Global Policy Forum

Poor Countries with IMF Loans 'Divert Aid from Public Health'

Poor countries that take loans from the IMF spend dramatically less on improving healthcare for their populations. IMF loan conditions restrict spending on health initiatives and allocate money to other uses. Consequently, countries that take IMF loans are less likely to achieve the Millennium Development Goals for human health.

By Larry Elliot

The Guardian
January 17, 2011

Poor countries that borrow from the International Monetary Fund are spending just one cent in every dollar received in health aid on improving the medical care of their populations, according to new Oxford University-led research.

The study, published in the International Journal of Health Services, said there were signs that the tough loan conditions imposed by the IMF were leading to health aid being diverted for other uses.

In an investigation of more than 100 low and middle-income countries, the report sought to explain why increased aid spending had left many countries well off track to hit the United Nations millennium development goals (MDGs) for health, which include a two-thirds reduction in infant mortality and a three-quarter decline in maternal mortality.

They said one likely explanation was that the curbs on public spending stipulated by the fund were encouraging governments in poor countries to use health aid for other needs. Countries that did not borrow from the IMF were found to have channeled 45 cents into health systems for every dollar of aid received.

The study by Dr David Stuckler of Oxford, Dr Sanjay Basu at the University of California, San Francisco and Professor Martin McKee at the London School of Hygiene and Tropical Medicine looked at 34 low and middle-income countries that borrowed from the fund and 101 countries on a similar income that did not rely on IMF support.

Their analysis showed that health spending in countries borrowing from the IMF in the decade from 1996 to 2006 grew at half the rate of countries that did not have IMF programmes.

Stuckler said: "Countries seeking IMF support are likely to differ from countries that are not and a request for an IMF loan is often associated with severe economic problems. Nonetheless, even in such circumstances, it is reasonable to expect aid from donors to have at least some positive impact on health funding, especially given that health needs are often greatest at such times.

"This study suggests that countries relying on IMF loans are not spending the aid in the way it was intended. A change in loan policies is needed to lift the existing restrictions on finance ministers so they are no longer prevented from spending health aid on the people that urgently need medical help."

According to the research, countries borrowing from the IMF tended to do so when their economies were struggling and needed health aid the most. It concluded that changes are needed to loan conditions so that finance ministers in poor countries had more "fiscal space" to use health aid for its intended purposes - tackling disease and supporting public health projects.

The report's authors said the study was limited to measuring pledges of aid rather than a full picture of what was actually paid. But they said the findings offered a "new rationale that reconciles the failure to achieve the MDGs despite increasing amounts of aid."

Aid channeled through governments was associated with lower public spending than relief through private non-governmental organizations, they said.


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