Economic Crisis May Take Toll on Health Services in Developing Nations

The Global Fund to fight AIDS, Tuberculosis and Malaria, a financing institution that invests donor countries’ money in health programs to battle the three diseases, announced last week that it is facing a $5 billion dollar funding gap through 2010.

“The Global Fund is not immune to the environment today of the global financial crisis,” Rajat Gupta, chairman of the Global Fund, said during a news teleconference on Jan. 29 at the World Economic Forum held in Davos, Switzerland. Despite the shortfall, Gupta expressed confidence that donors would come through with continued financing.

The Global Fund has not seen countries backing off of pledged contributions, but it has received a considerable increase in demand for new funding from eligible countries.

In December of 2008, the group scaled back its last round of grants by 10 percent, from $3.1 billion to $2.75 billion.

All of the program requests were approved, but the recipients were asked to meet the same goals with the newly-decreased funding by making changes like cuts to overhead costs or finding cheaper options on pharmaceutical purchases.

“The demand is much higher than we expected, so if we are going to meet that demand we are going to need more money than what is coming in,” said Global Fund spokesperson Andrew Hurst.

Ruth Levine, a health economist and vice president for programs and operations at the Center for Global Development, said the Global Fund shortfall is “cause for significant concern” and serves as a reminder that providing foreign aid is crucial in times of economic decline.

“Foreign aid tends to be a pretty easy target. It doesn’t have a very deep constituency, voters at home don’t feel it when it’s cut,” Levine said. But the domestic budget gains are often more symbolic than practical, Levine said, as foreign aid makes up only a small percentage of most high-income countries’ spending.

For many developing nations that aid is crucial, and in some of the most aid-dependent countries in sub-Saharran Africa, more than half of the total public health spending comes from aid commitments, Levine said. In addition, many developing countries lack the social safety nets that protect people from an economic shock.

“When national budgets are squeezed because of falling tax revenues and falling donor contributions the social services for the poor are some of the first to be jeopardized,” Levine said.

In an attempt to mitigate the health effects of the crisis, the World Bank is planning to triple the loans it provides in the health sector this year. Julian Schweitzer, sector director for health, nutrition and population at the World Bank, said $950 million worth of lending in the health sector was approved in 2008 and in 2009 that will increase to about $3 billion.

In the past 25 years, economic declines and the resulting reduced expenditures by governments have cost the lives of an estimated 1 million children, Schweitzer said.

“We saw [during previous economic downturns] that health is particularly badly affected in the social sectors. It’s the sector that seems to get hit hardest by budget cuts,” Schweitzer said. “What we also see is that it is women and children that are particularly badly hit.”

Schweitzer said countries are being advised to focus spending on specific programs, like child immunization, and nutrition for pregnant mothers.

The group has already seen an increase in country requests for budget support loans, which include health spending, and also in specific health sector loans. The Bank is focusing on a number of countries in Africa, Asia and Latin American, considered to be at particular risk from the economic crisis.

At a January meeting of the World Health Organization, Director-general Dr. Margaret Chan highlighted the risks to families in many low income countries where the majority of health services are paid for out-of-pocket.

The economic crisis will force more families to rely on publicly financed care, or neglect preventative care entirely, Chan said.

Even more troubling, said Levine, is the possibility that people infected with HIV/AIDS or other deadly diseases in developing countries will have to interrupt their treatments.

“These are programs where declines in aid … they affect individuals who are dependent on these resources for life saving drugs,” said Levine. “So the stakes are much, much higher than in the past.”