Author Topic: Do sector MTEFs make sense?  (Read 637 times)

petagny

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Do sector MTEFs make sense?
« on: November 03, 2010, 14:09:16 GMT »
I see some ToR floating around for some more 'sector MTEF' work.

Can anyone explain to me how the idea of an individual sector MTEF fits with the MTEF concept as usually defined, i.e., a whole of government medium-term budget planning process set within an over-arching (and sustainable) aggregate resource framework?

Policy-based expenditure planning at the sector level can be useful, but for me it's not an MTEF unless done within a top-down sector resource constraint that is consistent with allocations to other sectors and derived from the aggregate macro-fiscal framework.

I don't think this is just a pedantic discussion about terminology. A bunch of unconnected sector MTEFs does not, for me at least, constitute a functioning MTEF with all the associated implications for macro-stability and effective resource allocation. In some cases, however, I get the impression that this is the interpretation being made. This could be misleading.

Napodano

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Re: Do sector MTEFs make sense?
« Reply #1 on: November 04, 2010, 11:05:06 GMT »
No, they do not make sense in isolation!

I see assignments on sector MTEFs springing out of two quick fixes:

1. donors have in their manuals for (sector) budget support an explicit conditionality for a sector to have an MTEF in place. This was the case of the EC, I believe, but I understand that is now corrected;
2. donors not having enough resources to finance a full "MTEF concept as usually defined" decide to go for a second best: divide the project in smaller assignments to be financed independently by individual agencies or over several calendar years.

My direct experience with sector MTEFs, naturally, has not been positive in terms of impact. Nevertheless I emphasised the performance management aspect of the exercise centred around two concepts:
(i) a set indicators of performance at outcome and output level is a valid management tool for line ministries whether or not connected to a top-down approach lead by MoF;
(ii) line ministries can self-impose ceilings to their MTEF exercise (often in the form of three scenarios) to increase the quality of their negotiation with MoF.

Definitively a second best solution, which would barily justify taxpayers money!
« Last Edit: November 04, 2010, 12:01:42 GMT by Napodano »

John Short

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Re: Do sector MTEFs make sense?
« Reply #2 on: November 04, 2010, 12:08:25 GMT »
I think calling them second best is being charitable!  I fully agree with petagny. Their existence is the result of lazy thinking and perhaps a lack of appreciation of what constitutes an MTEF.  Even "whole" MTEFs suffer because of a failure to understand the effort and timescale required and as a result the concept gets a bad press.

Martin Johnson

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Re: Do sector MTEFs make sense?
« Reply #3 on: November 09, 2010, 16:21:04 GMT »
After having been absent from the Board for a while learning Welsh (!) I re-started my browsing this afternoon with Frans' very interesting fireside chat and then followed that up with a review of this link started by Petagny.

The question posed (do sector MTEFs make sense?), appears to require little in the way of an answer. In and of themselves, they make little sense for the very good reasons outlined by Petagny. The reason for their emergence (in fact and in ToR-land) is undoubtedly due in part of the misunderstanding and poor donor procedures identified by Napodano and the sloppy approach to these things identified by Mr Short. Perhaps the underlying factor in each case is the use of the term 'MTEF' by practitioners, governments and donors alike when what they really mean is 'budget reform'. In the context of budget reform, however, laying the initial building blocks for an MTEF will, in some cases, require dedicated budget reform work in a very limited number of sectors.

Way back in 2002, for example, the Government of Pakistan approached DFID to request assistance in the design and implementation of a Medium Term Budget Framework (i.e. an MTEF with a more explicit recognition of resource specification in the acronym). (It is probably little coincidence that this followed an IMF recommendation for an MTEF in Pakistan.) What followed might be described, if one were to subscribe to such a notion, as a 'sector MTEF' (in Health and Population Welfare). In practice, it was one aspect of budget reform for a particular sector. Throughout it was referred to by Government, donors and virtually all other stakeholders as an MTBF. Some five years had passed before the federal government of Pakistan began to put in place the top-down elements required of a functioning MTBF, before ceilings began to be defined across almost all ministries (for the non-development budget - in aggregate only at that time for the development spend) and before the policy and output-based budgeting approach began to be applied across (almost all) ministries. As a close observer of this process throughout, one of the things that interested me was the pre-requisite in Pakistan for some sector-based budget reform (supported by the Finance Ministry) to establish some minimum building blocks for the future development of an MTBF. Whilst the current more comprehensive approach is some distance from the approach of the initial years (and can now, much more justifiably, be referred to as an MTBF, however nascent it remains), it is hard to imagine the current achievements without the prior sector-based budget reform work having taken place. In terms of the initial years, the label 'MTBF', therefore, was most certainly inaccurate with regard to the arrangements for specifying resources and planning expenditure. It was not inaccurate, however, with regard to a longer term aim of developing an MTBF.

