IMF POLICY PAPER

2018 REVIEW OF THE FUND’S CAPACITY

November 2018 DEVELOPMENT STRATEGY—OVERVIEW PAPER
IMF staff regularly produces papers proposing new IMF policies, exploring options for
reform, or reviewing existing IMF policies and operations. The following documents have
been released and are included in this package:

• A Press Release summarizing the views of the Executive Board as expressed during its
November 14, 2018 consideration of the staff report.

• The Staff Report, prepared by IMF staff and completed on October 3, 2018 for the
Executive Board’s consideration on November 14, 2018.

The documents listed below have been or will be separately released.

Staff Background Studies and Short Notes

Survey of Stakeholders and Independent Interviews
External Commentary and Background Studies
Report of the External Advisory Group

The IMF’s transparency policy allows for the deletion of market-sensitive information and
premature disclosure of the authorities’ policy intentions in published staff reports and
other documents.

Electronic copies of IMF Policy Papers

are available to the public from
http://www.imf.org/external/pp/ppindex.aspx

International Monetary Fund

Washington, D.C.

© 2018 International Monetary Fund

Press Release No. 18/434 International Monetary Fund
FOR IMMEDIATE RELEASE Washington, D.C. 20431 USA
November 20, 2018

IMF Executive Board Concludes 2018 Review of the Fund’s Capacity Development Strategy

On November 14, 2018, the Executive Board of the International Monetary Fund (IMF)
concluded the 2018 Review of the IMF’s Capacity Development (CD) Strategy.

Background

The IMF undertakes a comprehensive review of its capacity development efforts every five
years. A core function of the IMF, capacity development accounts for more than 30 percent
of IMF’s budget and includes support to member countries to build the institutions and
capacity necessary to formulate and implement sound economic policies. As part of the 2013
CD Strategy, the Fund’s Executive Board endorsed recommendations to strengthen the
governance structure for CD operations and CD prioritization, clarify the funding model,
reinforce the orientation of CD delivery toward outcomes, enhance monitoring and
evaluation, strengthen integration of technical assistance and training, exploit new
technologies, and leverage CD in outreach. Updated CD Policies and Practices based on this
review were endorsed by the Executive Board on September 4, 2014.

The current review builds on previous staff and Independent Evaluation Office CD reviews,
policy reviews on related topics, and ongoing work on operational strategies relevant to CD.
It has been informed by a wide range of inputs, including broad outreach both internally and
externally, including stakeholder surveys, interviews, and public consultation, as well as
several background studies and commentaries by Fund staff, external experts, and an
External Advisory Group. The review assesses progress with the 2013 policy agenda and
proposes measures to increase the impact and efficiency of CD.

Executive Board Assessment1

Executive Directors broadly supported the main conclusions and recommendations of

the 2018 Review of the Fund’s Capacity Development (CD) Strategy. They commended the
substantial progress made in implementing the 2013 CD Strategy, and noted the widespread
appreciation for the Fund’s CD, which plays a key role in supporting member countries’
1
An explanation of any qualifiers used in summings up can be found here:
http://www.imf.org/external/np/sec/misc/qualifiers.htm.
efforts to build institutions and capacity necessary to formulate and implement sound
economic and financial policies. They emphasized that the Fund’s CD Strategy should
continue to serve the membership’s current and evolving needs, and welcomed the inclusion
of risk considerations in the strategy.

Directors supported the focus on two mutually reinforcing objectives of enhancing the impact
and efficiency of CD. They agreed that the impact of CD needs to be increased by further
strengthening integration with the Fund’s policy advice and lending operations and by
tailoring strategies to each country’s institutional capacity and specific needs, while focusing
on implementation and outcomes. Directors also underscored the need to increase the
efficiency of CD by improving processes and systems, aimed at enhancing transparency and
accountability, and strengthening the basis for strategic decision-making, including by the
Board.

Directors supported the five specific areas of recommendations that underpin the Fund’s CD
Strategy:

• Roles and responsibilities. Directors emphasized the importance of country authorities

playing a leading role throughout the CD process, with due consideration to institutional
and capacity constraints. Such a country-centered approach requires area departments to
be in the leading role on the Fund’s overall country engagement, including establishing
country strategies and priorities for CD, taking into account the country’s own strategy
and working in collaboration with CD departments. Directors encouraged staff to learn
more systematically from best practices in integrating CD and surveillance and looked
forward to exploring further how to better integrate CD and surveillance, following on
findings of this review and experience from mainstreaming best practice in the context of
the 2020 Comprehensive Surveillance Review.

• Prioritization and monitoring. Directors considered that, with CD spending projected to

stabilize, effective prioritization is critical. They welcomed the move to a medium-term
orientation of CD planning, which will help increase the flexibility of resource allocation
across departments and topics. They also agreed on the need to further strengthen overall
monitoring of activities and narrowing the list of priorities, building on better information
systems. In this regard, Directors looked forward to further steps to operationalize
Results-Based Management and the Common Evaluation Framework.

• Country-tailored delivery focused on implementation. Directors agreed that departments

will need to build on existing strategies to move toward greater modernization and agility
in CD delivery. They called for continued experimentation with innovative technologies
to support more flexible delivery of CD and encouraged cost-efficiency evaluation of the
different modalities of delivery. They also supported further work on strengthening the
operational support for Regional Capacity Development Centers (RCDCs). Directors
underlined the importance of Fund CD activities in Fragile States, with some calling for
further prioritization for these countries. More generally, Directors looked forward to the
follow-up work on the IEO report on IMF and Fragile States. A number of Directors
 supported further improvement in CD delivery in the Caucasus and Central Asia,
including through a possible RCDC in the region.

• Internal consultation and information sharing. Directors called for further efforts to
strengthen information sharing on CD activities within the Fund. They noted the Fund’s
capital investments, including in establishing the Digital Workplace, investment in
Knowledge Management, and the CD Management and Administration Program
(CDMAP), which will help address critical gaps and support the harmonization of CD
processes across departments.

• Coordination, communication, and dissemination. Directors encouraged staff to better

systematize existing good practices on coordination with other CD providers, notably
with the World Bank, and to pursue innovative approaches to raise awareness of the
Fund’s CD work. Highlighting the benefits of sharing best practices, they saw merit in
improving the presentation of recommendations in TA reports and publishing more
topical notes and TA reports while preserving confidentiality and client trust.

In light of the significant growth of the Fund’s CD activities in recent years, Directors
emphasized the need to strengthen the sustainability and fungibility of external financing
and to closely monitor and manage related risks. They asked for more comprehensive
information about the funding model, with a few Directors noting the need to discuss the
funding issue in future updates. Directors acknowledged that the review takes place in
a resource-constrained environment. While some key reforms are already in train, many
recommendations will likely need to be accommodated through reprioritization within
departments, and others will require targeting and prioritization of CD more rigorously to
focus on impact. Directors also noted the importance of strengthening HR practices and
better incentivizing the work on CD.

Directors emphasized that, in accordance with the 2014 CD policy statement, which remains
in place, the Board should provide strategic direction and oversight through (i) regular
reviews of, and policy guidance for, the Fund’s CD policies and activities; and (ii) the budget
process. While respecting the demand-driven nature of CD activities, they stressed the
importance of more information sharing to better inform their views on broad priorities for
CD and to strengthen the strategic role of the Board. In this regard, they encouraged staff to
continue the practice of informal Board briefings on CD activities and to engage the Board
on strategic direction and priority-setting on a more regular basis going forward.

It is expected that the next review of the Fund’s CD strategy will be completed no later than
November 2023.
 2018 REVIEW OF THE FUND’S CAPACITY DEVELOPMENT
October 3, 2018 STRATEGY—OVERVIEW PAPER

EXECUTIVE SUMMARY
Capacity development (CD) is one of the Fund’s three core activities and has
grown in importance in recent years. It supports member countries’ efforts to build
the institutions and capacity necessary to formulate and implement sound economic
policies, thereby complementing the Fund’s surveillance and lending mandates.
Member countries, partners, and external commentators give the Fund high marks for
the quality of its CD. At the same time, efforts need to continue to strengthen Fund CD
to serve members’ current and evolving needs.

The 2018 CD Strategy Review examines progress under the Fund’s 2013 CD
Strategy and proposes a CD strategy for the next five years.

• It notes substantial progress in addressing the 2013 recommendations, which

included strengthening the CD governance structure, enhancing the prioritization
processes, clarifying the funding model, strengthening monitoring and evaluation,
promoting greater integration of TA and training, exploiting new technologies for
delivery, and leveraging CD as outreach. However, background work for this review
also pointed to the need to strengthen the CD framework further.

• The review builds upon the existing CD strategy, focusing on two mutually
reinforcing objectives. First, the impact of Fund CD needs to be increased by
further strengthening integration with the Fund’s policy advice and lending
operations, while continuing to make progress in framing CD through
comprehensive strategies tailored to each member’s needs, capacity, and
conditions, focusing on implementation and outcomes. Stronger coordination
between CD and the Fund’s other core functions will better connect CD with
countries’ risks and vulnerabilities and ensure surveillance and lending integrate
lessons from CD more effectively. Second, the efficiency of CD needs to be
increased by improving CD processes and systems. This will enhance transparency
and strengthen the basis for strategic decision making.

Five specific areas of recommendations support the strategy. Likewise, they

mitigate institutional risks stemming from the Fund’s CD activities. They include clearer
roles and responsibilities for key internal and external stakeholders in the CD process;
continued strengthening of prioritization and monitoring; better tailoring and
modernization of CD delivery with a focus on implementation of TA recommendations;
greater internal consultation and sharing of CD information; and further progress in
external coordination, communication, and dissemination of information (Annex I).
2018 CD STRATEGY REVIEW—OVERVIEW PAPER

Approved By Prepared by the Institute for Capacity Development (ICD) in

Sharmini Coorey consultation with other departments.

CONTENTS
Acronyms ___________________________________________________________________________________________ 4

CONTRIBUTORS ___________________________________________________________________________________ 5

CONTEXT___________________________________________________________________________________________ 7

ASSESSMENT OF PROGRESS SINCE 2013_______________________________________________________ 10

A. Framework for Assessment ____________________________________________________________________ 10
B. Progress on the 2013 Agenda _________________________________________________________________ 11
C. Challenges and Opportunities _________________________________________________________________ 16

CD STRATEGY FOR THE NEXT FIVE YEARS _____________________________________________________ 18

A. Roles and Responsibilities _____________________________________________________________________ 20
B. Prioritization and Monitoring __________________________________________________________________ 22
C. Country-Tailored Delivery Focused on Implementation ________________________________________ 28
D. Internal Consultation and Sharing of CD Information __________________________________________ 33
E. Coordination, Communication, and Dissemination ____________________________________________ 34

RESOURCE IMPLICATIONS ______________________________________________________________________ 36

ISSUES FOR DISCUSSION ________________________________________________________________________ 37

BOXES
1. CD and the Executive Board _____________________________________________________________________ 13
2. Focusing on CD Results _________________________________________________________________________ 15
3. Behavioral Insights and Organizational Change _________________________________________________ 19
4. Evolving Directions in Governance and Corruption CD Work ____________________________________ 27
5. Helping Sustainable Capacity Building in Fragile States _________________________________________ 29
6. CD in Languages Other Than English ____________________________________________________________ 30
7. RCDCs: Bringing CD Closer to Countries_________________________________________________________ 32

FIGURES
1. TA and Training Evolution _________________________________________________________________________9
2. Regional Capacity Development Allocation _____________________________________________________ 10
3. The Two-Level System of Prioritization __________________________________________________________ 11
4. Snapshot of Current CD Spending, FY18 ________________________________________________________ 23
5. Delivery Against Priorities, FY15–FY18 ___________________________________________________________ 24
6. Spending on CD _________________________________________________________________________________ 25
7. Projected Growth Rate, FY18–FY21 ______________________________________________________________ 25

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 2018 CD STRATEGY REVIEW—OVERVIEW PAPER

