Although work on a more medium-term fiscal framework began in 1992, 1994 is regarded as the first year of the MTEF reform. MTEF is annual, rolling three year-expenditure planning. It sets out the medium-term expenditure priorities and hard budget constraints against which sector plans can be developed and refined.

A key distinguishing feature of an MTEF is the integration of policy, planning and budgeting within a medium-term perspective. An MTEF typically consists of a top-down resource envelope consistent with macroeconomic stability and broad policy priorities and a bottom-up estimate of the current and medium-term cost of existing national programmes and activities and an iterative process of decision-making that reconciles these costs with available resources.

In Uganda, the initial MTEF exercise was a direct response to the deterioration of macro-fiscal performance and the inability of the Government to meet its counterpart funding commitments on donor-financed projects. Later the MTEF took on the role of facilitating shifts in sectoral allocations, particularly to pro-poor sectors.