Debt, Structural Adjustment Programs SAPs and Health

1
Debt, Structural Adjustment Programs (SAPs) and
Health

• GH 511/EPI 531
• Stephen Gloyd, MD, PhD
• 7 October 2008

2
Millennium Development GoalsUnited Nations 2000

• Eradicate extreme poverty and hunger
• Achieve universal primary education
• Promote gender equality and empower women
• Reduce child mortality
• Improve maternal health
• Combat HIV/AIDS, malaria, other diseases
• Ensure environmental sustainability
• Develop a global partnership
• Poor achievement in sub-Saharan Africa

3
MGD 1 - Poverty reduction Some progress, but not
in Africa
Wor
Source World Bank Group Global Data Monitoring
Information System
4
MGD 2 - Primary Education Progress
Wor
Source World Bank Group Global Data Monitoring
Information System
5
MGD3 Gender equality Improving except in
Africa
Wor
Source World Bank Group Global Data Monitoring
Information System
6
MGD 4 Child Mortality ReductionLagging in
Africa
Wor
Source World Bank Group Global Data Monitoring
Information System
7
MGD 5 Improve Maternal Health
Wor
Source World Bank Group Global Data Monitoring
Information System
8
MGD 6 Combat HIV/AIDS and other Diseases
Source World Bank Group Global Data Monitoring
Information System
9
MGD 7 Ensure Environmental Sustainability
Source World Bank Group Global Data Monitoring
Information System
10
MGD 8 Build Global Partnerships for Development
Source World Bank Group Global Data Monitoring
Information System
11
Why have many countries not improved more?

• Debt, structural adjustment programs (SAPs), and
  crumbling public infrastructure
• Forms of foreign assistance
• War and militarism

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Origins of Debt

• Increased oil prices (OPEC-1970s)
• Floating US currency
• Increased interest rates (7-22)
• Worldwide recession in 1980s
• Decreasing commodity prices (subsidies)
• Decreased US foreign assistance
• Waste, corruption, mismanagement
• Aggressive loans intentional (?)

13
Funding Dictators

• Total loans made to oppressive regimes (low and
  middle-income countries) 500 billion
• Loans to South Africas apartheid regime (being
  repaid by current government) 22 billion
• Africas debt stock in 1970 11 billion
• Africas debt stock in 2008 215 billion
• SSA receives 10 billion in aid but loses 14
  billion in debt payments per year

Source Africa Action (2008) -
http//www.africaaction.org/campaign_new/debt.php
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Debt Burden Especially on Africa
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• Government is not the solution to our problems.
• Government is the problem.
• Ronald Reagan,
• Inaugural Address, 1981

16
Structural Adjustment ProgramsWashington
Consensus (IMF, World Bank)

• Austerity measures to reschedule debt (but IMF
  conditional)
• Reduce government expenditures (education,
  health)
• Improve terms for foreign investment (reduced
  taxes)
• Privatize the economy Free market
• Continue paying debt (often greater than health
  budgets)

17
Structural Adjustment ProgramsWashington
Consensus (IMF, World Bank)

• 1. Decrease government spending
• Lay off workers (mostly health and education)
• Cut government programs (education, health,
  agriculture)
• End subsidies for poor (food, transport, housing,
  water)
• 2. Improve terms for foreign investment to
  increase exports
• Reduce taxation, currency controls on investors
• Devalue currency
• Reduce or freeze wages reduce worker power

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Structural Adjustment ProgramsWashington
Consensus (IMF, World Bank)

• 3. Privatize economy Free Market Rules
• Market regulation of prices (huge increases)
• Willingness to Pay ethic for social services
• Growth of private health care
• Reschedule debt over longer period (indefinite)

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Effects of SAPs

• Enormously increased food, transport prices
• Huge levels of unemployment
• Non-living wage for those who remain working
  (20-40 per month)
• User fees for health, education, and other
  services
• Reduction in education, health care quality
• Social unrest demonstrations, riots

20
SAPs reduced education budgets and affected
education
21
MDG2 Achieve Universal Primary Education
An additional 47 million African children of
primary school age will need to be enrolled
between 2007 and 2010 to reach MDG
Source The DATA Report 2007 - http//www.thedatar
eport.org/
22
SAPs and Reduction in Health Budgets

• Health budgets half of 1980s levels
• Benin 9 to 4
• Mali 8 to 4
• Mozambique 11 to 3
• Increasing donor dependence
• Support of NGOs for health care

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SAPs Weakened National Health Systems in Africa

• Ministry of Health (MOH) budgets were slashed,
  causing
• Inadequate workforce (numbers, salaries, morale)
• Poorly maintained and equipped health facilities
• Inadequate transport, communication
• Weak procurement and distribution of medicines
  and supplies
• Overall decreased quality of services

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Crisis in Health Care Providers

• Inadequate professional training
• Inadequate positions
• Brain drain of doctors and nurses
• External to USA, Europe, Japan, other richer
  countries
• Internal to better paying jobs in-country
  (part- or full-time)

