Funds for Capacity Development
September 28, 2016
IMF capacity development—technical assistance and training—helps member countries design and implement economic policies that foster stability and growth by strengthening their institutional capacity and skills. Six thematic funds support IMF capacity development on topics that are closely linked to the Financing for Development agenda and are delivered across all geographic regions. These funds complement other delivery modes of IMF capacity development—including through regional technical assistance centers—and are closely aligned with recipients' development strategies. In addition, two country funds provide tailored capacity development for two fragile states, which have large and distinct needs. Partners are actively engaged in the governance of these funds.
Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT)
Money laundering and the financing of terrorist activities can undermine the soundness and stability of financial institutions and systems, discourage foreign investment, and distort international capital flows. Established in 2009, this fund aims to enhance financial sector and macroeconomic stability at both the national and international levels; facilitate countries’ integration into the global financial system; and improve fiscal governance, transparency, and effectiveness. As such, it contributes to financial sector development and revenue mobilization.
Debt Management Facility II (DMF II)
Sound analysis and management of a country’s debt are critical for maintaining debt sustainability, and have broader implications for capital market development and financial stability. Launched in April 2014, DMF II is a joint IMF-World Bank fund that builds on the success of DMF’s first phase, which was established in 2008 by the World Bank. The fund is designed to help developing countries strengthen their capacity to manage public debt and build strong economies with stable financial systems. Activities under the DMF have helped more than 50 countries assess and improve the management of their debt, plan for future debt transactions, and ensure that their debt levels are sustainable.
Financial Sector Reform Strengthening Initiative (FIRST)
FIRST is a joint IMF-World Bank multi-donor grant facility that funds capacity development activities promoting financial sector development in low- and middle-income countries. Established in 2002, FIRST funds a broad range of financial sector reforms, including banking, insurance, capital markets, pensions, and crisis preparedness.
Managing Natural Resource Wealth (MNRW)
Many resource-rich countries fail to realize the full development potential of their wealth. MNRW was launched in 2011 to help countries build capacity to manage their natural resource wealth effectively. The fund also helps create a stable macroeconomic environment for exploration and exploitation of natural resources, helping to ensure that they are managed in a socially responsible way. The second phase of this fund will commence by end-2016.
Tax Administration Diagnostic Assessment Tool (TADAT)
Launched in February 2014, TADAT provides an objective and standardized performance assessment of a country’s tax administration system. It helps identify administrative strengths and weaknesses; facilitates shared views among all stakeholders (country authorities, international organizations, donors, and technical assistance providers) in setting a reform agenda; facilitates the management and coordination of external support for reforms; and provides a basis for monitoring and evaluating progress. The TADAT Secretariat reviews performance assessment reports to ensure that quality standards are met and consistency is maintained.
Revenue Mobilization (RM) (formerly Tax Policy and Administration)
An effective tax system is a core function for all countries. This fund was launched in 2011 (under the name Tax Policy and Administration) to help low-income and lower middle-income countries establish well designed and administered tax systems that generate sustainable revenue to pay for essential public services. Sound tax policy and administration also helps foster an environment where small- and medium-sized businesses can flourish. By raising the tax-to-GDP ratio and supporting sustainable economic growth, the fund aims to help countries reduce dependency on foreign aid. The second phase of this fund will commence by end-2016.
Building sound economic institutions and developing the skills to sustain them is a key priority for fragile states. The IMF has developed two country funds—one for South Sudan and one for Somalia—to help their economic and financial institutions become more effective, transparent, and accountable; and to strengthen their operating and technical capacity. The main areas covered in these funds are revenue mobilization, public financial management, monetary policy, financial sector supervision, and the establishment of statistical systems.
The South Sudan Fund was established in 2012. The Somalia Fund for Capacity Development in Macroeconomic Policies and Statistics started operations in February 2015.