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Economy and Finance

Medium-term budgetary framework

This page presents an index on the quality of medium-term budgetary frameworks (MTBF index) constructed by DG ECFIN. The latest available update to date covers the year 2020.

What are medium-term budgetary frameworks (MTBFs)?

Medium-term budgetary frameworks (MTBFs) are defined as those fiscal arrangements that allow government to extend the horizon for fiscal policy making beyond the annual budgetary calendar. Although the approval of the annual budget law remains the key step in which important decisions on budgetary policy are adopted, most fiscal measures have budgetary implications that go well beyond the usual yearly budgetary cycle. As a result, a single year perspective provides a poor basis for sound fiscal planning. MTBFs usually cover the preparation, execution, and monitoring of multiannual budget plans and contain both expenditure and revenue projections as well as the resulting budget balances.

In general, medium term budgetary objectives included in a MTBF represent a weaker form of commitment than a pure rule incorporating binding targets. However, they may help ensure fiscal discipline by making more apparent the impact of current policies on the government balance in the coming years. Likewise, the existence of a MTBF may facilitate monitoring by providing benchmarks against which budgetary developments can be assessed over time. Overall, a well-designed MTBF should reflect the impact of past budgetary commitments as well as the future cost of new policy measures.

Finally, the strengthening of MTBFs can efficiently complement the introduction of other institutional reforms such as the introduction of an expenditure rule or top down budgeting.

Database on medium-term budgetary frameworks

The Commission services have surveyed the existing medium-term budgetary frameworks and current budgetary procedures across EU Member States via several rounds of questionnaires (2006, 2008 up to 2020). As Stability and Convergence Programmes can be considered a specific type of a medium-term budgetary framework, they are also covered by the survey and provide useful information. The information collected on budgetary procedures, medium-term frameworks and Stability and Convergence Programmes covers issues of preparation, status, implementation, and connectedness with the budget (including supplementary and corrective budgets).

Index on the quality of medium-term budgetary framework

Using the above-mentioned survey information, the Directorate General for Economic and Financial Affairs (DG ECFIN) has constructed an index on the quality of medium-term budgetary frameworks that is annually updated and published on DG ECFIN's website. The index takes into account both the existence and properties of national medium-term budgetary frameworks and the preparation and status of Stability and Convergence Programmes.

The index captures the quality of the national medium-term budgetary framework through five criteria: (i) coverage of the targets/ceilings included in the national medium-term fiscal plans; (ii) connectedness between the targets/ceilings included in the national medium-term fiscal plans and the annual budgets; (iii) involvement of national parliament in the preparation of the national medium-term fiscal plans; (iv) involvement of independent fiscal institutions in the preparation of the national medium-term fiscal plans; and (v) level of detail included in the national medium-term fiscal plans.

In light of the broad-ranging reforms to national fiscal frameworks in recent years, the methodology used to construct the medium-term budgetary framework index has been changed in 2015 following an in-depth review carried out by DG ECFIN. The new and improved methodology has been implemented since the 2015 vintage of the database. The 'old' methodology has been discontinued, but the historical data vintages computed according to it are still available for download at the link below. To provide a bridge between the 'old' and 'new' data series, the 2015 vintage of the database has been computed according to both methodologies. The latest vintage of the database refers to the year 2020.




Figure 3 - The MTBF index from 2006 to 2020
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