Debt relief and public health spending in heavily indebted poor countries.

Abstract

The Heavily Indebted Poor Countries (HIPC) Initiative, which was launched in 1996, is the first comprehensive effort by the international community to reduce the external debt of the world's poorest countries. The Initiative will generate substantial savings relative to current and past public spending on health and education in these countries. Although there is ample scope for raising public health spending in heavily indebted poor countries, it may not be advisable to spend all the savings resulting from HIPC resources for this purpose. Any comprehensive strategy for tackling poverty should also focus on improving the efficiency of public health outlays and on reallocating funds to programmes that are most beneficial to the poor. In order to ensure that debt relief increases poverty-reducing spending and benefits the poor, all such spending, not just that financed by HIPC resources, should be tracked. This requires that countries improve all aspects of their public expenditure management. In the short run, heavily indebted poor countries can take some pragmatic tracking measures based on existing public expenditure management systems, but in the longer run they should adopt a more comprehensive approach so as to strengthen their budget formulation, execution, and reporting systems.