Public Spending on Health Care under IMF-Supported Programs
IMF Blog, March 9, 2017
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Bibliographic details
- Authors: Sanjeev Gupta, Baoping Shang
- Published: March 9, 2017
Key findings and summary
- Over the past few decades, protecting social programs and spending on health has been a cornerstone of the IMF’s support for countries.
- A number of studies have found that IMF support for countries’ reforms, on average, either preserve or increase public health spending.
- One study finds that the effect of IMF programs is considerable—they increase public health spending by about 1 percent of GDP over a 5-year period.
- While one recent study suggests a few ways in which IMF support may impede spending on public health, their impact is offset by other important factors through which the IMF’s support for a country positively affects public health spending.
- The empirical evidence generally points to positive outcomes for public health spending under IMF-supported programs.
Mechanisms through which IMF support can raise health spending
- Higher long-term economic growth
- Economic and financial stability promoted in IMF-supported programs can help governments raise revenue to finance health care.
- More donor support
- IMF support can help countries receive more financing from other donors, increasing resources available to finance priority spending on health and other social programs.
- Tax reforms
- IMF programs typically emphasize tax reforms that increase revenues, giving governments more money to spend on health care in a sustainable way.
- The number of countries with tax reforms has increased rapidly since 2007.
- This paper shows the positive link between IMF support, reforms, and revenues for 126 low-income and middle-income countries.
- The potential for raising the revenue ratio is almost one percentage point of GDP in a given year.
- Social spending protection
- The explicit incorporation of minimum levels of social spending in IMF-supported reforms has encouraged countries to raise health spending.
- The number of requirements on social expenditure as well as public investment in low-income countries has increased substantially over recent years.
- The IMF’s Independent Evaluation Office found that 29 of 30 recent reform programs incorporated these minimum levels.
- Emphasis on growth-enhancing public expenditure—including education and health spending—in country reforms supported by the IMF also helps raise spending on public health.
- More efficient spending
- Improving the overall efficiency of spending can help governments finance spending on education, health, and investment.
- Examples include phasing out energy subsidies—which typically benefit the rich more than the poor—to save money.
- In recent years, the number of requirements that help improve budget execution and control—and thus public spending efficiency—has increased considerably.
- In public investment, measures include introducing more rigorous appraisal, selection, and approval of investment projects, and strengthening management and monitoring of project implementation.
- Higher public health spending efficiency means governments can achieve better health outcomes with the same level of health spending.
Case example: IMF response to health crisis (Ebola)
- The experience of Guinea, Liberia, and Sierra Leone during the Ebola epidemic shows the positive influence of IMF financial support.
- Since September 2014, the IMF has provided emergency financial assistance to the three countries totaling US$378 million, to help respond to the Ebola outbreak.
- The IMF’s response helped the governments make room in their budgets, crucial to boost health spending, and provided a catalytic role vis-à-vis donors, whose assistance was largely directed at health spending.
Remaining challenges and scope for improvement
- There is room to improve the design of IMF support to countries in crisis.
- When it comes to public health, the empirical evidence generally points to positive outcomes, but specific studies indicate potential adverse channels that should be addressed in program design.
Literature cited (selected)
- Does the IMF constrain health spending in poor countries? Evidence and an Agenda for Action
- What happens to social spending in IMF-supported programmes?
- Does conditionality in IMF-supported programs promote revenue reform?
- Revisiting the IEO Evaluations of The IMF’s Role in PRSPs and the PRGF (2004) and The IMF and Aid to Sub-Saharan Africa
- IMF Response to The Ebola Crisis
- The impact of IMF conditionality on government health expenditure: A cross national analysis of 16 West African nations
Public Spending on Health Care under IMF-Supported Programs — Sanjeev Gupta, Baoping Shang — March 9, 2017
