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Policy for the Health Sector : The Bank’s health policy
Implications for the BankThe strategic policy objectives described here have a number of implications for the operations of the Bank. These include (i) identifying means for supporting international public goods such as selected research activities; (ii) staff resource requirements; (iii) flexible use of lending modalities for health sector activities; (iv) training of Bank staff; (v) the Bank’s approach to the issue of financial sustainability in the health sector; and (vi) the Bank’s policy on tobacco. International public goods. Currently, the Bank has few mechanisms for financing international public goods, such as research, other than through TA grants. Grants can be used to finance some aspects of health research, as is currently the case for agricultural research, but it will be useful to explore other methods of funding. Staff resource requirements. As of August 1998, the Bank has the equivalent of eight full-time staff working on the health sector, including five health specialists. This represents 1.2 percent of the Bank’s professional staff (another health specialist will join shortly). To maintain the current volume and number of health sector loans (which have averaged 1.5 percent and 2.1 percent, respectively, of overall Bank lending during the last decade) the planned complement of staff is likely adequate although it does not provide a critical mass of expertise. The proposed increase in health sector activities will require additional health sector specialists (including health economists and health administrators). Any additional staff resource requirements will be generally provided through reallocation of the existing resources. Lending modalities. There are a number of characteristics of the health sector that will require flexible use of existing lending modalities. For example, financing the introduction of new vaccines might require the use of lines of credit, multicountry loans, or other flexible arrangements. Similarly, pilot testing innovative approaches to the management, organization, or financing of health services might require adaptation of current procedures or the development of new products. For example, the important policy and software aspects of health sector activities may require relatively small but more frequent loans. Limiting the number of loans to a country or the number of sectors the Bank is involved in will engender either larger health sector loans or decreased health sector lending. Training of Bank staff. It may be possible to improve the effectiveness of Bank lending by providing health sector training to other operational staff in the Bank, including country economists, programs officers, and social sector economists. Given the need for macroeconomic policy dialogue to redirect government budgets toward the social sectors, such training will be timely and useful. Financial sustainability. Financial sustainability of capital investments in the health sector is a critical challenge because recurrent costs are large relative to the investment. Typically, annual recurrent expenses for a health center or health post represent 20 to 30 percent of the initial capital investment. For hospitals, it can be 40 to 60 percent. In attempting to promote sustainability, the Bank and its DMCs should concentrate on the macroeconomic picture, i.e., better fiscal management and greater allocations for the health sector. Since full, and in many cases even partial, cost recovery is not advisable in many parts of the health sector, the sustainability of investments will depend largely on the government’s general fiscal situation and intersectoral allocations. Obviously, such macroeconomic issues cannot be tackled simply within the purview of health sector capital investments, which typically form a small part of government expenditure. Limiting health investments to what governments can afford to finance in the short term is often unrealistic, and indeed counterproductive, from a long-term development perspective. Many countries are caught in a vicious circle of low human capital, low productivity, low government resources, and low investment in human capital. The Bank can assist its DMCs to break out of this vicious circle by investing more in their human resources and by encouraging them to do likewise. In addressing issues of sustainability in health sector projects, the Bank will focus on (i) macroeconomic considerations and intersectoral allocations of government resources; (ii) opportunities for introducing insurance mechanisms and diversifying public financing generally; and (iii) increasing efficiency and equity in the public health sector. The Bank will not insist on the short-term financial sustainability of the health projects based on efforts at cost recovery. Further, financial sustainability of health projects will be viewed in light of the Bank’s Criteria for Subsidies. While encouraging ownership of project activities by DMC governments is paramount, the Bank will follow a flexible approach to financing recurrent costs, especially for projects that redress serious inequities or provide public goods. Traditionally, the Bank has financed recurrent costs on a declining basis. However, for projects that promote new technologies, are of a pilot nature, or have overriding equity considerations, the Bank will apply this approach flexibly. Nonetheless, Bank financing of incremental recurrent costs generated by projects will be undertaken only if a sound fiscal policy is in place and a coherent social sector strategy exists with explicit linkages to broader development goals. Tobacco policy. Due to the heavy burden of disease in the region engendered by tobacco use (about 11 percent of all morbidity and mortality by 2020) and the unique commercial nature of the tobacco industry, the Bank will work closely with DMC governments to reduce the use of tobacco products. It is proposed that the Bank (i) encourage the DMCs to decrease tobacco consumption through increased tobacco taxes and other means; (ii) support DMC government efforts to regulate the marketing of tobacco products, particularly to the young; (iii) not accept any free goods or services from tobacco companies; (iv) not lend for the growing of tobacco or the production of tobacco products; and (v) continue to include tobacco products and processing equipment in the negative list of program loans.
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