Front Matter

Front Matter Page

IMF ENGAGEMENT WITH COUNTRIES IN POST-CONFLICT AND FRAGILE SITUATIONS—STOCKTAKING

June 3, 2015

IMF staff regularly produces papers proposing new IMF policies, exploring options for reform, or reviewing existing IMF policies and operations. The following document(s) have been released and are included in this package:

  • The Policy Paper on IMF Engagement with Countries in Post-Conflict and Fragile Situations—Stocktaking prepared by IMF staff and completed on May 6, 2015.

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

The report prepared by IMF staff has benefited from comments and suggestions by Executive Directors following the informal session on May 22, 2015. Such informal sessions are used to brief Executive Directors on policy issues and to receive feedback from them in preparation for a formal consideration at a future date. No decisions are taken at these informal sessions. The views expressed in this paper are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

Electronic copies of IMF Policy Papers are available to the public from http://0-www-imf-org.library.svsu.edu/external/pp/ppindex.aspx

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Front Matter Page

IMF ENGAGEMENT WITH COUNTRIES IN POST-CONFLICT AND FRAGILE SITUATIONS—STOCKTAKING

May 6, 2015

Executive Summary

This review examines experience in implementing the lessons drawn in the 2011 Board paper on the Fund’s engagement with countries in post-conflict and fragile situations (more commonly referred to as fragile states (FS)) and the ensuing 2012 Guidance Note. The focus is on capacity building, Fund facilities and program design, and policy support. The review identifies scope to improve the Fund’s engagement in selected areas.

Capacity building. Resources dedicated to capacity building in FS have risen in recent years. While recognized as high quality by FS authorities, the latter would like to see capacity building tailored more closely to their absorptive capacity, with a stronger focus on training and support through resident advisors. Staff teams generally concur that the Fund’s capacity building approaches could be further strengthened, but also point to budget and security constraints and the need for strong country ownership of the institution-building process.

Proposals: A new pilot approach is proposed for providing support to FS using a capacity building framework (CBF) that would establish goals for institution building, identify immediate and planned TA and training from the Fund and other development partners, and allow for fine-tuning of support, where needed, based on the evolving needs of FS. This proposed CBF will build on the new results based management (RBM) framework due to be rolled out in FY16 which will help strengthen monitoring and reviewing of outcomes of the CBF. The pilot approach, if successful, could be considered for broader FS usage, as well as application in selected non-FS low-income countries where capacity building is critical.

Fund facilities and program design. Use of the Rapid Credit Facility (RCF) by fragile states has increased, as envisaged in the 2011 Board paper, substituting in some cases for the use of staff-monitored programs (SMPs). FS authorities highlight inadequate levels of IMF financing as the key shortcoming of the Fund’s existing facilities/instruments, with access under the RCF particularly low. Judged by the number of quantitative targets and structural benchmarks, program design has not changed much in recent years, and is broadly comparable across fragile and non-fragile states. The number of successful programs is also broadly similar for both groups although the number of programs that fail quickly is higher for fragile states. The authorities see room for more emphasis on inclusive growth and protection of social expenditure, with indicative targets on priority social spending missed in about one-third of cases.

Proposals: A forthcoming paper will explore options to expand access to concessional financing for the Fund’s poorest and most vulnerable members subject to maintaining the self-sustaining nature of the Poverty Reduction Growth and Trust (PRGT). More substantive changes in facilities will be considered in the next facilities review. Steps are proposed to strengthen program success in protecting priority social spending through more targeted specification of spending floors and adoption of contingency plans to preserve spending from fiscal shocks.

Policy support. FS authorities view the Fund’s policy support as of high quality, but would like to see Fund teams bring greater FS experience, which would help in developing alternative policy solutions appropriate to FS circumstances. Staff welcomed the 2012 staff guidance note and the increased provision of training on FS-related political economy issues. That said, mission chiefs underlined the challenges of recruiting desk economists and resident representatives motivated and skilled for FS assignments.

Proposals: Training on political economy issues will be continued, and knowledge-sharing across teams working on fragile states will be fostered, including through a new intranet-based FS thematic site. The security concerns of staff considering FS assignments are being addressed through new security policies and steps are being taken to ensure that staff working on FS assignments share the same strong career prospects as their peers in non-FS positions.

Approved By Peter Allum, Daniela Gressani, and David Robinson

Prepared by the African, Middle Eastern and Central Asia, and Strategy, Policy, and Review Departments (in consultation with other departments). The paper was prepared by an interdepartmental working group involving AFR, MCD, and SPR. The lead author of this paper was Ms. Bouza (SPR), with major contributions by Messrs. Gelbard, Orav, Pani, and Ruggiero (AFR); Mr. Gemayel and Ms. Baduel (MCD); and Messrs. Meyer Cirkel and Allum (SPR). Mmes. Fuli (AFR), Liu and Kehayova (SPR) provided valuable research assistance. Mmes. San Pedro-Pribram and Milton (SPR) also provided valuable administrative support. Contributions to the box features were provided by Messrs. Kwalingana and Torrez (AFR), Messrs. Gottschalk, Saker, and Yang (APD), Messrs. Leichter and Vardy (ICD), Ms. Castellanos Garcia and Mr. Demirkol (MCD), Ms. Ndoye (SPR), and Mr. Ntamatungiro (WHD).

