afrol News, 4 September - Africa needs a significant increase in spending on health, IMF Deputy Managing Director Murilo Portugal told an international conference in Accra, Ghana, yesterday.

Speaking in a panel discussion on financing of health sector interventions at Forum on Aid Effectiveness, he noted that health spending in Africa had "only increased marginally" from an average of 1.6 percent of GDP in 2000 to 1.8 percent of GDP in 2007.

"The IMF is in favor of increasing spending for priority sectors, including health," Mr Portugal said, adding that higher health spending is important for meeting Millennium Development Goals, three of which are health related.

He further stated that public spending on health is low in low-income countries, especially in Africa, adding that spending totals often do not aggregate all health-related expenditure, as much health spending is off budget.

Mr Portugal also said creating sustainable fiscal space for priority spending has been a key element of IMF's policy advice in recent years. Countries have several options for creating fiscal space for priority spending, such as mobilizing additional domestic revenues, shifting resources from less productive areas like untargeted subsidies or unproductive activities of the civil service.

Others that he mentioned as options were additional borrowing as well as increased external assistance, which he said justified need and importance for aid predictability.

Mr Portugal however warned that increasing health spending on its own is not sufficient to achieve better health outcomes, stating that improved health outcomes are driven by complex factors such as female education, which influences infant mortality and fertility rates adding that improvements in water and sanitation are also critical for better health outcomes.

"Therefore, when we advocate additional financing for health, we should also call for adequate financing for these complementary sectors without which our ultimate objective of improving health outcomes may remain unrealised," Portugal told the panel.

Responding critics against the Fund, Mr Portugal reassured delegates that IMF has sharply reduced use of wage bill ceilings in its programmes.

"Following new policy approved by our Executive Board in July 2007, wage bill ceilings will be used in Fund-supported programmes only when justified by macroeconomic considerations and where capacity of governments to control such spending is particularly weak, such as in post-conflict situations," Portugal said.

"The Fund has already moved in this direction. Currently, not a single IMF-supported program under the Poverty Reduction and Growth Facility (PRGF) have wage-bill ceiling as "performance criteria." Only 3 out of 23 such programs include wage-bill ceilings as `indicative targets'," he added.

Previously, critics had claimed that gaps on public sector wage bills had stopped low-income countries from using donor resources for expanding employment in key poverty-reducing sectors, like health and education.

Ministers from over 100 countries, heads of international financial institutions, donor organisations, and civil society organizations from around the world are attending the Accra meeting.

As observed by IMF and other partners, Accra meeting comes at a crucial moment, which is just past midpoint to 2010 target date set by Paris Declaration on Aid Effectiveness, and halfway toward 2015 deadline for reaching UN's Millennium Development Goals.

Besides reviewing advances in, and assessing obstacles, Accra meeting also aims to broaden aid effectiveness dialogue to newer actors and chart a course for strengthening the aid effort.

By staff writer

© afrol News

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