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Chapter8 Eng
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Budgeting for health
Dheepa Rajan
Helene Barroy
Karin Stenberg
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© shutterstock
WHO Library Cataloguing-in-Publication Data The mention of specific companies or of certain manufacturers’ products
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Strategizing national health in the 21st century: a handbook / Gerard Health Organization in preference to others of a similar nature that are
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products are distinguished by initial capital letters.
Contents: 13 individual chapters
All reasonable precautions have been taken by the World Health Organ-
1.Health Policy. 2.National Health Programs. 3.Health Planning. ization to verify the information contained in this publication. However,
4.Handbooks. I.Schmets, Gérard. II.Rajan, Dheepa. III.Kadandale, the published material is being distributed without warranty of any kind,
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© World Health Organization 2016 The named editors have overall responsibility for the views expressed
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Suggested citation: Rajan D, Barroy H, Stenberg K. Chapter 8. Budgeting
The designations employed and the presentation of the material in this for health. In: Schmets G, Rajan D, Kadandale S, editors. Strategizing
publication do not imply the expression of any opinion whatsoever on national health in the 21st century: a handbook. Geneva: World Health
the part of the World Health Organization concerning the legal status Organization; 2016.
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Contents
Acknowledgements iv
Overview v
8.1 What is meant by budgeting for health? Some key concepts 1
8.1.1 What is a budget? 1
8.1.2 Public financial management 1
8.1.3 Medium-term expenditure framework (MTEF) 1
8.1.4 Line-item budgeting for health 2
8.1.5 Performance budgeting 3
8.1.6 Fiscal space and fiscal space for health 3
8.1.7 Strategic purchasing 4
8.2 Why is it important to understand the health budgeting process? 5
8.3 When does the budgeting process take place? 7
8.3.1 Budget cycle steps – a brief overview 7
8.3.2 Fiscal vs calendar year 8
8.4 Who are the people involved and engaged in the health budgeting process?
Roles of different stakeholders 9
8.4.1 MoH: engaging in health budget formulation and execution 14
8.4.2 Role of civil society organizations (CSOs) in the health budgeting process 15
8.5 How does the budgeting process work from the point of view of NHPSP stakeholders?
8.5.1 Budget formulation 18
8.5.2 Budget approval or enactment 22
8.5.3 Budget execution 22
8.5.4 Budget evaluation 22
8.6 Important operational issues for health planning stakeholders to consider during the
health budgeting process 23
8.6.1 Legal considerations 23
8.6.2 How can countries introduce and effectively undertake multiyear budgeting? 24
8.6.3 How can countries move from a line-item to a programme-based budget? 27
8.6.4 When and how should countries assess fiscal space for health? 30
8.6.5 How can the necessary data be collected? 31
8.6.6 How should countries understand and influence the political economy of budgeting
for health? 33
8.6.7 Looking beyond budget: importance of public finance systems for health financing
and UHC 35
8.7 What if...? 36
8.7.1 What if your country is decentralized? 33
8.7.2 What if your country is heavily dependent on aid? 36
8.7.3 What if fragmentation and/or fragility is an issue in your country? 37
8.8 Conclusion 38
References 39
Further reading 48
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Acknowledgements
We would like to give special thanks to Agnes Soucat for overall guidance. Thanks
are also due to Alyssa Muggleworth Weaver for overall background research support.
This chapter was a collaboration between the following units in the Health Systems
Governance and Financing Department: Health Systems Governancy, Policy and Aid
Effectiveness; Health Financing; Economic Analysis and Evaluation. Orienting guidance
and input specifically on budgeting for health was provided by Tessa Edejer, Joseph
Kutzin and Gerard Schmets.
This chapter has been externally reviewed by Professor Jacky Mathonnat and Benoit
Mathivet.
English language editing was provided by Dorothy van Schooneveld and Thomson Prentice.
We gratefully acknowledge financial support from the European Union and the Grand
Duchy of Luxembourg.
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© WHO /Eduardo Martino
Overview
Engaging in budget preparation,
understanding guiding principles of
budgeting as well as the political dynamics
that enable the budget elaboration and
approval process, is essential for health
planners and managers. In many countries,
the consequences of not doing so means that
health policy-making, planning, costing and
budgeting take place independently of each
other, leading to a misalignment between
health priorities and allocation and use of
resources.
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Health is financed by public and private funds.
To make progress toward universal health
coverage (UHC), a predominant reliance
on public,compulsory, prepaid funds is
necessary. Therefore, the way budgets are
formed, allocated and used in the health
sector is at the core of the UHC agenda. This
chapter outlines the overall budget process
for the public sector, discusses the specific
role of health within it, in particular the role of
the ministry of health (MoH) and other health
sector stakeholders, to provide timely inputs
into the budgeting process.
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Summary
What is meant by budgeting for health? ultimately allocated to the health sector through
the budgeting process. This misalignment has
Budgeting is related to the process of defining negative consequences: resources are not used
the allocation of resources to produce the best as intended, and accountability is weakened.
outputs given the level of revenues. A health On the other hand, a good understanding of
budget, typically included in the general govern- the budget process and engagement by MoH
ment budget, is more than a simple accounting and other health sector stakeholders at the
instrument to present revenues and expenses right time during the budget cycle will increase
– rather, it is a crucial orienting text, declaring the chances that the final resource allocation
key financial objectives of the country and its real matches planned health sector needs.
commitment to implementing its health policies
and strategies. While every implementing health
organization develops a budget, in this chapter When does the budgeting process take
we discuss the national government budgeting place?
process, which includes inputs from a wide
range of health sector stakeholders. The budgeting process starts with a prepara-
tion/formulation stage of budget proposals,
Why is it important to understand the health which includes a negotiation phase between
budgeting process? MoH and ministry of finance (MoF) and ends
up with parliamentary review and approval.
For those who seek to influence resource allo- In many countries the fiscal year follows the
cation in country, a good understanding of 12-month calendar year, beginning on 1 January;
the guiding principles of budgeting as well as in some countries, the fiscal year may start at
the political dynamics that enable the budget a different date (e.g. 1 October in the United
elaboration and approval process is essential. States of America, 1 July in Australia and New
In many countries, a lack of understanding of Zealand). In a given year, there are three cycles
budgeting issues results in delinked processes potentially taking place at the same time: the
such that health policy-making, planning, costing implementation of the current budget, which
and budgeting take place independently of each essentially takes place throughout the year, at
other. This leads to a misalignment between any given time; budget preparation for the next
the health sector priorities outlined in overall year; and audit or review of the previous year.
strategic plans and policies and the funds that are
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Who are the people involved and engaged How does the budgeting process work from
in the health budgeting process, in the point of view of national health
particular the budget preparation policy/strategy/plan (NHPSP)
phase? stakeholders?
Ministries of budget/finance and related entities The budget cycle starts with the government plan-
are the leading agents for budget development. ning for the use of the coming year’s resources.
Ministries of health play a critical role to prepare, To allow this to be done in accordance with
present and negotiate credible, priority-oriented health priorities, health planning stakeholders
budget proposals for the sector. Civil society have to engage strategically in this process and
and the general public can seek to influence be prepared to support it. This chapter takes
health budget definition by engaging with the the reader through the steps of the budget
executive or the legislature. cycle and some practical issues for the health
community to consider.
decentralized environment;
fragile environment;
highly aid-dependent context.
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8.1 What is meant by budgeting for health?
