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International Monetary Fund. Office of Budget and Planning

Ukraine. The Fund will remain nimble and respond to members’ emerging needs, including by reallocating budget resources within year as needed. The budget allocates resources to climate, digital money, macrofinancial surveillance, fragility, inclusion, debt, governance, updates to the Fund’s financial infrastructure and risk framework, and support for a changing workplace. Externally funded operations will also continue to complement Fund-financed capacity development (CD). The capital budget will advance the Fund’s modernization agenda, taking on board lessons from

International Monetary Fund. Independent Evaluation Office

surveillance. Fund-financed capacity development comprised about 65 FTEs, and lending work about 7 FTEs in FY2018. FSAPs = Financial Sector Assessment Program exercises; FSB = Financial Stability Board; FTE = full-time [staff] equivalent; OFC = offshore financial center. However, overall resources for financial surveillance seem barely back to their pre-GFC levels. MCM’s personnel spending is now at about the same level as in the mid-2000s, both in real dollar terms and as a share of the Fund-financed IMF budget (about 9 percent). 7 Further, resources for financial

International Monetary Fund

vulnerable cases, is maintained at current levels. Other recent budget pressures faced by the institution, including from further strengthening the Fund’s multilateral surveillance work, the expansion of Fund-financed capacity development and the jump in costs of security are assumed to be here to stay. In the medium-term, these assumptions yield a nominal expense path that is somewhat higher than in the April 2013 projections. In the longer term, the increase in nominal expenses is mitigated slightly by the downward revision to the Global External Deflator (GED). 11 7

International Monetary Fund
The medium-term income projections have been updated since the last estimate provided to the Executive Board in April 2013. Lending income is higher compared with the earlier estimates as a result of new arrangements approved since April 2013. Non-lending income is lower primarily due to revised projections for investment income. The updated expenditure path assumes the net administrative budget remains constant in real terms at the FY 2014 level, implying a nominal medium-term path that is somewhat higher than in the April 2013 projections. Precautionary balances are projected to reach the current target of SDR 20 billion in FY 2018. The projections also illustrate a broad balance between income and expenditures even if lending were to return to pre-crisis levels.
International Monetary Fund
Operating within a flat real budget envelope, the Fund delivered on the priorities and initiatives laid out in the Global Policy Agenda and Management’s Key Goals (MKGs). Resource pressures were addressed via implementation of streamlining initiatives, strategic reallocation of resources towards higher priority areas, and careful budget management. In terms of outputs, spending in FY 16 continued the shift from crisis management to crisis prevention, in line with the MKGs. Output shifted moderately from multilateral surveillance and oversight of the global system to bilateral surveillance and capacity development. Lending activity expenditure remained broadly unchanged. Average country spending was broadly aligned with assessment of risk. The net administrative budget outturn in FY 16 was $1,038 million against an approved budget of $1,052 million. The modest underspend reflects the preservation of the contingency reserve and lower-than-planned travel expenditure. Relative to FY 15, higher budget execution led to a small real (0.8 percent) year-on-year increase in net expenditures. Total capital expenditures of $131 million were recorded in FY 16 out of the $435 million in available appropriations. HQ1 Renewal expenses made up 70 percent of the spending.
International Monetary Fund

assessments in systemically important countries in FY 16. The budget also foresaw a reduction in resources devoted to lending, multilateral surveillance, and oversight of global system as the number of active programs was expected to fall and general research and flagship products were streamlined. 1 Both multilateral surveillance and oversight of the global system dropped as a share of the Fund’s output, but lending dropped only slightly as the number of programs was broadly unchanged. On the other hand, the expected reduction in Fund-financed capacity development did not

International Monetary Fund

aftermath of the global financial crisis will not be offset by the need for new posts in response to rising program requests. Ramped-up work on the financial sector , mainly to mainstream macro-financial surveillance and support FSAPs, will continue at a high level, though somewhat lower than in FY 17. Work on fiscal issues , including international taxation, will be broadly unchanged, while new resources will be provided for support of country teams on macro-structural issues (in addition to the policy work discussed below). Expanded Fund-financed capacity

International Monetary Fund

program. Weak governance that threatens the successful implementation of the program or the safeguards for Fund resources may result in suspension or delay of Fund financing. Capacity development. The Fund may decide, if requested, to perform financial and technical services that are consistent with the purposes of the Fund. The Fund provides technical assistance and training in a wide range of areas that are conducive to promoting good governance. Staff should bring to the attention of the authorities areas in which procedures and practices are found to be falling

International Monetary Fund
The Fund has been operating under a flat real resource envelope for the past six years. With continued efforts to maximize the use of available resources, spending in FY 17 is projected to reach 99 percent of the net administrative budget, and a low vacancy rate has helped stabilize overtime at 11 percent. Internal savings and reallocations have allowed the Fund to dedicate more resources to country work, including capacity development, without requiring an increase in the approved budget—apart from $6 million provided in FY 17 to cover rising security costs. An unchanged real net administrative budget in FY 18, despite deeper Fund engagement in a number of areas, as well as increased costs for corporate modernization. Accordingly, the budget proposal incorporates significant savings from reallocations and efficiency gains to fund new demands, as well as a further increase in the upfront allocation of carry-forward funds by about $10 million. The broad themes of the proposal are: (i) more intensive country work with a shift from surveillance to programs, but net savings in field offices; (ii) significant policy and analytical work on the financial sector and the role of the Fund (global safety net, facilities, and quotas), albeit less than in FY 17, with more work on structural issues and new challenges; (iii) funding for transforming IT and HR services, offset by central savings; and (iv) enhanced risk mitigation and knowledge management (KM), with the establishment of a KM unit to support cross-country analysis and knowledge transfer. At this stage, a flat resource envelope is assumed also for the medium term, contingent on continued reprioritization and a broadly unchanged global economic environment. Upward pressure on resources will arise from growing capacity development activities and certain revenue losses. Savings are expected from the TransformIT initiative and internal efficiency gains. But for the budget to remain flat, the Fund will need to continuously reprioritize and adjust its activities to make room for new demands. Even then, a more challenging global environment, with a further ramping up of Fund lending, or significant demands for deeper engagement in other areas, would put significant strains on resources over the medium term. The proposed capital budget envelope for FY 18–20 remains broadly unchanged from current levels. Some frontloading, however, is planned for the first two years, due to the cyclical nature of these investments and to accommodate strategic IT projects.