TABLE
1. 2013 CD Strategy Recommendations and Status ________________________________________________ 12

ANNEXES
I. Recommendations of the 2018 CD Strategy Review _____________________________________________ 38
II. Select Past CD Strategic Work and Reviews _____________________________________________________ 39

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Acronyms
AFR African Department
AFRITAC Africa Regional Technical Assistance Center
AML-CFT Anti-Money Laundering and Combatting Financing of Terrorism
APD Asia and Pacific Department
ATI Africa Training Institute
CCB Committee on Capacity Building
CD Capacity Development
CDMAP Capacity Development Management and Administration Program
CDOT Capacity Development Office in Thailand (formerly TAOLAM)
CEF Common Evaluation Framework
CICDC China-IMF Capacity Development Center
COM Communications Department
CSN Country Strategy Notes
FAD Fiscal Affairs Department
FTE Full-Time Equivalent
GPA Global Policy Agenda
HQ International Monetary Fund Headquarters
HRD Human Resources Department
ICD Institute for Capacity Development
IEO Independent Evaluation Office
IMFC International Monetary and Financial Committee
KMU Knowledge Management Unit
LEG Legal Department
MCD Middle East & Central Asia Department
MCM Monetary and Capital Markets Department
METAC Middle East Regional Technical Assistance Center
OBP Office of Budget and Planning
RAP Resource Allocation Plan
RBM Results-Based Management
RCDC Regional Capacity Development Centers
RSN Regional Strategy Notes
RTAC Regional Technical Assistance Center
SARTTAC South Asia Regional Training and Technical Assistance Center
SPR Strategy, Policy, and Review Department
STA Statistics Department
TA Technical Assistance
TAOLAM Technical Assistance Office for Lao PDR and Myanmar
TIMS Travel Information Management System
WHD Western Hemisphere Department

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Contributors
This review was conducted by an interdepartmental team led by ICD, under the leadership of Charleen Gust
and Robert Powell, and the overall guidance of Michele Shannon (all ICD). This overview paper draws from
background materials, which include:
I. Staff Background Studies and Short Notes
A. Staff Background Studies
1. Integration of CD and Surveillance: led by Oana Croitoru (ICD) with Natalia Aivazova (AFR),
Joseph Crowley (STA), Fernando Delgado (WHD), Susan George (MCM), Jan Gottschalk (FAD),
Alexei Kireyev (MCD), Emmanuel Mathias (LEG), Nicolas Million (ICD), and Gabor Pula (SPR),
under the guidance of Charleen Gust (ICD).
2. CD Prioritization: led by Dilek Goncalves (MCM) with Natalia Aivazova (AFR), Anjum Israr (FAD),
Wasima Rahman-Garrett, Andrew Warner, Nathalie Carcenac (all ICD), and Antonio Hyman-
Bouchereau (LEG), under the guidance of Robert Powell (ICD).
3. CD Monitoring and Evaluation: led by Thomas Benninger (FAD) with Yasemin Bal Gunduz,
Elizabeth Cunningham, Wasima Rahman-Garrett, Andrew Warner (all ICD), and Erik Plith (LEG),
under the guidance of Brian Olden (ICD).
B. Short Notes
1. CD Delivery
• Integrating TA and Training: led by Rodrigo Cubero (ICD) with Natalia Aivazova (AFR),
Nataliya Ivanyk (STA), Niels Maehle (MCM), and Stephane Schlotterbeck (FAD).
• CD and Emerging Issues: led by Wasima Rahman-Garrett (ICD) with
Racheeda Boukezia (FAD) and Clifford Blair (LEG).
• Technology in CD Delivery: led by Jolanta Stefanska (STA) with Christiane Roehler (FAD),
Hunter Monroe (MCM), and Barrie Williams (OBP).
• Capability Assessment Program: led by Alexei Kireyev (MCD) with
Vincent Koukpaizan (FAD) and Stephen Swaray (MCM).
2. Cooperation and Communications
• Coordination with Other CD Providers: led by Teresa Curristine (FAD) with
Myrvin Anthony (MCM), Oana Croitoru (ICD), and Lisbeth Rivas (STA).
• CD Partnerships: led by Yasemin Bal Gunduz with input from Nathalie Carcenac (all ICD),
based on work by ICD’s Global Partnerships Division.
• CD Communications: led by Amit Khetarpaul (COM) with Oana Croitoru, Joanna Swirszcz,
and Irina Kouropatkina (all ICD).
• Dissemination of CD Documents: led by Stephanie Medina-Cas (STA) with
Jim Beardow (COM), Pheabe Morris (LEG), and Nicolas Million (ICD).
C. Notes from the Field
1. AFRITAC East: Hervé Joly and Eric Lautier (AFR).
2. AFRITAC South and Africa Training Institute: Effie Psalida and Gillian Nkhata (AFR).
3. CAPTAC-DR: Mario Garza (WHD).
4. METAC: Taline Koranchelian (MCD).
5. PFTAC and CARTAC: David Kloeden (APD) and Wendell Samuel and Celeste Kubasta (all WHD).
6. SARTTAC: Sukhwinder Singh (APD) and Mangal Goswami (ICD).
7. CDOT (TAOLAM): David Cowen (APD).
8. Spotlight on Myanmar and CEF: Yongzheng Yang (APD) and Brian Olden (ICD).

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Contributors (concluded)
II. Survey and Interviews
A. Survey of Stakeholders: led by Andrew Warner with Yasemin Bal Gunduz, Nathalie Carcenac,
Oana Croitoru, Asmaa ElGanainy, Sandra Henry, Yiruo Li, Shijia Luo, and Nicolas Million (all ICD).
B. Independent Interviews: Teresa Ter-Minassian (former Director, IMF) and
Benedicte Vibe Christensen (former Deputy Director, IMF).
III. External Commentary and Background Studies
A. External Commentary: Minouche Shafik (Director, London School of Economics; former Deputy
Managing Director, IMF).
B. Background Studies:
1. A Review of the IMF’s Efforts to Strengthen Individual and Institutional Capacity,
Steven Radelet (Georgetown University)
2. Is IMF Work on Capacity Development Sufficiently Demand Driven? Ajai Chopra (former
Deputy Director, IMF).
IV. External Advisory Group Report: Elizabeth Hardy (Senior Lead, Behavioural Insights, Impact and
Innovation Unit, Government of Canada); Gus O’Donnell (Chairman, Frontier Economics); Mari Pangestu
(Faculty in Economics, University of Indonesia); Lant Pritchett (Professor of the Practice of International
Development, Kennedy School of Government, Harvard University; primary drafter); and
Antoinette Sayeh (Distinguished Visiting Fellow at the Center for Global Development and former
Director, IMF).

Specific quotes from papers by external participants in this study, as well as other quotes from external
advisors and observers, are highlighted throughout this report.

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CONTEXT1
1. The long-run performance of economies depends on the quality of their institutions
and human capacity.2 Institutions are the foundation that supports sustainable economic
development. They facilitate access to economic opportunities, play a key role in the efficient
allocation of resources, and in rewarding human and capital investment, protect property rights and
the rule of law, and help build resilience to shocks and crises.

2. The Fund’s CD, one of its three core activities along with surveillance and lending,
recognizes the critical role that institutions and
human capacity play in effective economic and
financial management. The Fund’s Articles of Views from External Commentators

Agreement indicate that “If requested, the Fund may

“Policies matter, but institutions probably
decide to perform …technical services that are matter more.” M. Shafik
consistent with the purposes of the Fund” (Art. V.2(b)).
As such, Fund CD is voluntary and provided based on “Building institutions and strengthening
capacity are among the most difficult
requests. CD is made up of technical assistance (TA),
challenges in a long process of development.”
training, and related activities. It supports member S. Radelet
countries’ efforts to establish the institutions and
human capacity necessary to develop and implement “The Fund is like a fire fighter—well-
recognized for crisis response but with an
sound macroeconomic and financial policies. CD
even greater potential to contribute through
helps to mitigate risks, leverage growth opportunities, the less exciting ‘fire prevention’ work of
and narrow developmental gaps. As detailed below, institution building.” L. Pritchett
member countries, partners, and external
commentators give the Fund high marks for the
quality of its CD, but they and Fund staff recognize the need for continued efforts to strengthen the
CD framework to serve members’ current and evolving needs. In this context, several key themes
emerge from the Fund’s CD reforms in recent years, and the background work for this review:

• Institution building is complex and takes time. There is no single path to building strong
institutions. The Fund’s five decades of CD experience shows that the process takes many years,
the path to success is often unclear and context-specific, changes may be incremental and
marked by periodic setbacks, and measuring progress is difficult. Further, specific needs will vary
depending on the issue at hand and country circumstances. As such, CD requires commitment

1 This overview report was prepared by a team led by Charleen Gust and comprising Nathalie Carcenac,
Oana Croitoru, Asmaa ElGanainy, Austin Hart, Yiruo Li, Barbra Licudine, Shijia Luo, and Mercy Pinargote Alarcon (all
ICD). It is based on extensive background work by an interdepartmental team, as highlighted above.
2Foundational research on these issues can be found in D. North, Institutions, Institutional Change and Economics
Performance (Cambridge University Press), 1990. North notes that institutions are the rules of the game in a society
or, more formally, the humanly devised constraints that shape human interaction. Institutions are both formal (rules)
and informal (conventions and codes of behavior). Organizations are groups of individuals bound by some common
purpose to achieve some objective. They include political bodies, economic bodies, social bodies, and educational
bodies. In this paper, we use these two terms interchangeably to describe the level at which IMF CD operates.

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2018 CD STRATEGY REVIEW—OVERVIEW PAPER

and adaptability. A medium-term approach is needed, with flexible delivery by the Fund and
with success measured based on impact on the ground.

• Country ownership is key. It strengthens the

prospects for durable learning and sustainable
“Country ownership and commitment are
and efficient policies, institutions, and resource
crucial because without it, TA is unlikely to
allocation. Effective CD means letting countries deliver results and resources will be wasted.”
lead, including in defining their own strategies J. Chopra
and priorities. It means setting realistic objectives.
“A more agile framework is needed to target
It also means recognizing that supporting change
CD to country needs, distinguishing cases
requires an understanding of each country’s focused on policy formulation or modular
starting point and unique institutional capacity to tasks from those requiring implementation of
pursue such a path. Recent research suggests complex operations, which demand more
tailored approaches.” L. Pritchett
that legitimacy and support for reforms—
particularly those involving complex “The Fund can do more to help members
implementation—are best rooted where such address the key impediments to successful
capacity is built by the country itself as part of a implementation of CD advice.” M. Pangestu

progressive process of learning, iterating, and

adapting.3 Close and continuous engagement
between the Fund and its members at both policy and technical levels supports CD that is
tailored to each member’s needs, capacity, and conditions.

• The world is changing rapidly. There have been unprecedented gains in living standards and
reductions in poverty worldwide in the last quarter century, but progress remains uneven, with
vast numbers left behind. Members are confronted with risks from low productivity and
potential growth, unfavorable demographic trends, rising inequality and uncertainty about the
future of work, elevated vulnerabilities related to debt build-up, external imbalances, stretched
asset valuations, and tightening global financial conditions, testing consensus for multilateral
solutions. The ongoing technological revolution, powered by sustained advances in information
and communications technology and the use of artificial intelligence, is challenging economies,
markets, institutions, and individuals to learn, adapt, and evolve. Questions related to global
public goods are becoming increasingly urgent in an interconnected world. The opportunities
and risks defining the future for the Fund’s members and the global economy will need to
inform the institution’s policy advice and its CD work.

• The Fund must continue to adapt and update its approach to engaging with countries,
including on CD. The Fund has increasingly recognized that to serve its members well, CD
cannot be a secondary or isolated activity. Where capacity is weak, the effectiveness and traction
of policy advice and financial support require a focus on institutional and human capacity
building, bringing together the diagnostic information the Fund already has, or leveraging the

3 The Building State Capability Program at Harvard’s Center for International Development reflects a “Problem Driven
Iterative Adaptation” (PDIA) approach, as outlined in work by Matt Andrews, Lant Pritchett, and Michael Woolcock.

