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Chapter 8 Budgeting for health

November 2016

In book: Strategizing national health in the 21st century: a handbook
Chapter: 8
Publisher: World Health Organisation
Editors: Gerard Schmets, Dheepa Rajan, Sowmya Kadandale

Authors:

Dheepa Rajan

World Health Organization WHO

Karin Stenberg

World Health Organization WHO

ntroducing performance-based budgeting: from concept to practice 30

…

What does it mean to have a functioning PFM system?

…

How important is budget prioritization for health? 11

…

Budget steps during a fiscal year starting on 1 January

…

Key stages of a comprehensive MTEF 1

…

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Chapter 8 Budgeting for health

1PC

Strategizing national health in the 21st century: a handbook

Chapter 8

Budgeting for health

Dheepa Rajan

Helene Barroy

Karin Stenberg

1PC

Strategizing national health in the 21st century: a handbook

1PC

Chapter 8 Budgeting for health

1PC

SNL

DHC

SNL

I CHAPTER 1 Introduction: strategizing national health in the 21st century

PC CHAPTER 2 Population consultation on needs and expectations

SA CHAPTER 3 Situation analysis of the health sector

P S CHAPTER 4 Priority-setting for national health policies, strategies and plans

S P CHAPTER 5 Strategic planning: transforming priorities into plans

O P CHAPTER 6 Operational planning: transforming plans into action

CHAPTER 7 Estimating cost implications of a national health policy, strategy or plan

B CHAPTER 8 Budgeting for health

ME CHAPTER 9 Monitoring, evaluation and review of national health policies,

strategies and plans

Cross-cutting topics relevant to national health planning

LR CHAPTER 10 Law, regulation and strategizing for health

CHAPTER 11 Strategizing for health at sub-national level

IP CHAPTER 12 Intersectoral planning for health and health equity

CHAPTER 13 Strategizing in distressed health contexts

Strategizing national health in the 21st century: a handbook

1PC

Budgeting for health

Dheepa Rajan

Helene Barroy

Karin Stenberg

Chapter 8 Budgeting for health

1PC

WHO Library Cataloguing-in-Publication Data

Strategizing national health in the 21st century: a handbook / Gerard

Schmets … [et al].

Contents: 13 individual chapters

1.Health Policy. 2.National Health Programs. 3.Health Planning.

4.Handbooks. I.Schmets, Gérard. II.Rajan, Dheepa. III.Kadandale,

Sowmya. IV.World Health Organization

ISBN 978 92 4 154974 5 (NLM classiﬁcation: WA 540)

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The document has been produced with the ﬁnancial assistance of

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Graphic design by Valerie Assmann.

Suggested citation: Rajan D, Barroy H, Stenberg K. Chapter 8. Budgeting

for health. In: Schmets G, Rajan D, Kadandale S, editors. Strategizing

national health in the 21st century: a handbook. Geneva: World Health

Organization; 2016.

Strategizing national health in the 21st century: a handbook

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Contents

Acknowledgements iv

Overview v

8.1 What is meant by budgeting for health? Some key concepts 1

8.1.1 What is a budget? 1

8.1.2 Public ﬁnancial management 1

8.1.3 Medium-term expenditure framework (MTEF) 1

8.1.4 Line-item budgeting for health 2

8.1.5 Performance budgeting 3

8.1.6 Fiscal space and ﬁscal space for health 3

8.1.7 Strategic purchasing 4

8.2 Why is it important to understand the health budgeting process? 5

8.3 When does the budgeting process take place? 7

8.3.1 Budget cycle steps – a brief overview 7

8.3.2 Fiscal vs calendar year 8

8.4 Who are the people involved and engaged in the health budgeting process?

Roles of different stakeholders 9

8.4.1 MoH: engaging in health budget formulation and execution 14

8.4.2 Role of civil society organizations (CSOs) in the health budgeting process 15

8.5 How does the budgeting process work from the point of view of NHPSP stakeholders?

8.5.1 Budget formulation 18

8.5.2 Budget approval or enactment 22

8.5.3 Budget execution 22

8.5.4 Budget evaluation 22

8.6 Important operational issues for health planning stakeholders to consider during the

health budgeting process 23

8.6.1 Legal considerations 23

8.6.2 How can countries introduce and effectively undertake multiyear budgeting? 24

8.6.3 How can countries move from a line-item to a programme-based budget? 27

8.6.4 When and how should countries assess ﬁscal space for health? 30

8.6.5 How can the necessary data be collected? 31

8.6.6 How should countries understand and inﬂuence the political economy of budgeting

for health? 33

8.6.7 Looking beyond budget: importance of public ﬁnance systems for health ﬁnancing

and UHC 35

8.7 What if...? 36

8.7.1 What if your country is decentralized? 33

8.7.2 What if your country is heavily dependent on aid? 36

8.7.3 What if fragmentation and/or fragility is an issue in your country? 37

8.8 Conclusion 38

References 39

Further reading 48

iii

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Acknowledgements

We would like to give special thanks to Agnes Soucat for overall guidance. Thanks

are also due to Alyssa Muggleworth Weaver for overall background research support.

This chapter was a collaboration between the following units in the Health Systems

Governance and Financing Department: Health Systems Governancy, Policy and Aid

Effectiveness; Health Financing; Economic Analysis and Evaluation. Orienting guidance

and input speciﬁcally on budgeting for health was provided by Tessa Edejer, Joseph

Kutzin and Gerard Schmets.

This chapter has been externally reviewed by Professor Jacky Mathonnat and Benoit

Mathivet.

English language editing was provided by Dorothy van Schooneveld and Thomson Prentice.

We gratefully acknowledge ﬁnancial support from the European Union and the Grand

Duchy of Luxembourg.

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Overview

Engaging in budget preparation,

understanding guiding principles of

budgeting as well as the political dynamics

that enable the budget elaboration and

approval process, is essential for health

planners and managers. In many countries,

the consequences of not doing so means that

health policy-making, planning, costing and

budgeting take place independently of each

other, leading to a misalignment between

health priorities and allocation and use of

resources.

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Health is ﬁnanced by public and private funds.

To make progress toward universal health

coverage (UHC), a predominant reliance

on public,compulsory, prepaid funds is

necessary. Therefore, the way budgets are

formed, allocated and used in the health

sector is at the core of the UHC agenda. This

chapter outlines the overall budget process

for the public sector, discusses the speciﬁc

role of health within it, in particular the role of

the ministry of health (MoH) and other health

sector stakeholders, to provide timely inputs

into the budgeting process.

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What is meant by budgeting for health?

Budgeting is related to the process of deﬁning

the allocation of resources to produce the best

outputs given the level of revenues. A health

budget, typically included in the general govern-

ment budget, is more than a simple accounting

instrument to present revenues and expenses

– rather, it is a crucial orienting text, declaring

key ﬁnancial objectives of the country and its real

commitment to implementing its health policies

and strategies. While every implementing health

organization develops a budget, in this chapter

we discuss the national government budgeting

process, which includes inputs from a wide

range of health sector stakeholders.

Why

is it important to understand the health

budgeting process?

For those who seek to inﬂuence resource allo-

cation in country, a good understanding of

the guiding principles of budgeting as well as

the political dynamics that enable the budget

elaboration and approval process is essential.

In many countries, a lack of understanding of

budgeting issues results in delinked processes

such that health policy-making, planning, costing

and budgeting take place independently of each

other. This leads to a misalignment between

the health sector priorities outlined in overall

strategic plans and policies and the funds that are

ultimately allocated to the health sector through

the budgeting process. This misalignment has

negative consequences: resources are not used

as intended, and accountability is weakened.

On the other hand, a good understanding of

the budget process and engagement by MoH

and other health sector stakeholders at the

right time during the budget cycle will increase

the chances that the ﬁnal resource allocation

matches planned health sector needs.

When does the budgeting process take

place?

The budgeting process starts with a prepara-

tion/formulation stage of budget proposals,

which includes a negotiation phase between

MoH and ministry of ﬁnance (MoF) and ends

up with parliamentary review and approval.

In many countries the ﬁscal year follows the

12-month calendar year, beginning on 1 January;

in some countries, the ﬁscal year may start at

a different date (e.g. 1 October in the United

States of America, 1 July in Australia and New

Zealand). In a given year, there are three cycles

potentially taking place at the same time: the

implementation of the current budget, which

essentially takes place throughout the year, at

any given time; budget preparation for the next

year; and audit or review of the previous year.

Summary

vii

Chapter 8 Budgeting for health

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Who are the people involved and engaged

in the health budgeting process, in

particular the budget preparation

phase?

Ministries of budget/ﬁnance and related entities

are the leading agents for budget development.

Ministries of health play a critical role to prepare,

present and negotiate credible, priority-oriented

budget proposals for the sector. Civil society

and the general public can seek to inﬂuence

health budget deﬁnition by engaging with the

executive or the legislature.

viii

How

does the budgeting process work from

the point of view of national health

policy/strategy/plan (NHPSP)

stakeholders?

The budget cycle starts with the government plan-

ning for the use of the coming year’s resources.

To allow this to be done in accordance with

health priorities, health planning stakeholders

have to engage strategically in this process and

be prepared to support it. This chapter takes

the reader through the steps of the budget

cycle and some practical issues for the health

community to consider.

Anything else to consider?

decentralized environment;

fragile environment;

highly aid-dependent context.

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Chapter 8 Budgeting for health

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I This is exercised through the introduction of good macroeconomic

models and mechanisms to consult on forecasts with stakeholders

such as the central bank, the revenue authority and independent

research agencies.

8.1 What is meant by budgeting for health?

Some key concepts

Narrowly deﬁned, the budget is the government’s

forecast of revenue and planned expenditure,

usually provided on an annual basis. A health

budget is the portion of the national budget

allocated to the health sector, including all

ministries and agencies involved in health-related

activities. A health budget is more than a simple

accounting instrument to present revenues and

expenses – rather, it is a crucial orienting text,

declaring the country’s key ﬁnancial objectives

and its real commitment to implementing its

health policies and strategies.

Public ﬁnancial management (PFM) rules govern

how budgets are formulated, funds disbursed

and accounted for. This is centrally important

to UHC because PFM is the interface that helps

ensure that increases in public spending translate

into expanded health coverage.

National health authorities should aim to

effectively engage with national budgetary

authorities to foster credible, priority-oriented

health budgets, and ensure efﬁcient fund ﬂows

and budget execution in order to ultimately

strengthen accountability.

An MTEF is a comprehensive, government-wide

spending plan that is expected to link policy

priorities to expenditure allocations within a

ﬁscal framework (linked to macroeconomic and

revenue forecasts), usually over a three-year

forward-planning horizon. Mid-term budgeting

can help connect revenue forecasts, sectoral

allocations and health policy priorities, and

strengthen the overall quality and credibility

of annual budget envelopes.

