A WHO study on debt relief initiatives

The decision to embark on this study was spurred by several observations:

1. The need to scale up health and immunization financing
Progress towards the health related Millennium Development Goals (MDGs) and the introduction of new vaccines requires additional funding for the health sector in almost all Heavily Indebted Poor Countries (HIPC). In addition, the new GAVI Alliance co-financing policy requires countries that have not contributed so far to the cost of vaccines to make additional efforts to mobilize funds.

2. The availability of funds from debt relief initiatives
Forty of the poorest and most heavily indebted countries are currently eligible to benefit from different debt relief initiatives: the Heavily Indebted Poor Countries (HIPC) Initiative, the Multilateral Debt Relief Initiative (MDRI), and some additional bilateral debt relief programmes. When compared with past and present public spending on health, the cumulative annual amounts of savings from the different debt relief initiatives are important in many HIPCs. And for the first time, the provision of debt relief is linked with the goal of poverty reduction and the attainment of the MDGs: beneficiary governments have pledged to reallocate the budgetary savings from debt relief to priorities which are in line with the national poverty reduction strategy. The health sector and in particular, the immunization programme were expected to benefit considerably from additional governmental budget allocations.

3. The lack of consistent information on data and funding mechanisms
There is little information available on whether and how debt relief may translate into increased expenditure on national priorities. Where data exists, it is often at aggregate level and difficult to derive solid conclusions for the health sector. At country level, we often observe a state of asymmetric information between the Ministry of Finance and other ministries, such as the Ministry of Health with regard to the amounts of budgetary savings annually generated by debt relief and procedures/mechanisms involved. Exploring the opportunities from debt relief for health financing is in line with WHO’s core functions of stimulating the generation, translation and dissemination of valuable knowledge and supporting national health officials to take advantage of potential financing sources.

Objectives

First objective

To quantify available debt relief resources and get a better understanding of the mechanisms through which these funds are managed and possibly channeled to the health sector.

The aim of the study was to find answers to the following questions:

• What is the total annual amount of debt service savings released by debt relief initiatives from which the country is currently benefiting? How much fiscal space is annually created in the budget of beneficiary governments?
• What are the mechanisms and procedures put in place to manage resources freed up by these initiatives and how health officials might use them to advocate for a stable and predictable share of these funds?
• How much of the debt service savings have been allocated and used for the health sector? And if so, for which programmes? Special attention is being given to the question whether the immunization programme has benefited.
• Are debt relief funds additional to ordinary resources for health at national and international level?
• What obstacles and challenges have hindered the efficient use of these resources (in general and in the health sector). What are the lessons learned and best practices?

Second objective

To inform WHO staff working at regional and country level and partners about available debt relief funds and the resulting opportunities for scaling up health and immunization financing.

Similarly, to provide support to national authorities (especially Ministries of Health) in beneficiary countries and to strengthen their capacity to advocate, plan and allocate (if possible) an appropriate amount of debt relief funds to health and immunization.

Sharing information on debt relief funds is important since national health authorities may not necessarily be familiar with the economics of debt relief. To facilitate dialogue and negotiation between different ministries on the allocation of budgetary resources, it is essential to establish more transparency on the annual fiscal space created by debt relief and on the management system to deal with the savings. Greater transparency would also lead to a better understanding of why one dollar of debt relief does not necessarily translate into one additional dollar of poverty reducing spending. This in turn could lead to more realistic expectations at national and international level about what debt relief actually can achieve.