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Topical Trust Funds—The New Assistance Vanguard

The IMF has begun implementing a new approach to financing its technical assistance by creating a series of topical trust funds that bring together interested donors.

The idea behind the new topical trust funds is to support broader initiatives on policy topics and engage donors on a broader, longer-term, and more strategic basis.

Let me illustrate this with two examples of trust fund programs that we are currently developing. A program on Tax Policy and Administration aims at helping countries mobilize more domestic resources in support of investment toward reaching the Millennium Development Goals, while also reducing their aid dependency.

Another program on Managing Natural Resource Wealth aims to help countries by addressing the related serious governance and policy challenges in a comprehensive way to avoid the “resource curse” and instead seize the opportunity for accelerated development.

Integration with regional centers

These trust fund programs are intended to be at the vanguard of international best practice in delivering technical assistance, often supported by an agenda for applied research. Compared with the regional centers, they tackle more complex, diagnostic, and strategic issues within their field of specialization, but devolve reform implementation to the regional centers, which provide hands-on institution and capacity building. In countries and regions that are not being served by a regional center, they fill the gap and also cover implementation of reforms in their topical area.

Topical trust funds have several advantages over more traditional forms of assistance delivery. For recipient countries, they increase the project scope and resources available for capacity building, thus making the assistance more predictable in the medium term.

They promote coordination between donors and assistance providers—as called for in the 2005 Paris Declaration on Aid Effectiveness—and so avoid costly duplication. They also provide donors with a menu of topics to support, depending on their development strategies and priorities, while using the Fund’s technical expertise and existing apparatus for assistance delivery and follow-up.

For the IMF, trust funds enable collective action in areas of common interest, and leverage the Fund’s own resources in strategic priority areas. The overarching objective is to help meet the continuously rising needs of countries, particularly of low- and lower-middle-income countries seeking to build the institutions and capacity needed to implement growth-enhancing policies.

Strategic guidance

Topical trust funds build on the positive experience with the successful governance model of our other multidonor trust funds, including the regional technical assistance centers. They are guided by a steering committee comprising donor representatives and IMF staff. International and regional institutions and assistance providers in the relevant field can be invited to participate as observers.

The steering committees provide strategic guidance and contribute to the setting of policies and priorities, including review and endorsement of an annual work plan. They also provide a forum for donors to coordinate assistance, exchange information, and expand their networks.

The first topical trust fund on Anti-Money Laundering and Combating the Financing of Terrorism became operational in May 2009.

Further trust funds are planned for 2010, including the ones I already mentioned on Tax Administration and Policy and on Managing Natural Resource Wealth, which are both at an advanced stage of development. Topics of other programs that are at the earlier stages of development include fiscal management, sustainable debt strategies, financial stability statistics, and training in Africa.