Some key concepts
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Fig. 8.1 Key stages of a comprehensive MTEF 1
Development of
Development of macro- sectoral expenditure Approval process
fiscal framework (MoF) frameworks (executive and/or
(MoF and MoH) legislature)
Line-item budgeting has been the norm in many “Performance budgeting”, “performance-based
countries, in which the budget information is budgeting”, “programme-based budgeting”
Line-item organized according to the types of expenses and “budgeting for results” are similar terms,
budgeting or cost categories. For health, these generally with a common unifying feature: they are all
is a way to
manage budget focus on staff, supplies (operational costs), and concerned with introducing performance infor-
information capital investment/equipment, all of which can mation into budget processes. The Organisation
according to the be characterized as inputs for health systems. for Economic Co-operation and Development
types of
Providers receive a fixed amount for a specified (OECD) has defined performance budgeting
expenses or
cost categories. period to cover specific input expenses (e.g. as a form of budgeting that links allocated
While this personnel, medicines, utilities). funds to measurable results.2 These alternative
approach aims budget classifications present advantages for
to increase
The existence of many line items is a way for the managing funds through increased autonomy
transparency
and legislature to retain control, but provides little for funds managers. Specifically for the health
accountability, flexibility to operationalize and manage health sector, it ensures that funds flow to the priority
it may often funds because the expenditure must follow services and enables the purchasing of health
in fact restrict
strictly defined budget lines. In many countries, services to be operational. By making explicit
flexibility
and lead to line-item budgeting has been a major deterrent the purposes and results of budget spending,
inefficient to a functioning health purchasing system, budget managers can also be held to account
resource which would require setting up appropriate by the legislature and citizens.
allocation.
payment mechanisms to enable funds flow to
the right services and maximize efficient use
of public funds.
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8.1.6 Fiscal space and fiscal space for health
Fiscal space is typically defined as “the availability health expenditures and the amount of external
Line-item
of budgetary room that allows a government to aid for health. Furthermore, there are those
budgeting
provide resources for a given desired purpose factors which are not directly in the hands of is a way to
without any prejudice to the sustainability of a health planning stakeholders but for which manage budget
government’s financial position”.3 Tandon and the health sector can play an important role in information
according to
Cashin’s conceptual framework to assess fiscal terms of advocacy – namely the prioritization
the types of
space for health in countries include factors of health within the overall government budget, expenses or
such as macroeconomic conditions, the extent and whether there are efforts to introduce new cost categories;
to which health is re-prioritized within the gov- earmarked funds specifically for health. however, this
budgeting
ernment budget, whether new earmarked funds
system does
for health have been introduced, the amount of Fiscal space for health analysis could be better not provide
external aid and increased efficiency of existing mainstreamed and systematized into the budg- the required
government health outlays.4 eting process in many countries to enhance flexibility to
operationalize
budgeting decisions. Health planning stakehold-
health plans
Health planning stakeholders have variable ers would do well by leveraging the fiscal space and maintain a
influence over these five factors. Some are analysis to take a closer look at the political and well-run health
directly outside of their control, such as the institutional enabling factors which can actually purchasing
system.
macroeconomic conditions. Others are in the support improved formulation, allocation and
direct domain of the health sector and therefore use of health budgeted resources.5 A better use
require particular attention from health planning of existing public resources toward UHC helps
stakeholders – namely the efficiency of current expand the fiscal room for the sector.
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8.1.7 Strategic purchasing
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8.2 Why is it important to understand the health
budgeting process?
During the budgeting process, health planning cal, rather than a purely technocratic process.III
stakeholders and managers will inevitably be After having analysed needs and determined the Understanding
requested by MoF to provide information on most equitable and efficient policies and plans, the guiding
principles of
sectoral priorities and an associated price tag. health planning stakeholders must proactively
the health
Understanding the guiding principles of budgeting engage in this politically-influenced process, as budgeting
as well as the political dynamics that enable the it determines the details of the national health process
budget elaboration and approval processes is budget, which impacts on effectiveness and minimizes
the chance of
essential to make the case for health. In many efficiency of public spending for health. How
misalignment
countries, a lack of understanding of these health managers will be able to spend their between health
budget-related issues results in delinked pro- money largely depends on what the budget sector priorities
cesses such that health policy-making, planning, allocation is. Not only is the budget envelope outlined in
strategic
costing and budgeting take place independently amount relevant, but so too is how that total plans and the
of each other. This leads to a misalignment amount is structured, how it flows into the funds that are
between the health sector priorities outlined system, timing of disbursements and how it will allocated to the
in overall strategic plans and policies and the enable health financing to function in practice health sector.
funds that are ultimately allocated to the health and to purchase the needed health services.
sector through the budgeting process. This mis-
alignment has negative consequences: resources Understanding and influencing the budget
are not used as intended, and accountability is formulation for the health sector is also a matter
weakened (see Box 8.1). On the other hand, a of efficiency and equity, two key health policy
good understanding of the budget process and objectives linked to UHC, a principle increas-
solid engagement by MoH and other health ingly enshrined in many countries’ NHPSPs.
sector stakeholders at the right time during How a budget is formulated and allocated,
the budget cycle will increase the chances that including to lower levels of government, has a
the final resource allocation matches planned direct impact on how well and how efficiently
health sector needs. funds can and will be used. Supporting a fair
distribution of resources across populations
In reality, the allocation of resources to different and/or geographical areas is likely to have a
institutions and purposes is essentially a politi- direct impact on health sector outputs.7
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Box 8.1
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8.3 When does the budgeting process take place?
The various public finance processes are struc- Budget execution, or spending, consists of
tured around the budget cycle. This annual cycle a set of processes that lead to effective fund
aims to ensure that public expenditure is well flows/transfers from the treasury to the MoH,
planned, executed and accounted for. A standard and onwards to sub-recipients (for example, A standard
budget cycle incorporates four distinct stages: districts, health providers, etc). The principal budget cycle
incorporates
issues that the MoH will be faced with during
four distinct
(a) budget definition and formulation; the budget execution phase are the actual stages: budget
delivery/purchase of health services by those definition and
(b) budget negotiation and approval; on the front line (e.g. health service providers) formulation;
budget
and the financial management function that negotiation
(c) budget execution; supports the former. and approval;
budget
(d) budget reporting, auditing and evaluation. Budget evaluation refers to internal and external execution;
and budget
control processes which are designed to ensure reporting,
The MoH is expected to translate government compliance with predefined targets and proce- auditing and
policy goals (as described in the NHPSP) into dures. Governments also have accounting and evaluation.
costIV estimates to fit into the suggested budget reporting procedures which help keep records
ceiling for the sector. The budget ceiling is given of financial and/or non-financial flows;9 these
by the MoF based on its revenue forecast outlining need to be respected and cross-checked.
the country’s macroeconomic prospects in the
medium term. An important point to note here is the issue
of budget amendments that can be passed by
The MoF and MoH engage in negotiations parliament during the course of the fiscal year.
over these requests which culminate in the This can happen when, for example, budgetary
formulation of a formal health budget proposal resources are lower than expected and overall
that is supposed to typically reflect revenue spending needs to be reduced. Negotiations will
and expenditure plans for the budget period determine whether the health-specific budget will
(most often one year). The budget proposal be maintained or changed. It is often at this stage
(which includes the health budget component) of budget renegotiation that the prime minister
is typically presented for budget approval to or president may play a key role in arbitrating
parliament, which can propose amendments, between different priorities and sectors. Health
before formal adoption. leaders need to maintain a sufficient level of
advocacy to ensure that the sector remains a
budget priority throughout the year.