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 2018 CD STRATEGY REVIEW—OVERVIEW PAPER

knowledge of other institutions on topics where the Fund may not have expertise (e.g., civil
service reform), to inform the high-level discussion. CD also supports more effective surveillance
and lending by providing insights into deficiencies, risks, and vulnerabilities in countries’ policy
frameworks. Synergies among the Fund’s three core functions which have already helped to
position the Fund as a global leader on CD in its areas of expertise, can be further leveraged to
serve its members better. Indeed, members view the Fund as one institution—not as siloed
functions or departments—and the Fund is uniquely positioned to support its members with its
global reach and mandate. Its wealth of specialized expertise can be better leveraged to
strengthen the relevance, efficiency, and traction of policy advice. Likewise, regular engagement
with high-level policymakers can strengthen targeting, visibility, and effectiveness of CD. The
Fund is also well-positioned to support knowledge sharing, peer learning, and coordination
among CD providers.

3. CD has grown to be a sizable pillar of the Fund’s work. CD work has grown rapidly in the
past decade (Figure 1). It now accounts
Figure 1. TA and Training Evolution
for about a third of Fund spending and (Index 1964=100) (Index 1964=100)
18 percent of staffing—roughly 725 full-
30,100 14,100
time equivalents (FTEs). This growth has
better positioned the Fund to respond to 25,100
12,100

members’ needs. But the pace of growth 10,100

Number of participants

TA Field Delivery (rhs)

20,100
has also brought challenges, including

Person-years
8,100

the need for a more robust internal 15,100

6,100
infrastructure to support ongoing 10,100
4,100
improvements in CD to ensure it is
5,100
flexible, targeted to country needs in Institute Training
Program (lhs)
2,100

areas of Fund expertise, well-coordinated, 100 100

FY64 FY73 FY82 FY91 FY00 FY09 FY18
efficient, and effective. It also puts a Sources: 2013 CD Strategy Paper; Participant and Applicant Tracking System; Travel Information
Management System (TIMS); and Fund staff calculations.
premium on the identification and Note: Based on number of training participants and TA delivery (not including HQ-based support due
to limitations on historic data series).
mitigation of risks in CD operations.

4. Fund CD is valued by members. CD is provided based on country requests and anchored

in the Fund’s “trusted advisor” role. Demand is strong, and nearly all member countries have
benefited from Fund CD since 2013. The network of regional CD centers (RCDCs)—a total of 16—as
well as related programs, are supported by a community of partners and host countries (Figure 2).

5. This review sets out a vision for country-centered CD that is well-integrated with the
Fund’s policy advice and highly effective. Realizing this vision will require building on the strong
progress towards a comprehensive country-tailored approach, with a focus on institutional and
human capacity building to support sustainable economic development and stability. It means
further modernizing CD delivery to be more flexible, with a focus on supporting countries in
implementing technical advice. It also means working closely with member countries and other
partners to extend the Fund’s role as a knowledge hub and convener in its areas of expertise for
technical practitioners as well as policy makers. Just as institutional change is difficult for member

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2018 CD STRATEGY REVIEW—OVERVIEW PAPER

countries, realizing this vision will require continued concerted efforts to adapt the machinery of
Fund CD operations, as well as the culture and incentives that will drive real change. The paper does
not seek to address the scale of CD relative to other Fund activities, which is better addressed in
discussions covering all activities at an institution-wide level. Governance of external funding for CD
is addressed, with the scale of such financing decided as part of the medium-term budget.

Figure 2. Regional Capacity Development Allocation

(FY2018, US$ millions)

Europe

9%

Asia &
11%
Middle E. the Pacific
18%
C. Asia
Sub-
Saharan
13% Africa
Topics
Fiscal TA
Western
Legal TA
Hemisphere 31% 18%
Monetary & Financial TA
Statistics TA
Other TA Multi-regional
Training
Regional Capacity Development Center
Sources: Office of Budget and Planning (OBP), Analytic Costing and Estimation System; and Fund staff calculations.
Note: Multi-regional includes spending on CD governance and fund-raising activities as well as CD provided to the staff of regional economic institutions and
country groups.

6. The report is organized as follows: it starts with an assessment of progress on

recommendations stemming from the CD strategy adopted in 2013. It then describes challenges
and opportunities, drawing from surveys, interviews, and background work. Next, it recommends
steps to increase the impact and efficiency of CD—focusing on how the Fund operates. Potential
resource implications are described in the following section. The last section lays out proposed
issues for discussion. Risk considerations are woven into the discussion throughout the paper.

ASSESSMENT OF PROGRESS SINCE 2013

A. Framework for Assessment

7. A comprehensive assessment framework has been employed for this review that:

• Builds on previous staff and Independent Evaluation Office (IEO) CD reviews, policy reviews on
related topics, and ongoing work on operational strategies relevant to CD (Annex II).

• Benefits from strong interdepartmental inputs and review by CD, area, and support departments.

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• Is informed by a wide range of inputs, including broad outreach (e.g., stakeholder surveys,
interviews, and public consultation) both internally and externally, as well as background studies
and commentaries by Fund staff, external experts, and an External Advisory Group.

B. Progress on the 2013 Agenda

8. Substantial progress has been made in advancing the agenda set out in the 2013 CD
review (Table 1). This agenda focused on enhancing the effectiveness of the Fund’s CD
(strengthening the governance structure, strengthening prioritization, clarifying the funding model,
reinforcing an orientation toward outcomes, and enhancing monitoring and evaluation) and on
enhancing CD delivery and outreach (greater TA-training integration, exploiting new technologies,
and leveraging CD in outreach):

• As highlighted in the 2014 Statement on IMF Policies and Practices on CD, CD governance has
been strengthened under the management-led Committee on Capacity Building (CCB).
Recently-introduced reforms seek to reinforce a more strategic medium-term orientation in CD
planning and to allow greater flexibility in resource allocation. At the same time, strategic
engagement with the Fund’s Executive Board on CD issues is being stepped up (Box 1).

• As detailed in the background study

Figure 3. The Two-Level System of Prioritization
on this topic, prioritization of CD
activities has been strengthened
under a reinforced
interdepartmental resource
allocation process. Reforms since
2013 recognize the importance of
taking into consideration both
country needs and the Fund’s own
priorities (Figure 3). The reforms also
set out a greater area department
role. Specifically, area departments now prepare regional strategies in consultation with CD
departments as a starting point for the prioritization process. This process also seeks to ensure
strong integration between the Fund’s three core functions. Under the 2017 reforms, these
regional strategies are to be complemented by country-level strategy notes (CSNs) for heavy CD
users, including fragile states. The inclusion of training in this process beginning this year will
help exploit further synergies between TA and training. To encourage coordination throughout
the CD process, explicit area department agreement is required on the timing and scope of all
CD missions.

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Table 1. 2013 CD Strategy Recommendations and Status

Recommendations Actions
Enhance the Effectiveness of CD
Update the governance structure
• Prepare a new policy statement for Board approval • CD Policy statement issued August 2014
• Draft new terms of reference for the CCB • Completed July 2013; regular meetings
since November 2013. Also, established a
regular dialogue on CD at heads of
departments level starting in 2017
Enhance prioritization
• Integrate CD into Fund's strategic planning process • Greater attention to CD in Fund strategic
documents (GPA; budget; work program;
policy reviews). Medium-term CD priorities
discussed annually by CCB based on
country needs and broader Fund priorities
• Develop guidance for Regional Strategy Notes (RSNs) • RSN staff-level guidance issued in 2014

• Pilot & assess Capability Assessment Program (CAP) • CAP piloted for Tunisia and Libya. Staff
review completed in 2015
Clarify the funding model
• Establish approval process for new donor initiatives • Staff-level guidance issued in May 2014
• Take up CD-related issues in Human Resources (HR) • CD issues reflected in October 2014 review
Department-led paper on categories of employment on these issues. Further consideration
expected in upcoming HR Strategy Review
Strengthen monitoring and evaluation
• Pursue work on RBM to enhance planning and • RBM in use for all new projects since FY18;
managing of outcomes catalog (indicators and outcomes) in place
• Develop guidance for a common evaluation standard, • Framework in place; guidance to be issued
based on principles for performance indicators,
methodology, and dissemination
Seize Opportunities for CD Delivery and Outreach
Greater integration of TA and training
• Seek further opportunity to coordinate TA and • Included training in the RSNs and
training, including through enhanced Resource Allocation Plan (RAP) starting
interdepartmental dialogue in 2017
• Offer internal training that complements external • Internal Economics Training curriculum
training and TA so staff can support CD absorption restructured in line with restructured
external curriculum. Customized
training provided to desks of countries
receiving external training
• Monitor Africa Training Institute (ATI) experience • Delivered substantial joint ATI-AFRITAC
with integrating TA and training training. SARTTAC opened in 2017
Exploit new technologies for delivery
• Use advances in technology to enhance the • Online learning launched in late 2013
effectiveness and expand the delivery of CD
• Experiment with webinars to aid high-level peer-to- • Several webinars with chief economists
peer exchanges and spread Fund institutional in Western Hemisphere region in 2014–
knowledge 2015
Leverage CD as outreach
• Monitor impact of CD-related outreach • Created CD platforms on imf.org; active
social media use; greater RCDC role
• Enhance communication among departments of • CD communications group created;
CD-related outreach activities Fund-wide CD story competition and
Postcard series launched
• Track progress on dissemination to various • Initiated major reforms to strengthen
stakeholders of CD findings and evaluations information available to staff; mixed
progress on increasing information to
external stakeholders

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Box 1. CD and the Executive Board

The Executive Board provides strategic direction and oversight for CD through the strategic planning and
budget processes, as well as regular reviews and policy guidance. Management translates the Board’s
strategic directions into procedures and practices that govern CD and conducts the Fund’s CD operations
(Background Study: Monitoring and Evaluation, Annex 1). The importance of the Board’s role is clear given
the rapid growth of CD over the past decade.
 CD and the Fund’s Strategic Planning Framework: As set out in the 2014 CD policy statement, the
Board provides guidance on CD activities through the Board work programs and discussion of
Management’s Key Goals, which together with International Monetary and Financial Committee (IMFC)
communiqués are key inputs to establish CD priorities that are focused, oriented to the medium term,
and integrated with broader Fund activities. More recently, the Global Policy Agenda (GPA) has also
been a key input. Recognizing their increasing importance, recent strategy documents have begun to
expand coverage of CD issues as part of an integrated strategy.
 The Medium-term Budget discussed by the Board each spring covers CD as one of the Fund’s core
activities and includes information on CD priorities. The Board provides guidance on planning, sets out
an overall envelope for Fund spending and external financing, and considers the size of CD relative to
other key outputs of the Fund. The annual budget outturn paper has also recently been expanded to
include information on CD delivery, overall and against various metrics, including priorities.
 External Funding and Nonmember CD Recipients: The Board approves international organization
and nonmember eligibility for CD and approves the establishment of new external financing accounts.
 CD and Fund Policy: Recent policy papers on core topics (e.g., data, fragile states, and governance)
have increasingly recognized the need to consider CD as an integral aspect of the Fund’s role.
 CD-Specific Reviews and Updates: The five-yearly review cycle provides the opportunity to consider
the fundamental framework for the Fund’s CD activities. Periodic reviews on specific CD-related topics
(e.g., updates to policies and procedures) complement this more comprehensive review as have more
recent informal Board briefings. Such briefings, which are expected to continue, provide a key
opportunity for staff to engage with the Board at a departmental or topical level. A key example is the
briefing series from November 2017 through July 2018, highlighting CD activities across topics and
regions by each CD department. Future updates and strategic reviews are also expected to incorporate
high-level results based on Results-Based Management (RBM) and related evaluations.

