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G L B A LP A R T N E R S H I P SShared Objectives ● Joint Action ● Real ImpactShared Objectives ● Joint Action ● Real Impact

G L B A LP A R T N E R S H I P SShared Objectives ● Joint Action ● Real Impact

G L B A LP A R T N E R S H I P SSHARED OBJECTIVES ● JOINT ACTION ● REAL IMPACT

G L B A LP A R T N E R S H I P SShared Objectives ● Joint Action ● Real Impact

Switzerland Subaccount under the IMF Framework

Administered Account for Selected Fund Activities

ANNUAL REPORT FY2017

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Switzerland

Subaccount under the IMF Framework Administered Account for Selected Fund Activities

ANNUAL REPORT FY2017

SWITZERLAND SUBACCOUNT ANNUAL REPORT FY2017 | i

TABLE OF CONTENTS

List of Acronyms ................................................................................................................................................................................................ ii

Executive Summary ......................................................................................................................................................................................... 4

IMF–SECO Cooperation ................................................................................................................................................................................. 5

Operations and Financial Performance ................................................................................................................................................... 8

Lessons Learned .............................................................................................................................................................................................. 15

Annex 1. East and South Programs Logframe .................................................................................................................................... 16

Annex 2: Global Program Logframe ....................................................................................................................................................... 20

Annex 3: East Work Program Financials ................................................................................................................................................ 32

Annex 4. South Work Program Financials ............................................................................................................................................ 34

Annex 5: Global Work Program Financials ........................................................................................................................................... 36

Annex 6: Progress by Sector Under the East Work Program ....................................................................................................... 37

Annex 7: Progress by Sector under the South Work Program .................................................................................................... 39

Annex 8: Progress by Sector under the Global Work Program ................................................................................................... 41

Annex 9: Project Profiles .............................................................................................................................................................................. 43 Tables Table 1. The SECO-IMF Partnership ........................................................................................................................................................... 6 Figures Figure 1. Top Contributors to IMF CD, FY2010-17 ............................................................................................................................... 7 Figure 2. East Program. Distribution of Funds by Topic ..................................................................................................................... 8 Figure 3. South Program. Distribution of Funds by Topic ................................................................................................................ 10 Figure 4. Global Program: Distribution of Funds by Topic .............................................................................................................. 12 Maps Map 1. East Program: Commitments ......................................................................................................................................................... 8 Map 2. South Program: Commitments ................................................................................................................................................... 10 Map 3. Global Program: Current Commitments ................................................................................................................................. 12 Boxes Box 1. Core Areas of IMF Capacity Development ................................................................................................................................. 5 Box 2. Modernizing Central Bank Operations in Turkmenistan ...................................................................................................... 9 Box 3. Tax Administration Diagnostics in Egypt and Peru .............................................................................................................. 11 Box 4. The GFS Project and the Capacity-Building Approach ........................................................................................................ 13 Box 5. Promoting the Use of Local Currency in Albania .................................................................................................................. 14

SWITZERLAND SUBACCOUNT ANNUAL REPORT FY2017 | ii LIST OF ACRONYMS

AFRITACs Africa Regional Technical Assistance Centers AML/CFT Anti-Money Laundering and Combating the Financing of Terrorism BCP Business Continuity Plan BOA Bank of Albania BOG Bank of Ghana BPM6 Balance of Payments and International Investment Position Manual CBC Banco de la República, Colombia CBRA Central Bank of the Republic of Azerbaijan CBT Central Bank of Turkmenistan CCA Caucasus and Central Asia CD Capacity Development CRBP Central Reserve Bank of Peru CRM Compliance risk management DANE National Administrative Department of Statistics, Colombia DIAN Dirección de Impuestos y Aduanas Nacionales DGETP Dirección General de Endeudamiento y Tesoro Público DGCPTN Dirección General de Crédito Público y del Tesoro Nacional DRP Disaster Recovery Plan EBRD European Bank for Reconstruction and Development ECF Extended Credit Facility EDP Excessive Deficit Procedure, EU EDS External debt statistics ESA European System of Accounts 2010 ESS External sector statistics ETA Egyptian Tax Authority EU European Union FAA Framework Administered Account FAD Fiscal Affairs Department, IMF FOTEGAL Forum of Latin American Treasurers FTA Federation of Tax Administration FTE Fiscal Transparency Evaluation FX Foreign exchange FY Fiscal year GFS Government finance statistics GFSM Government Finance Statistics Manual 2014 GIZ Deutschen Gesellschaft für Internationale Zusammenarbeit GmbH HQ Headquarters IDB Inter-American Development Bank IIP International investment position

SWITZERLAND SUBACCOUNT ANNUAL REPORT FY2017 | iii

INS National Institute of Statistics, Tunisia IT Information technology ITA Indirect Tax Authority LEG Legal Department, IMF LOU Letter of Understanding LTO Large Taxpayers’ Office MCM Monetary and Capital Markets Department, IMF MEF Ministry of Economics and Finance MOF Ministry of Finance MNRW Managing Natural Resource Wealth MTBF Medium-Term Budget Framework NBKR National Bank of the Kyrgyz Republic NBRM National Bank of the Republic of Macedonia (NBRM PFM Public financial management PMO Project Management Office, Egypt RMU Risk management unit QPSD World Bank / IMF Quarterly Public Sector Debt Database RPPIs Residential Property Price Indexes RSTA Republika Srpska Tax Administration SDDS IMF Special Data Dissemination Standard SECO State Secretariat for Economic Affairs, Switzerland SEE South Eastern Europe SIAF Sistema Integrado de Administración Financiera SNG Subnational government STA Statistics Department, IMF STX Short-term expert SUNAT Superintendencia Nacional de Aduanas y de Administración Tributaria TA Technical assistance TADAT IMF Tax Administration Diagnostic Assessment Tool TPA Tax Policy and Administration TSA Treasury Single Account TTF Topical Trust Fund WP Working paper

SWITZERLAND SUBACCOUNT ANNUAL REPORT 2017 | | 4

EXECUTIVE SUMMARY

Switzerland continues to be a strong supporter of International Monetary Fund (IMF) capacity development (CD). Since 1997, Switzerland, through the State Secretariat for Economic Affairs (SECO), has partnered with the IMF to finance CD for Swiss priority and constituency countries. The Swiss contribution significantly contributed to achieving SECO’s main goal of CD which is to promote economic stability and sustainable growth and thus help beneficiary countries to reduce poverty.

Switzerland, through the Swiss subaccount at the IMF, finances country-specific and region-wide projects globally, to which SECO has allocated US$49 million over an 11-year period. Three letters of understanding (LOUs) anchor the Swiss support for Swiss priority and constituency countries. LOU East1 has financed 14 projects in Eastern regions (since 2009), LOU South2 has supported 21 projects in Southern regions (since 2010), and under the LOU Global, 11 projects were financed in Swiss priority and constituency countries (since 2016).

In Fiscal Year 2017 (May 1, 2016–April 30, 2017) the SECO–IMF bilateral partnership continued to yield results. Under the five projects completed during this period, thirteen of the seventeen project objectives were fully achieved. LOU East supported a video to raise the visibility of the Government Finance Statistics project in Southeastern European Countries. All LOU East activities have now concluded except the central banking project in Turkmenistan, which has been extended through the end of the new IMF fiscal year (April 2018). Under LOU South, two revenue administration projects were approved in Peru and Colombia. In Egypt, a tax administration project approved in 2016 addressed weaknesses identified in the 2015 Tax Administration Diagnostic Assessment Tool. A separate budget formulation project is reviewing current budgetary laws and regulations in Egypt and recommending revisions or new legislation as needed.

During the reporting period, LOU Global kicked off activities with approval of five regional projects and six single-country interventions. Early funding for the new LOU was used to build on the success of projects initially financed through LOUs East and South. Furthermore, SECO decided to extend by three-year their support to IMF CD in government finance statistics (GFS) in South Eastern Europe. The renewal of GFS support made possible a regional workshop in March 2017 in which the European Union’s Excessive Deficit Procedure were explained and its implications for the participating countries analyzed. Meanwhile the IMF Monetary and Capital Markets Department (MCM) continued to support the Bank of Ghana in strengthening its legal and regulatory frameworks and supervisory oversight. Despite the change in Ghana’s government, the new directives and design of data reporting forms based on the Basel Directives and the country’s new Banking Act were drafted and passed in 2016.

As LOU East and South activities wind down, LOU Global is expected to be the sole source of new funding through 2020. SECO’s transfer of about US$14 million has been fully committed to new CD initiatives of MCM and the Statistics Department (STA). The remaining US$10 million are expected to finance projects that build on current initiatives, thereby ensuring continuity and good results by the end of the funding period.

1 Priority and constituency countries East: Albania, Azerbaijan, Bosnia-Herzegovina, Kosovo, the Kyrgyz Republic, Macedonia, Serbia, Tajikistan, Turkmenistan and Ukraine. 2 Priority countries South: Columbia, Egypt, Ghana, Indonesia, Peru, South Africa, Tunisia, and Vietnam.

SWITZERLAND SUBACCOUNT ANNUAL REPORT FY2017 | 5

IMF–SECO COOPERATION Introduction This is the seventh Annual Report on IMF capacity development (CD)—technical assistance (TA) and training—financed by Switzerland through its State Secretariat for Economic Affairs (SECO) subaccount. The report covers the period from May 1, 2016, through April 30, 2017. It provides both a snapshot of the financial status of the subaccount as of April 30, 2017, and an overview of operations during the reporting period. It also distils lessons learned to inform future programming and implementation of IMF–SECO bilateral assistance. IMF Capacity Development CD—the transfer of technical knowledge and best practices through TA and training—helps IMF member countries to build effective institutions and acquire the skills to formulate and apply sound macroeconomic and financial policies. Established in 1945, the IMF began to deliver CD in the early 1960s in response to requests from newly independent IMF members in Africa and Asia. As a core mandate of the IMF, in FY2017 CD accounted for about 28 percent of IMF spending. Exceptional in-house expertise, a focused approach, and integrated methodology enable the IMF to deliver the highest-value CD to member countries that request it. As one of the few institutions offering CD globally, the IMF is strategically placed to respond to country needs quickly and effectively. Its approach delivers results and provides external partners with both visibility and opportunities for strategic engagement with beneficiary countries. CD, which is focused on the core areas of IMF expertise (Box 1), is delivered mainly by the Fiscal Affairs Department (FAD), Legal (LEG) department, the Institute for Capacity Development, MCM, and STA. The IMF delivers CD through an integrated matrix based on a network of regional centers overlaid with support from thematic trust funds and bilateral program arrangements with external partners like SECO.

Box 1. Core Areas of IMF Capacity Development

Source: Institute for Capacity Development, 2017

• Tax policy and revenue administration; expenditure policy; public financial management; fiscal institutional frameworks; and fiscal risk

Fiscal Policy and Management

• Monetary and exchange rate policy; financial stability analysis and macroprudential policy; financial sector supervision and regulation; debt management; and crisis management

Monetary Policy and Financial Systems

• Laws and regulations on economic and financial policies and institutions; anti-money laundering and combating the financing of terrorism

Legislative Frameworks

• External sector; government finance; monetary and financial; national accounts and price statistics; data dissemination standards

Macroeconomic and Financial Statistics

• Macroeconomic diagnostics and analysis; forecasting and modeling; financial programming; macroeconomic policiesMacroeconomic Frameworks


The IMF-SECO Partnership

Since 1997, through its State Secretariat for Economic Affairs (SECO) Switzerland has partnered with the IMF to finance CD for its constituency and other priority countries. This long-standing partnership, which covers both bilateral programs and multi-partner vehicles, supports both country-specific and region-wide efforts (Table 1)

Table 1. The SECO-IMF Partnership

Activities financed by the Swiss Subaccount at the IMF focus on SECO priority countries through Letters of Understanding East, South, and Global. Switzerland is the fifth largest contributor to IMF CD (Figure 1).


SECO-financed activities are embedded in the broad strategic framework that governs cooperation between SECO and the IMF. This programmatic approach was adopted to (1) better reflect the SECO and IMF strategic orientations; (2) improve alignment with SECO’s internal controls and project cycle management requirements; and (3) enhance the impact and sustainability of interventions. The main goal of CD is to promote economic stability and sustainable growth and thus help to reduce poverty in recipient countries. Intervention domains reflect the IMF and SECO strategic focuses:

Public financial management (PFM) (including tax and accounting) Macroeconomic analysis and management Financial market development Central banking Pension systems Economic and financial statistics Anti-money-laundering and combating the financing of terrorism (AML/CFT).

In 2015, SECO and the IMF signed a new LOU for the next five years, for a total of CHF 24 million in financing for CD to SECO priority and constituency countries.

The Strategic Logframe

The activities of the East and South programs have been guided by a strategic logframe (Annex 1) that sets out eligible activity clusters, the range of potential projects, and indicative outcomes and indicators. For individual projects, the outcomes and indicators are customized to the situation on the ground and reported on in annual progress reports. Activities under the new Global LOU are guided by a separate framework based on the IMF results management (RBM) system (Annex 2).

Source: IMF Institute for Capacity Development, 2017

0255075

100125150175200

Cash Payments, in millions of U.S. dollars

Figure 1. Top Contributors to IMF CD, FY2010-17


OPERATIONS AND FINANCIAL PERFORMANCE LOU EAST This program is expected to end in April 2018 with the completion of a central bank modernization project in Turkmenistan (Box 2). As of April 2017, a total of US$12.6 million (98 percent) of the funds available for the East program had been committed, of which US$12.4 million (98.4 percent) had been spent. One new project was approved between May 2016 and April 2017 to promote the SECO-IMF partnership to improve government finance statistics in South Eastern Europe. The operations of the East Program are reviewed in Annex 3.

Map 1. East Program: Commitments



Central Banking14%

Financial Markets

7%

Public Financial Management

10%

Revenue Administration

57%

Macroeconomics1%

Statistics9%

Unallocated2%

Figure 2. East Program. Distribution of Funds by Topic


Box 2. Modernizing Central Bank Operations in Turkmenistan

With financing from SECO, since 2015 the priority for technical assistance from the IMF Monetary and Capital Markets Department (MCM) to the Central Bank of Turkmenistan (CBT) has been to build CBT capacity to analyze and forecast macroeconomic and monetary variables. As a result, the capacity of the CBT authorities to manage exchange rate and commodity price shocks has improved noticeably. The TA, provided through eight visits by a peripatetic external expert, has helped the CBT to establish a time series database of key economic indicators. It has also provided training on using basic econometric techniques to forecast inflation and monetary aggregates and on computing effective exchange rates while examining the impact on competitiveness and diversification. These improvements in analytical capacity could support eventual modernization of the monetary framework, leading to a more flexible exchange rate and enhanced monetary instruments. The second year of the program has emphasized financial programming, building on successes in the first year by extending the database to encompass the real, monetary, fiscal, and external sectors, and by bringing in CBT counterparts in the Ministries of Finance and Economic Development and in the Statistics Office. By building relationships with these institutions, the CBT has gained a broader view of economic developments and a deeper understanding of intersectoral linkages. The TA has helped Turkmenistan to respond effectively to devaluations of the currencies of the country’s two largest trade partners, Russia and Turkey, and to the steep drop in the international price of natural gas, its main export. The CBT quantified these shocks by computing and analyzing real and nominal effective exchange rates and by assessing the pass-through to domestic inflation. This would not have been possible if it had not been able to draw on the time series database to de-seasonalize price data. The analysis helped guide the CBT response to shocks by calibrating subsequent adjustments to exchange rate and monetary policy.

