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Glossary

The glossary in this Portal provides definitions of core terms closely related to the medium-term expenditure framework; and links to other online glossaries.

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Word

Definition

Macroeconomic framework

Macroeconomic framework: macroeconomic assumptions underpinning the budget. It is prepared in the strategic planning phase and provides a forecast of the overall resource envelope for the upcoming budget. A medium-term macroeconomic framework typically includes projections of the balance of payments, the real sector (or production sector), the fiscal accounts and the monetary sector. It is a tool to check the consistency of assumptions or projections concerning economic growth, the fiscal surplus or deficit, the balance of payments, the exchange rate, inflation, credit growth and its share between the private sector and the public sector, policies on external borrowing, etc.

Management control (internal control)

Management control (internal control) is defined as “the organisation, policies and procedures used to help ensure that government programmes achieve their intended results; that the resources used to deliver these programmes are consistent with the stated aims and objectives of the organisations concerned; that programmes are protected from waste, fraud and mismanagement; and that reliable and timely information is obtained, maintained, reported and used for decision-making” (INTOSAI). In practice, management control systems embrace a wide range of specific procedures, including, for example, controls on accounting, processes, procurement, separation of duties and financial reporting. Management control systems require effective communications within an organisation and need to be supported by sound internal audit procedures. It is the responsibility of an organisation’s management to establish and monitor management control systems, not that of the external auditor. However, an external auditor should comment on the absence or adequacy of such systems since a consequence of good management controls is that less detailed auditing of individual documents and transactions will be necessary.

Medium-term budget framework (MTBF)

Medium-term budget framework (MTBF) (see medium-term expenditure framework)

Medium-term expenditure framework (MTEF)

Medium-term Fiscal Framework (MTFF): A MTFF is the first, necessary step towards an MTEF. It typically contains a statement of fiscal policy objectives and a set of integrated medium-term macroeconomic and fiscal targets and projections of revenue, expenditure and financing over the medium-term.

Medium-term Budget Framework (MTBF): A MTBF builds on this first step by developing medium term budget estimates for individual spending agencies. The objective of an MTBF is to allocate resources to the nation’s strategic priorities and ensure that these allocations are consistent with overall fiscal objectives. This gives some degree of budget predictability to spending agencies, while ensuring overall fiscal discipline. In fact, a MTBF is the most basic type of MTEF.

Medium-term Expenditure Framework (MTEF): A MTEF develops the approach further by adding elements of activity and output based budgeting to the MTBF. These methods seek to improve the value for money of public spending, in addition to reinforcing fiscal discipline and strategic prioritization. A MTEF can also be defined as a whole-of-government strategic policy and expenditure framework within which ministers and line ministries are provided with greater responsibility for resource allocation decisions and resource use. The key to a successful MTEF is that institutional mechanisms assist and require relevant decision-makers to balance what is affordable in aggregate against the policy priorities of the country. The MTEF consists of a top-down resource envelope, a bottom-up estimation of the current and medium term costs of existing policy and, ultimately, the matching of these costs with available resources.

Medium-term fiscal framework (MTFF)

Medium-term fiscal framework (MTFF) (see medium-term expenditure framework)

Merit good

A merit good is a product that society values and judges that everyone should have regardless of whether an individual wants them. In this sense, the government (or state) is acting paternally in providing merit goods and services. They believe that individuals may not act in their own best interest in part because of imperfect information. Consumers and producers require complete information if they are to make efficient choices. In perfectly competitive markets we assume that all agents in the market have perfect information about the availability of goods and services and also the prices charged by suppliers. Consumers can make purchasing decisions on the basis of full and free information on the products that they are buying. In reality, all of us experience information deficits which can lead to a misallocation of resources. Information failure occurs when people have inaccurate, incomplete, uncertain or misunderstood data and so make potentially “wrong” choices. Consumers can never be expected to have a full-informed view about the products they are faced with in each and every market. Searching for information is time consuming and carries an obvious opportunity cost. Likewise, producers do not have full information about the products and prices being charged by their competitors and the information about the benefits that can be derived. Good examples of merit goods include health services, education, work training programmes, public libraries, Citizen's Advice Bureaux and inoculations for children and students.

Monetary policy

Management of the money supply, under the direction of the Board of Governors of the reserve bank system, with the aim of achieving price stability and full employment. Government actions in guiding monetary policy include currency revaluation, credit contradiction or expansion, rediscount policy, regulation of bank reserves and the purchase and sale of government securities.

Monopoly

In economics, a monopoly (from the Latin word monopolium - Greek language monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a product or service. Monopolies are characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitute goods.



Monopoly should be distinguished from monopsony, in which there is only one buyer of the product or service; it should also, strictly, be distinguished from the (similar) phenomenon of a cartel. In a monopoly a single firm is the sole provider of a product or service; in a cartel a centralized institution is set up to partially coordinate the actions of several independent providers (which is a form of oligopoly).