 CD funding model. In 2008, the Board endorsed stepping-up mobilization of outside resources
for TA and external training. Today, the Fund’s CD
activities benefit from significant support from
members. The share of external financing in “For developing countries to achieve

direct CD spending reached 55 percent in FY18, sustainable development, they need to

with the largest five contributors now accounting enhance capacity to address risks that are

for about half of the total. To mitigate risks difficult to be self-managed. The IMF plays an

stemming from increased reliance on external important role in building capacity and

funding and its concentration, a funding model supporting vulnerable low-income countries.”

was codified in the 2014 CD policy statement, and T. Aso, Deputy Prime Minister of Japan and

an interdepartmental review process for new Governor of the IMF for Japan

externally funded initiatives was established to

ensure alignment of donor-funded initiatives with

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the Fund’s CD priorities and medium-term budget (Short Note: CD Partnerships). The approach
has focused on risk mitigating measures, while promoting strategic partnerships and the
efficient use of resources by:

o Diversifying the donor base (with a focus on expanding and deepening CD partnerships with
bilateral donors, multilateral institutions, and private entities);
o Seeking greater funding certainty, consolidation, flexibility, and closer integration across
funding vehicles, including by promoting multi-partner and umbrella agreements that
enable the Fund to allocate funding across a range of CD activities;
o Standardizing and simplifying CD procedures to improve efficiency and transparency in CD
management, fundraising, and delivery; and
o Strengthening external engagement and communications to enhance CD visibility.

• Monitoring and evaluation. As detailed in the background study on CD monitoring and

evaluation, efforts have focused on two related initiatives:

o A unified RBM framework is now being rolled out on a Fund-wide basis. Since May 2017,
information is being gathered and monitored for all new CD projects (Box 2).

o A Common Evaluation Framework (CEF) was introduced in 2016 for CD evaluations, with a
view to strengthen the focus on results. The CEF targets development of a
medium-term evaluation planning cycle to support both internal strategic review and donor
accountability needs and to ensure that evaluations link more clearly to prioritization.

• Other areas:

o TA and training integration has been expanded, under both headquarters- and RCDC-
managed CD activities, supporting tailored delivery and fostering peer learning, (Short
Notes: Integrating TA and Training, and Notes from the Field).

o On technology, the pioneering online training program launched in late 2013 is helping to
share the Fund’s knowledge with the wider public, complement face-to-face training, and
improve absorption of TA. More broadly, technology is facilitating more frequent
communication and helping to address constraints to delivery. For example, use of
videoconferences and email allowed FAD to continue to provide fiscal TA to Liberia during
the Ebola crisis. (Short Notes: Technology in CD Delivery).

o On outreach, efforts have centered on developing CD-focused platforms (e.g., a CD landing

page on the Fund’s external website and CD social media accounts) and on supporting
partnerships (Short Notes: CD Communications).

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Box 2. Focusing on CD Results

While the Fund has a tradition of CD monitoring and evaluation, it also has recognized the need for a
more systemic monitoring and evaluation framework,
particularly given the rapid growth of CD activities.
• As highlighted in the background study on monitoring
and evaluation for this report, departmental reviews and
formal evaluations inform CD activities. The Fund also
publishes country examples that illustrate how CD
facilitates institution building in key areas.
• The Fund has recognized the importance of a greater
results focus in line with international best practice.
Results-based monitoring has been piloted since the
mid-2000s at a project level for some externally funded
programs, including selected regional technical
assistance centers (RTACs) and Fiscal Affairs
Department’s (FAD) Tax Policy and Administration
and the Managing Natural Resource Wealth Topical
Trust Funds.
A standardized RBM framework, endorsed by the Board in 2013, has been required for all CD operations
since May 2017—whether Fund or externally financed. Under this framework, all CD projects are organized
along “results chains,” or log frames, which set out expected causal relationships between the resources
committed to a project and the expected results as the basis for monitoring and evaluation. The goal is also
for RBM to support common understandings—for member countries and Fund staff across departments—of
key objectives, and to allow regular assessments of progress and mid-course corrections where relevant.
RBM is a work in progress. The process is already having a strong impact on CD planning—helping staff
who deliver CD consider more fully the objectives of their activities and support more robust monitoring,
and providing early warning where adaptation is needed. It will take time to build a database of high quality
information with a sufficient time series for reporting and analysis. Current work is focused on ensuring
consistent adoption across headquarters and field offices, quality testing, and strengthening business
processes and tools. Ensuring RBM is used appropriately is also key. As highlighted in Box 5 in the
background study on monitoring and evaluation, effective application of the framework is difficult, not least
given challenges in defining concrete outcomes and indicators; in attributing and aggregating results,
especially given their long-term nature; and in measurement. These considerations, and lessons from other
organizations implementing RBM, will need to continue to inform implementation.

o On dissemination of CD information, work is underway to strengthen the Fund’s

fragmented TA document and information management system, as described more fully
below, with the promise of better information sharing within the Fund. The recent launch of
Partners Connect and broader efforts to provide timely information to donors will help
strengthen donor relations and support better coordination of activities. Publication of CD-
related information has expanded in selected areas, e.g., topical “How-to” Notes, promoted
by FAD; “Technical Notes and Manuals,” produced by several departments, including the
Monetary and Capital Markets Department (MCM); and “Tax Law Notes,” produced by the
Legal Department (LEG), but publication of TA reports remains limited (Short Notes:
Dissemination of CD Documents).

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C. Challenges and Opportunities

9. Surveys and interviews with key stakeholders point to important strengths in the
Fund’s CD, but also highlight areas for improvement (Background Paper: Survey of Stakeholders
and Independent Interviews). In particular:

• Wide appreciation for the quality and usefulness of Fund CD. Outreach to external
stakeholders reaffirmed appreciation for the technical quality of CD advice. Interviews with
selected recipients and external partners as well as survey data … of CD recipients
strongly agreed or
show that the Fund’s global experience with economic and tended to agree that
financial sector reforms is considered useful to policy makers. 77% CD contributed
effectively to
In a recent study by AID Data, respondents saw the Fund as implementation of
leading among development partners on key parameters of policy advice

influence and helpfulness. Recipients responding to the stakeholder survey also generally
indicated that CD contributed effectively to implementation of policy advice. Similar results are
also seen in many evaluations of the IMF’s CD activities.

• Need for greater consideration of countries’ institutional capabilities. Most CD recipients

indicated in the survey that … of CD recipients … of CD recipients
indicated that greater indicated that
greater than half of TA
72% than half of TA
41%
insufficient resources
recommendations were recommendations hamper CD advice
were adopted implementation
adopted, including 42 percent
where three-quarters of recommendations were adopted and 15 percent where all were
adopted. However, they also pointed to important constraints to implementation, in particular,
inadequate resources and staff with insufficient training in implementing institutions, further
reinforcing the need for careful consideration of institutional capabilities. Stakeholder interviews
and external participants in this review reinforced the importance of continuing to increase the
focus on institutional capabilities in designing and implementing CD projects and when tailoring
policy advice.

• Need for ownership and commitment of authorities. The survey, interviews of external
partners, recent CD evaluations, and the external studies all underscored that in prioritizing CD
requests, substantial weight should continue to be placed on the degree of ownership by
countries. Interviews with external partners encouraged the Fund to continue to strengthen
involvement of country authorities in designing and monitoring implementation.

• Mixed views on coordination with other providers. Satisfaction with coordination with other
TA providers showed room for improvement across all categories of survey respondents (a view
echoed in interviews and by … of CD recipients … of CD external
strongly agreed or partners strongly
External Advisory Group
tended to agree that agreed or tended to
members), although CD 69% CD is well- 48% agree that CD is well-
coordinated with coordinated with
recipients were less negative
other TA providers other TA providers
than staff and partners.

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• Interest in more information on CD activities. Interviews with external partners underscored

interest in more information on CD activities, including through publication of TA reports.

• Need to continue to shift focus to results on the ground rather than the Fund’s own
outputs. This point has been emphasized in recent external evaluations of CD delivery, which
recommended more focus on the achievement of outcomes (e.g., increase in tax revenue) rather
than outputs (e.g., drafting of frameworks or regulations). This ongoing shift will help transform
the mindset of all stakeholders and reframe the foundations for CD activities and interactions to
focus on what matters most for the country itself.

10. Background work has also underscored challenges. In particular:

• Uneven practices of integrating CD and surveillance. As highlighted in the 2018 Interim

Surveillance Review, “…little progress has been made in leveraging knowledge from cross-
country experiences in Article IV policy advice and in integrating technical assistance with
bilateral surveillance, and this area would benefit from a course-correction.” The background
study on this topic recognizes considerable progress through the participatory RAP process and
enhanced interdepartmental dialogue. At the same time, Annex II in that study highlights
emerging good practice by both area and CD departments. These include CSNs, which are
drafted by area departments through a structured dialogue with CD departments and
engagement with the authorities. Recent reforms call for area departments to develop CSNs for
all heavy CD users. A multi-year fragile states initiative begun in 2015 has also supported
improved integration in selected countries, with a focus on institution building and country
ownership. Another example is the mainstreaming of international tax advice through inclusion
in several Article IVs each year. Despite this progress, the degree of interaction internally and
with country authorities on CD issues still depends too much on the interest of individual
mission chiefs and the availability of expert resources in a resource-constrained environment. As
such, more work is needed to embed good practices more systematically. In this context, efforts
underway to strengthen CD knowledge networks—both within the Fund and with external
stakeholders—will be critical.

• Weak information sharing systems and fragmented processes. CD processes and systems
would benefit from further integration across the Fund. They have not kept pace with the
expansion of CD activities and increased complexity associated with the expansion of regional
centers and greater use of external funding. For staff, accessing TA documents and using CD
information remains difficult, complicating internal coordination and integration, leading to
sizable inefficiency and limiting strategic analysis of CD activities.

• Human resource issues. Past reviews have highlighted challenges related to career
development and mobility for CD-providing staff. More broadly, the Fund has recognized the
need to ensure that the work of staff on CD issues and on countries with significant institutional
constraints is valued on an equal footing with those contributing to other core activities of the
Fund. These critical issues will be taken up in the upcoming HR Strategy, along with related

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issues, such as support for movement between IMF headquarters (HQ) and field assignments
and mobilizing staff with the appropriate skills and experience for CD work.

CD STRATEGY FOR THE NEXT FIVE YEARS

11. Against this backdrop, two key objectives should guide the CD strategy in the coming
period:

• Increasing the impact of Fund CD by continuing to strengthen integration between CD,

surveillance and lending and continuing to move to a comprehensive country-tailored approach
that adapts delivery to support implementation more consistently. Leveraging synergies
between CD, surveillance, and lending, and strengthening delivery will increase the quality and
impact of CD by better connecting it to countries’ risks and vulnerabilities and tailoring it to
specific institutional and organizational needs and reform priorities, taking account of local
conditions and capabilities.

• Increasing the efficiency of Fund CD by improving CD processes and systems, including

through the CD Management and Administration Program (CDMAP), described below. This will
facilitate more timely access to CD information, better management and targeting of CD
resources, more effective coordination between CD and surveillance/program work, and more
informed strategic decision-making and governance.

These objectives are mutually reinforcing. Increased synergies across the Fund’s key activities will
result in greater impact and efficiency, while improved CD processes and systems will support more
effective coordination across functions, increase internal efficiency, and enhance impact.

12. Five specific areas of recommendations support these objectives: clearer roles and
responsibilities of internal and external stakeholders in the CD process; continued strengthening
of prioritization and monitoring; increased tailoring and modernization of CD delivery; better
internal consultation and sharing of CD information;
and continued work on external coordination,
communication, and dissemination. These “A culture shift, with appropriate incentives

recommendations recognize the need to mitigate for mission chiefs and country teams to fully

risks through alignment in prioritization of CD with integrate CD-related work into their country

other activities and robust oversight, including in work is paramount.” J. Chopra

the context of the recent increase in external funding

“The Fund needs to make it easier for
for CD. Some recommendations that follow
everyone involved in CD to follow through
represent relatively modest shifts, building on the
with the behaviors that will lead to
substantial headway made over the last few years.
improved performance and greater
Others suggest more significant changes in how the
efficiency.” E. Hardy
Fund looks at its CD operations—learning from
innovation and best practice and mainstreaming
those ways of doing business.

