external public finance: project grants from bilateral or ... · external public finance: project...

External Public Finance: Project Grants from Bilateral orMultilateral Agencies

Using grant resources to finance immunization.

What is a project grant from abilateral or multilateral agency?A grant is a set of resources—money,technical assistance and/or goods in-kind—typically transferred from indus-trialized nations to poorer ones. There isno expectation that they will be repaid.Grants may come directly from individ-ual countries as part of a bilateral assis-tance package, or may be channelledthrough multilateral agencies of theUnited Nations, or the European Union.The World Bank and regional develop-ment banks also offer limited grantmonies, primarily for pre-investmentstudies and institutional capacity build-ing. The volume and type of grantsoffered is the outcome of a combinationof technical analyses and political choicesby donors and beneficiary countries.

What are common international policies andpractices in using grants forimmunization financing?Grant monies constitute a vital source offunding for immunization services, par-ticularly in low-income countries.Grants typically provide a share (or insome cases all) of the financing foressential vaccines, and may also supportinfrastructure investments, technicalassistance, information systems andother inputs. Grants rarely pay healthworker salaries, although historicallythere has been a practice of “topping

up” low government salaries to encour-age workers to deliver certain services,such as immunization.

What are the maincharacteristics of using grants to finance immunization services?• Promoting equity (o). Grants canenhance global equity by redistributingfunds from richer to poorer countries.However, their effect on equity within acountry depends entirely on program-matic actions, such as whether they areused to improve strategies to deliverservices in hard-to-reach areas.• Achieving efficiency (-). Grant financ-ing of immunization services can haveimportant efficiency-related impacts. Onthe narrow question of the efficiency offinancial management, grant financingmay be associated with a lengthy andbureaucratic process. Administrative,accounting and auditing resources aboveand beyond those required for routinegovernment financing often are requiredby granting agencies.

On the broader question of programefficiency, grant funding can also havenegative consequences. Because grantstend to reflect donor priorities, theysometimes distort program budgetingand activities, leading to inefficiencies. Asa simple example, if grant funding isavailable for four-wheel drive vehiclesbut not motorcycles, total fuel costs may

1

2

end up higher than they otherwisewould be, and/or outreach activities maybe more limited.• Providing adequate, timely and reli-able resources (-/+). The availability ofdevelopment aid is subject to a variety ofpolitical and other forces that may resultin substantial and unpredictableincreases and decreases in funding levelsover a short period of time. There is littlecorrelation between need and the avail-ability of grant funding. Many observersbelieve that the contribution of externaldevelopment assistance to immunizationprograms could be enhanced by multi-year commitments, tied to specific pro-gram goals.

With respect to timeliness, grants canprovide important supplementaryresources that permit program benefitsto be sustained, particularly during peri-ods when there is a shortfall in govern-ment resources due to macroeconomicor other crises.

• Engendering accountability (+).Accounting and oversight proceduresrequired by development agencies canincrease the level of accountability inprocurement and financial management.• Encouraging self-sufficiency (-).Seeing that donors are willing to pay forimmunization services, governments maydevote national resources to other needs.Over the long term, there may be—andin some countries has been—an erosionin the national commitment to immu-nization. In addition, extensive relianceon foreign technical assistance may comeat the price of decreasing domestic tech-nical and managerial capacity.

It is important to note that, in concept,external funds could promote self-suffi-ciency if, for example, they required anincreasing “match” of domestic funds overtime, and/or they financed efficiency-enhancing improvements in organizationand management of the program.

For additional informationplease contact:

GAVI Secretariatc/o UNICEF, Palais des Nations CH 1211 Geneva 10, Switzerland

Tel: 41.22.909.5019 Fax: [email protected] www.vaccinealliance.org

3

Using the proceeds from debt relief to finance immunization.

External Public Finance: Debt Relief through HIPC II

hensive and participatory fashion. (TheI-PRSPs are simpler, shorter versions ofPRSPs and can be developed morequickly than PRSPs, allowing debt reliefproceeds to be programmed in theshort-term while the longer PRSP docu-ment is in preparation.)

Countries that qualify for debt reliefunder HIPC II may:• Significantly reduce their long-termdebt service, transitioning from unsus-tainable indebtedness into sustainableindebtedness thereby improving theircredit rating and encouraging greaterforeign investment; and• strengthen development efforts morequickly through an increased allocationof funds to the social sectors.

