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

Strengthening Public Expenditure Management in Africa 403
framework, linked with the annual budget preparation, and including only
programs or projects for which financing is certain. The aim is to eventually
prepare annually a formal rolling medium-term expenditure framework
(MTEF) with the same coverage and in the same degree of detail as the annual
budget. This framework should be composed of bottom-up programs—
formulated by each ministry and consistent with government policy for the
sector—focusing only on the estimated future cost of existing activities
(ongoing policies), with expenditures for new policies decided only during the
preparation of the annual budget. (To do otherwise would risk turning
medium-term expenditure programming into medium-term expenditure
entitlements.) This ambitious objective, which requires substantial capacity
building in line ministries, should be approached gradually:
At first, the overall multiyear programs would include bottom-up programs
by only one or two major ministries and still rely on aggregate estimates
for the remainder of expenditures.
The bottom-up expenditure programs would gradually be expanded to
more and more ministries.
Eventually, some vertical deepening of the MTEF mechanism to subnational
levels of government may be realistic and desirable. However, here
again, the realities of opportunity cost and diminishing returns must be
confronted. To push an ill-equipped and overstretched local government
to formulate detailed MTEFs with full costing of specific activities linked
to various outputs would raise transaction costs way beyond the benefits
and—worse—would absorb very scarce local capacity needed to meet
urgent poverty reduction and service priorities. The right cost-benefit
balance must be struck, in terms relevant to the local context.
Concurrently, aid-dependent African countries should move to preparing a
strong public investment program (PIP) on a rolling basis and estimate the
forward local costs of projects financed by external sources. (This process is
discussed at greater length in the next section.)
A country can gain experience toward an MTEF by preparing a full-sector
expenditure program for one or two key sectors—provided that the
program is framed by sound aggregate projections of expenditures, by
function and broad economic category.
The right question, therefore, is not the elementary one of whether a
comprehensive MTEF is preferable to medium-term programming of
investment alone—obviously, it is. The right question is how to arrive at a
comprehensive MTEF. The clear first step is to have good medium-term