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8.3.2 Fiscal vs. calendar year
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Fig. 8.3 How important is budget prioritization for health?11
(a) MoH’s role in health budget formulation – first, because progress toward UHC is often
associated with increased public funding for
Developing robust health budget envelopes health, and secondly, because the latter also
requires strong engagement by health min- demands a functioning public finance system
istries with national budget decision-makers to align revenues with services and to manage
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expenditure better. Thus, the dialogue with increasing effectiveness in government health
MoF/treasury must involve not just the level spending.12
of funding but also the PFM rules that govern
their use (forming budgets, distributing them, For purposes of health budget execution, MoH’s
expenditure management, reporting). role includes understanding PFM systems, and
in particular, expenditure rules and regulations.
In particular, the MoH’s role in the process of In many countries, MoH’s capacities require
budget formulation boils down to three key inputs. strengthening in this area, as expenditure man-
agement is often not well known or understood
(i) Analysis of expenditure forecasts against by those who do not have specialist skills in
expected revenues; the aim here is to esti- public finance. For example, in many coun-
mate the potential for increased health tries, the MoH is not the final decision-making
spending. Institutionalizing fiscal space authority on spending (MoF is). This means
The Ministry of for health analysis within MoH will be an that payment requests for services already
Health (MoH)
must engage important step in this direction; rendered end up with the MoF (see Box 8.2). If
strongly with (ii) Drafting of credible, well-defined health the expenditure is not in line with expenditure
national budget budget proposals; systematizing costing rules, MoF may decide not to pay, especially in a
decision-
and priority-setting exercises within the circumstance where funds are not sufficient to
makers during
health budget defined envelope; cover all payment requests coming in from all
formulation. (iii) Engaging in budget negotiations and advo- sectors. Another challenge linked to a lack of
Credible, cating for a sound health budget allocation. understanding of the PFM system is the funds
well-defined
disbursement schedule. In many countries, it
expenditure
forecasts and does not necessarily follow the needs of sector
systematized (b) MoH’s role in health budget execution plans; instead, funds may be disbursed only at
costing and specific times of the year in specific amounts.
priority-setting
The budget execution stage is a pivotal process Health ministries should take this into con-
exercises can
put MoH in a for all ministries including health, as it is the sideration when planning activities and health
sound negotiat- one which enables the actual implementation budgets for more effective implementation.13
ing position with of NHPSP activities. MoH’s key role here is one
the Ministry of
of supervision, support, and oversight of budget Early engagement on the part of MoH with the
Finance.
execution as this is often the deciding factor MoF can provide better understanding of the
for implementation rates – poor technical and financial management rules and the system
administrative support and oversight capacity within which expenditures must happen. Closer
generally results in a low health budget execu- cooperation and inclusion of MoF representa-
tion rate, and in more unused fiscal margins. tives in key MoH consultations can help both
Evidence shows that fiscal space expansion for sides better understand each others’ needs
the health sector is largely possible simply by and challenges.
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Box 8.2
Low execution levels of the health budget: where does the problem lie?14
In many countries, health budgets are poorly Over 2011–2013, MoH’s forecasted necessary
executed, but little is known about the under- resources on equipment, services, and other
lying causes of under-execution. A detailed discretionary expenditure respectively came
analysis of the Democratic Republic of the to 14%, 21%, and 59% of the funds finally
Congo context reveals that the responsibilities requested from the Treasury, evincing an
lie on many fronts; many weaknesses and unambiguous disconnect between the estima-
delays at both MoH and MoF explain low tion of resource needs and actual resources
execution of the health budget envelope, used. It was, however, noted that the MoH’s
with one major systemic bottleneck being estimation of necessary resources were
the fact that the MoF still holds the final more in line with funds spent for personnel
spending decision-making authority above expenditure (94%).
all line ministries.
On the MoF side, monies paid out directly to
A closer look at the budget execution process suppliers/service providers on behalf of MoH
in the Democratic Republic of the Congo in came to only 55% for goods and equipment and
recent years demonstrated that the principal 40% for construction. This implies that roughly
impediments were: half of MoH’s suppliers received late payments.
In addition, when the budget cycle closed at
(i) MoH’s estimation of necessary resources year end, these late payments remained as
for health was finalized too late; the arrears in MoH’s name and needed to be
calculations have been of varying quality transferred to the following year’s budget.
over the years;
(ii) MoF releases funds directly to those who All in all, the bottlenecks are clearly systemic
are expecting payment from MoH (final in nature and imply weaknesses on various
spending decision-making authority is fronts and a need for a more comprehensive,
with MoF) and often does not do so in a long-term reform in government processes
timely manner. and government capacity.
A core element of effective health budget execu- place, and mechanisms used, to allocate funds
tion and expenditure management is strategic to health service providers. MoH is the entity
purchasing,15 referring to the arrangements in that must think through and design how health
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services should be purchased, in harmonization performance and progressing towards UHC, as
with existing PFM rules. This MoH task of it determines the way services are funded and
improving the strategic purchasing of health providers incentivized (see Table 8.1).
services is central to strengthening health system
Table 8.1 What can health planners do/help to foster PFM and health financing system
alignment?
Type of actions
Public finance cycle
/support needed from health planners
Reporting, auditing, evaluating Unified reporting and auditing system, and financial man-
agement information system
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8.4.2 Role of civil society
organizations (CSOs) in
the health budgeting
process
Other stakeholders such as CSOs and the civil society engagement with legislatures on
general public can seek to influence the budget budget analyses can be cardinal even if it is not
by engaging the executive or the legislature in easy, does not happen overnight, and is mostly
various ways: analysing budget proposals from characterized – at least in the initial stages – by
the angle of grassroots needs, advocating for building up relationships and credibility with
Civil society more transparency in budget processes, and government and parliament (Box 8.3).
engagement taking part in local budget-setting processes.V
in the budget
Even in fragile settings, case studies from Asia
process should
be welcomed The reality is that, in most cases, time for budget and Africa demonstrate that systematized citizen
and encouraged negotiations is short and budget sessions are not assessments of budget proposals can indeed be
by government, long enough to make the process as participatory conducted and can add great value to the budget
parliament and
other stake-
and effective as it should be. Nevertheless, MoH formulation process. More importantly, they have
holders. can play its part in encouraging and ensuring the potential to strengthen overall governance
more citizen and CSO involvement by producing and accountability practices between citizens
or endorsing best-practice documents on citizen/ and public authorities.16
CSO engagement in budgeting and collaborating
with civil society to get nuanced citizen feed- A few countries have moved a step further by
back (beneficiary assessment surveys, citizen introducing a “participatory budget”, in which
scorecards, opinion polls, etc.) for planning, citizens are involved in budget priority-setting
budgeting, and monitoring.VI processes at local levels. The example of the
Democratic Republic of the Congo shows the
Civil society engagement in the budget process interesting lessons learned (Box 8.4).
should thus not only be welcomed but also
encouraged by government, parliament, and Once the budget is formally presented to the
other stakeholders. Several countries report legislature, public hearings and debates may
low legislative capacity to analyse budgets, also create space for civil society to express
and thus they are dependent on line ministries itself on specific issues and/or the budget as a
as well as civil society, academia, and other whole. Often legislative committees engage in
bodies to support their study of the budget. discussions with civil society and other stake-
An example from Mexico demonstrates that holders before voting.
V Beyond the preparation phase, citizens and civil society platforms VI In the Philippines, for example, the government obliges depart-
can also play an active role in the oversight phase. Good practices in ments and agencies to consult and partner with CSOs when preparing
country experience include: citizens’ report cards and social account- agency budget proposals in the budget preparation stage.
ability mechanisms.