In order to do that well, governments need to

be able to generate robust forecasts of forward

macroeconomic conditions and revenue ﬂows,

as well as of the forward cost of existing and

new policies. While the former is usually the

responsibility of the central government,I the

latter can only be done well using the specialized

knowledge at sector level. Some countries

have also initiated the development of sector/

health-speciﬁc MTEF (see Fig. 8.1) that ﬁt into

the overall framework, which can help deﬁne

more credible annual allocations.

8.1.1 What is a budget?

8.1.2 Public ﬁnancial

management

8.1.3 Medium-term expenditure

framework (MTEF)

A health budget

allocates

national funds

to the health

sector, declares

key ﬁnancial

objectives of

the country,

and represents

a commitment

to health policy

and strategy

implementation.

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“Performance budgeting”, “performance-based

budgeting”, “programme-based budgeting”

and “budgeting for results” are similar terms,

with a common unifying feature: they are all

concerned with introducing performance infor-

mation into budget processes. The Organisation

for Economic Co-operation and Development

(OECD) has deﬁned performance budgeting

as a form of budgeting that links allocated

funds to measurable results.

These alternative

budget classiﬁcations present advantages for

managing funds through increased autonomy

for funds managers. Speciﬁcally for the health

sector, it ensures that funds ﬂow to the priority

services and enables the purchasing of health

services to be operational. By making explicit

the purposes and results of budget spending,

budget managers can also be held to account

by the legislature and citizens.

Line-item budgeting has been the norm in many

countries, in which the budget information is

organized according to the types of expenses

or cost categories. For health, these generally

focus on staff, supplies (operational costs), and

capital investment/equipment, all of which can

be characterized as inputs for health systems.

Providers receive a ﬁxed amount for a speciﬁed

period to cover speciﬁc input expenses (e.g.

personnel, medicines, utilities).

The existence of many line items is a way for the

legislature to retain control, but provides little

ﬂexibility to operationalize and manage health

funds because the expenditure must follow

strictly deﬁned budget lines. In many countries,

line-item budgeting has been a major deterrent

to a functioning health purchasing system,

which would require setting up appropriate

payment mechanisms to enable funds ﬂow to

the right services and maximize efﬁcient use

of public funds.

8.1.4 Line-item budgeting for

health

8.1.5 Performance budgeting

Fig. 8.1 Key stages of a comprehensive MTEF1

stage

Development of macro-

ﬁscal framework (MoF)

Approval process

(executive and/or

legislature)

Development of

sectoral expenditure

frameworks

(MoF and MoH)

Identiﬁcation of

sectoral priorities

(MoH)

Speciﬁcation of sector

resource allocations

(budget ceiling) (MoF)

Line-item

budgeting

is a way to

manage budget

information

according to the

types of

expenses or

cost categories.

While this

approach aims

to increase

transparency

and

accountability,

it may often

in fact restrict

ﬂexibility

and lead to

inefﬁcient

resource

allocation.

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Fiscal space is typically deﬁned as “the availability

of budgetary room that allows a government to

provide resources for a given desired purpose

without any prejudice to the sustainability of a

government’s ﬁnancial position”.3 Tandon and

Cashin’s conceptual framework to assess ﬁscal

space for health in countries include factors

such as macroeconomic conditions, the extent

to which health is re-prioritized within the gov-

ernment budget, whether new earmarked funds

for health have been introduced, the amount of

external aid and increased efﬁciency of existing

government health outlays.4

Health planning stakeholders have variable

inﬂuence over these ﬁve factors. Some are

directly outside of their control, such as the

macroeconomic conditions. Others are in the

direct domain of the health sector and therefore

require particular attention from health planning

stakeholders – namely the efﬁciency of current

Line-item

budgeting

is a way to

manage budget

information

according to

the types of

expenses or

cost categories;

however, this

budgeting

system does

not provide

the required

ﬂexibility to

operationalize

health plans

and maintain a

well-run health

purchasing

system.

health expenditures and the amount of external

aid for health. Furthermore, there are those

factors which are not directly in the hands of

health planning stakeholders but for which

the health sector can play an important role in

terms of advocacy – namely the prioritization

of health within the overall government budget,

and whether there are efforts to introduce new

earmarked funds speciﬁcally for health.

Fiscal space for health analysis could be better

mainstreamed and systematized into the budg-

eting process in many countries to enhance

budgeting decisions. Health planning stakehold-

ers would do well by leveraging the ﬁscal space

analysis to take a closer look at the political and

institutional enabling factors which can actually

support improved formulation, allocation and

use of health budgeted resources.

A better use

of existing public resources toward UHC helps

expand the ﬁscal room for the sector.

8.1.6 Fiscal space and ﬁscal space for health

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As one of the generic sub-functions of health

ﬁnancing,

purchasing refers to the allocation of

resources to health service providers. Purchasing

involves three sets of decisions, namely:

identifying the interventions or services to

be purchased, taking into account popula-

tion needs, national health priorities and

cost-effectiveness;

choosing service providers based on criteria

such as service quality, efﬁciency and equity;

determining how services will be purchased,

including contractual arrangements and

provider payment mechanisms.6

8.1.7 Strategic purchasing

II Health ﬁnancing functions include: revenue raising, resource

pooling and strategic purchasing.

Purchasing

involves

three sets

of decisions:

identifying

services to be

purchased,

choosing service

providers based

on certain

criteria, and

determining

the modalities

of payments to

providers.

Purchasing is undertaken by a purchasing

organization which can be, for example, an

insurance scheme, a MoH, or an autonomous

agency. Purchasing should not be confused with

procurement, which generally only refers to

buying medicines and other medical supplies.

There is a growing consensus, backed by efforts

being made by countries, to move away from a

passive approach to purchasing (no selection

of providers, no performance monitoring, no

effort to inﬂuence prices, quantity, or quality

of care) to an active or strategic one.

Strategic purchasing with general budget rev-

enues involves linking the transfer of funds to

providers, and, at least in part, to information

on aspects of their performance and the health

needs of the population they serve.

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During the budgeting process, health planning

stakeholders and managers will inevitably be

requested by MoF to provide information on

sectoral priorities and an associated price tag.

Understanding the guiding principles of budgeting

as well as the political dynamics that enable the

budget elaboration and approval processes is

essential to make the case for health. In many

countries, a lack of understanding of these

budget-related issues results in delinked pro-

cesses such that health policy-making, planning,

costing and budgeting take place independently

of each other. This leads to a misalignment

between the health sector priorities outlined

in overall strategic plans and policies and the

funds that are ultimately allocated to the health

sector through the budgeting process. This mis-

alignment has negative consequences: resources

are not used as intended, and accountability is

weakened (see Box 8.1). On the other hand, a

good understanding of the budget process and

solid engagement by MoH and other health

sector stakeholders at the right time during

the budget cycle will increase the chances that

the ﬁnal resource allocation matches planned

health sector needs.

In reality, the allocation of resources to different

institutions and purposes is essentially a politi-

cal, rather than a purely technocratic process.

III

After having analysed needs and determined the

most equitable and efﬁcient policies and plans,

health planning stakeholders must proactively

engage in this politically-inﬂuenced process, as

it determines the details of the national health

budget, which impacts on effectiveness and

efﬁciency of public spending for health. How

health managers will be able to spend their

money largely depends on what the budget

allocation is. Not only is the budget envelope

amount relevant, but so too is how that total

amount is structured, how it ﬂows into the

system, timing of disbursements and how it will

enable health ﬁnancing to function in practice

and to purchase the needed health services.

Understanding and inﬂuencing the budget

formulation for the health sector is also a matter

of efﬁciency and equity, two key health policy

objectives linked to UHC, a principle increas-

ingly enshrined in many countries’ NHPSPs.

How a budget is formulated and allocated,

including to lower levels of government, has a

direct impact on how well and how efﬁciently

funds can and will be used. Supporting a fair

distribution of resources across populations

and/or geographical areas is likely to have a

direct impact on health sector outputs.7

8.2 Why is it important to understand the health

budgeting process?

III For more information, please see Chapter 4 “Priority-setting for

national health policies, strategies and plans” in this handbook.

Understanding

the guiding

principles of

the health

budgeting

process

minimizes

the chance of

misalignment

between health

sector priorities

outlined in

strategic

plans and the

funds that are

allocated to the

health sector.

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Box 8.1

Côte d’Ivoire: understanding

the root causes for misalign-

ment between health planning

and budgeting8

Several factors can explain the misalign-

ment between health planning and budg-

eting at both central and decentralized

levels in the Ivorian context.

At central level, ﬁrst, there is a noticeable

lack of a general framework and aligned

calendar between health planning and

budgeting. There is no speciﬁc mech-

anism to align the budget formulation

and national health planning processes.

Operational plans are often developed

for the ongoing year, while the budget is

formulated for the next year. In addition,

there is no alignment on the objectives

and goals between the two documents.

The budget elaboration is solely driven by

the logic of facility-based funding through

inputs, while the existing strategy sets a

different approach through well-identiﬁed

programmes and expected results. Also,

when the programme-based budgeting

process was introduced, it was used more

as a means to reﬂect externally ﬁnanced

programmes than to ﬁt with nationally

deﬁned priorities as set out in the NHPSP.

Finally, weaknesses also resulted from

the fact that the processes were relatively

top- down, without considering local sector

needs in a post-war context.

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8.3 When does the budgeting process take place?

8.3.1 Budget cycle steps – a brief

overview

The various public ﬁnance processes are struc-

tured around the budget cycle. This annual cycle

aims to ensure that public expenditure is well

planned, executed and accounted for. A standard

budget cycle incorporates four distinct stages:

(a) budget deﬁnition and formulation;

(b) budget negotiation and approval;

(d) budget reporting, auditing and evaluation.

The MoH is expected to translate government

policy goals (as described in the NHPSP) into

cost

estimates to ﬁt into the suggested budget

ceiling for the sector. The budget ceiling is given

by the MoF based on its revenue forecast outlining

the country’s macroeconomic prospects in the

medium term.

The MoF and MoH engage in negotiations

over these requests which culminate in the

formulation of a formal health budget proposal

that is supposed to typically reﬂect revenue

and expenditure plans for the budget period

(most often one year). The budget proposal

(which includes the health budget component)

is typically presented for budget approval to

parliament, which can propose amendments,

before formal adoption.

