Download (Health + others) PRSP Macro + Financing Constraints

Health Financing and the National
Planning and Budget Processes
Solomon Kagulura
WHO Zambia
Health Financing: global
perspectives
Mismatch: health needs & health spending
100%
2%
10%
75%
56%
50%
88%
25%
34%
10%
0%
Burden of disease in
DALY
High income
Distribution of total
global expenditure on
health
Middle income
Low income
What percentage of GDP is needed to finance a health package of
US$34 per capita for the whole population?
Government Health Expenditures/GDP
(assuming 5 percent annual GDP grow th and total health expenditures of $34 per capita)
40.0
Eritrea
Ethiopia
35.0
Ghana
30.0
Projected
Kenya
Lesotho
20.0
Malaw i
15.0
Nigeria
10.0
Uganda
United Republic of
Tanzania
Zambia
5.0
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
0.0
19
95
Percent
25.0
What percentage of GDP is needed to reduce U5M to the
MDG target given the impact of GHE between 1990-2000?
GH as a percentage of GDP to meet the under-five mortality rate target
100
90
Eritrea
80
Ethiopia
70
Ghana
Kenya
60
Lesotho
50
Malaw i
40
Nigeria
30
Uganda
20
Tanzania
Zambia
10
0
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Year
Assumes a 1% real growth in GDP/capita per year, 5% reduction in illiteracy, 5% increase in road network, 5% increase in
sanitation, 5% increase in donor funding
Planning and budgeting
instruments
Better process helps win bigger budgets
And hopefully better outcomes
• In Mauritania, the Ministry of Finance increased
the health budget by 40% in 2002.
• It was influenced by MTEF analysis suggesting
targeted increase would reduce infant mortality by
30% and maternal mortality by 40% in five years.
• In Rwanda a similar process led to increased
health budget from 6% of total government budget
in 2004 to 10% in 2006.
The process graphically: Macro / Sector Links
Cost Sector Plan (Health + others)
PRSP
Cost PRSC
Macro + Financing Constraints
Different scenarios
MTEF
Fiscal Space and Sustainability
Fiscal space: financing public expenditure in
a prudent manner
Fiscal space:
“availability of budgetary room that allows a government to provide
resources for a desired purpose without any prejudice to the
sustainability of a government’s financial position”
The budgetary resources allocation for health depends on:
• Government’s overall fiscal policies
• Demand of competing sectors
• Spill over effect from one sector to another
Fiscal space can be generated through:
• Tax measures or improving tax administration
• Reallocation of resources away from lower priorities
• Borrowing internally or externally
• Seignorage
• Grants
Fiscal Sustainability
Fiscal Sustainability refers to:
“the ability of government to sustain spending on a desired purpose for
its planned duration, and to meet the cost of borrowing without
compromising the government's financial position”
Three conditions:
• For expenditures funded by loans: financial returns generated by
additional expenditure should cover the cost of borrowing
• For recurrent expenditure funded by donor grants: if intended to
continue these expenditures beyond the planned period of donor
funding, governments must be able to raise alternative source of
revenue to replace donor funding when it is phased out
• For all investments: governments must be able to cover recurrent costs
of any new capital investment, e.g. operation and maintenance cost of
new health facilities
Health sector spending presents particular challenges in relation to all
three conditions.
How can we finance more public
spending ?
One way is through growth
Note: Some Countries Spend Less Than Expected on Government Health
Programs
8
Domestically Financed Government Health Spending as % of GDP
Croatia
7
Czech Republic
6
Tunisia
Colombia
Panama
5
Lesotho
Belarus
Solomon IslandsTurkmenistan
Bolivia
4
2
1
0
Macedonia, Fyr
Estonia
Namibia
El Salvador
Turkey
Samoa
Lebanon
Armenia
Algeria Tonga
Kyrgyz Republic
Paraguay
Papua New Guinea
Peru
Zambia
Moldova Zimbabwe Jamaica
Bulgaria
The
BurkinaGambia,
Faso
Guatemala
China
Djibouti
Ghana Egypt, Arab Rep.
