic stability, inclusive growth, and job creation. That is why, for more than 50 years, the IMF has provided technical assistance and training to central banks, finance ministries, tax authorities, and other economic institutions. This assistance helps countries strengthen public finances, modernize monetary and exchange rate policies, buttress financial systems, develop strong legal frameworks, improve governance, and enhance the compilation and dissemination of macroeconomic and financial data. Such technical assistance also helps countries make progress toward their Sustainable Development Goals (SDGs).

The IMF’s capacity development (CD) work is initiated at the request of member countries and is tailored to their specific needs. The IMF has provided CD to all 189 members over time. In recent years, low-income developing countries have benefited from around half of the IMF’s CD-related resources. Support for fragile and conflict-affected states accounts for almost a quarter of IMF CD and is focused primarily on revenue mobilization, public financial management, banking regulation and supervision, statistical analysis, and central banking.

IMF CD is delivered to countries through targeted visits from IMF headquarter staff; long-term placement of resident advisors; a global network of regional CD centers; classroom training; and free online learning courses. External partners play a vital role and finance almost 60 percent of IMF CD, including support to regional CD centers, thematic funds focused on development priorities, and bilateral projects. The IMF Executive Board oversees IMF CD to improve its impact and effectiveness. It most recently reviewed the CD strategy in November 2018.

The IMF’s capacity development efforts focus on:

Public Finances: Helping governments better mobilize revenues and effectively manage expenditure, via tax and customs policies, budget formulation, public financial management, and debt management. This enables governments to maintain fiscal sustainability; improve infrastructure, such as schools, roads, and hospitals; build social safety nets; foster transparency; attract greater investments; and address the impact of climate change on public finances. 

Monetary and Financial Policies: Working with central banks to modernize their monetary and exchange rate frameworks and policies, and collaborating with financial sector regulators and supervisors to strengthen financial systems and banking supervision and foster financial inclusion. More recently, the IMF has been providing CD in fintech and cyber-risk. This helps improve macroeconomic and financial stability, fostering inclusive growth and international trade.

Macroeconomic Frameworks and Tools: Building government’s capacity in macroeconomic analysis, diagnostic and modeling tools, and policy formulation and implementation, with a focus on country-specific institutional contexts.

Legal Frameworks: Aligning legal and governance frameworks to international standards to support fiscal and financial reforms, fight corruption, and combat money laundering and terrorism financing.

Statistics: Helping countries compile, manage and disseminate macroeconomic and financial data. Improving these processes provides a more accurate understanding of their own economy and helps governments formulate economic policies, improves the investment climate, and fosters transparency and accountability. 

 

 

The IMF's capacity development work also helps countries tackle their developmental priorities by focusing on:

Reducing Inequality: The IMF trains policymakers to implement inclusive policies such as expenditure and subsidy reforms, progressive taxation, and financial inclusion. It also provides the analytical, operational, and monitoring tools countries need to tackle inequality.

Gender Equality:The IMF compiles gender-specific data on financial access to enable countries to better understand the impact of their economic policies on women. It is also helping boost female labor market participation, providing training on gender budgeting, publicizing best practices, and empowering female government officials through training. 

Climate Action:The IMF works with countries on environmental tax reforms, and efficient carbon and energy pricing. It also helps create robust frameworks and public financial management plans so countries can build resilience to natural disasters. It helps monitor systemic risks to financial stability from climate change shocks, supervises credit risks related to vulnerability, and assesses the resilience of financial institutions.

Capacity development is integrated with IMF surveillance and lending.

Strengthening economic institutions through CD helps increase the understanding of IMF policy advice in member countries, facilitates its implementation, keeps institutions up-to-date on global innovations and risks, and helps address crisis-related challenges and spillovers. In addition, IMF’s policy assessment and lending work help identify areas where CD activities can have the biggest impact.

Robust monitoring and evaluation systems ensure that IMF’s capacity development work has a strong focus on results.

The IMF is strengthening its results-based approach to facilitate better planning and improved monitoring of CD activities. This approach is complemented by a new evaluation framework to better measure and compare the performance of different kinds of technical assistance and training across the IMF.

Evaluations help determine, for example, the degree to which technical assistance has improved macroeconomic stability, public finance management systems, the quality of economic statistics, and financial governance. Similarly, these evaluations help determine whether training has improved job performance of government officials and enhanced their ability to analyze economic developments and assess policy effectiveness.