1. Government budgeting for HIV/AIDS: An analytical framework and key issues Presentation to Workshop on HIV/AIDS Budgeting Swakopmund, Namibia 12 August, 2003 Alison Hickey Research Unit on AIDS and Public Finance Budget Information Service alison@idasact.org.za

2. 1. Analyse government budget from an HIV/AIDS perspective OBJECTIVES of Research Unit on AIDS and Public Finance 2. Produce recommendations for policy-makers on allocations and effective funding mechanisms for transferring money for HIV/AIDS interventions 3. Build capacity in Parliament and civil society to participate in the budget process on HIV/AIDS issues South African non-governmental organisation promoting sustainable democracy

3. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 3 PRESENTATION  Indirect vs. direct expenditure on HIV/AIDS  Determinants of national allocations/budgeting II. Key issues: What have we learned about budgeting for HIV/AIDS? I. Overview and analytical framework

4. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 4  Massive resource boost needed to strengthen health sector generally. Supply and demand effect... HIV/AIDS directly impacts on government’s ability to deliver regular services, at the same time that it requires that government deliver more services.

5. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 5 Direct expenditure on HIV/AIDS programmes e.g. condoms, PMTCT, public awareness campaigns Indirect expenditure as result of impact of HIV/AIDS e.g. increased demand for social security grants, higher hospital bed occupancy, medicine for OIs Usually requires unconditional transfers or general budget support On recurrent or operational budget (State Revenue Fund) Best addressed using earmarked/ring-fenced funds On development budget (partially covered by donors)

6. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 6 HIV/AIDS sectoral impact assessments Design policy and programmes (strategic plans) Costing programmes and interventions Resource allocation and budgeting Structures and institutions for implementation (including financial flows) Service delivery (implementation) Monitoring & evaluation: programme impact assessments & financial audits Data used to revise programme and to budget for future Where do budgets fit into policy-making and service delivery? Demographic and prevalence data

7. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 7 budget inputs: funds, resources budget outputs: medicine, vaccinations, HIV tests budget outcomes: improved child health Indicators? How do we measure inputs, outputs and outcomes? Demographic data and impact studies are critical to resource allocation for HIV/AIDS.  Demographic data (prevalence rates)  Studies on socio-economic impact of HIV/AIDS  Sectoral impact studies on HIV/AIDS all have a very important role to play in budgeting for HIV/AIDS.

8. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 8 HIV/AIDS sectoral impact assessments Design policy and programmes (strategic plans) Costing programmes and interventions Resource allocation and budgeting Structures and institutions for implementation (including financial flows) Service delivery (implementation) Monitoring & evaluation: programme impact assessments & financial audits Data used to revise programme and to budget for future Demographic and prevalence data Budget outcomes Budget outputs Budget inputs

9. 9 What determines the budget? (national resource allocation) Previous budget Constitutional obligations/legal framework Rights/moral choices Policy priorities (political) Need (e.g. prevalence rates) Cost effectiveness research Capacity to spend Equity Cost of programmes

10. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 10  Percent of HIV/AIDS budget sourced from intl donors Intl donors account for 2/3 budgeted HIV/AIDS spending in 2002 in low & middle income countries (via ODA). Proportion of total funds contributed by natl govt much less in some regions: sub Saharan Africa ~ 9%.  Share of national health bill covered by public vs. private sources (out of pocket spending) Context for financing national HIV/AIDS responses

11. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 11 2. What are spending on HIV/AIDS interventions specifically? 1. What are we spending on health generally? National government expenditure: 3. What are we already spending indirectly as a result of the impact of the HIV/AIDS epidemic on the public health system?

12. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 12 Public expenditure on health as percent of general government expenditure in African countries, 1998

13. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 13 What is government spending on HIV/AIDS? Special designated funds for HIV/AIDS interventions spent by national Ring-fenced funds to provinces or local government for HIV/AIDS HIV/AIDS-specific allocations + Total government spending on HIV/AIDS Funds for general strengthening of health sector (non-specific HIV spending) Other programmes: nutrition, poverty alleviation, social security, food relief etc. Indirect expenditure as a result of impact of HIV/AIDS

14. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 14 PRESENTATION  Indirect vs. direct expenditure on HIV/AIDS  Determinants of national allocations/budgeting II. Key issues: What have we learned about budgeting for HIV/AIDS? I. Overview and analytical framework

15. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 15 1. Budgeting for multi-sectoral response is complex. Driven by health or located outside health ministry? Mainstreaming in non-health departments (beyond condom distribution) ~ HIV/AIDS as core business Multi sectoral (involve ministries of health, transport, finance etc.) Intergovernmental (involve national, regional, local) Public, private and NGO sectors

16. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 16 o Integrated programme planning (alignment with PRSPs) o Degree of national control over resource allocation (policy priorities; prevention vs. treatment; cost effectiveness of interventions) 2. Source of funds (national vs. donor) has critical implications for: o Budget processes and structures (recurrent vs. development; on or off budget) o Flow of funds and efficiency of spending o Transparency and monitoring (on or off budget)

