The death of MTEFs?

Dec 01, 2008

The PFM Blog has been hosting a fascinating debate on the challenges and uses of Medium Term Expenditure Frameworks (MTEF). This debate is highly topical because MTEFs have been part of the unquestioned recipe for budget reform in poor countries for more than ten years.

The debate started as a slightly esoteric domestic dispute between Marc Robinson and Bill Dorotinsky about the main functions of MTEFs. Click here to see the post and responses.

Next they featured a paper by Salvatore Schiavo-Campo; “Of Mountains and Molehills: The Medium-Term Expenditure Framework”. The astonishing finding from this ex-IMF and World Bank staffer is that:

“The evidence is now conclusive that pushing the MTEF as fashionable “cutting edge”, “state of the art” “best practice”–in disregard of institutional considerations and capacity limits–has produced fiscal Potemkin Villages and mountains of red tape with no improvement in macroeconomic balances, financial control and predictability, or efficiency of allocation and use of public funds.”

His conclusion is of course right. But it is very surprising for this opinion to come out of the IMF and World Bank after 20 years of promoting these very reforms as public finance gospel.

Incidentally, I wonder how long it will be before public finance technocrats come to a similar set of conclusions about the current wave of program budget and performance management reforms. True, some service delivery departments have managed to develop performance indicators.  But these indicators are not used to monitor performance. They are recorded and submitted  in compliance with regulations and filed and forgotten by understaffed treasuries.

What MTEFs do come down to in the South, is expenditure control by another name. Even in South Africa with its much lauded Treasury and Minister of Finance, MTEF ceilings have largely been used as barriers to extravagant budget demands by spending departments.

This is in line with a broader trend that most treasuries in the South are not interested in policy at all (OK, I’m generalizing). Where they have any muscle at all, they use it to police expenditure ceilings and deficit targets. No wonder citizens and citizen organizations are intensely skeptical of MTEFs. They can see that MTEFs are almost always about blunt expenditure cuts, rather than about spending money on the right things.

What is to be done?

So now that even the World Bank and the IMF have realized that MTEFs don’t work, maybe we can have a more serious discussion about how to reform public finances in poor countries. Reformulations of technocratic reforms will not take us any further. As Einstein told us: “Insanity =  doing the same thing over and over again and expecting different results.”

If we are going to shift the political interests that bedevil government finances in poor countries, new voices and interests must be introduced into these tired old debates. And surely these voices must include the people who stand to lose most: citizens themselves.

French philosopher Albert Camus once observed rather depressingly that the only serious philosophical question is whether we should commit suicide or not. Maybe the only serious public finance reform question is how to bring about meaningful participation in public resource allocation.

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2 comments:

  1. Hang on a second:

    “French philosopher Albert Camus once observed rather depressingly that the only serious philosophical question is whether we should commit suicide or not. Maybe the only serious public finance reform question is how to bring about meaningful participation in public resource allocation.”

    Do you mean concluding that participation in resource allocation is the only serious pfm reform question would be as depressing as contemplating suicide? I agree, that would be very depressing, but taking this as a conclusion from the failure of MTEFs is, as they say, throwing the baby out with the bathwater. After all, the problem with the promotion of MTEFs was not that it was meant to pursue the wrong objective, it was that the MTEF itself turned from means to end, which is obviously a bad idea.

    1. Thanks for the comment Philip. I was hoping to draw some response from the IMF blog too – but no luck. In response to your comment: what I argued was that in the practice of most developing countries (and probably in the best cases) MTEFs have been reduced to mechanisms of expenditure control. Hence their unpopularity with citizens and citizens groups.

      I am obviously not arguing against expenditure control. Just the MTEFs have failed as instruments to align budgets and government policy. I am beginning to think that no technocratic reform could ever achieve this goal. The balance of power probably needs to change before this will happen. Which is why the International Budget Partnership and its partners make such a big deal of citizen participation in the budget process.

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