Impact of Financial Crisis on Global Health

1. Impact of Financial Crisis on Global Health Stockholm October 22, 2009 Julian F. Schweitzer

2. What Do We Know? • Unlike most previous crises, current crisis originated in developed countries (beginning in the US) and is now global in scope.

3. Do We Have Reasons to Worry? • Yes, income is one of the strongest determinants of government and total health spending. • Experiences from previous crises gives us reasons to worry, e.g., in past crises in Argentina, Russia, Indonesia, Thailand, health spending declined in response to crises [Gottret et al (2009), “Protecting Pro-Poor Health Services During Financial Crises: Lessons from Experience,” in Innovations in Health System Finance in Developing and Transitional Economies, http://www.emeraldinsight.com/Insight/viewPDF.jsp?contentType=Book&Filename=html/Output/Published/EmeraldFullTextArticle/Pdf/10_1108_S0731-2199_2009_0000021005.pdf] • Yes: Rising unemployment, declining incomes, decreasing remittances, and rising poverty rates could be detrimental to health outcomes. • In many previous crises in Indonesia, Thailand, Peru, Mexico, there were detrimental impacts on vaccination coverage, micronutrient deficiencies, infant mortality rates, and other health indicators.

4. Do We Have Reasons to Worry? • Yes: many low-income countries, especially in sub-Saharan Africa, are now much more dependent on external sources for health spending. External share of total health spending, 1995 vs 2006

5. Has the Current Crisis had a Detrimental Impact on Health? • As of yet, we do not have sufficient data to reach conclusions on the health impact of the current crisis • FAO estimates project that 1.02 billion people will be undernourished in 2009, the largest number of hungry in the world people since 1970; Food insecurity and undernourishment is projected to increase 9.2%, compared to baseline estimates, as a result of the financial crisis. • Asia is projected to have the largest increase in undernourishment (13%), partly as a result of the region’s greater dependence on foreign trade and, hence, greater exposure to the crisis; Sub-Saharan Africa is projected to have a 6% increase in food insecurity, from an already high level. • Case study analyses conducted by recent FAO/WFP State of Food Insecurity in the World report highlights some worrisome trends: • Focus group discussions in Bangladesh indicate job losses, shifts to temporary work, and declines in frequency and amounts of remittances from abroad. • Assessments conducted in Nicaragua reveal job and income losses, especially among household employed in export-related industries and those dependent on remittances.

6. Anecdotal evidence that selected health programs have suffered or are expected to suffer cuts in some countries (e.g., reported – but difficult to substantiate – cuts in HIV/AIDS budgets up to 25%). Other countries have actually seen increases in allocations to health and to social spending more generally following the crisis (e.g., IMF study reports increases in social spending in Burundi, Congo, Malawi, among others). Are countries implementing counter-cyclical policies as a response to the crisis? Lack of systematic evidence to date of negative impact on government health spending or on health outcomes does not mean this is not occurring, or will not occur. Important to remain vigilant and to ensure that health spending on services that benefit the poor are protected. Has the Current Crisis had a Detrimental Impact on Health?

7. The Need to Focus on Essentials • Need to focus on carefully compiling data and keeping a close watch on health resources flows, health utilization rates, and on health outputs and outcomes so as to work with client countries to minimize any potential negative impacts of the current crisis. • Examples: analysis of health utilization and other data as they become available as for Turkey; tracking allocations to health as part of fiscal space work as in India and Indonesia and other countries; integrating crisis-related resource tracking with work on NHA). • Need to continue the focus on improving the effectiveness of government health spending, i.e., focus on “more money for health and more health for the money”. • Fundamental objective of public policy in health during a crisis must be to maintain/improveaccess to essential health services by the population, especially the poor and vulnerable.