Budget execution, or spending, consists of

a set of processes that lead to effective fund

ﬂows/transfers from the treasury to the MoH,

and onwards to sub-recipients (for example,

districts, health providers, etc). The principal

issues that the MoH will be faced with during

the budget execution phase are the actual

delivery/purchase of health services by those

on the front line (e.g. health service providers)

and the ﬁnancial management function that

supports the former.

Budget evaluation refers to internal and external

control processes which are designed to ensure

compliance with predeﬁned targets and proce-

dures. Governments also have accounting and

reporting procedures which help keep records

of ﬁnancial and/or non-ﬁnancial ﬂows;9 these

need to be respected and cross-checked.

An important point to note here is the issue

of budget amendments that can be passed by

parliament during the course of the ﬁscal year.

This can happen when, for example, budgetary

resources are lower than expected and overall

spending needs to be reduced. Negotiations will

determine whether the health-speciﬁc budget will

be maintained or changed. It is often at this stage

of budget renegotiation that the prime minister

or president may play a key role in arbitrating

between different priorities and sectors. Health

leaders need to maintain a sufﬁcient level of

advocacy to ensure that the sector remains a

budget priority throughout the year.

IV See Chapter 7 “Estimating cost implications of a national health

policy, strategy or plan” in this handbook.

A standard

budget cycle

incorporates

four distinct

stages: budget

deﬁnition and

formulation;

budget

negotiation

and approval;

budget

execution;

and budget

reporting,

auditing and

evaluation.

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8.3.2 Fiscal vs. calendar year

Some countries’ budget cycles, referred to as

ﬁscal years, follow the calendar year and others

do not. A ﬁscal year refers to a consecutive

12-month period which may or may not follow

the January to December calendar. That being

said, the most common ﬁscal year countries

use is the calendar year. Other commonly used

ﬁscal years are 1 July of one year to 30 June

of the following calendar year and 1 April of

one year to 31 March of the following calendar

year.10 Fig. 8.2 depicts the budget cycle steps

according to a ﬁscal year which is identical to

the calendar year.

Fig. 8.2 Budget steps during a ﬁscal year starting on 1 January

January –

March

Macro-

economic

and revenue

forecasts

April –

May

Budget

proposal

preparation

June

Budget

conference/

negotiations

August –

September

Preparation

of ﬁnance

law

October –

November

Parliament

review and

approval

December

Adoption of

ﬁnal budget

Not all countries

use the

calendar year

to determine

a ﬁscal year;

either way, the

budget steps

remain the

same.

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(a) MoH’s role in health budget formulation

Developing robust health budget envelopes

requires strong engagement by health min-

istries with national budget decision-makers

– ﬁrst, because progress toward UHC is often

associated with increased public funding for

health, and secondly, because the latter also

demands a functioning public ﬁnance system

to align revenues with services and to manage

Fig. 8.3 How important is budget prioritization for health?11

8.4 Who are the people involved and

engaged in the health budgeting process?

Roles of different stakeholders

8.4.1 MoH: engaging in

health budget formulation

and execution

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expenditure better. Thus, the dialogue with

MoF/treasury must involve not just the level

of funding but also the PFM rules that govern

their use (forming budgets, distributing them,

expenditure management, reporting).

In particular, the MoH’s role in the process of

budget formulation boils down to three key inputs.

Analysis of expenditure forecasts against

expected revenues; the aim here is to esti-

mate the potential for increased health

spending. Institutionalizing ﬁscal space

for health analysis within MoH will be an

important step in this direction;

Drafting of credible, well-deﬁned health

budget proposals; systematizing costing

and priority-setting exercises within the

deﬁned envelope;

Engaging in budget negotiations and advo-

cating for a sound health budget allocation.

(b) MoH’s role in health budget execution

The budget execution stage is a pivotal process

for all ministries including health, as it is the

one which enables the actual implementation

of NHPSP activities. MoH’s key role here is one

of supervision, support, and oversight of budget

execution as this is often the deciding factor

for implementation rates – poor technical and

administrative support and oversight capacity

generally results in a low health budget execu-

tion rate, and in more unused ﬁscal margins.

Evidence shows that ﬁscal space expansion for

the health sector is largely possible simply by

increasing effectiveness in government health

spending.12

For purposes of health budget execution, MoH’s

role includes understanding PFM systems, and

in particular, expenditure rules and regulations.

In many countries, MoH’s capacities require

strengthening in this area, as expenditure man-

agement is often not well known or understood

by those who do not have specialist skills in

public ﬁnance. For example, in many coun-

tries, the MoH is not the ﬁnal decision-making

authority on spending (MoF is). This means

that payment requests for services already

rendered end up with the MoF (see Box 8.2). If

the expenditure is not in line with expenditure

rules, MoF may decide not to pay, especially in a

circumstance where funds are not sufﬁcient to

cover all payment requests coming in from all

sectors. Another challenge linked to a lack of

understanding of the PFM system is the funds

disbursement schedule. In many countries, it

does not necessarily follow the needs of sector

plans; instead, funds may be disbursed only at

speciﬁc times of the year in speciﬁc amounts.

Health ministries should take this into con-

sideration when planning activities and health

budgets for more effective implementation.13

Early engagement on the part of MoH with the

MoF can provide better understanding of the

ﬁnancial management rules and the system

within which expenditures must happen. Closer

cooperation and inclusion of MoF representa-

tives in key MoH consultations can help both

sides better understand each others’ needs

and challenges.

The Ministry of

Health (MoH)

must engage

strongly with

national budget

decision-

makers during

health budget

formulation.

Credible,

well-deﬁned

expenditure

forecasts and

systematized

costing and

priority-setting

exercises can

put MoH in a

sound negotiat-

ing position with

the Ministry of

Finance.

(i)

(ii)

(iii)

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Box 8.2

Low execution levels of the health budget: where does the problem lie?14

In many countries, health budgets are poorly

executed, but little is known about the under-

lying causes of under-execution. A detailed

analysis of the Democratic Republic of the

Congo context reveals that the responsibilities

lie on many fronts; many weaknesses and

delays at both MoH and MoF explain low

execution of the health budget envelope,

with one major systemic bottleneck being

the fact that the MoF still holds the ﬁnal

spending decision-making authority above

all line ministries.

A closer look at the budget execution process

in the Democratic Republic of the Congo in

recent years demonstrated that the principal

impediments were:

MoH’s estimation of necessary resources

for health was ﬁnalized too late; the

calculations have been of varying quality

over the years;

MoF releases funds directly to those who

are expecting payment from MoH (ﬁnal

spending decision-making authority is

with MoF) and often does not do so in a

timely manner.

Over 2011–2013, MoH’s forecasted necessary

resources on equipment, services, and other

discretionary expenditure respectively came

to 14%, 21%, and 59% of the funds ﬁnally

requested from the Treasury, evincing an

unambiguous disconnect between the estima-

tion of resource needs and actual resources

used. It was, however, noted that the MoH’s

estimation of necessary resources were

more in line with funds spent for personnel

expenditure (94%).

On the MoF side, monies paid out directly to

suppliers/service providers on behalf of MoH

came to only 55% for goods and equipment and

40% for construction. This implies that roughly

half of MoH’s suppliers received late payments.

In addition, when the budget cycle closed at

year end, these late payments remained as

arrears in MoH’s name and needed to be

transferred to the following year’s budget.

All in all, the bottlenecks are clearly systemic

in nature and imply weaknesses on various

fronts and a need for a more comprehensive,

long-term reform in government processes

and government capacity.

A core element of effective health budget execu-

tion and expenditure management is strategic

purchasing,15 referring to the arrangements in

place, and mechanisms used, to allocate funds

to health service providers. MoH is the entity

that must think through and design how health

(i)

(ii)

Chapter 8 Budgeting for health

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services should be purchased, in harmonization

with existing PFM rules. This MoH task of

improving the strategic purchasing of health

services is central to strengthening health system

Table 8.1 What can health planners do/help to foster PFM and health ﬁnancing system

alignment?

Mid-term budget planning

Budget formulation and

negotiation

Execution process

Reporting, auditing, evaluating

Elaboration of robust health MTEF

Systematized ﬁscal space for health assessment

Investment case for health sector to support budget

prioritization

Elaboration of sound annual sectoral envelopes

Reﬁned budget structure

Costing for speciﬁc policy change (provider payment

mechanisms, beneﬁt package)

Good understanding of PFM rules

Harmonizing PFM rules and health purchasing arrangements

Uniﬁed reporting and auditing system, and ﬁnancial man-

agement information system

Institutionalized public expenditure for health assessments

and national health accounts, with a particular focus on

public expenditure

PUBLIC FINANCE CYCLE TYPE OF ACTIONS

/SUPPORT NEEDED FROM HEALTH PLANNERS

performance and progressing towards UHC, as

it determines the way services are funded and

providers incentivized (see Table 8.1).

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8.4.2 Role of civil society

organizations (CSOs) in

the health budgeting

process

Other stakeholders such as CSOs and the

general public can seek to inﬂuence the budget

by engaging the executive or the legislature in

various ways: analysing budget proposals from

the angle of grassroots needs, advocating for

more transparency in budget processes, and

taking part in local budget-setting processes.V

The reality is that, in most cases, time for budget

negotiations is short and budget sessions are not

long enough to make the process as participatory

and effective as it should be. Nevertheless, MoH

can play its part in encouraging and ensuring

more citizen and CSO involvement by producing

or endorsing best-practice documents on citizen/

CSO engagement in budgeting and collaborating

with civil society to get nuanced citizen feed-

back (beneﬁciary assessment surveys, citizen

scorecards, opinion polls, etc.) for planning,

budgeting, and monitoring.VI

Civil society engagement in the budget process

should thus not only be welcomed but also

encouraged by government, parliament, and

other stakeholders. Several countries report

low legislative capacity to analyse budgets,

and thus they are dependent on line ministries

as well as civil society, academia, and other

bodies to support their study of the budget.

An example from Mexico demonstrates that

civil society engagement with legislatures on

budget analyses can be cardinal even if it is not

easy, does not happen overnight, and is mostly

characterized – at least in the initial stages – by

building up relationships and credibility with

government and parliament (Box 8.3).

Even in fragile settings, case studies from Asia

and Africa demonstrate that systematized citizen

assessments of budget proposals can indeed be

conducted and can add great value to the budget

formulation process. More importantly, they have

the potential to strengthen overall governance

and accountability practices between citizens

and public authorities.16

A few countries have moved a step further by

introducing a “participatory budget”, in which

citizens are involved in budget priority-setting

processes at local levels. The example of the

Democratic Republic of the Congo shows the

interesting lessons learned (Box 8.4).

Once the budget is formally presented to the

legislature, public hearings and debates may

also create space for civil society to express

itself on speciﬁc issues and/or the budget as a

whole. Often legislative committees engage in

discussions with civil society and other stake-

holders before voting.

