The%20Medium%20Term%20Expenditure%20Framework

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The Medium Term Expenditure Framework

• Malcolm Holmes

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Three Levels of Expenditure Outcomes

• Aggregate Fiscal Discipline
• Prioritization of the Composition of Expenditures
• Technical Efficiency in the Use of Budgeted
  Resources

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Some Principles

• Transparency and accountability
• Comprehensiveness of budget
• Predictability of resources policies
• Flexibility
• Contestability
• Existence and sharing of information

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Fragmentation/Lack of Comprehensiveness

• Across
• Policy Making, Planning, Budgeting
• Fiscal activities
• Types of expenditure
• Sources of funds
• Time
• Inputs, outputs and outcomes

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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.

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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 budgets 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.

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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

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A Contract for Performance

• The Line
• Living within budget
• Clear sector strategies
• Using resources efficiently and effectively
• Reporting on resource use

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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

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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

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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

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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

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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?

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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?

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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?

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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?

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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?

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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?

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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?