Context

• Strong public health systems are essential for human development, economic productivity and social stability.
• Yet low- and middle-income countries (LMICs) face persistent health-financing gaps.
• While inadequate funding remains a fundamental challenge, declining international assistance, rising public debt and growing healthcare needs make it difficult to rely solely on higher expenditure.
• The priority must therefore shift from merely spending more to spending better, while ensuring adequate investment in health.

The Global Health-Financing Gap

• According to the World Bank, per-capita public spending for universal health coverage in LMICs remains significantly below minimum benchmarks.
• Although the health expenditure gap between LMICs and high-income countries as a share of GDP narrowed between 2000 and 2023, the per-capita spending gap widened substantially.
• This apparent convergence is misleading because similar shares of GDP can represent vastly different absolute resources.
• Hence, expenditure ratios do not necessarily indicate comparable healthcare capacity or outcomes.
• The situation has worsened with the decline in development assistance for health (DAH) after its pandemic-era peak.
• Reduced foreign assistance by major donors threatens an important supplementary source of financing for LMIC health systems.

Debt and Shrinking Fiscal Space

• Declining international assistance coincides with rising public debt and debt-servicing costs.
• Developing countries face growing fiscal pressures, leaving fewer resources for health, education, infrastructure and social protection.
• Governments therefore face a difficult balancing act between financing essential services and servicing debt.

Steps to Maximise the Health Impact of Every Unit of Public Expenditure

• Spend What Is Allocated
  • The first priority is improving budget execution. Allocations that remain unspent cannot translate into medicines, infrastructure, equipment or healthcare services.
  • Under-execution may result from administrative delays, procurement bottlenecks, weak planning, staffing shortages and inefficient fund flows.
  • Governments should consequently assess not only how much is allocated but also how efficiently allocations are converted into actual services and outcomes.
• Spend on the Right Things
  • The second priority is allocative efficiency, directing scarce resources towards interventions generating the greatest health and social returns.
  • Health budgets often adequately fund salaries while underfunding medicines, equipment and operational supplies.
  • Healthcare workers without adequate resources cannot deliver quality care.
  • Public spending also needs greater emphasis on primary and preventive healthcare rather than excessive concentration on secondary and tertiary treatment.
  • Strong primary care can facilitate early diagnosis, health education and continuity of care while reducing unnecessary pressure on hospitals.
• Prioritising Public Goods and Prevention
  • Government spending is particularly valuable where market failure limits private provision.
  • Vaccination, sanitation, infectious disease surveillance and prevention generate positive externalities and therefore justify strong public financing.
  • At the same time, demographic and epidemiological transitions are increasing the burden of non-communicable and chronic diseases.
  • Health systems must strengthen screening, risk-factor management, early detection and long-term care.
  • The objective should be an integrated system in which prevention, primary care and appropriate curative services complement one another.
• Better Governance, Better Health
  • The third priority is good governance. The impact of public expenditure depends heavily on institutional quality.
  • Corruption, inefficiency and weak administrative capacity can significantly reduce the benefits of additional spending.
  • Conversely, stronger bureaucracies, transparent institutions and effective accountability can improve health outcomes without proportionately increasing expenditure.
  • With growing decentralisation, strengthening subnational health governance at state, district and local levels is equally important.
• Strengthening Public Finance Management
  • Effective health financing requires more than a well-formulated budget.
  • Governments must strengthen budget credibility, timely cash disbursement, procurement and expenditure monitoring.
  • Greater participation of frontline health providers in budgeting can improve accountability and ownership, while transparent and competitive procurement can deliver better value for money.
  • Health budgets must also retain sufficient flexibility during emergencies, as demonstrated by the COVID-19 pandemic, when rigid financial systems proved inadequate for rapidly changing needs.

Conclusion

• In an era of shrinking development assistance, rising debt and expanding healthcare needs, the crucial question is how effectively resources are transformed into health outcomes.
• LMICs need a combination of adequate financing, efficient execution, strategic allocation and strong governance.
• Greater investment in prevention and primary healthcare, better public finance management, efficient procurement and responsive institutions can make scarce resources go further.
• Ultimately, every unit of public health expenditure should generate the maximum possible improvement in population health, strengthening resilience, reducing inequalities and ensuring sustainable progress towards universal health coverage.