Public Information Notice No. 02/73

Public Information Notice: Review of Technical Assistance Policy and Experience

July 18, 2002

On July 8, 2002, the Executive Board of the International Monetary Fund (IMF) reviewed the IMF's technical assistance (TA) activities carried out since the last review held on January 5, 2001, in particular the experience with the enhanced prioritization process put in place following the January 2001 Board meeting, as well as the experience with the two pilot programs—the Technical Consultations (TCs) and the Technical Cooperation Action Plans (TCAPs)—introduced in late 1999 to better integrate the planning and delivery of TA with program and surveillance work. In addition, the Board reviewed the IMF's evolving regional approach to the delivery of TA, its efforts to strengthen coordination with other TA providers, options to broaden the dissemination of information on TA internally and externally, and proposals to strengthen monitoring and evaluation of TA.¹

Background

The objective of IMF technical assistance, as described in the IMF's first Article of Agreement, is "to contribute to the development of the productive resources of member countries by enhancing the effectiveness of economic policy and financial management." The IMF fulfills this objective by providing support to capacity building and policy design and implementation. Through staff missions sent from headquarters, the provision of short-term experts and resident advisors, and on-the-job and more formal training at headquarters and regional training institutes, the IMF helps member countries strengthen their human and institutional capacity to formulate and implement growth-oriented and poverty-reducing macroeconomic and financial policies, and assists in the design of appropriate macro-economic and structural policy reforms. The IMF provides technical assistance in its core areas of expertise, namely: macroeconomic policy formulation and management; monetary policy; central banking; the financial system; foreign exchange markets and policy; fiscal policy, public finances, and fiscal management; and macroeconomic, external, fiscal and financial statistics.

As a result of the expansion of the IMF's membership and the adoption of market-oriented economies by a large number of countries, IMF technical assistance activities grew rapidly in the early 1990s. In addition, in recent years, the IMF has had to mount significant efforts, in coordination with the UN system and other TA providers, to provide prompt policy advice and operational assistance to countries emerging from conflict situations. A number of recent initiatives, relating to the IMF's efforts to strengthen the global financial architecture, has also generated new demands for TA to help countries adopt and adhere to international standards and codes for financial, fiscal and statistical management, including work on off-shore financial centers, anti-money laundering and, following the September 11 terrorist attacks, countering the financing of terrorism. At the same time, there is still continuing demand for TA to help Heavily Indebted Poor Countries (HIPC) undertake debt sustainability analyses and manage debt reduction programs, and to help low income countries design and implement poverty reduction and growth programs.

In light of the growing demand and competing needs for TA, effective prioritization is crucial if the IMF is to discharge its responsibilities. A set of prioritization filters and guidelines were introduced in 2000, and refined in early 2001, to enable the IMF's functional departments to more systematically align resource commitments with recipient member needs, consistent with the IMF's score area of specialization, main program areas and key policy initiatives.²

Measures have also been undertaken since 1999 to strengthen the effectiveness of IMF TA, particularly integrating TA more closely with surveillance and lending programs. To achieve this, the IMF has carried out, on a pilot basis, technical consultations (TCs) with selected governments on TA needs in connection with Article IV consultations which include a review of past TA and agreement on broad priorities for future IMF TA. For countries with substantial TA needs, the IMF has also implemented, again on a pilot basis, and with the cooperation of other bilateral and multilateral TA providers, comprehensive medium-term technical cooperation action plans (TCAPs).

Other measures undertaken to strengthen TA effectiveness include strengthening coordination and collaboration with other TA providers, especially the World Bank; improving systems for TA delivery, such as through the establishment of regional TA centers, and for the monitoring and evaluation of TA activities; and promoting the dissemination of information on TA activities more widely and openly.

Executive Board Assessment

Executive Directors welcomed the opportunity to review the application of the new technical assistance (TA) policy introduced in January 2001, and the detailed information on the delivery of TA in FY2001-FY2002. Directors reiterated the importance of TA in supporting member countries' efforts to strengthen the effectiveness of policies and institutions and thus promote macroeconomic stability and growth. Directors also stressed the importance of TA in supporting the Fund's traditional surveillance and program work, as well as its work in crisis prevention, restoring macroeconomic stability in post-crisis situations and human and institutional capacity building.

Directors welcomed the stabilization of TA delivery in FY2001-FY2002, after the decline in FY2000, and the continued increase in Fund training activities. The demand for TA related to program work and various recent initiatives has continued to expand and is expected to grow even further in connection with the work related to anti-money laundering and combating terrorism financing. In view of the considerable excess demand for TA, most Directors welcomed the efforts made since January 2001, when the Fund's TA program was last reviewed, in prioritizing TA. This has contributed to improved transparency and accountability in the planning and allocation of TA resources. However, Directors emphasized that continuous efforts are needed to improve the prioritization and effectiveness of TA. Some Directors felt that more information was required in order for the Board to make an informed judgment about the effectiveness of TA both in general and in specific countries. They noted that the views of recipient countries would be helpful in making such a judgment.

Recognizing that the new prioritization policy had only been in effect since FY2001, Directors agreed that it was too early to make hard judgments about the effectiveness of this policy, although some Directors suggested that a streamlining of the prioritization system could be considered. Most Directors were encouraged by the way in which the new prioritization process had been applied and endorsed, in particular, the increased focus on countries' implementation record of past TA recommendations. Several Directors underlined, however, the need to ensure that the considerable capacity constraints faced by many members are taken into account in the design of TA and that, in assisting such countries, adequate emphasis be given to the development of their human and institutional capacities. Directors noted in this regard that there is a need to ensure that recipient countries graduate from TA and that strong macroeconomic management skills are developed. Directors stressed the importance of country ownership, without which TA is less effective. Many Directors underscored that the allocation process first and foremost must take into account the needs of TA recipients, while a few other Directors emphasized that any prioritization of TA delivery must take into account the systemic or regional importance of and the use of Fund resources by TA recipients. Moreover, Directors stressed that the prioritization system should continue to allow for an appropriate degree of flexibility to enable departments to respond to emerging and priority needs and to ensure an appropriate balance in TA delivery amongst the membership.

