Journal Issue

Socioeconomic Implications of AIDS in Developing Countries

International Monetary Fund. External Relations Dept.
Published Date:
January 1991
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As AIDS increasingly takes its toll, it is becoming clear that the epidemic is much more than simply a health problem. An introduction to this complex issue

In the mid-1970s, the scientific community first became aware of an illness that was striking predominantly adults in various parts of the world. Those affected by the disease would gradually waste away and not respond well if treated for common illnesses. But it was not until the early 1980s that this syndrome was identified as the Acquired Immune Deficiency Syndrome (AIDS), the final and fatal stage of infection with the human immunodeficiency virus (HIV). Now, barely a decade later, the AIDS epidemic has reached global proportions. The World Health Organization (WHO) estimates that in 1991, there were nine million adults and almost one million children worldwide infected with the virus, with over 80 percent of those in developing countries. As the numbers of those infected continues to increase—with the developing world accounting for a growing share—finding a cure, or vaccine, looms as one of the greatest challenges to modern science.

To date, most of the discussion surrounding the AIDS epidemic has focused on the devastating human toll and the serious strains that no doubt will be placed on national health care systems. But as many developing countries—particularly the poorer economies of Sub-Saharan Africa—are already discovering, the epidemic is not solely a health issue and cannot be dealt with as such (see box). Rather, it threatens to alter dramatically the economic and social fabric of many societies, raising serious questions about the development process itself. Although not the biggest killer—far more people in the developing world succumb to childhood diseases, such as respiratory ailments, diarrhea, and measles—AIDS strikes young and economically productive adults. Moreover, given the large numbers of individuals infected with the HIV virus, AIDS may well turn out to be an even more serious problem in the years to come. This article takes a look at the potential social and economic consequences of AIDS for developing countries, drawing on initial World Bank work in this area.

Status of epidemic

For policymakers in countries that have been hit hard by AIDS, the need to design effective policies to prevent the further spread of the disease and to mitigate the negative consequences of the epidemic takes on increasing urgency with each passing day. But epidemiologists and statisticians are finding AIDS to be one of the most difficult diseases that they have ever tried to model. Unlike previous epidemics—such as the Black Plague, which ravaged Europe in the Middle Ages—AIDS has a long gestation period and can be transmitted sexually. As a result, researchers must try to predict human (i.e., mostly sexual) behavior—a formidable task.

Although AIDS is still a relatively new phenomenon—in effect, a breakdown of the body’s immune system, which leaves it vulnerable to “opportunistic” infections that would normally be treatable—scientists already know a great deal about its epidemiology or transmission. To begin with, AIDS can be transmitted in three ways: through sexual intercourse, which globally accounts for approximately 80 percent of all HIV infections (of these, only 10 percent are estimated to have been due to homosexual exposure); through infected blood or blood products (this includes not only blood transfusion, but contact with HIV-contaminated drug-injecting equipment and the well-publicized, albeit rare, needle-prick exposure of health personnel); and from a mother to her fetus or infant, also known as perinatal transmission, which accounts for another 10 percent.

Researchers also know that progression from the time of infection with the virus to the onset of full-blown AIDS is not immediate. In fact, there is a long incubation period—about ten years—during which individuals are already infectious but may show no signs initially of being ill. For children, however, the time from infection to developing AIDS is much shorter, usually less than five years. Average survival after the onset of AIDS for both adults and children in developing countries is less than one year.

What researchers do not know enough about is sexual behavior in given populations and the potential changes that current prevention campaigns might bring. Questions also surround the efficiency of transmission (notably, the probability that a mother will pass AIDS on to her fetus or infant; estimates range from 30–50 percent), as well as the exact number of those infected but not yet ill (data are particularly poor in developing countries). As a result, it is extremely difficult to forecast with any certainty at what point the epidemic will peak and stabilize in various regions, let alone in individual countries. Even so, conservative WHO estimates predict that nine million adults will develop AIDS during the 1990s, on top of one million AIDS cases in the 1980s. By the turn of the century, as many as 30 million adults and 10 million children will have been infected with HIV, generating one million annual AIDS cases—over 90 percent of which will occur in Africa.

Certainly the epidemic has spread the most quickly in Sub-Saharan Africa, which WHO now estimates accounts for roughly two thirds of the HTV infections worldwide (see chart). But unlike in developed countries, in Africa, AIDS has struck men and women in an almost even ratio, and this means—especially when fertility rates are high—that many infants are also at risk. The industrialized countries come next, at 17 percent, with most cases still involving homosexual men. Increasingly, however, there has been a rise in heterosexual transmission, probably through infected drug users to their partners in the United States, as well as in Latin America and the Caribbean. So far, South and Southeast Asia have escaped the high tolls seen in other regions, although there are indications that the epidemic is beginning to take hold in highly populated India and Thailand.

