What are the effects of IMF agreements on government health expenditure in low- and middle-income countries? A quantitative cross-country study across income groups and agreement types
Item statusRestricted Access
Embargo end date05/07/2018
Introduction The International Monetary Fund (IMF) is an international financial institution that acts as a lender of the last resort for countries experiencing balance of payments problems. Its loans to national authorities come with conditions, which typically include tighter control of public spending, though the nature and extent of conditions as well as the emphasis on social protection may vary according to the type of lending agreement. A subject of intense debate has been the effects of these loans on the capacity of health systems to meet health need. This study investigates the effects of IMF agreements on one crucial determinant of that capacity: government health expenditure (GHE). To do so, it evaluates: (i) the effects of IMF agreements on GHE across low- and middle-income countries; (ii) how these effects vary across different country income groups; and (iii) how these effects vary according to the type of agreement. Methods The study employs a dataset that includes GHE for 127 countries for the years 1995-2012, estimates the effects of IMF agreements using the Fixed Effects estimator, controls for determinants of GHE and accounts for endogeneity using a Heckman-style selection model. Results When controlling for endogeneity and important determinants of government health expenditure, the results suggest that, across all countries, agreements do not have a statistically significant effect on GHE. However, the effect differs according to country income group, with low-income countries experiencing increases in spending during agreement, lower-middle income countries seeing decreases in expenditure, for upper-middle income countries no effect on spending are observed. In addition, the effect differs according to agreement type: agreements with a social protection component are associated with increases in spending in low-income countries but have no statistically significant effects among middle-income countries. Agreement types with no social protection component are associated with decreases in spending among lower-middle income countries; and there is no statistically significant effect among low-income and upper-middle income countries. Conclusions The results indicate that, contrary to claims in the existing literature, IMF agreements do not have a statistically significant effect on GHE (positive or negative). However, this aggregate finding obscures the effect of particular agreement types in particular contexts. In low-income countries, agreements with an emphasis on social protection are associated with increases in GHE. When agreements have no social protection component they are associated with decreases in GHE for lower-middle-income countries, but not in other countries. In such contexts, IMF agreements either fail to enhance, or actually reduce, the capacity of health systems to meet health need.