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Box 8.3
In Mexico, the NGO FUNDAR (Centre for and little oversight and control. Opposition
Research and Analysis) monitors public politicians have criticized it bitterly, stating
policies in social sectors, especially health. that it has not lived up to expectations.
One of the policies it has been monitoring
for many years is the Seguro Popular (SP Through its budget analysis work, FUNDAR
– People’s Insurance) programme as it is first gained credibility and built trust with
one of the most important health policy various legislators and state-level civil society
programmes for those who would otherwise actors. Over several years, FUNDAR began to
be uninsured. The SP is thus Mexico’s solution make suggestions to modify Mexico’s article
to right-to-health legislation and is endowed on social protection spending to become more
with a generous budget. FUNDAR spent transparent – this involved meeting with the
many years concentrating on research and executive and the legislative branches, mainly
analysis of the SP’s policies, and learning the Health Committee and the Budget and
how to package and present its analysis for Public Accounts Committee. The suggestions
legislators and other CSOs. were not taken into consideration in the
following budget decrees but after much per-
Health policy in Mexico is decentralized; severance, seven amendments, all influenced
the federal government transfers up to 85% by FUNDAR, were incorporated into the 2012
of allocated health resources to the state Federal Budget Decree. These amendments
authorities for SP services. In several states, touched at the heart of accountability and
decentralized budget information is unavailable transparency issues and, at least in theory,
and there is little transparency as to which seek to improve expenditure control and
agency or entity is actually implementing SP evaluation of the SP budget, and increase the
services. The consequences at health service legislature’s capacity to supervise spending
delivery level are dire, with constant shortages via the National Audit Office. The lesson to
of medicines, high out-of-pocket payments be learned here is that influencing national
by households, and low investment in health budgets is a long-term process and both
infrastructure. In addition, the SP has proven civil society and parliamentarians, as well
to be a “golden egg” for many states, with its government, and ultimately the population,
large budget, large flexibility in spending, can greatly benefit.
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Box 8.4
Rural and urban citizens’ recent participation Participatory Budgeting Project can easily
in the formulation and management of local obtain, from wherever they happen to be,
budgets has helped to strengthen governance useful information on the date, time, and
in the Democratic Republic of the Congo. How place of meetings. They can also find out
does participatory budgeting work in practice? what was decided at meetings, vote by SMS
The local authority presents its budget to the (short message service) and, importantly,
public, specifying the share of the budget to monitor and evaluate the decisions made
be allocated to local investment. Through a through voting – all while going about their
process of dialogue, community members are daily lives. This participatory approach has
able to choose for themselves which priorities enabled the decentralized territorial entities
should be addressed and funded under the involved in the pilot project to improve local
local budget. The population is also involved governance through social accountabil-
in monitoring the implementation of the ity, effective participation of citizens in the
activities selected through this participatory management of public affairs and citizen
process. Using mobile phones, which most monitoring of public investments.
Congolese now own, stakeholders in the
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8.5 How does the budgeting process work from
the point of view of NHPSP stakeholders?
The budget cycle starts with the government plan- health policy priorities, health planners have
ning for the use of the coming year’s resources. to engage strategically in the process and be
To allow this to be done in accordance with prepared to support it.
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8.5.1 Budget formulation
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cussion with the MoF. This is a critical stage for Once budget negotiations have been finalized,
engaging in the budgeting process, including the cabinet endorses the proposals for inclusion
budget advocacy and negotiating with various in the budget that will go to parliament.20
stakeholders. Working hand in hand with civil
society organizations and think-tanks can be
useful here, especially in specific areas of
expertise (Box 8.3).
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Box 8.5
Using the illustrative example of Liberia helps MoF must accommodate various government
us understand in practice how budget prepa- priorities and make decisions on trade-offs
ration involves a large range of stakeholders in order for budget expenditure totals to add
at each and every step of the process. up to what is available with the country’s
fiscal space. There will also be negotiations
In Liberia, the MoF leads planning and budg- between central-level management MoH and
eting process. The MoF calculates revenue the district-level budget holders.
projections and then disseminates this infor-
mation to the respective line ministries, The process culminates in a draft budget
sometimes in the form of a workshop. The which the MoH officially submits to the
line ministries are then responsible for sub- President and the Parliament. Once the
mitting budget proposals, following which Parliament has adopted the national budget,
budget hearings, debate, and revisions of the line ministries are supposed to adjust
the original revenue projections take place their internal budgets according to final
between MoF and the line ministries. The budget allocations.
es
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December
February
January
March
April
June
May
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Box 8.6
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8.5.2 Budget approval or
enactment
The budget is said to be “enacted” when it is problems of a poor budget system, and thus
brought to the legislature for discussion and budget execution that is further away from the
subsequent passing into law. The (budget) planned budget. For the MoH, and any line ministry
The budget en-
appropriations committee usually has the for that matter, it is essential that its own sector
actment process power to vote on financial issues here as the costing and MTEF work has made explicit where
is a vital time for leading legislative body making spending rec- funds should go and for which activities. This can
the MoH to liaise ommendations and decisions on behalf of the help in a situation where the budget is unclear or
with the legis-
lature health legislature. In the budget approval stage, public where reporting systems do not provide adequate
committees and hearings and debates may take place on specific information to monitor expenditure.
support budget parts of the budget and/or the budget on the
analysis and
whole, with specific legislative committees
cross-
verification (or subcommittees) engaging in discussions 8.5.4 Budget evaluation
with the costed of specific topics. Here, the health committee
health plan. (which may be organized as a subcommittee Budget evaluation and oversight for the full
of the appropriations committee, or a separate national budget is usually undertaken by a
standing committee)VII will be active in studying supreme audit institution (SAI). Its mandate is to
the health sections of the overall budget and monitor public spending against stated budgets
preparing an analysis and response, often in and spending targets, and ensure accordance
the form of amendments. It is here that the with relevant laws and regulations. SAIs are
MoH has the vital opportunity to liaise with the among the most important agencies for ensuring
legislature and support the technical analyses that money is spent in the appropriate way, in
and cross-verification with the costed health the way it was intended.
plan. During this stage of the budget cycle,
media attention to the country’s budget is high Increasingly, SAIs are tasked with auditing the
and this forum can be used to bring attention efficiency of fund utilization, examining value
to specific issues, in partnership with advocacy for money, and assessing performance of public
organizations and civil society. services.23 Normally, the task of following up
on and enforcing audit results and recommen-
dations is within the remit of the legislature.
8.5.3 Budget execution Ideally, the legislature and the SAI (and where
relevant, with civil society organizations) should
The su-
preme audit This stage of the budget cycle includes the actual collaborate closely to ensure that SAI findings
institution’s implementation of the planned budget, which are acted upon.
(SAI) mandate rarely is executed exactly as the budget dictates.
is to monitor
The decisive issue is whether unplanned spend- Specifically for the health sector, health budget
public spending
against stated ing is adequately justified by policy decisions, execution can be evaluated during periodic sector
budgets and changes in macroeconomic projections, or other reviews. This would fall within the health policy
spending tar- reasons, and is well documented. and planning cycle and is separate from national-
gets and ensure
level budget audits, although health-specific
accordance with
relevant laws In many countries, budget implementation and audits can and will certainly be undertaken by
and regulations. oversight capacity is weak, which exacerbates a country’s SAI.