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13. Implementing these measures systematically requires consideration of how the Fund’s
institutional culture and incentives drive change. The behavioral insights field highlights the
benefits of strong leadership to support change, but also the power of small changes to improve
organizational performance (Box 3). In any organization undergoing change, fundamental reforms
depend on both grassroots efforts and leadership at all levels. In the Fund context, showcasing
examples of effective integration will continue to encourage more teams to do so; providing more
visibility on CD results is helping to build buy-in and accountability; and continuing to move towards
greater openness on CD information will further reduce the roadblocks to effective coordination.

Box 3. Behavioral Insights and Organizational Change1

Behavioral insights (BI) is a growing field that incorporates research from behavioral economics, psychology,
neuroscience, and other social sciences into decision-making models to more accurately describe and alter
observable behaviors. This focus recognizes the need to consider the human that lies at the center of all
organizations, and that will ultimately determine the success of any reform effort. Governments,
organizations around the world, and the Fund itself, are building behavioral insight capacity into their
operations to improve organizational performance. It recognizes that small, inexpensive changes encourage
positive behavior, e.g., sharing of information and clarifying roles and responsibilities. The brief list of
principles below will continue to be applied to support the CD strategy, including to implement this review’s
recommendations:

• Social norms. Behavior is influenced by perception of what others do and believe. To encourage positive
behavior, letting people know the desired behavior is commonplace has been proven to be effective.
For instance, showcasing examples of CD-surveillance integration may encourage more teams to do so.

• Transparency. Seeing the effect of one’s own work on the public good and understanding the impact of
the work can be a motivating force. Providing more visibility on CD results could help with this.

• Messenger. People are more likely to alter their behavior in response to a messenger they respect, e.g.,
from the Executive Board, IMFC, the Fund’s senior managers, and the membership itself.

• Commitment. Voluntarily using commitment devices such as agreement on RBM results chains by both
country authorities and Fund staff could help with country ownership.

• Status quo and inertia. This bias refers to people’s tendency to continue as they always have unless
presented with a strong incentive to change. Strengthening incentives for change and reducing the
effort or “hassle cost” required, for example with respect to ease of accessing CD information, can
stimulate positive behaviors.

• Open by default. Many organizations have adopted an “open by default” policy when it comes to
information. It may be important to create a culture where it would be required to make a case for not
sharing documents or data which could help reduce the costs of accessing CD information.
Regardless of the insight or principle, it is critical that the intervention or the proposed solution is rigorously
tested—properly executed experiments will yield evidence for broader implementation.
_______________________________________
1
For more background, see Behavioural Insights and Public Policy: Lessons from Around the World (OECD), World
Development Report 2015: Mind, Society, and Behavior (World Bank), and Public Service Transformed: Harnessing the
Power of Behavioural Insights (Mowat Centre).

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A. Roles and Responsibilities

14. Further clarifying roles and responsibilities among key stakeholders will facilitate more
effective CD engagement. Externally, work is underway to reinforce country engagement and
ownership and to strengthen partnerships. Internally, there is a need to guide staff with respect to
the roles they are expected to play in supporting consistent prioritized engagement with country
authorities across the various functions of the Fund.

15. Country authorities must play a leading role throughout the CD process. As noted
above, CD is most effective when fully owned and led by local reformers. Engagement with country
authorities needs to take place throughout the CD process, with ongoing effort required to
consistently apply best practice:

• In scoping and prioritizing CD needs, the Fund should do more to encourage and support
countries’ efforts to develop their own CD
strategies and coordinate them within their own
“Ownership by the authorities is a necessary
organizations and with development partners, as
condition for the traction and impact of CD but
well as broader domestic stakeholders, it is not sufficient. Absorption capacity is also
recognizing this will be difficult in countries with required.” J. Chopra
capacity constraints. Regular discussions of the
“The Fund (and other partners) should
CD agenda during surveillance missions and
encourage leaders…to develop a concise and
more active consultation with the authorities targeted CD strategy.” S. Radelet
(including through RCDC staff and resident
representatives where relevant) in the
preparation of RSNs and CSNs should become routine.

• On tailoring individual projects, under ongoing reforms the Fund’s CD will continue to move to a
medium-term programmatic approach, involving multiple interventions and delivery modalities,
as discussed more fully below. Experience has shown that such projects are most successful
when designed with detailed input from the authorities, including regarding their needs and
preferences in terms of focus (e.g., technical advice vs. implementation assistance), presentation
(e.g., detailed TA reports vs. presentations), and delivery modalities (e.g., combining TA and
training). They need to be considered as part of a broader strategy, coordinated with
interventions by other CD providers, and recognizing the country’s absorptive capacity.

• On monitoring, there should be regular discussion and concurrence on project objectives and
milestones under the RBM framework. The authorities should be fully engaged in monitoring,
allowing for midcourse corrections and adaptations of strategies where necessary (see below).

16. The core of integration is ensuring that when institutional and capacity weaknesses
constrain the adoption of recommended policies, these constraints are also covered in
surveillance. It means working with the authorities and CD departments to target CD to these areas
and follow up on implementation so that risks and vulnerabilities identified in surveillance are

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addressed over time and country-specific circumstances and constraints are taken into account.
Well-integrated CD and surveillance will take
different forms depending on the nature of the
country’s policy issues, its institutional capabilities,
“Effectively serving members with significant
and its engagement with the Fund. institutional capacity constraints means
putting these issues squarely at the center of
17. Such a country-centered approach that is the high-level dialogue.” G. O’Donnell
well integrated across the Fund’s core functions—
“Delivering more TA may not be the right
surveillance, lending, and CD—requires area
answer, particularly in fragile states. Rather the
departments to be in the leading role on overall type of TA, its timing, relevance, and context, is
country engagement, including establishing important and that’s where surveillance can
country strategies and priorities for CD, working help” A. Sayeh

in collaboration with CD departments. CD

departments must continue to be responsible for the
technical content of CD and have a leadership role in further building the Fund’s role as a
knowledge hub. Country teams, including resident representatives, are uniquely positioned to have
an overview across all sectors, engage with authorities, and draw together work by various CD
departments and experts, at a strategic level. Working closely with CD departments, mission chiefs
should draw on the authorities’ strategic priorities and, on this basis, formulate strategies and
priorities for Fund CD activities that complement broader country engagement. RCDCs also have an
important role in supporting these efforts, benefiting from their close proximity to members. These
strategies, set out as CSNs for heavy CD users, should inform and draw on regional CD strategies in
an iterative fashion. Clarification of cases where a CSN is required, e.g., through a common metric, is
needed. Leadership by the country mission chief (a title that bears reconsideration as it increasingly
misrepresents the breadth of their responsibilities) will facilitate closer internal dialogue, greater
use of CD to support priorities identified by surveillance, greater incorporation of CD findings in
surveillance advice, and enhanced monitoring of implementation of policy-relevant CD
recommendations.

18. A more systematic approach, drawing on good practice, would help integrate CD and
surveillance consistently. A focus on CD and surveillance does not discount the need to integrate
CD with lending. Rather, it recognizes the particular challenge of integration in non-program cases.

• As noted above, departments have undertaken several initiatives to strengthen integration,

including improved coordination around CD and surveillance missions and linkages in related
documents. However, these practices are not consistently applied, and greater clarity is needed
on roles across departments. Resource implications of strengthening integration for both area
and CD departments will need to be carefully assessed and managed.

• A consistent playbook would facilitate systematic year-round interaction among departments,

RCDCs, resident representatives, and authorities, with countries at the center. Experimentation
and knowledge sharing will be needed to enhance understanding of obstacles to integration,
again mindful of resource implications for all departments. Central to these efforts are ongoing

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capital initiatives that will strengthen information sharing, described below. The
2020 Comprehensive Surveillance Review is expected to explore further how to better integrate
CD and surveillance, following on the findings of this review and experience from mainstreaming
best practices.

Recommendations:

• Deepen strategic engagement with country authorities throughout the CD process.

• Area Departments to be in the leading role on overall country engagement, including
through CSNs required for all heavy CD users (defined by a common metric).
• Strengthen efforts to expand and learn more systematically from best practices in integrating
CD and surveillance.
• Explore further how to better integrate CD and surveillance in the context of the 2020
Comprehensive Surveillance Review, following on the findings of this review and experience
from mainstreaming best practices.
•
B. Prioritization and Monitoring

19. Given excess demand for Fund CD, prioritization is critical for ensuring that scarce
resources are allocated to the most productive uses across the institution (Figure 4). Current
priorities (below) have been defined broadly, reflecting topics and country groups where growth (at
a minimum in absolute terms, but more importantly in terms of share in CD activities) is being
targeted. With 95 percent of delivery linked to priority topics and/or countries, the fact that most
priority areas have grown has not translated into increased shares in many cases (Figure 5).

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Figure 4. Snapshot of Current CD Spending, FY18

By Region By Income Group By Delivery Department

Western LEG
Middle East Hemisphere LIDC
and Central 5% MCM
13% Multiple or no 32%
Asia region specified 19%
Mixed & ICD
12% 16% other 14%
34%
Europe STA
9% 12%

Sub-
Asia and Saharan EM Other
the Pacific Africa 30% FAD
AE 11%
20% 30% 39%
4%
Growth (FY11-18) Field versus HQ-based Spending Field Delivery Share
(FTEs)
Overall 89%
Non-RCDC HQ-based 58%
Fund-financed 39% 77%
RCDC 42%
Externally-financed 172% RCDC
23%
FY18 share of Fragile states 28%
Fund spending 31%

By CD Type Training by Mode of Delivery Training by Department

LEG
Face to face 3% MCM
3%
TA 70%
84% ICD STA
54% 11%

Other
including
RTACs
Training
Online 18%
16%
learning
FAD
30%
11%
By Priority Topic By Priority Country Group Priorities in Overall Delivery*
29% 95%
18.8% 86%
Domestic revenue mobilization 31.6%
22%
Public financial management 15.8% 60%
17%
Financial market deepening for LICs
3.6% 11.9%
Financial integrity (AML/CFT) 11.6% 4.6%
2.1%
Financial supervision & regulation, incl. fintech & cyber
risks, & monetary policy frameworks
Data: Closing gaps, improving quality, broadening
dissemination
CD Management Program Highly Fragile states Priority topic Priority country All priorities
countries vulnerable groups groups
Other spending including ICD macro training
countries
* Ba s ed on field-based FTEs.
Sources: Fund staff estimates, based on data available through travel and time reporting systems.
Note: Current data limitations, which constrain scope for precise data disaggregation, are to be addressed under the ongoing
CDMAP capital project described below.

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2018 CD STRATEGY REVIEW—OVERVIEW PAPER

Figure 5. Delivery Against Priorities, FY15–FY18

Priority Topic
Financial Market
Domestic Revenue Mobilization Public Financial Management Deepening for LICs
30 30 50

20 20 25

Percent
Percent

Percent
10 10 0

0 0 -25

-10 -10 -50

FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18

Financial Supervision and Regulation Closing Data Gaps, Ratcheting up Data

and Monetary Policy Frameworks Quality, Broadening Data Dissemination Financial integrity (AML/CFT)
(ex. AEs)
30 30 30

20 20 20

Percent
Percent

Percent

10 10 10

0 0 0

-10 -10 -10

FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18

1
Priority Country Groups

Fragile States Program Countries Highly Vulnerable Countries

50 50 50
40 40 40
30 30 30
Percent
Percent

Percent

20 20 20
10 10 10
0 0 0
-10 -10 -10
FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18

Share of total delivery (lhs) Y-o-Y growth rates (rhs)

Sources: Monitoring of Fund Arrangements (MONA) database; Travel Information Management System (TIMS); and Fund staff
Sources: Monitoring of Fund Arrangements (MONA) database; and Travel Information Management System (TIMS); and Fund staff cal culations.
calculations.
1 Based on the current list of countries.
1
Based on the current list of countries.