Source: IMF Monetary and Capital Markets Department, 2017


LOU SOUTH Activities financed by the South program are projected to end by FY2020. As of April 2017, all US$12.0 million (100 percent) of the funds available for the program had been committed (Figure 3), of which US$9.5 million (79 percent) had been spent. During the reporting period two new revenue administration projects were approved, in Peru and Colombia, totaling US$2.3 million (Box 3). Of the 19 projects approved for LOU South, 14 have closed. Annex 4 reviews activities financed by the South program in more detail.

Map 2. South Program: Commitments


Figure 3. South Program. Distribution of Funds by Topic


Central Banking14%


35%


49%

Other2%


Box 3. Tax Administration Diagnostics in Egypt and Peru

The IMF’s Tax Administration Diagnostic Assessment Tool (TADAT) measures the health of a country’s system of tax administration. Based on 28 indicators that cover the main functions of the tax system, it applies internationally accepted good practices to examine performance in 9 areas. The TADAT helps to gauge the strengths and weaknesses of a tax administration, offers insights on reform priorities, and provides a baseline for subsequent reassessments to monitor and evaluate reform progress.

The new administration that took office in Peru in July 2016 requested a TADAT assessment to set a baseline for measuring progress by the time it departs office in 2020, which coincides with the end of the SECO project for Peru. A March 2017 TADAT mission found that the administration of the Superintendencia Nacional de Aduanas y de Administración Tributaria (SUNAT) is solid, with international good practices already in place in most areas: the SUNAT obtained an A in 15 of the 28 TADAT indicators critical to tax administration performance and a D in only 3. In addition, SUNAT succeeded in reducing the VAT gap from 35.4 percent in 2010 to 30.8 percent in 2014 and in increasing the tax-to-GDP ratio from 15.4 percent in 2010 to 16.5 percent in 2014. However, these levels are still considerably lower than those of the leading tax administrations in the region and are not consistent with SUNAT’s institutional maturity.

With the support of SECO, the IMF Fiscal Affairs Department (FAD) provided TA from 2001 to 2015 in areas to which the TADAT team later gave an A. A successor SECO project targets weaknesses identified by previous FAD missions that make it more difficult for SUNAT to mobilize additional revenues, such as overlap in HQ functions, poor monitoring of activities to mitigate compliance risk, lack of adherence by local branches to the corporate strategy, lack of a comprehensive model for VAT compliance control, and lack of a comprehensive model for post-clearance control.

In Egypt, a SECO-funded TA project from March 2016 to April 2017 undertook to improve the performance of the Egyptian Tax Authority (ETA). The project objectives—to increase on-time filing of tax declarations and on-time payment of taxes—were selected from a list of weaknesses identified in a FAD TADAT assessment of the ETA in October 2015.

IMF experts worked with ETA officials to design new procedures and taxpayer treatments. These were piloted in a sample of offices and the results compared with performance in control group offices where the improvements had not been introduced. The pilot studies emphasized the need to collect and analyze core-process performance data using the TADAT Performance Measurement Framework. The ETA will in future use this more rigorous approach to performance management to measure the impact of improvement initiatives.

Source: IMF Fiscal Affairs Department, 2017


LOU GLOBAL Projects under the global program commenced in June 2016. As of April 2017, US$14 million (100 percent) of the funds already transferred under the program have been committed, of which US$1.7 million (12 percent) has been spent (Figure 4). During the reporting period, 11 new projects were approved. Annex 5 contains an overview of Global 2016 – 20 operations.



Map 3. 2016-20 Global Program: Current Commitments

Central Banking

23%

Public Financial

Management22%


23%

Statistics32%

Figure 4. Global Program: Distribution of Funds by Topic


Box 4. The GFS Project and the Capacity-Building Approach

Building on the success of the previous 18-month project, SECO agreed to extend funding for three years to improve capacity for managing government finance statistics (GFS) in countries in South Eastern Europe (Albania, Bosnia and Herzegovina, Kosovo, Macedonia, and Serbia). At that point it was decided to move beyond using only short-term experts (STXs) by appointing a long-term advisor, resident in the region, to work on the project full-time. The resident advisor, Mr. Deon Tanzer, is giving priority to building up institutions and fostering change to advance collection and analysis of fiscal data, often training through regional workshops.

The advisor, who is based at the Center of Excellence in Finance in Ljubljana, Slovenia, has experience with both the IMF Government Finance Division and the Netherlands Central Bureau of Statistics. Thus, he can offer expertise on the fiscal data requirements of both the IMF and the European Union (EU). He has also been certified as a project manager by Statistics Netherlands, where he guided adoption of new GFS reporting requirements based on a “Six-pack” of European legislative measures to reform the Stability and Growth Pact and introduce more intensive macroeconomic surveillance.

Working closely with the project manager at IMF headquarters, the advisor has promoted institutional reinforcement in South Eastern Europe (SEE) and improved compilation and dissemination of fiscal data. Within the first eight months the advisor had already visited all five countries participating in the project. In each mission, he stressed the importance of closer inter-agency cooperation so that the fiscal data produced will meet the stringent EU requirements. The advisor works closely with STXs to coordinate TA activities, which allows him more time to promote change management. One method for doing this is to encourage staff in the five countries to discuss the rationale for changes and raise the awareness and support of senior managers for the TA and its goals.

Regional workshops complement country TA by combining lectures, thematic presentations, and practical exercises with input from both the IMF and Eurostat. These workshops have been invaluable in bringing together staff from different national institutions as a team, and in introducing staff from the five countries to regional colleagues who are all facing the same kinds of problems. The most recent workshop, in March 2017, dealt with the reporting requirements for the EU’s Excessive Deficit Procedure (EDP); it combined theory, simple exercises, and team-building activities to demonstrate how EDP reporting should be done in practice.


Box 5. Promoting the Use of Local Currency in Albania

The term euroization refers to situations where the economic agents of one country use the currency of another country as a means of exchange, store of value, and unit of account. Euroization may impair the effectiveness of the traditional interest rate channel for transmitting monetary policy, exacerbate financial stability risks, and represent a loss of seigniorage income. It also exposes the financial system and the economy to the risk of abrupt depreciations of the exchange rate that may impair the ability of unhedged borrowers to service their debts. This could push nonperforming loans higher, to the point of impairing the bank lending channel.

The natural level of euroization for a country like Albania, a small, open economy with tight financial and trade links to the euro area, is above zero. Yet euroization of bank deposits has been trending upward in Albania even though the success of inflation targeting has removed the conditions that initially fueled euroization. Having stabilized the economy, Albania now has stable and low inflation, an exchange rate that is at worst only moderately appreciating, and more sustainable public finances. Since 2016, with SECO financing MCM has assisted the Bank of Albania (BOA) as it formulates and conducts monetary policy. The objective is to consolidate what inflation targeting has achieved while addressing the challenges to monetary policy transmission caused by euroization and market segmentation.

In its early stages, the project identified the high degree of euroization as one of the main structural challenges to be addressed in the medium to long term to enhance the effectiveness of monetary policy transmission and contain risks to financial stability. It therefore supported the BOA as it analyzed the determinants of euroization, drafted a comprehensive strategy to address the causes of excessive euroization, and applied the measures recommended.

External stakeholders generally praised the comprehensive strategy, which was announced in April 2017. Action over time to realize the strategy will be very important to macroeconomic stability and resilience and to reducing risks to financial stability. Building on this accomplishment, the project also contributed to an assessment of the dinarization strategy launched by the Serbian authorities in 2010.


LESSONS LEARNED Elicit Country Ownership Capacity development often suggests far-reaching changes to policy and operations, the structure of the financial system, or exchange rate and financial stability policies. These changes, although in the best interests of the country, are sometimes met with resistance, skepticism, and outright opposition. Further, far-reaching changes must be pursued relentlessly over a long period. It has been the experience of the IMF that over time complex changes can be best pursued, entrenched resistances overcome, and commitment ensured when, rather than pushing initiatives as a formal exercise to comply with external recommendations, the authorities take full ownership of them based on recognition of their benefits. With the Bank of Albania (see Box 5), this was evidenced by the launch after TA of a comprehensive de-euroization strategy. Although the TA was critically important for initial shaping of the strategy and the structure of its different elements, the BOA took full ownership of both the strategy and all its components because it recognized the long-term macroeconomic and financial stability benefits for the country. While engaging the media and the public, the BOA always used the benefits, of which it was convinced, to justify the strategy. This ultimately facilitated acceptance by the public and the entire range of stakeholders. Keep the Program Flexible The SECO-financed project in Turkmenistan underscored the importance of flexibility in program design. Although the TA request of the authorities had been less specific, the project proposal focused on enhancing the central bank’s analytical and forecasting capacity, leaving open the possibility that the project scope could expand to encompass monetary policy formulation and design of monetary instruments. With strong support from CBT management, project goals for the two-year period were largely achieved in the first year. Building on the improvements in CBT analytical capacity, the Deputy Prime Minister in charge of the economic portfolio proposed extending the CD to the Ministries of Finance and Economic Development and the Statistics Office in a joint financial programming exercise. The STX organized a workshop on financial programming for representatives of all four institutions, which led in later missions to greater cooperation and sharing of data. Maintain Perspective, Recognizing the Macroeconomic Context In a low- or low-middle-income country, the success of a project depends heavily on the macroeconomic circumstances. Projects are prepared based on macroeconomic parameters that are vulnerable to being upended during a project, which can influence how effective the TA is. This is especially the case if, after approval of a project, the country applies for an IMF-financed program, as Ghana did during the CD program on bank regulation and supervision. Since IMF programs typically have financial sector structural benchmarks or prior actions, the supervisory authorities may need to focus their scarce resources on meeting those requirements, leaving less time available to advance areas covered by the TA project. The IMF must be flexible so that a CD project can be reoriented so that it can achieve its objective while allowing the authorities to meet IMF program goals.


ANNEX 1. EAST AND SOUTH PROGRAM LOGFRAME

Cluster of activity Range of potential activities Outcomes Indicators

Macroeconomic policy making

Capacity building at the Central Bank and the relevant government entities

Facilitation of the institutionalization of data exchange and coordination of policy measures among the relevant entities

Introduction of macroeconomic modelling and forecasting techniques

Improved capacities for macroeconomic analysis, policy formulation and forecasting at the entities responsible for fiscal and monetary policy making

Improved interagency coordination of policy measures

Reduction of the local economies’ crisis vulnerability

Institutionalization of policy advice by trained economists

Effective inflation control

Number of trained staff Setup of a macroeconomic model at the

relevant agencies Availability and exchange of key

macroeconomic data Continuous Self-Assessment and

monitoring of the countries’ macroeconomic situation

Policy advice papers Establishment of an intergovernmental

fiscal and monetary policy coordination body

Macroeconomic fundamentals, particularly the inflation rate

Public financial management

(PFM)1

Budget preparation frameworks Budget classification,

including implementation of international standards

Program and performance-based budgeting

Expenditure tracking and medium-term expenditure framework (MTEF)

Accounting and reporting systems

Cash management Debt management Macroeconomic and fiscal

frameworks Natural resource management Tax and customs administration

reform

More effective control and governance mechanisms in PFM, taking account of international codes and good practices

Improved systems and procedures for budgeting, treasury operations, expenditure planning and control with appropriate safeguards in terms of oversight and auditing

Enhanced reliability and timeliness of reporting of government financial operations

Improved capacity for revenue and budget management

Enhanced revenue mobilization from improved and more cost e

Adoption and implementation of a modern legal and regulatory framework

Implementation of a medium-term expenditure framework (MTEF)

Implementation of program and performance-based budgeting (PPB) framework

Implementation of a comprehensive budget and accounting classification system, including implementation of GFSM 2001

Implementation of a modern debt management, cash management and banking framework

Adoption of International Accounting Standards

1 In addition to these structural benchmarks, selected PEFA indicators will be used to monitor progress.


Natural resource management Tax and customs

administration reform Core tax and customs

administration functions and operations Taxpayer services Customs procedures Risk-based compliance and

enforcement mechanisms Natural resource management Internal and external audit Public internal financial control

(PIFC)

Improved legal and institutional framework for the issuance and management of government securities

Implementation of an Integrated Financial Management Information System (IFMIS)

Production of timely and accurate fiscal reporting

Implementation of a modern intergovernmental fiscal relations framework

Increases in tax to GDP ratio Enactment new tax laws and taxpayer units Implementation of full self-assessment

systems for tax administration Integration of the management of

domestic taxes under one accountability structure

Setting up medium taxpayer offices Implementation of special taxation regime

for small taxpayers Implementation of automated systems for

integrated tax administration Increased proportion of imported

goods cleared through the green channel

Implementation of a compliance and enforcement strategy for customs administration

Regular internal and independent external budget audits

Volume of traded government securities Improved monitoring of the internal

and external debt situation & debt sustainability analysis

Improved auction procedures Improved data management and

monitoring for government securities


Financial markets development

Central bank supervisory powers Risk-based supervision

frameworks Capital adequacy frameworks Systemic liquidity management Supervision of non-bank

financial intermediaries Islamic banking government securities

Improved legal and institutional framework for financial sector supervision and for the issuance and trade in securities

Improved data management Increase of the number and

volume of traded securities Development of a yield curve

Increased compliance with the Basel core principles for effective banking supervision

Increased compliance with the Basel I capital adequacy framework, including the incorporation of a capital charge for market risk

Strengthened risk-based supervision (RBS) frameworks including improvements in both on-site and offsite supervisory methodologies and the development of enhanced risk assessment criteria

Appropriate regulatory frameworks for non-bank financial institutions and emerging areas of financial sector activity such as Islamic banking

Financial volume of the domestic debt market

Number and maturity of new introduced securities (government and private sector)

Development of the secondary market for government securities

Improved auction procedures Improved data management and

monitoring for government securities

Central banking operations

Monetary policy frameworks, instruments and management and conduct of monetary operations

Inflation targeting, forecasting, core inflation measurement

Improved monetary operations, debt management and payment systems

Enhanced capacities at the Central Banks

Improved inflation control

Modernization of national payment systems: SWIFT user group formation, establishment of a clearing house, implementation of multilateral netting, implementation of CPSIPS (Core Principles for Systemically Important Payment Systems) compliant regulatory and oversight regime, popularization of credit-push instruments


Systemic liquidity forecasting Domestic interbank, money

market and debt market Debt monitoring, including

medium-term asset-liability management (ALM) and medium-term debt strategies

Payments and settlement systems, including standards for mobile payments

Systemic liquidity forecasting: development of an effective liquidity forecasting framework, methodology for forecast error analysis

Inflation forecasting and real exchange rates: publication of inflation and exchange rate indicators

Primary and secondary market development: guidelines on vertical and horizontal repurchase transactions, modification of auction bidding processes, online bidding

Central bank policy communication: adopting and issuing a communication strategy document

Increased accessibility to financial services Debt management: public debt database,

treatment of debt operations in the Treasury ledgers in accordance with best international public accounting practice, debt sustainability analysis

Anti-Money Laundering/ Combating the Financing of Terrorism AML/CFT

Improvement of the institutional basis

Capacity building for relevant agencies

FIU institution building Reports on effectiveness and

efficiency of the AML/CFT regime

Preparation of a national AML/CFT Strategy

Improvement of the legal basis Strengthened institutional and

procedural public infrastructure for AML/CFT

AML/CFT regulatory frameworks to bring supervision on par with the requirements of new and revised legal frameworks and international standards and best practices

FATF and FSRB assessments Module IV report on the effectiveness of

the AML/CFT regime Annual statistics and reports of government

agencies Enhanced FIU skills and competence

Pensions Systems Pension system design Institutional capacity building Improvement of

macroeconomic, financial, and institutional sector preconditions necessary for a multi-pillar reform

Development of national laws and constitutional amendments

Setup of a technical unit responsible for pension system management

Introduction of a sustainable multi- or single pillar system

Increased pension participation

Number of trained staff Establishment of pension portfolios Regular transfer of worker’s and firms’

pension charges Regular disbursement of pension payments

to the retired Volume of paid pensions for aged Poverty reduction among the aged Increased national savings


ANNEX 2: GLOBAL PROGRAM LOGFRAME Strategic Objective

Outcomes Sample Indicators Means of Verification Assumptions/Risk/ Mitigation

Fiscal Sector: Public Financial Management Budget preparation improved.