25
Distribution of Health Workers in Selected
Countries
Source World Health Organization Statistical
Information System (WHOSIS)
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Dealing with Consequences of Debt

• Adjustment with a Human Face
• Bamako Initiative
• 1990s Reform
• Heavily Indebted Poor Country Initiative (HIPC)
  in 1996
• Multilateral Debt Relief Initiative (MDRI) in
  2005

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Adjustment with a Human Face (UNICEF)

• Policies to protect the well-being of the most
  vulnerable during structural readjustment, but IN
  THE SHORT TERM (poverty alleviation program)
• Child survival programs
• UNICEF study in 1995
• 6 of 10 countries - negative nutrition changes
  and/or IMR
• Increased numbers of people under poverty line
  all preceded by decreases in GDP/capita

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Bamako Initiative 1987 (UNICEF and WHO)

• Formal statement adopted by African Ministers of
  Health in Bamako, Mali
• Health of women and children - Funding and
  management of essential drugs at the community
  level
• Mandate
• Drug charges to recover expenditures
• 1st year proceeds for seed capital, 2nd and
  successive years as replenishment
• CHCs - community health committees

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Bamako Initiative 1987 (UNICEF and WHO)

• Implications
• UNICEF aligned with World Bank
• Charging fees, transferring costs to community
• Health care responsive to DEMAND, not NEED
• Depoliticized health

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Impact of SAPs - Immunization Coverage
SAPs
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1990s Reform"

• Continued debt repayment
• Continued price/wage problems
• Sporadic growth with increasing disparity
• Intense pressure on IMF, World Bank

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HIPC Initiative(Heavily Indebted Poor Countries)

• Set up in 1996 to reduce debt burden of poor
  countries
• Reformed in 1999, after pressure from campaigners
• Lengthy process (10 years)
• Only 41 countries eligible in 2008 (33 in Africa)
• Does not include all debts (IMF, WB, not private
  or bilateral)
• Designed to reduce debt to sustainable levels
• Conditionality (SAPs) continued

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How the HIPC Initiative Works

• To be considered for HIPC Initiative assistance,
  a country must
• Be IDA-only and PRGF-eligible
• Face an unsustainable debt burden, beyond
  traditionally available debt-relief mechanisms
• Establish a (6 year) track record of reform and
  sound policies through IMF- and IDA-supported
  programs (completion point)
• Have developed a Poverty Reduction Strategy Paper
  (PRSP) through a broad-based participatory
  process

Source IMF Factsheets - http//www.imf.org/extern
al/np/exr/facts/hipc.htm
34
Status of HIPC Eligible African Countries
Source The DATA Report 2007 - http//www.thedatar
eport.org/
35
MDRI Gleneagles Summit Debt Burden in 2005

• Total external debt of low-income countries 523
  billion
• Total debt service being paid every day by
  low-income countries 100 million
• Africas total external debt 300 billion
• For every 1 received in grant aid, low income
  countries paid 2.30 in debt service
• Many African countries spend more on debt than
  either health or education
• (e.g., Cameroon, Ethiopia, Gambia, Guinea,
  Madagascar, Malawi, Mauritania, Senegal, Uganda
  and Zambia all spent more on debt than health in
  2002

36
Multilateral Debt Reduction Initiative (MDRI)

• Launched by the G8 at Gleneagles in 2005
• Expand the pre-existing HIPC initiative to
  eliminate multilateral debt for qualified
  countries
• Promised 100 cancellation of the World Bank and
  IMF debt for 23 poor countries that reached
  completion point
• Agreed to write off as much as 57.5 billion in
  debt to some of the world's poorest countries
• No change to SAPs, only WB, IMF debt

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From Gleneagles to Hokkaido Summits
(2008)Results of HIPC and MDRI

• Countries which have received debt cancellation
  through HIPC 33 out of 41 eligible countries
• Total debt cancellation between 1996 - 2007
  23.8 billion
• Debt cancellation granted in one day to Iraq in
  Novmeber 2004 by the Paris Club 31
  billion
• Number of qualified teachers which Zambia was
  unable to employ because of a public sector wage
  freeze imposed by the IMF in 2004 as a condition
  of receiving HIPC debt relief 9,000

Sources HIPC and MDRI - Status of
Implementation Report 2008 and
http//www.networkideas.org/news/aug2006/Debt_Re
lief.pdf
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Annual Debt Payments Since Mid-1980s
European Banks
US Banks
15 Billion
African Governments
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Debt Cancellation Works

• In Benin, 54 of the money saved through debt
  relief has been spent on health, including on
  rural primary health care and HIV programs.
• In Tanzania, debt relief enabled the government
  to abolish primary school fees, leading to a 66
  increase in attendance.
• After Mozambique was granted debt relief, it was
  able to offer all children free immunization.
  Nurses salaries doubled.
• In Uganda, debt relief led to abolishing school
  fees (1997) and 2.2 million people gaining access
  to water

Source The Data Report 2007 - http//www.thedatar
eport.org/