Health Aid, Recession and Developing Countries

By: Bikal Dhungel 

Health is the most important thing in one's life. It is not necessary to describe about it more but it is worth noting that global health disparity is huge. Developing countries bear the disease burden over-proportionally and health spending remains too low. The tropical region is also a fertile ground for diseases like Malaria which is one of the largest killer of human lives. Other communicable and non-communicable disease prevalence is also high in tropical regions. Disease does not have a border, it can travel from one place to another by any means. Hence, the prevalence of communicable diseases in developing countries are also a huge threat for developed countries. That is why, the global initiative to fight communicative diseases like HIV/AIDS is greater and the financial means for that remains huge. But even for other diseases, developed countries support is present. Health sector gets huge amount of aid. However, this also puts poor countries in risk, especially during financial crisis in donor countries who tend to reduce health aid affecting poor countries negatively.

The current global recession and the European one has led to cuts in many sectors within the economy of countries that we hit hard. Streets of southern European cities like Athens, Barcelona, Madrid etc. were filled with demonstrators protesting against the cuts. Countries enacted their own policies following the crisis to mitigate the consequences in the economy. Germany for example, which was hit hard by the crisis due to its dependency of Export sector on foreign countries faced a 5.1% decrease in GDP(World Bank 2009) reduced working time for employees “Short time work” in order to avoid mass unemployment. Without the extensive use of short-time work, unemployment would have risen causing significant affects on the economy. Similarly, The European Central Bank (ECB), US Federal Reserve and other national governments took other policies to combat the effects of Recession.

Developing countries that had nothing to do with the crisis feared that recession in Europe and North America would hit them hard due to reduced development aid, Foreign Direct Investment (FDI) and remittance flows. The following figure shows that all three areas were affected due to recession from 2008 to 2009.

Source: World Development Indicators, World Bank, 2010)

In a globally networked world which is connected by trade, economic crisis in one region affects the other in many ways, mainly reduced trade ( which means higher number of unemployed people ), lower FDI, lower Remittance Flows, lower tourist arrivals and probably lower official development assistance. Countries that are especially dependent on these factors will face a serious problem. FDI is the largest source of income to developing countries and a factor that leads to their economic growth and technology transfer. Hence, reduction in FDI postpones this development and at the same time puts developing countries into more risks. Small island nations that rely on tourism for their income have to make budget cuts in important sectors like Health and Education following a falling number of tourists having a long term negative impacts.

Some countries for example the UK declared that they will not cut Development Aid despite the crisis and others like Germany increased their aid though without declaring officially like the UK(World Bank, 2013). However, in the case of Development Aid it would be possible but it will not be possible to declare such statements for FDI flow or tourism flow which is related to private sector. Development Aid consists of lowest number in comparison to other forms of money flow to poor countries. Hence, the severe effect of economic crisis cannot be avoided.

Following the crisis, ODA by hardly-hit countries fell drastically by as much as 39% of Greece and 32% of Spain . ODA from the European Union to Africa fell from 0.41% ($61.4billion) of GDP in 2006 to 0.38% ($59.4 billion) of GDP in 2007 (Source: OECD Statistics 2012). The UN committee on nutrition warns about the dire impact of Recession for the world’s poorest highlighting the facts that the crisis aggravates hunger and malnutrition which can soar up the number of hungry people to over one billion. It also claims further that global recession coupled with rise in international food prices helped to increase the extremely poor people from 130 to 155 million from 2005 to 2008 (Source: UN website ). Such crisis can easily cause civil unrest, increase in disease prevalence or other communicable and non-communicable diseases. The risks from communicable diseases are that there is nothing such as any national boundaries which stops them from moving from one place to another and could spread globally in a short time. For this reason, many donor countries are committed to fight such diseases like HIV/AIDS. Also to avoid such pandemic, it is necessary not to cut the aid flow at least in health sector. Such crisis of pandemics can also arise in the aftermath of natural disasters like flood of after the collapse of health infra-structures following an earthquake or hurricane. In order to handle such situation, mitigate the impacts and when possible, to avoid that, disaster management teams are being set up by various organisations and national governments. However, if there is lack of funding or uncertainties in funding, countries will not be capable to handle natural disasters like the earthquake in Haiti, Tsunami in Indian Ocean or Floods in China. So, Economic Crisis increases the risk of ability to fight natural disasters that impede growth in long term. Private sectors are also important players in international aid spectrum but also non-state actors like Bill and Melinda Gates Foundation, William J Clinton Foundation, Carter Center etc which are also channeling the health fund. The following graph shows Bill and Melinda Gates Foundation’s annual grants for global health. It shows that recession caused a decrease in grants from 2009 to 2010 and again from 2011 to 2012.

(Source: BMGF Statistics, 2014)

Organisations that are committed in health sector globally like WHO, UNICEF, UNAIDS also rely on contributions from national governments. The role of WHO in providing expertise and advising national governments of developing countries cannot be replaced and this is vital in today’s scenario where disease control is still a major issue. Similarly, UNICEF, UNAIDS and other such organisations have their own specialized functions that are of high importance. Irregularities of funding for such organisations have adverse effects in planning for health and emergency and will reduce their capacity. This on the other hand can slow the progress in health issues in developing countries.

For countries that rely heavily in donor funding, cuts in health aid will be the matter of life and death. Developing countries vary largely in terms of external financing of health care. In sub-Saharan Africa for example, external financing of health care is less than 7% (WHO, 2005) but most of the disease related programs are financed fully externally. Organisations like ‘The Global Fund to fight Aids, Tuberculosis and Malaria’ do not get any grants from country governments where they are operating, rather again from donor countries and private donors. So, reduction in funding on the one hand force the recipients to cut on health personnel, infrastructures or medical logistics that are vital in providing day to day health services in developing countries and on the other hand, shortfalls in particular disease related projects will increase the disease burden.

As a conclusion, it is not possible for poor countries to avoid the consequences of Recession in developed world on their economy and this could especially destabilize their healthcare sector which is critical for their well being. First, the recession can cause direct reduction in health aid. Second, the consequences on other sectors like lower tourist arrivals, FDI and remittance flow will affect the government budget and private income of poor countries and this will deteriorate their health and eventually the economy. Poor country governments let health sector financed by international support and themselves concentrate more on sectors like defense etc. They are also less motivated on public health. This is a dangerous thing to do, especially if there are spending short falls. Their focus should be on health, education and development first. The remaining fund should go elsewhere. This is why, the successful economies that developed itself to higher level, development and health sector were under the tight supervision due to its immense importance. Developing countries should learn from the current recession about how dependent they are with the rest of the world and should do the homework on how to reduce this dependency so that they are less vulnerable to external shocks. Developed countries should also understand that Health is important and poor health in poor countries will affect them directly. The recent Ebola crisis showed, if handled without care, it can reach Europe and America. Hence, development aid should be channeled to Health sector more. The current practice is discouraging as most aid goes for infrastructure to extract resources or elsewhere and health sector get less than 5% of development aid even though this number was increased in the last years and finally the donors should not only focus on the amount but also on its management. The issue of volatility and uncertainty should be dealt. Similarly in priority setting, better coordination and accountability to make the most use of it.