I have little doubt that the examples of 'sector MTEFs' (in whatever form) cited by my colleagues were of the ill-informed and or sloppy variety, but there is certainly plenty of scope for some of the early stages of MTEF design and implementation to be built upon aspects of sector budget reform. Being clear about what that reform is, is not and is intended to be is clearly important in this regard.
« Last Edit: November 09, 2010, 19:40:00 GMT by Napodano »

STONE

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Re: Do sector MTEFs make sense?
« Reply #4 on: January 10, 2011, 10:33:33 GMT »
I agree that they do not work in isolation.  Martin's point is correct.  I suspect that the problem is one of terminology - what is an MTEF/MTBF/MTBP?  And what do donors understand by the term?

Eugene McQuaid

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Re: Do sector MTEFs make sense?
« Reply #5 on: February 16, 2011, 07:01:05 GMT »
The use of acronyms and abbreviations was also an (irritating) distraction during my time at the Ministry of Finance in Bangladesh during the mid-2000's. We chose, at the time , in an attempt to differentiate and provide clarification , to agree on the following the terminology (definitional) – These were subsequently employed in the preparation and formational of the annual Medium-term Budget Policy Statement (MTBPS).

1.Medium Term Budgetary Framework (MTBF) is organised around five main elements or building blocks, including (i) a medium-term macroeconomic and fiscal framework (MTMFF), (ii) an analysis of key strategies and choices that should inform the allocation of budgetary resources, (iii) Line Ministry and Agency level Budget Strategy Frameworks (MBF's) linked to Annual Operation Plans (AOP's), (iv) resource ceilings and (priority) expenditure plans , (v) strengthened budget implementation procedures that ensure the timely and efficient implementation of Line Ministry and Agency budgets.
2. Medium Term Expenditure Framework (MTEF) is an extension to the MTBF paradigm whereby elements of activity and strategic output based budgeting (SOBB) are connected to the MTBF framework – again at  Line Ministry and Agency level.
3. Medium-Term Budget Policy (MTBP), in essence, plays a key role within the MTBF/MTEF initiative. It sets out the medium-term macroeconomic and fiscal framework within which the annual budget has been prepared and brings a stronger policy focus (policy based budgeting) and justification to the budget, thereby emphasising the linkage between the key strategies identified in the national development strategy-planning process (i.e. NSAPR in Bangladesh) and budgetary resource allocations.

Nothing new here I guess - however I am currently working in the Gulf region debating the use of similar attributes and the misperceptions associated with such.

PFM Board - very informative site and forum for discussion, thank you .

petagny

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Re: Do sector MTEFs make sense?
« Reply #6 on: February 16, 2011, 08:33:14 GMT »
Eugene,

Thanks for your kind words and welcome to the PFM Board.

Just to add further confusion look at the definitions from the OECD tome on managing public expenditure by Allen and Tommasi. Here the MTEF is a subset of the MTBF representing more detailed expenditure estimates (than the aggregates presented in the MTFF) broken down by function and/or strategic area. This is more or less the approach applied in Vietnam where we tried to introduce the concept of the Medium Term Fiscal and Expenditure Framework (more or less equivalent to the Allen/Tommasi MTBF). Allen and Tommasi do not make a direct link between the MTEF and performance-based budgeting.

Personally, I'm not very happy with associating the MTEF definition with a strong form of performance-based budgeting. I think you can have a useful MTEF without a strong performance orientation (but you can't have performance-based budgeting without an MTEF). I believe that this has been the cause of over-ambitious 'MTEFs' and subsequent disappointment in some countries that were not yet ready to go down the performance budgeting track, e.g., Ghana, Rwanda, Malawi. Albania began with an MTEF/MTBF that was more in line with the Allen/Tommasi definition and graduated to a more strongly performance oriented approach (the MTBP - Medium-Term Budget Programme). I would say this approach works better, but I may be in a minority!

I suppose in the end we just have to acknowledge that there are different definitions of the same terminology floating around and, as you have done, state clearly what definition is being used in a particular country context.

Martin Johnson

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Re: Do sector MTEFs make sense?
« Reply #7 on: February 18, 2011, 14:57:55 GMT »
Terminology .... that old chestnut .... different terms applying to the same concept and the same terms applying to different concepts. How do we make sense of this? I think Eugene and Petagny are correct. Spell out what concept each term refers to in a particular country context and take it from there. Otherwise, I think the secret is ... if you don't know what it is in a particular context, then ask someone who might.

Interestingly enough, I am just in the process of evaluating an acronym (sorry ... a MTBF). One of the outputs is 'Key budget process changes of the MTBF fully developed, formally adopted by and implemented by MoF staff'. These include 'MTEF, FPF, BSP and OBB'. I know what each these acronyms stands for (medium term budget framework, financial programming farmework, budget strategy paper, outout based budgeting). I also understand what the underlying concepts are for the last three in the particular context we are dealing with. What on earth 'MTEF' is meant to refer to as part of the particular MTBF in question is anyone's guess though. I think I might ask ...

 

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