Navigating the economic obstacle course while addressing long-term challenges: The role of IMF capacity development

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First Deputy Managing Director Gita Gopinath

By Gita Gopinath

I am very pleased to chair [today’s] important event, which is already becoming a semi-annual tradition. This dialogue, as you know, aims to further strengthen our partnership in capacity development to respond to countries’ immediate and long-term needs. We look forward to hearing from you as much as sharing with you our experience and priorities, particularly at a time when policymakers face immense challenges.

As we enter the third year of the pandemic, the global economy is facing a combination of shocks and policy challenges rarely seen before.

In addition to grave human suffering, the war in Ukraine is creating major stresses for the global economy, weakening the post-pandemic recovery and putting macroeconomic stability at risk. Six months ago, we had expected, by now, to see a consolidation of the recovery. Instead, policymakers face an extremely complex policy environment which poses difficult tradeoffs. The impact of sharply higher uncertainty, trade disruptions, higher energy, food, and other commodity prices adding to inflation pressures, refugees, and tighter financial conditions are reverberating widely across the globe, reflected in the IMF’s more sober global economic outlook released last week.

Low-income countries are particularly vulnerable, and the poorest are the most exposed of all.

To make matters more complex, countries are facing unprecedented longer-term challenges such as increased inequality, escalating fragility and conflict, a growing digital divide, and the existential threat of climate change.

Our CD is designed to be country-tailored and aligned with surveillance and lending priories to help member countries tackle these immediate and longer-term challenges. We calibrate CD, country programs and financial assistance to help countries develop and fine-tune policy tools while balancing these difficult trade-offs. We deliver this support from our headquarters in Washington, through our 17 Regional Capacity Development Centers, and our network of long-term experts in the field.

Since the onset of the pandemic, we have leveraged technology and created hybrid delivery models to help countries mitigate the economic impact of the crisis and support their recovery. 178 member countries have received CD through 4,000+ remote engagements, a majority of which benefited low-income countries and fragile and conflict-affected states.

The COVID-19 Crisis Capacity Development Initiative (CCCDI), which we launched last year with several partners, has been a centerpiece of our short-term response to members’ emergency pandemic-related CD needs. The CCCDI allowed us to provide additional CD in our core areas of expertise – these include public financial management systems, budgeting and revenue administration, tax policy, and governance.

Let me give you a few examples of ways in which we are responding to countries’ immediate needs and strengthening institutional resilience:

  • We work with countries to strengthen their tax administrations, which provides them with sustainable funding for critical budgetary spending. At the same time, we help countries design targeted expenditure programs to ease the social and economic impact of the crisis. Recently we have worked with many countries, for example Chad and Rwanda, to implement digital solutions to reduce physical interactions, improve tax collections, and reduce fraud. And we have helped design business continuity plans for tax administrations to continue functioning for example in Bolivia, Maldives, and Mongolia.
  • We work with a number of countries to strengthen the targeting, monitoring, and auditing of emergency COVID-related budgetary spending. For example, we are supporting the Mozambican Supreme Audit Agency to identify legal and institutional constraints that hinder the conduct, publication, and follow-up on audits of COVID-19 emergency spending.
  • We work with central banks to modernize their frameworks – – for exchange rate, inflation, and debt management – which is helping them respond to the global inflationary shocks and the tighter financial conditions. We work with them to strengthen their banking supervision which improves financial stability in the face of large swings in capital flows and supports financial inclusion. In 12 countries across Africa, for example, we have supported a regional, peer-learning approach to compile and report on financial soundness indicators.
  • We work with statistical agencies to improve economic data collection and dissemination, which is essential for informed policymaking in the rapidly evolving global environment.

We are also stepping up our CD on transformational frameworks to help countries tackle longer-term challenges such as climate change and green and inclusive growth, including in fragile and small island states. We are increasing our CD on climate change, gender, and digital money. Kristina Kostial, the IMF’s Coordinator for Climate, will talk about the IMF’s new Climate Strategy later in this meeting.   

Following the adoption of our new strategy on Fragile and Conflict-affected States (FCS), we will be ramping up our support to those countries by expanding our field presence and putting more experts in our regional centers.

All of these have been possible thanks to your strong partnership and support, including financial, technical, and strategic support. When we consider the global nature of the challenges facing us – from the lingering pandemic and the spillovers of war to climate change and digitalization – it is imperative that we partner together to provide impactful CD to our members.

Today is an opportunity for us to listen to you and learn from your experiences. I am keen to hear your perspectives on how CD can help countries rebuild and strengthen institutions to respond to the massive challenges we are facing now, as well as to lay the foundations for long-term resilience and green and inclusive growth.

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