Does the IMF Constrain Health Spending in Poor Countries?

Conclusions from a recent CGD brief on the topics;

-IMF-supported fiscal programs have often been too conservative or risk-averse. Despite some increased flexibility in recent years, they have often unduly narrowed the policy space by failing to investigate sufficiently more ambitious, but still potentially feasible, options for higher government spending and aid.

-The IMF Board and management have not made sufficiently clear what is expected of IMF staff in exploring the macroeconomic consequences of alternative aid scenarios. As a result, the IMF risks sending confused signals to donors and recipient governments.

-Wage bill ceilings have been overused in IMF programs and should be limited to the (probably rare) circumstances where a loss of control over payrolls threatens macroeconomic stability. IMF programs have not imposed specific constraints on hiring or wages in the health (or education) sector, but IMF efforts to protect these sectors from the effects of aggregate ceilings cannot be enforced in practice.

-A striking disconnect exists between macroeconomic and health sector policy-making. Key fiscal decisions are taken with little understanding of potential consequences for the health sector and health ministries typically cannot make an effective case for increased budgetary priority. Donors have often added to the fragmentation of budgetary processes. Addressing these capacity gaps will require considerable external support, but governments must take the lead.