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8.6 Important operational issues for health
planning stakeholders to consider during the
health budgeting process
Although the precise legal framework for govern- for public finance, the authority to issue detailed
ment budgeting varies from country to country, it regulations and instructions.
is usually spelled out in some form or other, be
it through a law or decree or regulatory directive The constitution, the budget organic law, and
or other means. Health planning stakeholders financial regulations are permanent and form the
should be aware of how to source information legal framework within which the annual budget
relevant to the budget and where to position law/finance law, which includes the revenue
their technical inputs and influence. and expenditure estimates for a given year, is The legal
prepared, approved, executed and audited. The framework that
impacts budget
The constitution is at the top of the legal hier- annual budget law can take different shapes formulation
archy. Although it usually deals only with broad depending on the system. and execution
principles, the constitution may clarify three is made up of
the constitution,
important aspects: In the francophone and Latin American systems,
organic budget
the coverage of the annual budget law (budget law, and finan-
1. the relative powers of the executive and or loi de finances in francophone countries and cial regulations.
legislative branches with respect to public ley anual de presupuestos in Latin America)
finance; is rather far-reaching, since it stipulates the
amount and details of revenue and expenditure,
2. the definition of the financial relations the balance amounts, any new tax legislation
between national and sub-national levels measures and any permitted changes to spend-
of government; and ing. Brazil, for example, has minimum health
spending thresholds in place at municipal, state
3. the requirement, for example, in common and federal levels of government that require
law systems, that all public funds be spent a certain percentage of the annual budget be
only under the authority of a law. dedicated to health services.24 Under the common
law system, only revenue and expenditure esti-
The organic law is usually the main vehicle mates need to be presented to the parliament.
for establishing principles of public financial By contrast, the annual budget in many transition
management. This may take the form of a single economies has often been rather summary in
law that guides budget formulation, approval, format as no detailed legislation stipulates the
execution, control, and auditing, or there may contrary: prior to any recent reforms, budget
be several general laws covering specific areas estimates were presented in aggregate format,
of public finance management that may also by budgetary institution – typically only the
relate to national and sub-national levels of major supervisory institutions and not their
government. The organic budget law also gives subordinate units – and broken down only by
to the government, or the minister responsible broad “functions”.25
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8.6.2 How can countries
introduce and effectively Box 8.7
undertake multi-year
budgeting? Introducing health MTEF in
Africa: the case of Malawi and
Since the mid-1980s, budgeting reforms world- the Democratic Republic of the
wide have been concerned in a significant way
Congo
MTEFs in the with engineering a shift from planning and
health sector approving budgets for one year at a time to a
were borne out multiyear perspective to improve predictability Malawi26
of the need to In 1993, a Budget Management Review in
ensure financial
and sustainability in sector funding. The need to
ensure the financial affordability and operational Malawi revealed real weaknesses in the
affordability
and operational feasibility of policy proposals has been a major country’s budgeting system; it especially
feasibility of factor behind the introduction of medium-term highlighted the fact that both sector-specific
health policy as well as overall spending objectives of
proposals.
perspectives. Given that the disconnect between
health policy-making, planning, and budgetary the government were unclear. In 1995, the
processes was recognized as a common factor World Bank assisted in introducing the MTEF
of several countries’ governance, the health process in Malawi in four sectors, including
MTEF has increasingly come to be regarded health, in response to the review’s findings.
as a central element of public expenditure The first year of implementation focused very
management reform programmes (see Box 8.7). much on adequately costing sector-specific
priorities to reflect the sector strategic plans.
All of the other sectors joined in the following
year, with the MoF providing overall guidance
and management. After the initial years of
implementation, it was clear that the Budget
Division needed more staff and provisions
were made for an increase in personnel.
The MTEF in Malawi was seen as a process
to support improved decision-making and
to better link policies, priorities, resources,
and budgets. It has involved both a top-down
and bottom-up joint approach – top-down
meaning a macroeconomic analysis looking
at total revenue and allocation of budget
ceilings to different sectors. At the same
time, a bottom-up approach at sector level
consisted of formulating a sector strategy
and breaking the strategy down into activities
and costs. In Malawi, a special emphasis was
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given to involving a wide range of stakehold- the budget initially announced for non-wage
ers in the design and implementation of the expenditure. This represents an additional
process and presenting the budgeting process USD 10 million in the health allocation.
as a management tool for all sectors. With
the MTEF work, the MoF has taken on a less However, the unpredictability of external
controlling role and is more of a supervisor resources and uncertainty surrounding
of performance, ensuring accountability and decentralization makes the medium-term
transparency in resource use. An evaluation in budget process an especially delicate exercise
early 2014 demonstrated good improvement that often has little link to macroeconomic
for Malawi’s budget credibility and stronger realities. The MTEFs in the Democratic
links between policies and budgets. However, Republic of the Congo are developed using
significant improvements were still necessary incomplete and patchy data: the provinces
for budget execution and control as well as have no clear idea of the domestic and
accounting procedures. external resources that they will receive the
following year. Therefore, MTEFs are hardly
Democratic Republic of the Congo27 ever used to manage resources and are
From 2011 the Research and Planning Division more of a theoretical exercise. The MoPH’s
at the Ministry of Public Health (MoPH) has run efforts to improve the budget process are
a programme to improve the budget process hampered by the uncertainty surrounding
via a results-oriented management concept decentralization and the fragmentation of
that uses the MTEF as a tool. Since 2012, the external financing. Recent efforts by the
national MoPH and provincial ministries have MoPH to strengthen their financing strategy
compiled a national and provincial MTEF each should enable the government to set out its
year. This tool is featured in the roadmap for official vision of the health financing and
government expenditure reform initiated by decentralization architecture, which will
the Ministry of Economy and Finance, making improve the budget process.
the health sector a trailblazer for a reform to
be extended to all other sectors. The benefits
are twofold. First, results-based management
practices are picked up by provincial planning
and budgeting teams. These teams will play
a central role in allocations of resources for
health. Second, the tool makes it easier to
develop arguments in defence of the health
budget when choices are being made for the
annual budget. In 2014, sound arguments
helped the MoPH obtain a 20% increase in
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To date, MTEFs have seen a mixed impact on judged as unrealistic and do not allow for ade-
increased budgetary predictability for health quate strategic planning.
ministries, but there is some evidence that
they have led to budget reallocations to the The process and quality of health and overall
sector.28 It is a common observation that the MTEF need strengthening in most countries,
quality of forward spending estimates, as well more specifically:
as revenue forecast, is generally poor. For the
former, they tend to consist far too frequently more realistic resource scenarios;
of the proposed budget for the first year of a better alignment of MTEF ceilings with annual
multiyear framework, followed by inflation sector allocations;
adjusted projections of cost for the later years: more support to MoH for developing sound
multiyear incrementalism, in other words. On health expenditure scenarios;
the latter, revenue projections are sometimes more participatory processes.
