Fiscal Space for Health in Bangladesh

Abstract

A strong health financing system will be an important priority as Bangladesh seeks to meet theexpectations of its population and embrace its future as a middle-income country. The objective of this report is to present policymakers with a foundation for an informed discussionabout government health spending and future health financing options in Bangladesh. It analyzesalternative sources of additional health financing and their potential contribution to higher spending in the sector. The findings will be relevant to both the Ministry of Finance (MoF) and Ministry of Health and Family Welfare (MoHFW) and can inform a dialogue between the two Ministries as the government seeks a way forward.Fiscal space for health is a particularly important policy challenge for Bangladesh because it currently has one of the lowest levels of government health spending in the world.Fiscal space for health refers to the availability of budgetary room that would allow a government to increase health spending without jeopardizing the sustainability of its fiscal position. In general there are five potential sources of fiscal space: (1) economic growth which translates into more overall government revenues and, in turn, a larger health budget; (2) a reprioritization within the budget in favor of health, resulting in higher expenditures; (3) increased overseas development assistance (ODA) for health; (4) an increase in health-specific resources, such as earmarked taxation or insurance contributions; and (5) greater efficiency in the use of existing health budget resources such that additional resources become available for new spending.The report also presents illustrative scenarios to show the potential impact that these channels can have on fiscal space for health in Bangladesh going forward. In summary, financing health in Bangladesh over the short to medium term will require a combination of existing and additional domestic resources that result from economic growth, improved tax collection, and most significantly a moderate re-prioritization of the budget in favor of the health sector. A longer-term agenda will relate to the possibility of generating additional resources through individual contributions starting with the formal employed sector, if that is the path chosen.