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Financial crisis and global health

Dr Andrew Steer
Director General, Department for International Development,
United Kingdom of Great Britain and Northern Ireland

Remarks at the high-level consultation on the financial crisis and global health

Your excellencies, Ministers of Health, Director-General, friends, thank you for the invitation to this very important event. Congratulations to the Director-General and staff of WHO for convening and leading us. Thanks too to WHO for the excellent background paper.

The global recession

The world economy has entered its most severe downturn since the 1930s. Coming on top of the food and fuel crises of 2008 this is likely to seriously set back the fight against global poverty.

Already 100 million people were pushed into poverty by last year’s events. And it would not be surprising if another 100 million fall into poverty as a result of the global recession.

Many middle-income countries have already felt the impact through the channel of financial markets. Most low-income countries have not – but should expect to in the months ahead.

  • Capital flows to developing countries will decline sharply – probably by half, from about $1 trillion per year to about $500 billion.
  • Foreign direct investment is likely to decline – as investors find it difficult to raise finance, and seek to avoid risk.
  • Exports from developing countries may well decline, for both volume and price reasons, as world trade falls this year for the first time in nearly 30 years.
  • Remittances, which have amounted to around $280 billion per year, are expected to fall as host-country economies suffer.

Some of these declines may seem modest, but they must be compared with the rapid growth that countries have become used to in recent years. Private investment decisions are based upon expectations of continuing growth – and thus may now fall sharply.

As a result growth in incomes and employment in developing countries will shrink; tax revenues will be much lower than budgeted; unemployment is likely to increase; and poverty will rise in many areas.

We do not know the precise impact of course, but we need to be prepared. At a minimum we expect growth rates to fall by 2% to 3% for the next two years. It is fair to guess that by the end of 2010 African per capita income levels will be at least 5% lower than they would otherwise have been. This is an average figure. Many poor families will suffer bigger declines.

Impacts on health

Impacts on health will vary greatly by country and context, but past downturns show some common patterns.

The impact on the poor will be especially serious, as risk-management options are limited: the poor may need to sell productive assets, nutritional standards are likely to fall and the ability to spend on private health care will fall.

We hope that the current downturn will not be as severe as that suffered by East Asian countries a decade ago. In that situation morbidity and mortality rates rose, with infant mortality rising in many local areas.

A common feature of most downturns is that spending on private health care falls as people turn to public health care. The demand for public health care rises significantly at precisely the time that governments feel the financial need to cut back. In such situations it is the poor who are almost always squeezed out. And it is important to remember that many millions of poor families are entering this period in an already weakened state because of last year’s price volatility. Tragically, it is estimated that 40-50 million children experienced permanent cognitive and physical injury last year as a result of the food crisis alone.

What to do?

Most obviously, we need to all we can to minimize the depth of this recession, and its spread to developing countries. Nobody could fault our leaders for not trying hard in this regard. No previous downturn has ever had as much money, effort and brainpower put into finding a solution. The G20 Economic Summit on Recovery and Jobs, to be held in London on 1 and 2 April 2009, will bring together the leaders of the Group of Twenty countries with the aim of agreeing on common coordinated solutions.

Adequate resources

Closer to home in the health sector, we need to ensure that resources for health do not fall. For rich countries, this means keeping our promises. Promises made at the International Conference on Financing for Development (Monterrey, Mexico, 2002) and at the G8 (Gleneagles, Scotland, 2005, and Hokkaido Toyako, Japan, 2008) and European Union summits must be kept. Keeping promises in good times is not difficult. The test of sincerity comes in difficult times.

In the past three global recessions, official development assistance levels fell – at precisely the time when it was needed the most. In the past two global recessions, such assistance for health also fell.

The United Kingdom Government has announced its determination to honour its pledge to raise official development assistance to 0.56% gross domestic product in 2010 and 0.7% in 2013. It is very important that that assistance not be diverted from health and other social sectors. The Government is committed to provide £6 billion ($9 billion) for achieving the health-related Millennium Development Goals by 2015. This implies a spending of almost £1 billion per year.

In addition, we are committed to spend 90% of our bilateral assistance on low-income countries, and we expect to spend about 62% of our total bilateral official development assistance in fragile states, the home of the “bottom billion”.

Under the principles of “mutual accountability” that we agreed in the Paris Declaration on Aid Effectiveness (2005) and Accra Agenda for Action (2008), we expect to be held accountable for these commitments we have made, just as partner countries will want to be held accountable as they make sure that their own budget resources are not diverted from health and other social services, as has sometimes happened in the past.

Innovative sources of finance

We will also need to be more innovative in seeking new sources of funding. This is why a High Level Taskforce on Innovative International Financing for Health Systems was created at the United Nations last September, under the chairmanship of the United Kingdom's Prime Minister Gordon Brown and Robert Zoellick, President of the World Bank. The Taskforce will report to the G8 Summit to be held in La Maddalena, Italy, in July, with a final report ready for the United Nations General Assembly in September.

It will explore a range of options – including scope for encouraging non-traditional donors, and voluntary levies earmarked for health in poor countries. It will also explore options for front-loading official development assistance, and making it more predictable. This can help add to the value of the aid. The Centre for Global Development has shown how the value of money rises by 11% if it is truly predictable, and in the right circumstances front loading also makes the money more valuable. The International Finance Facility for Immunization has already demonstrated high returns, and the Taskforce will explore whether such an approach would be possible for investment in health systems.

Innovations in public-private partnerships also need to be aggressively pursued. The pilot advance market commitment programme for new drug development needs to be monitored and (very likely) expanded. So too with innovations in product development partnerships with private and nongovernmental laboratories. And the remarkable innovations we have seen over the past decade in the GAVI Alliance, the international drug purchase facility UNITAID and the Global Fund to Fight AIDS, Tuberculosis and Malaria need to be understood and mined for further expansion.

Spending money better

Finally, we need to make health funding go further. Let us be frank here; in the health sector we have not been as cost-effective as we might. In many countries we still are not able to trace exactly how much money really reaches the interface with the client, and how much gets used up for administration along the way. We need to do a better job at monitoring flows of funds, ensuring that they reach the front lines, and deliver high-quality health at the lowest cost possible. We also need to invest more heavily in systems to monitor emerging health problems and to track results.

At the international level there is still scope for much better teamwork among agencies and donors, offering in turn opportunities to deliver better value for money. The International Health Partnership is beginning to play an important role in this regard, and we look forward to the upcoming ministerial meeting here in Geneva in two weeks' time.

A final word

Progress over the past decade has been impressive by any historical standard. As a result we stand where no generation has stood before: with a realistic chance of eliminating mass poverty within our generation. Access to good health care is a central plank of this goal.

The current crisis seriously threatens this dream. We must all use every ounce of energy and innovation to make sure that this dream stays alive. The people in the room this morning – ministers of health, donors, international agencies, the World Bank, nongovernmental organizations, and WHO itself – have a crucial role to play. I wish you the best in your important deliberations.