What are the maincharacteristics of using HIPCfunds for immunization services?• Promoting equity (+). Whether thefunds freed-up through debt relief havean equity-enhancing effect depends en-tirely on how they are used. If used asintended—for investments that alleviatepoverty—HIPC does have the potentialto improve conditions for the poorest ofthe poor.

What is HIPC?The Highly Indebted Poor Countries II(HIPC II)1 is a program of accelerateddebt relief introduced by the Group ofSeven (G7) countries in 1999. Countriescan use HIPC II debt relief proceeds tohelp support and strengthen programsin social sectors, including immuniza-tion services.

What are international policiesand practices related to HIPC?To be eligible for HIPC II debt relief, acountry must: have a low enough percapita income to be eligible for conces-sional/grant support from the Interna-tional Monetary Fund (IMF), WorldBank and regional development banks;face an unsustainable burden of debt;and have a track record of reform andsound policies through IMF- and WorldBank-supported programs.

Under HIPC II, debt relief proceedsmust be used for poverty reduction. Howcountries plan to attack poverty utilizingboth national and external resources isoutlined in a Poverty Reduction StrategyPaper (PRSP) or an interim PovertyReduction Strategy Paper (I-PRSP), bothof which must be produced in a compre-

1 As of October 2001, the following countries are eligible to receive HIPC II support: Angola,Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoros,Congo, Cote d’Ivoire, Democratic Republic of the Congo, Ethiopia, Gambia, Ghana, Guinea,Guinea-Bissau, Guyana, Honduras, Kenya, Lao PDR, Liberia, Madagascar, Malawi, Mali, Maurita-nia, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, SierraLeone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Yemen, and Zambia.

4

• Achieving efficiency (+). Debt reliefdoes not imply significant additionaloutlays for administration or manage-ment of funds.• Encouraging self-sufficiency, andproviding adequate, timely and reliableresources (+). The HIPC II debt reliefinitiative provides countries an opportu-nity to increase national financial sup-port for health and immunization pro-grams by reducing the drain of nationalfunds for debt servicing.

It is important to note, however, thatthe actual volume of funds made avail-able for social programs through theHIPC process may in reality be small.This is the case, first, because much ofthe savings accrues over time, ratherthan in terms of current budgets.Second, there are a tremendous numberof competing demands on the resourcesthat are freed up, and if a country cur-rently is in deficit spending, those fundshave already been committed. In addi-tion, although debt relief can cut a coun-try’s external debt by more than 60 per-cent, many countries will continue tohave large outstanding external debt.

While potentially useful, the incre-mental increase in national health budg-ets as a result of debt relief is expected tobe modest. A World Bank analysis on thefinancial impact of the HIPC initiativenoted that average social spending as apercent of GDP is expected to increaseby less than one percentage point inAfrica, from 4.4 to 5.1 percent over theperiod 1999-2003 and by about 3 per-centage points, from 10.8 to 13.5 percentin Latin America. Average social spend-ing as a percent of national revenues isonly expected to increase by less than 5

percentage points in both Africa andLatin America regions.• Engendering accountability (+/-).With respect to the transparency of useof debt relief proceeds, the track recordso far is mixed. Many HIPC countriesare establishing poverty funds, designedto be transparent and accountable mech-anisms to administer funds gainedthrough debt relief efforts. At the sametime, some country experiences indicatethat it has been extremely difficult totrack the funds made available underdebt relief, and there are chronic ques-tions about whether funding for socialprograms has been positively affected.

What are some keys to success for using the HIPCprocess to supportimmunization financing?Countries and development partners canmake a strong case within the I-PRSPs/PRSPs for focusing resources releasedthrough the HIPC process on immuniza-tion. Arguments include the following:• Vaccine-preventable diseases are bothcauses and effects of poverty.• Essential immunizations are highlycost-effective.• Poor children are less likely to haveaccess to high quality curative care sopreventive services are particularlyimportant for this age group.• Immunization costs are a very small share of government and health-sector spending.• Immunizations can help break thecycle of poverty and ill health.

For each program element I-PRSPsand PRSPs require:

• The identification of a developmenttarget and strategy (e.g., increase immu-nization coverage for the poor).• Establishment of a program indicator(e.g., increase immunization coverageusing DTP3 as an indicator).• Choice of an impact indicator (e.g.,reduction of infant mortality rate inthe lowest two income quintiles by agiven percent).

For more information . . . Financial Impact of the HIPC Initiative:First 22 Country Cases, March 2001. TheWorld Bank, Washington, DC.