More credible medium-term fiscal frameworks are included in budget documentation and better integrated with the annual budget process.

A more comprehensive and unified annual budget is published.

Medium-term fiscal frameworks prepared and there is clear linkage with annual budget.

Budget documentation and public access to key fiscal information is available.

i) IMF project assessments ii) Reports/ documents from beneficiary countries iii) External evaluation of the SECO LOU iv) Reports/ documents from other institutions such as the World Bank, SECO, and IDB v) IMF/WB Annual Meeting

Assumptions: The political climate is conducive to implement reforms. There is political will and capacity to implement reforms. Macroeconomic situation is stable and sustainable. Risks: Political instability can slow down and even stop implementation of reforms. Continuous rotation of managers and staff undermine the absorptive capacity and provoke permanent discontinuity. Lack of coordination among capacity building partners duplicate efforts and deliver contradictory advice. Deterioration of fiscal situation may impact availability of resources to finance reforms Risk Mitigation: Focus on strategic advice and hands on capacity building to have a more permanent impact. Incentivize authorities to implement administrative reforms that contribute to a more stable staff. Continual/regular high level engagement and monitoring. Regular coordination among capacity building institutions to assure proper exchange of information and coherent advice. Careful alignment of reforms with the main priorities of the government.

Coverage and quality of fiscal reporting improved.

The quality and comprehensiveness of fiscal reports are enhanced.

Fiscal and accounting reports follow international accounting and statistics standards.

Integration of assets and liabilities management framework improved.

More central government revenues and expenditures are deposited and disbursed through a TSA

Better integrated cash and debt management.

Improved disclosure and management of state assets.

More accurate and timely cash flow forecast in the central government.

Coverage of TSA is expanded. Active cash management is implemented. Accuracy of cash flow forecast is improved. Annual accounts include more financial and non-financial assets and liabilities.

Identification, monitoring, and management of fiscal risks strengthened.

Disclosure and management of contingent liabilities and other specific fiscal risks are more comprehensive.

Central fiscal oversight and analysis of public corporation is strengthened.

Fiscal risk statements are prepared and presented as part of the budget documents. A strategy to manage fiscal risks is defined.

PFM laws and institutions strengthened.

The capacity of the Ministry of Finance to meet its PFM responsibilities is enhanced.

Performance against full PEFA Indicator set + FTE and other diagnostic tools.


Strategic Objective

Outcomes Sample Indicators Means of Verification Assumptions/Risk/ Mitigation

Fiscal Sector: Revenue Mobilization Revenue administration management and governance arrangements strengthened.

A reform strategy and a strategic management framework are adopted and institutionalized.

Strategic and operational plans are prepared, adopted and institutionalized.

Key performance indicators are regularly reported and monitored.

Reform plan is adopted and well communicated, and reform management capacity is in place.

i) IMF project assessments ii) Reports/ documents from beneficiary countries iii) External evaluation of the SECO LOU iv) Reports/documents from other institutions such as the World Bank, SECO, and IDB v) IMF/WB Annual Meeting

Assumptions: The political climate is conducive to implement reforms. There is political will and capacity to implement reforms. Macroeconomic situation is stable and sustainable. Risks: Political instability can slow down and even stop implementation of reforms. Continuous rotation of managers and staff undermine the absorptive capacity and provoke permanent discontinuity. Lack of coordination among capacity building partners duplicate efforts and deliver contradictory advice. Deterioration of fiscal situation may impact availability of resources to finance reforms Risk Mitigation: Focus on strategic advice and hands on capacity building to have a more permanent impact. Incentivize authorities to implement administrative reforms that contribute to a more stable staff. Continual/regular high level engagement and monitoring. Regular coordination among capacity building institutions to assure proper exchange of information and coherent advice. Careful alignment of reforms with the main priorities of the government.

Organizational arrangements enable more effective delivery of strategy and reforms.

Clear organizational structure along functional lines and/or taxpayer segments established and operating.

Support functions enable more effective delivery of strategy and reforms.

Improved human resources strategies and practices support the tax administration.

Improved ICT strategies and systems support the tax administration

Corporate priorities and compliance better managed through effective risk management.

Compliance risks identified, assessed, ranked and quantified through intelligence and research.

Compliance improvement program in place to mitigate identified risks.

Compliance risk mitigation activities monitored and evaluated

Institutional risks identified, assessed and ranked.

Tax/customs administrative procedures legally established

Tax administration procedures codes updated to international good practices.

Core tax administration functions strengthened.

Integrity of the registered taxpayer base strengthened.

Reliable taxpayer information available.

Taxpayer services initiatives to support voluntary compliance strengthened.

Service delivery standards in place and routinely monitored, and performance against standards improves over time.

Taxpayer perceptions of service monitored and improve over time.

Larger proportion of taxpayers meet their filing obligations as required by law.

On-time filing ratio improves over time

Management of filing compliance improves over time.


Larger proportion of taxpayers meet their payment obligations as required by law.

On-time payment ratio improves over time Management of refunds improves over time Management of tax arrears improves over time.

Audit and other verification programs more effectively ensure completeness and accuracy of reporting.

Automated cross-checking used to verify return information Sound methodologies used to monitor the extent of inaccurate reporting and tax gaps.

Core customs administration functions are strengthened.

Foreign trade operators meet their reporting and payment obligations.

Alignment of customs procedures (including transit) with international standards and regional integration objective improves over time. An increasing percentage of cargo manifests and declarations are electronically received and processed by customs and reconciliation procedures are strengthened. Traceability of goods and customs actions in the customs systems is strengthened.

Customs control during clearance process more effectively ensures accuracy of declarations.

Risk-based control selectivity is applied more consistently over time.

The rate of physical inspections decreases over time.

Effective application of procedures based on international standards for valuation, origin and the tariff classification of goods improves over time.

Audit and anti-smuggling programs more effectively ensure enforcement of customs laws.

A larger share of trade is controlled progressively through a properly designed post clearance audit program.

The framework to control special regimes and exemptions is strengthened.


Strategic Objective Outcomes Sample Indicators Means of Verification Assumptions/Risk/ Mitigation Economic and Financial Statistics

Strengthen compilation and dissemination of data according to the relevant internationally accepted statistical standard, including developing/improving statistical infrastructure, source data, serviceability and/or metadata.

Data are compiled using the coverage and scope of the latest manual/guide.

The scope covers ISWGNA recommended tables:

annual supply and use tables

balance sheets, revaluation and other volume changes in asset accounts for all sectors

For residential property price index, major categories of residential properties are included.

i) IMF project assessments ii) Reports/documents from beneficiary countries iii) External evaluation of the SECO LOU iv) Reports/documents from authorities including at the IMF/WB Annual Meetings

Assumptions: Willingness and support of high-level national officials to adopt and implement national action plans and to develop capacities to compile and disseminate fiscal statistics in line with inter-national standards. Cooperation from country authorities and enterprise officials to provide necessary information. Readiness of the authorities to receive technical assistance Risks: Insufficient resources (staff and financial) to collect data, design and put into production a compilation system. Unwillingness to provide appropriate source data on a timely basis. Mitigation: Focus on strategic advice and hands on capacity building to have a more permanent impact.

Source data are adequate for the compilation of the national accounts.

Source data needed to compile annual estimates are comprehensive and reasonably approximate the definitions, scope, classifications, valuation, time of recording required, and timely.

Source data needed to compile quarterly estimates are comprehensive and reasonably approximate the definitions, scope, classifications, valuation, and time of recording required, and timely. Data are discrete and not cumulative.

Macroeconomic data sets used by policy-makers have been made more intersectorally consistent (reduced discrepancies).

National accounts statistics are consistent or reconcilable with government finance statistics, external sector statistics, and monetary and financial statistics.

Source data are adequate for the compilation of price statistics.

Source data needed to compile the RPPI are adequate.

Data are compiled using the concepts and definitions of the latest manual/guide.

GFS are compiled following the GFSM 2001/GFSM 2014 framework, concepts, and definitions, and PSDS are compiled following the PSDSG 2011 framework, concepts, and definitions.


Data are compiled using the coverage and scope of the latest manual/guide.

The scope of flows includes all transactions of general government (or public sector) units, and the scope of stocks includes all financial assets and liabilities of general government units.

Data are compiled using the sectorization of the latest manual/guide.

Institutional sectors are defined in accordance with GFSM 2001/GFSM 2014 guidelines.

GFS are compiled for the general government (or public sector) and its subsectors.

A comprehensive list of general government (or public sector) units exists, is maintained, and is disseminated.

Higher frequency data has been compiled and/or disseminated internally and/or to the public

GFS and debt data for general government (or public sector) operations are compiled and disseminated on a quarterly basis.


Strategic Objective Outcomes Sample Indicators Means of Verification Assumptions/Risk/ Mitigation Financial Supervision and Regulation

To contribute to financial stability by enabling beneficiary countries to implement sound policies in the areas of financial supervision and regulation, crisis management and central bank modernization.

Beneficiary countries have: (i) strengthened banking regulations and prudential norms; (ii) effective and efficient supervisory authorities/ central banks and sound banking and financial systems that align with international best practice.

New regulations are revised and adopted by regulatory authorities

Upgraded regulations are effectively enforced by supervisory / regulatory authorities.

Processes and manuals for key supervisory functions are established and effectively implemented

i) IMF project assessments ii) Reports/documents from beneficiary countries iii) External evaluation of the SECO LOU iv) Reports/documents from other institutions such as the World Bank; and v) IMF/WB Annual Meeting

Assumptions: The authorities continue to prioritize work in this area. There is sufficient donor funding and technical assistance will be available to support the project. IT systems are in place to effectively capture data and produce relevant reports Key inputs from industry are received and an adequate level of industry buy in is achieved. Risks: Staff turn-over and retention of trained staff. Lack of political will and commitment to the project and a lack of cooperation on the part of industry Mitigation: Focus on strategic advice and hands on capacity building to have a more permanent impact. Incentivize authorities to implement administrative reforms that contribute to a more stable staff.

Strengthened regulation of insurance companies (IC) and risk based supervision capability of the insurance supervisor (IS).

Supervisory ratings have been assigned to majority of insurers and are being used as various tools, such as communication with senior level of the insurance sector, decision of timing and scope of on-site inspections, approval of dividends.

Improved supervisory effectiveness through enhanced capacity in IFRS knowledge related to provisioning.

Regulatory and supervisory provisioning guidelines are more closely in line with international standards (IFRS and Basel principles) and best practices.

Supervisors are better equipped with IFRS knowledge in assessing provisioning practices by banks.

Banks have strong capital and liquidity positions that adequately cover their risks and contribute to financial system stability

Basel II / III requirements have been incorporated in the legislative and regulatory framework

Banks comply with the new requirements

Strengthened regulatory framework, supervisory tools and capacity to address key risks in securities sector.

Regulatory and supervisory frameworks are more closely aligned with international best practice as evidenced by increased compliance with IOSCO principles.


Financial Crisis Management To contribute to financial stability by enabling beneficiary countries to implement sound policies in the areas of financial supervision and regulation, crisis management and central bank modernization.

Introduction of a framework for resolving failing financial institutions in accordance with international best practices

Using the FSBs Key Attributes of Effective Resolution Regimes (KAs):

Legislation drafted (within agreed timelines) for implementing a special resolution regime (SRR).

Responsibility assigned to a resolution authority (RA) or authorities, with adequate resources and independence.

Enabling regulations, policies and procedures implemented.



Introduction of a new deposit insurance system (DIS) in accordance with international best practices and harmonized with banking law, particularly regarding bank resolution.

Using the IADI/BCBS Core Principles for Effective Deposit Insurance Systems (DICPs):

Legislation is drafted with a timetable for implementing the DIS.

Enabling regulations, policies and procedures are addressed.

A framework for high-level officials of financial safety net participants to make effective contingency planning for crisis prevention, preparedness and management is in place

Ensuring proper legal and operational framework for the financial safety net to resolve banks while preventing spillovers into a crisis.

Establishment of a high-level crisis management committee to make contingency plans for their individual agencies, which will be rolled up into a national contingency plan.

Implementation of a framework to reduce private debt overhangs

Negative NPL growth.

Negative accounting impairment growth.

Positive credit growth.

Increases in number of long-term debt restructuring settlements.

Systemic Risk Analysis Improve financial stability via early detection of and effective and timely responses to the emergence of systemic risk.

Indicators of systemic risk are in place and the capacity of the central bank (CB) or relevant agency to produce and analyze these indicators is strengthened.

List of indicators of systemic risk with proven ability to flag emerging threats.

CB can identify main threats to systemic stability based on those indicators.

i) IMF project assessments ii) Reports/documents from beneficiary countries iii) External evaluation of the SECO LOU iv) Reports/documents from other institutions

Assumptions: The authorities continue to prioritize work in this area. There is sufficient donor funding and technical assistance will be available to support the project. IT systems are in place to effectively capture data and produce relevant reports. Key inputs


Enhanced stress testing capability of the central bank

Stress testing tools are incorporated in CBs supervisory work.

CB can identify vulnerabilities of the banking system under stress.

such as the World Bank; and v) IMF/WB Annual Meeting

from industry are received and an adequate level of industry buy in is achieved. Risks: Staff turn-over and retention of trained staff. Lack of political will and commitment to the project and a lack of cooperation on the part of industry Mitigation: Focus on strategic advice and hands on capacity building to have a more permanent impact. Incentivize authorities to implement administrative reforms that contribute to a more stable staff.

Central Banks make sound financial stability decisions by effectively analyzing and assessing risks to the financial system, and create a structure on which effective financial sector decisions are made.

A functional Financial Stability Unit (FSU) within the Central Bank is in place, and timely financial stability reports produced providing a comprehensive assessment of risks and vulnerabilities in the financial system.


Strategic Objective Outcomes Sample Indicators Means of Verification Assumptions/Risk/ Mitigation Monetary Policy

Strengthen monetary policies

Removal of Capital Flow Management Measures (CFMs) on capital flow.

Capital flows are free of CFMs to the appropriate degree depending on the relevant country circumstances.

CFMs removed except on some short-term transactions which need to remain controlled for financial stability reasons.


Assumptions: The authorities continue to prioritize work in this area. There is sufficient donor funding and technical assistance will be available to support the project. IT systems are in place to effectively capture data and produce relevant reports. Key inputs from industry are received and an adequate level of industry buy in is achieved. Risks: Staff turn-over and retention of trained staff. Lack of political will and commitment to the project and a lack of cooperation on the part of industry Mitigation: Focus on strategic advice and hands on capacity building to have a more permanent impact. Incentivize authorities to implement administrative reforms that contribute to a more stable staff.

