Economic impact of COVID-19 and health financing in the Pacific: The time for action is now

Many Pacific countries have managed so far to avoid the direct illness and deaths caused by COVID-19 (coronavirus), largely due to swiftly applied travel restrictions and other lockdown measures, combined with their geographical remoteness.

However, while being largely spared from the health impacts, Pacific countries are among the most at-risk from the global economic contraction spurred by the virus. With Pacific nations facing an average decline in per capita growth rates of 5.7% (with declines as high as 20% in Fiji), six years of economic output are projected to be lost. So how will Pacific countries allocate more limited resources in the future and, more critically, how will health financing be effectively funded moving forward? 

What does this mean for health financing?

Over 80% of health expenditure in the Pacific is publicly funded by the government (through domestic revenue and external financing). The remaining balance comes from external financing outside of the budget and from households’ out-of-pocket financing, which averages 10% of total health expenditure.

Factors determining public expenditure on health per capita

The impact of COVID-19 on health financing in Pacific countries depends not only on the extent, duration and severity of the economic contraction, but also on the revenue and borrowing of governments, on health’s share of public expenditure, and how well that share is managed. Countercyclical policies could help protect health financing and break the trend of decreased expenditure on health as seen in previous crises.

Pacific countries, Average Public Debt, 2015-2022 (as % of GDP)

Source: International Monetary Fund

Encouragingly, since the start of the pandemic, resources for health in Pacific countries have largely been protected or have increased. Significant additional resources have been made available by development partners and additional domestic budgets have been allocated to health which appears to be continuing into 2021. Current indications are that external financing will remain largely unchanged as a share of GDP across most countries, although this is subject to tremendous uncertainty. Ongoing support will depend on the economic and revenue impact of COVID-19 in donor countries and development partner institutions). Out-of-pocket contributions are likely to further decline due to lower use of health services and household incomes.

Regardless of efforts made so far, risks remain not only due to COVID-19 itself but because of further fiscal tightening in coming years.

Universal health coverage gains at risk

This is putting Pacific countries at risk of reversing years of gains made in advancing universal health coverage. High levels of non-communicable diseases and weak health systems mean countries may be quickly overwhelmed if reopening of borders brings COVID-19. 

Notwithstanding the actual virus, Pacific countries remain highly vulnerable to other damaging health and social impacts. Disrupted local and international supply chains have restricted access to essential and urgently needed goods. In light of what happened during the Ebola epidemic, there are significant concerns globally that disruption to routine health services and delayed health seeking behavior will lead to increased preventable deaths and illnesses from other causes.

For example, in countries supported by the Global Financing Facility for Women, Children and Adolescents (GFF), a partnership hosted at the World Bank, there have been substantial disruptions in outpatient visits, particularly for children under five years of age; childhood vaccinations; family planning services; and care for pregnant women – all key drivers of recent global progress in reducing maternal and child mortality. The GFF also estimates that as many as 26 million women could lose access to contraception across 36 countries, leading to nearly 8 million unintended pregnancies.

These disruptions are putting tens of millions of women and children at risk of dying or enduring lifelong health impacts. Governments and the global health community will need to double down on the provision of essential health services if years of progress are not to be compromised.  The GFF actively supports countries to prioritize and plan for continuation of essential health services strengthen frontline service delivery and address constraints in service demand.

Prioritizing strategic health financing to strengthen health systems

Pacific countries will need to carefully reassess how to allocate and use limited resources more effectively. While budgets have been protected so far, increasing pressure on public resources could lead to a decline in health budget allocations over coming years. Health ministries will need to demonstrate what health outcomes they are achieving for the resources they have and of the importance of investing in health – for health outcomes as well as the economy.

The impact of COVID-19 on health services and health outcomes needs to inform future prioritization and allocation of public expenditure.  This must include increased efforts to strengthen the weak systems that underpin the delivery of quality essential health services for all. Necessary improvements are needed in core health areas such as infection control/waste management, supply chains, diagnostic services and improved data for decision making. Without these improvements, countries will not have the strong foundation needed to respond effectively to the current and future threats to economic and health security predicted to become more frequent and more severe over coming years.

Economic shocks need not lead to a health financing shock IF governments act quickly. If action lags, it is likely that evolving economic circumstances will force changes that will affect health outcomes across the Pacific. 

Development partners have a role to play by supporting governments in planning their budgets, as well as in generating and using data for decision making. The time to act is now.

This blog post is largely based on the note ‘COVID19 Implications for Health in the Pacific Island Countries’  prepared by the World Bank at the 2020 Pacific Heads of Health Meeting, held on 22-23 July 2020.