Mali
Guinea
Philippines
Rwanda
Vanuatu
Morocco
Vietnam
EritreaTogo
Ecuador
Chad Sudan
Pakistan
Cote
Cameroon
D'Ivoire
Haiti
Georgia
Burundi
Malawi
Indonesia
Nigeria
Uganda
0
2,000
Costa Rica
Dominica
Jordan
Honduras
Mongolia
3
Slovak Republic
Hungary
Uruguay
4,000
Fi
Botswana
Latvia
Brazil
6,000
Chile
St. Kitts And Nevis
Mexico
Oman
Mauritius
Malaysia
8,000
Per capita income PPP
PPPPPP PPP
Saudi Arabia
Poland
South Africa
Thailand
Gabon
Dominican Republic
Argentina
10,000
12,000
14,000
Will Growth Help?
Future GDP Growth Will Be Modest
10
Real GDP Growth by Region
8
Percent
6
4
2
0
1991-2000
2001
2002
2003
2004
2005
2006-15
-2
Year
-4
EAP
SAR
LAC
ECA
SSA
MNA
Source: World Bank, Global Economic Prospects and the Developing Countries, 2004
Can countries increase taxation?
Tax revenue is low in SSA
Central Government Revenues, Early 2000s Average
R egions *
Total
R evenue as
% of GD P
Social
Security
Tax R evenue Taxes as % of
as % of GD P
Total GD P
Early 2000s
Am ericas
Sub-Saharan Africa
C entral Europe, Baltics , R us s ia &
Other Form er Soviet R epublics
Middle Eas t & N orth Africa
As ia & Pacific
Sm all Is lands (Pop. < 1 m illion)
20.0
19.7
16.3
15.9
2.3
0.3
26.7
26.2
16.6
32.0
23.4
17.1
13.2
24.5
8.1
0.8
0.5
2.8
Low -incom e countries
Low m iddle-incom e countries
U pper m iddle-incom e countries
H igh incom e C ountries
17.7
21.4
26.9
31.9
14.5
16.3
21.9
26.5
0.7
1.4
4.3
7.2
* IMF regional and inc ome c ategoriz ations
** Unw eighted av erages
Countries in SSA have low tax base a low capacity to increase tax
and non tax revenues
Figure 5. Annual percentage change of tax and
nontax revenue (as % of GDP) in 1990s
Figure 6. Annual percentage change in total revenue
(as % of GDP) in 1990s
Source: WDI database and IMF PRGF report
Note: Blue diamond stands for tax revenue and
rose square stands for nontax revenue
Source: WDI database and IMF PRGF report
Can countries allocate more to
health?
EXPANDING GOVERNMENT EXPENDITURES IN HEALTH
80
above regr. line
Eritrea
70
below regr. line
Quadrant IV
govt. exp. as % GDP
60
Angola
Quadrant I
Zimbabwe
50
Solomon Islands
Lesotho
40
30
20
Uganda
Mongolia
Ethiopia
Zambia
Comoros
Central African RepublicYemen,
Guinea-Bissau
Gambia,
The
Uzbekistan
Rep.
Togo
Burundi
Sierra
Leone Faso
Burkina
Papua New Guinea
Congo, Ghana
Rep.
Mali
Niger
Moldova
Benin
Malawi
Tanzania
Sudan
Pakistan
Azerbaijan
Kenya
Georgia
Mauritania
Indonesia
Vietnam Rwanda
Senegal
Cote D'Ivoire
Bangladesh
Chad
Tajikistan
Nepal
India Cameroon
Guinea Madagascar
Nigeria
Equatorial Guinea
Haiti
10
Kyrgyz Republic
Congo, Dem. Rep.
Cambodia
Quadrant III
Quadrant II
0
0
3
5
8
10
govt. health exp. as % govt. exp.
13
15
But government spending has its limits
share of GDP devoted to
govt. health expend. (%)
14
12
2000
10
8
2015 on current
trend
6
2015 required
for U5MR
MDG
4
2
0
eap
eca
lac
mna
sar
ssa
Assumes: Past impact of GH on outcomes remains constant and that, GDP per capita, donor
funding, road network and sanitation coverage increase at 2.5% per year. Illiteracy is assumed to
decline at 2.5% per year. Donor Funding is assumed to be only 1/3 as volatile in 2015 as in 2000.
