ISLAMABAD, Jan 21: The federal cabinet approved on Wednesday the adoption of Medium Term Budgetary Framework for three years.

The MTBF will cover the whole federal government, including provision for the issuance of indicated budget ceiling for the recurring budget 2009-10.

Prime Minister Yousuf Raza Gilani presided over the cabinet meeting.

After the meeting, Information Minister Sherry Rehman told a media briefing that it had decided not to increase interest rates further in the wake of slight deceleration in the rate of inflation.

She claimed that tax-to-GDP ratio had reached 10.5 per cent. The members of parliament would soon give their recommendations for the next budget through parliamentary committees, she added.

The minister said that the priority of the government was to give relief to the poor and allocate more funds for development projects.

Ms Rehman claimed the government had returned more than Rs98 billion to commercial banks and repayment to the State Bank had also been started.

Adviser to the Prime Minister Shaukat Tarin told Dawn that adoption of the MTBF would be a pragmatic approach to prioritise spending within available resources.

The concept of a three-year rolling fiscal framework was conceived by the previous government in 2005 to strengthen fiscal discipline and improve allocation of scarce public resources. It was financed by the UK Department for International Development.

Mr Tarin admitted that the project was initiated by the previous government but it was approved by the present cabinet to improve efficiency and cost-effectiveness in the use of public resources by federal ministries.

Under the programme, he said, a bottoms-up approach would be adopted to let all ministries avail fiscal space for spending. The finance ministry would provide details of available resources to the ministries, he added.

Mr Tarin said the approach would focus on improving sectoral allocation through an activity-based budgeting exercise.

While the approach is supposed to restrict the wasteful utilisation of public money, he claimed it would give more powers to ministries.

The ministries would now consolidate their requirements based on priorities, he added. “We would now easily determine which sectors need more money and focus of the government.”

The adviser said that the MTBF would also become a basis for preparation of the 2009-10 budget. He said that economic projections for three years would help the government have an idea about fiscal space before making allocations for development projects.

“This is a very pragmatic approach to ensure openness of the budget-making process. We will also share broad parameters of the budget with sub-committees of the National Assembly and Senate to base the whole process on consultations,” Mr Tarin said.