Making Dollars and Sense: Conditioned Domestic Financing in Global Health

The combination of fiscal tightening, including in external assistance for health, is leaving countries and donors alike grappling with the  future of global health financing. The years of substantial increases in external assistance for health have not led to a noticeably greater commitment to health in government budgets—and have raised questions about the effectiveness of donor policies on increasing public spending on health. We’re delighted to share a new policy paper that helps to shed light on these policies. In this paper, we examine the landscape of policies employed by global health funding agencies and do a deep-dive on two agencies—Gavi and the Global Fund to Fight AIDS, Tuberculosis, and Malaria (GFATM). We focus on these agencies because of their clear policies on what they call “co-financing.” We find that policies vary in how they are implemented, and that such policies need to be considered together in the context of country-owned health budgets.

We also find that the term “co-financing” is used differently by different agencies. Indeed, the multilateral development banks in 2024 launched a new Global Co-Financing Platform, referring to donor co-finance and not domestic finance. It’s time the global health agencies use terminology consistent with the development finance community.

The power of shared financing

Conditioned domestic financing policy, a mechanism where global health initiatives ask recipient country governments to contribute a certain amount of domestic spending on health, has been promoted as a pathway to greater sustainability and ownership. These policies are viewed as a critical step towards ensuring that countries can maintain their donor-supported health interventions amidst aid fluctuations and reductions. Our analysis revealed that, while these policies intend to promote sustainability, their consistency in achieving this objective varies widely. How can countries shift from a model where domestic financing requirements are driven by external funding agencies to one led by a country-owned national health strategy and plan?

The Tower of Babel: No standard term

One of the most striking findings from our study is the significant variation in how co-financing is defined, understood, applied, and monitored across different agencies. The lack of vocabulary and shared terminology across agencies and countries at best risks misunderstanding when speaking about the same concept. In particular, Gavi and GFATM use the term “co-financing,” whereas the World Bank and the Global Financing Facility use the term “counterpart financing.” In contrast, when referring to joint financing of multiple external organizations including other multilaterals, Gavi and GFATM use the term “blended finance,” whereas the World Bank (and indeed the rest of the multilateral development bank community) use the term “co-financing.” For policy wonks, our paper has a long text-filled table that goes through these policies in detail!

The magnitude of donor dependency and (lack of) sustainability

In addition to the desk review, we conducted a quantitative analysis to examine how these policies correspond to actual government health spending. For instance, as expected, Gavi’s co-financing requirements reflect a small fraction of the total general domestic government health expenditure (GGHE-D), with almost all sampled countries allocating equal to or less than 1 percent of their GGHE-D to Gavi’s required domestic spending. In contrast, GFATM’s domestic commitments as a share of GGHE-D were significantly higher. For example, Lesotho’s domestic commitments to GFATM are a staggering 117.6 percent of its GGHE-D, indicating either a high level of dependence on external funding or nonoperational domestic commitments. Put differently, in Lesotho for every 118 dollars of domestic commitments reported to the board, there are 100 dollars of general government health expenditure available.

Wanted: Harmonization and transparency

These findings have several implications for the future of global health financing. First, there is a clear need for greater harmonization and transparency in such policies across agencies. Without a standardized term, let alone a harmonized approach, a country may struggle to align these requirements with their overall health financing strategy, potentially undermining efforts to achieve universal health coverage.

Second, the reliance on conditioned domestic financing as a tool for promoting sustainability should be carefully balanced with the reality of countries’ fiscal capacities. Our paper shows that the pressure to meet these obligations can constrain already tight health budgets. For example, in Nigeria, the government spends 64 percent of its domestic routine immunization budget just to meet Gavi’s requirements alone. This level of financial commitment risks distorting domestic resource allocation both in terms of priorities and towards increased verticalization and ring-fencing.

A call for a common policy on domestic financing

As global health agencies and recipient countries continue to navigate the transition from external aid, it is crucial that such policies are designed and owned by the countries themselves, with clear considerations for  countries’ ability to pay as measured by the size of their government health budgets and expenditures. Policies need to be aligned with a country’s fiscal realities, but even the presence of such disjointed policies risk undermining the goals of sustainability and country ownership they are intended to promote. Misalignment across donors and with countries may be painful for all involved.

Advancing sustainable yet impactful health systems must keep domestic, public spending on health as the bull’s eye of global health success. But letting a thousand flowers bloom with many agencies’ different policies may be yet another example of donors getting in the way. In the spirit of the Lusaka Agenda, global health should be building on a shared vision led and owned by countries, not by agency-specific dreams of how sustainability can be enforced. In the refrain of “donors should do better,” as in the case of fragmentation, doing better can mean doing it together.