Are donors coming through?
Donor funding
• Donor funding is relevant mostly in Africa a few other LIC
• Meeting commitments is proving to be difficult
• Most Donor Funding for health comes in the form of
vertical programs and is off budget
• Recent econometric work shows that additional donor
funding does no have an impact on U5M and MM unless
volatility and fungibility issues are addressed
The following charts illustrate some of the problems
Donor Funding: Are commitments being delivered?
ODA is Rising But is Far Short of What is Needed to Meet the MDG
(0.54) and the Monterrey Commitments (0.70)
2003 US$ billions
Percent
120
0.35
0.32
ODA as % of donors' GNI(right axis)
100
0.30
0.30
0.25
0.25
80
0.20
T ot al ODA (left axis)
60
0.15
40
0.10
T ot al ODA t o SSA (left axis)
20
0.05
0
Prospects for ODA in 2006 and 2010 are based on DAC members’ post-Monterrey announced
commitments. Not all DAC members have made commitments beyond 2006.
Source: OECD DAC database.
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0.00
A Large Part of the Increase in Aid is Not Directed to
Financing the Incremental Costs of Meeting the MDGs
Increase in ODA is concentrated in
 debt relief and TC
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
 a few countries
Multilateral:
$1.9 billion
Emergency &
disaster relief
& food aid:
$2.8 billion
Other
bilateral:
$1.2 billion
Technical
cooperation:
$4.8 billion
Debt relief:
$6.0 billion
19
18
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
-1
-2
MICs:
$0.2 billion
Jordan:
$0.8 billion
Iraq:
$2.1 billion
Unallocated
by country:
$3.9 billion
Sub-Saharan
Africa LICs:
$3.9 billion
Afghanistan:
$1.1 billion
Congo:
$5.1 billion
Other LICs:
-$0.6 billion
Breakdown of total increase in nominal net ODA of $16.7 billion in 2001-03
The real increase in ODA in 2001-03 is $7.5 billion in 2003 dollars.
Donor Health Assistance is increasing
12,000
US$ (in millions)
10,000
Private Non-profit
8,000
Other Multilateral
6,000
Development Banks
UN System
4,000
Bilateral
2,000
0
Average 1997-99
2003
Year
But large part of the increase is in vertical
programs
Trend in HIV/AIDS Financing
Relative to Total DAH 2000-2004
100
Percent
80
60
68
84
85
16
15
2000
2002
HIV/AIDS Financing
40
20
32
0
Year
2004
Lack of predictability of donor assistance
Figure 3. Donor Commitments as a percentage of
Total Health Expenditure
100
80
Mauritania
Tanzania
Mali
Eritrea
60
40
20
0
1997
1998
1999
2000
2001
Figure 4. Percentage of Total Health Expenditure
Financed by External Sources
25
20
Guinea
Benin
Burundi
Liberia
15
10
5
0
1997
Source:
1998
1999
2000
2001
WDI and OECD DAC donor funding database. Staff estimates
Where Does All the Aid Go?
On average, for every $1 disbursed by donors to our 14
case study countries, we estimate:
•Not recorded in balance of payment
•Recorded in B of P but not in Govt spending
•Aid earmarked to specific projects
•Budget support
$0.30
$0.20
$0.30
$0.20
1990s structural adjustment provided a larger share of
aid as general budget resources.
Conclusions
• Countries are behind with respect to the MDG goals
• Broad agreement exists on health priorities.
• Accountability for results is not always supported by
control of the resources necessary to achieve them.
• Fiscal constraints are binding, particularly in low-income
countries.
• Public health expenditure needs to be well- targeted and
allocated to high impact interventions proven to work.
Conclusions
• In good practice cases, PRSP identifies spending priorities
in consultation with sectors, MTEF/budget process shifts
resources towards them, reviews and adjusts each year in
light of performance.
• Capacity problems can be managed if bottlenecks are
tackled in a logical sequence, avoiding large "earmarked"
commitments that distort priorities.
• Progress to the MDGs requires more budget support in aiddependent countries