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Fiscal Space for Health in Malawi and Revenue Potential of ‘Innovative Financing’ - P4H Network

Fiscal Space for Health in Malawi and Revenue Potential of ‘Innovative Financing’

In the context of developing and reviewing health financing reform options, various proposals have been made to expand domestic revenues for health. This includes the development of contributory SHI as well as proposals for “innovative financing” and earmarked taxes. Revenue from domestic sources of financing would then be pooled through a Health Fund and used to finance health services. To spearhead the establishment of the Health Fund, the Government of Malawi (GoM) requested Abt Associates (SSDI-Systems Project) to examine the revenue generation potential and sustainability of introducing earmarked taxes for health.
In July 2015, a request was made to the World Bank to participate in the health financing reforms, specifically to review the work on the revenue potential for earmarked taxes for health, and creation of the health fund. This request was conceived on the understanding that analyses of earmarked taxes need to be embedded in the broader macroeconomic and fiscal context of which the World Bank has the expertise to engage beyond the health sector and put health financing into the overall macro-economic context. As such, the Bank team extended the analysis by further examining the adverse effects that may be triggered by the introduction of the proposed earmarked taxes.This was achieved by adding price/cost data, supply and demand-side data (i.e. production, sales and revenue figures), and health statistics. Moreover, considering that proposals for SHI and earmarked taxes for health have been motivated by a perception that the health sector is under-financed and overly reliant on external financing, the report also includes a fiscal space for health analysis. In a nutshell, this report examines the following:

Potential to expand fiscal space in the health sector; drilling-down on the revenue generation potential for twelve areas proposed for earmarked taxes;

Risks and potential downsides of earmarked taxation, and adverse effects that may be triggered by the introduction of the proposed earmarked taxes; and

Provides recommendations on the viable options for increasing fiscal space for health in Malawi.

This analytical work was prepared on request from the Government of Malawi by Bank staff from the Health, Nutrition and Population Global Practice with support from the Macro Economics and Fiscal Management Global Practice, and Abt Associates (SSDI-Systems Project). The work is consistent with the national health reform agenda, and builds on an initial report by the Ministry of Health and Abt Associates which looked at international and local experiences of Health Funds, and prospects for introducing a Health Fund in Malawi.

Reference
01 May 2017