20. Further, with CD spending projected to stabilize, prioritization takes on increased

importance. Under the FY19–21 budget, CD’s share of spending will level off at 31 percent
following rapid growth based on external funding (Figure 6). This funding is expected to stabilize at
58 percent of direct spending. With demand continuing to exceed available resources, prioritization
will be key to growth in critical areas (Figure 7). Flexibility will also be critical as the Fund’s broader
strategic priorities continue to evolve. In this context, growth in governance and anti-corruption
work, not currently programmed, will need to be accommodated. While precise data are not
available, CD departments report that spending on emerging issues remains modest.

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 2018 CD STRATEGY REVIEW—OVERVIEW PAPER

Figure 6. Spending on CD
CD activity is expected to stabilize after strong growth
35
Budgeted
400 Outturns
30.9 30

25.9 25
300
Millions of USD

20

Percent
200 15

10
100
5

0 0
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Externally-financed (lhs) Fund-financed (lhs) CD (plus indirect costs)/total spending (rhs)

Sources:
Sources: Office of Budget
Office of Budgetand
andPlanning,
Planning, Analytic
Analytic Costing
Costing andand Estimation
Estimation System;
System; and Fund
and Fund staff calculations.
staff calculations.

Figure 7. Projected Growth Rate, FY18–FY21

By Priority Topics and Country Groups
14
12
10
8
6
4
2
0
Domestic Public financial Financial Financial Closing data Financial Program Highly Fragile states
revenue management market supervision and gaps, ratcheting integrity countries vulnerable
mobilization deepening for regulation, up data quality, (AML/CFT) 1/ countries
LICs Fintech and broadening data
monetary policy dissemination
frameworks

20 By Region

16

12

-4
Sub- Asia and the Europe Middle East Western Mulitple or
Saharan Pacific and Central Hemisphere no region
Africa Asia specified

Source: Fund staff estimates.

1
AML/CFT strategy to be discussed in a forthcoming Board paper on this topic.

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21. Further enhancements to the framework for prioritization are in train. Key aspects
include:

• Medium-term orientation. In 2017, the Fund moved from an annual to a rolling three-year
resource allocation cycle, focused on aggregates rather than missions. A strategic overview is
discussed by department heads and approved
by management. Medium-term priorities are
reviewed each year, and this information is
“It is important to be realistic about what can
reported to the Board in the budget. Multi-year be measured and continue to work on
engagements through RCDCs, bilateral projects improved methods of measurement…The most
and, increasingly, multi-partner vehicles are also important things are very hard to measure and
a mechanistic approach should be avoided.” M.
supporting the anchoring of CD activities in
Shafik
multi-year results frameworks. While early
implementation of the new resource allocation “It is more important to measure the right
process points to the need for further work to thing roughly than the wrong thing precisely.”
G. O’Donnell
fully embed the new processes (e.g., to
strengthen data, including on demand, and for “A focus on results is critical, but monitoring
all participants to adopt a project-based should be defined to allow for experimentation
mindset), the initial roll-out has been promising, and iterative adaption along the way.” L.
Pritchett
raising the profile of key issues to senior
decision makers. It will be important to ensure “Local authorities must be involved in
that this shift continues such that CD is establishing metrics and goals, and must
conceptualized, sequenced, and implemented as understand and internalize these goals, or they
may begin to feel that RBM is a form of
medium-term projects. A medium-term
‘stealth conditionality’….CD efforts pose
orientation also helps to anticipate shifting particular challenges for RBM, since CD is
needs and provides time to address challenges inherently difficult to define and measure,
in resource allocation across CD departments takes a long time to achieve, and usually does
not unfold in a neat, linear process.” S. Radelet
and topics—shifts that are generally more
difficult in the short term. These difficulties arise
from lead times necessary to recruit and replace
experts as well as headquarters-based “back-stoppers,” who play a critical quality control role,
when skill needs change.

• More targeted medium-term Fund-wide priorities. Lessons from early experience with the
framework suggest benefits to a more streamlined set of priorities to better target areas where
growth in CD delivery is particularly important for the membership and where the share of CD
needs to be increased. It will also be important to monitor a broader range of topics and country
types to support a clearer picture of trends.

• The needs of the Fund membership should continue to be the main factor shaping CD. For
example, recognizing the importance of good governance and anti-corruption frameworks for
achieving sustainable growth and macroeconomic stability, the Fund is redefining its
involvement in these areas across its three core activities (Box 4).

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Box 4. Evolving Directions in Governance and Corruption CD Work

Good governance and anti-corruption efforts can contribute to economic efficiency, macroeconomic
stability, and sustainable growth. The Fund’s work on governance is guided by a policy dating
from 1997, which includes two broad areas:

• Improving the management of public resources; and

• Supporting the development and maintenance of a transparent and stable economic and regulatory
environment conducive to efficient private sector activities.
Based on this policy, the Fund has provided TA and training in a wide range of areas to promote good
governance and combat corruption.
A framework for enhanced Fund engagement on governance and corruption issues was adopted in
April 2018. A methodology has been developed across six key governmental functions, namely: (i) fiscal
governance; (ii) financial sector oversight; (iii) central bank governance and operations; (iv) market
regulation; (v) rule of law; and (vi) AML/CFT. The assessment examines the nature and severity of governance
and corruption vulnerabilities.
Under the framework, CD will play an important role as part of a broader strategy. To ensure integration
into surveillance/programs, CD work in the governance area will be tailored towards supporting surveillance
and program priorities determined by the new assessment methodology.
Area departments have a key role in establishing these priorities given their participation in the Standing
Working Group on Governance. Given that entrenched weaknesses require sustained efforts, particularly in
the context of fragile states, this CD work would be anchored in a medium-term strategy.
CD work will remain heavily focused on policy reforms where the Fund has relevant expertise and
experience. Fund CD support will also be coordinated with that of other international organizations that
may be providing different but complementary CD support. For example, in Ukraine, LEG has provided CD
on AML/CFT issues related to politically exposed persons, while the World Bank and United Nations
Development Program (UNDP) have provided CD on asset declarations. Similarly, in Guinea, LEG is focusing
on AML/CFT including to support anticorruption efforts, coordinating with the UN and World Bank. Likewise,
in countries where weaknesses in public procurement practices create vulnerabilities to corruption, the Fund
will continue to draw on the World Bank’s expertise.
The modalities through which CD work will be supported include missions fielded by CD department staff
and developing best practice guides and knowledge databases for wide dissemination within the Fund.

22. Work to strengthen the monitoring and evaluation framework is also continuing.
Building on the progress to date, sustained efforts will be needed to solidify a consistent and
comprehensive results-based framework. Fully embedding this results focus will take time and
iterative effort as lessons are gained and better ways of operating are explored through
experimentation and review. Effective use of RBM will also entail greater engagement with
authorities and their buy-in on proposed CD project objectives and milestones. As more results data
becomes available, it will take on an increased role throughout the project life-cycle, helping both
staff and the authorities plan, monitor, adapt, and evaluate. It will also help to prioritize delivery,
including to countries with strong ownership, and promote partnership on CD between staff and the
authorities. At the same time, RBM is a management tool and not an end in itself—avoiding
excessive focus on scores and ensuring related processes do not become overly bureaucratic will be
critical. The foundational work on the common evaluation framework will need to be followed up to

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(i) build a medium-term evaluation plan and a systematic response mechanism, including
monitoring and reporting on follow-up; (ii) develop a central repository for evaluations and include
a link to all published evaluations on the Fund’s website; and (iii) bring evaluations into the
prioritization process.

Recommendations:

• Strengthen the focus and monitoring of priorities by narrowing the list of priorities and
building on better information systems.
• Take further steps to develop and operationalize a clear governance framework for RBM and
the common evaluation framework.
•

C. Country-Tailored Delivery Focused on Implementation

23. Fund CD is highly valued by recipients, but the Fund must continue to strive to
increase its impact. This means building on progress to move decisively from the former model
based on mainly providing technical advice (“what to do”) to assistance with implementation (“how
to do it”), from a trusted advisor providing recommendations on reform needs to a trusted partner
helping countries to design and implement reforms. It also means continuing to shift to a
comprehensive view of building capacity and a focus on achieving desired outcomes, recognizing
that this complicates planning and makes resource management more challenging. Continuing this
shift is especially critical in fragile states, where hands-on, incremental approaches are needed for
sustainable reforms (Box 5). Embedding a results-focused, comprehensive, country-tailored
approach entails:

• Reinforcing diagnostics. The Fund is building an increasingly robust toolkit to diagnose

institutional capabilities, building on the Fund’s role as a standard setter and knowledge hub.
Targeted diagnostic tools are an important starting point in assessing needs to more closely
inform the content and modalities of CD delivery.

• Engaging fully on institutional readiness.

This means taking into consideration more
“The Fund should explore the possibility of
consistently organizational and decision-
introducing (or supporting) training and other
making aspects, leadership and management advice focused on building leadership,
commitment, resistance to change from management, strategy development, and related
different stakeholders, resource constraints, skills… If the Fund cannot take on these training
roles directly, it should work with other
limitations in human capacity, and political
groups…What the Fund should not continue to do
instability, among other factors. As is to simply ignore these critical skills and assume
highlighted in the short note on the CAP that somehow they will take care of themselves.”
pilot, these issues are particularly challenging, S. Radelet

and some aspects of these questions go

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beyond the Fund’s expertise. Addressing them will require a clearer framework to define new
ways of operating—including through partnerships with other organizations with relevant
expertise. Shifting from “best practice” to “best fit” is especially important in fragile and low-
capacity countries.

Box 5. Helping Sustainable Capacity Building in Fragile States

Fragile states have been an institutional priority for Fund CD since 2014. They are heterogeneous—
post-conflict countries and small and vulnerable states. The Fund has adapted its approach in several stages:
• The IMF Engagement with Countries in Post-Conflict and Fragile
CD in Fragile States
Situations-Stocktaking in 2015 proposed a multi-year framework
to improve integration of CD with surveillance and lending. ▪ 6 of the top 20 CD users
Guinea, Liberia, Mali, Sierra Leone, Central African Republic, Sudan,
West Bank and Gaza, and Myanmar are participating. ▪ 42 of the 43 fragile states
received CD in FY18
• The 2018 IEO Report on the IMF and Fragile States called for
(i) broader implementation of holistic country strategies bridging
surveillance, lending, and CD through the Article IV process; and (ii) practical steps to increase the
impact of CD. The related Management Implementation Plan calls for developing forward-looking
country engagement strategies that lay the basis for full integration between surveillance, lending, and
CD. The forthcoming HR Strategy will also address staff incentives and Fund-wide policies and practices
to encourage work in fragile states.
Substantial CD is directed to fragile states. Six fragile countries (Democratic Republic of Congo, Guinea,
Liberia, Gambia, Myanmar, South Sudan) were among the top 20 CD recipients over FY2014–18. RTACs cover
38 of the 43 fragile countries, and the Capacity Development Office in Thailand (CDOT) serves Myanmar.
Somalia and South Sudan have dedicated trust funds. Several thematic trust funds also provide CD support.
The CD approach in fragile states recognizes their special needs. This means remaining mindful of often
limited absorptive capacity, local scarcity of resources, and possible political and security concerns. The
approach must remain flexible and tailored according to individual circumstances, and include careful
prioritization and sequencing, incrementality of reforms to ensure sustainability and policy buy-in, and more
hands-on and on-the-ground advice. In some cases, it may require more direct field support through RCDCs
or country-based experts. In rare cases, it may also mean temporary supplementation of local capacity to
ensure critical functions are carried out. Additional examples include:

• The 2017 Multi-Country Report on Building Fiscal Capacity in Fragile States by FAD underscored the
importance of targeting and sequencing TA in a way that reflects institutional capability while yielding
quick tangible results that can help improve traction with reforms. Other key lessons include prioritizing
and sequencing reforms, promoting effective donor coordination, and implementing formal Medium-
Term Revenue Strategies and expenditure reform strategies to help countries exit fragility.

