MTEFs :objectives and preconditions Allister Moon PREM week, November 2000
MTEF objectives Aggregate fiscal discipline: an instrument to support sustained stabilisation Strategic allocation: strengthening policy competition and predictability in budget strategy Technical efficiency: an instrument for enhancing public sector accountability
Development of an MTEF : Uganda 1992-00 1992 -94 Macroeconomic framework , + selective treatment of medium term allocation (eg wage bill, defence, roads) 1995 - 97 Macro framework plus comprehensive sector allocations, linked to sector policy objectives(eg UPE, PEAP) 1998- annual consultations on MTEF with donors, legislature, civil society
Aggregate fiscal discipline Comprehensive and realistic macroframework Multi year perspective on aggregate resources, expenditure envelopes Ensuring consistency between resources and aggregate policy commitments
Strategic allocation (1) Decisionmaking process: transparent, contestable, Cabinet level early in the budget cycle binding for resource ceilings in annual budget preparation Increase in predictability of sector financing
Strategic allocation (2) Sector expenditure plans, linking policy to budgets Multi year Integrated (eg local/external financing, capital/recurrent, wage/non wage) Linking inputs/outputs/outcomes
Accountability Shifting focus to outputs, rationalisation of controls on inputs Publication of the framework Public announcement of outputs, monitorable performance targets, Focal point for dialogue on budget strategy with legislature and civil society
Preconditions for beginning MTEF Macroeconomic stability Predictability of aggregate expenditure envelope Commitment from Cabinet Core capacity in finance ministry/central agencies
Preconditions for progress with MTEF Capacity to enforce hard budget constraint at sector/ministry level (systems capacity and political will) Executive commitment to a more transparent budget process Capacity in sector policy analysis and expenditure planning Supportive donor behaviour
Preconditions for considering an MTEF
Supporting an MTEF: supply Strategies for PE work which focus on long term strengthening of PEM capacity Delivering advisory support within the time constraints of the budget cycle Refocussing sector work to strengthen base for sector expenditure plans
Supporting an MTEF: demand Use the MTEF as a reference for policy dialogue and program design Encourage Government’s use of the MTEF in donor coordination Promoting access and role of civil society in MTEF process
Lessons from experience Commitment from central agencies critical Balance ‘top down’ and ‘bottom up’ Develop ‘bottom up’ sectoral coverage in step with increasing predictability Look for early engagement of players outside the executive Keep expectations realistic and plan for long haul