## What Happens to Public Health Spending in IMF-Supported Programs? Another Look

_IMF Blog, December 21, 2014_

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## Bibliographic details
- Authors: Benedict Clements, Sanjeev Gupta, Masahiro Nozaki
- Published: December 21, 2014

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### Background
- Improvements in health have a large positive effect on well-being and economic activity; the 2013 Lancet Commission indicates about 11 percent of the economic growth in recent decades can be attributed to these improvements.
- The impact of IMF-supported programs on public health spending has been the subject of earlier research covering periods before the global financial crisis, which found a positive effect of Fund-supported programs on public health spending (Martin and Segura, 2004; Center for Global Development, 2007; Clements, Gupta and Nozaki, 2013).
- This analysis reassesses the evidence for developing economies extending the sample to 2003 to 2012.

### Empirical findings (2003–2012)
- Broad patterns from earlier peer-reviewed analysis continue to hold: spending rises at a brisker pace in countries with Fund-supported programs than in those without.
- Health spending as a share of GDP has been rising at a faster annual pace in countries with Fund-supported programs, especially:
  - low-income countries (which pay zero interest under Fund-supported programs), and
  - countries of Sub-Saharan Africa.
- Over a 10 year period, the cumulative difference between program and non-program low-income countries is about 0.6 percentage points of GDP.
- The 2013 econometric analysis indicates that if macroeconomic factors that affect health spending are controlled for, the impact almost doubles.
- Other measures of spending increases show the same pattern:
  - Real health spending per person grew by an average of about 6½ percent a year in low-income countries with programs.
  - Low-income countries without programs averaged spending increases of 4½ percent.
- Developments between 2008 and 2012 show a similar story during and after the global financial crisis.
- Countries adversely affected by the Ebola virus also show greater spending increases (as a percent of GDP) during periods with Fund-supported programs:
  - Guinea increased by 0.7 percentage points (2010 to 2013).
  - Liberia increased by 1.6 percentage points (2010 to 2013).
  - Sierra Leone increased by 0.24 points (2010 to 2013).

### Channels and mechanisms
- Tax reform emphasis in Fund-supported programs can raise revenues, helping countries increase social spending in a fiscally sustainable manner.
- Programs that lead to higher economic growth can generate fiscal space (including through more robust revenue growth) to finance increased health outlays.
- IMF-supported programs can have a catalytic effect on donor financing, deepening the pool of resources for priority spending on health and other programs.
- More recently, the incorporation of minimum floors on social spending in Fund-supported programs has encouraged countries to raise health spending; the IMF’s Independent Evaluation Office found that 29 of 30 recent programs incorporated these minimum floors (IEO, 2014).

### Policy implications and recommendations
- Fund-supported programs are compatible with country plans to expand public spending on health.
- Raising health spending is necessary but not sufficient for better health outcomes; countries should also focus on reforms that improve the efficiency of health spending, where there is significant room for improvement (Coady, Francese, and Shang, 2014).

*Benedict Clements, Sanjeev Gupta, Masahiro Nozaki — December 21, 2014 — What Happens to Public Health Spending in IMF-Supported Programs? Another Look.*

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## References

- [reforms](http://www.imf.org/external/pubs/ft/fandd/2014/12/coady.htm)
- [https://www.imf.org/wp-content/uploads/2014/12/health-spending.jpg](https://www.imf.org/wp-content/uploads/2014/12/health-spending.jpg)

_Source: https://www.imf.org/en/blogs/articles/2014/12/21/what-happens-to-public-health-spending-in-imf-supported-programs-another-look_