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Health and education spending update: Rise in social spending under IMF programs continues, but benefits are unequal

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
January 2000
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A recent review of data on government spending on education and health care reveals that such spending has continued to grow in countries with IMF-supported programs (see IMF Survey, March 8, 1999, page 79; February 23, 1998, page 52; and July 21, 1997, page 217). Indicators of education attainment and health status have also continued to improve. But underlying the increase in average spending are significant differences among countries and an uneven distribution of the benefits. The review, which covers 66 countries with IMF-supported programs during 1985-98, is part of an ongoing effort by the IMF to compile and analyze data on government spending in the education and health care sectors.

Average trends

Under IMF-supported programs, public spending on both education and health care has increased on average, both as a share of GDP and total spending and in real per capita terms, and social indicators have improved (see top chart, this page). Average spending growth slowed during 1998, but was not out of line with developments in earlier years. The spending increases were, on average, equally split between current and capital outlays.

Variation in spending across countries

The averages mask substantial variation across countries and within regions. Public education and health care spending have increased in real per capita terms in just under two-thirds of the countries with IMF-supported programs. On average, the largest spending decreases in real per capita terms have taken place in countries where such spending was relatively high and inefficient at the outset of the program (most notably in transition economies).

The variation in spending trends has been especially large in sub-Saharan Africa. This region includes four of the countries with the largest declines in real per capita education spending under IMF-supported programs (the Republic of Congo, Cöted’Ivoire, Madagascar, and Niger), as well as four of the countries with the largest increases in such spending (Burkina Faso, Cameroon, Ethiopia, and Lesotho). Both the level and the growth in spending on social sectors have been relatively low in highly indebted poor countries (HIPCs)—that is, countries that are eligible for relief of external debt under the HIPC Initiative—compared with other countries that are eligible for the IMF’s new Poverty Reduction and Growth Facility (PRGF) (see bottom chart, page 95). At the same time, the improvement in social indicators has been slower in HIPCs than in other PRGF-eligible countries.

Social spending in countries with IMF-supported programs1

(average change)2

Citation: 29, 6; 10.5089/9781451934229.023.A013

1 Reflects all countries with IMF-supported programs for which data are available.

2 Between preprogram year and most recent year for which data are available.

Data: National authorities and IMF staff estimates

Change in social spending and social indicators in HIPCs and in PRGF-eligible countries1

(average annual percent change)2

Citation: 29, 6; 10.5089/9781451934229.023.A013

1 Reflects countries for which data are available.

2 From first year since 1985 for which data are available to most recent year for which data are available.

3 Heavily indebted poor countries eligible for debt relief under HIPC Initiative.

4 Non-HIPC countries eligible for the Poverty Reduction and Growth Facility. Excludes transition economies: Albania, Armenia, Azerbaijan, Bosnia and Herzegovina, Georgia, the Kyrgyz Republic, former Yugoslav Republic of Macedonia, Moldova, Mongolia, and Tajikistan.

Data: World Bank, World Development Indicators database; national authorities; and IMF staff estimates

Distribution of social indicators within IMF program countries, 1992-971

(percent)

1 Reflects countries for which data are available.

2 Households in the bottom 20 percent of the income distribution.

3 Households in the top 20 percent of the income distribution.

Data: World Bank, African Development Indicators 1998/99; and World Bank, Poverty Assessment Reports (various issues)

Benefits of social sector spending

The distribution of benefits of spending on education has been uneven within countries, as reflected in lower levels of indicators of education attainment in rural areas, for women, and in low-income households (see chart, this page). Preliminary data from household surveys in various countries show similar inequities for indicators of health care received (for example, infant mortality, immunization, births attended by skilled personnel, and access to sanitation). The uneven distribution of benefits from public spending on social sectors is exacerbated by the high share of resources devoted to nonbasic services available primarily to higher-income households (for example, 58 percent of total public health care spending is allocated to curative health care, and 19 percent of education spending, to tertiary education).

These results have two important implications for the preparation of poverty reduction strategy papers (these are country-driven documents identifying priority public action for poverty reduction; see IMF Survey, January 10, page 3). First, increased outlays on antipoverty programs in the context of debt relief for HIPCs should not perpetuate existing inefficiencies in public spending on education and health care. Second, careful attention needs to be paid to the targeting of public services to rural areas, women, and low-income households.

Ian S. McDonald

Editor-in-Chief

Sara Kane

Deputy Editor

Sheila Meehan

Senior Editor

Elisa Diehl

Assistant Editor

Sharon Metzger

Senior Editorial Assistant

Lijun Li

Editorial Assistant

Jessie Hamilton

Administrative Assistant

Philip Torsani

Art Editor/Graphic Artist

Carol Greer

Graphic Artist

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