Many experts now acknowledge that the best way of structuring public spending and budget initiatives in developing countries is through a Medium Term Expenditure Framework (MTEF) approach. But just how successful have MTEFs been and what lessons can be learnt for countries that are thinking of introducing this system?
This case study, prepared by two African practitioners, Seth Anipa and Felix Kaluma, and edited by Elizabeth Muggeridge, examines how MTEFs have been introduced in Ghana, with the PUFMARP project, and compares that to the experiences of Malawi, who adopted the framework 1995-1998. One of the main objectives of the MTEF process is to restructure and rationalise the allocation of resources of a country in order that priority areas are given necessary funding.
The authors also pose the question of what a successful MTEF looks like and how long it can take to develop. In order for the MTEF to be successful it needs to conform to a number of criteria. The most important of these is that the Ministry of Finance, its Ministers, Chief Director and Director of Budget, must be committed and involved on a day-to-day basis with helping implement the changes. The report highlights other success factors as:
- A need for “demonstrated political will at the highest level. ”
- Involvement of stakeholders in the construction, introduction and execution of the process.
- The managing of expectations. The MTEF should be regarded as a process for helping Governments to distribute “scarce” resources, as opposed to providing “additional” resources.
- Effectual team building between Government and consultants is a requisite factor, whilst central agencies must have “sufficient capacity.”
- The process of Budget preparation must be securely connected to budget “implementation, monitoring, reporting and evaluation.”
- The roles of Parliament and the Civil Service must be clearly specified, to ensure correct consultations and to avoid conflicting advice.
There are many benefits in choosing to adopt the MTEF approach. For one, it tackles the issues of effective allocation of scarce resources to activities that are in urgent need. However, it must be recognised that there are also some difficulties in implementing the process. Benefits include:
- An allowance for better-informed decisions by Cabinet, Parliament, and Principal Secretaries/Chief Directors regarding the issues they pursue and those they abandon.
- A greater translucency in allocating resources between and within sectors
- By involving managers in the budget preparation process it will help them to recognise the scarcity of resources and mean increased efficiency in the employment of resources.
- Donor coordination can be improved through extra analysis and information by the process and provide a foundation for negotiations with donors on a costed set of exercises.
Difficulties include:
- The MTEF process can initially be a lengthy one, due to its requirement for detailed information and analysis.
- There may be some resistance to the process, as it symbolises a significant change.