Some Directors suggested that, given the continued high demand and the many new initiatives requiring TA, consideration be given to an increased allocation of resources to TA, while other Directors felt that this issue should be reviewed in the context of budget discussions taking account of evaluation findings. Directors agreed, however, that mobilization of external financing for TA activities should actively continue and encouraged management and staff to strengthen efforts to increase the leverage of Fund TA resources. In this context, Directors welcomed the Fund's increased cooperation with other TA providers, including the World Bank, and the substantial role that bilateral contributions are now playing in financing Fund-provided TA, a trend that was to be encouraged. The issue of a pricing mechanism to reduce the excess demand for TA and to increase its effectiveness was raised by several Directors. However, it was noted that in the coming months, the staff will present to management a review of the country contributions policy and come back to the Board on this issue.

Directors reviewed the experience with TCs and TCAPs. While generally acknowledging that TCs, which were introduced on a pilot basis to integrate TA better with surveillance work, have not been entirely effective, Directors agreed that there is a need to ensure that regular consultations on TA take place. They also observed that more efficient ways to conduct such consultations need to be found, including effective coordination between the TA departments, the area departments, and TA recipients themselves. Continuing efforts to enhance the effectiveness of TCs as originally envisaged also should not be ruled out. This experience needs to be reviewed at a later date. Directors noted that where TA has important macropolicy implications, or where substantial amounts of it are being provided, an assessment of its role and effectiveness should be an integral part of surveillance work. They urged staff and management to ensure that Article IV Staff Reports on such countries include a substantive coverage of the role of TA in the achievement of the individual member's macroeconomic objectives, results achieved, and follow-up actions to be taken. Directors agreed that the use of TCAPs should continue on a selective basis only as proposed by staff.

Directors noted that there continues to be a need to improve coordination and cooperation among TA providers. They, therefore, felt that the Fund should continue to play a proactive role in working with the authorities and other providers on ways to improve the effectiveness of TA delivery at the country level. This would help leverage Fund resources, reduce duplication of efforts, and avoid the provision of conflicting policy advice.

Directors supported the use of regional arrangements for TA delivery and training—which have taken on greater prominence in recent years—where such arrangements are cost effective, promote ownership, and enhance cooperation with other TA providers. Some Directors felt that more information was required in order for the Board to make a detailed judgment about the effectiveness of the regional approach. Directors also welcomed the increased collaboration with regional institutions. Given the volume of TA provided through regional centers, Directors suggested that more regular information be provided to the Board on the work of the TA centers and the results achieved.

Directors agreed that greater dissemination of information on the Fund's TA work, within the Fund and externally to the public, is important for transparency and accountability and for sharing lessons learned in key policy areas and capacity building. However, recognizing that country-specific TA reports often cover sensitive information, Directors considered it important that an appropriate balance be struck between making more information available on TA and safeguarding the confidentiality of information provided by members.

Directors noted that the availability of information on TA being provided to the Board is currently limited. For the Board to form a judgment about the effectiveness of TA, Directors considered it important that more information on the TA program and, in particular, country-specific information on TA be provided. Most Directors, therefore, welcomed the suggestion that summary reports on country-specific TA and topical issues should be provided periodically to the Board. Many Directors also agreed that recipients of Fund TA should be encouraged to make TA reports, or their executive summaries, preferably in electronic version, available to the Board. In this context, they saw merit in Board access to a central electronic repository of TA reports.

Directors considered that more information on Fund TA should be made available to the public. In this regard, Directors reiterated the critical importance of sharing relevant information with other TA providers on a reciprocal basis, as well as with donor partners supporting Fund TA, and agreed that members should be strongly encouraged to make more reports available to other providers and donors. Similarly, recognizing that increasing the dissemination of information on Fund TA is important, the majority of the Board felt that more general information on the Fund's TA program could be made available to the public, and recommended that TA recipients consent to publication of TA reports with a delay of up to one year, on a voluntary basis. Several Directors, however, did not see the benefit of introducing a general policy of publishing TA reports.

Directors welcomed progress in developing an improved financial accounting system, and encouraged further efforts in the direction of a comprehensive system that captures the full cost of TA activities. A few Directors expressed concern that development and implementation of such a system would take as long as two to three years. While recognizing that departments have improved work practices and systems for monitoring and evaluation of TA activities, most Directors stressed the need for greater standardization in approaches used by departments for planning, monitoring, and evaluation, and welcomed the initiation of work to achieve this. Directors requested additional information on the actual effectiveness and impact of TA, and endorsed the proposal to introduce a formal three-year program of evaluation. Directors reiterated their support for the planned evaluation of the TA program by the IEO, and stressed that the evaluation should be given high priority. A number of Directors suggested that an external evaluation of the TA program could be considered, if the evaluation by the IEO cannot be done soon enough. A few Directors regarded a review by an outside body as unnecessary.

Directors endorsed the proposed work program, which continued the efforts to strengthen the effectiveness of TA and its integration in the work of the Fund. Directors agreed that the Fund's TA program should be reviewed in a year's time.

Finally, Directors agreed to the publication of the staff paper, together with the PIN summarizing the Executive Board's discussion.