1. The Medium Term Expenditure Framework
Malcolm Holmes

2. Three Levels of Expenditure Outcomes
Aggregate Fiscal Discipline
Prioritization of the Composition of Expenditures
Technical Efficiency in the Use of Budgeted Resources

3. Some Principles
Transparency and accountability
Comprehensiveness of budget
Predictability of resources & policies
Flexibility
Contestability
Existence and sharing of information

4. Fragmentation/Lack of Comprehensiveness
Across:
Policy Making, Planning, Budgeting
Fiscal activities
Types of expenditure
Sources of funds
Time
Inputs, outputs and outcomes

5. 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.

6. 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.

7. 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

8. A Contract for Performance
The Line
Living within budget
Clear sector strategies
Using resources efficiently and effectively
Reporting on resource use

9. 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

10. 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

11. 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

12. 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

13. 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?

14. 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?

15. 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?

16. 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?

17. 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?

18. 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?

19. 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?