By the turn of the century, however, some dramatic changes are anticipated. Although the rate of increase of new cases is expected to slow in industrialized countries, in large part because of behavior change among high-risk groups, the numbers will continue to climb sharply throughout the developing world. By the year 2000, over 90 percent of those infected with HIV will be in developing countries, with half in Sub-Saharan Africa and a quarter in South and Southeast Asia. The current trend among high-risk groups in Thailand and India is particularly disturbing. What started in Thailand as a problem among intravenous drug users has now spread to the heterosexual community. In June 1989, about 3 percent of Bangkok’s estimated 100,000 prostitutes were HIV positive; 18 months later, the figure was up to 20 percent, and the disease is likely to spread quickly from infected clients to their spouses.

Global adult HIV prevalence, by region

(In percent)

Source: Derived from World Health Organization, Global Programme on AIDS, “Current and Future Dimensions of the HIV/AIDS Pandemic, A Capsule Summary.” April 1991.

Socioeconomic impact

What costs can countries expect to bear as a result of the AIDS epidemic, especially in the developing world, where many are already struggling with high debt loads, fragile economies, famine, scarce human capital, and, in some cases, civil wars? Increasingly, the evidence shows that the ramifications will cut across all sectors, implying that many countries may need to look at the implications for development itself.

Demographic effects. First and foremost, AIDS is a human tragedy, as captured by the changes in social indicators increasingly used as a proxy to monitor the development process. In Africa, where HTV prevalence rates have reached 10 percent and greater, deaths due to AIDS among children are already negating gains made by child survival programs in reducing mortality. Anticipated declines in adult mortality rates, too, are beginning to show signs of reversal. WHO has estimated that over 1985–90, AIDS added 10 percent on average to annual death rates for adults aged 15–49. In five years, these rates will increase by an additional 40 percent, and for some age groups, mortality rates could double or even triple. Gains in life expectancy, too, will be eroded as ADDS strikes adults in their prime productive years. The impact of AIDS on population growth rates will be noticeable—most models estimate that population growth rates in severely affected countries will be reduced by one half to one percentage point annually in the next two decades. But predictions of negative growth and shrinking populations are very unlikely, particularly where underlying growth rates remain high, such as in Sub-Saharan Africa. And, in spite of the AIDS epidemic, the promotion of family planning services should remain on the priority agenda.

Economic impact. Assessing the magnitude of the economic impact hinges, of course, on the difficult task of determining the course of the epidemic itself. Based on anecdotal evidence at the household and firm level, however, a reasonable hypothesis is that the impact on the productive sectors will be channeled through changes in the size and quality of the labor force. Given the scale of the epidemic in some hard-hit countries, it is conceivable that long-run growth in per capita output will be constrained.

AIDS predominantly affects adults in their prime sexual and most productive ages, and unlike many other diseases afflicting adults in developing countries, it is fatal. Furthermore, this disease does not spare the occupational or urban elite, who are arguably among the more productive members of the economy. It is thought that the virus first spread among higher socioeconomic classes in African capitals. Indeed, infection rates in African urban centers are often double those in rural areas (AIDS is already the leading cause of adult death in Abidjan, and about 20 percent of adults in Kampala are infected).

Formal sector. The spread of AIDS in cities in the developing world has implications for the development of the service and industrial sectors, the expansion of the private sector, as well as capacity-building efforts in countries where human capital is scarce. At the firm level, morbidity reduces productivity and boosts firms’ medical expenses; eventual mortality also means increased outlays for death benefits. Replacement and retraining costs in hard-hit industries are already beginning to escalate.

Uganda: a new approach to combating AIDS

AIDS began to spread in eastern Africa along the shores of Lake Victoria in the mid-1970s. Today, of just under 17 million Ugandans, 1.3 million carry the HIV virus, most in their prime productive and most sexually active years. If the epidemic continues unabated, more than a million Ugandans—including nearly 400,000 children—will have died from AIDS by the turn of the century. Already, indicators of child survival and life expectancy are well below what they would have been without AIDS (see charts in box), and these estimates are conservative, given the number of uninfected children that will be losing primary caretakers—their mothers.

Faced with this crisis, Uganda has been one of the most forthright governments in Africa in admitting the seriousness of the problem. Indeed, it was the first, with help from WHO, to develop and adopt a Medium Term Plan to control AIDS, implemented by a special unit in the Ministry of Health that was established in 1986. These early efforts concentrated on developing and disseminating health education messages, screening blood supplies, and establishing a surveillance system to track the disease’s spread. But in April 1990, the Government of Uganda turned to the World Bank for additional help, although traditionally the Bank has not been involved with the control of epidemics.

