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Medium-term Fiscal Policy (MTFP) Statement

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The Medium-term Fiscal Policy Statement (MTFP) is a statement presented to the Parliament under Section 3(2) of the Fiscal Responsibility and Budget Management (FRBM) Act, 2003, which sets out three-year rolling targets for five specific fiscal indicators in relation to GDP at market prices, namely, (i) Revenue Deficit (ii) effective revenue deficit, (iii) Fiscal Deficit, (iv) Tax to GDP ratio and (v) Total outstanding Debt as percentage of GDP at the end of the year.

MTFP is a document which lays down the projected fiscal aggregates to arrive at the fiscal targets as prescribed in Fiscal Responsibility and Budget Management (FRBM) Act/Rules (say, keeping revenue deficit at zero and fiscal deficit at 3%) over the coming three year period.

The Statement includes the underlying assumptions, an assessment of sustainability relating to balance between revenue receipts and revenue expenditure and the use of capital receipts including market borrowings for generation of productive assets.


The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 was enacted with a view to provide a legislative framework for reduction of deficit, and thereby debt, of the Government to sustainable levels over a medium term so as to ensure inter-generational equity in fiscal management and long term macro-economic stability. FRBM Act requires the government to lay before the parliament four policy statements in each financial year namely, Medium Term Fiscal Policy Statement, Fiscal Policy Strategy Statement, Macroeconomic Framework Policy Statement and Medium Term Expenditure Framework (MTEF).

The FRBM framework provides a medium term perspective to fiscal management. For instance, the FRBM framework requires the Government to reduce the deficits to a prescribed level in a prescribed time following a laid out fiscal consolidation roadmap. Accordingly, Government is required to place a medium term fiscal framework in the parliament, laying down the projected fiscal aggregates to meet the fiscal targets as prescribed in Act/Rules. The Act also mandates the Government to spell out the strategy that it decides to adopt to meet the projected fiscal plan. While the Medium Term Fiscal Policy (MTFP) lays down the fiscal constraints of the Government in medium term, Medium Term Expenditure Framework (MTEF) lays down the expenditure commitments for various sectors over a 3 years rolling framework.

In terms of principles of Public Expenditure Management Handbook of World Bank issued in 1998, the MTFP can be considered as one of the steps to arrive at Medium term Expenditure Framework.

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