Public budgets continue to make up the vast majority of government funding for health, making them a cornerstone of financing for universal health coverage (UHC). Even for countries that have contribution-based insurance systems, government budgetary support is significant.1 So it is critical that health budgets be formulated, executed, and accounted for in a way that directs funds to national health priorities and supports effective and efficient health service delivery. Deviations from this undermine the ability of governments to make progress toward UHC objectives and ultimately ensure greater health and well-being to their populations.
Budget execution — the actual release of budget funds to spending entities — is a critical phase in the budget cycle that ultimately determines which services, activities, and providers receive funding and how they receive it. Budget execution in the health sector relates not only to timeliness and compliance with annual allocations but also to budget adequacy – the assurance that funds are spent and accounted for to achieve priority health outcomes without sacrificing the quality or efficiency of service delivery. Because of the greater complexity of health financing relative to other sectors, the deliberate design and implementation of the health financing functions – revenue generation, pooling, and purchasing – is required. These functions govern how funds flow through the health system and are used by frontline providers and other budget units to achieve service delivery objectives.
Poor budget execution – money not spent or not spent in alignment with priorities — results in inefficiencies that undermine the ability of health agencies to improve access to needed health services and improve population health. Yet billions of dollars in unexecuted health budgets are returned to treasuries every year.
Poor health budget execution is often attributed to the absorptive capacity of the health sector. But it is also often deeply rooted in a country’s public financial management (PFM) rules and processes, which take time to change. PFM systems may lack the flexibilities the health sector requires to encourage successful budget execution. Ultimately, root causes of poor budget execution are shared between the finance and health sectors. There are things ministries of health can do, however, to improve budget execution while longer term steps PFM reforms are undertaken, and MOHs in some countries have identified promising practices. Documenting and sharing these practices, with a focus on the practical steps involved, can benefit other countries that want to accelerate progress in health budget execution.
Core Initiatives
This year, the USAID-funded Local Health System Sustainability Project (LHSS), in collaboration with the Joint Learning Network for Universal Health Coverage (JLN), launched a new activity to understand and address poor health budget execution from the perspective of Ministry of Health practitioners — the Health Budget Execution Learning Exchange. The learning exchange aims to identify and share promising practices to improve health budget execution while national efforts to strengthen general PFM systems are ongoing. The learning exchange is a time-limited, facilitated platform for interested countries to share promising practices to improve health budget execution, jointly problem-solve, and generate lessons and solutions that can be adapted for different country contexts.
USAID and the JLN are collaborating with 8 countries that expressed interest in learning from each other about ways to improve health budget execution, with Results for Development (R4D) serving as the technical facilitator under the Local Health Systems Sustainability project. Activities to exchange learning will take place between July and November 2021, with a final knowledge product generated by the learning exchange anticipated to be released in early 2022.
Improving budget execution for health is also high on the global UHC agenda. In 2021, the World Health Organization and the World Bank Group, with technical support from the International Monetary Fund, also began a two-year initiative to help countries address health budget execution issues. The program includes developing a country-level assessment framework to guide an analysis of health budget execution issues in countries, map their root causes, and identify policy solutions. The approach is now being used in more than 20 low- to middle- income countries (LMICs) to engage finance and health stakeholders in assessing their phase of budget execution. Preliminary findings will be presented in the upcoming meeting of the Montreux Collaborative on fiscal space, public financial management and health financing.
A shared vision for ‘good’ health budget execution
To frame the learning around practical issues the countries are facing, the learning exchange started by creating a shared vision of ‘good’ budget execution. The facilitation team conducted scoping interviews with each country team to understand how they define good budget execution and the challenges they face achieving that. The country learning partners reached consensus on what good budget execution means to them: alignment with priorities, good financial management, flexibility, and timeliness (Figure 1).
The group identified four sets of factors that need to work together to create an enabling environment for good budget execution:
1. Legal and regulatory frameworks
2. Priority-setting processes
3. Budget structure and processes
4. Accountability mechanisms
Factors that affect health budget execution
The learning partners also created a collective vision for an enabling environment for good health budget execution and discussed factors that inhibit progress toward this vision (Figure 2).