The Bank responded to the Government’s appeal by forming a multidonor mission in September 1990, consisting of senior representatives from WHO, the United Nations Development Programme (UNDP), the United Nations Children’s Fund, the United Nations Population Fund, Britain, Denmark, Norway, Sweden, and the United States. The objective was to pinpoint Uganda’s emerging and unmet needs in the area of AIDS prevention and control. Questions raised by concerned Ugandans included: (1) how to provide cost-effective patient care for the tens of thousands developing symptoms of full-blown AIDS, including highly contagious tuberculosis; (2) how to provide basic needs, including school fees, for anywhere from 500,000 to 1 million orphans; (3) how to develop and spread health messages through more channels than only the Ministry of Health; and (4) how to assess the long-term economic ramifications, particularly in terms of per capita income and productivity.

As the mission participants worked closely with government officials and local NGO representatives, they quickly discovered that the impact of AIDS extended far beyond the health sector. Moreover, since Uganda was one of the first countries affected by the AIDS epidemic, early indications of some longer-term economic consequences were already becoming evident. The answer was to develop a multisectoral approach, with discussions centering on how to devise both a strategy and an appropriate institutional structure to ensure that the problem was effectively tackled. This theme was pursued by a follow-up Bank mission, jointly supported by WHO and UNDP.

The structure that emerged in early 1991 was a National AIDS Commission, chaired by the President of Uganda and comprising key ministers from a wide range of sectors. Its chief function is to set broad policy and provide high-level political support for the multisectoral AIDS activities. The Commission is supported by a full-time Secretariat, which is now working with relevant ministries and NGOs to develop a national AIDS strategy. Once this is done, the Secretariat will be instrumental in mobilizing—but not necessarily directly channeling—resources, as well as coordinating interventions, to stem further infections and mitigate the devastating consequences of AIDS

Mortality rates far children under five in Uganda, 1985–2010

Deaths per thousand live births

Life expectancy at birth in Uganda, 1985–2010

In years

Note: Demographic parameters are projections based on standard World Bank methodology. For Uganda, the World Bank average decline in mortality of causes other than AIDS was assumed, while fertility decline was assumed to follow a slow decline pattern. The “With AIDS” scenario is based on a World Bank simulation model.

Source: World Bank staff estimates, 1991.

Agriculture. The rural sector will not escape the touch of the epidemic, either. Although infection rates are lower in rural areas, throughout much of the developing world, most people still live there, making the absolute numbers of infected persons much higher. For countries where the bulk of agricultural production is very labor intensive and grown on smallholder plots, shortages of able-bodied adults may lower overall agricultural output. In addition, in the early phases of HlV-related illnesses, individual productivity will be reduced, other household members will need to devote time to caring for the patient, and household resources—otherwise used to purchase agricultural inputs—may be diverted for medical treatment.

Coping mechanisms involving labor allocation decisions are not well understood. The contribution of children’s labor may be increased as families struggle to maintain current cropping patterns, and nonessential activities, such as weeding and pruning, may be curtailed. The key constraint will surface during periods of peak labor demand. If a household becomes unable to either supply labor internally or hire temporary workers, the composition of crops may be altered, and established patterns of many smallholders indicate that subsistence needs are usually met first, with marketable crops grown thereafter. It is conceivable that farmers will incrementally reduce labor-intensive or cash crops, but the extent to which this occurs will depend on these types of coping mechanisms, as well as underlying factors, such as population density, soil fertility, and rural infrastructure.

Overall, as was the case with many plagues and epidemics in the past, the short-term socioeconomic consequences could be severe, but there will no doubt be adjustments in the long term. Families, communities, and nations will adapt in an effort to cope with the increased mortality. If labor becomes a truly binding constraint, technological changes to save labor will emerge. If AIDS becomes severe, relative prices will adjust over time, and as wages get bid up, migration could play an equilibrating role. What is clear, however, is that more information is needed not only about the path of the epidemic but also about how the disease will alter development prospects in individual countries with differing resource endowments.

Human capital. One of the most troubling aspects is the possible implications for human capital formation—a key ingredient for successful development, as underscored in the World Bank’s World Development Report 1991. Investing in people through improved health, education, and nutrition—particularly women, who constitute half of the developing world’s population—holds the key to higher productivity and output in the long run, as well as being a desirable end in itself. But the AIDS epidemic poses a serious threat to the further development of human capital, potentially reversing the gains already made.

Education. Families with an AIDS illness or death will be less able to afford school fees, in part because of other expenditures on medical care, and children may be required to spend more time at home performing chores normally carried out by adults. In addition, university students, entering sexually active ages, are at increasing risk of contracting HIV, and their loss has a compound effect—not only have many years of education been foregone, but often limited university positions have been denied to others, as well.

