Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the third quinquennial review of the Fund's Capacity Development (CD) Strategy.
Every five years, the IMF undertakes a comprehensive review of its CD strategy. As a core function of the Fund, CD accounts for around one-third of our direct work with member countries and supports them to develop human capacity and build institutions for sound macroeconomic policies.
Regular reviews of our CD strategy are vital to ensure that the Fund's CD continues to be of high quality and well-focused on the priority needs of member countries. The past two strategy reviews in 2013 and 2018 led to a series of reforms to increase the efficiency and impact of CD, while strengthening its internal governance. This review builds upon these reforms to advance the evolution of the Fund's CD. It calls for CD to become more flexible, better integrated with the Fund's economic analysis and lending activities and well-tailored to respond to member needs. The review benefitted from the recent independent evaluation of Fund CD and a wide range of inputs, including internal and external consultations with CD stakeholders, surveys of recipients and development partners, staff background studies and recommendations of the External Advisory Group.
The strategic vision for the Fund's CD is informed by its comparative advantages and the Fund's surveillance priorities amid a changing global CD landscape, characterized by elevated uncertainties from higher debt, geopolitical tensions, climate change and digitalization. The reform proposals of the current review center around the six key areas: strengthening CD prioritization and integration to respond to members' evolving needs, enhancing the funding model to reduce risks, strengthening monitoring and evaluation, modernizing modalities, increasing field presence, and reviewing human resources policies for staff working on CD.
Executive Board Assessment[1]
Executive Directors welcomed the opportunity to discuss the Fund's capacity development (CD) strategy. They noted the sustained progress in implementing the recommendations of the previous CD strategy reviews to further enhance the efficiency and impact of Fund CD, and broadly supported the proposals of the review toward a more flexible, integrated, and tailored CD model. Directors commended the staff's work and their outreach efforts to build consensus for the proposals leading up to the Board discussion. They also called for strengthening coordination and communication with other development partners to improve traction and efficiency of Fund CD delivery.
Directors appreciated the quality and value added of Fund CD, noting the central role it plays in supporting member countries. The importance of Fund CD was also recognized by the IEO evaluation in 2022 and confirmed by the recent surveys of CD stakeholders.
Directors noted that Fund CD should continue to respond to the membership's demands and evolving needs, and endorsed the vision of agile and demand-driven CD that focuses on the Fund's comparative advantages and is well integrated with surveillance and lending activities. Directors broadly supported the review's proposals in six inter-related areas:
CD Prioritization and Integration
Directors concurred that the current size of CD relative to surveillance and lending is broadly appropriate, while noting that prioritization is key to meeting the evolving and most pressing needs of our members. They underscored the need to closely collaborate with authorities in setting priorities to ensure ownership and stressed the importance of further deepening CD integration with the Fund's surveillance and lending activities, including through improved coverage of those efforts in staff reports for heavy CD users. Directors considered that CD delivery should be scaled up to address unmet demand from member countries in the Western Hemisphere.
Funding Model
Directors concurred that external funding has enabled the Fund to expand significantly its CD and better meet members' needs. While acknowledging the risks associated with the Fund's reliance on external financing for CD, they agreed that external financing would continue to play a key role, given internal budget constraints. Directors encouraged staff to continue work on mitigating those risks and welcomed in this regard the staff's ongoing efforts to increase the flexibility and diversity of funding sources, including through regional and thematic vehicles, with a number of Directors also calling for deployment of a larger share of internal resources. Directors also supported exploring the future establishment of a CD stabilization mechanism, and called for additional work on its design, mechanisms, and funding sources. Most Directors also supported the proposed modification in the charging policy for CD delivery to lift the self-financing requirement for high-income members that are already contributors to Fund CD, with a few Directors calling for this requirement to be lifted for all high-income members.
Impact
Directors welcomed the progress in enhancing monitoring and evaluation of Fund CD (prioritized by past CD Strategy Reviews) to more effectively demonstrate effectiveness and impact. They concurred with the proposed enhancements of the results management framework, including measures to seek explicit agreement with country authorities on targeted results and resource commitments; and developing strategic results frameworks at the project level. Directors also welcomed the proposals to build standardized mechanisms for monitoring and evaluation results to directly inform CD priorities. They emphasized that coordination with other development partners is critical to enhancing the efficiency and impact of Fund CD.
Modalities
Directors welcomed proposals to further modernize the ways that country-tailored CD is implemented, such as combining in-person and virtual delivery and further integrating technical assistance and training. While in-person CD delivery is a large and essential component of Fund CD, they welcomed the increased effectiveness under mixed modalities supported by technological progress. Directors stressed that the choice of modalities should be tailored to country-specific circumstances and the authorities' absorptive capacity, particularly in fragile and conflict-affected states and in small developing states. They also supported undertaking a review of the Fund's external training curriculum to complement these approaches.
Field Presence
Directors agreed that field presence, in particular through the global network of Regional CD Centers (RCDCs), has become fundamental to the Fund's CD model. They supported the proposals to clarify RCDC governance, regularly review RCDC's coverage and, after careful consideration, introduce modifications to their financing and administrative frameworks, effectively adopting these centers as an integral part of the CD strategy in order to strengthen the effectiveness of this network.
HR Policies
Directors emphasized the importance of appropriate HR policies to maintain the quality and continuity of CD expertise and to incentivize staffing in these areas. They supported initiating a strategic review of the HR framework for staff working on CD over the medium term to complement existing HR initiatives, such as the work on the local employment framework. Directors emphasized the desirability of increasing mobility and career progression possibilities for specialized economists and CD experts, including by adjusting and harmonizing policies and practices for these career streams.
Directors also urged staff to manage the risks associated with the reform proposals.
They called for careful management of resource implications of the proposals' implementation in a flat real budget environment and welcomed in this regard the staff's assessment that most costs could be achieved by re-prioritizing within current workstreams. A few Directors considered that an implementation roadmap with indicative timeframes and accountabilities would be useful to support implementation.
It is expected that the next review of the Fund's CD strategy will be completed no later than April 2029.
[1] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
