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Beyond the Annual Budget
Governments should decide that an MTEF is appropriate, and an MTEF should be seen to serve the government’s broad economic and development objectives rather than the development partners’ narrow interests. Aid creates many problems for budgeting because it is volatile and can involve spending rigidities. The MTEF provides a mechanism for reconciling aid volatility (and resource volatility more generally) with expenditure stability and the preferences of donors with those of government. Bringing aid on-MTEF and on-budget is also consistent with the general trend toward using country systems to manage aid.
Organizational Adaptability and Technical Capacity MTEFs change how budgeting is conducted. Under an MTEF, the cabinet and parliament play a more strategic role, providing guidance on priorities and policies, although they still perform their respective oversight and legislative functions. The MoF focuses on the macro-fiscal framework, the technical aspects of setting spending priorities, and management of the aggregate budget; in most countries, the MoF also oversees all aspects of MTEF preparation, in effect acting as a gatekeeper. Spending agencies are responsible for formulating sector strategies and spending plans and for managing and evaluating programs. These are quite different from the traditional roles under annual budgeting, where the MoF prepares the budget in accordance with cabinet instructions and manages public funds, parliament approves the budget, and spending agencies implement programs. All participants in the budget process have to adjust to their new roles and work together to make collective decisions regarding resource allocation, but they also must accept that one agency, usually the MoF, is in the lead. For its part, the MoF has to recognize that its task is to provide guidance on intersector priorities, to resolve interagency conflicts, and ultimately to set expenditure ceilings, but not to get involved in the details of spending decisions. Problems have arisen in trying to implement a new operational model for budgeting. The MoF, spending agencies, or both have not been motivated or prepared to take on their new roles. The MoF can be too authoritarian and spending agencies can be too submissive; both can have little intention of sticking to their budgets. It is better for budget allocations to be contested as part of the budget process than after the fact, and this is what an MTEF allows—competition for resources and commitment to the outcome once it has been decided. In some cases, the cabinet, parliament, or both have not internalized what an MTEF can and cannot (or should not) do and what their roles are in the MTEF process. There have