17. 17 South Africa donor funds for HIV/AIDS Average funding per annum Source: van Rensberg et al. 2002. Strengthening Local Govt.. Response to HIV/AIDS in South Africa www.uovs.ac.za/faculties/humanities/chsrd NB. Partial view of HIV/AIDS donor activities

18. 18 Urban/rural focus of donor funding for HIV/AIDS in South Africa Source: van Rensberg et al. 2002. Strengthening Local Govt.. Response to HIV/AIDS in South Africa www.uovs.ac.za/faculties/humanities/chsrd NB. Partial view of HIV/AIDS donor activities

19. 19 Priority areas for donor funding for HIV/AIDS in South Africa Source: van Rensberg et al. 2002. Strengthening Local Govt.. Response to HIV/AIDS in South Africa www.uovs.ac.za/faculties/humanities/chsrd NB. Partial view of HIV/AIDS donor activities

20. 20 3. What are the suitable funding mechanisms for HIV/AIDS interventions? Need to protect AIDS as national priority, and treatment and care as constitutional obligation. Ring-fenced funds can ‘force’ regions/depts to implement programmes, and serve as a catalyst Earmarked or ring-fenced funds vs. unconditional transfers? Advantages of decentralised budgeting Unconditional transfers allow regions discretion: - to make different political choices (outside natl policy) - to allocate funds to most cost-effective programmes

21. 21 South Africa HIV/AIDS funding framework has three streams: 1. Line-items on Natl Health Dept. budget for centrally-run programmes. 2. National sends extra funds to provinces intended for HIV/AIDS. Relies on provinces to allocate as they see fit. 3. Suitable funding mechanisms, cont. 3. National uses conditional grants to kick-start new interventions; ensure implementation of key programmes; retain control of how funds allocated across provinces. Provinces create business plans, but national determines funding, usually insufficient for full implementation of plan. No HIV/AIDS transfers to local govt.

22. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 22 Which funding channel is appropriate depends upon the purpose of the expenditure, or the intended outcome. Budget support or unconditional transfers  Indirect costs too intertwined in regular heath care service delivery to use ring-fenced funds to finance them  HIV related expenditure which is difficult to isolate (medicines, treatment of OIs) must be financed with uncondtl transfers  Is best means to ensure general strengthening of health sector Earmarked funds  only appropriate for limited aspects: public awareness campaigns, condom distribution etc.

23. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 23 Mechanisms to finance interventions Possible financing sources/mechanismsInterventions implemented by: Regular allocation from general revenue fund (line- items in dept budgets) Special levy National government Grant from national or subnational govt Direct donor funds NGOS and CBOS Intergovernmental transfer from national govt Conditional grant (earmarked transfer) Unconditional transfers Own revenue Special levy Donor funds (direct) Regional and local government

24. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 24 5. Capacity to rapidly expand programmes Need for skilled experienced staff (filling posts quickly) How does govt rapidly build capacity in the public service (financial and programme management skills)? Scaling up (from pilots to national programmes) Short vs. long term costs (infrastructure/training costs)

25. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 25 5. Capacity (cont.) Basic trade-off between accountability and bureaucracy. Strict restrictions/procedures for public expenditure can contribute to underspending. - But alternative to underspending is irresponsible spending/corruption - What line departments see as rigidity, treasury sees as a capacity problem. - ‘Underspending is a management problem.’

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27. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 27 Average spending on regular provincial health dept budgets = 99.3% HIV/AIDS conditional grant spending generally = 96.7% HIV/AIDS health cg specifically = 97.4% Provincial health depts more easily spend funds from their regular provincial budget--compared to ring-fenced funds transferred from national govt as conditional grants Example of South Africa:

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30. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 30 5. Resource allocation and targeting funds Need vs. ability to spend Target resources based on prevalence rates? Equity

31. Thank You Alison Hickey Research Unit on AIDS and Public Finance Budget Information Service alison@idasact.org.za

32. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 32 Example of South Africa: Good evidence that spending on the HIV/AIDS conditional grants is markedly improving in the last two years.

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34. South Africa Bilateral Donor Funds to DoH €4 million2001-2003Ireland Aid R1 million2003JICA (Japan) $25 million2003USAID $3 million2003CDC €9 million2003-2004KfW £30 million2003-2008DFID DK100 million2002-2004Denmark €6.2 million2002-2007Belgium R26 million2002-2003EU FundingPeriodDonor

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36. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 36 How much is specifically targeted for HIV/AIDS interventions?  South Africa

37. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 37 What is achievable is not only determined by available resources.  Absorption capacity becomes critical question. - programme & financial management skills Effective HIV/AIDS response will require: - political committment - getting the policy right - allocation of sufficient resources - set-up of appropriate structures/systems - capacity to deliver services

38. Research Unit on AIDS and Public Finance ~ Idasa ~ 12 August 2003 38 Apart from the impact on public sector expenditure…. Impact of HIV/AIDS on revenue (macro economic growth) Link between revenue and expenditure sides of the budget (tax expenditure) Example of personal income tax cuts in South Africa Need for tax analysis from HIV/AIDS, pro-poor perspective