Aid, Debt, IMF Conditionalities and Domestic Health Financing in Low- and Middle-Income Countries

Across Low- and Middle-Income Countries (LMICs), public external debt burdens as well as the number of International Monetary Fund (IMF) loan conditionalities have grown over time. These externally derived macro-fiscal factors, along with Official Development Assistance (ODA), may influence the fiscal space for health and policy decisions that co-determine to what extent countries finance their health systems with domestic government funds (GHE-S), and to what extent they rely on household Out-Of-Pocket Payments (OOP). The levels and balance of these sources have great implications for health service access and health outcomes, particularly among poorer population groups. However, we did not identify studies that have jointly examined how these key external factors are associated with GHE-S and OOP, nor compared their correlation sizes. This is key for understanding which might be the most effective policy levers for pursuing Universal Health Coverage (UHC). We performed a panel data study of 105 LMICs from 2005-2019, investigating associations between GHE-S and OOP, and a set of ODA-, public external debt- and IMF programme and conditionality variables. We used the Generalised Method of Moments estimator and performed a range of robustness checks. Increases in ODA via the recipient country public sector were associated with modest reductions in both OOP and GHE-S, measured per GDP. Increases in public external debt servicing per GDP were associated with slight relative increases in OOP and slight relative decreases in GHE-S per CHE. We found no relationship between IMF programme participation or conditionalities and GHE-S or OOP. Our findings support less donor concern of aid fungibility in the health sector, while adding that both on- and off-budget ODA for health also appear to modestly subsidise OOP. Our findings for debt indicated a small shift in the burden of payment from government onto the user from increasing public external debt servicing. This provides some added support to calls for debt resolution among more heavily indebted LMICs to avoid the negative health service access implications from OOP.