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The IUP Journal of Accounting Research and Audit Practices:
Preview of Medium-Term Expenditure Frameworks
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Annual budgeting procedures largely ignore future costs and benefits of government programs. They involve determining affordability and implementation of policies in the limited time horizon. In the meantime, they also have to fulfill target group demands. Deficit financing, pro-cyclical fiscal stance, time inconsistency, transparency and good governance are important factors to be considered for achieving high quality durable government policies. It further also explores the manner in which it connects with initiatives from other sectors for future budgeting, feasible access and future policy projection of new programs with existing policies. However, Medium-Term Expenditure Framework (MTEF) approaches involve many fundamental and complex issues, about which much has been written and the debate for which still continues. It is still in its infancy in India with a brief experience at the level of the center. Few states have been found to implement MTEF on a preliminary basis for specific sectors with donor funding. A detailed review of the MTEF is performed in the preent paper and it reveals that fundamentally, MTEF alone cannot deliver efficient public expenditure management. Hence, the paper shows that before designing MTEF, concerns regarding transparency and accountability of public expenditure have to be addressed.

 
 
 

What determines the public expenditure of the government in recent years? Conventional economic arguments on public expenditure are influenced by many economic factors (Wagner, 1883; and Peacock and Wiseman, 1961) and politico-economic indicators (Kalecki, 1943; Nordhaus, 1975; Hibbs, 1977; Cukierman and Meltzer, 1986; Rogoff, 1987; Alesina, 1987; Alesina and Sachs, 1988; Rogoff and Sibert, 1988; and studies on India by Karnik, 1990; Sen and Vaidya, 1996; Chaudhuri and Dasgupta, 2005; and Khemani, 2007). A sound and transparent system of managing public expenditure is important. There is also a need to situate the annual budgets in a longer policy horizon. In any country, annual budgets are the centerpiece of government financial process. Domestic resources and external assistances support the development of government entitlement policies and programs. In general, it has been directed through the annual budget. Each financial or calendar year, the government or social policies require funding and yield benefits. Balancing a long-run fiscal position poses a challenge for any government. Specific annual budgets largely ignore future costs and benefits of government programs. Particularly, relevant time horizons for future consequences of government budget policies are inabilities to extend public decision making. Medium-term approach has made the necessary demonstrations, measures and tools for the government budget and line ministries to sort out the pressure through the budget cycle. The Medium-Term Frameworks (MTFs) promise to provide necessary directions of administrative and public interest in a specific line ministries or programs (World Bank, 1998; and OECD, 2001). MTFs involve many fundamental and complex issues, about which much has been written and the debate still continues.

 
 
 

Annual budgeting procedures, Benefits of government programs,Fulfill target group demands,Medium-Term Expenditure Framework (MTEF) .