Lessons from Three Countries That Have Strengthened Budget Structures and Processes to Improve Health Budget Execution

A young child in a blue sweater and white knit hat looks into the camera while two doctors in white coats stand in the background.
A child and two pediatricians stand near the waiting room at a clinic in Meru District, Kenya. (Photo: Mia Collis/Elizabeth Glaser Pediatric AIDS Foundation)

By Heather Viola

What do Lao PDR, Malaysia, and Kenya have in common? All three countries have strengthened their budget structures and processes to enable good health budget execution. Their experiences hold valuable lessons for others striving to increase budget execution and unlock significant resources for health.

In Lao, the government adopted the practice of transferring funds for all priority health programs directly from the national treasury to provincial health departments. Direct transfer occurs regardless of whether the funding comes from public sources or donors. The benefits include timelier budget transfers, improved capacity for budget absorption through the removal of rigidities such as cumbersome, centralized administrative processes and multiple signatories, and the ability of government staff to monitor budget implementation in closer to real-time. Through timelier budget transfers, direct funding to the subnational level has helped ensure funding is available when needed for vital health services.

Malaysia’s incremental, 60-year transition to outcome-based budgeting has helped resolve challenges such as centralized input controls with little autonomy at ministry of health, program, and activity levels; inefficient accounting systems; non-harmonized budget codes across departments; and budget performance based on expenditure levels rather than measurable targets. By implementing outcome-based budgeting, the government has enabled better alignment of budget execution with local needs and priorities. It has also improved budget transparency with an online accounting and performance measurement system. Malaysia’s journey to outcome-based budgeting is a long-term commitment to devolving financial control to subnational levels while concurrently developing human resource capacity and strengthening IT infrastructure for improved health budget execution.

Outcome-Based vs. Program-Based Budgeting: What’s the Difference?

While countries may use different terminology, outcome-based and program-based budgeting are approaches that many countries are undertaking to move their national budgeting systems and processes towards “good” health budget execution. Both promote more transparent and prioritized budgeting practices and explicit links between allocation and planning and the desired programmatic priorities and health outcomes.

For its part, Kenya transitioned from line-item budgeting to program-based budgeting at both the national and county levels. Budgets are now based on programmatic needs over the medium to long term rather than on historical spending. Program-based budgeting makes it possible to devolve and tailor budgets to the needs of different programs and geographic locations, as well as track progress on health-related goals. The new approach has made it easier to inform the public about prioritized and funded health programs and has enhanced public participation in Kenya’s budget process by holding the government accountable to the clearly defined program targets. As part of implementing program-based budgeting, national development goals were aligned to the goals of subnational (county) governments through integrated development plans to ensure appropriate resource prioritization decisions, greater efficiency, and less duplication.

Key Lessons for Improved Health Budget Execution

Lao, Malaysia, and Kenya shared these experiences as part of the Joint Learning Network Health Budget Execution Learning Exchange, an initiative led by the USAID Local Health System Sustainability Project (LHSS) in collaboration with the Joint Learning Network for Universal Health Coverage (JLN). While the three countries implemented different practices and steps, they gleaned common learnings from their experiences — learnings that can be useful to other countries seeking similar results:

  1. Ministries of Health and Finance must work collaboratively to realize improvements in health sector budget execution, regardless of where reforms originated. Finance ministries often lead government-wide reforms to budget structure and process, with little to no involvement of health ministries. This can impede success in the health sector. In all three country examples, the directive to strengthen financial autonomy at subnational levels originated from the Ministry of Finance. Barriers to reforms, such as intragovernmental resistance to moving away from centralized administration, can be overcome through improvements in coordination and collaboration across ministries. This may include the Ministry of Finance informing the Ministry of Health of the financial flexibilities that already exist in the public financial management (PFM) legislation or guidance for application in the health sector. Or it may include the finance ministry engaging the health ministry in the design and leadership of new PFM reforms. Further, health sector-specific adaptations can facilitate the adoption of government-wide reforms in the health budget structure and processes.
  2. Developing subnational capacity in financial management is a critical prerequisite for progress. To devolve financial responsibility and ensure that budget structure and process improvements are operationalized at the subnational level, governments may need to support the development of financial management capacity among subnational officials. This is especially true in the health sector, given that health professionals working in subnational facilities do not always have the bandwidth to take on financial management responsibilities.
  3. Budget reform in the health sector is a long-term commitment to be undertaken incrementally. Improving the budget structure and process for budget execution entails achieving a better balance between financial flexibility and control. As countries remove financial rigidities, develop subnational PFM capacity, and invest in more advanced IT infrastructure to collect more sophisticated information, a stepwise, incremental process can be used to enhance budget accountability and transparency and ultimately improve budget execution and planning.

Stay tuned for the next blog in this series on how Ghana and Bangladesh enhanced their accountability mechanisms for better health budget execution.

About the author:

Heather Viola is a program officer at R4D and manages the LHSS-JLN Health Budget Execution Learning Exchange.

Additional contributors:

Cheryl Cashin is a managing director at R4D and the lead author of the joint R4D-WHO publication, Aligning Public Financial Management and Health Financing.

Miriam Omolo is a health financing expert and country facilitator for the LHSS-JLN Health Budget Execution Learning Exchange. She also serves as Executive Director at The African Policy Research Institute.

Aparna Kollipara is a health financing expert and a member of the technical facilitation team for the LHSS-JLN Health Budget Execution Learning Exchange.

Nivetha Kannan is a program associate at R4D and a member of the technical facilitation team for the LHSS-JLN Health Budget Execution Learning Exchange.

See other blogs in this series: Promising Practices That Are Helping Ministries of health Improve Their Health Budget Execution and Supporting Country progress Towards Better Health Budget Execution.

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LHSS Project

LHSS Project

USAID’s Local Health System Sustainability Project helps countries achieve sustainable, self-financed health systems that offer quality health care for all.