Context
Low‑ and middle‑income countries (LMICs) are far from meeting the financing needed for universal health coverage. The World Bank notes that per‑capita public health spending in LMICs is about half the minimum benchmark. While the share of GDP spent on health has narrowed slightly, per‑capita gaps have widened more than three‑fold since 2000.
Key Developments
- 2021: Peak of DAH during the COVID‑19 pandemic.
- Early 2025: The United States announced a 67% cut in its foreign assistance programme; the UK, France and Germany followed with cuts of 39%, 35% and 12% respectively.
- 2024: Global public debt reached a record $102 trillion, with developing nations accounting for $31 trillion. UNCTAD reported a record $921 billion in net interest payments by developing countries.
- 2024‑25: In India, only about two‑thirds of the flagship health infrastructure mission allocation was spent; within the NHM, just 26% of earmarked funds for disease programmes were utilized.
Important Facts
Budget execution in LMICs averages 85‑90%, lower than for general budgets and education. Wage bills are usually fully spent, but spending on goods, services and preventive care is low. The London School of Hygiene & Tropical Medicine estimates India spends less than 25% of public health money on preventive care.
Evidence shows that public health spending yields the greatest health impact when directed at classic public goods—such as infectious disease control and sanitation—where market failure exists. Spending on curative services that the private sector already provides competitively yields lower returns.
Exam Relevance
Understanding the financing gap, the role of OECD projections of a possible 60% drop in health funding from the 2022 peak, and the impact of rising public debt are crucial for answering questions on health economics, fiscal policy and international development in GS3.
The governance challenges highlighted—budget credibility, procurement efficiency, and sub‑national implementation—link to GS4: Ethics and GS3: Economy, especially when discussing corruption, public‑finance management and decentralisation.
Way Forward
- Spend allocated funds fully: Strengthen execution mechanisms to raise health‑budget absorption to >90%.
- Prioritise preventive and primary care: Shift a larger share of spending to public‑goods interventions like vaccination, sanitation and disease surveillance.
- Improve governance: Reduce corruption, enhance bureaucratic capacity, and decentralise oversight to sub‑national bodies.
- Strengthen public finance management: Ensure budget credibility, timely cash disbursement, and involve health providers in budgeting to boost accountability.
- Maintain flexibility: Design budgets that can adapt to emergencies, as learned from the COVID‑19 experience.
Even with constrained resources, well‑directed spending can narrow health outcome gaps across countries.