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Health spending must be sustainable

10 Sep 2008

George Obeng Adjei; Francis Anto; Paul Chinnock

Source: TropIKA

A ‘side event’ within the Third High-level Forum on Aid Effectiveness, held in Accra 2nd-4th September, was an examination of the importance of predictability in aid programmes, based on experience within the health sector.

The session was opened by Rwanda’s Minister of Finance James Musini, who said aid predictability was fundamental. Unpredictable aid undermined efficiency; it generated distortions and missed opportunities. He also expressed concern that the current focus in many aid programmes was on ‘high-profile diseases’, such as HIV/AIDS, which were not necessarily major contributors to the total morbidity burden.

Murilo Portugal, Deputy Managing Director of the International Monetary Fund (IMF), said the fund supported higher social spending, including for health. He noted that, although there had been recent increases in public spending on health in sub-Saharan Africa, there was a consensus that, without significantly increasing health spending, many countries would not be able to achieve the health-related millennium development goals (MDGs). In particular, rising food and fuel prices had increased demand for additional spending on safety-net measures, and were putting pressure on the ‘fiscal space’ available for other spending, including health. Measures that would increase fiscal space included, mobilizing additional domestic revenues through broadening the tax base, shifting resources from less productive areas, increasing the efficiency of existing health spending, additional borrowing, and increased external financial assistance.

He said that, while the IMF welcomed increasing external financial assistance for health in developing countries, it was important to ensure that the increased spending was sustainable from a macroeconomic perspective.

Murilo Portugal stressed that better health outcomes were driven by a complex set of factors and not by health sector expenditure alone. He noted for instance that female education influenced infant mortality and fertility rates, and improvements in water and sanitation were critical for better health outcomes. For these reasons, when additional financing for health was advocated, it should be paralleled by adequate financing for complementary sectors.

He also referred to the wage bill ceilings in IMF-supported programmes. He said these could be justified only by macroeconomic considerations and in situations where the capacity of governments to control such spending was particularly weak, such as in post-conflict situations.

Summing up, he said that improving health outcomes in developing countries required not only additional, but more efficient and better quality spending. The IMF was committed to this area through policy advice and technical assistance for strengthening institutions and enhancing governance, as well as financial support.

The main issues raised during the discussion which followed concerned predictability, harmonisation, programme fragmentation, procurement and ‘legalistic’ procedures. Panelists in the session agreed that the transaction costs involved in fragmented aid were not helpful and that, as a starting point, recipient countries should ‘clearly spell out’ these concerns to donors. However, on the recipient side, reforms were also required, especially in public finance management systems, in order to assure donors that they could use these systems for aid disbursement. In addition, it was noted that integrating health with education, water and sanitation, and agriculture would improve effectiveness.

Read the main TropIKA.net news story on the Third High-level Forum on Aid Effectiveness here.

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