DUSHANBE, May 3-4, 2007 - A round table on “Sharing experiences on MTEF Implementation in Eastern Europe (EE) and CIS countries” was held in Dushanbe, Tajikistan. The round table was organized by the World Bank, PEMPAL, and World Bank Institute (WBI) in collaboration with the Ministry of Finance of the Republic of Tajikistan. Over one hundred participants were invited to the workshop and these participants include high level officials from the key line ministries, budget committee, officials from key budgetary organizations (KBOs) of regional and local administrations, and international donors.

The main objective of the two-day round table was to facilitate the MTEF implementation process, which has already been started by the Tajik government, by sharing some of the experience from EE and CIS countries, all of which have successfully implemented MTEF in recent years. These countries include Armenia, Moldova, Slovakia, and Georgia. Government of Tajikistan formally launched the MTEF process in September 2006 with the approval of MTEF guidelines. Education has been chosen as a pilot sector for the 2008 budget. World Bank together with other development partners (EU, DFID and UNICEF) is supporting this initiative.

It is expected that a successful transition from an existing norm-based to a medium-term expenditure framework (MTEF), where budget allocations are based on policy goals, will provide the sectors with a predictable spending envelope to undertake medium-term reforms in key areas such as health and education and thereby to meet its Millennium Development Goals in time. An MTEF will directly contribute towards Tajik government’s multiyear plan to achieve sustainable economic growth by improving the efficiency and effectiveness of public expenditures, growth in real income of the public officials, pensioners, servicemen, and significant improvements in access to and quality of main services such as health, education, infrastructure, and water, as described in National Development Strategy (NDS) and second Poverty Reduction Strategy Paper (PRSP2). Mr. Negmatjon Buriev, Senior Economic Advisor to the President of the Republic of Tajikistan also confirmed these objectives when he said that “the Government of Tajikistan is committed to establishing a clear link between national policy priorities and budget/resource allocation to ensure that Tajikistan will achieve NDS and MDG objectives”. In order for MTEF to be fully effective, it is necessary for citizens to have access to information on public expenditure through public participation in the budget process, expenditure tracking, and through independent evaluations, all of which will improve the transparency and accountability at all levels of public expenditure management of the government.

The key objective of the MTEF is to establish a clear link between government policies and resource allocation and budgets. A similar link is rarely established in annual budgets, which often leads to untenable policies due to lack of adequate resources to implement all of them. This results in a spill over from one year budget to the next, leading to large fiscal deficits, macroeconomic instability, and a degradation of public services due to ineffective and inefficient allocation of public resources. One of the main requirements of an MTEF is to prioritize and cost government policies and programs over a medium term, which is often 3-5 year period, depending on the specific MTEF time horizon chosen by a country. As Mr. Shafkat Sohibov, the Deputy Minister of Finance observed, “the Ministry of Finance is leading the development of MTEF in Tajikistan given its importance in improving the efficiency of resource allocation in the public sector.” In MTEF, clearly established goals and priorities of the government policy will be the basis for the budget formulation and therefore expenditures will be planned over a three year period.  Key budget organizations (KBOs) will receive limited funds based on the measurable results/outcomes that each KBO is expected to achieve over this period. Similar reforms were introduced and are being implemented in most of the developed countries such as South Korea and France and many developing and transition countries have already joined this group of countries which include the EE and CIS countries represented in this workshop. These country experiences in moving from an annual to a medium-term expenditure/budgeting framework with budget allocations based on policy priorities and performance of KBOs were of special interest to Tajik government officials who have launched a pilot MTEF implementation strategy in the education sector for 2008 budget. As World Bank country economist for Tajikistan, Mr. Sudharshan Canagarajah, summed up, “MTEF will support the current economic reforms envisaged under NDS and PRSP2 and a successful implementation of MTEF in all key sectors will lead to higher economic growth through better allocation of limited available resources and alleviation of poverty through overall improvements of key sectors such as education, health, and infrastructure.”

The first day of the round table started with a session on why MTEF is necessary for Tajikistan. The session had a comprehensive coverage of the key objectives of an MTEF and its operational stages within which a full-fledged MTEF process evolves. It also highlighted the potential benefits over an annual budget process where there is often a weak or no link whatsoever between policy objectives, resource allocations and the budget. Session two was on MTEF in transition countries and the Tajik perspective. This session also included case studies from Moldova and Slovakia. Session three focused on establishing a macroeconomic framework for MTEF and session four was devoted to a discussion on setting sector allocations ceilings by linking macro framework with strategic sector priorities.

On second day of the round table, there were three main sessions and an open discussion where all international and local presenters participated. The second day’s first session was on the preparation of sector budgets based on MTEF with case studies from Moldova and Slovakia which highlighted the main incentives for these countries to embark upon an MTEF, key implementation challenges faced, and the results achieved so far. The next session was on the necessary institutional set-up for a successful implementation of an MTEF with case studies from Armenia and Georgia. The third session was on sector budget under an MTEF, highlighting the main concerns and challenges from a sector’s perspective.

Overall, the round table will raise awareness of an MTEF among key government officials, and thereby provide an environment to implement the MTEF with little or no opposition from sectoral ministries. The case studies presented at the workshop also provided some general lessons and best practice and, in addition, valuable information on how to avoid the pitfalls that some of these countries faced during the implementation of the MTEF.

The representatives from the World Bank, European Commission, United Nations Children’s Fund (UNICEF) and UK Department for International Development (DFID) pledged their technical and financial assistance for the implementation of MTEF over next three years.

For more detailed information, please contact Dilya Zoirova, Public Information Assistant, World Bank Country Office in Dushanbe at dzoirova@worldbank.org or +992 (37) 221-15-18,                   221-03-81, 221-07-56.