Scaling-up Resources for HIV/AIDS Control and Macroeconomic Policies: The Case of Kenya

1. Scaling-up Resources for HIV/AIDS Control and Macroeconomic Policies: The Case of Kenya Global Conference on HIV/AIDS and Macroeconomic Policies International Poverty Centre (IPC) Brasilia, 20-22 November degol.hailu@undp.org

2. Introduction • About 1.2 million people live with HIV/AIDS • Overall ODA fell, but aid to the health sector and aid to HIV/AIDS control increased significantly • HIV/AIDS spending was scaled up and the prevalence rate declined: 14% (2001); 6.7% (2003); 6.1% (2004) • Macroeconomic stability was not affected • Public health expenditure declined • HIV/AIDS spending is small as a share of GDP • Aid was not spent and was only partially absorbed

3. History of Aid flows • Falling ODA flows for the last 15 years • Aid as a share of GDP was 17% in 1993, but fell to 4% in 2004 • Aid flows declined from US$1,185 million in 1990 to US$634 million in 2004. • Disagreement on conditionality is major cause of aid fluctuation • Slight recovery after PGRF agreements in 2000

4. Kenya – Aid in US$ and as a share of National Income, 1975-2004Source: World Bank WorldDevelopment Indicators (2006)

5. Aid and Expenditure in Health Sector • Aid to the health sector as a share of total health expenditure up from 13% in 1998 to 15% in 2003 • But, total health expenditure as a share of GDP fell from 4.9% to 4.3% • Public health expenditure fell from 2% to 1.7% as a share of GDP (the LDC average is 2.4%); also fell from 11% to 7% as a share of total government expenditure (the LDC average is 9%) • Private health expenditure as a share of total health expenditure increased from 55% to 61%

6. Scaling-up HIV/AIDS Spending • As a share of overall aid, HIV/AIDS funding rose from 6% in 2000/01 to 38% in 2004/05, averaging 19% • As a share of total health expenditure HIV/AIDS spending increased from 5% to 34% • But, as a share of GDP, HIV/AIDS spending rose from 0.2% of GDP in 2000/01 to 1.5% in 2004/05 (averaging 0.7%)

8. HIV/AIDS Spending Including Target, US$ Source: KNASP (2005)

9. State of the Macro-economy(Source: Calculated from IMF’s IFS) • Comparing the periods before (1995 to 1999) & after (2000-2004) HIV/AIDS scaling-up • The CPI averaged 6% in the before period compared with 5% in the after period and the GDP deflator averaged 10% compared with 6% (PGRF target less than 3%) • Depreciation of the real exchange rate by 3.9% • High and positive growth rates of exports and imports

11. Aid Utilization

12. Summary • Overall ODA has been declining • HIV/AIDS funding increased, but even at a higher level only make up 1.5% of GDP • Public health spending declined, while private health expenditure increased • Aid was not spent; but partially absorbed and added to reserves as well as used to retire debt • No sign of macroeconomic instability • Policy is geared towards a growth strategy

13. Recommendations • Consider expansionary fiscal and monetary policies: increase spending of external resources (given the fiscal deficit target) • Reverse the decline in health expenditure, particularly in light of the linkages between HIV/AIDS and other diseases such as TB • Campaign and advocate for debt relief to Kenya that will allow channeling resources to HIV/AIDS control

14. END Thank You degol.hailu@undp.org