Adopting a formal inflation targeting regime.

The Central Bank (CB) announces the CBs objective to formally adopt an inflation targeting regime.

An inflation target is announced (either a point or a band).

Establishment of an effective macroprudential policy framework.

A macroprudential policy body is established with the mandate to implement macroprudential policy.

A legal framework is in place. The institutional framework assures willingness to act, fosters ability to act, and promotes effective cooperation.

The body has the relevant resources, information and tools at its disposal, and can map its assessment of risks into the implementation of appropriate tools.

The authorities are taking appropriate macroprudential policy action to mitigate systemic risk.


Objective Outcomes Sample Indicators Means of Verification

Assumptions/Risk/ Mitigation

Central Banking Operations Enhance the effectiveness of monetary policy implementation and strengthen central banks’ operational framework within the monetary policy regime of choice

To strengthen the capacity of the central bank to implement monetary policy effectively in the context of the given monetary policy regime.

An effective operational strategy (specification/ positioning of the operating target, and counterparty-types) consistent with the monetary framework and country circumstances is established.

A liquidity forecasting framework to guide monetary operations is in place. A set of monetary instruments necessary to meet the operating objective is established.

An effective liquidity management strategy utilizing the monetary instruments to achieve the operating target is in place.

The collateral framework is articulated, including with risk mitigation measures consistent with CB risk appetite.

Short-term money markets are functioning and sufficiently deep to facilitate monetary transmission.



To develop the capacity of the authorities to implement FX operations efficiently and in a manner consistent with their chosen monetary policy and FX regime.

A strategy for conducting FX operations including intervention is established with clear criteria for its use and consistent with the FX regime.

Appropriate tools are available to transact and allocate FX and facilitate price discovery.

The exchange rate is sufficiently flexible for the chosen FX regime.

Financial, operational and reputational risks associated with FX operations are adequately managed.


Improved inflation control

There is a legal mandate to pursue the objective of price stability.

There is a monetary policy committee or equivalent that is responsible to set monetary policy.

The CB has implemented the Forecasting and Policy Analysis System (FPAS). There is analytical and technical capacity to undertake forecasting and analysis.

The CB manages the policy rate effectively and guides inflation expectations. The CB is transparent regarding its policy implementation.

Establish an effective government securities market infrastructure consistent with the level of market development

Government securities market used effectively, as evidenced by a structured issuance program, an auction calendar and primary market data (bid-to-cover ratio, auction tail analysis, timeliness of auction announcements) and secondary market data (number of transactions, average value of transactions, spreads, timeliness of trade execution).

Advise and assist the central bank (CB) in introducing a new or a redenominated national currency, thereby replacing outstanding cash currency in circulation.

A currency conversion is launched following the implementation of a time-bound action plan within an agreed budget.

Advise/ assist the CB in adopting IFRS as their formal financial reporting framework

A timetable for IFRS adoption accepted by the Bank

Advise/ assist the CB and other relevant authorities in developing and reforming the national payment system.

Adoption of a national payments strategy and implementation of a time-bound action plan.

Payment, clearing and settlement systems are developed in line with international standards.

oversight unit is in place at the CB that coordinates with other relevant authorities supervising FMIs.

Develop/strengthen the legal and operational capability of the central bank to provide LOLR.

In line with best principles set out in WP/00/14 “Draft Working Paper on Lender of Last Resort—Lessons from the Crisis”


Objective Outcomes Sample Indicators Means of Verification

Assumptions/Risk/ Mitigation

Debt Management Minimize cost of public debt subject to risks (and foster development of domestic debt markets).

Formulate and support the implementation of a medium-term debt management strategy that is consistent with sustainability and leads to a robust portfolio.

Participants deliver presentations that demonstrate their knowledge of the MTDS framework.

MTDS being used effectively, as evidenced in the regular reporting such as quarterly bulletin and annual DM reports.

i) IMF project assessments ii) Reports/ documents from beneficiary countries iii) External evaluation of the SECO LOU iv) Reports/ documents from other institutions such as the World Bank; and v) IMF/WB Annual Meeting

Assumptions: The authorities continue to prioritize work in this area. There is sufficient donor funding and technical assistance will be available to support the project. IT systems are in place to effectively capture data and produce relevant reports Key inputs from industry are received and an adequate level of industry buy in is achieved. Risks: Staff turn-over and retention of trained staff. Lack of political will and commitment to the project and a lack of cooperation on the part of industry. Mitigation: Focus on strategic advice and hands on capacity building to have a more permanent impact. Incentivize authorities to implement administrative reforms that contribute to a more stable staff.

Establish an effective government securities market infrastructure consistent with the level of market development

Government securities market used effectively, as evidenced by a structured issuance program, an auction calendar and primary market data (bid-to-cover ratio, auction tail analysis, timeliness of auction announcements) and secondary market data (number of transactions, average value of transactions, spreads, timeliness of trade execution).

Enable international market access for issuance of international bonds

Issuance of bonds in the international market; or

Approval of an action plan to implement steps leading to the issuance; or

Decision not to proceed with international bond issuance

To develop effective debt portfolio risk analysis that is carried out periodically and to put in place an effective risk management framework on the basis of risk assessment to inform debt management strategies and fiscal sustainability, leading to a robust debt portfolio.

Risk management framework being used effectively, as evidenced in the regular reporting such as quarterly bulletin and annual DM reports.

Risk management targets as set out in DM annual reports are met or variances credibly explained.

Establish an effective market infrastructure for Islamic securities that is consistent with the level of market development

Issuance of Islamic securities; or

Approval of an action plan to implement steps leading to the issuance


ANNEX 3: EAST WORK PROGRAM FINANCIALS

Title Status Total Budget

Expenses Balance Percent Implemented

3.48 2.80 0.68

1 Turkmenistan Modernizing central bank operations in Turkmenistan - MCM_TKM_2015_01

Ongoing. Approved Sept 2014, ending 4/30/2018

0.41 0.24 0.17 59%

2 Kyrgyz Republic Strengthening Banking Supervision - MCM_KGZ_2014_01

Completed.8/27/2013-1/15/2014.

0.21 0.15 0.06 …

Returned to Pool (0.06) 3 Kyrgyz Republic Resident Legal Advisor for the

Kyrgyz Republic - LEG_KGZ_2012_02

Completed. 2/1/2012- 2/28/2014.

0.45 0.40 0.05 …

Returned to Pool (0.05) 4 Azerbaijan, Kyrgyz

Republic and Tajikistan

Domestic Government Securities Markets and Monetary Policy - MCM_MCD_2010_01

Completed. 6/1/2010 - 6/30/2011.

1.30 0.94 0.37 …

Returned to Pool (0.37) 5 Tajikistan, Kyrgyz

Republic, and Azerbaijan

External Sector Statistical Improvements - STA_MCD_2015_10

Completed. 11/01/2014- 06/30/2016.

0.59 0.58 0.01 …

Returned to Pool (0.01) 6 Tajikistan Improving Accounting Controls

at National Bank of Tajikistan -MCM_TJK_2010_03

Completed. 2/10/2011 -5/31/2012.

0.34 0.34 (0.01) …

Project Overrun 0.01 7 Turkmenistan Macroeconomic Governance

training - INS_TKM_2010_01Completed. 7/21/2010 -6/30/2011.

0.18 0.15 0.03 …

Returned to Pool (0.03)

$12.8 million over six years(In millions of U.S. dollars)

Country

MIDDLE EAST AND CENTRAL ASIA




11.14 9.55 1.60 8 Albania Monetary Policy Advisor to the

Governor of the Bank of Albania - MCM_ALB_2016_01

Completed. Approved on 6/26/2015, ending 5/31/2017.

0.50 0.45 0.04 91%

9 Regional, Albania Bosnia- Herzegovina, FYR Macedonia, Kosovo, Serbia

Reform and Modernization of Tax Administration - FAD_EUR_2015_02

Completed. 01/01/2015-12/31/2016.

1.92 1.86 0.05 …

Returned to Pool (0.05) 10 Regional, Albania

Bosnia- Herzegovina, FYR Macedonia, Kosovo, Serbia

Reform and Modernization of Tax Administration - FAD_EUR_2010_02

Completed.10/1/2010- 12/31/2014.

6.34 5.46 0.88 …

Returned to Pool (0.88) 11 Regional, Albania,

Bosnia and Herzegovina, Kosovo, Macedonia, Serbia

Improve Capacity for Government Finance Statistics in SEE Countries - STA_EUR_2015_11

Completed. 11/01/2014-06/30/2016.

0.54 0.49 0.05 …

Returned to Pool (0.05) 12 Serbia Public Financial Management -

FAD_SRB_2015_02Completed. 5/1/2015- 9/30/2016.

0.53 0.41 0.12 …

Returned to Pool (0.12) 13 Serbia Budgeting Modernization

Advisor Phase II - FAD_SRB_2011_01

Completed. 2/28/2011- 3/1/2013.

1.30 0.86 0.44 …

Returned to Pool (0.44) 0.00 - 0.01

14 Switzerland GFS Promotional Video-STA_EUR_2017_05

Ongoing. 2/28/2017-5/31/2017.

0.01 - 0.01 0%

Cash Inflows 12.83 3.00 9.00 0.83

14.62 2.05

Cash Balance Available 0.25


Total Approved Budget

SOUTH-EASTERN EUROPE

Returned to Pool

$12.8 million over six years(In millions of U.S. dollars)

Country

Total Pledges

Switzerland (Transfer from FAA)

Switzerland (LOU East 215 CHF) Switzerland (LOU East 216 USD)

OTHER


ANNEX 4. SOUTH WORK PROGRAM FINANCIALS



2.10 1.87 0.23

1 Ghana Strengthening Regulatory and Supervisory Capacity -MCM_GHA_2014_02

Completed. 04/01/2015-11/30/2016.

0.42 0.42 0.00 …

Returned to Pool (0.00) 3 Ghana Strengthening Regulatory and

Supervisory Capacity (Bank of Ghana) MCM_GHA_2011_01

Completed. 4/18/2011-1/31/2014.

0.73 0.71 0.02 …

Returned to Pool (0.02) 4 Ghana Enhance Financial Stability

Analysis and Reporting -MCM_GHA_2011_02

Completed. 4/18/2011- 01/31/2014.

0.41 0.38 0.03 …

Returned to Pool (0.03) 2 Ghana Tax Law Reform -

LEG_GHA_2011_01Completed. 5/11/2011 - 4/30/2015.

0.29 0.17 0.13 …

Returned to Pool (0.13) 5 South Africa Strengthening Fiscal Policy

Analysis at the National Treasury - FAD_ZAF_2010_01

Completed. 8/2/2010 - 6/30/2011.

0.24 0.19 0.05 …

Returned to Pool (0.05) 1.39 0.87 0.52

6 Indonesia Enhance Bank of Indonesia supervisory capacity -MCM_IDN_2010_02

Cancelled 0.25 0.00 0.25 …

Returned to Pool (0.25) 7 Vietnam Strengthening Tax Policy and

Administration - FAD_VNM_2010_01

Completed. 6/29/2011-10/31/2013.

1.14 0.87 0.27 …

Returned to Pool (0.27) 3.55 1.08 2.47

8 Egypt Strengthening Budget Formulation -FAD_EGY_2015_02

Ongoing. Approved on 02/17/2016, ending06/30/2018.

0.52 0.18 0.34 35%

9 Egypt Tax Administration -FAD_EGY_2015_03

Completed. Approved on 02/05/2016, ending 04/30/2017.

0.52 0.39 0.13 75%

10 Tunisia Tax Policy and Administration - FAD_TUN_2014_03

Completed: 1/24/2014 - 4/30/2016.

1.30 0.22 1.08 …

Returned to Pool (1.08) 11 Egypt Strengthening the tax

administration reform agenda - FAD_EGY_2010_02

Cancelled 0.49 0.14 0.35 …


$12 million over six years(In millions of U.S. dollars)

ASIA AND THE PACIFIC


Country

AFRICA




3.55 1.08 2.47

12 Egypt Strengthening fiscal management capacity -FAD_EGY_2010_03

Cancelled 0.73 0.15 0.58 …

Returned to Pool (0.58) 8.42 5.45 2.97

13 Colombia Revenue Administration-FAD_COL_2017_02

New. Approved on 11/22/2016, ending 01/31/2020.

0.92 0.10 0.82 10%

14 Peru Revenue Administration -FAD_PER_2017_01

New. Approved on 11/16/2016 ending 02/28/2020.

1.40 0.19 1.21 13%

16 Colombia Modernizing Debt and Treasury Management-FAD_COL_2009_01

Completed. 7/20/2010 - 4/30/2013

0.95 0.80 0.15 …

Returned to Pool (0.15) 15 Colombia Public Financial Management -

FAD_COL_2013_01Completed. 11/01/2013 - 4/30/2016.

0.50 0.44 0.06 …


17 Peru Support for Treasury and IFMIS Modernization-FAD_PER_2010_02

Completed. 11/1/2010-12/31/2014.

2.34 2.05 0.29 …

Returned to Pool (0.29) 18 Regional Consolidating reform of tax and

customs administration FAD_WHD_2015_01

Completed. 8/15/2014- 12/31/2015.

0.80 0.69 0.11

Returned to Pool (0.11) 19 Regional Reform and Modernization of Tax

& Customs Administration -FAD_WHD_2011_01

Completed. 2/28/2011- 4/30/2014.

1.51 1.20 0.31 …


0.35 0.23 0.11

20 Evaluation Report Completed. 0.22 0.15 0.07 …

Returned to Pool (0.07) 21 Switzerland Video Production of SECO

Funded Success Stories- ICD_CHE_2013_01

Completed. 6/18/2012 -9/30/2014.

0.13 0.08 0.04 …


12.00 12.00

15.80 3.80 0.00


$12 million over six years(In millions of U.S. dollars)

Total Approved Budget

Cash Balance AvailableReturned to Pool

Cash InflowsSwitzerland (LOU South 242 USD)

Total pledges


WESTERN HEMISPHERE

Country

OTHER


ANNEX 5: GLOBAL WORK PROGRAM FINANCIALS



6.31 0.75 5.56 1 Albania Monetary Policy Advisor to

Bank of Albania -MCM_ALB_2017_03

Ongoing: Approved on 11/22/2016 ending 1/31/2018.

0.45 0.11 0.34 25%

2 Colombia Improving Fiscal Transparency Project - FAD_COL_2017_04


1.40 0.20 1.20 14%

3 Ghana Strengthening Regulatory and Supervisory Capacity at the Bank of Ghana -MCM_GHA_2017_01


1.03 0.21 0.82 21%

4 Kyrgyz Republic Banking Supervision and Regulation - MCM_KGZ_2017_01


0.79 0.04 0.75 4%

5 Peru Public Financial Management - FAD_PER_2017_04


1.68 0.19 1.49 11%

6 Tajikistan Strengthening Bank Supervision - MCM_TJK_2017_02

Ongoing: Starting 5/1/2017 ending 4/30/2019.

