The Bad News Is Good News? The Problems of Graduating from Foreign Health Aid

Last month I attended a working group set up under the auspices of UHC2030 to look at the problems facing countries that lose external funding for their health programs. For many countries, the bad news is good news—their incomes and capacities have improved so much that donors no longer view them as needing the assistance. But the bad news is still bad news—how are they going to deal with the loss of support?

For me, three questions permeated the presentations and discussions:

1. Is there anything specific to losing external funding that isn’t already part of a country’s strategy to strengthen its health system?
2. If coordination among donors is needed, can that be achieved centrally or will it only happen within the countries receiving aid?
3. What is the right way to gauge a country’s own effort to mobilize resources?

Losing aid means more than losing money

Many of the presentations emphasized that countries which strengthen the institutions and capacities of their health systems will have fewer problems adjusting to smaller inflows of aid. In this regard, it seemed like the agenda for helping countries through such a transition is identical to the agenda for helping countries achieve universal health coverage.

But in other presentations, it became clear that foreign aid involves more than money. Representatives from low- and middle-income countries noted that the attention given to developing proposal for foreign aid agencies is often more detailed and professional (and more exciting) than developing the budget for the finance ministry. They pointed out the value to them of having technical support from outsiders, and the value of political support for addressing the health needs of neglected subpopulations. They also noted the benefits they lose when they can no longer access subsidized commodities or services like bulk purchasing and coordinated procurement. Thus, even when foreign aid might represent a small share of government health spending—less than 2 percent in countries like South Africa, Estonia and Indonesia—the ability to pay for those programs won’t necessarily replace the technical or political support that it provides.

Participants also mentioned another issue: what to do when foreign aid is delivered through mechanisms that a country cannot or will not sustain? In particular, many foreign aid programs contract directly with non-governmental service providers (NGOs). Sometimes this is done to reach people who would not otherwise use public facilities, but sometimes agencies contract NGOs because they are unwilling to directly finance government health systems. When external funding declines, countries may be unable to finance or provide these services because of legal impediments to contracting with NGOs. In other cases, the services may be too expensive or difficult for the government to manage. Whether it creates issues of institutional capacity or financial priority-setting, aid-supported programs pose a challenge to the development of an effective and sustainable government health system unless they consider these transitional problems early.

Coordination happens in country or not at all

The unpredictability of aid can also be a problem for recipients, particularly when donors fail to give advance notice about curtailing programs or arrange for transferring responsibilities in an orderly fashion. While GAVI and the Global Fund were credited with providing public information about the procedures they follow when deciding when a country is ready “to graduate,” bilateral agencies were described as opaque. In this regard, the United States is often a big puzzle. While PEPFAR seems to be paying attention to its exit strategy in South Africa, its performance in other countries was not viewed as favorably.

But the value of coordination really counts at the country level. No matter how much agencies call for coordination at their headquarters, it is the staff who are responsible for implementation at the local level who ultimately do or do not share information and collaborate. The most successful cases reported at the workshop happened in countries where the government led the process of coordination and insisted on a full health sector perspective. In other cases, a major multilateral agency might play this role in the recipient country by regularly convening donors. In still other cases, there was only one major donor left and coordination among donors wasn’t an issue at all. The key, however, seemed to be having a strong push for coordination among donors by people working in the country receiving aid.

Look at absolute spending not just percentages

Money isn’t the only part of managing this transition, but it is still an important one. The irony is that countries can often make a stronger case to receive aid when they are performing poorly than when they perform well. Donors and recipients handle this uncomfortable reality by planning and programming, monitoring and persuading. Donors want to see that countries are committing larger shares of domestic revenues to health as a sign that program will be sustained.

By this measure, things often don’t look very good.

But countries have many other needs that are competing for scarce funds. It is sensible, from the receiving country’s perspective, to accept foreign aid for health and allocate more money to programs they need but which may not be eligible for external funding. So, until foreign aid declines, the share of public spending going to health isn’t a good predictor of what will happen.

As an illustration, Burkina Faso’s share of government spending going to health is only marginally higher than it was in 1995—6.1 percent instead of 5.4 percent—even though foreign aid to health is almost three times higher per capita than it was in 1995 (see table). But the share by itself is misleading to some degree.  Over this same period, GDP per person doubled and government revenues tripled. In absolute terms, Burkina Faso increased its public spending on health from about $94 million to $361 million.

So over two decades, while foreign agencies increased their annual spending per person from $6.99 to $30.49 and reduced it back to $19.27, Burkina Faso’s government increased domestic health spending per person from $9.36 to $20.35 and sustained it at $20.51. So even if the share of government spending on health declined from 2005 to 2014, is this a country which is showing commitment or not? And what is likely to happen if external support declines? Will these programs be absorbed by the government and financed with domestic revenues or not?

There is no way to predict the answer. The result depends on domestic political decisions and that, in turn, depends on the existence of domestic constituencies to argue for health spending. If public health advocates only argue in terms of increasing the share of the national budget, it forces people to think of that spending in terms of what else must be given up. If, however, health spending is promoted by showing what services and health outcomes can be obtained for the money, it may be more likely to succeed. This may be a better way to make the case for what a country should spend on health.

Transit or transition?

Some countries are going to need external assistance for health for a long time to come. But there are other countries which are “fortunate enough” in terms of development that they face an imminent decline in foreign support. When aid agencies think about cutting programs and when countries plan for their financial future with or without foreign aid, all these issues are on the table: a decline in external funding may mean more than losing money; coordination among donors is more likely if it happens locally and preferably if it is locally led; and judgments regarding commitment must look beyond spending shares to the absolute amounts of money being spent. Ultimately, the success of any of these transitions depends on what a country learns how to do for itself. But, aid agencies have an obligation to make that process more predictable and smoother.

Thanks to Seb Bauhoff and Rachel Silverman for important corrections and useful inputs.