V Beyond the preparation phase, citizens and civil society platforms

can also play an active role in the oversight phase. Good practices in

country experience include: citizens’ report cards and social account-

ability mechanisms.

VI In the Philippines, for example, the government obliges depart-

ments and agencies to consult and partner with CSOs when preparing

agency budget proposals in the budget preparation stage.

Civil society

engagement

in the budget

process should

be welcomed

and encouraged

by government,

parliament and

other stake-

holders.

Chapter 8 Budgeting for health

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Box 8.3

Civil society participation in health budgeting: the case of Mexico17

In Mexico, the NGO FUNDAR (Centre for

Research and Analysis) monitors public

policies in social sectors, especially health.

One of the policies it has been monitoring

for many years is the Seguro Popular (SP

– People’s Insurance) programme as it is

one of the most important health policy

programmes for those who would otherwise

be uninsured. The SP is thus Mexico’s solution

to right-to-health legislation and is endowed

with a generous budget. FUNDAR spent

many years concentrating on research and

analysis of the SP’s policies, and learning

how to package and present its analysis for

legislators and other CSOs.

Health policy in Mexico is decentralized;

the federal government transfers up to 85%

of allocated health resources to the state

authorities for SP services. In several states,

decentralized budget information is unavailable

and there is little transparency as to which

agency or entity is actually implementing SP

services. The consequences at health service

delivery level are dire, with constant shortages

of medicines, high out-of-pocket payments

by households, and low investment in health

infrastructure. In addition, the SP has proven

to be a “golden egg” for many states, with its

large budget, large ﬂexibility in spending,

and little oversight and control. Opposition

politicians have criticized it bitterly, stating

that it has not lived up to expectations.

Through its budget analysis work, FUNDAR

ﬁrst gained credibility and built trust with

various legislators and state-level civil society

actors. Over several years, FUNDAR began to

make suggestions to modify Mexico’s article

on social protection spending to become more

transparent – this involved meeting with the

executive and the legislative branches, mainly

the Health Committee and the Budget and

Public Accounts Committee. The suggestions

were not taken into consideration in the

following budget decrees but after much per-

severance, seven amendments, all inﬂuenced

by FUNDAR, were incorporated into the 2012

Federal Budget Decree. These amendments

touched at the heart of accountability and

transparency issues and, at least in theory,

seek to improve expenditure control and

evaluation of the SP budget, and increase the

legislature’s capacity to supervise spending

via the National Audit Ofﬁce. The lesson to

be learned here is that inﬂuencing national

budgets is a long-term process and both

civil society and parliamentarians, as well

government, and ultimately the population,

can greatly beneﬁt.

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Box 8.4

Rural and urban citizens’ recent participation

in the formulation and management of local

budgets has helped to strengthen governance

in the Democratic Republic of the Congo. How

does participatory budgeting work in practice?

The local authority presents its budget to the

public, specifying the share of the budget to

be allocated to local investment. Through a

process of dialogue, community members are

able to choose for themselves which priorities

should be addressed and funded under the

local budget. The population is also involved

in monitoring the implementation of the

activities selected through this participatory

process. Using mobile phones, which most

Congolese now own, stakeholders in the

Participatory Budgeting Project can easily

obtain, from wherever they happen to be,

useful information on the date, time, and

place of meetings. They can also ﬁnd out

what was decided at meetings, vote by SMS

(short message service) and, importantly,

monitor and evaluate the decisions made

through voting – all while going about their

daily lives. This participatory approach has

enabled the decentralized territorial entities

involved in the pilot project to improve local

governance through social accountabil-

ity, effective participation of citizens in the

management of public affairs and citizen

monitoring of public investments.

Participatory budget: lessons from pilot experiences in the

Democratic Republic of the Congo18

Chapter 8 Budgeting for health

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Fig. 8.4 Aligning budget and strategic priorities: a core challenge19

8.5 How does the budgeting process work from

the point of view of NHPSP stakeholders?

The budget cycle starts with the government plan-

ning for the use of the coming year’s resources.

To allow this to be done in accordance with

health policy priorities, health planners have

to engage strategically in the process and be

prepared to support it.

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The macroeconomic projections, calculated

usually by a macroeconomic unit in the MoF,

enables the budget ofﬁce within the MoF to

determine the global level of expenditure that

can be allowed without adverse macroeconomic

implications, given expected revenues and a

safe level of deﬁcit.

In many countries, the prime minister or the

president and/or the cabinet will be directly

involved in budget formulation and preparation,

especially in inﬂuencing the main strategic

orientations and modalities of implementation.

The initial formulation of the national budget

happens within the budget ofﬁce of the MoF, with

input from the various sectors. The degree of

openness and interaction with the other sectors

is very speciﬁc to each country, and this process

will determine how long it takes to come up

with a budget (weeks or months). The MoF will

certainly request clear, transparent, and concrete

information from its own individual departments

or from other ministries directly. Some MoFs

issue budget circulars to give instructions to

line ministries, with the indicative aggregate

spending ceiling stated for each ministry. This

circular will also include information on how to

prepare spending estimates in a way that will

be consistent with macroeconomic objectives.

It will spell out the economic assumptions to

be adopted on wage levels, the exchange rate

and price levels (and preferably differentiated

price levels for different economic categories

of goods and services).

MoH negotiations could be with the budget ofﬁce

directly or with an individual from a different

MoF department assigned to the health sector.

The MoF must accommodate various government

priorities and make decisions on trade-offs in

order for budget expenditure totals to tally up

to what is available with the country’s ﬁscal

space. There will also be negotiations between

central-level management MoH and the district-

level budget holders.

In reality, a lot of the budgeting processes make

use of historical budgeting, i.e. the budget is

based on last year’s allocations. Unless there

are major changes to the economic situation

or government priorities (e.g. the 2014 Ebola

crisis in West Africa), the broad contours of the

budget should be generally known. They will be

a combination of critical projections on economic

growth, inﬂation, demography, revenue (all of

this information should be included in the pre-

budget statement) and overarching ﬁscal goals.

Budgeted funds are often tied up with the ﬁxed

costs of staff and infrastructure, leaving limited

ﬂexibility, and perhaps even reduced budgetary

scope for key patient treatment inputs, such as

medicines and other disposable items.

The MoH can bring itself into a strong nego

tiating position by having its costed plan and

plan of negotiation ready before the MoF begins

calling on the different sectors for information.

Normally, simply requesting an increase in

funds for the health sector will not be adequate

to convince a ﬁnance ministry that is dealing

with several competing priorities. A costed

plan is a prerequisite to negotiations with the

MoF; however, in addition, speciﬁc information

such as, for example, who are the ultimate

beneﬁciaries of this plan, what are the expected

health outcomes, and if necessary, how this will

affect the country’s economy and government

goals as a whole, should be deliberated upon

beforehand, calculated and analysed, for dis-

8.5.1 Budget formulation

It is important

to keep in mind

that the MoF

must accom-

modate various

government

priorities and

make decisions

on trade-off.

MoH thus must

come with a sol-

id evidence base

and arguments

which have been

thought through

carefully to

make the case

for health.

Chapter 8 Budgeting for health

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cussion with the MoF. This is a critical stage for

engaging in the budgeting process, including

budget advocacy and negotiating with various

stakeholders. Working hand in hand with civil

society organizations and think-tanks can be

useful here, especially in speciﬁc areas of

expertise (Box 8.3).

Once budget negotiations have been ﬁnalized,

the cabinet endorses the proposals for inclusion

in the budget that will go to parliament.20

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Box 8.5

Key steps of Liberia’s budgeting process21

Using the illustrative example of Liberia helps

us understand in practice how budget prepa-

ration involves a large range of stakeholders

at each and every step of the process.

In Liberia, the MoF leads planning and budg-

eting process. The MoF calculates revenue

projections and then disseminates this infor-

mation to the respective line ministries,

sometimes in the form of a workshop. The

line ministries are then responsible for sub-

mitting budget proposals, following which

budget hearings, debate, and revisions of

the original revenue projections take place

between MoF and the line ministries. The

MoF must accommodate various government

priorities and make decisions on trade-offs

in order for budget expenditure totals to add

up to what is available with the country’s

ﬁscal space. There will also be negotiations

between central-level management MoH and

the district-level budget holders.

The process culminates in a draft budget

which the MoH ofﬁcially submits to the

President and the Parliament. Once the

Parliament has adopted the national budget,

the line ministries are supposed to adjust

their internal budgets according to ﬁnal

budget allocations.

December

January

February

March

April

May

June

Revenue projections by MoF and line ministries

Training workshops by MoF for line ministries

Budget proposal submission by line ministries to MoF

Revenue forecast revisions

Submission of draft budget by MoF to President’s Ofﬁce

Line ministries prepare priorized cash plan

MoF prepares overall priorized govt. cash plan

Parliament adopts national budget

Draft budget submission by President’s Ofﬁce to Parliament

Line ministries adjust budgets as per ﬁnal appropriations

Budget hearings and arbitration between MoF and line inistries

Chapter 8 Budgeting for health

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Box 8.6

The budget preparation process in Ghana22

The budget process in Ghana is an annual

event which includes top-down setting of

ceilings and broad priorities and bottom-up

prioritization and allocation. Key steps in the

process are listed below.

A request for inputs from the general

public, including civil society and private

sector groups.

An update of the macroeconomic frame-

work, including overall expenditure ceil-

ings and the distribution of government

and donor funds.

An early policy review by ministries,

departments and agencies, including

costing of objectives, policies and activ-

ities.

Cross-sectoral meetings to identify: areas

of overlap and duplication in outcomes,

objectives and key outputs; areas where

collaboration and coordination are required

in the planning and implementation of

activities; and comments and feedback

on prioritization of objectives.

Review and ﬁnalization of ceilings in view

of predicted cost forecasts.

6. Final ceilings are approved by Cabinet.

Development of more detailed ﬁrst-year

operational plans. These are developed

bottom-up including regional and district

plans, reﬂecting the policy direction and

priorities set out in the NHPSP.

Discussion of operational plans in policy

and technical hearings with the Ministry

of Finance and Economic Planning. After

ﬁnalization the Ministry consolidates the

national budget.

Final allocation of ceilings between cost

centres and objectives.