Legal and regulatory frameworks. The learning partners agreed that an enabling environment for good budget execution requires clear, fit-for-purpose PFM laws, accompanying guidelines, and capacity at the national and subnational levels to carry them out. Currently, however, challenges include rigid PFM laws and regulations that limit flexibility for spending institutions to use resources efficiently, and weak capacity, especially at the subnational level, to implement the PFM rules effectively.
Priority-setting processes. Priority-setting processes that enable good budget execution were defined by the learning partners as those that ensure planning and budgeting are aligned and that budgets reflect priorities identified by a range of stakeholders through a consultative and process. Currently, there are challenges with budget formulation processes that are cumbersome and de-linked from planning processes. A separate LHSS and JLN collaboration will explore country experiences with institutionalizing explicit priority setting in the health sector, to facilitate peer learning and sharing of promising practices.
Budget structure and processes. The way the budget is structured and the processes for how funds are transferred and released are critical factors affecting budget execution, especially regarding how well funding is aligned with priorities and the timeliness of the release of funds. The learning partners agreed that program-based budgeting leads to better alignment of budgets with priorities, and automated processes facilitate timely release of funds. Currently, however, several countries continue to formulate and execute budgets according to input-based line items rather than programs, with inefficient processes for formulation and release.
Accountability. The learning partners agreed that accountability for good budget execution requires an appropriate level of decentralization, with roles and responsibilities distributed effectively between the national and subnational levels. They also agreed that automated financial information management is needed to facilitate in-time monitoring, and functioning accountability frameworks need to be in place and effective. In practice, however, most of the participating countries face inefficient manual monitoring systems with poor compliance and accountability and a lack of transparency.
What comes next?
This fall, the learning exchange will host two virtual learning events to further explore the promising practices that enable a country to move from an “inhibiting” to an “enabling” health budget execution environment. Participant countries have prioritized two areas for deepened exploration: 1) budget structure and processes and 2) accountability.
In both learning events, the participants will come together to share experiences and support each other – whether they are experiencing similar challenges, have already addressed comparable barriers and impediments, or are just interested to learn from each other. Participants will discuss practical steps that can be taken along these pathways from an inhibiting to an enabling environment. We will also work closely with the World Health Organization and the World Bank to nurture deeper collaboration and shared learning and facilitate the identification of actionable policy options in their target countries.
The approach presented here is just the tip of the iceberg in understanding the challenges and complexities many countries face in achieving good health budget execution, but it is the tip that was prioritized by the learning partners based on the challenges that are most pressing for them today. The learning exchange will use the framework co-created by the learning partners to gain a deeper understanding of practical steps countries can take to improve budget execution and will support countries – both within the learning exchange and beyond – on their journeys along the pathway to better budget execution, strengthened health systems, and ultimately, better health outcomes for their populations.
About the author:
Heather Viola is a program officer at R4D and manages the LHSS-JLN Health Budget Execution Learning Exchange.
Additional contributors:
Cheryl Cashin is a managing director at R4D and the lead author of the joint R4D-WHO publication, Aligning Public Financial Management and Health Financing.
Hélène Barroy is a Senior Health Financing Specialist at WHO, Geneva, Switzerland. She specializes in budgeting, public financial management, and fiscal space for health issues.
Miriam Omolo is a health financing expert and country facilitator for LHSS-JLN Health Budget Execution Learning Exchange. She also serves as Executive Director at The African Policy Research Institute.
Aparna Kollipara is a health financing expert and a member of the technical facilitation team for the LHSS-JLN Health Budget Execution Learning Exchange.
Nivetha Kannan is a program associate at R4D and a member of the technical facilitation team for the LHSS-JLN Health Budget Execution Learning Exchange.
This blog was made possible by the support of the American people through the United States Agency for International Development (USAID). The contents are the sole responsibility of the authors and do not necessarily reflect the views of USAID or the United States government.
[1] Yazbeck, A. S., Savedoff, W., Hsiao, W., Kutzin, K., Soucat, A., Tandon, A., Wagstaff, A., Yip, W. 2020. The Case Against Labor- Tax-Financed Social Health Insurance for Low- and Low-Middle-Income Countries. Millwood: Health Aff. 39: 892–897.
