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An Investigation into the Impact of the Medium-Term Expenditure Framework on Budgetary O utcomes

An Investigation into the Impact of the Medium-Term Expenditure Framework on Budgetary O utcomes. Jim Brumby World Bank. Aim of the Research.

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An Investigation into the Impact of the Medium-Term Expenditure Framework on Budgetary O utcomes

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  1. An Investigation into the Impact of the Medium-Term Expenditure Framework on Budgetary Outcomes Jim Brumby World Bank

  2. Aim of the Research Medium Term Expenditure Frameworks (MTEFs) are fiscal instruments aimed at enhancing fiscal performance. This study analyzes the impact of MTEFs on several dimensions of fiscal performance: • Fiscal discipline, that indicates how well spending relates to revenues. • Allocative efficiency, that measures the extent to which resources flow toward the most needed public projects. • Technical efficiency, that shows the extent of waste of resources allocated to a given project.

  3. Types of MTEFs Different types of MTEFs can be distinguished: • MT fiscal frameworks (MTFFs) provide a macro-fiscal basis for budget formulation. It is likely to impact fiscal discipline more than efficiency. • MT budget frameworks (MTBFs) in addition specify spending agency expenditure ceilings based on top-down resource availability and bottom-up resource needs. This is likely to impact most on allocative efficiency. • MT performance frameworks (MTPFs) in addition focus on spending program inputs, outputs and outcomes. This would impact most on technical efficiency.

  4. Global MTEF Adoption

  5. Stylized Facts – Event Study MTEFs Fiscal Discipline Allocative Efficiency

  6. Stylized Facts – Event Study MTEFs Fiscal Discipline Allocative Efficiency

  7. Econometric Results - Summary Table

  8. Key Messages • MTEFs improve fiscal discipline measured as overall fiscal balance. The effect is significant and increasing as the country moves from an MTFF to an MTPF. • MTEFs improve allocative efficiency measured as the volatility of health expenditures to total expenditures. As expected, the effect is larger as the country goes from an MTFF to an MTBF. • While the volatility drops with after the introduction of the MTEFs, the spending in health increases consistent with expectations. Results can vary with the estimator used, but always positive when significant. • Results on technical efficiency measured as health spending’s impact on output of the health sector—whether life expectancy or infant mortality—are mixed. If we use life expectancy as a measure of service delivery, results show a positive effect of the MTPF, but no effect from the introduction of other frameworks (as expected). But when considering child mortality, the only significant coefficients are negative and relative to MTBF.

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