Following the UK government’s decision to cut aid from 0.7 to 0.5 percent of GNI, recent announcements have shown that bilateral aid is likely to receive the biggest hit, all while in the midst of a global pandemic. In this blog, we look at what the reduction could mean for health services in lower-income countries and find that UK aid supports important health services that are already under stress due to COVID, and which are unlikely to find alternative funding sources. We conclude with some advice for Ambassadors and officials on implementation.
The context of UK aid cuts
In 2021 COVID-19 looks set to escalate further in many countries, with rising cases and new strains. In 2021 we will likely see economic, fiscal, and health financing crises for many low-and middle-income countries (LMICs) following the 3.5 percent contraction in global GDP in 2020.
To respond to the next phase of COVID-19, LMICs need strong health systems, systems that focus on the basics, with good data and surveillance, an excellent and context-appropriate testing and vaccine delivery system, and the ability to make careful choices between COVID and routine, but essential, health services. Therefore, countries and donors will need to work together to re-prioritise how to use more limited domestic and aid resources.
It is in this context that CGD colleagues estimated that the UK aid reduction to 0.5 percent of GNI in 2021 will result in 50 percent cuts to bilateral FCDO spend in just one year. Bilateral health aid plays a critical role in how the UK contributes to strengthening health systems in LMICs, health surveillance, and global health security. These cuts are therefore hard to reconcile with the Foreign Secretary’s commitment to international health security.
What does UK bilateral aid tend to fund?
At this stage, the decisions on where these cuts will occur has not been decided, so it is not yet possible to say which programmes will be most affected. Cuts will not fall equally, and we should expect (hopefully) greater cuts in lower priority and low impact health areas. What we can consider is what FCDO bilateral health spend has historically covered, and how this might be affected. With multilateral health aid (estimated to be £4,939 million in 2019) more likely to be protected and British Ambassadors in LMICs being asked to cut their aid budgets by 50 to 70 per cent, they will inevitably have to look at these big-ticket items:
- In 2019 bilateral ODA for health was £1,431 million (14 percent of total UK bilateral ODA), which is an increase of £101 million compared to 2018.
- In 2018 over half of all bilateral health spend went to four areas:
- Reproductive health care and family planning (25 percent)
- Health policy and administrative management (13 percent)
- Infectious disease control (9 percent)
- Nutrition (9 percent)
Cuts in these areas run the risk of reducing the capacity of health services to manage the COVID pandemic, but also maintain essential services.
We can be more confident about risks presented by cuts in countries where health represents a very large proportion of UK total aid, for example, Zimbabwe, Sierra Leone, and Nigeria. It will be very hard for Ambassadors to manage 50-70 percent of bilateral aid cuts without significantly impacting on these programmes, including cuts to basic core health services, infectious diseases, nutrition, and water and sanitation:
- In Zimbabwe, the total project budget from FCDO is £75m of which 45 percent is dedicated to health. The main projects funded through this ODA go towards supporting a resilient health system in Zimbabwe to deliver sexual, reproductive, maternal, new-born, child and adolescent health and nutrition services, including responding to priority infectious diseases.
- In Sierra Leone, the total project budget from FCDO is £74m, of which 41 percent is spent on health. This ODA also primarily contributes to essential reproductive, maternal and child health services, including family planning, water and sanitation.
- In Nigeria, with a total project budget of £244m comprising of which 32 percent is spent on health, including six health projects implemented and planned for 2021, ranging from programmes on nutrition, sanitation and hygiene, the national malaria programme, and improving basic health services.
In countries such as these, cuts to UK aid could represent a significant shock to the performance of the health system, and analysis of alternative financial sources that could replace them should be carried out with the government.
Can countries count on other sources of financing to fill the gap?
Reductions in the UK aid budget from 0.7 percent of Gross National Income (GNI) to 0.5 percent will lead to a reduction of £4.5bn or $6.2bn relative to 2019. Unfortunately, the global economic crises means countries domestic resources are also constrained and external private investment (albeit not specifically to health) may have exceeded the decline following the 2008 Global Financial crisis by 60 percent. The Institute for Fiscal Studies have argued that this provides an opportunity to “build back better” by reforming taxes to put in place architecture that allows countries to offer more, better health services, but the fiscal crisis created by COVID-19, and the competing demands on government expenditure, means more innovative financial mechanisms are unlikely to meet the scale needed. Some countries have therefore already started to reduce spending; for example Nigeria has considered cutting healthcare spending by 40 percent in its 2021’s budget.
The experience of past crises gives some hope that health may be protected in domestic budget allocations going forward; public spending on health in Sierra Leone, Guinea, and Liberia increased after the Ebola outbreak, and also post-2008–09 global financing crisis health budgets slowed and closely followed the trajectory of real GDP, but remained, on average, positive and superior to real GDP growth. Even from this hopeful perspective, absolute funding for health, from donors and domestic sources, is likely to fall in most countries, leaving few options to fill the gap caused by the FCDO’s cuts.
Conclusions and recommendations
In summary, with such large cuts coming to bilateral UK health aid, Ambassadors will inevitably have to cut support to key areas such as infectious diseases, surveillance, core health system functions, and reproductive health. This rapid reduction in one year will be difficult for other actors to replace, particularly during domestic fiscal contraction and reduction in the budgets of other donors.
These cuts are steep and could undermine health security, but how they will be implemented still matters. Ambassadors and officials should work cloosely with LMIC governments and other development partners to:
- Carefully coordinate and manage these cuts to minimise their harm, communicating likely cuts to stakeholders early and investigating options to handover financing to other donors and the government where possible.
- Support processes to work across the health system and budget to review priorities, and ensure disinvestments are focused on areas of lower priority and costeffectiveness. This can become an opportunity to invest in priority setting systems and partnerships.
- Consider prioritising opportunities for strengthening services that will support both the COVID response and also longterm system strengthening, such as oxygen production, primary care and communitybased surveillance.