Fairbank, A., M. Makinen, W. Schottand B. Sakagawa. (2000) Poverty Reduc-tion and Immunizations. Abt AssociatesInc. Bethesda, MD. This document isalso posted on the Global Alliance forVaccines and Immunization web site at:www.vaccinealliance.org

Poverty Reduction Strategy PaperSourcebook—Health, Nutrition and Pop-ulation chapter. The World Bank, Wash-ington DC. Available on-line in English,French, Russian, Spanish and Portugueseat: http://www.worldbank.org/poverty/strategies/sourctoc.htm.

See the HIPC website operated by theWorld Bank, http://www.worldbank.org/hipc/




5

External Public Finance: Sector-Wide Approach

Using pooled external support to finance immunization.

What is a “Sector-WideApproach”A sector-wide program of external sup-port, commonly known as a Sector-wideApproach (or by the acronym SWAp), isa relatively new way for donor and lend-ing agencies to organize their support toa developing country’s health sector. Thefundamental idea is that developmentpartners work with the beneficiary gov-ernment to agree upon a comprehensivevision and strategy for the health sectoras a whole, and then provide all externalsupport within that framework—ratherthan as isolated categorical programsdetermined solely by external interestsand priorities.

What are international policies and practices related to SWAps?In concept, a fully evolved SWAp has thefollowing characteristics, among others:external funds are not earmarked; exter-nal financing does not go directly to aproject unit, but rather to an overallbudget; the government sets priorities;and reviews and reporting processes are consolidated.

In many instances, SWAps are associ-ated with sectoral reform processes—that is, the development partners seek towork with the government to define avision and implement a strategy formore efficient and equitable functioningof the sector, rather than maintenanceand expansion of the government’s cur-

rent “way of doing business.” That said,there is not necessarily a one-to-onecorrespondence between a SWAp andsector reform.

There currently are no examples offully-evolved SWAps—i.e., where unear-marked budget support is provided by alldonors, based on an agreed-upon frame-work. However, in several countries (e.g.,Ghana, Bangladesh, Zambia, Tanzaniaand others) there is a range of variants ofthe concept, and popularity of sucharrangements appears to be increasing.

What are the maincharacteristics of using a SWApfor immunization programs?• Promoting equity (+). Grants frombilateral or multilateral agencies, whetherpart of a SWAp or not, can enhanceglobal equity by redistributing funds fromricher to poorer countries. However, theireffect within a country depends on pro-grammatic actions, such as whether theyare used to improve strategies to deliverservices in hard-to-reach areas. The nego-tiations between the funding agencies andthe government, which form the basis fora SWAp, usually include discussions aboutactions to improve targeting of services tothe poor or other equity-enhancingapproaches.• Achieving efficiency (+). Compared totraditional project-specific external fund-ing, SWAps can imply lower transactioncosts to access funding: Once the frame-work and performance targets for a

6

SWAp are agreed to, in concept the exter-nal financiers simply provide budget sup-port, which can be used through regularchannels. Few additional administrativeand accounting resources are required.

SWAps also have the potential toenhance program efficiency, if they pro-vide the government with greater flexi-bility in resource allocation than project-specific funding.• Providing adequate, timely and reli-able resources (+). In concept, a SWApfor external grants and loans can makean important contribution to healthsector funding, particularly in the poor-est countries, and therefore can help toensure adequate funding for all priorityprograms. There has been some concernamong the immunization communitythat shifting from a project-specific to aSWAp arrangement might reduce thefunding available for support of immu-nization programs. While it is certainlytrue that earmarking of donor funds—

for example, for vaccines or for coldchain rehabilitation—is anathema toSWAps, allocation of government fundsfor priority public health programs atthe national level is strongly encouragedby the SWAp process: All partners partic-ipate in negotiations about how publicspending patterns can be reoriented toimprove health conditions. Thus, aSWAp can ensure higher levels of fund-ing for immunization.• Engendering accountability (+). ASWAp can be negotiated around healthoutput and/or outcome targets.• Encouraging self-sufficiency (-).Potentially, external funds could promoteself-sufficiency if, for example, theyrequired an increasing “match” ofdomestic funds over time, and/or theyfinanced efficiency-enhancing improve-ments in organization and managementof the program. However, any injectionof external funding runs the high risk ofengendering greater dependence on aid.




7

What is national budgetsupport?National budget support is financialinput from external sources (principallybilateral and multilateral donor agen-cies) delivered to the national treasuryor the account of a particular govern-ment ministry.

