1. Health Financing and the National Planning and Budget Processes Solomon Kagulura WHO Zambia

2. Health Financing: global perspectives

3. Mismatch: health needs & health spending

5. What percentage of GDP is needed to finance a health package of US$34 per capita for the whole population?
Projected
More money is needed!

6. What percentage of GDP is needed to reduce U5M to the MDG target given the impact of GHE between ?
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

7. Planning and budgeting instruments
Why are renewed efforts needed?
Existing processes generally do not:
Have results-based frameworks, focus on outcomes, and have the necessary M&E plans and feedback mechanisms;
Give sufficient attention to governance-related issues (e.g. public financial management, procurement, or absenteeism);
Have sufficient coordination between finance and health ministries during program implementation;
Holistically address national health systems in this era of global programs;
Focus on health systems’ development and sustainable, long-term, and predictable financing.
What is needed
A “Needs Assessment” which identifies systemic constraints and implementation bottlenecks for the delivery of essential services and the required process to address them;
Capacity development plans linked to policy and institutional needs including assessing complementarities with other sectors, analyzing the role of non-state partners (NGOs, civil society, and the private sector), and integrating national health systems with global programs;
Improve the interface between MOF and MOH as co-leaders working with other relevant ministries;
Ensure consistency between health sector development plans, SWAps, the overall budget including cross-sectoral trade-offs and the macroeconomic framework, in consultation with the IMF;
Apply the Paris Principles of aid effectiveness to the health sector in country-specific circumstances including harmonization and alignment behind government strategies and processes, managing for results, and mutual accountability;
Strengthen systems of management for results, including monitoring and evaluation, appropriate indicators, and mutual accountability; and,
Determine major financing gaps and potential additional funding resources, eventually adjusting the plans to available resources and capacity to deliver.

8. 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.

9. Macro + Financing Constraints
The process graphically: Macro / Sector Links
Cost Sector Plan (Health + others)
PRSP
Cost PRSC
MTEF
Macro + Financing Constraints
Different scenarios

10. Fiscal Space and Sustainability

11. Fiscal space: financing public expenditure in a prudent manner
“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

12. 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.

13. How can we finance more public spending ?

14. One way is through growth
Note: Some Countries Spend Less Than Expected on Government Health Programs

15. Future GDP Growth Will Be Modest
Will Growth Help?
Future GDP Growth Will Be Modest
Source: World Bank, Global Economic Prospects and the Developing Countries, 2004

16. Can countries increase taxation?

17. Tax revenue is low in SSA Central Government Revenues, Early 2000s Average

18. Countries in SSA have low tax base a low capacity to increase tax and non tax revenues

19. Can countries allocate more to health?

20. EXPANDING GOVERNMENT EXPENDITURES IN HEALTH80
above regr. line
Eritrea 70
below regr. line
Quadrant IV 60
Angola
Quadrant I 50
Zimbabwe
Solomon Islands
Lesotho
govt. exp. as % GDP 40
Ethiopia
Mongolia
Central African Republic
Guinea-Bissau
Comoros
Gambia, The
Zambia 30
Burundi
Togo
Yemen, Rep.
Uzbekistan
Niger
Congo, Rep.
Ghana
Sierra Leone
Burkina Faso
Papua New Guinea
Mali
Malawi
Benin
Moldova
Azerbaijan
Pakistan
Sudan
Tanzania
Georgia
Kenya
Indonesia
Vietnam
Rwanda
Mauritania 20
Bangladesh
Cote D'Ivoire
Senegal
Kyrgyz Republic
Chad
Nepal
Tajikistan
Uganda
India
Nigeria
Cameroon
Guinea
Madagascar
Equatorial Guinea
Haiti
Congo, Dem. Rep. 10
Cambodia
Quadrant III
Quadrant II 3 5 8 10 13 15
govt. health exp. as % govt. exp.

21. But government spending has its limits
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.

22. Are donors coming through?

23. 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

24. 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)
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.

25. Increase in ODA is concentrated in
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
a few countries
Breakdown of total increase in nominal net ODA of $16.7 billion in
The real increase in ODA in is $7.5 billion in 2003 dollars.

26. Donor Health Assistance is increasing

27. But large part of the increase is in vertical programs

28. Lack of predictability of donor assistance

29. 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 $0.30
Recorded in B of P but not in Govt spending $0.20
Aid earmarked to specific projects $0.30
Budget support $0.20
1990s structural adjustment provided a larger share of aid as general budget resources.

30. 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.

31. 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 aid-dependent countries