0.97 0.00 0.97 0%

7.79 0.98 6.80 7 Albania, Bosnia and

Herzegovina, Kosovo, Macedonia and

STA Improve Capacity for GFS in South Eastern Europe -STA_EUR_2017_01


1.82 0.35 1.47 19%

8 Azerbaijan, Kyrgyz Republic, and Tajikistan

Central Asia Fiscal Transparency (GO) - STA_MCD_2017_01


0.92 0.15 0.78 16%

9 Albania, FYR Macedonia, and Serbia

Southeast Europe Revenue Administration -FAD_EUR_2017_02


3.20 0.24 2.96 7%

10 Colombia, Indonesia, and Peru

Sectoral Accounts and Balance Sheets Compilation - STA_IMF_2017_04


0.89 0.16 0.73 18%

11 Colombia, Peru, Tunisia, and Ukraine

Improve Capacity for Residential Property Price Indexes- STA_IMF_2017_05


0.96 0.09 0.87 9%

13.98 13.98

14.10 -

(0.12)


Cash InflowsSwitzerland (LOU South 242 USD)

Total Approved BudgetReturned to PoolCash Balance Available

COUNTRY-SPECIFIC

Total pledges

$24.1 million over five years(In millions of U.S. dollars)

Country/Region

REGIONAL


ANNEX 6: PROGRESS BY SECTOR UNDER THE EAST WORK PROGRAM

Country Title/ Project ObjectivesProject ID Progress as of April 30, 2017

Implementation Period

ONGOING

Tajikistan - Improve ESS accuracy, timeliness, and comprehensiveness

STA_MCD_2015_10 Kyrgyz Republic - Improve ESS accuracy, timeliness, and comprehensiveness11/1/2014 - 6/30/2016 Azerbaijan - Improve ESS accuracy, timeliness, and comprehensivenessTurkmenistan Modernizing central bank operations in Turkmenistan (NEW)MCM_TKM_2015_0110/15/2014 - 10/16/2016

COMPLETEDKyrgyz RepublicMCM_KGZ_2014_01 Build capacity to monitor banks under conservatorship for eventual resolution8/27/2013 - 1/15/2014 Assist in developing plans to address agenda of reforms resulting from July 2013 FSAPKyrgyz Republic Strengthening Financial Legal Framework at the NBKRLEG_KGZ_2012_02 Improve the financial sector legal framework for the Kyrgyz Republic2/1/2012-2/28/2014 Enhance the capacity of the NBKR Legal Department

Fostering domestic government securities markets and monetary policy

Improve the functioning of the government securities markets

MCM_MCD_2010_01 Install supporting systems, infrastructure for monitoring and analysis6/1/2010-6/30/2011 Improve coordination in public debt management among authorities and the central Tajikistan Improving Accounting Controls at the National Bank of TajikistanMCM_TJK_2010_03 Strengthen the accounting framework2/10/2011-5/31/2012 Improve Management Information

Improve governance of financial reporting and internal controlsTurkmenistan Financial Programming and Policies CourseINS_TKM_2010_01 Design effective macroeconomic policy recognizing the interrelationships across sectors 7/21/2010-6/30/2011

Strengthen CBT’s capacity to modernize its monetary framework

Enhance Banking Supervision at the National Bank of the Kyrgyz Republic

CENTRAL ASIA

Regional, Tajikistan, Kyrgyz Republic, Azerbaijan

External Sector Statistical Improvements

Fiscal Affairs

Monetary and

Ca pital Markets

Legal

Statistics

Regional, Azerbaijan, Kyrgyz Republic, Tajikistan




ONGOING AlbaniaMCM_ALB_2016_01 Strengthen monetary policy analysis and decision making by the Supervisory Council9/1/2015 - 9/30/2016 Support the efficient implementation of the monetary policy stance

Albania - The VAT refund system will function more effectively than currentlyBosnia and Herzegovina - Improve compliance management based on assessment of major risks to revenue collection

FAD_EUR_2015_02 Kosovo - Advise on finalizing major preparatory components for launching an IT reform1/1/2015 - 12/31/2016 Serbia - Reestablish dismantled compliance risk management structures and approach

FYR Macedonia - Advise on establishing structures to roll out the use of CRM approach

Albania - Improve compliance and dissemination of GFS data

Bosnia and Herzegovina - Improve compliance and dissemination of GFS dataKosovo - Improve compliance and dissemination of GFS data

STA_EUR_2015_11 Macedonia - Improve compliance and dissemination of GFS data11/1/2014 - 6/30/2016 Serbia - Improve compliance and dissemination of GFS dataSerbiaFAD_SRB_2015_02 Strengthen the budget preparation process5/1/2015 - 4/30/2016

COMPLETED

Bosnia and Herzegovina - Advise on corporate strategy, arrears management, VAT risk management

FAD_EUR_2010_02Kosovo - Review 2013 compliance response plan, advise on large taxpayer compliance, and e-performance management system

10/1/2010-12/31/2014Serbia - Advise on taxpayer services, audit, and IT governance. Debt collection strategy implemented for large and new collectible debts, compliance plans in place.FYR Macedonia - Facilitate phasing in of a modern CRM and arrears management

Serbia Budgeting Modernization Advisor Phase IIFAD_SRB_2011_01 Introduce a medium-term budget framework2/28/2011-3/1/2013 Introduce program budgeting

Strengthen expenditure prioritization process


Improve Capacity for Government Finance Statistics in Southeastern Europe (NEW)

Public Financial Management Advisor to the Ministry of Finance

Fiscal Affairs

Mo

ne

tary and

Cap

ital Marke

ts

Legal

Statistics

EASTERN EUROPE

Fiscal reforms project for Southeastern Europe (NEW)Regional, Albania, Kosovo, Bosnia and Herzegovina, FYR Macedonia, Serbia

Monetary Policy Advisor to the Governor of the Bank of Albania (NEW)

Regional, Albania, Kosovo, Bosnia and Herzegovina, FYR Macedonia, Serbia

Regional, Albania, Kosovo, Bosnia and Herzegovina, FYR Macedonia, Serbia

Reform and modernization of tax administration for South-Eastern Europe

OBJECTIVE Fully Achieved

Largely Achieved

Partially Achieved

Not Achieved


ANNEX 7: PROGRESS BY SECTOR UNDER THE SOUTH WORK PROGRAM



ONGOINGGhanaMCM_GHA_2014_02 Strengthen legal, regulatory, operational frameworks for risk-based supervision

3/3/2014-11/30/2016 Enhance the supervisory capacity of BOG supervisory staff

COMPLETEDGhanaLEG_GHA_2011_01 Enact a Tax Administration Act 5/11/2011-4/30/2015 Enact a Modernized Internal Revenue Act

Amend Value Added Tax (VAT) lawEnact a new Customs Management Act

MCM_GHA_2011_01

4/18/2011-1/31/2014 Strengthen legal, regulatory, operational frameworks for risk-based supervisionEnhance the supervisory capacity of BOG supervisory staffTo strengthen the supervisory process including introducing a supervisory program

MCM_GHA_2011_02

4/18/2011-1/31/2014 To strengthen the institutional framework of the BOG for financial stability analysis Build capacity in the BOG to undertake Financial Stability Analysis and ReportingTo strengthen Financial Stability Reporting and communication to the marketBuild capacity for publication and dissemination of the Financial Stability Report

South AfricaFAD_ZAF_2010_01 Strengthen analytical capacity in the National Treasury's Fiscal Unit team8/2/2010 - 6/30/2011 Provide international experience on fiscal rule design

Identify further technical training needs

COMPLETEDIndonesiaMCM_IDN_2010_02 Strengthen the institutional development of BI's learning centerCancelledVietnamFAD_VNM_2010_01 Subject legislative reforms to create a growth-oriented tax policy regime6/29/2011-10/31/2013 Support the implementation of tax administration modernization strategy

ONGOINGEgypt Strengthening Budget FormulationFAD_EGY_2015_02 Improve budgetary legal framework, budget preparation and fiscal risk management3/1/2016 - 6/30/2018

FAD_EGY_2015_033/1/2016 - 4/30/2017 Taxpayers file tax declarations and pay taxes in full on timeTunisiaFAD_TUN_2014_03 Streamline, strengthen, improve productivity of indirect and direct tax regimes1/24/2014-4/30/2016 Modernize tax administration and strengthen its effectiveness

Reform tax administration, integrating functions and responsibilities into a single

Tax Policy and Administration

Strengthening Regulatory and Supervisory Capacity (NEW)

Tax Law Reform

Strengthening Regulatory and Supervisory Capacity at Bank of Ghana

Enhance supervisory capacity at the Bank of Indonesia

Fiscal Affairs

Mo

netary an

d

Capital M

arkets

Legal

AFRICA

Enhance Financial Stability Analysis and Reporting

Strengthen Treasury capacity for fiscal policy analysis

ASIA AND THE PACIFIC

Egypt: Tax Administration

Strengthen tax policy and administration





CANCELLEDEgyptFAD_EGY_2010_02 Modernize effective tax administration9/30/2010-4/30/2015 Convert the General Sales Tax into a VAT, introduce small business taxationFAD_EGY_2010_031/1/2011-4/30/2014 Improve PFM systems across central, sub-national governments

Increase coordination between authorities and TA providers

ONGOINGColombiaFAD_COL_2013_01 Operationalize Business Continuity, Disaster Risk Plans for divisions of the Ministry8/29/2013-4/30/2016 Rationalize business processes within the reorganized structure

COMPLETEDColombiaFAD_COL_2009_01 Modernization of debt and treasury management7/20/2010-4/30/2013PeruFAD_PER_2010_02 Improving capacity for cash planning and management at the Peruvian treasury11/1/2010-12/31/2014 Modernization of the Peruvian financial management information system (SIAF)Regional FAD_WHD_2015_01 Improve compliance management in Colombia 9/1/2014 - 12/31/2015 Improve compliance management in PeruRegionalFAD_WHD_2011_012/28/2011-4/30/2014

Peru - Adopt a comprehensive compliance improvement program; strengthen audit, enforcement, and collection processes through the redesign of the IT systems

ICD_IMF_2015_01 SECO Bilateral Program Evaluation9/3/2014 - 4/30/2015ICD_CHE_2013_01 Video Production of SECO-Funded Success Stories6/18/2012-9/30/2014

LEGEND


Fiscal A

ffairs

Mo

ne

tary

an

d

Ca

pita

l Ma

rke

ts

Leg

al


Strengthen tax administration reform agenda

Strengthen fiscal management capacity

WESTERN HEMISPHERE

Consolidating reform of tax and customs administration


Debt and Treasury Management

Treasury and IFMIS Modernization

SWITZERLAND

Reform and Modernize Tax and Customs Administration in Colombia and PeruColombia - Strengthen capacity for improved compliance management, expand e-filing, restructure audit VAT refund processes, develop comprehensive risk model for

OBJECTIVE Fully Achieved

Largely Achieved

Partially Achieved

Not Achieved


ANNEX 8: PROGRESS BY SECTOR UNDER THE GLOBAL WORK PROGRAM



ONGOINGAlbaniaMCM_ALB_2017_03 Improve economic analysis and forecasting for better monetary policy decisions

1/16 2017 - 1/31/2018 Strengthen Central bank capacity to implement monetary policy ColombiaFAD_COL_2017_04 Improve coverage and quality of fiscal reporting

10/01/2016 - 04/30/2020 Strengthen identification, monitoring, and management of fiscal risksImprove integration of asset and liability management

GhanaMCM_GHA_2017_01 Implement Basel II and III regulatory framework

10/18/2016 - 10/17/2019 Improve risk-based supervision practices and processesDevelop strategy to implement Basel II Pillar 2 framework for ICAAP

Kyrgyz RepublicMCM_KGZ_2017_01 Implement a risk-based supervision system and upgrade other supervisory

4/9/2017 - 11/23/2018 Develop and strengthen banking regulations and prudential normsPeruFAD_PER_2017_04 Formulate a comprehensive, credible, and policy-based budget preparation

10/01/2016 - 09/30/2019 Strengthen identification, monitoring, and management of fiscal risksImprove coverage and quality of fiscal reportingImprove integration of asset and liability management framework

Public Financial Management (NEW)

Strengthening Bank Regulation and Supervision (NEW)

Banking Supervision and Regulation (NEW)

Monetary Policy Advisor to Governor of Bank of Albania (NEW)

Improving Fiscal Transparency (NEW)

Fiscal Affairs

Mo

ne

tary and

Cap

ital

Marke

ts

Statistics

COUNTRY-SPECIFIC


ANNEX 9: PROJECT PROFILES

Modernizing Central Bank Operations in Turkmenistan MCM_TKM_2015_01

Description

SECO agreed to finance a peripatetic expert to visit Ashgabat as part of a two-year project to support modernization of the Central Bank of Turkmenistan (CBT). The TA project is designed to build up CBT analytical capacity, especially for forecasting key indicators, to support eventual modernization of its monetary framework. The project will strengthen the CBT’s institutional capabilities by (1) establishing a database of economic indicators and building capacity to use it; (2) enhancing analysis and forecasting related to inflation and monetary aggregates; and (3) building capacity to analyze and report on the implications of effective exchange rate developments for competitiveness and diversification.

Overall Program Budget US$414,598

Expenditures through April 2017 US$244,082

Remaining Balance US$170,516

Overview of Progress Achieved through FY2017

In the second year of the project, the peripatetic expert, Mr. Ilmar Lepik, has continued to make steady progress in building the analytical and forecasting capacity of CBT staff. Mr. Lepik served as economic advisor to the President of Estonia in 2006-13, after working at the Bank of Estonia as Head of the Economics Department and member of the Monetary Policy Committee. He made five visits to Ashgabat between February 2016 and March 2017.

Building on the successful launch in the first project year of a database of economic indicators and the enhancement of analytical and forecasting capacity, in the second year, at the request of Turkmenistan’s Deputy Prime Minister, the focus has shifted to financial programming. The objective is to establish a quantitative framework encompassing the real, monetary, fiscal, and external sectors in order to give a panoramic picture of economic developments and provide a reference point for policy analysis.

The October 2016 mission included a one-week workshop with representatives from the CBT, Ministry of Finance, and Statistics Office that drew on a country case study written for ICD’s new Russian language financial programming course. In addition to presenting the analytical framework, the workshop helped build relationships between the institutions, as is essential for a joint financial programming exercise.

Subsequent missions employed data drawn from public and quasi-public sources in Turkmenistan. The economic content of the previous workshop was applied in a more comprehensive way, and preliminary projections for the baseline scenario were prepared. There are still enough project funds for three more missions. Possible topics are being discussed with the Turkmen authorities, and in the next two months a proposal will be prepared for SECO on use of the remaining funds. Over the past two years, the project has helped the authorities to improve their capacity to manage risks by providing analytical tools they can use to assess the impact of external shocks and examine alternative policy responses.


Monetary Policy Advisor to the Governor of the Bank of Albania MCM_ALB_2016_01

Description

After Albania introduced inflation targeting in 2009, the Bank of Albania (BoA) requested long-term assistance with designing and conducting monetary policy. The objectives of this project are to consolidate achievement of the inflation targeting plan and address the challenges to monetary policy transmission arising from euroization, market segmentation, and the policy rate lower bound in a context of disinflationary trends in the euro area.

Given the achievements of the project, the close cooperation of the authorities, and the residual work to be carried out to ensure completion of a wide range of initiatives already launched, the project, initially scheduled for 13 months, was extended by 12 months in follow-up project MCM_ALB_2017_03.





The progress achieved by MCM_ALB_2016_01 through FY2017 was driven by the outcomes of the multitopic IMF mission on monetary policy design and implementation conducted at the BoA in January 2016. The goal was to consolidate the results achieved in the first part of the project in FY2016 and operationalize the agreed strategies.

