International Monetary Fund Programs and Health Spending

Health outcomes and economic policies are linked in complex ways that go well beyond the IMF competence or mandate. However, IMF programs can indirectly influence the health sector through its policy prescriptions.

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Health spending is highly sensitive to overall fiscal policies. As poor countries try to best utilize foreign aid and their own resources to deal with the myriad demands on the health system, not the least of which is HIV/AIDS, the effect of IMF-supported programs on the health sector can be called into question. In such programs, the IMF agrees with governments on the macroeconomic policies (e.g., fiscal, monetary, and exchange rate policies) that they will pursue. Since having an arrangement with the IMF is often a pre-requisite for access to other types of financing, including official debt relief, many low-income countries have IMF programs. Critics are concerned that the programs unduly constrain health spending at a time when more donor money may be available and, specifically, that:

  •  IMF programs include macroeconomic, and especially fiscal, policies that are too restrictive towards government spending--either because the IMF takes too conservative a view of what is needed for macroeconomic stability or because its assessments of the potential for scaling up aid are insufficiently optimistic.
  • Wage bill ceilings (limits on government spending on public employee wages) have unnecessarily disrupted much-needed expansions of the health workforce.
  • The IMF response to such criticisms is that governments are responsible for choices on expenditure priorities and that the Fund does not set targets for spending or wages in particular sectors.

Objectives of the Working Group

CGD Convened the IMF Supported Programs and Health Spending Group with two broad goals:

(i) To establish the facts about what happened in the key areas, discussed above, where the IMF has been criticized.

(ii) To make practical recommendations for improvements where warranted.

Membership of the Working Group

The Working Group, chaired by former CGD visiting fellow David Goldsbrough, included 15 experts drawn from policy-making positions in developing countries, academia, civil society, and multilateral organizations serving in individual and voluntary capacities, with a diverse range of experience in policy analysis and implementation on health sector and macroeconomic was composed of a diverse group of experts who were tasked with answering the question, Does the IMF Constrain Health Spending in Poor Countries? The groups’ consultative work generated a number of background papers and culminated in June 2007 with the release of a final report that makes a number of policy-based recommendations both to the IMF and to the stakeholder community.

Read the working groups Report or Policy Brief