• The Middle East Regional Technical Assistance Center (METAC) shifted CD to offsite locations to
accommodate the exceptional circumstances of countries in conflict situations. METAC also intensified
hands-on training during conflict stages. Follow-up CD missions were scheduled after receiving the
authorities’ confirmation on the completion of the recommendations from previous missions.

• In Myanmar, TA experts have blended training with TA, taking a hands-on approach. TA combined the
explanation of fundamental concepts with practical applications. To further emphasize policy relevance
of CD, the surveillance team and CDOT cooperated closely during surveillance missions in discussing
with key technical counterparts the proposed conceptual framework (e.g., on macroeconomic forecasts).

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• Strengthening flexibility in delivery.

Categorizing CD as TA or training is
“As opposed to what occurred in the past, where
increasingly difficult as CD continues to organizations focused on training selected individuals,
move toward a medium-term project the focus has changed noticeably to enhancing the
focus with more flexible engagement overall capacity of the organization.” I. Coomaraswamy,
Governor of the Central Bank of Sri Lanka
modalities. This means continuing to shift
toward multi-year project engagements “You have really been there for Liberia and in helping us
and knowledge sharing, including through to move forward notwithstanding the challenges and
peer-to-peer interactions and attachments lingering effects of Ebola.” E. Stewart Tamba, Former
Commissioner General, Liberia
(whereby an official from one country
spends time in an organization in another “What we appreciate about IMF regional centers: their
country). This also requires continuing to proximity, their timely advice, their hands-on support for
strengthen flexibility in delivery reform implementation” M. Nsanzabaganwa, Deputy
Governor of the National Bank of Rwanda
modalities, reducing emphasis on
producing detailed TA reports and
focusing more on assisting with
implementation, including through related training for officials. From the training side, it means
less emphasis on classroom-based training of diverse groups of officials and more emphasis on
online training and tailoring classroom training by targeting similar groups of officials or
customizing delivery to a specific organization to carry out policy functions. Peer learning
workshops have become increasingly common in project engagements with countries, and help
sustain the impact of both TA and training. It also means continued recognition of the
importance of delivery in languages other than English (Box 6). Finally, CD departments are
increasingly adjusting the mix of technical support, combining field-based experts and HQ-
based missions. RCDCs, which by design have traditionally played a more hand-on role given
proximity to members, remain well-positioned to support a more flexible, needs-based model in
collaboration with headquarters (Box 7).

Box 6. CD in Languages Other Than English

Working in languages other than English is critical to the Fund’s engagement with its members.
In FY18, for example, the Fund provided 28 courses in languages other than English to over 750 officials
(11 percent of courses and 10 percent of officials who received classroom training, respectively).
Furthermore, about one quarter of classroom training was delivered with interpretation into another
language—Arabic, Chinese, French, Spanish, Portuguese, and Russian—to over 1,850 officials (accounting for
a quarter of classroom trainees). For online training, in FY18 over 1,025 government officials (21 percent of
online trainees) were trained in languages other than English (French, Spanish, Russian, and Arabic).
Languages other than English are equally important for TA. CD departments maintain a strong roster of
experts, often coming from agencies of other countries, who can operate in languages other than English.
Staff are also considering how to address existing requirements for translation of TA reports to English prior
to publication, which represents a constraint in some cases.

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• Facilitating “communities of practice” and regional or topical peer learning. The Fund can
position itself more decisively as a knowledge hub and convener on CD topics, building on the
strong networks of CD departments in their areas of expertise. As noted above, the Fund also
should continue to catalyze regional engagement through peer-to-peer workshops, particularly
by leveraging its network of RCDCs.

• Experimenting with new technologies. Use of web-based approaches for follow-up on TA

missions (e.g., through emails and video communication rather than a series of traditionally
structured missions) can also support more
iterative engagement and may help reduce
“One of the IMF’s most important successes over the
the administrative burden associated with
last few decades—often overlooked—has been in
hosting frequent visits for the authorities. creating global norms of professional practice among
In this context, in FY18 the top 10 users of central bank governors, ministers of finance, and other
CD averaged about 60 missions each from senior finance officials…The Fund should more
intentionally aim to create and strengthen these norms,
the Fund alone. The adoption of cloud-
networks, and communities of practice at deeper levels
based video conferencing software offers a within organizations.” S. Radelet
convenient way to communicate and
enable collaborative opportunities online, “The High-Level Peer-to-Peer Forum on Monetary
Policy in the ASEAN countries held in Singapore … was
without the constraints of location. The use
an extraordinarily well-organized and effective event.
of cloud technology could also support Representatives from ASEAN central banks gave
more efficient data-sharing frameworks detailed and transparent policy presentations on their
and compilation tools useful for capacity different approaches to inflation targeting. The
exchange of views (with the IMF and other
building. At the same time, “big data” is
international experts)—whether related to upcoming
becoming a more viable option for global challenges or local policy implementation—
countries to strengthen their statistics and represented genuine progress toward improved
policymaking by complementing and monetary policy in the region.” J. Taylor, Stanford
University
replacing traditional data. More statistics
CD is already being provided to help
countries understand available options.
Artificial intelligence could also be used more (e.g., text mining) to support access to specialized
expertise.

Recommendations:
• CD departments to build on existing departmental strategies to continue moving towards
greater modernization, modularity, flexibility, and agility in CD delivery and to bring about
medium-term shifts in expertise as CD priorities change over time.
• Continue experimentation with new technologies to support more flexible delivery.
• Follow up on the Management Implementation Plan for the 2018 IEO report on IMF and
Fragile States.
• Strengthen operational support for RCDCs.

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Box 7. RCDCs: Bringing CD Closer to Countries

The Fund’s global network of RCDCs and training programs helps deliver CD. A regional approach
facilitates a quick response to countries’ emerging needs, as well as closer coordination with other
development partners on the ground, including through sharing of cross-country experience and peer-to-
peer learning. It also fosters regional integration and allows for better tailoring of advice and training,
helping countries advance towards the Sustainable Development Goals. Activities are complemented by
global thematic funds focused on topical areas.
RCDCs are financed jointly by the Fund, external development partners, and member countries.
Since 2013, new RCDCs include the Africa Training Institute (ATI), the Africa Regional Technical Assistance
Center (AFRITAC) West 2 (both opened in 2013), the South Asian Regional Training and Technical Assistance
Center (SARTTAC, in 2017), and the China- Trends in Structuring CD Financing Vehicles
IMF Capacity Development Center (CICDC,
FY2010 FY2015 FY2018
in 2018). (49 million USD) (131 millions USD) (174 millions USD)

RCDCs are an increasingly important 18%

modality for CD delivery. RCDCs now 13%

account for about half of external support 12%

37% 48%
49%

for CD activities and about a quarter of all

51% 39%
CD spending. Support from external 33%

partners and host countries provides more

than three-quarters of the resources
needed to run these centers. They also
Regional Bilateral Thematic

contribute their expertise to foster Sources: Capacity Development Information Management System (CDIMS); and Fund staff calculations.

coordination, efficient delivery, and the sharing of best practices.

RCDCs are innovating. With support from HQ, RCDCs are taking advantage of proximity to work
with members to design flexible delivery, including greater customization and integration of TA and
training, strengthening linkages between surveillance and CD, and addressing special challenges in
fragile and small states (Short Notes: Integration of TA and Training & Notes from the Field).
RCDCs are evaluated regularly. RCDCs are assessed under their governance framework midway through
their funding cycles. Recent evaluations have recommended, for instance, a focus on achievement of
substantive, longer-term objectives, improved results measurement, adoption of policies to enhance
sustainability, and strengthened coordination. RCDCs have responded with renewed efforts to monitor and
measure results, greater outreach to partners, and refinement of work plans in consultation with recipients.
Other field-based positions have been used selectively to support tailored delivery in high-intensity
cases. Examples include in-country resident advisors in the areas of banking supervision, public financial
management, and revenue administration. Getting the balance right between HQ and field-based staff and
between country-specific or regional coverage in the field requires careful consideration. Issues include
relative costs and benefits of direct support versus iterative support through a regional presence to meet
urgent needs and help countries build their own capabilities.
Several challenges will require attention in the period ahead. Weak information systems, as well as
fragmented and unclear procedures and roles following a period of rapid growth, have contributed to
coordination and quality control challenges between RCDCs and HQ and have limited potential
coordination and learning across RCDCs. These issues are a key focus of the work underway to strengthen
information sharing, harmonize processes, and streamline administrative complexity. Efforts will also need to
be made to better integrate CD delivery between RCDCs and HQ, including to reinforce backstopping. The
HR Strategy will also look at staff mobility between HQ and field positions and the application of consistent
policies for field-based staff.

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D. Internal Consultation and Sharing of CD Information

24. Strengthened information sharing holds the promise of transforming the Fund’s
CD operations. Enhancing cooperation between CD and area departments and between HQ and
field-based operations depends on improving the way CD outputs are tracked and making it much
easier for staff to access CD documents and data. Such information will also support operations and
results tracking, reporting, and analysis—all essential for effective resource use and strategic review.
Several ongoing initiatives support these objectives:

• A comprehensive program led by the Knowledge Management Unit (KMU) aims at

strengthening internal access to Fund documents, beginning with TA reports, through a
comprehensive and searchable data management system.

• The “Digital Workplace” project will provide staff with a single access point for documents, data,
and analytical tools across activities—helping staff connect their various streams of work.

• CDMAP promises to transform CD operations. Building on previous Fund-wide efforts and

existing good practices within departments, it will capture and disseminate data on CD delivery
and results (both financial and performance). The project will address critical gaps and support
much-needed harmonization of CD processes across departments and improve the way in which
the Fund carries out its CD activity. CDMAP will improve the planning, managing, monitoring,
and reporting of CD activities, increase transparency, and secure efficiency gains. Most
fundamentally, it will provide a clearer picture to all participants in the CD process of risks and
opportunities, allowing for more nimble and responsive planning. And it will help to build the
connective tissue needed to bring CD activities together with other core functions.

25. Opportunities also need to be found to inform and engage the Executive Board more
regularly on CD. For instance, given the need to consider the size of CD in the context of the Fund’s
overall activities, more prominent reporting on CD in the context of the medium-term budget
discussions should continue. Staff could also continue the practice of the recent informal Board
briefings on CD activities. Finally, bilateral surveillance discussions of heavy CD users would also
provide an opportunity for the Executive Board to discuss the CD strategy for that country. More
generally, bilateral surveillance discussions could provide an opportunity to consider whether the
adoption of key policies is being constrained by capacity issues, whether the Fund is providing
relevant CD support, and what progress is being made with implementing CD recommendations.

Recommendations:
• Implement ongoing initiatives to enhance knowledge management (KMU project) and
improve internal access to data, analytical tools, and productivity tools (Digital Workspace).
• Implement CDMAP.
• Continue the practice of informal Board briefings on CD activities and find other opportunities
to inform and engage the Executive Board more regularly on CD.

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E. Coordination, Communication, and Dissemination

26. Coordinating better with other providers is

key. Coordination supports efficiency gains and helps
“Supporting country-led coordination efforts
to sustain the impact of CD. It ensures consistency of
should be a key priority for the Fund.” M.
policy advice, mitigates risks of duplicating efforts,
Pangestu
helps better leverage the pool of available resources
and expertise (especially in emerging areas of CD), and
“The EU has found in the IMF a natural
promotes more efficient use of resources at both the
strategic partner with a long track record of
authorities’ and the providers’ ends. Effective
supporting economic reform in developing
coordination requires investment in tailored
countries…our partner countries greatly
approaches and is most effective when the country
appreciate the joint EU-IMF efforts in
itself is in the driver’s seat (Short Notes: Coordination).
capacity policy dialogue.” N. Mimica, EU
There is no single recipe to improve coordination but
Commissioner for International Cooperation
existing good practices, including coordination with
and Development
donor partners through the Fund’s thematic and
regional trust funds, provide a starting point.

