What are the effects of IMF agreements on government health expenditure in low- and middle-income countries? A quantitative cross-country study across income groups and agreement types
Introduction The International Monetary Fund (IMF) is an international financial
institution that acts as a lender of the last resort for countries experiencing balance of
payments problems. Its loans to national authorities come with conditions, which
typically include tighter control of public spending, though the nature and extent of
conditions as well as the emphasis on social protection may vary according to the type
of lending agreement. A subject of intense debate has been the effects of these loans
on the capacity of health systems to meet health need. This study investigates the
effects of IMF agreements on one crucial determinant of that capacity: government
health expenditure (GHE). To do so, it evaluates: (i) the effects of IMF agreements on
GHE across low- and middle-income countries; (ii) how these effects vary across
different country income groups; and (iii) how these effects vary according to the type
of agreement.
Methods The study employs a dataset that includes GHE for 127 countries for the
years 1995-2012, estimates the effects of IMF agreements using the Fixed Effects
estimator, controls for determinants of GHE and accounts for endogeneity using a
Heckman-style selection model.
Results When controlling for endogeneity and important determinants of government
health expenditure, the results suggest that, across all countries, agreements do not
have a statistically significant effect on GHE. However, the effect differs according to
country income group, with low-income countries experiencing increases in spending
during agreement, lower-middle income countries seeing decreases in expenditure, for
upper-middle income countries no effect on spending are observed. In addition, the
effect differs according to agreement type: agreements with a social protection
component are associated with increases in spending in low-income countries but have
no statistically significant effects among middle-income countries. Agreement types
with no social protection component are associated with decreases in spending among
lower-middle income countries; and there is no statistically significant effect among
low-income and upper-middle income countries.
Conclusions The results indicate that, contrary to claims in the existing literature, IMF
agreements do not have a statistically significant effect on GHE (positive or negative).
However, this aggregate finding obscures the effect of particular agreement types in
particular contexts. In low-income countries, agreements with an emphasis on social
protection are associated with increases in GHE. When agreements have no social
protection component they are associated with decreases in GHE for lower-middle-income
countries, but not in other countries. In such contexts, IMF agreements either
fail to enhance, or actually reduce, the capacity of health systems to meet health need
