Fiscal Space for health care: (How) Does it affect the health of people? Gorik Ooms Institute of Tropical Medicine, Antwerp, Belgium Department of Public Health Geneva, October 2008

Mozambique: a textbook example of ‘Positive Synergies’?

It could have been, but there were some issues with expenditure ceilings (which we mentioned in an article in The Lancet…) “To receive debt relief, countries must prepare a poverty reduction strategy paper (PRSP) for approval by the IMF and World Bank, which then periodically assess implementation. … Most strategy papers include a multiyear budget projection called a medium term expenditure framework (MTEF), which includes spending targets for various sectors of government activity. In some countries, health-spending targets identified in the MTEF have functioned, at least temporarily, as health- spending ceilings…”

What the IMF and the World Bank replied…

Comparing budgets as planned in the 2001 PRSP of Mozambique with effective expenditure according to the 2006 NHA Either the IMF and the World Bank – which approved the PRSP – are incredibly strong predictors of the future; Either the IMF and the World Bank – which approved the PRSP – are incredibly strong predictors of the future; Or, they controlled health expenditure... Or, they controlled health expenditure...

IMF imposed ceilings, in different forms and shapes

But what if donors are willing to give more? Countries are allowed to accept it, but not to ‘spend’ it

How can the IMF (and finance ministries, and governments) get away with ‘spending’ only 27% of additional aid? Two possible ‘tricks’: 1. Make an ambitious budget, but do not execute it entirely. Donors have a problem with left-over funds, they will not reclaim their share, they will allow you to keep the 30% that has not been spent, and you can put it in reserves. 2. ‘Spend’ it, but do not ‘absorb’ it. Accept the foreign exchange, and keep it, do not sell it. Print more local currency and spend it – it’s your right, it’s called ‘seignorage’ – donors will be happy because they think their foreign exchange has been spent, but in the end it is the domestic economy that foots the bill.

What is the relevance of all this to ‘Positive Synergies’? GHI’s, or disease-specific funding in general, is much less vulnerable to the tight control by the IMF and the World Bank. However, if disease-specific funding becomes part of a wider effort to strengthen health systems (and general health services), it would become subjected to the tight IMF and World Bank control. “The IHP Compact will increase development partner commitment to achieve the following: ONE single country health and HIV/AIDS plan to scale up the health, nutrition, malaria, tuberculosis and HIV MDGs (MDGs 1,4,5 and 6). This plan needs to be integrated into the country macro- economic framework.”