The Disbursement Gap II.

In thinking about President Bush’s request to extend PEPFAR’s life for another 5 years and an additional $30 billion, I’ve come across some data that suggests the U.S. is having disbursement problems. While I don’t think this will pose a problem for PEPFAR reauthorization in the short run, I wonder if these problems are unique to the U.S. and what is their origin. I blogged about it before and Kim Yi Dionne of UCLA suggested bureaucratic delays might be partially responsible.

According to data from Jennifer Kates of the Kaiser Family Foundation:

  • In 2006, the U.S. committed $2,631.7mn for bilateral and multilateral HIV/AIDS programs in the developing world and disbursed $1,589.8mn (a disbursement level of 60.4%).
  • In 2005, the U.S. committed $1918.7mn and disbursed $1095.0mn (a level of 57%) .

In conversations with some other folks who work on this issue, colleagues suggested this was not unique to the United States. Other bilateral donors may be experiencing this problem. The Global Fund was identified as also potentially suffering from a disbursement gap.

I first looked into Canadian and UK patterns of disbursement, and it doesn’t appear that they have those problems. Of course, the Canadians aren’t giving nearly as much, though I suppose it could be a lot for them. The British come closer in terms of volume and given the size of their economy, it is pretty substantial.

When I look at Jennifer Kates’ data on 2005 and 2006, DFID and Canada disbursed all that they pledged for bilateral giving. Canada’s bilateral pledges/disbursements were $107.1mn and $63.1mn in 2005 and 2006 respectively. The UK bilateral pledges/contributions were $637.1mn and $779.6mn in 2005 and 2006 respectively. The only other major bilateral donor that faced a disbursement gap was the Dutch. In 2006 they pledged more than $900mn and only disbursed $345mn.

As for the Global Fund, it has made agreements of grants of nearly $7.6bn since inception and disbursed about $4.6bn (a disbursement level of 61%). There is considerable variation by region with southern, western, and Central Africa’s 57.6% disbursement level and large proportion of overall grants (about 30%) driving the average down. See here for data.

What accounts for this disbursement gap? The Global Fund website suggests this is normal:

Disbursements will always lag behind commitments. The Global Fund follows a performance-based approach to grant-making. This means that additional funds are not disbursed until evidence of progress has been seen. Disbursements are typically made on a quarterly basis.

Cynics might suggest the $15bn and the $30bn figures are designed for maximum political effect with few able to gauge and monitor the actual disbursement levels. I wouldn’t doubt that the President is hoping to achieve some positive press for a now politically popular cause, but the more tricky issue which could bedevil attempts to ramp up spending in the future is absorptive capacity.

Michael Bernstein of the Center for Global Development suggests this may be a huge barrier to getting more money dedicated to this problem:

A major barrier to moving money more quickly is the limited capacity in recipient countries. Many countries with large AIDS epidemics historically spent little on health, so a sudden inflow of large sums cannot be easily absorbed. Donors disbursement policies can exacerbate the problem, making it harder for recipients to manage AIDS funds.

He provides this graphic which shows the rapid increase in donor financing for HIV/AIDS efforts from PEPFAR, the Global Fund, and, to a lesser extent, the World Bank. He notes that:

The new resources provided by the “big three” funders represent a huge increase in funds at the country level. In Uganda and Ethiopia, once AIDS money began flowing from all three funders in 2004, the amount of money provided quickly approached (and by 2005 had exceeded) the governments’ 2003 budgets for the entire health sector.

He emphasizes the difficulty of complicated reporting requirements that vary by donor, and the amount of time it takes to get proposals through. He also details the vagaries of the way in which PEPFAR agreements of various forms take shape with recipient countries. Bernstein recommends more flexibility in how donors allow funds to be spent.

In any case, this is an interesting area. Some of my colleagues suggest rescinding U.S. restrictions on prevention spending would enable the U.S. to spend more (rules requiring 2/3 of prevention funds be spent on faithfulness and abstinence, restrictions on talking with sex workers). Since prevention is only a piece and a smallish piece of U.S. HIV/AIDS spending (20%), I wonder if flexibility post-reauthorization would provide all that much cushion in the U.S. ability to disburse more.

I think the real challenge is what happens if donors (even partially) make good on their commitments at Gleneagles to provide universal access to treatment by or near 2010. The UNAIDS study on the costs of scaling up, not only for treatment but prevention and care, are quite large, requiring a doubling to quadrupling of current flows, as I blogged about here.

The absorptive capacity issues will likely loom even larger in the months and years to come, which could be problematic for donor’s willingness to foot a larger assistance program.

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One Response to “The Disbursement Gap II.”

  1. I think it would be interesting to ask country directors for the Global Fund or PEPFAR/USAID or DFID what their problem is with disbursement in-country. Do they not have enough places to put the money? Or are they unwilling to commit to something that wouldn’t be sustainable after the donor money dried up?

    On the micro-level, there is a clinician in a rural district of Malawi who is given a certain amount of antiretrovirals every month to disburse to Stage III and Stage IV patients. What was interesting about this clinician was that he never disbursed the full set of drugs he was allotted each month. I couldn’t help but wonder why – I mean, you have the drugs, there is a steady flow from the national government, and there are certainly enough patients trying to get on drugs. In fact, his higher-ups were saying if he didn’t distribute the amount given they would reduce his disbursement. Still, no ability to clean the shelves every month. I am still puzzled by this clinician and what he was stockpiling for.

    In the case of PEPFAR/Global Fund/etc., if money isn’t spent in a fiscal year, does it get called back to the coffers? I mean, I know at my public university whatever is in your academic account that isn’t spent by June 30th gets called back up to the central finance guys. Is that the same for PEPFAR et al? Or, do the in-country directors get to hold onto this money (since everyone is expecting a ‘lag behind commitments’) and spend it the following year, or the year after that, etc.

    If they get to hold onto the money for an indefinite period of time, I could see why those at the implementation level wouldn’t disburse everything. The incentives aren’t set up for them to disburse it all – because once it’s disbursed, they need to look for a new job. Right? And they could easily point to reasons why they couldn’t spend it: lack of capacity for the inflow of resources, or delays in Monitoring and Evaluation, [fill in your NGO-speak reason here].