In terms of monetary policy design, with inflation rebounding from the low levels of the first half of 2016 and gradually returning to target, the project worked to improve BOA macroeconomic modeling and forecasting capabilities, especially medium-term forecasting and scenario analysis. Priorities were identified and improvements incorporated into the models, tested, and verified to ensure that the main shortcomings identified were addressed, although there is scope for further reform. The goal of MCM_ALB_2017_03, the follow-up project, is to enhance communication of monetary policy, as identified under MCM_ALB_2016_01, in order to anchor inflation expectations.

An optimization model to drive targeting of medium-term foreign exchange (FX) reserves was chosen, calibrated, and put in place. This ensures that accumulation of reserves above the minimum necessary is driven by a sound model that considers the economic and financial vulnerabilities identified and their evolution over time, while also considering the opportunity costs of holding FX reserves. A comprehensive strategy was elaborated to reduce euroization over the medium term to make monetary policy more effective and reduce financial stability vulnerabilities. The follow-up project will ensure both adoption and sound, consistent application of the strategy as initially envisaged.

In terms of monetary policy, the project mostly focused on embedding within well-defined frameworks recurrent decisions, such as the size of the portfolio of domestic financial assets, spelling out their objectives, constraints, procedures, and factors in decision-making; and allocating responsibilities for implementation. The frameworks adopted will ensure that decisions are consistent over time and anchor operational decisions in a hierarchy of objectives to be pursued to maintain a tight focus on how effectively and efficiently monetary policy is being conducted.

In light of what the project has achieved, it is possible that other countries can benefit from the BOA achievements and project deliverables. To this end, IMF Working Papers are being drafted on the estimation of the lower policy rate bound in a euroized economy and on de-euroization strategy; these should help publicize some of the main achievements of the project efforts. A regional conference of senior policy makers in the Western Balkans in May 2017 that discussed recent monetary policy, financial stability, and reserve management challenges, policy responses, and effects similarly offered an opportunity to inform peers of what the project accomplished.


Reform and Modernization of Tax Administration in Southeastern Europe (SEE) FAD_EUR_2015_02

Description

This two-year project, which closed on December 31, 2016, supported efforts to reform tax administration in Albania, Bosnia and Herzegovina, the Former Yugoslav Republic (FYR) of Macedonia, Kosovo, and Serbia. It provided an essential bridge between a previous SECO-financed IMF project that ended in December 2014 and a two-year follow-up project that began on January 1, 2017. The project focused mainly on helping tax administrations to (1) improve their strategic management capacity; (2) adopt modern methods of compliance management; and (3) strengthen IT systems. It was carried out in parallel with a continuing IMF tax administration project for SEE that is financed by the European Union (EU).

Overall Program Budget US$1,917,975

Expenditures through April 2017 US$1,864,935



Albania

Objective―The VAT refund system will function much more effectively; the authorities will be aware of how tax administration performance compares with international standards; and the authorities will be aware of the size and potentially also the composition of the VAT gap.

The VAT refund system has been redesigned: It is now risk-based and refund payments are up-to-date (previously refunds to taxpayers were delayed for years). A TADAT mission, which made the tax administration more aware of how the system performs against international standards, has influenced the shaping of new development objectives that were incorporated into the agency’s second-generation Strategic Plan for 2017–21. In addition, a targeted mission supported measurement of the VAT gap. A risk management unit (RMU) was established and staffed. This unit has operationalized the IT system risk module and designed two pilot projects as a precursor to wide roll-out of the compliance risk management (CRM) methodology. A redesigned HQ structure and all department directors are now in place.

Bosnia and Herzegovina

Objective―Compliance management in the national Indirect Tax Authority (ITA) is more strategic and based on an assessment of major risks to revenue collection; and the ITA makes strides in reforming its IT systems.

The ITA now has an RMU, and promising early results confirm that a modern CRM approach for VAT will be achieved. A data exchange agreement between the four BiH administrations is now operational and data are being exchanged. User requirements and tender material for a new ITA VAT and excise IT system have also been finalized. Electronic auditing capability has been enhanced through TA support in the form of both classroom training and workshops.

Kosovo

Objective―The tax administration will have finalized the major preparatory components for launching an IT reform; it will have in place a sound second-generation corporate strategy for reforms; it will have completed all the preparations for merging the customs and tax administrations.

Real progress has been made on the early phases of IT reform. The drafting of user requirements for a new system, detailed requirements for changes in current business processes, and project governance design have all been completed. Plans for merging the tax and customs administrations have been refined and reflect the rescheduled merger date of September 2017. There has been progress with reform of core business processes.


FYR Macedonia

Objective―The tax administration will have established formal organizational structures to roll out more widely the use of the CRM approach.

Through a TADAT mission, the tax administration has become more aware of how FYR Macedonia’s tax system performs against international standards, which has facilitated formulation of a second-generation modernization program. The government has approved an organizational restructuring, including establishment of an RMU and a Modernization Unit, now underway.

Serbia

Objective―The tax administration will have reestablished the dismantled CRM structures and will have come far with phase-in the CRM approach.

The RMU has been reestablished. In addition, the Compliance Council has endorsed the tax administration’s compliance plan for 2017 and embarked on its role of overseeing the development of a whole-of-agency CRM strategy. A Taxpayer Services Department has been established and a phased implementation plan will expand the nature and scope of its activities over the next two years. The tax administration is currently drawing up a plan to address issues identified in the TADAT assessment and work has begun on addressing weaknesses relating to active management of filing obligations.

General Project Implementation Risks

Reforms in SEE tax administrations have not progressed as fast as is generally seen in more advanced administrations. Though there are many reasons for this, the main one is the highly hierarchal management approach that in SEE is a feature not just of tax administration but of all government institutions. Managers and employees are less inclined to embrace reform initiatives and exercise their judgment in making decisions; low remuneration may inhibit discretionary effort; and there is a lack of open discussions in which both management and staff could challenge and contribute ideas and participate in strategic thinking. This is an area that may eventually warrant specific TA attention. However, achieving change of this magnitude requires overt championing by government leaders and willingness to drive a paradigm shift.


Serbia: Public Financial Management FAD_SRB_2015_02

Description

To build PFM capacity in the Serbian Ministry of Finance (MOF), the specific objectives of this project were to (1) strengthen budget preparation; (2) build capacity to assess fiscal risks; and (3) support the launch of a broader PFM reform program.

This project was designed to address weaknesses in Serbia’s medium-term budget process that undermined its credibility. It also aimed to establish more systematic assessment of fiscal risk, especially since some fiscal risks were being realized.





Budget preparation has been strengthened by design and partial implementation of a methodology for estimating and costing forward spending; better assessment of fiscal risks, based on a fully developed example of a fiscal risk statement; and a finalized PFM reform program. When fully in place, these elements will reinforce the medium-term fiscal strategy; they are not yet in full operation due to delays associated with elections and the government not being in place, which delayed the budget calendar and preparation of medium-term policy papers.

Although the SECO-funded PFM project in Serbia concluded in August 2016, the resident advisor equipped the authorities with a range of methodologies and tools that will assist in full implementation of the bottom-up medium-term budget framework. FAD will continue to support this process through engagement by the regional advisor financed by the European Union and in future HQ-led missions.


Strengthening Regulatory and Supervisory Capacity at the Bank of Ghana MCM_GHA_2014_02

Description

The overall objective of this project, which covered April 2015–November 2016, was to further strengthen the Bank of Ghana (BOG)’s legal and regulatory frameworks and supervisory oversight for banks, as well as consolidate the progress that has been made since January 2012 under the predecessor SECO-funded project.

A resident bank supervision advisor was assigned to the BOG to assist with key deliverables, such as implementation of the new Banking Act, introduction of Basel II and certain elements of Basel III, and integration of a revised supervisory framework. Due to unexpected delays with the recruitment and selection process, the advisor took up this assignment only in October 2015.





Unfortunately, during most of the advisor’s term, the new Banking Act remained a draft; also, it was not clear whether the draft act ultimately submitted to Parliament would be amended. Hence, it was difficult for the BOG and the advisor to start working on the implementation of the law. Nevertheless, BOG staff drafted the subsidiary regulations during the year of the advisor’s assignment.

The macroeconomic situation of Ghana deteriorated in 2015-16 and the authorities turned to the IMF to conclude a Fund-supported Extended Credit Facility (ECF) program. Consequently, during this period much of the BOG’s supervisory capacity was tied up with the conduct of an updated Asset Quality Review of the Ghanaian banks, an ECF structural benchmark.

With respect to Basel implementation, the advisor drafted a time-bound action plan and commenced work giving existing committees new terms of reference. In terms of risk-based supervision, the advisor focused on three core areas: (1) organizational framework and oversight; (2) people—judgment, experience/action; and (3) a supervisory toolkit for records and document management to support the integrity of decisions by supervisors. The advisor also held training sessions for staff on supervisory plans and supervisory assessments of risk governance and management of credit risk. The advisor also launched a review of the draft regulations.

Since the project covered only one year, the advisor’s work is continuing as part of the successor SECO-funded project (project ID: MCM_GHA_2017_01).


Egypt: Strengthening Budget Formulation FAD_EGY_2015_02

Description

The project is designed to help the authorities to reinvigorate and advance Egypt’s PFM reform agenda, which has been stalled by political instability. The project objectives take into account the PFM reform strategy and action plan developed with World Bank support. The strategy and action plan address such PFM challenges as reinforcing the legal framework; consolidating the budget process; developing the medium-term perspective in fiscal forecasting; enhancing the policy and programmatic context for preparing budgets; better automating the budget process; strengthening cash planning and management; accelerating achievement of a fully operational treasury single account (TSA); and heightening capacity for monitoring and measuring fiscal risks.

The project has three points of focus: budget legislation, budget preparation, and managing fiscal risks. The project is therefore reviewing current budgetary laws and supportive regulations and recommending revisions or, as needed and if agreeable to the authorities, new legislation. The work on budget preparation recognizes the need for a medium-term perspective that is also consistent with the country’s macrofiscal framework and development plans and supported by a more analytical and transparent presentation of the budget, such as a program format. Finally, on fiscal risks, the project seeks to help the authorities enhance the analysis and disclosure of fiscal risks and build capacity to manage such risks.





The most progress has been achieved in budget preparation and fiscal risk management. In the context of the IMF-supported program, fiscal objectives have been set as the foundation for a thorough and coherent medium-term fiscal framework with improved macrofiscal forecasting. The next step is to better integrate this medium-term perspective into the budget process in line with the strategic advice provided in FY2017. With project support, efforts have also been made to introduce program budgeting for seven pilot ministries; this is expected to be reflected in the 2018 budget proposal.

The main factors enabling success are: (1) strong commitment to reform by both the government and Parliament; (2) the reform commitments made under the IMF-supported program; and (3) the relatively advanced information collection and analytical capabilities of the Ministry of Finance. The TA delivery modalities also contribute to success, particularly because there is continuity in the composition of mission teams and coordination with other TA providers.


Egypt: Tax Administration FAD_EGY_2015_03

Description

The project assisted the Egyptian Tax Administration (ETA) as it addressed certain weaknesses identified in the Tax Administration Diagnostic Assessment Tool (TADAT) exercise undertaken in October 2015. As a result of the exercise, taxpayer declaration filing and payment of taxes were selected as the priorities for work on core tax administration functions.





The project began in March 2016 and was completed in April 2017. TA was delivered through both missions from IMF headquarters and visits from short-term experts, who provided technical training and assistance in designing more effective procedures for managing filing and payment compliance. As it became apparent that more general managerial weaknesses could undermine the outcome of the project, TA was extended towards the design of implementation and evaluation procedures to be piloted, and building project management capacity.

Pilot exercises were conducted in two phases. The first, from August 1 to October 31, 2016, generated mixed results, due mainly to a communications breakdown within the ETA in which guidance materials prepared during the STX visits were not disseminated to the Project Management Office (PMO) and pilot offices. A consequent failure to establish control groups from the start of the pilot made it hard to assess the impact of improvement initiatives.

Improvements recorded in the Phase I pilot were based on too small a sample of offices and taxpayer files to provide a reliable indicator of success for roll-out of the enhanced procedures. The ETA therefore conducted a second phase, based on a larger sample of offices and taxpayer files, and committed more resources to the PMO and the pilot offices.

The Phase II pilots have shown encouraging results; Value Added Tax (VAT) outcomes in particular were significantly better than in the control group. The benefits of risk assessment and differentiated taxpayer treatments are now understood and accepted in both the PMO and the pilot offices, as is the need for standardized data collection, analysis, and performance reporting.


Colombia: Revenue Administration FAD_COL_2017_02

Description

The project targets mobilizing resources and strengthening management of tax and customs administration to raise revenue that contributes to long-term and inclusive growth. It consolidates results achieved by the tax and customs agency (DIAN: Dirección Nacional de Impuestos y Aduanas Nacionales) under previous projects.

In addition, the social security agency (Unidad de Gestión Pensional y Parafiscales – UGPP) and the gambling tax agency (Coljuegos) will benefit from advice on how use risk management to manage corporate priorities and compliance effectively.





Although the project approval process took longer than anticipated, FAD was able to deliver all seven assignments planned for FY2017. Project execution did not begin until February 2017 when a staff visit and two STX visits assessed DIAN’s progress on implementing previous FAD recommendations, and assisted the DIAN in defining STX activities for the remaining two months of FY17 and the FY18 action plan. From March to April 2017, four STX visits assisted the DIAN with taxpayer segmentation, processing tax arrears, and selective risk-based control for customs operations.

The February 2017 visit found that progress had been slow since the previous SECO project ended in December 2015, especially action on systems for authorizing tax invoices, controlling suppliers, and registering noncompliant taxpayer behavior. The authorities are aware that constant HQ and STX visits are central to ensuring that the DIAN keeps moving forward with reforms; the lack of such visits explains the delays. The authorities, who were eager to start the new project, requested additional TA on assessing and streamlining the workload of each DIAN operational unit.

Having learned from the previous project, at the start of the new project FAD secured the commitment of the authorities to incorporate the project action plan into the DIAN operational plan, where it will be monitored regularly: keeping the authorities informed of progress will help ensure buy-in and traction. Also, the new project includes detailed terms of reference for each STX visit and the DIAN team has a technical staff person responsible for each component of the project, Finally, DIAN senior managers have authorized that each team member receive the TA reports directly from FAD, enabling prompt follow-up of issues identified.


Peru: Revenue Administration FAD_PER_2017_01

Description

The project targets mobilizing resources and strengthening management in tax and customs administration in Peru to raise revenue to contribute to long-term and inclusive growth. This 36-month project will consolidate the results achieved by the tax and customs agency (SUNAT: Superintendencia Nacional de Aduanas y de Administración Tributaria) and lessons learned during previous SECO projects (FAD_WHD_2011_01 and FAD_WHD_2015_01).



Remaining Balance US$1,214,314


Official project activities began only in March 2017. The FAD proposal for a new project funded by SECO was approved by the authorities when they took office in July 2016; however, during the 2016 IMF Annual Meetings the Minister requested some refinements. In December 2016, FAD worked with the authorities on drafting a new proposal, which was approved by SECO in February 2017, and a project action plan for the remaining two months of FY17 and all of FY18.

The main topics of the revised project are crafting the SUNAT compliance risk management model, which includes improving the agency’s information systems; specifying activities to mitigate compliance risk in the manufacturing and trade sectors and for large taxpayer business reorganizations, and improving risk-based control for customs operations; formulating a comprehensive VAT compliance control model, with new systems for registering taxpayers, authorizing tax invoices, controlling suppliers, registering noncompliant taxpayer behavior, and strengthening the VAT refund process; and improving organizational arrangements to address the overlapping functions of several HQ units and to align local branch procedures to the SUNAT corporate strategy.

