If you are a wealthy government, how do you make sure the aid money you give to a poor country gets spent on something worthwhile? A popular way is to designate the money for a particular purpose, and one good purpose is health. If the poor country government is already spending a certain amount on health services, and you give them the same amount again, designated for health services, then the total expenditure on health care doubles, doesn’t it? Unfortunately not.
Last week the Lancet published the results of a study by the Institute for Health Metrics and Evaluation, funded by the Bill and Melinda Gates Foundation. The study found that the governments of countries which received funds designated for health services tended to divert away funds that they would otherwise have spent on health. For developing countries, each dollar donated for health services resulted in an overall health expenditure increase of less than 57 cents.
The governments of recipient countries presumably think that, now someone else is looking after their health costs, they can target other spending priorities. Donors might try to fix this by circumventing the governments of recipient countries altogether, but this results in permanent weakening of the official healthcare infrastructure. So what is the magic solution? As with most other aid conundrums, we are still looking for one.