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The budget is said to be “enacted” when it is

brought to the legislature for discussion and

subsequent passing into law. The (budget)

appropriations committee usually has the

power to vote on ﬁnancial issues here as the

leading legislative body making spending rec-

ommendations and decisions on behalf of the

legislature. In the budget approval stage, public

hearings and debates may take place on speciﬁc

parts of the budget and/or the budget on the

whole, with speciﬁc legislative committees

(or subcommittees) engaging in discussions

of speciﬁc topics. Here, the health committee

(which may be organized as a subcommittee

of the appropriations committee, or a separate

standing committee)

VII

will be active in studying

the health sections of the overall budget and

preparing an analysis and response, often in

the form of amendments. It is here that the

MoH has the vital opportunity to liaise with the

legislature and support the technical analyses

and cross-veriﬁcation with the costed health

plan. During this stage of the budget cycle,

media attention to the country’s budget is high

and this forum can be used to bring attention

to speciﬁc issues, in partnership with advocacy

organizations and civil society.

8.5.3 Budget execution

This stage of the budget cycle includes the actual

implementation of the planned budget, which

rarely is executed exactly as the budget dictates.

The decisive issue is whether unplanned spend-

ing is adequately justiﬁed by policy decisions,

changes in macroeconomic projections, or other

reasons, and is well documented.

In many countries, budget implementation and

oversight capacity is weak, which exacerbates

problems of a poor budget system, and thus

budget execution that is further away from the

planned budget. For the MoH, and any line ministry

for that matter, it is essential that its own sector

costing and MTEF work has made explicit where

funds should go and for which activities. This can

help in a situation where the budget is unclear or

where reporting systems do not provide adequate

information to monitor expenditure.

8.5.4 Budget evaluation

Budget evaluation and oversight for the full

national budget is usually undertaken by a

supreme audit institution (SAI). Its mandate is to

monitor public spending against stated budgets

and spending targets, and ensure accordance

with relevant laws and regulations. SAIs are

among the most important agencies for ensuring

that money is spent in the appropriate way, in

the way it was intended.

Increasingly, SAIs are tasked with auditing the

efﬁciency of fund utilization, examining value

for money, and assessing performance of public

services.

Normally, the task of following up

on and enforcing audit results and recommen-

dations is within the remit of the legislature.

Ideally, the legislature and the SAI (and where

relevant, with civil society organizations) should

collaborate closely to ensure that SAI ﬁndings

are acted upon.

Speciﬁcally for the health sector, health budget

execution can be evaluated during periodic sector

reviews. This would fall within the health policy

and planning cycle and is separate from national-

level budget audits, although health-speciﬁc

audits can and will certainly be undertaken by

a country’s SAI.

8.5.2 Budget approval or

enactment

VII Not all health-related committees in a legislature will have inﬂu-

ence over the budget. The exact committee or body which has a health

mandate and inﬂuence over the budget will differ in each country.

The budget en-

actment process

is a vital time for

the MoH to liaise

with the legis-

lature health

committees and

support budget

analysis and

cross-

veriﬁcation

with the costed

health plan.

The su-

preme audit

institution’s

(SAI) mandate

is to monitor

public spending

against stated

budgets and

spending tar-

gets and ensure

accordance with

relevant laws

and regulations.

Chapter 8 Budgeting for health

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8.6.1 Legal considerations

Although the precise legal framework for govern-

ment budgeting varies from country to country, it

is usually spelled out in some form or other, be

it through a law or decree or regulatory directive

or other means. Health planning stakeholders

should be aware of how to source information

relevant to the budget and where to position

their technical inputs and inﬂuence.

The constitution is at the top of the legal hier-

archy. Although it usually deals only with broad

principles, the constitution may clarify three

important aspects:

the relative powers of the executive and

legislative branches with respect to public

ﬁnance;

the deﬁnition of the ﬁnancial relations

between national and sub-national levels

of government; and

the requirement, for example, in common

law systems, that all public funds be spent

only under the authority of a law.

The organic law is usually the main vehicle

for establishing principles of public ﬁnancial

management. This may take the form of a single

law that guides budget formulation, approval,

execution, control, and auditing, or there may

be several general laws covering speciﬁc areas

of public ﬁnance management that may also

relate to national and sub-national levels of

government. The organic budget law also gives

to the government, or the minister responsible

for public ﬁnance, the authority to issue detailed

regulations and instructions.

The constitution, the budget organic law, and

ﬁnancial regulations are permanent and form the

legal framework within which the annual budget

law/ﬁnance law, which includes the revenue

and expenditure estimates for a given year, is

prepared, approved, executed and audited. The

annual budget law can take different shapes

depending on the system.

In the francophone and Latin American systems,

the coverage of the annual budget law (budget

or loi de ﬁnances in francophone countries and

ley anual de presupuestos in Latin America)

is rather far-reaching, since it stipulates the

amount and details of revenue and expenditure,

the balance amounts, any new tax legislation

measures and any permitted changes to spend-

ing. Brazil, for example, has minimum health

spending thresholds in place at municipal, state

and federal levels of government that require

a certain percentage of the annual budget be

dedicated to health services.24 Under the common

law system, only revenue and expenditure esti-

mates need to be presented to the parliament.

By contrast, the annual budget in many transition

economies has often been rather summary in

format as no detailed legislation stipulates the

contrary: prior to any recent reforms, budget

estimates were presented in aggregate format,

by budgetary institution – typically only the

major supervisory institutions and not their

subordinate units – and broken down only by

broad “functions”.25

8.6 Important operational issues for health

planning stakeholders to consider during the

health budgeting process

The legal

framework that

impacts budget

formulation

and execution

is made up of

the constitution,

organic budget

law, and ﬁnan-

cial regulations.

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Since the mid-1980s, budgeting reforms world-

wide have been concerned in a signiﬁcant way

with engineering a shift from planning and

approving budgets for one year at a time to a

multiyear perspective to improve predictability

and sustainability in sector funding. The need to

ensure the ﬁnancial affordability and operational

feasibility of policy proposals has been a major

factor behind the introduction of medium-term

perspectives. Given that the disconnect between

health policy-making, planning, and budgetary

processes was recognized as a common factor

of several countries’ governance, the health

MTEF has increasingly come to be regarded

as a central element of public expenditure

management reform programmes (see Box 8.7).

8.6.2 How can countries

introduce and effectively

undertake multi-year

budgeting?

Box 8.7

Malawi26

In 1993, a Budget Management Review in

Malawi revealed real weaknesses in the

country’s budgeting system; it especially

highlighted the fact that both sector-speciﬁc

as well as overall spending objectives of

the government were unclear. In 1995, the

World Bank assisted in introducing the MTEF

process in Malawi in four sectors, including

health, in response to the review’s ﬁndings.

The ﬁrst year of implementation focused very

much on adequately costing sector-speciﬁc

priorities to reﬂect the sector strategic plans.

All of the other sectors joined in the following

year, with the MoF providing overall guidance

and management. After the initial years of

implementation, it was clear that the Budget

Division needed more staff and provisions

were made for an increase in personnel.

The MTEF in Malawi was seen as a process

to support improved decision-making and

to better link policies, priorities, resources,

and budgets. It has involved both a top-down

and bottom-up joint approach – top-down

meaning a macroeconomic analysis looking

at total revenue and allocation of budget

ceilings to different sectors. At the same

time, a bottom-up approach at sector level

consisted of formulating a sector strategy

and breaking the strategy down into activities

and costs. In Malawi, a special emphasis was

Introducing health MTEF in

Africa: the case of Malawi and

the Democratic Republic of the

Congo

MTEFs in the

health sector

were borne out

of the need to

ensure ﬁnancial

affordability

and operational

feasibility of

health policy

proposals.

Chapter 8 Budgeting for health

1PC

given to involving a wide range of stakehold-

ers in the design and implementation of the

process and presenting the budgeting process

as a management tool for all sectors. With

the MTEF work, the MoF has taken on a less

controlling role and is more of a supervisor

of performance, ensuring accountability and

transparency in resource use. An evaluation in

early 2014 demonstrated good improvement

for Malawi’s budget credibility and stronger

links between policies and budgets. However,

signiﬁcant improvements were still necessary

for budget execution and control as well as

accounting procedures.

Democratic Republic of the Congo27

From 2011 the Research and Planning Division

at the Ministry of Public Health (MoPH) has run

a programme to improve the budget process

via a results-oriented management concept

that uses the MTEF as a tool. Since 2012, the

national MoPH and provincial ministries have

compiled a national and provincial MTEF each

year. This tool is featured in the roadmap for

government expenditure reform initiated by

the Ministry of Economy and Finance, making

the health sector a trailblazer for a reform to

be extended to all other sectors. The beneﬁts

are twofold. First, results-based management

practices are picked up by provincial planning

and budgeting teams. These teams will play

a central role in allocations of resources for

health. Second, the tool makes it easier to

develop arguments in defence of the health

budget when choices are being made for the

annual budget. In 2014, sound arguments

helped the MoPH obtain a 20% increase in

the budget initially announced for non-wage

expenditure. This represents an additional

USD 10 million in the health allocation.

However, the unpredictability of external

resources and uncertainty surrounding

decentralization makes the medium-term

budget process an especially delicate exercise

that often has little link to macroeconomic

realities. The MTEFs in the Democratic

Republic of the Congo are developed using

incomplete and patchy data: the provinces

have no clear idea of the domestic and

external resources that they will receive the

following year. Therefore, MTEFs are hardly

ever used to manage resources and are

more of a theoretical exercise. The MoPH’s

efforts to improve the budget process are

hampered by the uncertainty surrounding

decentralization and the fragmentation of

external ﬁnancing. Recent efforts by the

MoPH to strengthen their ﬁnancing strategy

should enable the government to set out its

ofﬁcial vision of the health ﬁnancing and

decentralization architecture, which will

improve the budget process.

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To date, MTEFs have seen a mixed impact on

increased budgetary predictability for health

ministries, but there is some evidence that

they have led to budget reallocations to the

sector.

It is a common observation that the

quality of forward spending estimates, as well

as revenue forecast, is generally poor. For the

former, they tend to consist far too frequently

of the proposed budget for the ﬁrst year of a

multiyear framework, followed by inﬂation

adjusted projections of cost for the later years:

multiyear incrementalism, in other words. On

the latter, revenue projections are sometimes

Box 8.8

Barriers to medium-term budgeting29

Legacy systems in francophone and anglo-

phone countries in Africa may affect the

implementation of standard reforms such as a

medium-term budgeting. While francophone

systems have budget control beneﬁts and

offer some mechanisms that are not out of

keeping with a medium-term perspective

(such as allowing for capital programming to

have a multiyear legal basis in the ﬁnancial

laws), they also present important challenges.

The central control over spending ministries

discourages spending agencies from taking

strategic responsibility for better spending

and the budget format does not help either.

