International Health Aid: Following the Money

First systematic look taken at budget impact in developing countries

Carol Cruzan Morton

New research shows that governments of developing countries have doubled their public spending on health overall, reaching $18 billion in 2006 (with some notable exceptions). And in most countries on average, a recent doubling of global health aid has added even more to the bigger domestic health budgets, according to the first systematic study to ask: Where’s all that money going? What’s the budgetary impact?

In a general doubling of health budgets in developing countries, researchers found substantial variation between countries from 1999 to 2002 compared with 2003 to 2006, in terms of the relative health share of the general government budgets. Large parts of Latin America, the Middle East, and Asia showed increased government commitment to health (blue, top), while many countries in sub-Saharan Africa showed decreased commitment (red, top). During the same time, those countries with a declining share of government spending on health have received the most international health aid (blue, bottom).

Images courtesy of Institute for Health Metrics and Evaluation (IHME)

“This is a big change since a decade ago,” said Julio Frenk, dean of HSPH, who was not an author on the paper. “Health is now seen as a main component of the global agenda. The global health community has managed to persuade the leaders of donor countries of the intrinsic value of health for human rights, security, governance and the global economy.”

But in some of the poorest countries, the study also found, increased international aid money is replacing, rather than adding to, domestic public spending on health. The analysis prompted a daylong forum in London to announce the findings and to address financing policy issues raised by the study. The study did not examine health outcomes.

“Government spending on health plays a key role in promoting population health,” said Chunling Lu, HMS instructor in social medicine and first author of the study, published online April 9 in the British journal The Lancet. “Developing countries still need more money from the international community.”

What Aid May Add

For the first time, observers say, Lu and colleagues at the Institute for Health Metrics and Evaluation (IHME) of the University of Washington have mounted a comprehensive effort to track where public and private donor money for global health goes and how it is used. The findings raise several serious questions about international health financing and are expected to frame future discussions and research.

Most health spending comes from governments and households in developing countries, but good health takes more money than poor nations now spend per person per year, about $14. (Compare that to the average $2,235 per person per year that richer governments spend.)

Debate in London centered on the question of “additionality”—whether outside donor aid adds to the domestic health budget or merely replaces it. Some argue that the poorest countries exhibited rational economic behavior by applying money freed by international health aid to tend to other government budget priorities.

Others counter that donors supplement impoverished countries’ grossly underfunded health budgets. When their leaders reallocate the health spending, they defeat the purpose of the international aid.

Domestic Funds Go Further

Such spending can negatively affect the recipient country’s health system, Frenk said. That’s because the well-meaning outside money comes earmarked for specific and important programs, such as fighting AIDS, tuberculosis or malaria. That money cannot be used to shore up the system to address other health needs.

“In a developing country, you want a flexible budget to support doctors and clinics,” said Frenk, who, as minister of health for Mexico from 2000 to 2006, expanded the country’s health budget—using only national sources—in a reform that is on track to provide universal coverage by 2011.

“We are hoping that the lessons learned from countries that are investing more of their own money in their health systems can be applied where domestic public health spending is declining,” said Frenk, who is the IHME board chairman. “The worst outcome would be for people to lose faith in health aid.”

Patterns in Health Spending

Two major trends emerged from the work. First, in sub-Saharan Africa, where many governments receive significant health aid directly from developed countries, international organizations and global health initiatives, aid appears in part to be replacing domestic public health spending instead of supplementing it fully. For every health aid dollar spent, governments moved from 43 cents to $1.14 from their health budget to other priorities.

Second, in countries where nongovernmental organizations receive and dispense most of the aid, government health spending appears to have risen. Both trends merit further research, the authors say.

“The fact that many governments are committing more of their own resources to health is crucial,” said coauthor and IHME director Christopher Murray. “Aid from outside donors plays an important role, but can fluctuate from year to year. Governments ultimately have to sustain themselves.”

The researchers emphasize greater transparency and accountability. They call for clear reporting standards for government spending on health as well as health-related sectors.

For more information, students may contact Chunling Lu at chunling_lu@hms.harvard.edu.

Conflict Disclosure: The authors declare no conflict of interest.

Funding Sources: The Bill & Melinda Gates Foundation; the authors are solely responsible for the content of this work.