A March 2017 TADAT mission assessed Peru’s tax administration system and two STX visits assessed the SUNAT information system and helped design the VAT compliance control model. In April 2017, an STX visit followed up on the design of the VAT compliance control model. The TADAT mission found SUNAT has a solid tax administration structure. In most areas, international good practices are already in place: SUNAT obtained an A in 15 of the 28 TADAT indicators critical to tax administration and a D in only 3. In recent years SUNAT has also succeeded in reducing the VAT gap, from 35.4 percent in 2010 to 30.8 percent in 2014, and in raising the tax-to-GDP ratio, from 15.4 percent in 2010 to 16.5 percent in 2014. However, these percentages are still considerably lower than those of the leading tax administrations in the region and are not consistent with SUNAT’s institutional maturity. With the support of SECO, FAD has provided TA in the areas that earned an A from the TADAT team. This new SECO project is focused precisely on the main weaknesses identified by previous FAD missions that hinder the capacity to mobilize additional revenues: overlap in HQ functions, inadequate monitoring of compliance risk mitigation activities, lack of alignment of local branches with the corporate strategy, lack of a comprehensive VAT compliance control model, and lack of a comprehensive post-clearance control model.

The lessons learned from previous SECO projects should make it possible to keep reinforcing the institutional culture during this project. For example, the commitment of the authorities, secured at project outset, and the fact that they are kept informed of progress has helped ensure buy-in and traction. A well-coordinated technical work plan within an agreed schedule has been refined with each HQ-led mission: terms of reference are specified for each STX visit, enabling informed follow-up and a flexible response to changing circumstances. The Revenue Administration – Gap Analysis Program (RA-GAP) missions helped strengthen analytical capacity. Close cooperation with other TA providers, particularly the World Bank and the IDB (sometimes through concurrent missions) ensures that technical work plans were well coordinated and duplication avoided.


Monetary Policy Advisor to the Governor of the Bank of Albania MCM_ALB_2017_03

Description

After Albania introduced inflation targeting in 2009, the Bank of Albania (BoA) requested long-term assistance with monetary policy design and application. The objective of this project is to ensure continuous pursuit and ultimate completion of a wide range of initiatives launched by the predecessor project, MCM_ALB_2016_01.





Progress through FY2017 continued to be driven by the outcomes of the multitopic IMF mission on monetary policy design and implementation conducted at the BoA in January 2016, which the authorities reconfirmed in November 2016. The goal of the project is to consolidate the results achieved and elaborate on and operationalize the initiatives initially chosen. A secondary goal is to share the main achievements of the project with other countries in the region and beyond that might also benefit from the BoA experience.

In terms of monetary policy design, as the external environment improves and the output gap narrows, inflation is slowly drifting up to the 3 percent BoA target. The project is therefore directed to enhancing BoA macroeconomic modeling and forecasting capabilities, especially as they relate to incorporating medium-term forecasting and scenario analysis into the standard decision-making process. It is also concerned with better communication of monetary policy and forecasting as a way to help anchor inflation expectations and consolidate inflation-targeting achievements.

The de-euroization strategy elaborated as part of the predecessor project, MCM_ALB_2016_01—reducing financial euroization over the medium term, to heighten the effectiveness of monetary policy and reduce financial stability vulnerabilities—has been adopted, operationalized, and communicated. The current project will ensure its sound and consistent implementation.

In terms of conducting monetary policy, the project continues to focus on formalizing the framework and operational procedures to drive recurrent decisions and on making consistent use of the frameworks elaborated.

The project is also analyzing options to promote the government securities market, widen the investor basis, and generally deepen the financial system. Pursuing these options will then become a central priority.

In light of the considerable achievements of the project, it seemed likely that other countries could benefit from the BoA achievements and project deliverables. To that end, two IMF Working Papers (WPs), on estimation of the lower policy rate bound in a euroized economy and on the de-euroization strategy, are being written. A Regional Conference for Western Balkans senior policy makers was also organized to discuss recent monetary policy, financial stability and reserve management challenges, policy responses, and the effects thereof. Held successfully in May 2017, the conference offered an opportunity to describe the project achievements, partly through presentations based on the two WPs. Finally, the project also contributed to a short-term mission to Serbia to assess activities related to the National Bank of Serbia dinarization strategy and recommend possible enhancements. This leveraged the BoA experience with de-euroization strategy and offered an opportunity for cross-country fertilization.


Improving Fiscal Transparency in Colombia FAD_COL_2017_04

Description

The project is working with the Colombian Ministry of Finance (MHCP) to reinforce its main public financial management (PFM) systems and bring them closer to OECD standards. The project concerns are treasury and debt management; fiscal transparency and fiscal risks; government accounting and fiscal reporting; and financial management information systems. The project has three strategic objectives: (1) improved the coverage and quality of fiscal reporting; (2) better identification, monitoring, and management of fiscal risks; and (3) closer integration of asset and liability management. It will also have a regional component: supporting participation of the Colombian authorities in the Forum of Latin American Treasurers (FOTEGAL), which is supported by the IMF, the World Bank, and the IDB.

The project builds on the outcomes and lessons learned from the previous SECO-financed project dealing with the same areas, but in this iteration there is broader coverage of issues and institutions. An FTE conducted by the IMF will have a roadmap to implement reforms in the areas assessed. Under the leadership of Colombian authorities, an overall PFM reform plan will be developed based on the FTE and PEFA results.





This first assessment covers only the seven months since the project started in October 2016. The MHCP is leading elaboration of the action plan to guide the PFM reforms that will be executed with the IMF, SECO, and the World Bank.

One milestone for Objective 1, Improved Coverage and Quality of Fiscal Reporting, was reached as planned in December 2016, when evaluation of the strategy to incorporate and update the new chart of accounts and budget classifications in IFMIS was completed. During the coming year, the long-term advisor will follow up on integrating budget classifications and the chart of accounts into the IFMIS.

On Objective 2, Strengthened Identification, Monitoring and Management of Fiscal Risks, the results of the FTE conducted in April/May 2017 will be used to identify weaknesses in the fiscal risk assessments and recommend measures to achieve this objective.

As for Objective 3, Improved Integration of Assets and Liabilities Management, the mission is following up on progress in cash and debt management since the previous SECO project ended. There is work to be done in the areas of cash forecasting, review of core treasury business processes, and elaboration of guidelines for tracking treasury activities. The project will provide TA on designing an information system to integrate cash and debt management.


Banking Supervision Advisor to the Bank of Ghana (BoG) MCM_GHA_2017_01

Description

The project aims at financing a resident banking supervision advisor in the BoG for an additional two years to (i) further strengthen the BoG’s legal and regulatory frameworks and supervisory oversight for banks; (ii) consolidate the progress made since January 2012 under the predecessor SECO-funded projects; and (iii) improve the financial stability and macroprudential policy frameworks.

The first year of the current banking supervision advisor has been financed by SECO under an earlier project (project ID: MCM_GHA_2014_02), which ended on October 17, 2016. That project achieved notable success in recommending to the BoG to make progressive improvements to its risk-based supervision (RBS) and its regulatory approach of the banking industry. Some recommendations were implemented although full adoption of better practice in RBS remains a work in progress. The development of Basel policy internally is helping to build staff capacity before consultations commence with the banking industry on the new requirements. For longstanding success, the improvements to RBS and the policy development on Basel are interlinked and depend on the other. The current project allows the advisor to continue to focus on implementing the Basel accords and improvements in the organizational framework and practices of RBS at the BoG.





The advisor has had to overcome significant challenges to execute the project. At end-2016, the general elections were won by the opposition and eventually there was a change in the Governor of the BoG in March 2017. Consequently, the attention of management has been diverted from the Advisor’s program objectives. Moreover, mandatory retirement of senior departmental managers and a renewed focus on an Asset Quality Review and bank resolution have added to the strains on banking supervision. Nevertheless, the advisor achieved notable successes in fostering the acceptance of a Basel Implementation strategy and program. The program has three distinct phases and clear deliverables to reach the very ambitious target completion date of January 1, 2018. Achieving this deadline would make it possible for the advisor to follow through on the implementation until the end of his assignment in October 2018.

To alleviate the problems regarding the transition to new leadership, the advisor has prepared a strategy paper to support the department’s direction and transition, as more senior staff will retire in 2017. This strategy with key deliverables—Capital Requirements Directive and Reporting forms (as part of a Quantitative Impact Study) - was accepted by the then Governor. The new Governor has reaffirmed the BoG’s support for the strategy.

To facilitate and expedite the deliverables for the Basel Policy Directive by the BoG, the advisor gained support for and delivered an offsite program in May 2017 with the engagement of 28 BoG staff. The offsite exercise built on policy work of the BoG developed in previous years complemented with practical drafting and guidance from the Advisor. Working in four groups the staff made substantial progress on their sections which ultimately resulted in a completed first draft by June 2017. The Advisor is reviewing the draft directive, developing the reporting forms and advancing the strategy to consult with industry.

The IMF-financed program has set structural benchmarks for the BoG in supervision. To facilitate the execution of the IMF-program, the advisor has worked with the BoG on improvements in RBS to focus on greater planning and oversight of supervision work and demands. The Department supervision plan for 2017 includes more specific plans for bank examinations, as well as timelines for the sign-off on supervisory reports to banks.


Peru Public Financial Management FAD_PER_2017_04

Description

The goal of the project is to strengthen Peru’s main public financial management (PFM) systems, giving special attention to adoption of the recommendations of the 2015 Fiscal Transparency Evaluation (FTE). The recommendations relate to improving budget preparation, macrofiscal forecasting, fiscal and accounting reporting, and management of fiscal risks.

The project is directed to achievement of four strategic objectives: (1) comprehensive, credible, and policy-based budget preparation; (2) better identification, monitoring, and management of fiscal risks; (3) improved coverage and quality of fiscal reporting; and (4) better integration of asset and liability management. The project will build on the outcomes and lessons learned from the previous SECO-financed project, which focused on strengthening treasury and debt management and improving Business Continuity and Disaster Recovery Plans (BCP/DRP).





Because the project began in October 2016, this first assessment covers only seven months. A new government had taken office in July 2016 and issued several urgent decrees through December. The first mission therefore took place in January 2017. The project got off to a good start with the January Medium-Term Budget Framework (MTBF) mission. The MTBF is a strategic objective for Peru: one priority for the Minister of Finance is to enhance credibility and incorporate a medium-term perspective into the budget process. He seeks to put in place a multiyear budget plan to help order the annual budget negotiations, avoid incremental spending, and ensure consistency with the new fiscal rules (nominal deficit, debt, and general government spending).

The IMF recommended three-year rolling ceilings to inform the budget preparation and medium-term planning. The HQ mission was immediately followed by visits by short-term experts in March and April so that the Ministry of Economics and Finance (MEF) could start implementing the MTBF in 2017. The experts worked closely with the MEF and selected line ministries, provided extensive recommendations, and prepared a detailed action plan.

The MEF is following the proposed action plan in preparing the 2018 budget. The first MTBF will define three-year ceilings for each budget line and each ministry. The first year will be binding (acting as the annual budget) and the two subsequent years’ indicative, to be updated as evolving macrofiscal conditions require. The MTBF is being designed to be consistent with the macrofiscal framework, fiscal rules, and annual budget. Initially the MTBF will cover the central government and the provinces; municipalities will be added in a second stage.

The MEF made its commitment clear in a seminar it organized in April 2017 on international experiences with the use of MTBFs and supervision of subnational government finances. About 200 central, provincial, and municipal budget officials participated. The IMF shared international experience with the MTBF and disseminated the results of TA provided to Peru. Supporting the seminar were the IMF (with financial support from the Managing Natural Resource Wealth Topical Trust Fund [the MNRW-TTF]), the IDB, and SECO. The participants were particularly interested in mechanisms for updating the MTBF annually and coordinating it with the fiscal rules. Officials from Brazil, Mexico, and Spain presented their experiences, pointing out that the finances of subnational governments (SNGs) are a major fiscal risk. Peru wants to improve the quality of budget execution, invest more in infrastructure, and mitigate the risks related to SNGs.

The long-term expert was selected and presented in April 2017. Mr. Mauro Fridman was chosen through an IMF open recruitment process. He will begin his assignment as soon as the Peruvian Ministry of Foreign Affairs delivers the required privileges and immunities, as was expected by end May. Mrs. Virginia Alonso, FAD project manager, presented Mr. Fridman to the Peruvian authorities and SECO representatives in April 24-28, 2017, when his main tasks and responsibilities were discussed. Coordination with SECO representatives locally has been excellent.


The authorities are highly committed, and the project is considered a strategic support for the reform agenda. MEF budget officials are already working on the new methodologies.

TA for the other objectives is planned to start after June 2018. Specifically, in FY18 fiscal risks will be the subject of TA, starting with managing the risks of natural disasters, which the IMF and MEF identified as a priority after analyzing the needs arising from the 2017 emergency. Other fiscal risk areas of interest to the project are public-private partnerships, macrofiscal risks, and inadequate reporting of fiscal risks. Work on the project objectives related to treasury and accounting may start later in FY2018 and continue into FY2019. Peru will participate in the annual regional seminar of accountants, FOCAL, in August 2017 in Panama.



During the period assessed in this report, the new long-term GFS advisor conducted missions to each country to begin building relationships and drafting flexible workplans to guide TA over the three years of the project. The workplans take into account the assistance being provided by the long-term advisor and by STXs who worked with the countries in the previous phase of the project and will continue to do so. Representatives of all five countries attended a well-regarded workshop dealing with Eurostat EDP reporting requirements held in Ljubljana in March 2017.

Albania

Albania saw the fewest interactions during the assessment period. The final TA mission funded in the first phase of the project visited Tirana in May 2016, and the GFS advisor conducted an initial mission in November 2016 but the next mission, in May 2017, was outside the period covered by this report.

The priority for the work with Albania is to establish a detailed work plan that emphasizes building up fiscal reporting. Because Albania, which is the most advanced of the five project countries, already reports comprehensive annual GFS data to STA and debt data to QPSD, the project is concentrating on improving its reporting of data to Eurostat and creating an environment for integrated compilation of fiscal data. First steps have been to review interagency work arrangements and the memorandum of understanding between the Ministry of Finance, the Statistics Office, and the Bank of Albania.

Bosnia and Herzegovina

Of the five SEE countries, Bosnia and Herzegovina has seen the most intensive engagement, with the final first-phase mission taking place in June 2016 and intensive engagement by the regional long-term advisor beginning in October. The long-term advisor has conducted five missions to Sarajevo and Banja Luka, and an STX mission took place in April 2017. The number of missions reflects the country’s complicated governance arrangements and the importance of engaging with all the different entities.

Improve Capacity for GFS in South Eastern European Countries STA_EUR_2017_01

Description

For this project, STA is providing TA to Albania, Bosnia and Herzegovina, Kosovo, Macedonia, and Serbia on improving government finance statistics (GFS). The goal is to achieve concrete results within three years, building on work done in the initial project (October 2014 to June 2016), and make substantial progress in producing data consistent with the Government Finance Statistics Manual 2014 (GFSM) and the requirements of the European System of Accounts 2010 (ESA) and Excessive Deficit Procedure (EDP), which will support the EU membership aspirations of SEE countries. The project’s main goals are to (1) finish delineating the public and general government sectors in terms of the GFSM and ESA definitions and publish a register of general government and public sector units in each country; (2) report EDP data and metadata to Eurostat; (3) report comprehensive data on debt to the World Bank / IMF Quarterly Public Sector Debt Database (QPSD); and (4) fill in gaps in reporting of annual GFS data to the STA for inclusion in the GFS Yearbook database. Secondary goals are to improve the quality of existing data and build capacity in GFS and EDP statistics. These goals are to be achieved through capacity building (TA and training), with high engagement and accountability on the part of beneficiary countries.