With a strong emphasis on law in francophone

systems, the lack of legal provisions for

modern budget management mechanisms

such as MTEFs and programme budgeting

mean that reforms to these effects have

very little impact. On the plus side, the

requirement to adhere to the West African

Economic and

Monetary Union directives,

however, has driven successful reforms of

key parts of the PFM systems.

In anglophone Africa, the United King-

dom-based ﬁnancial management tradition

can clash with the constitutional form of

modern states. The role of parliament in

undermining comprehensive, medium-term

budgeting that is affordable and effective

is among the key concerns. In anglophone

countries the strong legal emphasis on the

accountability of the spending agency (in this

case, MoH) accounting ofﬁcers in turn under-

mines a strong ﬁnance ministry mandated to

run a disciplined budget process. The weak

role of parliaments and inadequate capacity

for medium-term forecasting, particularly

at sector level, further affects the impact of

these reforms.

judged as unrealistic and do not allow for ade-

quate strategic planning.

The process and quality of health and overall

MTEF need strengthening in most countries,

more speciﬁcally:

more realistic resource scenarios;

better alignment of MTEF ceilings with annual

sector allocations;

more support to MoH for developing sound

health expenditure scenarios;

more participatory processes.

Chapter 8 Budgeting for health

1PC

8.6.3 How can countries move

from a line-item to a

programme-based

budget?

Many countries are progressively moving away

from activity-based or line-item budgeting

towards a system that is more focused on outputs

and places emphasis on results. The shift from

traditional budgeting to alternative budgeting

methods with results and performance at its

focus is noted to be more useful as a policy

or decision-making tool. It assures elected

and administrative ofﬁcials of what is being

accomplished with the money, as opposed to

merely showing that it has been used for the

purchase of approved input.

At the end of

the budget cycle, a review of performance is

supposed to help planners allocate and spend

more effectively toward the set targets in the

following years (see Box 8.9). In moving towards

performance budgeting, countries adopt a

system of planning, budgeting and evaluation

Fig. 8.5 Introducing performance-based budgeting: from concept to practice30

Strategizing national health in the 21st century: a handbook

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that emphasizes the relationship between money

budgeted and results expected.

However, there are caveats. While performance-

based budgeting seems to have been effective

to better inform resource allocation decisions

and in supporting higher quality of negotiation

processes between MoF and line ministries like

health, systematic evidence has been lacking

on the actual effects on health sector perfor-

mance. Performance-based budgeting requires

considerable budget management capacity

within the spending institutions. Providing more

autonomy to such institutions (such as MoH)

would require that accountability systems are

in place and functioning to ensure that more

ﬂexibility indeed leads to better sector results.

However, in weak PFM systems, the introduc-

tion of an alternative budget classiﬁcation is

likely to create more confusion and to reduce

accountability, at least initially. Budgets may

therefore need to be presented using several

different formats in a transition phase.

Speciﬁcally for the health sector, the introduction

of programme budgets can increase risks of

creating new silos (programme budgets are often

disease-speciﬁc vertical programmes). Modifying

the budget structure will not be sufﬁcient to

drive ﬂows to expected results. Just as equally

important as budget structure are personnel

management and structure of government

that provide incentives and accountability for

improved health sector performance.

The move

towards

performance-

based budgeting

creates a system

that emphasizes

the relationship

between money

budgeted and

results expect-

ed. However,

caveats include

the increased

risk of new

budget silos and

initial confusion

in weak PFM

systems.

Chapter 8 Budgeting for health

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Box 8.9

From line-item to programme budgeting: the case of the

Republic of Korea32

The Republic of Korea’s budget system

revealed that the most problematic feature

of the budget classiﬁcation system was that it

placed primacy on classiﬁcations by organiza-

tion (ministries and agencies) and, most of all,

by budget account. As a result, programme or

activity level expenditures were fragmented

over different accounts. Conversely, even

when a programme or activity was funded

solely through a single budget account, it

took considerable cross-checking to verify

that there are no other expenses in another

account. The opacity of spending information

for programmes or activities was compounded

by the fact that there were more than 6000

activities. Thus the solution demanded that

the budget classiﬁcation system be simpliﬁed

in order to make the spending information

more transparent and accessible. Further-

more, this streamlining of the classiﬁcation

system should be accompanied by greater

discretion granted to spending ministries

like health. This would also allow the budget

ofﬁce and the legislature to concentrate on

the broader resource allocation decisions

while harnessing the expertise of front-line

managers in spending within their sectors,

in order to raise the efﬁciency of lower-level

spending decisions.

With this general direction in mind, the Gov-

ernment decided on several basic principles

for restructuring its line-item budget into a

programme budget:

a programme cannot span multiple min-

istries;

all activities that have the same policy

objective must be grouped under a single

programme, regardless of revenue source;

programmes must be clearly differentiated

from one another both in policy objective

and programme name.

Further guidelines have been set to ensure

that the programme classiﬁcation matches

that of the National Fiscal Management

Plan (NFMP – the country’s MTEF) and that

the ﬁnal number of activities is reduced to a

level that is practical for resource allocation

decision-making. Additionally, the Government

decided that all indirect costs (salaries, facility

maintenance, etc.) for each ministry would

be aggregated into a separate programme,

as would simple transfers among different

budget accounts, rather than trying to dis-

tribute such costs or transfers into other

programmes.

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The quest for ﬁscal space for health should be

mainstreamed into the budgeting process (see

Fig. 8.6 and Box 8.10). Situating ﬁscal space for

health analysis in the overall budget forecast

process is essential. It is likely that the analysis

will be best placed at the medium-term budget

formulation stage. It is a critical moment, largely

unexploited, which should allow aligning realistic

revenue forecasts with government priorities and

associated expenditure ceilings. Sector-speciﬁc

ﬁscal space assessment, if conducted prior to

and as a support for the elaboration of a sound

MTEF, will maximize impact on change. With

such an assessment, health planners will bring

useful technical value and support for exploring

the actual potential ﬁscal space, rather than

focusing on historical frameworks and ceilings.

A more realistic sense of the actual potential

ﬁscal space for health can also aid health min-

istries to better plan for a possible reduction of

resource allocations to health during the year –

which can happen in times of ﬁnancial difﬁculty

due to ﬂuctuations in external aid, a reduction

in domestic resources, or other reasons. In

such circumstances, NHPSP implementation

can be deeply undermined if potential resource

reductions are not adequately planned for and

taken into account from the very beginning.

8.6.4 When and how should

countries assess ﬁscal

space for health?

Box 8.10

Taking stock of ﬁscal space

for health: main lessons from

assessments in developing

countries33

Lessons from country evidence have

shown that in contexts with very limited

public spending for health (all standards

included), ﬁscal space for health projec-

tions have helped to identify feasible sce-

narios for expanding resource availability

on both the revenue generation and the

expenditure side. They signalled existing

margins from clearly untapped resources

(e.g. taxation, mineral resources), from

misalignment with government priorities

and international commitments (e.g. low

health prioritization) and from effective-

ness and efﬁciency-related losses (e.g. low

execution, skewed allocations, technical

inefﬁciencies).

In more advanced countries (i.e. higher

revenues and health prioritization within

the budget envelope), evidence has shown

that further gains are likely to derive from

the expenditure side through improved

management of the existing health budget

envelope. In the short and medium term,

a strategic combination of improved exe-

cution and modiﬁed allocation within the

budget envelope is likely to drive ﬁscal

space expansion for the sector. In such

contexts, successful country experiences

have focused on how to align an existing

budget envelope with the UHC goals

(i.e. reduce inequalities in service use

and spending), rather than delaying or

derailing the sequence of their reform

process and expecting sizeable gains

from the resource side.

The move

towards perfor-

mance- based

budgeting cre-

ates a system

that emphasizes

the relationship

between money

budgeted and

results expect-

ed. However,

caveats include

the increased

risk of new

budget silos and

initial confusion

in weak PFM

systems.

Chapter 8 Budgeting for health

1PC

Accessing and effectively using quality budget and

ﬁnancial data is critical for health planners and

managers, especially to drive future investment

decisions. In many countries, MoH and other

stakeholders cannot rely on good quality budget

and ﬁnancial data, for the following reasons:

lack of access to and use of data by relevant

MoH units;

poor classiﬁcation of public expenditure

for health;

weak ﬁnancial management reporting and

consolidation systems within MoH and across

ministries.

Over the past decade, the systematized produc-

tion of national health accounts has helped to

monitor overall health expenditure from different

sources at country level and to provide globally

a systematic description of the ﬁnancial ﬂows

related to the consumption of health care goods

and services (see Box 8.11). MoH is encouraged

to make use of health accounts outputs in a

more systematic manner to further inform

health planning and budgeting. There is also a

need to institutionalize and systematize public

expenditure assessments, as well as national

health accounts, within MoH to strengthen

their ability to inform and inﬂuence budget

8.6.5 How can the necessary

data be collected?

Fig. 8.6 Positioning ﬁscal space

for health analysis in the

budgeting process34

Fiscal space

analysis, including

for health sector

MTEF:

revenue forecast

and expenditure

deﬁnition

Annual budget

formulation

and approval

Good quality

budget and

ﬁnancial data

are essential to

inform health

planning and

budgeting.

Expenditure

assessments

should thus be

institutional-

ized, not the

least because

countries are

encouraged to

move towards a

dominant reli-

ance on public

expenditure to

make progress

towards UHC.

Strategizing national health in the 21st century: a handbook

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decision-makers. As countries are encouraged

to move toward a dominant reliance on public

expenditure to make progress toward UHC,35

more efforts shall be put on strengthening

production and effective policy use of good quality

public expenditure for health data. In doing so,

three main aspects can be annually monitored:

how much is allocated to the health sector

compared to the overall budget;

how much of the allocated budget is actually

executed;

reasons for under or over-spending.

Box 8.11

Role of national health accounts in informing budget formulation and

expenditure tracking36

Health accounts cover actual expenditure and

not budgets or commitments. Health accounts

track health expenditure from all sources

(including nongovernmental) to different

types of providers (for example, hospitals vs

providers of ancillary services) and different

uses (for example, inpatient vs outpatient care

or curative care vs preventive care).

Health accounts address ﬁve basic questions.

Where do resources come from (through

which ﬁnancing mechanisms have the

revenues/resources been pooled)?

Who is managing those resources and

under which ﬁnancing arrangements do

people get access to health care goods

and services?

What kinds of goods and services are

consumed?

Which health care providers deliver these

goods and services?

5. Who beneﬁts from the expenditures (by

age, gender, regions, diseases)?

A new System of Health Accounts was issued

in 2011 to allow comparison across countries

and to accommodate a number of changes

and improvements.

