Public Information Notice No. 13/72

Public Information Notice: IMF Executive Board Reviews the Fund’s Capacity Development Strategy

June 27, 2013

On June 12, 2013, the Executive Board of the International Monetary Fund (IMF) considered the staff report “The Fund’s Capacity Development Strategy—Better Policies through Stronger Institutions” (hereafter referred to as “the staff paper”).

Background

It has been long recognized that institutions play an important role in fostering macroeconomic stability and economic development. The quality of economic institutions—including ministries of finance, central banks and statistical agencies—hinges on the people running them, their approach to policymaking, and the legal and governance structures that underlie them.

The Fund helps develop capacity by offering technical assistance (TA) and training to member countries’ economic institutions and officials, focused on its core macroeconomic and financial mandates. The transfer of knowledge and of best practices in the form of capacity development (CD) services is one of the Fund’s core activities, along with surveillance and lending. The Fund delivers its own TA and training to ensure high standards.

The staff paper outlines reforms to increase the effectiveness of the Fund’s CD program.

Executive Board Assessment

Executive Directors welcomed the opportunity to discuss the Fund’s CD strategy, which builds on the 2008 and 2011 reviews of TA, and the 2008 review of training. They noted that member countries appreciated the TA and training provided by the Fund and reaffirmed the main objective of the Fund CD program, namely to help build institutions and capacity in member countries to formulate and implement sound economic and financial policies.

Directors reiterated their support for the key attributes of Fund technical assistance as defined in the 2011 TA review, and agreed that they applied as much to training as to TA. These attributes call for TA and training to be: (i) focused on the Fund’s core macroeconomic and financial mandate; (ii) integrated with other core responsibilities of the Fund; (iii) nimble in its response to changes in country needs; and (iv) effective in strengthening institutional capacity. Directors noted that training and TA share many conceptual elements, allowing integration into an overall CD strategy.

Directors emphasized that good governance of the Fund’s CD activities is important for success. Accordingly, they endorsed the proposal for an updated policy statement covering CD services and for putting CD on an equal footing with surveillance and lending activities by mandating regular and well-integrated reviews. Some Directors felt that the present paper is a useful step in a more comprehensive approach to CD planning, delivery, and evaluation.

Directors underscored that prioritization is a key element in the CD strategy. While CD activities need to be driven by country demand, Directors also considered that the allocation of scarce CD resources across regions and topics should take into account the Fund’s overall strategic priorities as elaborated in the context of the global policy agenda (GPA). Directors thus endorsed the principle of a two-level prioritization system that would reflect both individual country demands and the Fund’s overall objectives. Directors were also supportive of efforts to enhance instruments that facilitate prioritization and welcomed the plans to develop staff guidance on the preparation of regional strategy notes. Directors stressed the importance of ensuring that the authorities’ views are fully reflected in the Fund’s CD prioritization process.

Directors observed that donor funding had emerged as an important source for Fund CD financing, and that this was likely to continue. Accordingly, they agreed that donor-financed projects should be fully integrated into the Fund’s strategic planning and budget process. Directors endorsed a set of funding principles for CD covering the role of the Fund, the role of donors, and the additionality of donor funding. They noted that these principles should aim to ensure adequate funding for CD in crisis situations, allow donor funding where objectives coincide, and rely on Fund financing when donor support is not available. In this regard, they emphasized the particular importance of maintaining close and flexible coordination among the Fund, donors, and recipient countries. Directors stressed the importance of integrating the Fund’s TA and training activities with that of other international institutions, as well as collaboration with other regional and national organizations.

Directors considered that regular evaluation is a crucial component of a sound CD strategy to foster learning from past experiences and enhance accountability. They endorsed strengthening the monitoring and evaluation framework, including incorporating feedback from evaluation results into the prioritization and delivery of CD. They noted that the Fund uses a number of different evaluation instruments, and saw merit in a unified approach to evaluation that would help distill lessons, including through independent external assessments as appropriate. Directors supported the plan to continue with implementation of results-based management, with increasing emphasis on outcomes and clear objectives.

Directors supported taking advantage of advances in information and communication technology to enhance the effectiveness and reach of Fund CD. In particular, they viewed favorably the initiative to further develop online courses, with some Directors stressing the importance of finding the right balance between online and face-to-face training.

Directors observed that the Fund’s CD activities are relatively less well-known than other areas of Fund work. They considered that further efforts to promote this line of work, which was generally well appreciated by members, could be helpful. Directors reaffirmed the 2008 principles for dissemination of TA information. Some Directors underscored that Fund staff should be cognizant of sensitivities related to CD activities in some countries, while some other Directors pointed to the benefit of widely sharing knowledge across the membership and encouraged wider dissemination of information subject to the principle of voluntary publication.

It is expected that the next review of the Fund’s capacity development activities will be completed no later than June 2017.