Conclusions and Implications for the Future Role of the Bank
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Case studies also indicate that there are strong links between MTEFs and the quality of public financial management (PFM) more generally. While aggregate data suggest that MTEFs lead to better-quality budgeting, the case studies point to instances where MTEFs are poorly integrated with the budget process, where MTEFs are a pro forma exercise run parallel to but separate from the budget, and where MTEFs have, in fact, set back rather than taken forward PFM reform. This raises an interesting question. If MTEFs are, in fact, less well implemented than is needed to be fully effective, why does MTEF adoption have such a strong influence on fiscal discipline? It is widely understood that poorly implemented reform does not work well, so what is happening? The possibility that an MTEF is part of a broad package of reforms with other elements that improve fiscal discipline, regardless of MTEF adoption, has been ruled out. A more realistic possibility is that, on balance, MTEFs are not that badly implemented; some are, but most are not. Indeed, a wellimplemented MTEF can be a vehicle for supporting changes to budget systems that not only make an MTEF more effective in promoting fiscal discipline, but also have an independent disciplining effect of their own. This illustrates the importance of sequencing PFM reform appropriately, taking advantage of the increasingly demanding requirements of successive MTEF stages—MTFF, MTBF, and MTPF—to use MTEF implementation as the basis for sequencing PFM reform. Of course, the strength of political support for the MTEF and the capabilities and capacity of agencies responsible for its implementation are important determinants of success, and none of these factors can be taken for granted. There is also evidence that MTEFs implemented with Bank support have helped to improve fiscal discipline and allocative efficiency. Given that the Bank has been a significant player in providing MTEF-related lending support and advice to low- and middle-income countries, this study has tried to distill lessons from a review of the Bank’s engagement with MTEFs with a view to determining whether Bank support has been conducive to achieving the expected benefits from MTEFs. In terms of fiscal stability as well as allocative and technical efficiency of public spending, the review shows that the majority of MTEFs completed have received a satisfactory rating. Moreover, since 2002 the number of lending operations rated less than satisfactory has declined. This suggests that the design and implementation of MTEFs have gradually improved, there has been a supporting approach to fiscal policy and an enabling environment for institutional reform, and MTEFs have