Are Current Debt Relief Initiatives an Option for Scaling Up Health Financing in Beneficiary countries?/Les Initiatives Actuelles Pour Alleger la Dette De Certains Pays Fournissent-Elles Une Solution Pour Financer Plus Largement Leur Secteur De sante?/?Es Posible Aprovechar Las Actuales Iniciativas De Alivio De la Deuda Para Expandir la Financiacion Sanitaria En Los Paises Beneficiarios?

By Kaddar, M.; Furrer, E. | Bulletin of the World Health Organization, November 2008 | Go to article overview
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Are Current Debt Relief Initiatives an Option for Scaling Up Health Financing in Beneficiary countries?/Les Initiatives Actuelles Pour Alleger la Dette De Certains Pays Fournissent-Elles Une Solution Pour Financer Plus Largement Leur Secteur De sante?/?Es Posible Aprovechar Las Actuales Iniciativas De Alivio De la Deuda Para Expandir la Financiacion Sanitaria En Los Paises Beneficiarios?


Kaddar, M., Furrer, E., Bulletin of the World Health Organization


Introduction

"The original focus of the Heavily Indebted Poor Countries (HIPC) Initiative was on removing the debt overhang and providing a permanent exit from rescheduling. Relief can also be used to free up resources for higher social spending aimed at poverty reduction to the extent that cash debt-service payments are reduced. These are now twin objectives." The World Bank and the International Monetary Fund (IMF), 1999.

Forty one of the poorest and most heavily indebted countries, of which 33 are located in sub-Saharan Africa, are currently eligible to benefit from debt reduction under the enhanced HIPC Initiative and from cancellation of multilateral debt under the more recent Multilateral Debt Relief Initiative (MDRI). Many hopes and promises were attached to the launch of these initiatives. For the first time, the provision of debt relief was explicitly linked with the goal of poverty reduction: budgetary resources no longer needed for debt servicing were meant to be used for scaling up expenditure conducive to poverty reduction. (1) Given the important role of health in the achievement of the Millennium Development Goals, and the fact that all eligible countries identify this sector as a priority in their Poverty Reduction Strategy papers (although to a variable extent), health was expected to benefit from significant additional resources.

More than one decade after the launch of the HIPC Initiative and two years after the implementation of MDRI, it has become evident that the situation is far more complicated. One dollar of debt relief does not necessarily translate into one additional dollar of expenditure on poverty (let alone specifically on health). The successful realization of the initiatives' objective with regard to increased expenditure on poverty, and our capability to assess this question, depend on various internal and external factors. Internally, a very decisive one seems to be the ability of officials in ministries such as health and education to actively advocate for these resources. All too often, the ministry of health lacks crucial information about the overall amounts of debt relief available on an annual basis and about the procedures in place to manage them (Box 1).

In this paper, we presenta classification of debt relief savings management systems and illustrate the different types with findings from our country case studies. The proposed classification is not new. It was introduced by the IMF and The World Bank (6) and has been used by other authors. (7) However, a thorough-comprehension of its meaning and implications is essential for health officials in beneficiary countries to increase their bargaining power and for a wider public not necessarily familiar with the economics of debt relief to readjust expectations of what debt relief can realistically achieve and of what can be measured. We also present the major external challenge, i.e. the question of additionality to other forms of foreign aid, which may prevent current debt relief initiatives from having the desired impact. Finally, we ask for improved transparency and information flow at the national and international levels and propose a broader research agenda to tackle this issue.

Box 1. WHO working group on the financial impact of debt relief
initiatives

In 2006, a working group at WHO decided to take a closer look at
current debt relief initiatives since various governments reported
that they use HIPC funds for scaling up priority health
interventions, notably their immunization programme.

Three main reasons fuelled and justified this enquiry:

(i) The necessity to provide additional (external and domestic)
resources to the health sector of many developing countries in
order to progress towards the Millennium Development Goals;

(ii) The potential magnitude of additional fiscal space provided as
a result of the combined effect of different debt relief
initiatives;

(iii) The lack of accurate information and analysis of the impact
of debt relief on social sector spending in general and on health
spending in particular, despite the wide publicity and importance
attached to the launch of the HIPC initiative and the MDRI. 

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Are Current Debt Relief Initiatives an Option for Scaling Up Health Financing in Beneficiary countries?/Les Initiatives Actuelles Pour Alleger la Dette De Certains Pays Fournissent-Elles Une Solution Pour Financer Plus Largement Leur Secteur De sante?/?Es Posible Aprovechar Las Actuales Iniciativas De Alivio De la Deuda Para Expandir la Financiacion Sanitaria En Los Paises Beneficiarios?
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