External Resources and Aid Fungability in Health

Presenter: Ajay Tandon, World Bank

Abstract

Recent trends indicate a dramatic rise in donor assistance for health (DAH). Overall DAH has risen from about US$ 2 billion in 1990 to well over US$ 14 billion in 2004. In addition, there are several new players in evidence in the field: in addition to bilateral and multilateral donors, recent years have seen several new private and public initiatives and organization become prominent in the area of health aid including the Bill & Melinda Gates Foundation, the Global Alliance for Vaccines and Immunization, and the Global Fund for AIDS, Tuberculosis, and Malaria. Has this increase in donor funding led to a real increase in resources available for health in low-income countries especially those in sub-Saharan Africa? We summarize some recent evidence related to aid fungibility ie, the displacement of domestic resources by external resources, thereby compromising additionality -- in the health sector. We also present evidence on the impact of donor funds on domestic resources for health using Uganda as a case study. We discuss issues related to:

(i) the "net" impact of foriegn aid on domestic resource availability for health; (ii) implications with regard to fungibility of external assistance that is off-budget versus on-budget; and (iii) the impact on the health system of strict disease-specific earmarked foreign aid.