COVID-19 Vaccination Financing and Budgeting Q&A
What is the overall recommendation with regards to financing?
- The evolution of the COVID-19 pandemic has demonstrated the unpredictable nature of the virus, with new variants shifting the epicenter of the disease and countries experiencing multiple waves of infections and economic impact. Achieving high vaccination coverage in all countries is the only way to disrupt the pandemic globally and win the race against the virus.
- The substantial impact that COVID-19 has had on the health and wellbeing of everyone plus its crippling effect on economies across the world means that COVID-19 vaccination will serve two critical functions: an essential health intervention (reducing mortality and morbidity) plus much-needed economic stimulus (allowing economies to re-open). Vaccination can also become a public good: once a critical mass of people have been vaccinated, the herd immunity that results is enjoyed by all.
- It should follow, then, that financing COVID-19 vaccination is a government-wide responsibility and that governments need to explore how best it should be financed. The very large positive externalities (i.e., the health and economic benefits of vaccination are both at the individual and societal level) arising.
- Sources of funding for COVID-19 vaccination should not come at the expense of other essential health or social services keeping in mind that said funding, because of its very large positive externalities, is an overall economic decision taken by government and is certainly not limited by the reprogramming of existing MOH budgets. In the case that existing funds are reprogrammed to COVID-19 vaccination from other activities or investments (at the government-wide level), priority should be given to identifying areas of non-productive spending or non-essential activities that can be delayed without negatively impacting population welfare.
What are the main funding sources for COVID-19 vaccination financing?
- Broadly, there are three main sources of funding for COVID-19 vaccinations:
- Domestic revenue: All countries use general government domestic revenue to finance health budgets, particularly when it comes to immunization where there are such positive externalities. In some countries, funds raised from payroll taxes (mandatory insurance contributions) and pooled in national / social insurance schemes also provide a potential source to fund vaccination (either vaccines, service delivery or elements of the health system such as the supply chain).
- External funding: Many low- and lower-middle income countries, as well as World Bank International Development Association (IDA)-eligible countries (mainly small states) are eligible for external support: for vaccine doses through the COVAX Facility as well as for vaccine distribution programs. Funding can take the form of grants and highly concessional loans, depending on countries’ eligibility. Countries that cannot access these funds due to debt distress and other factors may be eligible for trust funds that are channeled through the World Bank and other multilateral development banks.
- Alternative financing: Mechanisms that have been proposed in the past for immunization include immunization trust funds, social impact bonds, and lotteries, but few have been implemented sustainably and there is limited evidence that these alternative mechanisms contribute to additional resources, and may even lead to further fragmentation. The pursuit of secondary funding sources, while potentially valuable, should not distract from the above core sources of funding.
- Due to the likely impact of COVID-19 on the economy and on public spending, the Ministry of Finance or Economy (MOF) will ideally be the lead government body for clarifying and shoring up financing for COVID-19 vaccination in the short- to medium-term. In many cases, the Ministry of Health (MOH) will play a central role in executing spending in the roll-out. However, this authority is not automatic, as finance may be provided through extra-budgetary mechanisms (e.g., off-budget development financing and loans); and other Ministries (such as Social Affairs, Education, Social Protection and Defense) that have a comparative advantage in reaching certain target populations. Countries with strong social / national health insurance schemes may also use purchasing arrangements of those health financing institutions.
- COVID-19 vaccination is a health intervention that has benefits across all sectors. Effectively financing the vaccine roll-out will, therefore, require a whole-of-government approach. Involving coordination between the MOF, MOH, other line ministries, and other key stakeholders (including development partners) to determine the latest macroeconomic and fiscal forecasts, available sources of finance and spending requirements to understand the implications for the available resource envelope.
What arguments can be used to advocate for sufficient COVID-19 vaccination funding?
- The arguments for COVID-19 vaccination investment are simple:
- The economy cannot open or restart safely and sustainably unless the epidemic is controlled. This requires COVID-19 vaccination in combination with public health and social measures.
- COVID-19 vaccination saves lives and reduces morbidity.
- In some countries experiencing lower levels of COVID-19 cases and mortality, the demand for COVID-19 vaccination might be low; but experience shows that if left unchecked, it might later be more difficult to control.
- International trade is dependent on global vaccination against COVID-19 (1).
This year’s government budget does not have any budget inputs for COVID-19 vaccination, why is that?
- Some countries could not budget for something that did not exist at the times the budgets were developed. Many countries operate on a calendar year budget (January 1 – December 31) with budget negotiations often starting in May, with draft budgets ready for legislative approval in Oct/Nov. COVID-19 vaccines were not yet available in October or November of 2020.
- Some countries may have assumed that the COVAX Facility allocations would be large enough in 2020 to not warrant any further increase in MOH programmatic budgets for immunization.
- Financing for vaccines may not appear in the budget because countries have chosen instead to access finance through multilateral banks (either new grants or loans, restructured grants or loans), or other trust funds or funding from bilateral agencies.
Can financing still be made available for the COVID-19 vaccination roll-out in 2021 even if it has not been indicated in the current budget?
- Yes. MOF can introduce supplemental budgets in the second half of the year to increase the domestic resource envelope for COVID-19 vaccination. Fiscal space can be created from reprioritizations of existing recurrent and capital budget commitments towards investments in COVID-19 vaccination. Additional government revenue can also arise from improving economic activity and/or improved revenue collection and administration.
