Public Financial Management for PRSP - Deutsches Institut für ...
Public Financial Management for PRSP - Deutsches Institut für ...
Public Financial Management for PRSP - Deutsches Institut für ...
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<strong>Public</strong> <strong>Financial</strong> <strong>Management</strong> <strong>for</strong> <strong>PRSP</strong> Implementation in Malawi<br />
Based on the established macroeconomic framework, the actual budget planning<br />
begins. It is fundamental to embed the annual planning process into a<br />
longer term planning perspective as the implementation of strategic policy<br />
objectives and political programmes takes time and usually commits government<br />
to expenditures beyond one fiscal year. There<strong>for</strong>e, annual budget planning<br />
alone is not an adequate instrument to translate medium or long-term<br />
strategic goals into effective allocation decisions and spending priorities in<br />
accordance with medium-term sector policies and programmes. Consequently,<br />
many developing countries – mostly under pressure from IMF and<br />
World Bank – have introduced Medium Term Expenditure Frameworks<br />
(MTEFs) in order to facilitate the integration of policy, planning and budgeting<br />
within a medium-term perspective (Holmes / Evans 2003, 5) and thus<br />
provide a better link between medium-term objectives and the annual budget<br />
(see Box 3).<br />
Box 3:<br />
MTEFs in developing countries<br />
According to the World Bank, MTEFs aim at achieving four major objectives:<br />
- Improve macroeconomic balance by developing a consistent<br />
and realistic resource framework.<br />
- Improve the allocation of resources to strategic priorities between<br />
and within sectors.<br />
- Increase commitment to predictability of both policy and funding<br />
so that ministries can plan ahead and programmes can be<br />
sustained.<br />
- Provide line agencies with a hard budget constraint and increased<br />
autonomy, thereby increasing incentives <strong>for</strong> efficient<br />
and effective use of funds.<br />
An MTEF consists of a top-down resource envelope and a bottom-up estimation of<br />
the current and medium-term costs of the policy programmes and activities. Typically,<br />
MTEFs cover a time horizon of three to five years, over which estimated<br />
aggregated costs are matched with the estimated overall amount of available resources.<br />
The precise matching of costs then takes place in the context of the annual<br />
budget process.<br />
German Development <strong>Institut</strong>e 31