Box 8.8
Legacy systems in francophone and anglo- Economic and Monetary Union directives,
phone countries in Africa may affect the however, has driven successful reforms of
implementation of standard reforms such as a key parts of the PFM systems.
medium-term budgeting. While francophone
systems have budget control benefits and In anglophone Africa, the United King-
offer some mechanisms that are not out of dom-based financial management tradition
keeping with a medium-term perspective can clash with the constitutional form of
(such as allowing for capital programming to modern states. The role of parliament in
have a multiyear legal basis in the financial undermining comprehensive, medium-term
laws), they also present important challenges. budgeting that is affordable and effective
The central control over spending ministries is among the key concerns. In anglophone
discourages spending agencies from taking countries the strong legal emphasis on the
strategic responsibility for better spending accountability of the spending agency (in this
and the budget format does not help either. case, MoH) accounting officers in turn under-
With a strong emphasis on law in francophone mines a strong finance ministry mandated to
systems, the lack of legal provisions for run a disciplined budget process. The weak
modern budget management mechanisms role of parliaments and inadequate capacity
such as MTEFs and programme budgeting for medium-term forecasting, particularly
mean that reforms to these effects have at sector level, further affects the impact of
very little impact. On the plus side, the these reforms.
requirement to adhere to the West African
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Fig. 8.5 Introducing performance-based budgeting: from concept to practice 30
Many countries are progressively moving away accomplished with the money, as opposed to
from activity-based or line-item budgeting merely showing that it has been used for the
towards a system that is more focused on outputs purchase of approved input.31 At the end of
and places emphasis on results. The shift from the budget cycle, a review of performance is
traditional budgeting to alternative budgeting supposed to help planners allocate and spend
methods with results and performance at its more effectively toward the set targets in the
focus is noted to be more useful as a policy following years (see Box 8.9). In moving towards
or decision-making tool. It assures elected performance budgeting, countries adopt a
and administrative officials of what is being system of planning, budgeting and evaluation
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that emphasizes the relationship between money However, in weak PFM systems, the introduc-
The move budgeted and results expected. tion of an alternative budget classification is
towards likely to create more confusion and to reduce
performance- However, there are caveats. While performance- accountability, at least initially. Budgets may
based budgeting
based budgeting seems to have been effective therefore need to be presented using several
creates a system
that emphasizes to better inform resource allocation decisions different formats in a transition phase.
the relationship and in supporting higher quality of negotiation
between money processes between MoF and line ministries like Specifically for the health sector, the introduction
budgeted and
health, systematic evidence has been lacking of programme budgets can increase risks of
results expect-
ed. However, on the actual effects on health sector perfor- creating new silos (programme budgets are often
caveats include mance. Performance-based budgeting requires disease-specific vertical programmes). Modifying
the increased considerable budget management capacity the budget structure will not be sufficient to
risk of new
within the spending institutions. Providing more drive flows to expected results. Just as equally
budget silos and
initial confusion autonomy to such institutions (such as MoH) important as budget structure are personnel
in weak PFM would require that accountability systems are management and structure of government
systems. in place and functioning to ensure that more that provide incentives and accountability for
flexibility indeed leads to better sector results. improved health sector performance.
© WHO/HFP
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Box 8.9
The Republic of Korea’s budget system With this general direction in mind, the Gov-
revealed that the most problematic feature ernment decided on several basic principles
of the budget classification system was that it for restructuring its line-item budget into a
placed primacy on classifications by organiza- programme budget:
tion (ministries and agencies) and, most of all,
by budget account. As a result, programme or 1. a programme cannot span multiple min-
activity level expenditures were fragmented istries;
over different accounts. Conversely, even
when a programme or activity was funded 2. all activities that have the same policy
solely through a single budget account, it objective must be grouped under a single
took considerable cross-checking to verify programme, regardless of revenue source;
that there are no other expenses in another
account. The opacity of spending information 3. programmes must be clearly differentiated
for programmes or activities was compounded from one another both in policy objective
by the fact that there were more than 6000 and programme name.
activities. Thus the solution demanded that
the budget classification system be simplified Further guidelines have been set to ensure
in order to make the spending information that the programme classification matches
more transparent and accessible. Further- that of the National Fiscal Management
more, this streamlining of the classification Plan (NFMP – the country’s MTEF) and that
system should be accompanied by greater the final number of activities is reduced to a
discretion granted to spending ministries level that is practical for resource allocation
like health. This would also allow the budget decision-making. Additionally, the Government
office and the legislature to concentrate on decided that all indirect costs (salaries, facility
the broader resource allocation decisions maintenance, etc.) for each ministry would
while harnessing the expertise of front-line be aggregated into a separate programme,
managers in spending within their sectors, as would simple transfers among different
in order to raise the efficiency of lower-level budget accounts, rather than trying to dis-
spending decisions. tribute such costs or transfers into other
programmes.
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8.6.4 When and how should
countries assess fiscal Box 8.10
space for health?
Taking stock of fiscal space
for health: main lessons from
The quest for fiscal space for health should be
mainstreamed into the budgeting process (see
assessments in developing
The move
Fig. 8.6 and Box 8.10). Situating fiscal space for countries 33
towards perfor-
mance- based health analysis in the overall budget forecast
budgeting cre- process is essential. It is likely that the analysis Lessons from country evidence have
ates a system will be best placed at the medium-term budget shown that in contexts with very limited
that emphasizes public spending for health (all standards
formulation stage. It is a critical moment, largely
the relationship
between money unexploited, which should allow aligning realistic included), fiscal space for health projec-
budgeted and revenue forecasts with government priorities and tions have helped to identify feasible sce-
results expect- associated expenditure ceilings. Sector-specific narios for expanding resource availability
ed. However,
fiscal space assessment, if conducted prior to on both the revenue generation and the
caveats include
the increased and as a support for the elaboration of a sound expenditure side. They signalled existing
risk of new MTEF, will maximize impact on change. With margins from clearly untapped resources
budget silos and such an assessment, health planners will bring (e.g. taxation, mineral resources), from
initial confusion
useful technical value and support for exploring misalignment with government priorities
in weak PFM
systems. the actual potential fiscal space, rather than and international commitments (e.g. low
focusing on historical frameworks and ceilings. health prioritization) and from effective-
ness and efficiency-related losses (e.g. low
A more realistic sense of the actual potential execution, skewed allocations, technical
fiscal space for health can also aid health min- inefficiencies).
istries to better plan for a possible reduction of
resource allocations to health during the year – In more advanced countries (i.e. higher
which can happen in times of financial difficulty revenues and health prioritization within
due to fluctuations in external aid, a reduction the budget envelope), evidence has shown
in domestic resources, or other reasons. In that further gains are likely to derive from
such circumstances, NHPSP implementation the expenditure side through improved
can be deeply undermined if potential resource management of the existing health budget
reductions are not adequately planned for and envelope. In the short and medium term,
taken into account from the very beginning. a strategic combination of improved exe-
cution and modified allocation within the
budget envelope is likely to drive fiscal
space expansion for the sector. In such
contexts, successful country experiences
have focused on how to align an existing
budget envelope with the UHC goals
(i.e. reduce inequalities in service use
and spending), rather than delaying or
derailing the sequence of their reform
process and expecting sizeable gains
from the resource side.
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Fig. 8.6 Positioning fiscal space
for health analysis in the Fiscal space
budgeting process 34 analysis, including
for health sector
MTEF:
revenue forecast
and expenditure
definition
Annual budget
formulation
and approval
Accessing and effectively using quality budget and Over the past decade, the systematized produc- Good quality
financial data is critical for health planners and tion of national health accounts has helped to budget and
financial data
managers, especially to drive future investment monitor overall health expenditure from different are essential to
decisions. In many countries, MoH and other sources at country level and to provide globally inform health
stakeholders cannot rely on good quality budget a systematic description of the financial flows planning and
budgeting.
and financial data, for the following reasons: related to the consumption of health care goods
Expenditure
and services (see Box 8.11). MoH is encouraged assessments
lack of access to and use of data by relevant to make use of health accounts outputs in a should thus be
MoH units; more systematic manner to further inform institutional-
ized, not the
poor classification of public expenditure health planning and budgeting. There is also a
least because
for health; need to institutionalize and systematize public countries are
weak financial management reporting and expenditure assessments, as well as national encouraged to
consolidation systems within MoH and across health accounts, within MoH to strengthen move towards a
dominant reli-
ministries. their ability to inform and influence budget
ance on public
expenditure to
make progress
towards UHC.