- Fiscal space can also be created through increased deficit spending (i.e., taking on more debt). However, this may reduce future fiscal space for health due to the requirement to service this debt. Nonetheless, as COVID-19 vaccination is an investment with extremely high economic returns – due to the reopening of economic activity – it may be a justifiable investment. Deficit financing may not be possible for some countries, though, as they may already be too overloaded with debt servicing payments. In fact, many countries already spend more on debt servicing than they do on health. This poses a major hurdle for progress towards UHC in the coming years.
- Additional resources can be made available, up-front, though concessionary loans / grants of development partners. The World Bank and other multilateral development banks have made unprecedented amounts of funding available for COVID-19 vaccination expenditures (including programmatic costs). This is not new funding, but rather a reprioritization of existing development assistance envelope. Such development assistance is particularly well suited to financing the large upfront costs of the vaccine roll-out without jeopardizing the existing health budget and/or longer-term financing capabilities.
- Debt restructuring that reduces or postpones debt servicing obligations also offers an avenue for widening fiscal space (for health and other priorities). A coordinated debt-relief initiative would therefore be highly beneficial.
What if there are no additional monies for COVID-19 vaccination programmatic expenses for 2021?
- While COVID-19 vaccines may be available, in-country deployment may be insufficient due to lack of funding to cover operational expenses. In that case, unsystematic (and potentially last-minute) reprioritizations of existing budgets (from MOH and elsewhere) may have to take place. Reportedly, programmatic budgets for routine immunization and maternal care have been among the first to be reprioritized for funding for COVID-19 vaccination. Such reprioritizations threaten these essential services and may even reverse progress towards UHC.
- Given these dynamics and the large burden on health sectors to roll out COVID-19 vaccination, countries should first look beyond MOH budgets and seek reprioritization from other sectors. Additionally, there is a need to identify those functions of the health system that can be leveraged and used as efficiently as possible to roll out COVID-19 vaccination. This should be done through a clear system mapping process to both use available resources and minimize displacement on essential services.
What factors increase the likelihood of adequate and sustainable COVID-19 vaccination financing for 2021 and beyond?
- Ensuring COVID-19 vaccination financing is broadly tied to three steps:
- robust costing of a realistic plan;
- advocacy and active participation in the 2022 budget preparation; and
- subsequent monitoring and evaluation of expenditures.
- A sound financial plan backed up by planning tools, such as the COVID-19 Vaccination Introduction and deployment Costing (CVIC) tool (2), should be used to estimate costs and serve as a basis for credibly quantifying the medium-term costs of COVID-19 vaccination. The planning process should be based on credible, multiple-year cost estimates.
- COVID-19 vaccination should be integrated into the routine national health planning and budgeting processes, national immunization and sector plans and regular health activities. This could also include the need for a multi-sectoral response, with intense coordination between different Ministries and development partners to identify sources of funding with concurrent high-level political commitment.
- A verticalized and uncoordinated approach to planning and budgeting of the vaccination roll-out can lead to inefficient budget allocations and execution, making it difficult to garner support for COVID-19 immunization and the health system more broadly.
- Work within the existing budget cycles. Budgeting typically starts about three to six months after the start of the fiscal year (3) and includes four phases: budget formulation, legislature approval, budget execution, and expenditure tracking and auditing. Chapter 8 on Budgeting for health of “Strategizing national health in the 21st century: a handbook” is a good reference for more information (4).
If a country has adequate financing allocated to COVID-19 vaccination with medium-term perspective, are there other budgetary issues that need to be considered?
- Financing COVID-19 vaccination is not just about identifying resource gaps and filling them. Also critical is how budgets flow through different layers of government and through the health system to be spent at different service providers. Bottlenecks in these execution systems create delays, wastage and increase costs. With MOFs potentially looking for ways to rationalize government budgets given the considerable expansion of public expenditures in the past year, poorly executed budgets – even those of the MOH – are at risk of being cut.
- MOFs often push for the use of Medium-Term Expenditure Frameworks (MTEFs). MTEFs align the government’s expected three to five-year revenue horizon with its priorities, and projected expenditures. Medium-term COVID-19 vaccination costs should therefore be integrating into any existing or planned MTEFs.
What is critical to ensure that COVID-19 vaccination budgets are well executed?
- Rapid rollout of COVID-19 vaccination will require budget flexibility, which may take the form of increased allowance for shifting budgetary line items, budgeting and approvals by program output instead of input, and decentralized control over budget execution.
- However, increased flexibility does not have to translate to reduced accountability and reduced monitoring of outputs. In fact, many argue that increased budget flexibility is generally associated with greater transparency and accountability as budget holders are held accountable for outputs.
- Stronger budget accountability requires continued efforts to strengthen MOH and purchaser agency capacities for effective financial and performance monitoring in relation to COVID-19 vaccination funds and pools.
Should countries consider efficiency-enhancing reforms to free up or strengthen existing resources as part of the vaccination rollout?
- Yes. Seeking to improve value for money in the health sector and in other sectors as well is critical. The current crisis offers an opportunity for reform. For instance, countries could consider the following to leverage resources for COVID-19 vaccination roll-out:
- Prioritizing public spending on primary health care for improved health developmental outcomes at lower cost
- Improving access to essential generic medicines
- Strengthening purchasing arrangements
- Improving integration of health care, for greater efficiency and effectiveness
- Reducing medical errors, uncoordinated care, misuse (e.g., inappropriate hospital admissions) and fraud
- Improving health information systems and public financial management processes
- Reducing fragmentation of fund flows and parallel administrative arrangements
(3) Check the CIA website for confirmation of your countries fiscal year: https://www.cia.gov/the-world-factbook/field/fiscal-year/