Chapter 8 Budgeting for health

1PC

Overall, the budget elaboration process is a

site for contestation of power and resources,

and therefore not just an outcome of economic

rationality. It is above all a political exercise

(Box 8.12). Central to health planners is the

acknowledgement that the budget preparation

phase is fundamentally political, because it

is about making real policy choices based on

societal preferences and linking them to practical

health sector strategies.

In order to understand the political economy

of the budgeting process, it is necessary to

understand the accompanying processes of

health policy and planning.37

The process of allocating resources to different

goals, priorities or institutions is essentially

a political, rather than purely technocratic

one. In addition to analysing health needs,

health planning stakeholders should pay

sufﬁcient attention to understanding political

processes pertaining to budgeting prior to

and during the budget formulation process.

The process of budget allocation does not

occur in isolation from macroeconomic and

revenue issues, and efﬁciency/effectiveness

concerns in the use of funds for health and in

the other sectors. A holistic understanding

of public expenditure systems – and the

institutional cultures that condition them – is

important in order to formulate strategies for

change and improvement (i.e. an increased

allocation to health).

It should never be automatically assumed that

health allocations translate accurately into

spending. What money actually gets spent by

whom, on what items and for what purpose

is often determined during the process of

budget execution, which in itself implies

political, ﬁnancial and technical interactions

within a large range of interests and powers.

8.6.6 How should countries understand and inﬂuence the political

economy of budgeting for health?

The budget

process is

fundamental-

ly a political

exercise, an ac-

knowledgment

that must be

understood by

health planning

stakeholders.

Strategizing national health in the 21st century: a handbook

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Box 8.12

The politics of budget formulations38

To guarantee meaningful change in budget

allocations, it is recommended to have infor-

mation about the following:

(a)

the formal structure of roles and respon-

sibilities within the budget process;

(b)

the formal rules governing decision-

making, political choice and account-

ability within the public expenditure

management system;

inﬂuence (outside the formal allocation

of roles and responsibilities), which

inﬂuence the outcomes of the budget

process;

(d) incentives for action (covert as well as

overt) affecting the decision-making of

politicians and ofﬁcials during budget

formulation and execution;

(e)

the latitude for independent discretionary

action of bureaucrats at all levels of the

budget execution process;

(f) the norms and values prevailing in key

institutions within the budget formulation

and execution process.

The experience of budget initiatives with

social/health goals suggests a number of

broad lessons that can help guide practice,

including the following: Firstly, budget pro-

cesses which are successful in relation to

social/health goals often involve a broad

range of actors with different positions and

skills – including NGOs, researchers, par-

liamentarians, members of political parties,

technocrats and members of the social

groups in question themselves. Secondly,

many successful social initiatives on the

budget process in developing countries have

beneﬁted from donor support. Sometimes

this has been through support to civil society

groups, sometimes through support to build-

ing capacity in government, and sometimes

through the provision of extra resources (e.g.

through Heavily Indebted Poor Countries debt

relief). Thirdly, successful initiatives (such

as the participatory budgeting movement

in Brazil, or the gender budget initiative in

South Africa) are often facets of a broader

popular political movement or project. Where

governments have particularly strong frame-

works of policy goals, or other frameworks

for accountability (such as constitutional

provisions related to economic and social

rights), the space for pro-poor engagement

in the budget process is stronger.

Chapter 8 Budgeting for health

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From a public ﬁnance perspective, the key

objectives of PFM are to maintain sustainable

ﬁscal discipline, ensure strategic and effective

allocation of resources and the efﬁcient delivery

of public services. On the other hand, health

ﬁnancing is typically characterized by functions

that guide the collection, allocation and pooling of

resources, as well as the purchasing of services,

with the ultimate goal being universal health

coverage (UHC). Fostering mutual understanding

and further alignment between PFM and health

ﬁnancing systems is critical, and health planning

stakeholders have a critical role to play here.

PFM systems shape the level and allocation

of public funding (budget formulation), the

effectiveness of spending (budget execution)

and the ﬂexibility in which funds can be used

(pooling, sub-national PFM arrangements,

purchasing). While PFM is sometimes considered

a bottleneck for effective health spending due

to rigidities in the way budgets are formulated

and executed, PFM rules also provide the sector

with a domestic, integrated platform to manage

resources irrespective of their sources (i.e. a core

attribute of pooling) and their levels (i.e. across

national and sub-national entities).

From a PFM perspective, health is perceived

as one of the spending sectors that deliver key

public services and goods but overall lacks a

good understanding of the PFM roles and rules

for public sector effectiveness and ﬁnancial

accountability. In some countries, health is seen

as a sector with less capacity, vis-à-vis other

sectors, to adequately formulate its priorities

and needs and deﬁne credible budgets. Often,

actual health sector spending is far from initially

deﬁned targets. In most low-income countries,

actual health spending is typically lower than

budget allocations, which ultimately reﬂects

the sector’s difﬁculties to plan, commit and

disburse according to national PFM rules. The

perception of lack of measurable, immediate

health outputs of public resources tends to also

reinforce a common perception of the sector’s

ineffectiveness and inefﬁciencies.

Overall, health has been both a distorting and

innovating sector for PFM systems. Over the

past two decades, the health sector has some-

times generated the development of parallel

PFM systems to secure investments and limit

ﬁduciary risks for external investments. Ear-

marked allocations and parallel budgeting,

pooling procurement, reporting arrangements

have become a strong attribute of the sector’s

development aid. At the same time, several

low- and middle-income countries have also

embarked on alternative health ﬁnancing reforms

that have been mutually beneﬁcial for both

the sector and PFM as a whole, through, for

example, the development of sectoral MTEFs,

the strengthening of domestic procurement

mechanisms, the tracking of resources and

expenditures up to the sub-national levels, a

sound management of domestic pooled funds, the

introduction of purchasing agents and strategic

payment mechanisms to control expenditure

and expand coverage at the same time. In this

respect, the health sector can help leverage

domestic PFM efforts.

8.6.7 Looking beyond budget: importance of public ﬁnance systems

for health ﬁnancing and UHC

The key objec-

tives of public

ﬁnance systems

are to maintain

sustainable

ﬁscal discipline,

ensure strategic

and effective

allocation of

resources

and efﬁciently

deliver public

services.

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Fig. 8.7 What does it mean to have a functioning PFM system?

8.7 What if...?

8.7.1 What if your country is

decentralized?

If health is a mandate for a decentralized entity,

the full health policy and planning cycles may

fall under a decentralized authority. Fiscal

decentralization involves shifting some respon-

sibilities for expenditures and/or revenues

to lower levels of government; this can have

an impact on health sector funding, as well

This section outlines budgeting issues in speciﬁc

settings such as decentralized contexts, highly

donor-dependent countries, and fragile states.

as how funds ﬂow to the health system. In

particular, it is important to clarify where local

governments can determine the allocation of

health expenditures themselves versus those

where the centre mandates expenditures and

decentralized entities simply execute those

health expenditures.

Fiscal decen-

tralization

involves shifting

some respon-

sibilities for

expenditures

and/or revenues

to lower levels

of government;

this can have an

impact on health

sector funding,

as well as how

funds ﬂow to the

health system.

Chapter 8 Budgeting for health

1PC

For health planners, it is critical to understand

at which level revenue and expenditure decisions

are taken (see Box 8.13). Decentralization can

make health budgeting processes more complex

in that sense, even more so in contexts with

weak governance systems. In addition, care

must be taken to avoid new inefﬁciencies due to

decentralization, such as separate procurement

by each region when it would make most sense

to procure together as a single purchaser.

Three main challenges have been observed

across decentralized countries or those in the

process of decentralization.

Resource mobilization mechanisms can

end up being competing and fragmented,

leading to inefﬁciencies in collection and

pooling efforts;

Health sector priorities (often set at national

level) may be misaligned with sub-national-

level budgets and spending targets (e.g. health

can de-prioritized in sub-national budgets);

Financial record management is more com-

plex, with resulting poor national consoli-

dation of ﬁnancial data and limited ﬁnancial

accountability.

A well-managed decentralization process will

have in place institutional arrangements for

coordination, planning, budgeting, ﬁnancial

reporting, and implementation across govern-

ment ministries/institutions as well as between

the different administrative levels of the coun-

try. These coordination bodies are important

mechanisms for MoH and health planning

stakeholders to discuss speciﬁc budget-related

issues linked to speciﬁc rules (e.g. the design

of ﬁscal transfers) as well as review budget

execution against sector priorities.39

Box 8.13

Caveats in a decentralized

setting: the case of Zambia40

The catch in decentralized settings comes

when the decentralization process is

not prepared adequately or does not

function as it should. This might mean

that some structures and responsibilities

are decentralized but not others, limiting

the empowerment truly given to local

district managers and communities, and

also limiting its beneﬁts. An example of

the problems that may arise in such a

situation can be seen in Zambia, where

an evaluation of decentralization after

about a decade of implementation found

that health districts had only a moderate

range of choice over expenditures, user

fees, contracting, targeting and gov-

ernance. Their choices were even more

limited over salaries and allowances

and they had no control over additional

major sources of revenue, like local taxes.

Health system performance indicators

also showed no major change compared

to before decentralization, suggesting that

the expected advantages for the health

system did not come into play. This is

a particularly difﬁcult situation, since

expectations are often raised with the

introduction of a decentralization policy

but cannot be matched with action on the

ground when not adequately implemented.

This situation is usually linked to power

and decision-making in some areas still

being held centrally, leading to tensions

between top-down central-level policy

decisions and more locally driven agendas.

(a)

(b)

(c)

Strategizing national health in the 21st century: a handbook

1PC

The central planning authority should give strong

guidance as to the methodologies to be used for

costing, budgeting, and expenditure tracking –

without it, a diverse and heterogeneous set of

data from the various decentralized structures

will make aggregating countrywide data and

producing national estimates very difﬁcult. For

example, an additional layer of analysis must

be conducted for national health accounts

data in countries with highly decentralized

health ﬁnancing systems with little central-level

guidance or authority. Getting comparable and

consistent ﬁgures is often a challenge that may

necessitate external expertise. Many countries

may not have the time or resources to make this

extra effort. At a global level, there is a deﬁnitive

drive to establish centralized District Health

Information Software (DHIS2) and Hospital

Management Information Systems to strengthen

consistency in reporting.

Finally, an issue which can arise in a decentral-

ized setting is a relative lack of reporting and

transparency on money ﬂows. Often, it is the

central level that is held to closer scrutiny and

is subject to political pressures on the funds it

allocates and disburses to decentralized author-

ities. After that, as Box 8.3 illustrates in the case

of Mexico, access to regional or district budget

and expenditure data may be considerably more

difﬁcult. Low levels of transparency at regional

or district levels may reﬂect a lack of account-

ability to the population on matters related to

health budgets and expenditures. This would

imply that the advantages and added value of a

decentralized system close to population needs

are not being leveraged and that budget-related

problems have simply been relocated from

central to decentralized level. As Box 8.3 also

demonstrates, civil society groups can be key

partners of the government and population to

ensure better accountability and transparency at

lower levels of the health system and advocate for

the objectives of decentralization to be fulﬁlled.