Contents

  • Acronyms and Abbreviations

  • INTRODUCTION AND CONTEXT

  • FUND ENGAGEMENT WITH FRAGILE STATES MEMBERS

    • A. Capacity Building

    • B. Fund Facilities and Program Design

    • C. Policy Support

  • FUND ENGAGEMENT WITH FRAGILE STATES STAKEHOLDERS

    • A. Fragile States Representatives

    • B. Development Partners

  • NEXT STEPS AND CONCLUSIONS

    • A. Capacity Building

    • B. Fund Facilities and Program Design

    • C. Policy Support

  • ISSUES FOR DISCUSSION

  • BOXES

    • 1. Staff Guidance Note on the Fund’s Engagement with Countries in Fragile Situations

    • 2. IMF Technical Assistance for Fragile States

    • 3. IMF Training for Fragile States

    • 4. Country Cases: Fund Engagement in Countries in Fragile Situations in Recent Years

    • 5. Fund Engagement in Countries Affected by the Ebola Epidemic

    • 6. Staff Training on Political Economy Issues

  • FIGURES

    • 1. The Distribution of Fragile States

    • 2. Trends in Technical Assistance Delivery, FY2009–FY2014

    • 3. Country Authority Views on Adequacy of Fund Capacity Building

    • 4. Mission Chief Views on Obstacles to Capacity Building

    • 5. Proportion of Countries with Fund-Supported Programs, 2005–14

    • 6. Types of Fund-Supported Programs, 2005–14

    • 7. Authorities’ Views on Adequacy of Fund Facility/Instrument

    • 8. Authorities’ Views on Reasons of Inadequacy of Fund Facility/Instrument

    • 9. Evolution of Fragile States Quotas, 2009–14

    • 10. Program Targets and Benchmarks, 2005–14

    • 11. Proportion of Programs Successfully Concluded, 2005–14

    • 12. Proportion of Programs Going Quickly Off-Track, 2005–14

    • 13. Pace of Macroeconomic Adjustment and Structural Reforms

    • 14. Authorities’ Views on Focus on Inclusive Growth and Social Protection

    • 15. Fragile States: Proportion of Social Spending Floors Missed

    • 16. Authorities’ Views on Use of Contingency Plans in Fund-Supported Programs

    • 17. Fragile States Authorities’ Views on Fund Mission Teams

    • 18. Fund Mission Chief Views on Usage of the 2012 Staff Guidance Note

    • 19. Fragile States Authorities’ Views on Staff Understanding of Country Fragility

  • TABLES

    • 1. Basic Economic Trends

    • 2. Main Source of Inputs to the Review

    • 3. Recommendations of the June 2011 Board Paper on Macroeconomic and Operational Challenges in Countries in Fragile Situations

    • 4. Mission Chief Views on Support from Technical Assistance Departments

    • 5. Recent Uses of RCFs by Countries in Fragile Situations

    • 6. Mission Chief Views on Team Engagement with Fragile States

    • 7. Mission Chief Views on Incentives for Fragile States Work

    • 8. Resource Cost Estimate for Capacity Building

  • APPENDIX

    • I. List of Countries in Fragile Situations

  • References

Acronyms and Abbreviations

AFC

Central AFRITAC

AFR

African Department

APD

Asia & Pacific Department

CAR

Central African Republic

CB

Capacity Building

CBF

Capacity Building Framework

CCB

Committee on Capacity Building

CCR

Catastrophe Containment and Relief

CD

Capacity Development

CPIA

Country Policy and Institutional Assessment

CSOs

Civil Society Organizations

DFID

Department for International Development

ECF

Extended Credit Facility

FAD

Fiscal Affairs Department

FATF

Financial Action Task Force

Ffd

Financing for Development

FPP

Financial Programming and Policies

FS

Fragile States

GPA

Global Policy Agenda

GN

Guidance Note

HIPC

Heavily Indebted Poor Countries

HRD

Human Resources Department

HRLs

High Risk Locations

ICD

Institute for Capacity Development

IET

Internal Economics Training

LICs

Low-Income Countries

LIDC

Low-Income Developing Countries

MCD

Middle East and Central Asia Department

MDTFs

Multi-Donor Trust Funds

MICs

Middle-Income Countries

MONA

Monitoring of Fund Arrangements

MoU

Memorandum of Understanding

NFS

Non-fragile States

NGOs

Nongovernmental Organizations

OECD

Organization for Economic Cooperation and Development

PRGT

Poverty Reduction Growth and Trust

RAP

Resource Allocation Plan

RBM

Results Based Management

RCF

Rapid Credit Facility

RFI

Rapid Financing Instrument

REO

Regional Economic Outlook

RRs

Resident Representatives

R&R

Rest and Recuperation

RSN

Regional Strategy Notes

RTACs

Regional Technical Assistance Centers

SAF

Security and Business Continuity Accountability Framework

SMPs

Staff-Monitored Programs

SPR

Strategy, Policy and Review Department

STA

Statistics Department

STI

Singapore Training Institute

TA

Technical Assistance

TIMS

Travel Information Management Systems

UCT

Upper Credit Tranche

WG

Working Group

IMF Engagement with Countries in Post-Conflict and Fragile Situations - Stocktaking
Author: International Monetary Fund