Public Sector Governance and Accountability Series: Budgeting and ...

240 Salvatore Schiavo-Campo
past the point of diminishing returns. In some African and other developing
countries, the medium-term expenditure framework (MTEF) has become a
juggernaut of increasingly fine detail and geographic reach, imposing time and
resource costs on the country’s public administration far out of proportion to
any benefit. A good reformer should know not only when to seize the opportunity
to introduce an innovation, but also when to stop pushing it. Fourth,
introducing MTEF is complicated enough without saddling it with major
changes in the budgeting system itself. Ghana, where the MTEF introduction
gave promising initial results that were negated shortly thereafter, provides an
example (see box 8.2). As argued in chapter 12 on the reform process, budget
reform is easy to introduce in Africa. The challenge is to make such reforms
last and produce benefits that more than justify their costs.
To avoid these pitfalls, many industrial countries have limited the scope
of their estimates of multiyear expenditures to the future cost of existing
programs. Comparing this cost with the revenue forecast yields the aggregate
financial margin available for new programs—which the government
should begin to prepare but would not budget until they are ripe to be
launched. Three variants of medium-term expenditure programming can
be considered:
1. A mere technical projection of the future costs of ongoing programs
(including, of course, the recurrent costs of investment projects).
2. A strict programming approach, which entails (a) programming savings
in low-priority sectors over the period to leave room for new higher-priority
programs, but (b) including in the multiyear framework ongoing programs
and only those new programs that are to be included within the annual
budget under preparation, or for which financing is certain (for example,
the Public Investment Program prepared in Sri Lanka until 1998).
3. The “traditional planning” approach, which identifies explicitly all programs
and their cost over the entire multiyear fixed period. Examples of
this approach include the development plans of the 1960s and 1970s
covering all expenditures or the kind of first-generation public investment
programs still being prepared in several developing countries.
Where the institutional mechanisms for realistic revenue projections,
sound policy decision making, and budget discipline are not fully in
place, this approach can lead to overloaded expenditure programs and
can thus harm the credibility of both the plan and the annual budget.
The feasibility of implementing formal multiyear programming depends
on the capacity and institutional context of the specific country.When multiyear
programming is not feasible, two activities are still a must: (a) considering the