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The 25th Annivesary Of PFTAC: High Level Dialogue On IMF Capacity Development And Growth

An interesting week ahead for the heads of financial institutions in the region. The International Monetary Fund will be celebrating the 25th anniversary of the Pacific Financial Technical Assistance Center
01 Dec 2018 10:25
The 25th Annivesary Of PFTAC: High Level Dialogue On IMF Capacity Development And Growth
International Monetary Fund Deputy managing director Carla Grasso will represent the IMF at the 25th Anniversary of the Pacific Financial Technical Assistance Center (PFTAC) in Nadi next week. Photo: International Monetary Fund

An interesting week ahead for the heads of financial institutions in the region.
The International Monetary Fund will be celebrating the 25th anniversary of the Pacific Financial Technical Assistance Center (PFTAC) with a two-day High Level Dialogue on Capacity Development and Growth in Sofitel Fiji Resort & Spa, Denarau, Nadi, Fiji on December 6 to 7.

PFTAC was established as the IMF’s first technical assistance centre in 1993 and today the Fund operates 16 such centres worldwide covering training, technical assistance and capacity development.      In recognition of the accomplishments of PFTAC and its stakeholders, particularly member countries and development partners, IMF Deputy Managing Director Carla Grasso will represent the IMF along with other senior officials.

Global thought leaders on climate change and development will participate, along with a wide range of Government Ministers, Central Bank Governors, senior officials and policy makers from member countries, as well as academic, business, civil society, media and youth.

A statement from IMF said: “Our goal is to highlight the IMF’s capacity development support for our member countries, to which we now devote about one third of the total IMF budget.

“Focusing on the Pacific, we will look at how capacity development can help countries make the most of growth opportunities, build resilience to natural disasters, and attain the United Nations Sustainable Development Goals.

“Raising growth rates in the Pacific is a particular challenge due to the small size and remoteness of many island economies, compounded by the region’s vulnerability to climate change and natural disasters”

Below is an excerpt of an interview with Ms Grasso.

 

1.Why have you taken time out of your busy schedule to visit Fiji?

First of all, let me tell you how pleased I am to be here in Fiji.

This is my first visit to Fiji and I welcome the opportunity to see firsthand the progress that the country is making and to focus on the challenges ahead.

I will open the conference on Capacity Development and Growth, along with acting Prime Minister, Attorney-General and Minister of the Economy, Aiyaz Sayed-Khaiyum.

The conference will also celebrate the 25th Anniversary of the Pacific Financial Technical Assistance Center (PFTAC)—which was also a first, the first of this type of center launched by the IMF.

Economic institutions—such as central banks, finance ministries, tax and customs authorities, financial regulators—play a vital role in a country’s development.

Strengthening the capacity of these institutions results in more effective policies that enable growth, stability and resilience.

So, for more than 50 years, the IMF has worked in partnership with countries to provide technical assistance and training to strengthen these important economic institutions.

It’s a core mandate of the IMF and accounts for nearly a third of our activities, next to economic surveillance and lending.

PFTAC has been instrumental in this regard in the region.

We created it 25 years ago to place IMF technical assistance resources directly in the region, enabling us to respond quickly to the region’s emerging needs.

This is a model that we have now applied globally.

So, I am here in Fiji to celebrate with our 16 PFTAC members and generous donors and development partners who have helped PFTAC promote greater macro-financial stability in the region.

I want to recognise the achievements of the Pacific Island Countries, and to discuss current policy challenges with policymakers, development partners, academics and other experts.

I want to share the IMF’s views, but first and foremost, I am here to listen.

 

2.The focus of the conference is on making the most of growth opportunities and building resilience.

Why are these critical for the region?

Raising growth in the Pacific is a challenge due to the small size of many Pacific economies, their remoteness from one another and from their markets, even within national boundaries, and their vulnerability to natural disasters. Opportunities for growth vary by country depending on endowments and capacity.

Some Pacific economies are currently or could potentially be benefiting from tourism, others from natural resources whether non-renewable minerals, or renewable resources if sustainably managed like fisheries and forests.

Increasing interconnectedness and larger regional economies are also providing growth opportunities.

All these efforts are prone to the extreme vulnerabilities of the region from natural disasters such as cyclones, droughts, geothermal events, and rising sea levels.

When disaster strikes, much of the hard-earned progress can be wiped out, particularly from destroyed infrastructure.

So, I believe the single biggest opportunity in front of us is sustaining growth that is resilient to the next disaster.

 

  1. What role has IMF technical assistance and training played in addressing these issues in the region? And how does all this fit into the IMF’s work?

Over the years, about half of PFTAC’s technical assistance and training efforts have focused on strengthening public financial management and revenue systems.

This is enabling the region to improve the quality of its spending and raise resources for public investment and social services. PFTAC programmes also contribute to more reliable and timely statistics that are crucial for assessing economic developments, formulating policies, and addressing the financial sector vulnerabilities in region.

 

One example is climate change.

The IMF has done significant research and analysis on the economic impact of natural disasters and the exacerbating impact of climate change.

And for many years, PFTAC has been operationalising this research to directly help its member countries cope effectively with the risks and costs of climate change.

IMF capacity development has helped to train members to conduct their own debt sustainability assessments, taking into account the fiscal implications of natural disasters; and create robust fiscal frameworks and public financial management (PFM) plans.

All of this is key for resilience.

Over the past 25 years, PFTAC has organised some 2,050 expert visits to Pacific government agencies for hands on support and trained some 3,400 government officials in the critical areas of public financial management, revenue administration, macroeconomic management, and financial sector supervision.