Some questions to consider for costing and

budgeting in decentralized settings

What does decentralization actually mean in

practice in your country? How far are struc-

tures, responsibilities, and budgets actually

decentralized?

The more power and authority actually vested

in local authorities, the more scope there

is for rational costing and budgeting that is

close to the real needs of the local population.

Does the central level authority need to aggregate

costing and budgeting nationally?

If so, guidance and templates from a central

authority would be useful and necessary

to reduce the burden and error margins of

reformatting and restructuring in order to

compare and aggregate. In addition, technical

support from a central authority might be

recommended.

The central-level authority should take into

account revenue generation at different levels

for more accurate ﬁscal space projections.

How transparent are health system costs,

budgets, and expenditures reported at decen-

tralized level?

A low level of transparency may indicate

a lack of accountability to the population

coming under the decentralized authority

and a subsequent lost opportunity to leverage

the planning and budgeting advantages of

being close to the population.

Chapter 8 Budgeting for health

1PC

Box 8.14

Budgeting and health expenditure management in a decentralized

state: Nigeria41

Nigeria is a federal state with three tiers of

government, namely, the federal government,

36 state governments, and 774 local govern-

ments. The principal actors in the Nigerian

public health sector are the Federal MoH

(FMoH), the 36 State Ministries of Health

(SMoH), the 774 Local Government Author-

ities (LGA) Departments of Health, and the

authorities of the Federal Capital Territory,

as well as various government parastatals

and training and research institutions that

are concerned with health matters.

The FMoH, the SMoH, and the LGA Depart-

ments of Health are responsible for plan-

ning and managing health spending in their

respective jurisdictions. Public expenditure

streams for the three levels of government

are largely uncoordinated. Federal, state, and

local allocation and expenditure decisions

are taken independently, and the federal

government has no constitutional power to

compel other tiers of government to spend

in accordance with national priorities.

The complexity of ﬁscal transfers and ﬁnancial

ﬂows in Nigeria between federal, state, and

local agencies makes it difﬁcult for the govern-

ment to reconcile and track resource ﬂows

across the different levels and agencies of

the health system. In general, the absence

of accurate and detailed records on budgets

and expenditures indicates that government

administrations at all levels do not have

the means to ensure that health resources

are distributed equitably, efﬁciently, and

effectively.

A further complication to Nigeria’s decen-

tralized setting came with the creation in

thirty states only, of a new agency, the State

Primary Health Care Development Agency.

This agency is now responsible for primary

health care in the state and is tasked to

bring all primary care facilities and stafﬁng

under its control. In the 30 states where this

Agency exists, the LGA Health Authorities

are also under its direct control, creating

much confusion as to the delineation of

tasks and funding mechanisms.

This example from Nigeria demonstrates

that decentralization does not always

solve existing problems; in fact, when not

organized and managed properly, decen-

tralization can create unintended hurdles.

Strategizing national health in the 21st century: a handbook

1PC

8.7.2 What if your country is

heavily dependent on aid?

Budget transparency is a key principle of the

Paris Declaration on Aid Effectiveness (2005),

whereby donors and recipient countries agreed

that greater budget transparency is necessary

to ensure that resources are allocated towards

effective poverty reduction strategies. The

Accra Agenda for Action (2008) and the Busan

Partnership Agreement (2011) also included

additional commitments for donors to provide

timely information on aid ﬂows to recipient

governments, such that country budgets can

rely on predictable ﬁnancial ﬂows.

However, in reality, countries that rely more

heavily on donor funds are especially vulnerable

to the unpredictability of external funds. Donor

dependence is a tricky concept as the deﬁnition as

to what constitutes dependence is not clear – in

particular whether dependence is more an issue

of inﬂuence rather than an amount or share of

the budget provided through external assistance.

Nevertheless, it is acknowledged that external

fund inﬂows may not only be positive. Donor

grants may be earmarked and there may be a

lack of reliable projections for future planning

years.42 In addition, there are indications that

increases in development assistance is not

necessarily associated and matched with an

increase in government health spending from

domestic sources.43

A review of 16 highly aid-dependent countries

(countries with an Open Budget Index [OBI] aid

dependency index averaging more than 10% over

the years 2000 to 2006) revealed that although

the presence of donors can promote reforms

to strengthen budget transparency, the effects

may be offset by other characteristics of donor

activity, such as fragmentation and limited use of

aid modalities for broader government support

and pooled sector funding.44

The 2012 Open Budget Survey Report measures

the state of budget transparency, budget partic-

ipation and budget oversight in 100 countries.

One of the principal ﬁndings was that budget

transparency in low-income countries is affected

by the choice of aid modalities (i.e. the ways in

which aid is provided) and the type of donor

interventions, rather than the overall level of aid

dependence. In short, the greater the proportion

of aid channelled through recipient country

budget systems, the more those systems will

be strengthened and the more likely they are

to become transparent.

“Rather than being linked to the level of overall

aid dependence, the transparency is more

correlated with an index of donor engagement

which tries to capture the quality rather than

the quantity of donor ﬂow.”45

Chapter 8 Budgeting for health

1PC

The effect is not just from the amount of aid

and the modalities, but also from the number

of donors present. The greater the number of

donors there are, the greater the fragmenta-

tion. In many countries, health remains the

most fragmented sector, thus complicating

sector-wide planning.

The most common budget-related challenges

in aid-dependent countries include:

problems with predictability of donor funds

and alignment, harmonization, and coor-

dination with sector strategies and sector

strategy budgets;

Common

budget-related

challenges for

aid-dependent

countries are

the limited

predictability of

donor funds, the

disconnect be-

tween pledged

and disbursed

donor monies,

the timing of

fund release

which may be

in line with

need, and donor

conditionalities

tied to speciﬁc

funds.

a disconnect between the pledged and

actually disbursed monies from donors to

aid-dependent countries;

the timing of fund release – this impacts on

budget credibility and ability to implement

activities;

donor conditionalities tied to speciﬁc funds.

Overcoming some of the above-mentioned

challenges involves constant dialogue with

donors on these issues. It can help considera-

bly to gather and document evidence demon-

strating the kinds of difﬁculties encountered

by the budget-related challenges, including

implementation delays or lack of implemen-

tation altogether.

Strategizing national health in the 21st century: a handbook

1PC

Box 8.15

Health accounts in a conﬂict-

affected or emergency setting

In conﬂict-affected countries the health

accounts activities remain logistically and

methodologically challenging because

of the inherent insecurity, governance

and institutional weaknesses. Usually

government investments are very lim-

ited, out-of-pocket expenditures may

increase and the access to health care

services and goods is limited, which

may lead to an increase of risk-taking

behaviour and impoverishment. These

countries rely heavily on international

aid for health care provision but at the

same time the absorptive capacity in

the recipient government institutions

may be very low. The health accounts in

post-conﬂict settings usually focus on

resource tracking of external funds. It is

important to validate the health accounts

results internally (with the data authorities

and stakeholders), but also to cross-check

the data with other sources (donor reports

and international databases) as well as

analyse the data, comparing them with

general economic and health indicators.

The ﬁndings from health accounts reports

can help improve donor accountability

and coordination, ensure more equitable

distribution of development aid, and lead

to better reallocation of health care funds.

8.7.3 What if fragmentation

and/or fragility is an issue

in your country?

Fragile or post-conﬂict states will have a reduced

tax base and limited revenue generation com-

pared to other countries, translating into an

increasing reliance on informal payments and

on donor funding. In addition, the transition from

short-term emergency relief to longer-term

development means a shift in funding models

for the health sector – usually, there is some

government takeover of basic services with

heavy donor assistance. In most cases, this will

be accompanied by the continued presence of

emergency services as well, creating several

parallel funding streams for different types

and levels of services that necessitate strong

steering capacity and management by the

MoH. This is – almost by deﬁnition of a fragile

state – rarely existent, which makes rational

planning and budgeting extremely complex

and challenging. (See, for example, Box 8.15).

Private expenditure, remittances from abroad,

and aid inﬂows end up attaining larger totals than

expected for health in fragile state situations.

Estimates from Afghanistan, Liberia, and the

Darfur region of Sudan demonstrate that private

health spending soars when public ﬁnancing is

largely absent.

VIII

High levels of private spending

means that only those with money can pay to

have access to health services.

A good basis for policy dialogue during the

national health planning process would be a

basic estimation of the total future resource

envelope to be expected for health. Due to the

uncertainty of estimations, various scenarios

can be developed, i.e. low levels of ﬁnancing

vs high levels of ﬁnancing. If possible, a special

study examining the level of private expenditure

would be warranted, given the weight of private

expenditure in the health sector.

VIII More information can be found in Chapter 13 “Strategizing in

distressed health contexts” in this handbook.

Chapter 8 Budgeting for health

1PC

Strategizing national health in the 21st century: a handbook

1PC

Chapter 8 Budgeting for health

1PC

8.8 Conclusion

A health budget should be viewed as a crucial

sectoral orienting text, declaring key ﬁnancial

objectives and its real commitment to imple-

menting health policies and strategies.

During the budgeting process, health planning

stakeholders and managers will need to under-

stand the guiding principles of budgeting as

well as the political dynamics that enable the

budget elaboration and approval processes;

not doing so will be a huge missed opportunity

to make the case for health. If MoH and other

health sector stakeholders are actively and

knowledgeably engaged with MoF and others

during the budget cycle, resource allocation

will more likely match planned health sector

needs, and execution is more likely to follow

allocations.

The various public ﬁnance processes are struc-

tured around the budget cycle. In this chapter,

the four distinct budget cycle stages (budget

deﬁnition and formulation, budget negotiation

and approval, budget execution and budget

reporting, auditing and evaluation) are elabo-

rated upon, with an emphasis on health sector

stakeholders’ speciﬁc role in each, possible

entry points for engagement, and particular

issues to consider when doing so.

In essence, developing robust health budget

envelopes requires strong engagement by health

ministries with national budget decision-makers,

to make the standpoint of the health sector

clear, comprehensible and compelling. This

requires MoH and planning stakeholders to

think through the operational details and costs

of health sector needs and how health services

should be purchased within the framework of

existing PFM rules.

Strategizing national health in the 21st century: a handbook

1PC

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Chapter 8 Budgeting for health

Figures

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