Seeking to scale up its regional approach to helping member countries, the IMF plans to open four new regional centers for delivering technical assistance.
The new centers—one in Central America, one in Central Asia, and two in Africa—are a response to country demand and to positive experience to date with the regional assistance approach. The African centers will complement three existing centers in the region—in Tanzania, Mali, and Gabon.
The centers aim to combine strategic advice from IMF headquarters in Washington with on-the-ground capacity-building assistance for member countries. The new centers cover the following countries:
• Central America—Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Panama;
• Central Asia—Azerbaijan, Kazakhstan, the Kyrgyz Republic, Mongolia, Tajikistan, Turkmenistan, Uzbekistan, and possibly Pakistan; and
• Africa—the country composition of the new centers has not yet been decided. But the second center in West Africa could potentially cover Cape Verde, The Gambia, Ghana, Liberia, Nigeria, and Sierra Leone, and the one in Southern Africa could cover Angola, Botswana, Comoros, Lesotho, Madagascar, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Zambia, and Zimbabwe.
As with the existing regional centers, the new centers will work with IMF headquarters to design and deliver an integrated program of technical assistance and training to countries on a regional basis. The centers are also geared to support regional economic integration efforts being pursued by the relevant countries. IMF assistance will boost these efforts by, among other things, promoting the harmonization and coordination of economic policies across countries.
A decade of experience
Over the past decade, regional centers have gradually evolved to play a major role in IMF technical assistance. Experience has shown that these centers, which are largely donor financed, can be especially important vehicles for helping countries carry out economic reforms in coordination with IMF headquarters.
Each regional center covers a small group of countries and serves as a regional base for resident advisors to these countries in core areas of IMF assistance. With their physical proximity to countries, regional centers are often better placed than IMF headquarters to handle reform implementation issues on a day-to-day basis. As a complement to the work of IMF headquarters, these centers have proven to be useful platforms to enhance IMF assistance in several important ways:
• Being based in the field, resident advisors at regional centers are able to develop deeper knowledge of the needs and circumstances of countries, and provide more intensive and constant follow-up on assistance delivered.
• All regional centers are guided by steering committees comprising representatives from donors, beneficiary countries, and other international agencies. This helps promote aid coordination and ownership of reforms, in line with the objectives of the Paris Declaration on Aid Effectiveness.
• Regional centers carry a high potential for economies of scale. Neighboring countries typically have similar economic structures and assistance needs, and a regional approach enables more help to be delivered at lower cost. An added benefit is that regional centers can promote the sharing of reform experiences between countries, allowing officials to adopt tried-and-tested best practices while minimizing reform risks.
Strategic integration and synergies
Exploiting regional similarities has been a key factor behind the growth of regional centers.
For instance, for the center in Central America, recipient countries have greatly accelerated their integration in recent years, including by establishing and strengthening key regional bodies to steer that process. These include the Central American Monetary Council, the Council of Finance Ministers, and the Council of Financial Sector Superintendents.
The entry into force of the Central America–Dominican Republic free trade agreement with the United States, as well as plans to complete a Central American customs union, mark other milestones in the same direction. In support of these initiatives, IMF headquarters has been scaling up its assistance to Central American countries over the past few years. A regional center would play a critical role in pushing that effort forward.
Similar assistance needs
The proposed Central Asian and Southern African regional centers arise from similar regional factors.
Country coverage in Central Asia will largely mirror that of the Central Asia Regional Economic Cooperation program, while the Southern African center’s coverage would be broadly aligned with that of the Southern African Development Community. The second West African center’s potential beneficiary countries have very similar assistance needs and will benefit from the sharing of reform ideas and solutions through the center.
Additionally, the opening of the two new Africa centers will mark the fulfillment of the vision set out in the IMF’s 2001 Africa Capacity Building Initiative to establish five regional centers to serve all of sub-Saharan Africa.
Strategic guidance and governance
A tripartite organizational framework extends beyond the financial dimension into the governance structure. Each center is overseen by a steering committee composed of representatives from beneficiary countries, donors, and the IMF. These steering committees provide strategic guidance for the centers’ work plans, through a consultative process that helps build shared ownership of the assistance delivered.
Consistent with its complementary character to IMF headquarters work, regional assistance will be coordinated with related help that will continue to be delivered from Washington, with both aspects of capacity-building assistance reflected in the IMF’s Regional Strategy Notes. These plans articulate and prioritize the capacity-building needs of countries in a medium-term framework and in the context of Fund surveillance and lending activities, to ensure appropriate balance between short-term policy needs and medium-term capacity-building requirements.
Participation and support from the key regional bodies and agencies has always been an important facet of all regional centers. This is especially so given the centers’ strong familiarity with local circumstances and reform issues. Indeed, in the existing centers, strong support from regional development banks and financial institutions has been a crucial rallying point to attract financing from other donors. Each center will thus work closely with the respective regional bodies to further countries’ reform agendas.
Donor representation in the steering committees also improves coordination of IMF assistance with that from other providers. This arrangement has served the existing centers well, as noted by successive independent evaluations.
Importantly, country ownership and support for these bases is increasingly shown by significant financial commitments from beneficiary countries to their respective centers.
The way forward
As a precursor to the institution of the steering committees for each of the new centers, working groups have been established to drive the process. Discussions have been initiated with beneficiary countries on broad assistance needs and priorities that could be addressed, and with donors on possible financing for the new centers. It is expected that, by April 2009, the Central American center will be the first of the new centers to open.
IMF to Launch Trust Funds to Support Technical Assistance
The IMF plans to launch a series of trust funds to channel its technical assistance to specific policy topics. The menu-based Topical Trust Funds approach is designed to augment IMF resources already allocated to technical assistance.
Demand for the IMF’s technical assistance is rising continuously, particularly from low- and lower-middle-income countries seeking to build the institutions and capacity needed to implement growth-enhancing policies. To meet this rising demand as well as to better coordinate assistance delivery, the Fund seeks to strengthen its partnerships with donors by engaging them on a broader, longer-term, and more strategic basis.
The idea is to pool donor resources in multidonor trust funds that would supplement the Fund’s own assistance resources while leveraging the IMF’s expertise and experience. The funding model is planned to operate by region and by topic, offering donors various entry points according to their priorities. Complementing the IMF’s regional technical assistance centers, topical trust funds will provide global geographical coverage and specialized topical scope.
Supported by a research agenda, these trust funds are intended to be at the vanguard of international best practice in delivering assistance, addressing more advanced or complex issues within their field of specialization. The trust funds would create synergies with the work of the IMF’s regional centers, which focus on hands-on implementation of such advice on-site.
The proposed trust funds have several advantages over more traditional forms of assistance delivery. For recipient countries, they increase the project scope and resources available for capacity building. They promote coordination between donors and assistance providers—as called for in the 2005 Paris Declaration on Aid Effectiveness—and thus avoid costly duplication.
Trust funds also provide donors with a menu of topics to support, depending on their development strategies and priorities, while using the Fund’s technical expertise and existing apparatus for assistance delivery and follow up. For the IMF, trust funds enable collective action in areas of common interest and leverage the Fund’s own resources in strategic priority areas.
IMF staff have started talks with donors on a range of topical trust funds. Work is most advanced in the preparation of a trust fund covering anti–money laundering and combating the financing of terrorism. The trust fund is expected to become operational in May 2009, and a full trust fund menu of topics is planned over the next few years. Other possible topics include fragile states, data provision, public financial management, management of natural resource wealth, debt sustainability and public debt and asset management, and financial sector stability and development.