IFI governance


Upheaval planned for IMF technical assistance

17 June 2008

The combination of the Fund’s income crisis and a series of critical reports has finally forced the Fund to revamp one of its three main pillars of activity, technical assistance (TA). TA, despite accounting for 24 per cent of the IMF budget, has received less attention than other areas of Fund activity. The changes, including charging countries and/or donors for TA, threaten country ownership over technical assistance design and strategies.

Despite reservations from low-income countries (see Update 60), the IMF plans to engage in “a more proactive approach to mobilizing new resources for TA” meaning that the Fund will be competing with developing countries for aid resources. Fund internal financing of TA will decline by 16 per cent this year and 21 per cent over three years, with donor financing increasing by as much as 58 per cent. This is one of a serious of measures designed to help the Fund plug its own budget deficit (see Update 61). The IMF’s training programme is facing similar changes to TA including a scale-back in the spending of Fund resources and more cost sharing with donors and participants.

The Fund board approved the “bundling of TA into topical trust funds for fund-raising purposes” mimicking the practices of multidonor subaccounts, the current mechanism through which the Fund manages donor money for TA. This means that the Fund and donors will control the allocation of resources for TA, not recipient countries. The Fund currently assesses a blanket 13 per cent administrative charge on such money. It plans to continue to take this fee pending changes to the charging structures for TA which would allow them to bill the trust funds for specific management and administration expenses.

The reforms may worsen recipient ownership of the TA agenda because the prioritisation of subjects for technical advice will be handled by Fund area departments based in Washington. Previously the Fund had experimented with Technical Assistance Country Strategy Notes, usually written by Fund staffers while on mission in the country, but these will be scrapped in favour of Regional Strategy Notes (RSNs) written from headquarters. No RSNs have yet been finalised and it is unclear how much genuine consultation there will be between area department staffers and country authorities when the notes are written. The policy proposal submitted admitted to the board that “there is a need to strengthen coordination with country authorities”.

In fact, the policy paper devotes little space to consulting with recipients and much to discussing how to better coordinate with donors. Using the rhetoric of the Paris Declaration on Aid Effectiveness, the paper makes much of donor harmonisation but completely ignores the Paris Declaration principles on ownership. In numerous places in the policy paper and in the summary of the board discussion, IMF TA is referred to as complementing donor development strategies and policies including the need to “make Fund TA more ‘marketable'”. However, it is only once linked to recipient country poverty reduction strategies, which are listed as being equally important as the Fund’s opinions on economic policy for the purpose of prioritisation of TA.

Sakiko Fukuda-Parr, a professor of International Affairs at The New School and author of numerous reports on TA commented: “What is happening with IMF TA looks quite regressive. Ownership of economic policy reforms is central to successful development and to long term capacity development. Technical assistance has been notorious in failing to build capacity because as an instrument it is precisely taking ownership away from developing countries.  At the core of the problem is that the power relationship embedded in TA contradicts ownership.  This is obviously an issue that needs serious analysis and debate.”

As a quid pro quo for contributing more to pay for IMF TA, donors are also given priority in the dissemination of analysis of reports from capacity building missions. A separate paper on the dissemination strategy for technical assistance, indicates that donors and other TA providers will get privileged access to TA reports, even though the reports are not currently shared with parliaments or the public in recipient countries. Again the Fund justifies this based on the need for donor harmonisation without any reference to the public interest or ownership.

This lack of transparency of TA reports is more disturbing given the IMF plans to charge countries for TA. While the full decision of what to charge has not yet been made, and will be determined by IMF management and not the board, the preliminary proposal was for a sliding scale of 20 per cent cost recovery from low-income countries, up to 100 per cent charges for high-income countries. Countries that are borrowing from the IMF will be exempt from the charges. Ultimately the citizens of developing countries, and their legislators who represent them, will pay for technical assistance but not see the results.

The Fund indicates in the paper that “the Managing Director’s task force on TA has recommended that departments proactively encourage TA recipients to consider publication on the Fund’s external website”, but that does not seem to ever have been put in place. The Fund does not track information on the number of TA reports released and none seem to be available on the IMF web site.

The Fund staff also admitted in the policy paper that the oversight of IMF TA is in disarray, including poor usage of the Technical Assistance Information Management System (TAIMS), a database for TA administration. “Only 15 per cent of all TA missions in fiscal year 2007 were linked to TAIMS projects. Although all externally financed projects should be registered in TAIMS, two-thirds lacked an end-of-project assessment; one-fifth did not have project outputs; and more than one-tenth did not have project objectives.” The Fund has not consistently managed its TA as projects, but this will now change. All TA will henceforth be managed as projects and each project must have objectives, assumptions, activities, outputs and outcomes set out in advance. The paper assures that country authorities will be “consulted in the design of the main project deliverables”.

“Because of its drastically diminished operations as lender of last resort, the IMF – like the Bank – wants to sell more of its advisory services”, noted Stephen Browne, author of several book on capacity building while at the UNDP including Aid and Accountability and now the deputy executive director at the International Trade Centre in Geneva. “However, at a time when the Paris Declaration and other initiatives are seeking to loosen the ties of aid to its sources, and to encourage country ownership and choice, the IMF may find it difficult to convince, particularly its former clients, of its objectivity as a provider of ‘free-standing’ TA. When the IMF ‘consults with’ developing countries, the dialogue has usually been in only one direction.”