Jun 11, 2021

IMF-CEF Partnership Provides Valuable Tailored Support to Countries in SEE

Our partnership with the International Monetary Fund (IMF) builds on a long history of effective collaboration. We have been addressing South East Europe’s capacity development challenges since 2001 when the CEF was established. We were delighted to talk to Juan Toro, Deputy Director at the IMF’s Fiscal Affairs Department (IMF FAD), about our successful and strong partnership.

CEF currently hosts two IMF advisors, covering the areas of public financial management (PFM), and revenue administration, while two more advisors reside at the Joint Vienna Institute. All of them are focused on supporting effective fiscal institutions in the South East Europe (SEE). Why is it important for the IMF to have such a strong presence in this region?

Having efficient and effective fiscal institutions is essential for the countries in the SEE region in their efforts to deliver macroeconomic stability and sustainable growth; mobilize revenue to finance expenditure policies; and implement essential structural reforms across government areas. The IMF has been active in the delivery of Capacity Development in PFM and revenue administration in SEE for many years to support the countries in the region to achieve having efficient and effective fiscal institutions, aligned with international good practices.

The cooperation between IMF and CEF goes back a long time. In the PFM area, a resident PFM regional advisor has been in place in CEF since 2005. In the early years, the focus was on structural PFM reforms during the transitions to market economies. More recently, the focus has been on assisting countries in designing and implementing changes to budget and treasury processes that contribute to sustainable fiscal policy over the medium term. In the revenue administration area,  a regional advisor on revenue administration has been based at the CEF since 2010. The focus has been on facilitating reform efforts that over time should bring the region’s tax administrations on par with modern European administrations and achieve consistency in the application of tax administration practices throughout the region.

What role does the IMF-CEF partnership play in supporting the development of SEE in this respect?

The IMF’s Fiscal Affairs Department (FAD) and the CEF have established a close and successful working relationship over the last two decades. The CEF has hosted our regional advisors and has supplied valuable logistical support, office accommodation, and excellent training facilities. The advisors have shared their technical expertise with participants from SEE countries via CEF’s regional training seminars. The regional advisors supported the CEF to design these training programs and benefited from CEF’s learning management.

The shared commitment to support the strengthening of PFM and revenue administration in the region has resulted in tangible improvements for many of the SEE countries that receive FAD capacity development assistance with funding support from the EC. The IMF - CEF partnership demonstrates how the blending of FAD’s on-the-ground capacity development with the regionally based learning opportunities, delivered by the CEF, provides valuable tailored support and guidance to beneficiary countries.

Can you share with us three challenges the world will face in the next five years, where IMF’s work and support will play a crucial role?

The COVID-19 pandemic has worsened macroeconomic conditions in many countries, resulting in increased budget deficits and increasing debt all around the world. Increasing economic and social inequalities have affected macroeconomic stability further. Many countries’ approaches to the vaccination initiative will take quite a long time to produce results, which will continue affecting their economic activities and growth. SDGs have been affected by the pandemic as well.

Climate change also is a threat to macroeconomic stability. Climate experts are stressing that we need to start today to be able to change the current trends. Governments will play a key role in this, ensuring the resources are available to pay for the expenditures and investments needed. But also to design policies that lead the private sector to invest in climate change.

IMF will continue supporting the countries through its surveillance, lending and capacity development activities to tackle these challenges in macroeconomic stability.

The world has witnessed quite an extraordinary period, starting in March 2020. How did the changed circumstances (like working from home and only online) affect you personally and what are some of the positive learnings you will take from this period?

Despite the travel restrictions, good engagement with the countries was continued, with all Capacity Development activities being delivered remotely. However, building relationships with authorities is important in Capacity Development and the virtual environment can limit engagements to build a closer relationship that we enjoy and value.

The pandemic showed that we can adapt to the needs of our membership and work together with them to overcome the challenges. We adjusted our work arrangements with the authorities quickly to ensure continuity of Capacity Development activities, including in addressing the immediate challenges while keeping an eye on medium-term institutional building issues.

The pandemic forced us to switch to remote delivery of our Capacity Development activities. While the Fund had been discussing the option of providing more online support to countries, we were now forced to do so basically overnight. The past year has been a learning experience for us and for the countries that we work with. We have learned that remote delivery adds to the options we have to support countries. It will become part of the “new normal” that we hope to reach soon but it will not eliminate in-country work.