Health. Even before AIDS, many developing countries were straining to improve the general health status of their populations. Now they must also cope with growing demands for hospital beds, health personnel, and drugs—in some parts of Africa, over half the occupants in many hospital wards are HIV-positive. The opportunity costs of temporarily treating illnesses of terminal AIDS patients could be enormous, as patients with curable ailments are crowded out. Expensive drugs available to those suffering with AIDS in industrialized countries are well beyond the reach of both public sector health care budgets and most individuals. Expenditures for health care are unlikely to expand at the same rate as new AIDS cases, despite the desperate need for them to do so to reach even basic primary health goals. Costly drugs are not recommended in WHO treatment guidelines for AIDS. One exception is to fully treat tuberculosis—a communicable disease now known to increase with AIDS—to prevent secondary infections.

Food security and nutrition. The links between AIDS, nutrition, and food security are complex. Extreme weight loss is one of the key symptoms of AIDS, caused by difficulties in food intake because of HlV-related illnesses. But distinguishing between AIDS and acute malnutrition is very difficult without testing for HIV. This is especially true for children, as chronic malnutrition (i.e., stunted growth) will only show up in children over time, and pediatric AIDS cases are unlikely to live long enough to show signs of stunting.

Even more disturbing are the indirect effects of AIDS within households on the food security and the nutritional status of surviving family members. Because AIDS is spread heterosexually, it is not uncommon for more than one adult per family to carry the virus. Household productive capacity, purchasing power, and per capita food availability are all likely to be reduced in the event of an adult’s death from ADDS. Disruption—and even dissolution—of family structures because of AIDS is likely to increase food insecurity and malnutrition. Extended families that take in orphans could find food resources spread more thinly.

Women and children. As heterosexual exposure takes over as the main mode of transmission worldwide, women and children will become more and more vulnerable, both as potential AIDS casualties and as survivors. The implications are quite serious, given that in many developing countries—particularly in Africa—women are not only the main providers of care but also the ones largely responsible for food production, agricultural labor, and the raising of children. The evidence from Africa increasingly shows that women are more likely to be infected than men and at an earlier age. This happens, in part, because women tend to have little control over the sexual behavior of their husbands, either in terms of their own relationships or those outside the union. Moreover, as mentioned earlier, women infected during peak childbearing years also expose unborn children to the virus.

Another cause of deep concern is that by the year 2000, there may be an estimated five to ten million orphans in Africa alone—a region that has never had to deal with an orphan problem, thanks to extended families—on top of the ten million children that are projected to be infected. Orphanages hold little hope as a solution because of the sheer numbers involved, and extended families in parts of Africa are already beginning to feel the strains; often, the responsibility to feed, clothe, shelter, and educate the children falls on elderly grandparents, with little means of financial or physical support. Of growing concern is the ability of widows and orphans to acquire property rights (i.e., land) after the death of a male head of household. Without access to means of production, widows and children may be forced into petty theft or prostitution to support themselves.

What can be done?

The AIDS epidemic poses an unprecedented challenge to policymakers—a challenge that must be met on two fronts. First, in keeping with the strategy long urged by WHO, the emphasis should be on prevention, especially in areas where the epidemic is in its earliest stages (as in Asia). Short of a vaccine, an unlikely development before the year 2000, this means changing sexual behavior. But as many prevention campaigns have demonstrated, improved knowledge does not necessarily lead to reformed behavior. The use of condoms and the treatment of other sexually transmitted diseases can also help—Thailand, for example, has a well-established and highly visible program to deliver contraceptives, especially condoms, which could be tailored quickly to promote safe sex. Blood screening, use of protective medical garments (gloves), and clean syringes add to the effort.

But even if all new transmissions were stopped tomorrow, there would still be a staggering number of AIDS cases, especially in Africa, with potentially profound implications for human resource development and economic growth. Thus, policymakers must also concentrate on designing measures to mitigate the consequences of the epidemic, which will involve taking stock of the potential magnitude of the epidemic as it affects various economic sectors. Since AIDS is no longer solely a health issue, ministries across the board should be involved in both planning interventions to mitigate the consequences (e.g., school fees for orphans and labor-saving technologies) and disseminating prevention messages (e.g., through teachers, agricultural extension agents, political organizations, social groups, and religious bodies). Local communities and nongovernmental organizations (NGOs) must also be enlisted—indeed, in many instances, they have already been instrumental in responding to the needs of patient care and providing for orphans.

What started out as a disease of concern to national health ministries and international health organizations has now become a problem with many dimensions. It is imperative in countries where the epidemic has already made inroads, that governments openly acknowledge the seriousness of the problem and take urgent action to stem the further spread of the virus. Even where the incidence of HIV infection is low—but where there are factors known to facilitate its transmission—early prevention measures, such as information campaigns, should also be promoted. The challenge for the donor community is to identify areas of comparative expertise and move forward quickly in a coordinated approach. Failure to do so will only exacerbate what is emerging as a major challenge to economic and social progress in developing countries and, above all, a human tragedy of massive proportions.

Jill Armstrong

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