MEDIUM TERM EXPENDITURE FRAMEWORK
(MTEF)
Introduction of MTEF
The middle to late 1990s there was the proliferation of MTEFs throughout
the developing world.
Africa may be regarded as the regional leader in MTEF implementation (Le
Houerou & Taliercio Pg 1 Africa Regional Working Paper series N0.28,
February 2002)
Tanzania is among of the countries adopted MTEF
Introduction of MTEF Cont.
The Medium Term Expenditure Framework (MTEF)
is a resource management tool that is now applied in
government planning and budgeting.
It is essentially about consolidation and using of
existing resources better.
It is a results oriented budgeting which takes into
account inputs, outputs as well as outcomes.
MTEF provides platforms for the use of performance
measures to justify expenditure allocations.
The concept of MTEF
MTEF provides the linking framework that allows expenditures to be
driven by policy priorities and disciplined by budget realities
According to the World bank’s public expenditure management handbook,
“MTEF consists of top-down resources envelop, a bottom-up estimation
of the current and medium-term costs of existing policy and ultimately ,
the matching of these costs with available resources… in the context of
the annual budget process.”
The concept of MTEF Cont.
Top-down resource envelope
Is fundamentally a macroeconomic model that indicates fiscal targets and
estimates revenues and expenditure, including government financial
obligations and high cost government- wide programs such as civil service
reform
The concept of MTEF Cont.
Bottom-up
To complement the macroeconomic model, the sectors engage in bottom-up
reviews that begin by scrutinizing sector policies and activities with an eye
toward optimizing intra-sectoral allocations.
The value added of MTEF approach comes from integrating the top-down
resource envelop with the bottom-up sector programs
The concept of MTEF Cont.
Generally
Therefore, MTEF can be seen as the prioritised three year integrated
estimates, based on clearly defined performance indicators within a
Strategic Plan
MTEF is not a completely new process.
Objectives of MTEF
Improved macroeconomic balance, especially fiscal discipline
Better inter- and intra sector resource allocation
Greater budgetary predictability for line ministries
More efficient use of public monies
Greater political accountability for public expenditure outcomes
through more legitimate decision making processes
Greater credibility of budgetary decision making (political restraints)
MTEF in Tanzania
MTEF was introduced (in 1999) as a logical development
from Public expenditure Reform (PER) that had
observed several inadequacies in the budget
management. The key concerns were:
Limited time frame
The three year time frame was considered as ideal for development
Tanzania LGAs started to implement MTEF budgeting in the years
2004/05.
MTEF’s IN TANZANIA cont.
Predictive value of budgets
The budgets were seen to reflect large variances between projections and
outturns.
The gaps are as a result of;
unrecorded donor support,
shortfall in local counter part funds, and
inaccurate projections
The uncertainties arising from these gaps undermine the
predictive value of budgets and indeed that of implementing
programmes
MTEF’s IN TANZANIA cont.
Enhancing sustainability of budgets
Fiscal sustainability is often compromised by not appropriately projecting
recurrent cost implications of ambitious targets or a public investment
drive, which does not adequately provide for their recurrent financing.
The primary concern here is to ensure that sector programs are properly
costed both in terms of investment financing and implied future budget
requirements for maintaining the level and quality of services provided
from them.
MTEF’s IN TANZANIA cont.
Enhancing Budget efficiency
Prior 1996, the practice in Tanzania was the use of mini budgets in
accommodating extra-budgetary expenditures.
Beginning financial year 1996 government of Tanzania adopted a cash
budget approach as a means to ensure that spending entities live within their
allocated means and also to encourage efficiency through hard budget
constraints.
MTEF Budgeting Preparation
The three-year period starts with the year for which
the current budget is prepared and includes two
subsequent financial years.
See illustration
Using illustration- MTEF 2009/10 – 2011/12
Budget 2009/10 Budget 2010/11 Budget 2011/12
Allocation Estimate Estimate
For Budget 2010/11 Budget 2011/12
Approval Allocation Estimate
Budget 2011/12
For Approval
Allocation
For Approval
MTEF Budgeting preparation Cont.
Current Year Forward Estimates
Estimates 2010/11
2011/12 2012/13
Personnel 14,795,267
Administration 943,599
Inventories 1,071,494
Equipments 778,261
Land and buildings 216,161
Professional and special services 1,348,676
Operations & Maintenance 2,500,000
Miscellaneous 50,261
Total 21,703,719
2011/12 2012/13
Personnel 6.5% 8%
Administration 6% 7%
Inventories 8% 9%
Equipment 20% 25%
Land and buildings 1% 1.5%
Professional and special services 8% 10%
Operations & Maintenance 10% 15%
Miscellaneous 2% of total personnel 2% of total personnel
costs costs
MTEF Budgeting Preparation
Note;
The key factors taken into account when determining the
forwarding of budgets in the next three years are expected
changes in:
Inflation
Population rates
Expenditures such as O & M requirements for current
development expenditures
