the imf & institutional capacity

8/16/2019 The IMF & Institutional Capacity

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The Role of Capacity-Building in Poverty

Reduction By IMF Staff

March 2002

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Contents

I. The Importance of Institutional Capacity

II. Prioritiin! "ee#s for Capacity Buil#in!

III. The IMF Contri$ution to Capacity Buil#in!

I%. International Coor#ination of Capacity Buil#in!

Reducing poverty in the world's poorest countries fundamentally depends on a substantial

effort from the countries themselves, especially in implementing reforms needed to improve

economic performance. Unfortunately, countries often lack the capacity to implementneeded reforms or even to make the best possible use of foreign assistance. The Millennium

Development oals !MDs"#global targets for $%& that the world's leaders set at a

(eptember $%%% summit meeting#are an ambitious agenda for reducing poverty.& )t is

therefore essential that the international community make a concerted effort to help poorcountries develop the institutional capacity needed to reach the MDs. This brief looks at

some key issues and the role of the )M* in the international effort at capacity building.

I. The Importance of Institutional Capacity

&Institutional capacity& is often use# as a shorthan# for a country's a#ministrati(e an#mana!ement capacity) particularly *ith respect to implementin! economic policies. Thisencompasses a *i#e ran!e of acti(ities+

• the a$ility to collect the statistical information nee#e# for effecti(e policy

implementation) an# to #o so in line *ith internationally accepte# stan#ar#s,

• the a$ility to effecti(ely plan !o(ernment e-pen#iture an# the #eli(ery of pu$lic

ser(ices at $oth the central an# local !o(ernment le(els,

• the pu$lic sector's ai# a$sorption an# proect implementation capacity,

• the effecti(eness of a!encies to fi!ht corruption an# enhance !o(ernance,

• the esta$lishment an# operation of appropriate re!ulatory an#/or pru#ential

frame*ors for companies an# $ans,

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• the main! an# enforcement of rules an# la*s an# u#icial reforms,

• the protection of property ri!hts,

• an# the promotion of competition an# of a maret1$ase# economic system in

!eneral.

here capacity is *ea3that is) *here a !o(ernment is una$le to effecti(ely carry out itso*n policies3the conse4uences for society can $e (ery costly. 5 !oo# e-ample is thecapacity to mae reasona$ly accurate $u#!et forecasts. In 5frica ust a fe* years a!o) the#ifference $et*een $u#!ete# an# actual recurrent e-pen#iture 6i.e.) spen#in! e-clu#in!in(estment proects) *hich are often #onor1fun#e#7 *as as hi!h as 80190 percent. Such#ifficulties in forecastin! mean the country's lea#ership cannot mae the $est #ecisions onho* to spen# pu$lic money. In some countries) the !o(ernment ha# #esi!nate# primarye#ucation) pu$lic health) an# roa# maintenance as spen#in! priorities) yet fun#s often en#e#up $ein! allocate# to other areas.

II. Prioritizing Needs for Capacity Building

The co(era!e of institutional capacity is (ery $roa#) an# inclu#es a ran!e of sills in all parts of the !o(ernment) as *ell as the a$ility to transmit these sills to ne* staff as e-istin!staff resi!n or retire. Fortunately) one of the $enefits of the M:;s is to focus attention oney outcomes for !o(ernment acti(ities) *hich then pro(i#e a $asis for prioritiin!capacity1$uil#in! acti(ities. hile nee#s (ary from country to country) certain areas ofinstitutional capacity nee# ur!ent attention in many poor countries) an# merit specialmention+

•

Soun# macroeconomic policies) inclu#in! a transparent an# ena$lin! #omestic $usiness en(ironment an# an efficient financial sector $ase# on the rule of la*) arefun#amental. This re4uires effecti(e macroeconomic management capacity)inclu#in! legislative and regulatory abilities an# debt management skills.