What are common international policies and practices on budgetsupport for immunization?Typically, funds are provided condi-tional on the creation of a budget linefor particular items, such as vaccines, ordonor consultation on a sector budget.For example, the European Union pro-gram of budget support for Sahelianountries—known as Appui au Renforce-ment de l’Indépendence Vaccinale enAfrique Sahélienne (ARIVAS)—requiresthat participating countries establishbudget lines for vaccines. In most cases,some form of reporting is required,although it is less detailed than for proj-ect grants. In some instances, foreigntechnical assistance in budgeting andfinancial management accompanies thebudget support.

Not all donors have the option ofusing budget support (rather than proj-ect support), although there is a trendamong international agencies toward thisoption, and away from project grants.

What are the maincharacteristics of using budget support to financeimmunization services?• Promoting equity (o). Whethernational budget support has equity-enhancing effects depends on program-matic decisions.• Achieving efficiency (+). In concept,national budget support requires rela-tively few additional resources to managethe funds.• Providing adequate, timely and reli-able resources (+). Budget support cantake years to implement as it oftenrequires the development of trust amongpartners, a structure for consensus build-ing on goals and priorities, and a moni-toring and reporting system. However,once established, national budget sup-port represents an important contribu-tion to ensuring that there are sufficientfinancial resources to achieve programgoals; it implies reliable, multi-year com-mitments by development partners.• Engendering accountability (+). Highlevels of accountability are required tomaintain donor confidence in the systemand to promote efficient and effectiveuse of resources.• Encouraging self-sufficiency (-/+).Whether long-term self-sufficiency isenhanced or hampered by nationalbudget support depends on how it isstructured and managed. On the posi-tive side, budget support is considered

External Public Finance: National Budget Support

Using national budget support from donor agenciesto finance immunization.

au: pleasecheck spellingof Sahélienne -I don’t think“Saheélienne iscorrect.

8

to promote capacity building by puttingthe national government in control ofthe disbursement of funds and support-ing the development of accounting andreporting systems. In concept, underbudget support, donor priorities andproject reporting procedures no longerdominate the time of policy-makers.Governments can therefore concentrateon longer term strategic health policy-making that is incorporated into thebudgetary process of the country. Thefact that resource allocation decisionsare made by the government rather than by donors alone may increase thelikelihood that these allocations will bemaintained after the withdrawal ofexternal assistance.

On the negative side, whenever there is an external source of funding, thenational government may depend onthose external funds for priority pro-grams, and fail to take measures toincrease its own financial contribution.

What are some keys to successof budget support?Budget support works best when the fol-lowing conditions are in place or wherethere is a willingness to put them in place:• A positive policy environment.• A rigorous system of financialaccountability or the means to build one.• Strong program monitoring systemsor the means to build them.• A shared vision of the strategic direc-tion for the health sector.

• A willingness to view the budgetsupport as part of a process of im-proving health sector management and implementation.• A rigorous annual review process thatinvolves the main stakeholders.• Mutual trust, strong government own-ership of the program and agreement onthe “rules of the game.”• Flexibility on the side of donors and awillingness to take the broad view.• Donors’ willingness to deliver contri-butions on time.• Broad participation in planning and design.• An appreciation of the complexitiesand difficulties to be encountered inmoving from a project-based to sector-based program and a plan for dealingwith these challenges.

For more information . . . Foster, M. A. Brown, T. Conway.

(2000) Sector-Wide Approaches for HealthDevelopment. World Health Organiza-tion Strategies for Cooperation and Part-nership, Global Programme on Evidencefor Health Policy. World Health Organi-zation, Geneva, 2000. WHO/GPE/00.1

Kaddar, M, B. Sakagawa. (2001) Analy-sis of International Mechanisms Support-ing Immunization Programs: The Euro-pean Union’s ARIVAS. Abt Associates,Bethesda, MD. For additional information

please contact:



9

External Public Finance: Vaccine Fund

Using Vaccine Fund resources to finance immunization.

What is the Vaccine Fund?The Vaccine Fund is a multi-milliondollar trust fund established to supportcountries to strengthen their immuniza-tion services and introduce new andunder-used vaccines. The Fund makes itsawards based on recommendations fromthe Board of the Global Alliance for Vac-cines and Immunization (GAVI). Coun-tries with a GNP per capita equal to orbelow US$1,000 are eligible for support.

The Vaccine Fund was established inJanuary 2000 with an initial grant ofUS$750 million from the Bill andMelinda Gates Foundation. Since thattime, there have been significant contri-butions from many national govern-ments. Total commitments for theVaccine Fund exceed US$1 billion for 2001-2005.

