MEFMI Workshop Draws on IMF Experience in Economic Surveillance

The Financial Programming and Policies (FPP) framework provides the basis for consistent macroeconomic analysis and policy simulation. This is built around integration of the various macroeconomic accounts, bringing together the System of National Accounts (SNA), Balance of Payments (BOP), Government Finance Statistics (GFS), and Monetary and Financial Statistics (MFA). The linkage of these accounts within the broad context of policy consistency checks facilitates the design and evaluation of different policy scenarios with a view to eliminate disequilibrium between aggregate demand and supply (which manifests itself in BOP problems, high inflation rates, and low or falling output).

Given this backdrop, MEFMI has over the years conducted FPP workshops to acquaint its client institutions with capacity to formulate and implement the financial programming frameworks in accordance to the international best practices. A number of these events have been conducted in collaboration with the IMF Institute of Capacity Development (ICD).

In 2014, the joint MEFMI/IMF FPP workshop was held from 18 to 29 August in Windhoek, Namibia. In addition to providing technical expertise, the IMF ICD contributed US$50,000 to the workshop budget. 

The objective of the workshop was to enhance participants’ understanding of the design and implementation of macroeconomic and financial policies for the growth, stability and poverty reduction; drawing on the IMF’s experience in economic surveillance, the design of financial programs, and the provision of technical advice to its member countries.

The workshop was officially opened by Mrs Florette Nakusera, Director of Research, Bank of Namibia (BON). In her opening remarks, Mrs Nakusera underscored the importance of financial programming, pointing out that consistent and effective macroeconomic policy coordination is critical in minimizing some of the economic imbalances in the region. She acknowledged the technical and financial support from the IMF, which has significantly strengthened region capacity building efforts. Going forward, she emphasized the need for more collaboration between MEFMI and the IMF to support capacity building for the region.

The IMF ICD, represented by the lead resource person, Mr. Jules Pierre Leichter, commended professional collaboration with MEFMI and its member states for facilitating transmission of the ICD training programme to Eastern and Southern Africa. He noted that the ICD remains committed to work with the region on a number of areas of mutual interest. In concluding his remarks, he thanked the Government of Namibia for hosting the event and for facilitating entry visas to all officials attending the workshop.

MEFMI, represented by the Task Manager, emphasised the high commitment that MEFMI attaches to capacity building in the area of FPP and promised to continue working closely with the IMF ICD to ensure compliance to the best practices.

During the closing session, Dr. Sehliselo Mpofu, MEFMI’s Director for Macroeconomic Management Programme, expressed profound gratitude to the IMF ICD for a long-lasting solid collaboration with the Institute. She further thanked the Government of Namibia for hosting the workshop and Bank of Namibia for presiding over the opening session and providing logistical support. Going forward, she expressed MEFMI’s intent to discuss with the IMF on areas of further collaboration and support during the Annual Meetings in October 2014. In conclusion, Dr. Mpofu challenged participants to ensure that robust macroeconomic data are in place for effective implementation of the FPP Frameworks. Despite data challenges, she encouraged participants to apply the experiences and tools acquired from the workshop to implement FPP Frameworks. MEFMI, in collaboration with its partners, will continue addressing data challenges and nurturing countries’ initiatives to operationalise the Financial Programming Frameworks. She encouraged client institutions to capitalize on these initiatives.The workshop was attended by 31 participants, comprising officials from the Central Banks, Ministries of Finance and Planning. Female participation was significant, accounting for 48% of the participants.

The IMF ICD seconded four resource persons for the workshop; Mr. Jules Pierre Leichter, Ms Hali Edison, Eric Clifton and Alex Segura-Ubiergo. While three experts were from outside the MEFMI region, one was the IMF Country Resident Representative for Mozambique, who brought in regional experience to the workshop.

The workshop blended lectures and hands-on exercises. Lectures were conducted in the morning while practical workshops were conducted in the afternoon.  Participants were divided into three groups under the guidance of counselors. Each group prepared a presentation which was discussed on the last day of the workshop. Course materials were posted on an IMF website with each participant given access credentials. This reduced printing cost to a significant extent.

Prior to the residential component of the workshop, 80% of the participants went through the online FPP training organized by the IMF ICD, which was a pre-requisite for the course, largely to bring participants’ understanding to the same level and to enhance capacity.

The workshop was hands-on with practical exercises based on Zambian data. The coverage was mainly on three major parts:

1.       i.            Part 1 focused on the basic skills required to undertake financial programming. This encompassed training on principal features of the four macroeconomic accounts namely; national accounts, government financial statistics, balance of payments and monetary and financial statistics. This session involved both lectures and practical exercises on how to review, interpret, analyse the accounts and establish interrelations among them.  Other key data recording aspects were also covered. These include treatment of cash versus accrual principles, stock versus flows and valuation changes.

1.     ii.            Part 2 entailed the diagnosis of macroeconomic performance and analysis of the effects of macroeconomic and structural policies. This involved formulation of simple short-term projections (using Excel Spreadsheets) assuming policies remain unchanged (baseline scenario) and identified potential internal or external macroeconomic imbalances. Variables of interest in these exercises included, among others, real GDP, inflation, current account balance, international reserves and fiscal deficits.

1.   iii.            Part 3 involved preparation of a macroeconomic policy program (policy scenario) to correct identified imbalances. In this exercise, participants identified a set of fiscal, monetary, exchange rate, and structural measures that could be realistically implemented, given a country’s economic, financial, political and social constraints that could help restore internal and external balance and lay foundation for sustainable growth. Issues of proper sequencing and coordination of policy measures were vigorously debated. 

The workshop further discussed other cross-cutting and emerging issues. These include country experiences in managing imbalances associated with fluctuations in natural resources revenue. Three countries made presentations on this area namely; Angola, Namibia and Mozambique.

The major deliverables of the workshop included:

a)      Enhanced hands-on capacity to undertake macroeconomic analysis;

b)      Participants learnt and applied forecasting techniques, setting economic targets, quantifying the appropriate magnitudes of the instruments (such as the policy rate) required to reach the targets and prepared adjustment programs. This enhanced their analytical skills, quantitative reasoning and sound judgment; and

c)      Exposure to building blocks for designing a financial program, which entails setting program objectives (say for inflation, international reserves and poverty reduction), policy measures and to make projections.

The workshop was timely, given the macroeconomic imbalances facing some member states, amid natural resources booms and discoveries. It also came at a time when MEFMI is embarking on developing FPP frameworks for the region and institutionalizing FPP Working Groups. The skills imparted during the workshop are expected to complement these initiatives.