Medium-Term Expenditure Frameworks

Abstract

There is a very strong case for a medium-term approach to budgeting. An annual perspective is too short when many government programs have costs and benefits that extend unevenly over many years. Moreover, competing for incremental resources made available through annual budgets encourages politicians and bureaucrats to pursue their narrow, short-term self-interest, which results in budget allocations that do not serve the economy and society well. By providing the financing assurances needed for a more strategic, forward-looking approach to setting spending priorities, medium-term expenditure frameworks (MTEFs) can help to promote better quality budgeting. The purpose of this chapter is to provide an overview of MTEFs. The next section describes what MTEFs are and how they have developed, followed by a discussion of the impact of MTEFs on fiscal performance.