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decision-makers. As countries are encouraged 1. how much is allocated to the health sector
to move toward a dominant reliance on public compared to the overall budget;
expenditure to make progress toward UHC,35
more efforts shall be put on strengthening 2. how much of the allocated budget is actually
production and effective policy use of good quality executed;
public expenditure for health data. In doing so,
three main aspects can be annually monitored: 3. reasons for under or over-spending.
Box 8.11
Health accounts cover actual expenditure and 3. What kinds of goods and services are
not budgets or commitments. Health accounts consumed?
track health expenditure from all sources
(including nongovernmental) to different 4. Which health care providers deliver these
types of providers (for example, hospitals vs goods and services?
providers of ancillary services) and different
uses (for example, inpatient vs outpatient care 5. Who benefits from the expenditures (by
or curative care vs preventive care). age, gender, regions, diseases)?
Health accounts address five basic questions. A new System of Health Accounts was issued
in 2011 to allow comparison across countries
1. Where do resources come from (through and to accommodate a number of changes
which financing mechanisms have the and improvements.
revenues/resources been pooled)?
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8.6.6 How should countries understand and influence the political
economy of budgeting for health?
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Box 8.12
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8.6.7 Looking beyond budget: importance of public finance systems
for health financing and UHC
From a public finance perspective, the key and needs and define credible budgets. Often,
The key objec-
objectives of PFM are to maintain sustainable actual health sector spending is far from initially
tives of public
fiscal discipline, ensure strategic and effective defined targets. In most low-income countries, finance systems
allocation of resources and the efficient delivery actual health spending is typically lower than are to maintain
of public services. On the other hand, health budget allocations, which ultimately reflects sustainable
fiscal discipline,
financing is typically characterized by functions the sector’s difficulties to plan, commit and
ensure strategic
that guide the collection, allocation and pooling of disburse according to national PFM rules. The and effective
resources, as well as the purchasing of services, perception of lack of measurable, immediate allocation of
with the ultimate goal being universal health health outputs of public resources tends to also resources
and efficiently
coverage (UHC). Fostering mutual understanding reinforce a common perception of the sector’s deliver public
and further alignment between PFM and health ineffectiveness and inefficiencies. services.
financing systems is critical, and health planning
stakeholders have a critical role to play here. Overall, health has been both a distorting and
innovating sector for PFM systems. Over the
PFM systems shape the level and allocation past two decades, the health sector has some-
of public funding (budget formulation), the times generated the development of parallel
effectiveness of spending (budget execution) PFM systems to secure investments and limit
and the flexibility in which funds can be used fiduciary risks for external investments. Ear-
(pooling, sub-national PFM arrangements, marked allocations and parallel budgeting,
purchasing). While PFM is sometimes considered pooling procurement, reporting arrangements
a bottleneck for effective health spending due have become a strong attribute of the sector’s
to rigidities in the way budgets are formulated development aid. At the same time, several
and executed, PFM rules also provide the sector low- and middle-income countries have also
with a domestic, integrated platform to manage embarked on alternative health financing reforms
resources irrespective of their sources (i.e. a core that have been mutually beneficial for both
attribute of pooling) and their levels (i.e. across the sector and PFM as a whole, through, for
national and sub-national entities). example, the development of sectoral MTEFs,
the strengthening of domestic procurement
From a PFM perspective, health is perceived mechanisms, the tracking of resources and
as one of the spending sectors that deliver key expenditures up to the sub-national levels, a
public services and goods but overall lacks a sound management of domestic pooled funds, the
good understanding of the PFM roles and rules introduction of purchasing agents and strategic
for public sector effectiveness and financial payment mechanisms to control expenditure
accountability. In some countries, health is seen and expand coverage at the same time. In this
as a sector with less capacity, vis-à-vis other respect, the health sector can help leverage
sectors, to adequately formulate its priorities domestic PFM efforts.
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Fig. 8.7 What does it mean to have a functioning PFM system?
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Box 8.13
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The central planning authority should give strong ensure better accountability and transparency at
guidance as to the methodologies to be used for lower levels of the health system and advocate for
costing, budgeting, and expenditure tracking – the objectives of decentralization to be fulfilled.
without it, a diverse and heterogeneous set of
data from the various decentralized structures Some questions to consider for costing and
will make aggregating countrywide data and budgeting in decentralized settings
producing national estimates very difficult. For
example, an additional layer of analysis must What does decentralization actually mean in
be conducted for national health accounts practice in your country? How far are struc-
data in countries with highly decentralized tures, responsibilities, and budgets actually
health financing systems with little central-level decentralized?
guidance or authority. Getting comparable and
consistent figures is often a challenge that may The more power and authority actually vested
necessitate external expertise. Many countries in local authorities, the more scope there
may not have the time or resources to make this is for rational costing and budgeting that is
extra effort. At a global level, there is a definitive close to the real needs of the local population.
drive to establish centralized District Health
Information Software (DHIS2) and Hospital Does the central level authority need to aggregate
Management Information Systems to strengthen costing and budgeting nationally?
consistency in reporting.
If so, guidance and templates from a central
Finally, an issue which can arise in a decentral- authority would be useful and necessary
ized setting is a relative lack of reporting and to reduce the burden and error margins of
transparency on money flows. Often, it is the reformatting and restructuring in order to
central level that is held to closer scrutiny and compare and aggregate. In addition, technical
is subject to political pressures on the funds it support from a central authority might be
allocates and disburses to decentralized author- recommended.
ities. After that, as Box 8.3 illustrates in the case The central-level authority should take into
of Mexico, access to regional or district budget account revenue generation at different levels
and expenditure data may be considerably more for more accurate fiscal space projections.
difficult. Low levels of transparency at regional
or district levels may reflect a lack of account- How transparent are health system costs,
ability to the population on matters related to budgets, and expenditures reported at decen-
health budgets and expenditures. This would tralized level?
imply that the advantages and added value of a
decentralized system close to population needs A low level of transparency may indicate
are not being leveraged and that budget-related a lack of accountability to the population
problems have simply been relocated from coming under the decentralized authority
central to decentralized level. As Box 8.3 also and a subsequent lost opportunity to leverage
demonstrates, civil society groups can be key the planning and budgeting advantages of
partners of the government and population to being close to the population.
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Box 8.14
Nigeria is a federal state with three tiers of ment to reconcile and track resource flows
government, namely, the federal government, across the different levels and agencies of
36 state governments, and 774 local govern- the health system. In general, the absence
ments. The principal actors in the Nigerian of accurate and detailed records on budgets
public health sector are the Federal MoH and expenditures indicates that government
(FMoH), the 36 State Ministries of Health administrations at all levels do not have
(SMoH), the 774 Local Government Author- the means to ensure that health resources
ities (LGA) Departments of Health, and the are distributed equitably, efficiently, and
authorities of the Federal Capital Territory, effectively.
as well as various government parastatals
and training and research institutions that A further complication to Nigeria’s decen-
are concerned with health matters. tralized setting came with the creation in
thirty states only, of a new agency, the State
The FMoH, the SMoH, and the LGA Depart- Primary Health Care Development Agency.
ments of Health are responsible for plan- This agency is now responsible for primary
ning and managing health spending in their health care in the state and is tasked to
respective jurisdictions. Public expenditure bring all primary care facilities and staffing
streams for the three levels of government under its control. In the 30 states where this
are largely uncoordinated. Federal, state, and Agency exists, the LGA Health Authorities
local allocation and expenditure decisions are also under its direct control, creating
are taken independently, and the federal much confusion as to the delineation of
government has no constitutional power to tasks and funding mechanisms.
compel other tiers of government to spend
in accordance with national priorities. This example from Nigeria demonstrates
that decentralization does not always
The complexity of fiscal transfers and financial solve existing problems; in fact, when not
flows in Nigeria between federal, state, and organized and managed properly, decen-
local agencies makes it difficult for the govern- tralization can create unintended hurdles.