The project has worked with the central authorities, GFS compilers in the Central Bank and the Agency for Statistics in Bosnia and Herzegovina, and entity-level institutions in both the Federation of Bosnia and Herzegovina in Sarajevo and the Republic of Srpska in Banja Luka. The primary concern of the project has been to improve compilation at all levels and respond to the need for better coordination between institutions and entities. Attention is also being directed to inter-agency cooperation and clarifying data flow in Bosnia’s complex institutional structure. Progress has been made on debt reporting; a time series of debt data awaits management clearance before it can be reported to QPSD. Work also continues on delineating general government and public sector units, and initial steps have been taken on compiling data for the EU.

Kosovo

In April 2017, the long-term advisor made two visits and the STX one. Good progress had been made earlier on reporting data to the IMF, with annual GFS data reported for the first time in 2015 and revised data submitted in 2016. Compilation of balance sheet data, including debt statistics, has begun and it is hoped that Kosovo can begin reporting to QPSD early in 2018. Kosovo’s list of general government units has been published, and the chart of accounts is being revised to enable reporting of data to Eurostat later in the project, as scheduled in the action plan.

Macedonia

Macedonia has hosted two missions, an initial visit by the long-term advisor and a joint mission of the STX and the long-term advisor in February 2017. Work continues on sector classification and the delineation of general government and public sector units, but most of this work has been completed. The authorities have begun reporting central government debt to the QPSD and plan to begin reporting annual GFS to the IMF by yearend. A broad work program has been agreed and responsibilities allocated to the Ministry of Finance, the State Statistical Office, and the National Bank of the Republic of Macedonia (NBRM). Initial steps have been taken on accrual recording of revenue and expenditures, and the bridge table linking Macedonia’s chart of accounts to GFSM 2014 and ESA 2010 classification has been comprehensively reviewed. The NBRM is making good progress on the general government financial accounts.

Serbia

There were three missions to Serbia during the assessment period: a joint visit by the regional long-term advisor and an STX in November 2016, a visit by the long-term advisor in February 2017, and one by the STX in April. The project is working closely with the Statistical Office of the Republic of Serbia and the National Bank of Serbia to finish delineating the general government sector and finalize bridge tables to enable compilation of GFSM 2014 and ESA-based fiscal data. Publication is expected by the end of 2017. Serbia is not yet reporting to QPSD or providing annual GFS data to the IMF but is expected to begin doing both early in 2018.


Central Asia and South Caucasus: Fiscal Transparency STA_MCD_2017_01

Description

For this project, STA provides TA and training to improve fiscal statistics in Azerbaijan, the Kyrgyz Republic, and Tajikistan. The goal is to strengthen the ability of the authorities to (1) better analyze and understand national economic developments and the underlying fiscal position; (2) formulate and conduct appropriate macroeconomic policies; (3) capture and assess fiscal risks; and (4) promote fiscal transparency.

By the end of the project, the three countries are expected to have improved their fiscal capacity and the quality of fiscal statistics for analysis, policy making, and IMF surveillance. Azerbaijan and Tajikistan are also expected to make progress on fiscal sector requirements for subscribing to the IMF Special Data Dissemination Standard (SDDS). To this end, the project will help draft GFS action plans with country-specific verifiable indicators and milestones on the road to achieving the intended outcomes; it envisages close cooperation with other capacity development providers, such as FAD and the World Bank PFM Modernization Project, to complement PFM reforms with those on GFS. Secondary goals are to improve the quality of existing data and build capacity in GFS areas through TA and training, with high beneficiary-country engagement and accountability.





The project was launched by an opening workshop November 1–3, 2016, in Baku, Azerbaijan. The workshop was opened by the Vice Minister of Finance of Azerbaijan, Mr. Emin Huseynov, and by Mr. Rainer Koehler, Division Chief of the STA Government Finance Division. The aims of the workshop were to familiarize the participating countries with the project objectives and activities and for each country to draw up an action plan to achieve the project objectives. The countries described how their fiscal statistics are currently compiled. IMF experts provided a brief theoretical overview of the Government Finance Statistics framework. The workshop was successful; participant ratings averaged 4.8 (out of 5).

Based on the analysis and groundwork laid at the opening workshop, missions were conducted to Azerbaijan and the Kyrgyz Republic to refine the needs assessment and plans for improving the quality and frequency of fiscal statistics. During the missions the countries agreed on specific work plans for both short-term actions to improve the quality of current data and long-term actions to increase the frequency of data transmission and fill gaps in balance sheet data. An important achievement in both cases was obtaining political support for the project. The planned mission to Tajikistan will have the same goals.

Azerbaijan

Work during the first mission was directed to improving the legal and organizational structure for data compilation and formalizing collaboration between the MOF and the Statistical Committee, which compiles the data. Further work focused on improving the quality of existing data and establishing a work plan to strengthen fiscal reporting by compiling balance sheets. Azerbaijan already reports GFS data in the format of the GFSY Questionnaire, which is a first step to adopting the GFSM2014 methodology. After the mission, Azerbaijan submitted to STA improved GFS data for 2015 and expressed its interest in participating in the common World Bank/IMF public sector database.

Kyrgyz Republic

The Kyrgyz Republic is the most advanced of the countries participating in this project in terms of GFS compilation. Project work focused on the first submission of quarterly data and the first transmission of public sector debt statistics. Also, to


further improve data quality, a preliminary exercise of comparison with other macroeconomic statistics (balance of payments, monetary, and financial statistics) was conducted. The Kyrgyz Republic already provides data in GFSY format for the general government sector. Next will come work on filling gaps in balance sheet data.

Tajikistan

Work has not yet started. A delayed response from the Tajik authorities to the mission proposal caused a significant reprogramming of the project schedule. However, with the motivation shown by Tajikistan staff during the opening workshop and with committed political support, there may well be visible results in a short time.


Develop Capacity to Compile Sectoral Accounts and Balance Sheets in Selected Emerging Market Economies STA_IMF_2017_04

Description

The IMF Statistics Department (STA) is providing TA to Colombia, Indonesia, and Peru on sectoral accounts and balance sheets to enable them to detect systemic risks, vulnerabilities, and possible contagion from economic shocks. During the initial discussions, the authorities acknowledged the additional benefit of this work as they move to comply with the Special Data Dissemination Standards Plus.

The initial focus is on annual estimates, with a view to building capacity to issue quarterly frequency integrated sectoral accounts and balance sheet data in line with the 2008 System of National Accounts (2008 SNA). Because a crucial feature of sectoral accounts and balance sheet statistics is that they bring together data from all parts of the economy, a focus of the project will be on identifying adequate source data and leveraging as wide a range of statistical information as possible. A secondary objective will be to foster and enhance cooperation between data-producing agencies. Also, a regular production schedule is necessary. The project also emphasizes the importance of actual dissemination of data to ensure that economic policy making is informed. Dissemination will also include the compilation of metadata for public consumption.

In 2015 the G20 endorsed as a priority area quarterly and annual dissemination of sectoral accounts flows and balance sheet data to measure vulnerabilities, interconnections, and spillovers. The project will keep before the authorities the main challenges countries encounter in compiling these statistics and the importance of improved data sources and close inter-agency coordination.





The project started with one-week diagnostic missions to all three countries to assess current institutional arrangements, identify the main data needs, and advise the authorities in defining phased target outcomes through 2019. The missions brought together all data-providing agencies. An important result of these missions was that in all cases the authorities committed to building capacity by year-end 2019 for compiling and disseminating integrated data in line with the 2008 SNA. Committed cooperation between data-producing agencies is especially crucial because in all three countries, statistical systems are decentralized.

In a data-focused project like this one, remote working arrangements are required so that TA experts can access initial estimates and provide guidance as work proceeds. In-country missions then become a forum for discussion and finalization of estimates and training in such areas as production schedules.

Colombia

A diagnostic mission visited the National Administrative Department of Statistics (DANE) of Colombia in November 2016 and met with the Banco de la República (CBC), the General Accounting Office (GAO), and other relevant agencies. The diagnostic mission concluded that Colombia’s data are generally adequate to pursue this project. DANE will take the lead on the interagency steering committee, project teams, and technical working groups and, together with the CBC, will initiate production of provisional sectoral accounts and a complete quarterly balance sheet account for all institutional sectors for a reference quarter in 2016. In the medium term, the mission will work with the authorities to identify the most serious data gaps and propose mitigation strategies. The IMF expert will also provide training on sector accounts generally and specific


training on capital stock estimation, seasonal adjustment, and methodologies for estimating the household and nonfinancial corporation sectors.

Peru

A diagnostic mission to the National Institute of Statistics and Information (INEI) in the fall of 2016 also met with staff of the Central Reserve Bank of Peru (BCRP), the Ministry of Economics and Finance (MEF), the National Superintendency of Customs and Tax Administration (SUNAT), the Superintendency of Securities Markets, and the Superintendency of Banking, Insurance, and Private Pension Funds (SBS), to identify main data needs, and define project target outcomes. In Peru’s decentralized system, sectoral accounts will be a joint product of the INEI (nonfinancial activities and asset positions) and the BCRP (financial transactions and positions). The other agencies—in particular, SUNAT—will take advisory roles in the proposed interagency steering committee, project teams, and technical working groups. At present, there are no sector financial statistics; however, the BCRP compiles government financial statistics, components of monetary and financial statistics, and international accounts, so some key pieces are in place, although there are concerns about data quality, valuation, and the compilation of accounts for nonfinancial corporations (NFCs) and households. INEI has agreed to take the lead in such project-related activities as producing one-time provisional sector accounts—a complete balance sheet account for all institutional sectors, in concert with or followed in short order by a complete financial account.

Indonesia

A diagnostic mission visited the national statistical office Badan Pusat Statistik (BPS), the Bank of Indonesia (BI), and several Directorates of the Ministry of Finance, and the Ministry of State-Owned Enterprises to discuss proposed target dates and outcomes. Initially the focus will be on producing annual estimates, with quarterly estimates to be ready for dissemination by the end of the project. Higher-quality data is a major concern, especially for NFCs and households. The BPS, as principal compiler, agreed to put together by yearend-2017, annual sectoral current, capital, and financial accounts, using available data sources, and will schedule regular meetings of working and technical groups and coordinate requests for data from other agencies.


Improve Capacity for Residential Property Price Indexes STA_IMF_2017_05

Description

This three-year project will provide TA on improving capacity to collect and disseminate Residential Property Price Indexes (RPPIs) in Colombia, Peru, Tunisia, and Ukraine. The project will support the building of national capacity to compile and disseminate RPPIs that follow the guidelines and best practices outlined in the Handbook on Residential Property Price Indices. Because the main challenges are securing access to suitable data on property transactions and using appropriate compilation techniques, capacity-building efforts will be directed to ensuring that compilers can find and analyze source data of suitable quality and coverage and are able to use appropriate compilation methods.

The IMF/FSB G-20 Data Gaps Initiative and guidance on Financial Soundness Indicators treat data on residential property and the associated price changes as critical to analysis of financial stability policy. Policy makers draw on RPPIs when they design such macroprudential policies as those intended to reduce the systemic risks arising from excessive financial procyclicality, such as asset bubbles, and also to inform monetary policy and inflation targeting. In the realm of official statistics, they are used in estimating the value of housing as a component of wealth, as a deflator in the national accounts, and as an input into the consumer price index, which in turn is used for wage bargaining and indexation purposes. RPPIs have gained prominence around the world as critical in detecting and monitoring economic risks and vulnerabilities, which is also why they increasingly inform IMF surveillance.





During the period assessed, short diagnostic missions were conducted to each country to discuss data needs and plans for developing and disseminating RPPIs. In discussions with the authorities, the missions clarified and revised indicators and milestones for each project objective. The missions also established baselines for each target project outcome and drafted action plans to guide the authorities in achieving their project objectives.

An important success in the first stage of the project was helping country authorities to specify their short- and long-term TA requirements to ensure that momentum is sustained over the course of the project. For each country, short-term steps were identified that will help improve the current methodologies. In the longer term, the main concerns will be identifying data sources and introducing more sophisticated techniques.

Colombia

A diagnostic mission visited the National Administrative Department of Statistics (DANE) in March 2017. Banco de la República (CBC) staff also participated in the meetings. All parties agreed that to ensure that source data are adequate the immediate priority should be to advise on the current redevelopment of the property registration databases of the Superintendent of Notaries and Registry Offices. In the medium term, the authorities agreed that a TA priority was how to use appropriate statistical techniques for analysis and improvement of the RPPIs currently compiled by each institution, and research on hedonic pricing models. The project should map out a road to compilation of a single national RPPI with the broadest possible coverage, using the most appropriate techniques and considering the redevelopment of the property registration database. The extent to which coverage and methodologies can be improved will be largely determined by the availability and suitability of source data provided by the redeveloped database. However, there is scope to improve current compilation methodologies even while using current data sources. Also identified were topics where training is needed to increase staff capacity for applying the appropriate price index formula and for using basic hedonic methodologies.


Peru

A diagnostic mission went to the Central Reserve Bank of Peru (CRBP) in March 2017. The authorities requested TA to (1) ensure that statistical techniques are appropriate by improving the methodology for compiling the current indexes and helping identify improved source data by assessing the potential for using a database of web-scraped property prices that the CRBP currently compiles; and (2) support engagement with possible data providers to secure access to comprehensive administrative data on property transactions. It was agreed that a seminar with Peruvian stakeholders, and perhaps compilers from Colombia (another beneficiary of the SECO2 RPPI project), could kick-start a program of outreach to potential data providers. Topics where training is required to build staff capacity were also agreed on. The mission and the authorities identified several methodological issues to be dealt with during the next TA mission, such as limiting inclusion of advertised prices to the first period in which each property is offered for sale and testing a basic hedonic model. That mission will likely take place late in 2017 and will also discuss plans for the outreach seminar.

Tunisia A diagnostic mission to the National Institute of Statistics (INS) took place in October 2016. The authorities requested that TA focus on three areas: (1) in the shorter term, improving the methodology for the current index, especially the weighting and aggregation methodology; (2) over a slightly longer period, developing analytical indexes using a time-dummy-based hedonic model, which is a more appropriate statistical technique; and (3) in the longer term, assisting the Tunisian taxation authority in securing access to more detailed source data on the physical characteristics of transferred property. Topics for training required to increase staff capacity were also identified. The mission and the authorities identified several areas of analysis that the INS prepared before the first TA mission in May 15-19, 2017. Ukraine The authorities requested that project TA cover two areas: (1) in the short term, supporting the objective of using appropriate statistical techniques to improve the methodology for the current index; and (2) in the longer term, ensuring that source data are adequate by engaging with potential data providers to secure access to comprehensive administrative data on property transactions. Topics for training to increase staff capacity were also discussed. The mission and the authorities also identified methodological areas that could be improved during the next TA mission, scheduled for June 2017.

International Monetary FundInstitute for Capacity Development Global Partnerships Division

700 19th Street NWWashington, DC 20431USATel.: 1-202-623-9880Fax: 1-202-623-7106Email: [email protected]

Switzerland Subaccount under the IMF Framework

Administered Account for Selected Fund Activities

ANNUAL REPORT 2015

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