The prospects of creating ‘fiscal space’ for the health sector

Never has there been a time when the visibility of the health problems of low-income countries (LICs) has been so prominent in the world’s policy circles. Industrial governments have scaled up their aid for spending on HIV/AIDS treatment and prevention programmes; major foundations are providing major financing of immunization and vaccination programmes as well as research efforts to develop vaccines and cures for pervasive LIC diseases; non-governmental organizations (NGOs) have intensified their involvement in the delivery of health services; and government leaders now speak to the worry of a global flu pandemic. Overall spending in the health sector has increased dramatically in some cases, and countries are now grappling with how to staff clinics, hospitals and vaccination programmes. These efforts in the health sector are occurring in the context of the wider global concern about the financial costs of meeting the Millennium Development Goals (MDGs), since these will involve spending on education, water, sanitation and housing, as well as the physical infrastructure needed to foster rapid economic growth. In this environment, concerns have emerged as to how to find the fiscal resources (or ‘fiscal space’) required to finance the required spending on health. Will macroeconomic constraints prove an independent limiting factor on what governments can spend? In what follows, I will try to clarify the issues that are involved in the fiscal space debate – describing how fiscal space can be created, indicating the macro and microeconomic factors that may limit a government’s capacity to expand health sector spending, and underscoring the importance of budget sustainability as a factor that needs careful consideration as governments elaborate scaling-up plans. I will use the cases of Malawi, Zambia and Tanzania to illustrate some of the issues involved.