• Budget process reforms and MTEFs
• • 2828: Vietnam Forestry MTEF
• Monitoring and Evaluation
• Public Expenditure Reviews
• Public Finance Diagnostics
• Public Service Reform, Capacity Building, Training
• Qualitative Research
• Quantitative surveys
• Statistical and econometric analysis

Budget Process Reforms and MTEFs

The introduction of medium-term and performance-oriented budgeting is driven by a number of factors, including the desire on the part of policymakers to ensure that:

• there is greater fiscal stability over the medium term to support effective spending
• budgetary decisions are more clearly related to policy objectives
• spending is more clearly related to results
• opportunities to debate and decide on priorities are created
• links between recurrent and capital spending are made
• there is a transparent framework for the reform of expenditure programmes

The key distinguishing feature of a MTEF is the integration of policy, planning and budgeting within a medium term resource constraint.  A MTEF typically consists of:

• a top-down resource envelope consistent with macroeconomic stability and broad policy priorities
• a bottom-up estimate of the current and medium term costs of existing national programmes and activities, and
• an annual process of decision-making between the two which reallocates resources from lower to higher priorities and from lesser to more effective programmes over time. 

The MTEF is then essentially a process in which one multi-year estimate is rolled forward into the next (so that the second year in one cycle becomes the starting point for the first year in the next) as part of the annual budget preparation process.

A fully-fledged MTEF would reflect comprehensive long-term expenditure plans based on national policy objectives. The spending plans would contain both recurrent and capital spending and would fully reflect any projects and programmes implemented by aid agencies.The national-level MTBF would form the basis for the annual budget call circular, showing indicative ceilings for each sector and ministry. It would be supported by sector-level MTEFs, which would summarise the budgets of each institution within the sector. Each line ministry, in preparing its budget submission, would be allowed to reallocate between institutions falling under each ministry and between input cost categories. Eventually the process would operate at sector level, to allow reallocation between ministries within the same sector. In federal systems, the national-level MTEF would link to lower levels which would operate the same process.

In theory sublime, in practice budget process reforms in developing countries have shown relatively disappointing progress. Prescriptions for reform are often rooted in developed country best practice and fail to take into account a developing country’s administrative and governance reality. Experience suggests that reaching the basic objectives of a MTEF in a developing country context involves an approach rooted as much in organisational analysis and change management practices as in modern theories of public financial management. OPM has supported the design and implementation of MTEFs and similar reforms in Georgia, Kenya, Lesotho, Palestine, Rwanda and Nicaragua We are currently supporting the design and roll-out of the MTEF in Pakistan.

Project Examples

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