The%20MTEF%20in%20Practice%20-%20Reconciling%20Conflicting%20Claims

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The MTEF in Practice - Reconciling Conflicting
Claims

• Malcolm Holmes

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Implementing an MTEF

• Pilot or whole of Government
• Budget unification (PIP elimination)
• Reduction of the number of budget line items
• Link between line items and objectives and impact
• Introduction of a 3 year perspective
• Mission statements and strategic plans for
  sectors

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Implementing an MTEF (Cont.)

• Use of strategic plans for budget preparation
• Emphasize costs of activities
• Merging of external and domestic financing
• Withdrawal of MoF from details of budget
  allocations in LM
• Engaging cabinet
• Focus on performance

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Ghana Explaining progress

• Commitment from Minister and Ministry of Finance,
  line ministers and donors
• MTEF based on GOG-led PER
• Consensus building efforts (losers and winners)
• MTEF becomes budget process

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Ghana Explaining Progress (Cont.)

• Consistency between MTEF and sector approaches
• Link to other reforms
• Performance focus - matching authority and
  accountability

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Ghana Sustainability Tests

• Predictability of funding (domestic and external)
  
• predictable macro/fiscal framework
• cash flow estimates
• cash available on time
• budget voted on time by parliament
• Predictability of policies
• - Cabinet Engaged
• Controlling expenditure
• Focus on outcomes

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Ghana Sustainability Tests (Cont.)

• Dynamic process of evaluation of policies
• Autonomy and accountability of LM
• Civil service management - pay policy, authority
• Decentralization

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Uganda

• Sequential progression through 3 levels
• Using MTEF-style approach since early 1990s
• Fiscal discipline
• Predictable sectoral expenditures that reflect
  stated strategic policies
• MTEF reinforcing goals
• Provides framework for implementing Poverty
  Eradication Action Plan

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Sequencing the MTEF in Uganda

• 1992/93 Medium-term expenditure planning with
  goal of fiscal discipline
• Cash-flow management with monthly expenditures
• 1996/97 Linking sectoral allocations to policies
• Linking policy and funding predictability to
  technical efficiency

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Reforming the budget process

• Annual budget framework process
• Identifies medium-term priorities, resource
  constraints and sectoral ceilings
• Consultation with line Ministries and external
  stakeholders
• Links with civil society through more transparent
  budgeting documents

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Extending the MTEF

• Extending MTEF to district government
• Provision of technical expertise from central
  Ministries
• Defining roles in budgeting
• Budget administrators propose envelopes
• Sectors propose policy choices and allocations
• Cabinet and parliament make political choices

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Uganda Sustainability Tests

• Implementation of strategic allocations
• Deviation between budgeted expenditure and actual
  spending 25
• Line Ministries overspending MTEF ceilings
• Revenue unpredictability
• Shortfall of tax revenues
• Inability of donors to provide medium-term
  commitments
• Impacts on expenditure disbursement

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Uganda Sustainability Tests (contd)

• Limited flexibility with expenditure
  readjustments
• Statutory expenditures
• Politically important areas
• Areas with donor conditions
• Continued separation of donor-funded project from
  Consolidated Fund

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Uganda Sustainability Tests (contd)

• Sectoral planning issues
• Little clarity of goals
• Little quantitative analysis
• Failure to link expenditure estimates to
  priorities
• Few performance measures
• Monitoring and evaluation of sectoral efforts is
  weak

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Uganda Sustainability Tests (contd)

• Improving the quality and efficiency of service
  provision

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PRIORITIZATIONInstitutional Arrangements

• Hard Budget Constraint
• Cohesive political executive
• Sector Strategies
• Forum within which decisions constrained by
  resource availability over medium term and
  policies compete
• Programmatic decisions devolved to line ministers
  (within hard sector ceilings)

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PRIORITIZATIONInstitutional Arrangements (Cont.)

• Strategic priorities and sustainability drive aid
• Information - Costs, Performance

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Mechanisms for Prioritization

• Case Australia
• Aggregate Fiscal Targets and Strategic Objectives
• Medium-term Costs of Competing Policies

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Australia Medium-term Costs of Policies
Mar 84
Real growth rate
Projection dates
May 85
Nov 85
Dec 86
Aug 89
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Mechanisms for Prioritization

• Case Australia
• Aggregate Fiscal Targets and Strategic Objectives
• Medium-term Costs of Competing Policies
• Arena for Contesting and Coordinating Policies
• - Cabinet Strategic Priorities
• - Line Spending-Savings within Hard Budgets
• Ex-post Evaluation
• Outcomes
• - Deficit 4 GDP to surplus of 2 GDP
• - Shifts in intra and intersectoral composition
• - Greater funding predictability

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Australia Changes in Expenditure Composition,
1983-94
Millions
New spending
Net change
Savings from existing policy
Source Dixon, 1993 32
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Sector-wide Approaches as Performance Based
Budgeting

• Sector-wide
• Clear Strategy and Policy Framework
• Program Focus
• Sector Expenditure Program
• Medium-term Perspective
• Consistent with Macroeconomic Framework
• Donor Coordination

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Getting Decisions in the Right Hands

• Strategic Policy
• Sector Envelopes
• Program Individual Ministers
• Running Costs Managers