• Coordination has been better organized in program countries or in countries with large and
complex CD agendas, where area department mission chiefs took a more active role in engaging
with other organizations. In rare cases, resident CD coordinators have been appointed to
monitor the evolution of CD engagements and ensure closer dialogue with other CD providers
(e.g., Ukraine, Mozambique). In other cases, regular contacts through annual CD providers’
coordination committees (e.g., Myanmar) have also worked well. Finally, coordination among CD
providers has worked when the authorities themselves have been in the lead (e.g., in Rwanda
the authorities organize the CD agenda based on their needs and priorities).

• A strong role for area department mission chiefs and field-based staff in coordinating
overall engagement with a country holds benefits in improving coordination with
other CD providers at the country level. In countries with large CD needs, a more regular
forum to communicate and share information among various CD providers (e.g., a CD
providers’ committee) could be useful. Where there are capacity constraints in the face of
multiple CD projects, a greater Fund presence on the ground could be considered on a targeted
basis, resources permitting. This could be ensured through a more active role for resident
representatives, RTAC coordinators, or through in-country CD coordinators. In considering these
issues, it will be important to recognize the inherently high resource implications of taking a
more active role in coordination.

• Notwithstanding the significant efforts to support coordination, however, coordination will

remain inherently challenging, given, for example, weak cross-agency information systems,
different procedures, misaligned incentives, and scarce resources to manage coordination. As
such, it will continue to require concerted efforts by Fund staff.

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27. Progress on the Fund’s CD communications will need to continue. Awareness of CD

work is increasing, but understanding of CD activities and their tangible benefits to the country
among broader audiences remains limited and thus poses an ongoing challenge for CD
communications. To address this challenge, future CD communications will be focused on new
forms of story-telling to bring CD to life (e.g., graphic novels, video story-telling, publicizing CD
stories via social media platforms, and developing more content in languages other than English on
the CD portion of the Fund’s website and in training material), increasing audience-focused efforts
(e.g., among civil society organizations, media, and partners) through the CD experience at the
Spring and Annual Meetings, and posting CD materials on the Fund’s external website (Short Notes:
CD Communications).

28. Wider dissemination of CD information is needed. Wider availability of information on

the Fund’s CD activities can help spread best practices and provide cross-country lessons. It can
support the buildup of professional networks and communities of practice. Publication can raise the
visibility of CD activities and their objectives and help muster domestic social and political support
for reforms. It would also support better coordination with donors and other CD providers, offering
greater opportunities to acknowledge their contributions, and reinforce their support, a point
stressed by external partners in interviews.

• CD departments have begun to take steps to better “translate” technical advice into more
accessible messages for policymakers. For example, the Statistics Department is implementing
standardized summaries in TA reports, delivered in less technical language to bridge the gap
between technical and policy-relevant materials for senior country authorities, country teams,
and other nontechnical staff. Publication of topical notes on CD activities is now well established
and the topics they cover could usefully be expanded, including to synthesize findings and
lessons for countries in similar circumstances.

• In response to donors’ calls for more timely and easier access to CD activities that they help
finance, efforts are underway to improve the accessibility of relevant TA information through the
new Partners Connect platform.

• On publication, CD-related topic notes and information on CD operations and evaluation are
expected to expand, and work is also underway to make these materials easier to find on the
Fund’s external website. A more concerted effort is also required to strengthen publication of
TA reports, which remains limited at less than 5 percent, despite a longstanding policy to
encourage publication. An interdepartmental working group is examining ways to boost
publication consistent with the Fund’s voluntary framework and the importance of protecting
confidential information. Challenges include the high volume of documents and the need to
ensure robust review within the Fund and member countries, with associated resource
implications. More broadly, Fund staff could do more to inform and engage local stakeholders
on key TA recommendations (e.g., through surveillance documents, other published materials,
and outreach).

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29. Work on CD partnerships will continue. Funding risks related to externally financed CD
have been and continue to be actively managed on a range of fronts:

• Pursuing broader and more sustained partnerships through more active fundraising to a wider
range of partners. More diversified partnerships will reduce dependence on large contributors as
shortfalls from one partner can be more easily absorbed by the others. Longer and more
strategic partnerships provide greater funding certainty over the medium term.

• Increasing fungibility and flexibility by promoting multi-partner and umbrella agreements that
enable the Fund to allocate funding across a range of CD activities.

• Reducing operational risks by securing financing upfront before carrying out CD delivery, and
flexibly adjusting the components of a work program if funding falls short. All CD projects or
programs have built-in degrees of flexibility to allow adjustments.

Recommendations:

• Better leverage existing good practices on coordination in collaboration with other providers.
• Pursue innovative CD communications approaches to raise awareness of the Fund’s CD work.
• Improve the presentation of recommendations in TA reports to senior authorities and other
nontechnical users. Engage local stakeholders on key TA recommendations as part of
surveillance and outreach.
• Publish more topical notes in specialized areas of interest to policymakers, also bringing in
cross-country learning.
• Implement forthcoming recommendations of the working group on TA report publication.
• Continue to increase the sustainability and fungibility of external financing.

RESOURCE IMPLICATIONS
30. This review takes place in a resource constrained environment within the Fund. With
limited scope for additional resources to support CD-related activities, efforts to strengthen Fund
CD will likely need to be accommodated within the existing budget envelope. In the absence of
additional resources, this likely implies reduced CD delivery, but greater effectiveness in those CD
engagements that are pursued:

• Some key reforms recommended (e.g., finalizing the KMU CD knowledge sharing initiative,
rolling out CDMAP, and improving access to analytical and productivity-enhancing tools under
the Digital Workspace) are already in train and initial estimates have been included in the
current medium-term budget.

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• The recommendations related to better integrating CD and surveillance will likely need to be
accommodated through reprioritization within departments, in line with the recognized strategic
importance of increasing synergies among the core functions of the Fund. These efforts could
include existing initiatives (e.g., CD framework for fragile states) and draw on best practices (e.g.,
the more integrated approach to CD and surveillance in AFR). Ensuring a targeted approach—
where additional effort will have the highest returns—will also be important.

• Some recommendations will require greater tradeoffs. Specifically, the strengthened role of area
departments will require careful consideration of resources for both area and CD departments.
In addition, to strengthen tailored delivery, including by enhancing the assessment of
institution-specific capabilities within countries, strengthening coordination, and addressing the
currently low rate of publication of TA reports, departments will need to consider how best to
allocate resources among competing needs. This will likely require targeting and prioritizing CD
delivery more rigorously to focus on impact.

• Ongoing process and systems improvement, while requiring significant upfront investment, can
be expected to generate some gross savings when fully implemented, though the scale of these
savings is not yet clear and some of these resources will need to be utilized to maintain the
modernized systems and processes that are currently being defined.

ISSUES FOR DISCUSSION

31. Staff would welcome Directors’ views on the following questions:

• Do Directors agree with the main findings and key themes emerging from this review?

• Do Directors endorse the strategic objectives set out in this report?

• Do Directors consider that the specific operational recommendations would support these
broader strategic objectives:

o Clearer roles and responsibilities among various stakeholders;

o Continued strengthening of prioritization and monitoring;

o Better tailoring and modernization of CD delivery with a focus on implementation;

o Greater internal consultation and sharing of CD information; and

o Further progress in external coordination, communication, and dissemination of information.

• Do Directors consider that the strategic objectives and recommendations proposed in this
review will mitigate identified institutional risks related to the CD strategy?

• Do Directors have other suggestions to enhance the impact and efficiency of CD?

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Annex I. Recommendations of the 2018 CD Strategy Review

Box 1. Recommendations of the 2018 CD Strategy Review

Staff work in the coming period will consider concrete steps to advance the report’s recommendations. This
work will build upon ongoing activities and incorporate behavioral insights highlighted in Box 3.

Clarify roles and responsibilities

• Deepen strategic engagement with country authorities throughout the CD process.
• Area Departments to be in the leading role on overall country engagement, including through CSNs for
all heavy CD users (defined by a common metric).
• Strengthen efforts to expand and learn from best practices in integrating CD and surveillance.
• Explore further how to better integrate CD and surveillance in the context of the 2020 Comprehensive
Surveillance Review, following on the findings of this review and experience from mainstreaming best
practices.

Better prioritization and monitoring

• Strengthen the focus and monitoring of priorities by narrowing the list of priorities and building on better
information systems.
• Take further steps to develop and operationalize a clear governance framework for RBM and the
common evaluation framework.

Enhance country-tailored delivery focused on implementation

• CD departments to build on existing departmental strategies to continue moving towards greater
modernization, modularity, flexibility, and agility in CD delivery as well as to bring about medium-term
shifts in expertise as CD priorities change over time.
• Continue experimentation with new technologies to support more flexible delivery.
• Follow up on the Management Implementation Plan for the 2018 IEO Report on the IMF and Fragile
States.
• Strengthen operational support for RCDCs.

More effective internal consultation and sharing of information

• Implement ongoing initiatives to enhance knowledge management (KMU project) and improve internal
access to data, analytical tools, and productivity tools (Digital Workspace).
• Implement CDMAP.
• Continue the practice of informal Board briefings on CD activities and find other opportunities to inform
and engage the Executive Board more regularly on CD.

Improved external coordination and communication

• Better leverage existing good practices on coordination in collaboration with other providers.
• Pursue innovative CD communications approaches to raise awareness of the Fund’s CD work.
• Improve the presentation of recommendations in TA reports to senior authorities and other nontechnical
users. Engage local stakeholders on key TA recommendations as part of surveillance and outreach.
• Publish more topical notes in specialized areas of interest to policymakers, bringing in cross-country
learning.
• Implement forthcoming recommendations of the working group on TA report publication.
• Continue to increase the sustainability and fungibility of external financing.

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Annex II. Select Past CD Strategic Work and Reviews

1. The 2018 CD Strategy Review builds on earlier work on CD and on staff and IEO
reviews on related topics (Figure A2.1). Previous assessments reviewed various aspects of TA,
training, and/or summarized lessons from various TA project evaluations. For instance, the 2005 IEO
Report and 2014 Update, the 2008 Paper on Training as Part of Capacity Building, the 2008 Report
on Enhancing the Impact of Fund Technical Assistance, the 2011 Report of the Task Force on the
Fund’s Technical Assistance Strategy, and the 2013 CD Strategy Paper have all highlighted the
importance of improving the CD framework including CD prioritization, delivery, funding,
monitoring, and evaluation. Box 2 and Annex I of the 2013 Review summarize earlier key
recommendations. The 2011 TA review emphasized the key attributes of Fund TA, which were
presented as the “FINE model” discussed earlier, while the 2013 CD Strategy brought TA and
training under one umbrella.

Figure A2.1. Context of 2018 CD Strategy Review

2. The review also draws on other recent strategic work of relevance to CD. It takes into
account relevant staff and IEO reviews that have been recently completed on topics of relevance for
CD, including the 2018 Interim Surveillance Review, which highlighted the need for better
integration of CD with surveillance to help achieve surveillance goals; the 2018 Data and Statistics
Strategy, which highlighted the key elements needed to enable the Fund and its members to better
meet the evolving data needs for surveillance priorities in a digital world; the Review of the 1997
Guidance Note on Governance which highlighted the importance of anchoring the Fund’s CD
work in the areas of governance and corruption within a longer-term framework; and the 2018 IEO
Report on Fragile States, which provided specific recommendations to increase the impact of CD
in fragile states, including through increasing on-the-ground support and employing realistic
impact assessment tools.

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