Don’t let the budget fool you

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How well the health budgets are being implemented in developing countries? Photo: Shutterstock
How well the health budgets are being implemented in developing countries? Photo: Shutterstock

Most countries are committed to the provision of quality health services to all their citizens, without the risk of financial hardship. Adequate budget provisions are an important, yet insufficient requirement in this pursuit. The budget also needs to be implemented in full and with regard to efficiency and accountability.

Despite being widely recognized as critical, evidence on how well the health budgets are being implemented in developing countries is not systematically collected. Further, the literature is scarce on how budget execution practices relate to health financing functions and service delivery. A new World Bank and WHO publication addresses this issue head on.

How does budget execution relate to universal health coverage?

The report identifies multiple ways in which budget execution practices can affect UHC goals. For example, poor execution practices may lead to the accumulation of arrears, which in turn is likely to increase the price of commodities. This hinders efficient service delivery. Similarly, equity concerns may arise if the budget is implemented unevenly over time and across regions. The quality of service delivery may suffer if budgets are not implemented in full, and health staff don’t have the operational resources necessary to provide quality services. Partial or late payment of salaries will invariably affect moral and quality of services. Lastly, there are problems of accountability if the budget is not implemented prudently. More systematic field work is needed to identify pathways, actors, and policy options such that budget execution practices better support UHC.

What is the evidence of budget execution rates?

Budget execution rates, or the share of the original budget implemented, can be measured. To understand the magnitude of the problems with budget execution rates, the report draws on previously unexplored PEFA annex data (from 73 LMICs between 2009-2016) and World Bank BOOST data (from 64 LMICs between 2009-2018).

Health budget execution rates are inversely related to levels of income and maturity of PFM systems. Health budget under-execution is particularly pervasive in LMICs where the budget is executed at around 85-90 percent. Some countries have chronic budget execution problems where the health budget is executed consistently at a rate below 85 percent. The health budget is implemented systematically at a lower rate than the overall government budget or other sectors (as also found in the G20 report on High Performance Health Financing for UHC). For example, on average, the health budget is executed at 4 percentage points below the education sector (Fig.1). The analysis calls for unpacking the specificities of the problems in health – a sector that may be more sensitive than others to the lack of flexibility in some budget systems.

Figure 1: The health budget is mostly executed at a lower rate than the education budget
Figure 1: The health budget is mostly executed at a lower rate than the education budget

This means that governments are deprioritizing health during budget implementation. For Sub-Saharan Africa countries in the sample, the average health budget was 6.7 percent of the general government budget, well below the Abuja target of 15 percent. At implementation, this was further deprioritized at half a percentage point as health spending (as a share of general government spending) was on average only 6.2 percent. In some countries this is much more distinct than others (Fig 2). Half a percentage point can be detrimental for service delivery as it is mostly withheld from non-wage recurrent or capital spending.

Figure 2: Health spending is deprioritized during budget implementation
Figure 2: Health spending is deprioritized during budget implementation

Underspending in some categories often occurs concurrently with overspending on other expenditure items. While the wage and salary budget tend to be implemented in full, the analysis shows that this is less so for goods and services or the capital budget. This can leave health workers without the necessary supplies or support infrastructure to provide quality services and invariably lead to inefficiencies.

A way forward

Better and more granular data are urgently needed to give a fuller picture of the trends and patterns in health budget execution. Publishing budget execution data by economic, administrative, functional, and programmatic classifications would allow for better analysis, help benchmarking and allow practitioners to draw appropriate lessons from peers.

For meaningful remedial action, it is necessary to trace problems back to the responsible authority. Root causes may be external to the health sector. For example, a poor budget execution rate may follow an over-optimistic revenue projection that does not materialize. Subsequently budgets are not released despite promises, which is beyond the control of the health sector. Other problems could be traced back to the health sector, such as issues relating to how providers are paid, delays in procurement, or coordination problems among key stakeholders. A systematic delineation of root causes and associated actors is needed to foster a constructive dialogue and can be used to craft an appropriate policy response between health and finance. With the support of an advisory committee, GAVI and the IMF, the WHO and World Bank are committed to support countries to identify bottlenecks and explore policy remedies.

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Authors

Helene Barroy

Senior Health Finance Specialist, World Health Organization

Fedja Pivodic

Health Economist, World Bank

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