Scaling-up Resources for HIV/AIDS Control and Macroeconomic Policies: The Case of Kenya Global Conference on HIV/AIDS and Macroeconomic Policies International Poverty Centre (IPC) Brasilia, November

Introduction About 1.2 million people live with HIV/AIDS Overall ODA fell, but aid to the health sector and aid to HIV/AIDS control increased significantly HIV/AIDS spending was scaled up and the prevalence rate declined: 14% (2001); 6.7% (2003); 6.1% (2004) Macroeconomic stability was not affected Public health expenditure declined HIV/AIDS spending is small as a share of GDP Aid was not spent and was only partially absorbed

History of Aid flows Falling ODA flows for the last 15 years Aid as a share of GDP was 17% in 1993, but fell to 4% in 2004 Aid flows declined from US$1,185 million in 1990 to US$634 million in Disagreement on conditionality is major cause of aid fluctuation Slight recovery after PGRF agreements in 2000

Kenya – Aid in US$ and as a share of National Income, Source: World Bank World Development Indicators (2006)

Aid and Expenditure in Health Sector Aid to the health sector as a share of total health expenditure up from 13% in 1998 to 15% in 2003 But, total health expenditure as a share of GDP fell from 4.9% to 4.3% Public health expenditure fell from 2% to 1.7% as a share of GDP (the LDC average is 2.4%); also fell from 11% to 7% as a share of total government expenditure (the LDC average is 9%) Private health expenditure as a share of total health expenditure increased from 55% to 61%

Scaling-up HIV/AIDS Spending As a share of overall aid, HIV/AIDS funding rose from 6% in 2000/01 to 38% in 2004/05, averaging 19% As a share of total health expenditure HIV/AIDS spending increased from 5% to 34% But, as a share of GDP, HIV/AIDS spending rose from 0.2% of GDP in 2000/01 to 1.5% in 2004/05 (averaging 0.7%)

HIV/AIDS Spending Including Target, US$ Source: KNASP (2005)

State of the Macro-economy (Source: Calculated from IMF’s IFS) Comparing the periods before (1995 to 1999) & after ( ) HIV/AIDS scaling-up The CPI averaged 6% in the before period compared with 5% in the after period and the GDP deflator averaged 10% compared with 6% (PGRF target less than 3%) Depreciation of the real exchange rate by 3.9% High and positive growth rates of exports and imports

Aid Utilization

Summary Overall ODA has been declining HIV/AIDS funding increased, but even at a higher level only make up 1.5% of GDP Public health spending declined, while private health expenditure increased Aid was not spent; but partially absorbed and added to reserves as well as used to retire debt No sign of macroeconomic instability Policy is geared towards a growth strategy

Recommendations Consider expansionary fiscal and monetary policies: increase spending of external resources (given the fiscal deficit target) Reverse the decline in health expenditure, particularly in light of the linkages between HIV/AIDS and other diseases such as TB Campaign and advocate for debt relief to Kenya that will allow channeling resources to HIV/AIDS control

END Thank You