In the developing world the level oj development remained unsatisJactory partly due torninsufficient access to financial resources, poor utilization and management oj thernresources in the public sector. To contribute its part the general objective oj this study isrnto examine the pelformance oj Medium Term Expenditure Framework (MTEF) and itsrnoutcome on budget system oj Addis Ababa City. The thesis is designed to Jollowrndescriptive and exploratory type oJresearch method. Data have been collectedFom bothrnprimmy and secondary sources in order to generate relevant and valid result.rnAccordingly both structured and semi-structured questionnaires and interviews werernimplemented to access primary data Fom 76 respondents oj 22 public bureaus and 5 subrncitiesThe findings oj the analysis revealed that MTEF is integrated in to the budget process;rnimproved reallocation oj budget towards poverty oriented sectors based on the city'srnstrategic plan when compared to the pre-MTEF implementation period. Acknowledgingrnsome benefits oj MTEF, its overall contribution to the budget system observed to bernlimited. Budget is highly input oriented rather thanJocusing on perJormance. There is nornunit cost and standardization oj activities to estimate operational and project costs in thernbudget processOn the basis oj the empirical finding, the linkage between MTEF and the budget trendrnindicate that there is improvement on both revenue and expenditure perJormance.rnHowever, due to the Jact that many exogenous Jactors are left out only MTEF may not bernattributed to these improvements. It is concluded that coupled with weak capacity oj therncity, a fiill-fledged MTEF, is not sequenced by overall PEM reJorm restricting its Jullrnbenef it. As a result, in order to improve the budget system, it calls Jor Jurther reJorm,rnwhich includes redesigning a city level MTEF, Jollowed by sequences reinJorcing reJormsrnto bring successful paradigm shift.