From Overall Fiscal Space to Budgetary Space for Health: Connecting Public Financial Management to Resource Mobilization in the Era of COVID-19
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From Overall Fiscal Space to Budgetary Space for Health: Connecting Public Financial Management to Resource Mobilization in the Era of COVID-19 Hélène Barroy and Sanjeev Gupta Abstract This paper advances the concept of budgetary space for health, which explores resources available for health that are generated through higher public expenditure, better budget allocations, and through improved public financial management (PFM). The budget decomposition approach presented in the paper provides insight into the extent to which each factor drives expansion in budgetary space for health. The approach is applied to 133 low- and middle-income countries (LMICs) between 2000–2017 and finds that around 70% of budgetary space for health is driven by changes in overall public expenditure, while about 30% is directly attributable to the share of Center for Global the budget allocated to health. Further, PFM improvements can maximize or Development even enlarge budgetary space for health. A key implication of the analysis is 2055 L Street NW that health policymakers should systematically link PFM reforms to budgetary Fifth Floor space for health by supporting comprehensive country assessments and by Washington DC 20036 enhancing the effectiveness of budget dialogue between finance and health 202-416-4000 authorities. www.cgdev.org This work is made available under the terms of the Creative Commons Attribution- NonCommercial 4.0 license. CGD Policy Paper 185 October 2020 From Overall Fiscal Space to Budgetary Space for Health: Connecting Public Financial Management to Resource Mobilization in the Era of COVID-19 Hélène Barroy World Health Organization Sanjeev Gupta Center for Global Development The Center for Global Development is grateful for contributions from the Bill & Melinda Gates Foundation in support of this work. The World Health Organization acknowledges support received from the United Kingdom’s Department for International Development (Making Country Health Systems Stronger programme). We also appreciate financial support received from the Government of France, the European Union, and the Duchy of Luxemburg under the UHC Partnership. Hélène Barroy and Sanjeev Gupta. 2020. “From Overall Fiscal Space to Budgetary Space for Health: Connecting Public Financial Management to Resource Mobilization in the Era of COVID-19.” CGD Policy Paper 185. Washington, DC: Center for Global Development. https://www.cgdev.org/publication/overall-fiscal-space-budgetary-space- health-connecting-public-financial-management Center for Global Development The Center for Global Development works to reduce global poverty 2055 L Street NW and improve lives through innovative economic research that drives Washington, DC 20036 better policy and practice by the world’s top decision makers. Use and dissemination of this Policy Paper is encouraged; however, reproduced 202.416.4000 copies may not be used for commercial purposes. Further usage is (f) 202.416.4050 permitted under the terms of the Creative Commons License. www.cgdev.org The views expressed in CGD Policy Papers are those of the authors and should not be attributed to the board of directors, funders of the Center for Global Development, or the authors’ respective organizations. Contents Acknowledgements ............................................................................................................................... 1 Key policy messages .............................................................................................................................. 2 I. Introduction ..................................................................................................................................... 3 II. Connecting overall fiscal space and budgetary space for health in a budgetary framework ............................................................................................................................................. 6 Defining budgetary space for health .............................................................................................. 6 Components of budgetary space for health.................................................................................. 7 Component 1. Annual public expenditure envelope .............................................................. 7 Component 2. Share of the public expenditure envelope dedicated to health................... 7 Component 3. Effective and flexible public expenditure management .............................. 7 III. Driving budgetary space for health: breaking down the role of each component ..........................................................................................................................................11 A simple approach to understanding the drivers of budgetary space for health ..................11 Findings from a budget decomposition analysis of 133 LMICs .............................................11 IV. Incorporating a public financial management dimension to budgetary space for health .................................................................................................................................26 Overall links between PFM and budgetary space ......................................................................26 PFM improvements to enhance budgetary space for health ...................................................26 1. Budget formulation ................................................................................................................27 2. Budget negotiation and approval.........................................................................................28 3. Budget execution ....................................................................................................................28 4. Budget monitoring and evaluation ......................................................................................29 V. Budgetary space for health in practice: implications for research and policy ..........30 Research implications .....................................................................................................................30 Policy implications ..........................................................................................................................32 Concluding remarks ............................................................................................................................34 References .............................................................................................................................................35 Annex 1. IMF list of key steps and indicators to assess the overall fiscal space .......................40 23 Acknowledgements This working paper was developed by Hélène Barroy (Health Systems Governance and Financing, WHO Headquarters) and Sanjeev Gupta (Center for Global Development). Research assistance was provided by Sanhita Sapatnekar, Yann Tapsoba, and Zhubin Chen, consultants for WHO. The authors would like to acknowledge contributions from a range of colleagues, namely: Susan Sparkes (WHO), Jeremy Lauer (University of Strathclyde), Tomas Roubal (WHO Regional Office for the Western Pacific), Elina Dale (WHO), Ajay Tandon (World Bank), Christoph Kurowski (World Bank), Patrick Hoang-Vu Eozenou (World Bank), Richard Allen (independent consultant), Cheryl Cashin (Results for Development), and George Schieber (independent consultant). The paper was peer-reviewed by John Langenbrunner (independent consultant), Kalipso Chalkidou (Center for Global Development-IDSI), and Santiago Levy (Brookings Institution). An earlier version of this paper was presented and discussed at the 2019 International Health Economics Association World Congress in Basel, Switzerland, the 4th Meeting of the WHO Collaborative Agenda on Fiscal Space, Public Financial Management and Health Financing in 2019 in Montreux, Switzerland, and a seminar at the Center for Global Development (CGD) in Washington, D.C., in December 2019. The work was developed under the guidance of Joseph Kutzin and Agnès Soucat for WHO, and Amanda Glassman for CGD. Editing was provided by Anna Dirksen. 1 1 Key policy messages 1. Ministries of finance play an important role in creating budgetary space for health— fiscal decisions made by finance ministries drive 70% of funding. 2. Health ministries play an equally important role—effective engagement in the budgeting process can provide up to 30% of budgetary space for health, on average. 3. Health policymakers should expand revenue discussions to include public financial management (PFM), paying special attention to the importance of strengthening budget allocation and execution to expand budgetary space for health. 4. Strengthening PFM is arguably one of the most effective approaches to maximize existing budgetary space for health; the approach is especially critical given the revenue constraints expected in the COVID-19 era. 5. Four key PFM-related interventions have been shown to enhance budgetary space for health: (i) reducing unnecessary spending by exploring flexible budget structures (ii) influencing budget allocation decisions through a results-based approach to budget negotiation; (iii) reducing unused revenues by working towards full budget execution; and (iv) shaping future allocations through good budget performance. 2 2 I. Introduction The United Nations Millennium Declaration and its Millennium Development Goals (MDGs) galvanized efforts by world leaders to meet the needs of those most in need. In the years immediately after the goals