IMF How To Notes

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Teresa R Curristine, Isabell Adenauer, Virginia Alonso-Albarran, John Grinyer, Koon Hui Tee, Claude P Wendling, and Delphine Moretti. "How to Develop and Implement a Medium-Term Fiscal Framework", IMF How To Notes 2024, 005 (2024), accessed December 10, 2024, https://0-doi-org.library.svsu.edu/10.5089/9798400289668.061

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Summary

This Note 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 a set of institutional arrangements for prioritizing, presenting, reporting, and managing fiscal aggregates - revenue, expenditure, balance, and debt - generally over a three-to-five-year period. It incorporates a fiscal strategy, medium-term projections of key macroeconomic variables and fiscal aggregates, and 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. Ultimately, 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. In addition to providing guidance on how to design an MTFF and the institutional and technical arrangements needed to support implementation, the Note discusses key challenges and presents country examples from across the globe by income group and concludes with lessons learned.

Subject: Budget planning and preparation, Expenditure, Fiscal policy, Fiscal risks, Fiscal rules, Macroeconomic and fiscal forecasts, Medium-term budget frameworks, Public debt, Public financial management (PFM)

Keywords: Budget cycles, Budget planning and preparation, Fiscal frameworks, Fiscal planning, Fiscal risks, Fiscal rules, Macroeconomic and fiscal forecasts, Medium-term budget frameworks, Medium-term fiscal framework, MTFF

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