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8.7.2 What if your country is
heavily dependent on aid?
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The effect is not just from the amount of aid a disconnect between the pledged and Common
and the modalities, but also from the number actually disbursed monies from donors to budget-related
challenges for
of donors present. The greater the number of aid-dependent countries; aid-dependent
donors there are, the greater the fragmenta- the timing of fund release – this impacts on countries are
tion. In many countries, health remains the budget credibility and ability to implement the limited
predictability of
most fragmented sector, thus complicating activities;
donor funds, the
sector-wide planning. donor conditionalities tied to specific funds. disconnect be-
Overcoming some of the above-mentioned tween pledged
The most common budget-related challenges challenges involves constant dialogue with and disbursed
donor monies,
in aid-dependent countries include: donors on these issues. It can help considera-
the timing of
bly to gather and document evidence demon- fund release
problems with predictability of donor funds strating the kinds of difficulties encountered which may be
and alignment, harmonization, and coor- by the budget-related challenges, including in line with
need, and donor
dination with sector strategies and sector implementation delays or lack of implemen-
conditionalities
strategy budgets; tation altogether. tied to specific
funds.
© WHO/HFP
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8.7.3 What if fragmentation
and/or fragility is an issue Box 8.15
in your country?
Health accounts in a conflict-
Fragile or post-conflict states will have a reduced
affected or emergency setting
tax base and limited revenue generation com-
pared to other countries, translating into an
In conflict-affected countries the health
increasing reliance on informal payments and
accounts activities remain logistically and
on donor funding. In addition, the transition from
methodologically challenging because
short-term emergency relief to longer-term
of the inherent insecurity, governance
development means a shift in funding models
and institutional weaknesses. Usually
for the health sector – usually, there is some
government investments are very lim-
government takeover of basic services with
ited, out-of-pocket expenditures may
heavy donor assistance. In most cases, this will
increase and the access to health care
be accompanied by the continued presence of
services and goods is limited, which
emergency services as well, creating several
may lead to an increase of risk-taking
parallel funding streams for different types
behaviour and impoverishment. These
and levels of services that necessitate strong
countries rely heavily on international
steering capacity and management by the
aid for health care provision but at the
MoH. This is – almost by definition of a fragile
same time the absorptive capacity in
state – rarely existent, which makes rational
the recipient government institutions
planning and budgeting extremely complex
may be very low. The health accounts in
and challenging. (See, for example, Box 8.15).
post-conflict settings usually focus on
resource tracking of external funds. It is
Private expenditure, remittances from abroad,
important to validate the health accounts
and aid inflows end up attaining larger totals than
results internally (with the data authorities
expected for health in fragile state situations.
and stakeholders), but also to cross-check
Estimates from Afghanistan, Liberia, and the
the data with other sources (donor reports
Darfur region of Sudan demonstrate that private
and international databases) as well as
health spending soars when public financing is
analyse the data, comparing them with
largely absent.VIII High levels of private spending
general economic and health indicators.
means that only those with money can pay to
The findings from health accounts reports
have access to health services.
can help improve donor accountability
and coordination, ensure more equitable
A good basis for policy dialogue during the
distribution of development aid, and lead
national health planning process would be a
to better reallocation of health care funds.
basic estimation of the total future resource
envelope to be expected for health. Due to the
uncertainty of estimations, various scenarios
can be developed, i.e. low levels of financing
vs high levels of financing. If possible, a special
study examining the level of private expenditure
would be warranted, given the weight of private
expenditure in the health sector.
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© Shutterstock
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8.8 Conclusion
A health budget should be viewed as a crucial rated upon, with an emphasis on health sector
sectoral orienting text, declaring key financial stakeholders’ specific role in each, possible
objectives and its real commitment to imple- entry points for engagement, and particular
menting health policies and strategies. issues to consider when doing so.
During the budgeting process, health planning In essence, developing robust health budget
stakeholders and managers will need to under- envelopes requires strong engagement by health
stand the guiding principles of budgeting as ministries with national budget decision-makers,
well as the political dynamics that enable the to make the standpoint of the health sector
budget elaboration and approval processes; clear, comprehensible and compelling. This
not doing so will be a huge missed opportunity requires MoH and planning stakeholders to
to make the case for health. If MoH and other think through the operational details and costs
health sector stakeholders are actively and of health sector needs and how health services
knowledgeably engaged with MoF and others should be purchased within the framework of
during the budget cycle, resource allocation existing PFM rules.
will more likely match planned health sector
needs, and execution is more likely to follow
allocations.
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31 Ibid.
41 Ohadi E, El-Khoury M, Williamson T, Brinkerhoff D.
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Further reading
Andrews M, Cangiano M, Cole N, de Renzio global health economic and public policy. Volume
P, Krause P, Seligmann R. This is PFM. Bos- 1: Economics of health and health systems.
ton: Harvard University; 2014 (CID Working World Scientific Publishing Company; 2016,
Paper No. 285; https://www.hks.harvard.edu/ 267–309 (http://www.who.int/health_financing/
content/download/69282/1249938/version/1/ documents/alternative-strategies-for-uhc/en/,
file/285_Andrews_This+is+PFM.pdf, accessed accessed 18 August 2016).
17 August 2016).
Norton A, Elson D. What’s behind the budget?
Barroy H, Andre F, Mayaka S, Samaha H. Investing Politics, rights and accountability in the budget
in universal health coverage: opportunities and process. London: Overseas Development Insti-
challenges for the Democratic Republic of Congo. tute; 2002 (https://www.odi.org/sites/odi.org.uk/
2014 Health public expenditure review. Washing- files/odi-assets/publications-opinion-files/2422.
ton (DC): World Bank; 2016 (http://documents. pdf, accessed 18 August 2016).
worldbank.org/curated/en/782781468196751651/
pdf/103444-WP-P147553-PUBLIC-Health-PER- Tandon A, Cashin C. Assessing public expendi-
Investing-in-Universal-Health-1608488.pdf, ture on health from a fiscal space perspective.
accessed 18 August 2016). Washington (DC): World Bank; 2010 (HNP Dis-
cussion Paper; http://siteresources.worldbank.
Cashin C. Health financing policy: the macro- org/HEALTHNUTRITIONANDPOPULATION/
economic, fiscal, and public finance context. Resources/281627-1095698140167/Assesing-
Washington (DC): World Bank Group; 2016 (A PublicExpenditureFiscalSpace.pdf, accessed
World Bank study; http://documents.world- 17 August 2016).
bank.org/curated/en/394031467990348481/
Health-financing-policy-the-macroeconom- Tsofa B, Molyneux S; Goodman C. Health sector
ic-fiscal-and-public-finance-context, accessed operational planning and budgeting processes in
17 August 2016). Kenya- “never the twain shall meet”, International
J Health Plann Manage. 2015;31(3):206–76 (http://
Le Houerou P, Taliercio R.(2002): Medium onlinelibrary.wiley.com/doi/10.1002/hpm.2286/
term expenditure frameworks: from concept full, accessed 19 August 2016).
to practice: preliminary lessons from Africa.
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