One area that has been particularly effective is tax administration, where our efforts have contributed to improved revenue collection to finance critical government programmes.

A recent IMF study shows that on average across the Pacific, tax collections have risen from around 18 to 20 per cent of GDP between 2005 and 2015, an excellent achievement of the Pacific nations accomplished with PFTAC assistance.

All this is also helping the region create a foundation they need to make progress towards the Sustainable Development Goals (SDGs).

By the way, we offer training not just for government officials, but also to the public – all of our online courses are free of charge to anyone with an internet connection at https://www.edx.org/school/imfx.

4.What are some lessons learned over the past 25 years? How do you see the role of PFTAC in working with the region for the next 25 years?

Since the PFTAC’s opening 25 years ago, the model has since been replicated in numerous other centers worldwide, building on each other’s successes.

Throughout the years we’ve learned that, to truly deliver long-standing results, each center must be tailored to each region’s priorities, it should work directly with member countries and respond quickly to emerging needs; and that close cooperation and sustained follow up is crucial for continued success.

Another key lesson learned is that the IMF cannot achieve this alone.

Our centers would not be possible without the support of our partners and host countries.

PFTAC is so grateful to the government of Fiji for its contributions and for hosting the center these last 25 years.

And the long-standing involvement and technical and financial support of New Zealand, Australia, the European Union, Korea, and the Asian Development Bank (ADB) have helped make the center the success it is today.

Going forward, we are seeing increasing interest and use of the IMF’s online learning programs that can reach a far wider audience of both government officials as well as the general public.

Indeed, technology is likely to be a major driver and influencer in what and how PFTAC does in future years.

Much is happening in the financial sector from FinTech that has significant implications for our financial supervision work.

Big data has ramifications for tax collections, statistical compilation and dissemination, and technology is crucial to sound public financial management and asset management.

 

5.Do you see a role for IMF in raising green finance in the Pacific?

Advanced economies have pledged US$100bn (FJ$200bn) annually to finance climate mitigation and adaptation by 2020.

In addition, the UN’s Green Climate Fund aims at catalysing resources to small states and this has been accessed by some Pacific Islands, most recently Cook Islands. So, there are a range of different funds available.

However, we hear from recipient countries that it can be complicated to access the different funds.

We see a role for the IMF to help countries take the steps necessary to successfully mobilise the different types of financing available.

The IMF can help by providing policy advice on countries’ macroeconomic frameworks and, together with other development partners, help countries to set out disaster risk reduction and resilience building strategies. Through capacity development, our regional capacity development centers like PFTAC continue to help countries build robust fiscal frameworks, strengthen public investment management, and better prioritise expenditures. Hopefully all this can help countries access the funds more easily.

But this is an area where we are also looking to see what more we can do.

 

6.How can countries in the Pacific better manage what they own and owe?

This is an important challenge for many countries around the world, including the Pacific Islands. Domestic and external borrowing can help achieve important policy goals.

Many countries have large infrastructure gaps that need to be filled. Some countries also face reconstruction costs following natural disasters.

In these circumstances, financing is welcome because it could bring much needed infrastructure and connectivity to countries, which in turn could support growth.

The IMF advises countries to look closely at whether the level of debt is sustainable—is there enough future income to meet loan repayments.

We advise countries to contain overall levels of debt, to seek concessional financing, to prioritise expenditures, to maintain fiscal buffers to cope with natural disasters, and to improve revenue-raising capacity to keep debt levels sustainable.

When looking at specific projects, Countries need to take an active role in making sure that all projects fit with their development plans, that the payoff of the projects is adequate and that any attendant risks are properly managed.

There is significant variation in debt levels in the Pacific. Debt levels in a few countries are quite high—PNG, Samoa, Tonga and Vanuatu—and that is something we are watching.

 

7.What areas does the Pacific region need to improve to push finance literacy and encourage a culture of saving for the future?  What would be your message to people about a saving culture?

The Pacific Islands are actively engaged in improving financial literacy and many have developed detailed strategies which is very positive.

Improving financial literacy and developing a savings culture are important ways to help boost growth and lower poverty and inequality.

More access to financial services can help people climb out of poverty by making it possible for them to obtain credit and insurance to run a business, invest in education or health, manage risk, and weather financial shocks—all of which can generate income and improve the quality of their lives.

 

On areas to push, I would point to three:

  • First, use of bank accounts, a number of Pacific Island countries have begun to expand mobile bank accounts in remote areas. The next challenge is to make sure that those accounts are actively used for transactions and do not lie dormant. This requires a financial education effort.
  • Second, consumer lending.

It is important to make sure that consumer protection is adequate, so that credit, by all types of lenders, is offered on fair terms and that banks and non-bank financial institutions are soundly regulated and supervised, here PFTAC is actively engaged in helping countries improve the operational effectiveness of their frameworks.

  • Third, some Pacific Islands rely on remittances as an important source of income and the cost of sending and receiving remittances is high.

Reducing these costs requires actions on multiple fronts. One key area is easing the process for customer identification for those sending and receiving remittances.

In turn this would help banks meet stringent compliance standards with respect to anti-money laundering and countering the financing of terrorism.

The IMF stands ready to work with Pacific Island countries on all these critical issues to build essential government capacity, boost staff skills, and ensure that policy choices promote inclusive economic growth that benefits everybody. This is essential for countries to achieve the SDGs.

Feedback:  maraia.vula@fijisun.com.fj

 



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