How to Develop and Implement a Medium-Term Fiscal Framework

IMF How To Notes, September 26, 2024

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How to Develop and Implement a Medium-Term Fiscal Framework

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Bibliographic details

• Authors: Teresa R Curristine, Isabell Adenauer, Virginia Alonso-Albarran, John Grinyer, Koon Hui Tee, Claude P Wendling, Delphine Moretti
• Published: September 26, 2024
• Series: IMF How To Notes
• DOI: https://doi.org/10.5089/9798400289668.061

Overview and purpose

• Provides guidance on developing and implementing a medium-term fiscal framework (MTFF).
• MTFFs aim to promote fiscal discipline and sustainability, transparency, and better-informed fiscal decisions.
• An MTFF comprises institutional arrangements for prioritizing, presenting, reporting, and managing fiscal aggregates — revenue, expenditure, balance, and debt — generally over a three-to-five-year period.
• An MTFF incorporates:
  • a fiscal strategy,
  • medium-term projections of key macroeconomic variables and fiscal aggregates,
  • ceilings on total expenditure to guide subsequent annual budgets.
• By introducing a medium-term perspective into fiscal and budgetary decision making, MTFFs provide a clearer understanding of the impact, trade-offs, and risks of policy choices.
• MTFFs contribute to enhancing transparency and accountability by communicating the government’s medium-term fiscal goals, policies, and fiscal performance.
• Clarity on medium-term fiscal plans and on their effective implementation can bolster confidence in the government’s ability to manage its finances prudently and competently.

Content scope and structure of the Note

• Guidance on how to design an MTFF.
• Discussion of institutional and technical arrangements needed to support implementation.
• Discussion of key challenges to MTFF development and implementation.
• Presentation of country examples from across the globe by income group.
• Concludes with lessons learned.

Key findings and functions of MTFFs

• MTFFs are tools to:
  • promote fiscal discipline and sustainability,
  • improve transparency,
  • support better-informed fiscal decisions.
• Core elements include:
  • fiscal strategy,
  • medium-term projections of macroeconomic variables and fiscal aggregates,
  • expenditure ceilings to guide annual budgets.
• Benefits highlighted:
  • clearer understanding of policy impact, trade-offs, and risks,
  • enhanced transparency and accountability,
  • increased confidence in government fiscal management when plans are clear and effectively implemented.

Institutional and technical arrangements (high-level)

• Institutional arrangements prioritize, present, report, and manage fiscal aggregates.
• Technical arrangements support medium-term projections and setting of expenditure ceilings.
• Implementation relies on aligning MTFF ceilings and projections with subsequent annual budget processes.

Challenges and country examples

• The Note discusses key challenges to MTFF adoption and implementation.
• Country examples are presented across income groups to illustrate practical applications and variations in MTFF design and implementation.

Content in this bundle

• How to Develop and Implement a Medium-Term Fiscal Framework
  • How to Develop and Implement a Medium-Term Fiscal Framework (Markdown version)
  • How to Develop and Implement a Medium-Term Fiscal Framework (PDF)