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22nd March, 2015

Fiscal Space for Health

Health Budget Advocacy
Health Care Financing

You might already have heard of the term “fiscal space for health”. It describes whether the government has enough additional resources to increase the amount of money it spends on health without spending beyond its means or taking funds away from other sectors. Read more about it in this blog.

Fiscal space for health is an important concept for health budget advocates because it allows us to draw a distinction between two scenarios:

  1. Stagnant health spending and low fiscal space for health: the government is not increasing health spending because it cannot afford to. 
  2. Stagnant health spending and high fiscal space for health: the government is not increasing health spending because it is not a priority.

Many of the discussions in the post-2015 Financing for Development negotiations will concentrate on how to increase domestic fiscal space for development priorities. There are many ideas, from improving tax collection, introducing “sin taxes”, or striking better tax deals with mining companies.

But what happens after you’ve increased fiscal space? A group of researchers from the RESYST (Resilient and Responsive Health Systems) consortium, recently looked at what happened in Kenya, South Africa and Lagos State (Nigeria) as the tax collection capacity of these countries and states increased dramatically over the past 15 years.

They found that, in all three places, economic growth and greater government budgets (i.e. greater fiscal space) did not translate into more health spending per person. In some cases, health spending even decreased!

There were four reasons for this:

  1. Health was not just in competition with other sectors – it also had to compete with the prioritisation of debt repayments and efforts to curb government spending overall due to prevailing macro-economic policy
  2. The Ministry of Health often lacked the political influence and the technical know-how to negotiate greater health spending with the Ministry of Finance and lost out in competition with other sectors
  3. The process for developing the health budget often meant that small changes here and there ended up eroding the overall allocation to health
  4. The Ministry of Finance was reluctant to increase the health budget because it did not trust the health sector to deliver results

These are important findings. It means we can’t just assume that health spending will naturally increase along with economic growth or the government’s budget. Engaging in political debates about how public resources should be spent, as elected representatives, members of civil society organisations, civil servants, or citizens, is crucial to ensuring that the health sector is adequately resourced.

The researchers also provide a few recommendations – while they are targeted to Ministry of Health officials, we think health budget advocates should also take note.

The Ministry of Health should engage in macro-economic policy debates.

AHBN says: This might not be your cup of tea or your area of expertise, but health budget advocates also need to get involved in these debates. A case needs to be made that a healthy nation is a more productive nation, which is better for the economy in the long-run.

The Ministry of Health needs to perform better in arguing for higher health budgets, particularly in terms of demonstrating economic and social benefits linked to specific health interventions.

AHBN says: Health budget advocates can help by providing some of this evidence as well as human stories, and reinforcing the political pressure outside the Cabinet.

The Ministry of Health needs to demonstrate its ability to spend efficiently and deliver results.

AHBN says: health budget advocates, through budget (or staff, or drugs) tracking can raise red flags where results are not up to par. And they can help convince health officials that fixing these issues could result in greater budgets in the future.

Interested in finding out more? Check out the ReSYST policy brief, a literature review on fiscal space for health, or a working paper on the South African case. below. 

We can’t just assume that health spending will naturally increase along with economic growth or the government’s budget.