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The World Bank’s Fierce Grasp of Yesterday

November 4, 2013

by Jeremiah Norris

Advocates of Universal Health Coverage (UHC) believe that the key to success can be seen in the World Bank’s new vision as stated by its President in his address to the World Health Assembly in May 2013. He said: “We must be the generation that delivers universal health coverage … warning that UHC could become a toothless slogan”.

Senior policy-makers at the Bank, and its sister organization, the IMF, should take this warning seriously. In 1999, the Bank conducted an audit of 107 of its health projects, finding: 1) “the Bank does not adequately assess borrower capacity to implement planned project activities; 2) notably lacking is an adequate assessment on demand for health services; 3) we know little about what the Bank has ‘bought’ with its investments”.

In 2009, it conducted another internal audit based on corrective measures it had set in place, finding: one-third of World Bank health, nutrition and population program loans met with unsatisfactory outcomes. The Bank spent $17 billion on these initiatives.

Subsequently, the Guardian Weekly drilled deeper into the Bank’s audit, determining that: “despite the Bank’s raison d’être to end poverty, that was the specific objective of only 6% of projects and a secondary objective of 7%. Even when this was a stated objective, there was little monitoring of outcomes. Where it was done, few projects had achieved that goal … and much of the spending aids [the] richest 20% of people”.

The Bank conducts annual reviews through its Independent Evaluation Group (IEG). In a 2006 evaluation of a subsample of 25 Bank-assisted countries for which outcomes had been assessed, “only 11 reduced the incidence of poverty between 1990s and the early 2000s, while poverty either stagnated or increased in the remaining 14 countries”.

In 2007, the IMF published a report on health aid and infant mortality. It found that “despite the vast empirical literature considering the effect of foreign aid on growth, there is little systematic empirical evidence on how overall aid affects health, and none (to our knowledge) on how health aid affects health”.

The Bank’s funding is directed mainly to the public health sector of developing countries. Here, it is burdened by high transaction costs, lack of ownership, and interest payments. It competes with private resource flows, often without these operational liabilities. Official Development Assistance (ODA was once the dominate form of assistance to developing countries. But today, according to Hudson’s Index of Global Philanthropy and Remittances, “Nearly 80% of all DAC donors’ total economic engagement with the developing world is through private financial flows.”

An October report by the Bank on global remittances has estimated that they are “expected to reach $414 billion in 2013, and $540 billion by 2015”. These flows often are used to purchase health and educational benefits. Sooner or later, every remitted hard currency ends up in a country’s central bank where it is used to purchase goods and services which can only be procured through the use of scarce foreign exchange.

In the post-colonial world of the early 1960s, most countries emerging into independence had virtually no private health sectors. In that environment, it was perfectly logical for the World Bank to lend into their public sectors. That world has changed dramatically. For instance, in the largest countries, private expenditures on health as a percent of total expenditures on health show that it is 69% in Bangladesh; 81% in Cambodia; 64% in China; 76% in India; 65% in Indonesia; 55% in Mexico; 75% in Nigeria; 73% in Pakistan; 62% in South Africa; 70% in Uganda; and 73% in Viet Nam.

The successful implementation of UHC is dependent upon: “1) removal of direct out-of-pocket payments); 2) [a migration from] employment-based and contributory insurance models … to the public health sector; and 3) financial support through general government revenues”. Given the choice between low cost private resources for healthcare and heavily burdened ODA for UHC, it shouldn’t be surprising that ministries of finance would choose a resource flow which would provide them with increased levels of foreign exchange at least cost to their societies, while at the same time improving their international credit ratings for borrowing.

The Bank’s president is prescient in his caution that UHC could end up as a slogan. Yet, when used in his new vision To End Extreme Poverty by 2035 during the Bank’s Annual Meeting in October, it indemnifies donors from performance accountability. Who could be against such a laudable goal! When cast against an ocean of inconsequential Bank and IMF audits and their leadership in debt forgiveness of $93 billion for 40 poor countries through the Jubilee Program—the same countries which would be the main subjects of UHC, an embrace of these concepts by the Bank can be seen as a continuous tight grip on slogans in a retracing search for yesterday’s icebergs.

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