A New Compact for Health Financing: The Global Political Economy of Reform

In an era marked by unprecedented global challenges, from climate change to geopolitical tensions, the landscape of global health financing is at a pivotal juncture. In response to the growing recognition of the need for more equitable and effective global health systems, CGD analysts have proposed "New Compact" between donors and recipient countries that puts locally-led evidence informed priority-setting and financing first.

Achieving this ambitious goal requires more than just political or financial commitments; it necessitates careful navigation of the global political economy that underpins health financing. As part of a wider body of work on developing the New Compact proposal, this blog outlines how a political economy analysis (PEA) of financing reform in global health, or the New Compact proposal specifically,  could be structured, focusing on three critical stages outlined in a recent World Health Organization paper; context, stakeholders, and strategy for change. Through this lens, we identify key challenges and opportunities, and offer recommendations for advancing this vital reform agenda.

Context: The current moment

The current global context is one of competing priorities and growing polarisation. The world is grappling with the dual crises of climate change and global health security, all while navigating the complex dynamics of geopolitical tensions. Global economic instability and geopolitical tensions have strained health budgets, complicating efforts to achieve universal health coverage and meet global health goals. International crises, including COVID-19, have tested the commitment of countries in the Global North on the rhetoric of equity in global health. At the same time, we are witnessing a plateauing of interest in core development issues, including global health, in many Global North countries. This is driven, in part, by slow economic growth and a shift towards governments that more explicitly focus on national interests over international development in donor countries. International aid for health has, as a result, stagnated or declined in recent years, putting additional pressure on domestic resources to cover growing health needs. This will be a particular challenge in a year of a “traffic jam” of replenishment rounds for global health funds.

Against this backdrop, there has been a rhetorical shift, with increasing discussions about the need for accountability and power to shift from North to South. This movement towards greater localization in global health financing, emphasizes the empowerment of local governments and communities to take charge of their health funding and management. There is also a growing recognition of the problems caused by the complexity and fragmentation of the global health architecture. The New Compact has been proposed as a way to address many of these challenges, by promoting a more cohesive and equitable approach to health financing.

Stakeholders: Players, power, and interests

To move forward with the New Compact, it is essential to map the stakeholders involved and their interests. This mapping is a critical component to understanding the political economy for successful reform, as it will help identify the key actors and the power dynamics at play.

Table 1: Summary of relevant stakeholders and their potential incentives and barriers to reform

We are currently seeing a growing polarization in ideas about the purpose of aid among stakeholders. In earlier decades, aid was often viewed as an expression of the benevolence of richer countries, aimed at supporting human development in needy nations. This narrative resonated across both northern and southern countries. However, the discourse in many northern countries has shifted, with increasing emphasis on "our money, our interests." This contrasts sharply with the evolving perspective in southern countries, where there is a growing belief in reparations, with the argument that they have a rightful claim to the wealth accumulated in richer countries, often through exploitative historical processes.

While aspirations for equitable partnerships and more effective aid have been articulated, there is a lack of clarity about what this means in practice. Specifically, there is little discussion about the power structures that need to change and who must relinquish power or resources to make these partnerships truly equitable and aid more effective. This is a critical issue that needs to be addressed if the New Compact is to succeed.

Strategy: How to and how not to

The purpose of understanding the context and the stakeholders is to develop a feasible strategy for change. A political economy analysis for change would aim to develop a strategy drawing on a fuller appraisal of the context and stakeholders. Here we identify two points that are likely to be important.

Identifying common interests between stakeholders is critical. One of the key areas of mutual interest between donors in the Global North, who are increasingly looking to reduce their spending on health aid, and recipients, who are seeking greater control over their health systems, is the push for increasing domestic financing and enhancing country ownership in recipient countries. The New Compact has been proposed as a way to bridge the gap between domestic financing for essential health services and the need for additional health aid from donor countries. This approach would focus on supporting accountability and community demand for increased domestic financing for health, which is a fundamental step towards prioritizing health in national budgets. At the same time, external health aid would be used to support additional services that may not be covered by domestic financing, ensuring that essential health services are provided without over-reliance on external aid.

Ultimately, deep reform of global health financing needs stronger collaboration among Southern countries to collectively exercise their power in global health forums. This could involve forming coalitions that advocate for reform or strategically negotiate for a more equitable distribution of resources. Additionally, effective champions for reform—from both the Global North and South—need to be identified and supported to elevate these issues on the agenda at major global health meetings.

What is unlikely to be effective is further piecemeal tinkering by donors, with a focus primarily on their own goals and policies. For effective systemic reform, there must be a broader coalition including relevant donors and countries.

Conclusion

The New Compact for health financing has the potential to address the deep inequities in the global health system. Its success depends on tackling challenges stemming from the global political economy that underpins health and the willingness of stakeholders to engage in difficult conversations about power, resources, and responsibility. A thorough analysis of the political economy for reforming the global health architecture is much needed. It would illuminate areas of mutual interest between stakeholders, such as increasing domestic financing and strengthening country ownership, which can pave the way towards a more equitable and effective global health system.