World Bank and IMF preventing transfer of foreign aid to HIV/AIDS programmes

05/18/05

EMBARGO: 00:01H (London time) Friday May 20, 2005.

Multilateral financial organisations that aim to reduce poverty are preventing foreign aid from reaching HIV/AIDS programs in developing countries, states an article in this week's issue of THE LANCET.

Ted Schrecker (University of Ottawa, Ontario, Canada) and Gorik Ooms (Médecins Sans Frontières, Brussels, Belgium), state that expenditure ceilings for public health, created by the World Bank and the International Monetary Fund (IMF), stop countries from benefiting from outside investment in their health programmes. To receive debt relief countries must provide the IMF and World Bank with a poverty reduction strategy. Most strategies include spending targets or ceilings for various sectors of government activity. These ceilings exist because of concerns that rapid inflows of foreign exchange associated with increased aid can drive up the value of the recipient country's currency. The result would be to increase the price of exports, thereby undermining competitiveness. However, ceilings create a clear disincentive for external donors to offer desperately needed financing, state the authors. This is because the IMF requires that countries include the value of all new donor funding received for initiatives, such as scaling up antiretroviral treatment, in their health budgets. If a sector receives any new funds that were not initially budgeted for, a comparable amount must be cut from the budget.

The authors use the situation in Uganda as an example of the effect of expenditure ceilings. In September 2004, the IMF claimed no funds for HIV/AIDS projects had been rejected by Uganda because of expenditure limitations, while conceding that only US$18.6 million of the $201 million approved for Uganda by the Global Fund to Fight AIDS, Tuberculosis and Malaria had been disbursed.

The authors comment: "[The existence of public health expenditure ceilings] reveals the dark underside of the industrialised world's grand rhetoric about improving the health of the poor.

"At the very least, the World Bank and the IMF owe the developing world an unequivocal commitment that they will be part of a solution to the health funding problem, instead of perpetuating it."

Source: Eurekalert & others

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