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The Medium Term Expenditure Framework
Three Levels of Expenditure Outcomes
Aggregate Fiscal Discipline Prioritization of the Composition of Expenditures Technical Efficiency in the Use of Budgeted Resources
Some Principles Transparency and accountability Comprehensiveness of budget Predictability of resources & policies Flexibility Contestability Existence and sharing of information
Fragmentation/Lack of Comprehensiveness
Across: Policy Making, Planning, Budgeting Fiscal activities Types of expenditure Sources of funds Time Inputs, outputs and outcomes
Enabling Environment for Public Sector
Link Policy, Planning, Budgeting Restrain decision making: affordability cost, expected results evaluate Forum within which policies compete Capacity and willingness to reprioritize and reallocate.
Characteristics of Sound PEM
Commitment, capacity & willingness to: Prepare a budget (a) in line with development priorities and (b) that can realistically be implemented Specify the budget’s intended results execute budget as passed by the legislature Account for results achieved Evaluate impact of policies and programs and take results into account in budget preparation.
A Contract for Performance
The Center More predictable funding More predictable policy Specifying expected performance Greater transparency and predictability in processes for reprioritizing and reallocating resources Leave management decisions to line managers
A Contract for Performance
The Line Living within budget Clear sector strategies Using resources efficiently and effectively Reporting on resource use
Using a Medium Term Expenditure Framework
Fiscal Targets (what is affordable) Forward Estimates of Existing Policy Institutional Mechanisms for Making the Trade-offs A Focus on Performance Enhanced Predictability
Ensuring Better Resource Planning
MTEF provides structure that: Disciplines policy choices within realistic constraints Translates longer-term priorities into funded programs and activities Links policy and spending choices with expected impact and costs Improves predictability of policy and funding
Better Resource Planning
Reflected in: Matching of spending with overall resource availability Sectoral spending coordinated with government-wide priorities Improved sector planning Increased effectiveness and efficiency of spending
7 Steps in Preparing an MTEF
(Re)estimate the resource envelope Define medium-term sectoral resource limits Prepare sector programs Review the sector programs Submit revised limits to the Cabinet Finalize the budget and present it to Parliament Review and Rollover
1: (Re)estimate the resource envelope
Forecasts of economic performance 3-5 year perspective Derive domestic revenue estimates Forecast development assistance flow What actors are involved?
2: Define medium-term sectoral resource limits
Costs of existing policies and programs--committed, contracted Sectoral priorities of government Adjust baseline to reflect strategic priorities and existing policies/commitments Submit to Cabinet prior to beginning of budget cycle What actors are involved?
3: Prepare sector programs
Medium-term strategic plan by sector Objectives, outcomes, outputs and activities Expenditure forecasts Identify changes in ongoing and new programs Define spending by programs and objects What actors are involved?
4: Review the sector programs
Review and improving quality of sectoral efforts focus on broad strategic issues Verify consistency between sectoral and government-wide objectives and spending Verify costs over medium-term Assists sector in realigning spending in case estimate exceeding ceilings What actors are involved?
5: Submit revised limits to cabinet
MoF proposes multiyear limits on sector spending Present for Cabinet approval Cabinet decision forms the basis of detailed budget proposal What actors are involved?
6: Finalize the budget and present it to Parliament
MTEF budget proposal provides framework for line agencies Line agencies prepare budget submissions to MoF Include indicative allocations/limits for medium-term MoF reviews and aggregates agency submissions Considered by Cabinet Presented to Parliament What actors are involved?
Maintain existing spending estimates
7: Review and Rollover Maintain existing spending estimates Revise according to policy or parameter changes at specified points Begin next budget cycle using updated estimates Consider changes in government-wide priorities (Re)estimate the resource envelope What actors are involved?
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