It does do fallback, but normal MediaWiki pages (i.e. not the Wikibase interface on entity pages) use the user's language fallback chain (which is affected by the languages in their Babel box), unlike entity pages which only use the default fallback chain for the interface language.

You can see which languages it will try and in which order by going to Special:MyLanguageFallbackChain (wikidata.org, test.wikidata.org).

With {{#babel:en|de-3|mul}} and the interface set to en-gb I get:

• en-GB - British English
• en - English
• mul - multiple languages
• de - German

With {{#babel:de|en-3|mul}} and the interface set to en-gb I get:

• en-GB - British English
• de - German
• mul - multiple languages
• en - English

With {{#babel:frc-0|fit-0|mdf-1|an-1|de-3|mul|en|arz}} and the interface set to io I get:

• io - Ido (interface language)
• arz - Egyptian Arabic (native level Babel language)
• en - angla (native level Babel language)
• mul - pluraj lingvoj (native level Babel language)
• de - germana (level 3 Babel language)
• an - aragona (level 1 Babel language)
• mdf - mokŝa (level 1 Babel language)
• fit - Tornedalen Finnish (level 0 Babel language)
• frc - kaĵun-franca (level 0 Babel language)
• eo - Esperanto (fallback for interface language io)
• ar - araba (fallback for Babel language arz)
• es - hispana (fallback for Babel language an)
• myv - erzja (first fallback for Babel language mdf)
• ru - rusa (second fallback for Babel language mdf)
• fi - finna (fallback for Babel language fit)
• fr - franca (fallback for Babel language frc)

It seems the order it uses is:

• interface language
• Babel languages by proficiency (with equal proficiencies sorted alphabetically by code)
• fallbacks for the interface language
• fallbacks for each Babel language

It would make sense for country variants like en-gb to fall back to en first, but fallbacks are mostly used to fall back to other languages and the current behaviour allows people to override the default fallbacks, so it's probably better to leave it as it is.