Public financial management for effective response to health emergencies: Key lessons from COVID-19 for balancing flexibility and accountability
• Public revenues are the cornerstone of funding for governments’ response to health emergencies; as such, public financial management (PFM) – the rules and mechanisms governing the allocation, execution and reporting of public funds – has been an integral part of the health response to the COVID-19 pandemic.
• This rapid review highlights the importance of PFM for health emergencies, by analysing various countries’ experiences of financing their national health response to COVID-19 and identifying some early lessons. This review can help countries to enhance their understanding of good practices, and key requirements for adjustments to their PFM systems.
• To be able to effectively adapt and quickly respond to health emergencies, PFM may need to be overhauled. Key PFM policy actions summarized in Table 1 include recommended adjustments for each phase of the budget cycle (formulation, spending, and reporting), to ensure health financing is more agile, flexible and responsive to emergency needs, while assuring transparency and accountability.
• One of the key PFM-related lessons emerging from the COVID-19 health response is the need to shift from budgeting by line items to budgeting based on programmes. Programme-based budgets are more readily structured to allow for more flexible allocations of public resources, and are thus more effective responses to health emergencies.
• The COVID-19 pandemic has shown the need to prepare expenditure management systems by updating emergency spending protocols and proactively empowering frontline providers to access, manage, and account for public funds in an agile way.
• The adoption of measures to balance speed and accountability is another key lesson. Better equipping financial management information systems to provide integrated reporting of emergency-related spending is a critical step to ensuring public trust for the response.
• Countries can better prepare for future health emergencies by strengthening their regular PFM mechanisms and capacities, while limiting the proliferation of parallel mechanisms which can exacerbate fragmentation of health financing and hinder alignment with national response plans. The use of extra-budgetary mechanisms without well-defined procedures is unlikely to result in the efficient use of public resources for health emergency response.
Introduction: why PFM matters for the response to health emergencies
Public revenues are the cornerstone of funding for the response to health emergencies. While private financing can contribute to a country’s response, public sources make up the largest share of the funding available for this purpose. This has been exhibited during the current pandemic, with the health response to COVID-19 predominantly funded from public sources, even in countries facing revenue constraints [1,2]. For example, in Ghana, COVID-19-related health spending in 2020 was mostly funded through domestic government funds (83%) with external and private funding representing 10% and 7% of the total, and in Burkina Faso, domestic public funding represented 53% . The predominance of public funding promotes consistency, efficiency and equity in the response .
Given the importance of public finances, the ongoing COVID-19 pandemic has also shown that public financial management (PFM) should be an integral part of the response. Effectiveness in financing the health response depends not only on the level of funding but also on the way public funds are allocated and spent. This is determined by the PFM rules that guide how public funding is allocated, executed, and reported, and in turn how money flows to health service providers [4,5]. Early assessments have shown that PFM systems ranged from being a fundamental enabler to acting as a roadblock in the COVID-19 health response [6,7].
When the crisis hit, many countries’ domestic PFM systems were not ready or agile enough to support an effective emergency response. Challenges commonly faced by countries include [6,8-10]:
i) estimating and formulating budget provisions to align with response needs;
ii) tailoring spending modalities to ensure funds are quickly available for service delivery units and disbursed flexibly and on time;
iii) adjusting tracking and reporting systems to ensure public funds for emergency response are accounted for effectively and transparently.
While problems in service delivery have been extensively documented , the underlying PFM mechanisms of the response also merit attention. To highlight the importance of PFM in health emergency contexts, this policy brief analyses various country PFM experiences and identifies early lessons emerging from the financing of the health response to COVID-19. The policy brief is focused on documenting lessons from the budgeting and spending mechanisms and processes; it does not discuss the sources of funding, nor the content of fiscal policies in response to COVID-19, which are covered extensively elsewhere . The assessment is done by stages of the budget cycle: budget allocation, budget execution, and budget oversight. Identifying lessons from PFM modalities used to finance the health response to COVID-19 is fundamental both for health policy-makers and for finance authorities, to enhance PFM system preparedness to respond effectively to future health emergencies. It can help to enhance understanding of good practices, as well as key requirements for future system adjustments.
The assessment is built on a non-systematic review of several activities initiated by WHO in 2020 to monitor countries’ health response from a PFM perspective (see Table 2). The evidence reviewed included a desk-based survey initiated in March 2020, which analysed budgeting, spending, and accounting modalities in financing of the health response in 183 countries. Technical consultations were conducted in 17 countries (Argentina, Australia, Brazil, Chile, China, Costa Rica, Dominican Republic, Ecuador, Indonesia, Lao People’s Democratic Republic, Malawi, Mexico, Mongolia, Peru, Philippines, South Africa, Ukraine) between June and September 2020 by WHO to further the understanding of PFM modalities. Complementary analyses conducted in 2021 to unpack specific PFM aspects of the health response, including an analysis of 40 extra-budgetary funds used to channel resources for the response , a mapping of PFM issues related to COVID-19 vaccine roll-out , and an in-depth assessment of PFM modalities in selected countries, including Argentina, the Philippines and South Africa [14,15] were also reviewed. In late 2021, the emerging findings in this paper were further explored and validated during the 5th Meeting of the Montreux Collaborative, a virtual meeting that gathered over 900 participants and 50 speakers over 5 days to explore policy options to help countries rebuild and strengthen health financing and PFM systems to make them more responsive to future shocks and able to sustain efforts towards universal health coverage (UHC). Finally, in early 2022, to gather the latest information on the response, another non-systematic review of published literature and publicly available audit reports on COVID-19-related expenditures was conducted to complement the understanding of the opportunities and risks associated with the use of emergency procedures. Source: World Health Organization