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October 18, 2007

Central American MTEF Workshop

Central American countries, Panama, and the Dominican Republic sponsored a workshop on medium-term expenditure frameworks (MTEFs) for Vice-Ministers, Budget Directors and Treasurers on October 8-9, 2007. The workshop was hosted by the Honduran Ministry of Finance in Tegucigalpa, and was organized and delivered by the IMF Fiscal Affairs and Western Hemisphere Departments, with the support of the World Bank and InterAmerican Development Bank, and participation of speakers from Colombia and Spain.

MTEFs are in place or being adopted in scores of countries around the world, and there is much misunderstanding of the concept. Some countries think a multi-year macroeconomic forecast is an MTEF, while others think a separate document with multi-year expenditure forecasts is an MTEF. And, occasionally, some countries think an MTEF is about appropriating a budget for more than one year. The overview presentation is available here. [Download mtefs_overview.ppt]

The workshop provided a common understanding of MTEFs, country experience in implementing them,  potential benefits to the central america region, as well as sessions on some specific issues such as capital budgeting plans and MTEFs, and sector ministries in MTEFs. The agenda in Spanish and English can be downloaded here: Spanish [Download hondurasagenda_seminario_mtef.DOC] or English [Download central_american_mtef_workshop_agenda_final.DOC].

A few key points from the workshop are:

  • MTEFs as a reform are about improving the budget process, not creating a separate process
  • In addition to adding multi-year dimensions to budgeting decisions, MTEFs involve creating a structured budget decision-making process, and changing the incentives of those involved in making budget decisions and using resources.
  • Introducing an MTEF is itself a multi-year undertaking, and the reform can be broken into more manageable segments that add value, but don’t overwhelm the PFM system with too much reform at once. Shock-therapy PFM reform is generally not sustainable reform.
  • While there are no formal pre-requisites for beginning an MTEF, there are some PFM system elements that make it easier, such as a good chart of accounts and budget classification, and an automated financial management information system.
  • MTEF implementation will not achieve its full benefit if there are large off-budget spending, earmarked revenues and expenses not controlled by the annual budget, or weak budget execution systems that do not allow implementing the budget as approved.

In addition to presentations by experts, the workshop included many working sessions where countries discussed key challenges to implementing MTEFs in their country, and ways of overcoming those challenges. Fortunately, many countries have some of the foundations in place for succssful implementation of an MTEF. Each country had some PFM system elements where they were further advanced than their peers, making this group of countries well-suited to forming a peer-learning working group for taking PFM reforms such as MTEF forward.

Posted by Bill Dorotinsky

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