Topical Trust Funds Aim to Expand IMF's Capacity Building

Two new topical trust funds dedicated to specific capacity-building activities

Natural resource fund targets sound management of natural resource wealth

Tax policy, administration fund seeks higher revenues, lower aid dependence

The funds, known as topical trust funds, aim to total $55 million and are dedicated to specific capacity-building activities.

The new trust funds—Managing Natural Resource Wealth and Tax Policy and Administration--are currently budgeted at $25 million and $30 million respectively over the next five years and will begin operating in May 2011. The IMF’s first trust fund—Anti-Money Laundering/Combating the Financing of Terrorism--was launched in 2009.

The primary donors to the trust fund on managing natural resource wealth are Norway and Switzerland, supported by the Netherlands and Kuwait. Talks with other donors, including Australia and the European Union, are under way to reach the targeted amount of $25 million.

For the trust fund on tax policy and administration, Germany and Switzerland are the lead donors, supported by Belgium, Luxembourg, and the Netherlands. The European Commission and Norway have also expressed interest in contributing, and discussions are under way with several other donors to bring the fund to its $30 million target.

“Matching the priorities of donors and the IMF is key to forging a strong partnership,” said Anton Op de Beke, a senior economist in the IMF’s Strategy, Policy, and Review Department and main author of the natural resource fund’s program document.

Philip Daniel, a deputy division chief of the IMF’s Fiscal Affairs Department who helped develop the fiscal substance of the natural resources trust fund, noted that there is substantial and increasing demand for technical assistance in natural resource management.

The natural resources fund would “permit the expansion of technical assistance, taking a programmatic approach in which we develop medium-term cooperation with low- and lower-middle-income member countries. All of this technical assistance is based on solid research,” Daniel said (see box).

Information gap

“Accumulating financial assets, rather than spending the windfalls from natural resources, is politically challenging,” said Robert Sheehy, Deputy Director of the IMF’s Monetary and Capital Markets Department, which developed an asset and liability risk management module for the natural resources fund. “The asset and liability risk management module will help...