HIV/AIDS as a Fiscal Liability

The costs of HIV/AIDS programs are significant from a macroeconomic or fiscal perspective in a number of countries. Assessing the fiscal implications is complicated by the long lags between infection and the need for HIV/AIDS-related services, and the long duration over which these services (notably treatment) are required. The paper interprets the fiscal costs of HIV/AIDS programs as quasi-liabilities, which are incurred by HIV infections and are paid off as HIV/AIDS-related services are delivered. On the microeconomic level, the analysis yields estimates of the costs incurred by single HIV infections, which - together with other criteria - can be used in assessing the effectiveness of HIV/AIDS program allocations. On the macroeconomic level, the analysis highlights the large magnitude of the HIV/AIDS quasi-liability (according to criteria for the sustainability of public debt), and quantifies the fiscal savings achieved or projected as a consequence of declining HIV incidence. --HIV/AIDS,health shocks,health expenditures,social expenditures,fiscal space,debt sustainability,quasi-liabilities,Africa,Botswana,South Africa,Swaziland,Uganda

HIV/AIDS as a Fiscal Liability

The costs of HIV/AIDS programs are significant from a macroeconomic or fiscal perspective in a number of countries. Assessing the fiscal implications is complicated by the long lags between infection and the need for HIV/AIDS-related services, and the long duration over which these services (notably treatment) are required. The paper interprets the fiscal costs of HIV/AIDS programs as quasi-liabilities, which are incurred by HIV infections and are paid off as HIV/AIDS-related services are delivered. On the microeconomic level, the analysis yields estimates of the costs incurred by single HIV infections, which - together with other criteria - can be used in assessing the effectiveness of HIV/AIDS program allocations. On the macroeconomic level, the analysis highlights the large magnitude of the HIV/AIDS quasi-liability (according to criteria for the sustainability of public debt), and quantifies the fiscal savings achieved or projected as a consequence of declining HIV incidence

Economic growth in development---health, demographics, and access to technologies.

The first substantive chapter (II) addresses the macroeconomic impact of HIV/AIDS, with reference to sub-Saharan Africa. The framework is designed to capture some interactions between the formal and the informal sector, and - reflecting open capital markets of many economies affected by HIV/AIDS - to address the implications of capital mobility. Additionally, our study is the first academic study of the growth impact of scaling up antiretroviral treatment. Allowing for capital mobility, our analysis returns a stronger impact of HIV/AIDS on output and income per capita than the corresponding closed-economy models. The estimated impact on the informal sector is more pronounced than for the formal sector, reflecting a stronger impact of HIV/AIDS on savings rates. GDP per capita is lower in the scenario with comprehensive scaling-up of antiretroviral treatment, as rising costs of care and treatment affect savings rates. Chapter III adapts a microeconomic framework with forward-looking agents to study the contributions of health, as well as income, to living standards, drawing on empirical work on the value of statistical life. For leading industrialized countries, the contribution of health over long periods of time has been of similar magnitude as rising incomes, but the contribution of health has slowed down since about 1950. For developing countries, the slowdown occurred somewhat later. HIV/AIDS has resulted in steep declines in living standards in a number of countries in sub-Saharan Africa. Chapter IV focuses on the impact of capital-deepening arising from falling relative prices of ICT equipment. The estimated impact of ICT-related capital deepening on growth in developing countries is substantial (about 0.3 percentage points), although lower than comparable estimates for leading industrialized countries. Unlike in some industrialized countries, the impact of ICT-related capital deepening has not slowed down after 2000, owing to growing absorption of communications equipment

Financing essential HIV services: a new economic agenda.

Anna Vassall and colleagues discuss the need for, and challenges facing, innovative and sustainable financing of the HIV response. Please see later in the article for the Editors' Summary

HIV/AIDS, demography and development: individual choices versus public policies in SSA

Despite the increasing rate of diffusion of effective therapies, the battle against HIV/AIDS in Sub-Saharan Africa (SSA) is far from being over. Three main challenges are that the epidemics might paralyse or reverse the fertility transition, the expansion of the resources needed to finance the fight against HIV, and the emerging resistance to anti-retroviral treatments. This research proposes a UGT-like model showing the complexity of the interplay amongst the (macro)economy, the epidemics, their endogenous feedback on mortality and fertility and the central role of policy actions aimed to fight HIV. The disease-induced increase in adult mortality can hamper economic development by its upward pressure on the precautionary demand for children and downward pressure on education. This can dramatically reduce physical and human capital accumulation