What are common international policies andpractices in using the VaccineFund for the procurement of new and under used vaccines and strengtheningimmunization services? There are three basic conditions for sup-port from the Vaccine Fund. Countriesmust have:• a fully functioning Inter-agencyCoordination Committee (ICC) or equivalent;• an assessment of immunization serv-ices conducted during last three years;

• a multi-year plan for immunizationprogram

The Vaccine Fund currently providessupport from two sub-accounts: immu-nization services, and new and under-used vaccines.

Immunization services sub-account:To access the immunization services sub-account, countries must have:• National DTP3 coverage < 80%• Annual targets for increasing numberof children to receive DTP3• Action plans as part of the multi-yearplan to achieve:

■ safe injections and safe managementof sharps waste■ a reduction of vaccine wastage andimmunization drop-out rates.The Vaccine Fund allocates support

from the immunization sub-accountthrough the awarding of shares. Eachshare conceptually represents the VaccineFund’s contribution toward immunizingone child. The initial share value is set atUS$20. Share values are divided into two parts:• Up-front investment in plans to reachadditional children for the first twoyears. The investment is calculated basedon the number of children the govern-ment plans to reach in the future.• Retrospective reward for additionalchildren having been immunized. Thereward is to be calculated at the end ofeach year based on the number of addi-

10

tional children actually immunized withDTP3 by age 12 months during the pre-ceding year.

If countries do not show any increasesin numbers of children immunized aftertwo years, support from the immunizationservices sub-account will be suspendeduntil satisfactory progress is shown.

New and under-used vaccines sub-account:To access the new and under-used vac-cine sub-account for the procurement ofhepatitis b, Haemophilus influenzaetype b, (either as single antigens or incombination with DTwP) and yellowfever, countries must have a:• National DTP3 coverage >50%• Plan for the introduction ofnew vaccines • Action plans as part of the multi-yearplan to achieve:

■ safe injections and safe managementof sharps waste■ a reduction of vaccine wastage andimmunization drop-out rates

MonitoringCountries are expected to submit annualreports to GAVI with a more extensivemid-term review two years from the startof initial disbursement. Overall perform-ance as measured by DTP3 coveragerates at the district level are to be exter-nally verified through a Data QualityAudit (DQA), which was first performedon a pilot basis in 2001. This process willbe the first of its kind to verify achieve-ments in health services performance.

GAVI is providing support tostrengthen the financial managementand institutional capacities within recipi-ent countries, and thereby improve thechances of long-term sustainability. Atthe half-way point in funding, countriesare required to submit a financial sus-tainability plan, specifying how futurefunding requirements will be met. If theprocess of preparing the plan is under-taken as a serious effort to obtain com-mitments from the beneficiary govern-ment, as well as development partners, itcan represent important progress towardsustainability. GAVI also is makingefforts on the vaccine supply side,working with private sector manufac-turers to ensure a reliable supply of bothtraditional and newer products, ataffordable prices.

For more information . . . See the Global Alliance for Vaccines andImmunization website:www.vaccinealliance.org.

See the Vaccine Fund website:www.vaccinefund.org.




What are the majorcharacteristics of using theVaccine Fund for theprocurement of vaccines andsupplies and strengthening ofimmunization services? • Promoting equity (o). Whether use of the Vaccine Fund has equity-enhancing effects depends on program-matic decisions.• Achieving efficiency (+). With respect to efficiency of financial manage-ment, there are no special procedures or costs required to access the VaccineFund resources.

In terms of programmatic efficiency,the use of the Vaccine Fund is linked toUNICEF’s procurement mechanism andfacilitates access to vaccines of assuredquality at the best available price.• Providing adequate, timely and reli-able resources (+). While the process ofsubmitting and obtaining approval forthe application can take several months,support from the Vaccine Fund can bemobilized relatively quickly once a coun-try’s application is approved.• Engendering accountability (+). TheVaccine Fund concentrates on accounta-bility for results, rather than spending.Countries are expected to monitor andshow an increasing number of childrenbeing immunized with DTP3. They arefree to allocate the grant funding as theychoose to support immunization services.• Encouraging self-sufficiency (-/+). Asan external source of funding, there is arisk that use of the Vaccine Fund willundermine efforts to increase nationalfinancial commitments to the immu-nization services, and/or stimulate anexpansion in the program that ultimatelyis unaffordable. However, steps are beingtaken to mediate this risk.

external public finance: project grants from bilateral or ... · external public finance: project...

Documents