•


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positi(e syner!ies) $ut pro!ress *ill tae time an# shoul# reflect the priorities an# startin! points of the country. Many lo*1income countries are no* en!a!e# in the process of#e(elopin! Po(erty


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• 5t the !lo$al le(el) the Integrated Framework for Trade-Related Technical

Assistance to Least eveloped !ountries is an intera!ency effort8 aime# at facilitatin!coor#ination of tra#e1relate# technical assistance. The International Tax ialog is a lessformalie# initiati(e@ that $rin!s to!ether #e(elopin! countries to impro(e ta-a#ministration throu!h #iscussion an# $etter coor#ination of technical assistance. 5n#the "aris#$ Task Team on %tatistical !apacity &uilding Indicators' chaire# $y the IMF)

is one of se(eral initiati(es aime# at impro(in! statistical capacity.

• 5t the re!ional le(el) the "artnership for !apacity &uilding in Africa ("A!T)) an

initiati(e le# $y the inter!o(ernmental 5frican Capacity Buil#in! Foun#ation) is aime# atstren!thenin! human an# institutional capacities in su$1Saharan 5frica.

• 5t the country le(el) coor#ination of capacity1$uil#in! support $y #onors is a

re!ular feature of #e(elopment assistance. It is important that the recipient countriesthemsel(es tae the lea# in coor#inatin! this support. The recent re(ie* of the "R%" process has hi!hli!hte# $oth the importance an# the ur!ency of ali!nin! #onor support*ith the P


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e-chan!e operations)forei!n reser(esmana!ement)systemic li4ui#ityarran!ements an#

relate# issues in pu$lic #e$tmana!ement

Promote soundand efficient

!an'ing and

financial systems asnecessary forfinancial an#economic sta$ility)

inclu#in! throu!hstren!thenin! $ansuper(ision policiesan# re!ulation) $anrestructurin!/resolution) cross1$or#ersuper(ision issues)an# payments systemissues

Contri$utin!

tocapacity-!uilding(ithin central !an'sand financial

supervisory agencies

for effecti(e on!oin!implementation ofmonetary) e-chan!ean# financial sector policies) inclu#in!le!al frame1*or an#institutional

impro(ements) an# priority aspects ofcentral $anaccountin! an#au#itin! systems

Banin! system1relate# issues incorporate

6e.!.) fiscal fe#eralism) tariff reform7

Budget preparation andpu!lic e-pen#ituremanagement)inclu#in! reform of treasury an#

!o(ernment accountin! an# reportin!systems

&hort-term e%penditurerationalization) incorporation ofsocial safety nets in IMF pro!ram#esi!n) an# analyses of macro1fiscalsustaina$ility of social securitysystems

5#(ice on ho* to utilie

information technolo!y in ta-/customsa#ministration an# pu$lic e-pen#ituremana!ement

:esi!n of central !o(ernmenttransfer systems to lo*er le(els of!o(ernment

:esi!n of social safety nets an#social security systems) $ut only *henrele(ant to macroeconomic a#ustment

an# in the a$sence of timely orl#Ban in(ol(ement

Con#uct of courses) seminars an#*orshops on (arious fiscal issues

Ta- aspects of financial a$use

internationalin(estment positions


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restructurin! an# $anruptcy

Capital maret#e(elopment an#

o(ersi!ht

"on$anfinancial sectorsuper(ision,coor#ination an#consoli#ation ofsuper(isory $o#ies

:e(elopment ofcre#it $ureaus

orshops/seminarson central $anin!an# financial sectorsuper(ision issues

technolo!y#e(elopment

Trainin!courses/semina

rs forin#i(i#ualcountries

:e(elopmentof sourcestatistics

> The !oals for 20>9 inclu#e+ Dal(in! e-treme po(erty an# hun!er) achie(in! uni(ersal primary e#ucation an# !en#er e4uity) re#ucin! un#er1fi(e mortality an# maternal mortality

$y t*o1thir#s an# three14uarters respecti(ely) re(ersin! the sprea# of DI%/5I:S) hal(in!the proportion of people *ithout access to safe #rinin! *ater an# ensurin! en(ironmentalsustaina$ility.2 The Policy Statement on IMF Technical 5ssistance is a(aila$leathttp+//***.imf.or!/e-ternal/pu$s/ft/psta/in#e-.htm.8 In(ol(in! the IMF) International Tra#e Centre) A"CT5:) A":P) orl# Ban) an# theT.@ In(ol(in! the orl# Ban) IMF) EC: an# the A".

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