After decades of overseas development aid and record investments in global health in lower income countries, donors are looking for an exit strategy. Both bilateral and multilateral donors have started to expect governments that receive aid to become more self-sufficient by increasingly tying their aid to conditions (for example, by requiring they allocate a minimum amount of their national budget to health or health sub-categories, like the procurement of contraceptives). But progress has been slow, and many countries remain largely dependent on donors to finance their citizens' health services.
Domestic resource mobilisation (DRM) - the process through which governments raise and collect funds for public spending from domestic sources - started gaining traction at the beginning of the 2000s as various notable publications emerged, such as a report from the WHO Commission on Macroeconomics and Health. Over the following decade, donors started reducing their aid or introducing requirements to co-finance health services and programmes, which made DRM a more prevalent theme in global health discussion.
But it wasn’t until the adoption of the Sustainable Development Goals (SDGs) in 2015 that we saw a marked shift in attention among donors towards focusing on strengthening countries’ ability to mobilise resources as an essential step in the path towards universal health coverage (UHC) and better health outcomes. In the same year, the United Nations Third International Conference on Financing for Development concluded with the Addis Ababa Action Agenda (AAAA), which outlined the roadmap for financing the SDGs, and brought countries together under the shared commitment of increasing their domestic resource mobilisation, for example, by widening their national tax base. On the side, the Addis Ababa Tax Initiative (AATI) was launched, which includes a commitment to double donor support for tax reform in lower income countries by 2020. Signatory countries declared their commitment to raise domestic funds to implement the AAAA and finance their own development agenda.
Options supports national and subnational governments across Africa and Asia to increase public investments in health. We do this by providing them with tailored diagnostic processes of their health systems and financing , (including analyses of funding flows), as well as helping them to identify bottlenecks in service delivery or access, and set priorities for their health budgets or specific health interventions. We also work with civil society coalitions and national media to help them understand and analyse how health budgets are planned and spent, and hold governments accountable for their commitments.
Through this work, three key lessons have emerged on how countries can strengthen their domestic resource mobilisation efforts to finance their health goals.
- A sustained shift towards reduced donor dependence requires a systems approach
Focusing on funding for one health area or service for increased public investment may be a good entry point for donors; but making meaningful progress towards self-reliance requires a systems lens that takes into account a country’s wider public financial management, governance and decentralisation reforms and processes. Otherwise any gains made could be lost at every budget or electoral cycle.
Priority setting and public investment reforms should align to strategies for achieving universal health coverage and national economic development targets in order to be sustainable. In Nigeria, for example, we have seen that this also helps protect investments from changes between budgetary or electoral cycles and brings together stakeholders beyond the health sector.
Public health and the economy are closely intertwined, as the economic fallout from the COVID-19 pandemic has shown. Investments in health are not therefore limited to the purview of the Ministry of Health, and their impact on health outcomes and economic growth has to be measured in the long term, as our analysis on the importance of investing in family planning and sexual and reproductive health services in Bangladesh shows.
- Increasing public investment in health is a political decision
The reallocation of public funding towards health, such as a Head of State announcing free healthcare, is a political decision. As one of our programmes in Malawi has shown, advocates for health investments must therefore seek opportunities to help leaders use health care as political capital by identifying potential allies or highlighting how a health investment could help further a government’s broader agenda, such as the contribution of family planning to achieving the demographic dividend or Sustainable Development Goals.
When governments increase their investments in health, they can set priorities that better respond to the health needs of their citizens. This, in turn, helps them make a case for further increasing their health budgets relative to other national priorities. Donors and development practitioners can help to support this process by providing decision makers with the clear and robust evidence they need to set priorities for health investments.
Clear communication of the benefits of investing in health is essential to gain wide and sustained political support for increasing a country’s health budget. For example, quantifying the benefits of a healthy population to achieving economic development targets can help win finance ministry support.
- Donors can support governments to mobilise and use domestic resources for health by ensuring that their aid better aligns with national priorities
Monetary incentives can work. Despite a government’s best intention to increase domestic financing, other priorities often get in the way. Match funding has risks and limitations, but Kenya managed to catalyse additional funding for family planning. Here we saw how donors can incentivise governments to invest more in their health systems for example, by matching their funding for a specific health innovation – for example, by providing $2USD for every dollar a government invests in family planning commodities.
Where donor requirements or incentives do not align with national spending priorities, they risk changing how funding is distributed within the health budget (for example, because governments may move money intended for a health priority to one that meets a new donor requirement for co-financing) rather than increasing the overall amount allocated to health. In the case of transition away from aid, for example, a donor’s reduction in funding (in health or other sectors) can lead to large gaps in the country’s overall available budget. The government needs to make up for the shortfall and may not be able to fund all the priorities it had included in its strategies or plans. A donor can mitigate this risk by ensuring that the process of its aid reduction and the areas affected are clearly discussed with the country’s government and take into account existing national plans and health investment priorities.
As donor funding shifts towards multilateral funds and global initiatives, such as the Global Financing Facility, there is an opportunity to accelerate alignment with government priorities and promote more transparent and participatory priority-setting and budgeting processes. As one of our programmes in Kenya has shown, multilateral initiatives have supported civil society to engage in planning and budgeting processes by establishing country mechanisms and processes where government representatives and civil society come together. They can also improve transparency by requiring or normalising financial data to be published and shared routinely, alongside monitoring reports on the progress of implementation of the funded interventions.
The COVID-19 pandemic has put additional pressure on global resources, in both donor and recipient countries. Expectations and targets for DRM are changing every day, and it is even more urgent to look at them in the broader context of universal health coverage. This means clearly linking medium to long term health priorities (for services and population coverage) to realistic financing plans, that look at how the revenues are mobilised and used.
 Schäferhoff, Marco, Shantih Van Hoog, Sebastian Martinez, Sara Fewer, and Gavin Yamey. 2019. “Funding for Sexual and Reproductive Health and Rights in Low-and Middle-Income Countries: Threats, Outlook and Opportunities.”
This blog is written by Options' health financing experts.