News of Interest
25 April 2012

African Development Bank: Fiscal policy for the HIV/AIDS response and economic wellbeing

TUNIS - Southern African governments could use public spending in their battle against the extremely high rates of HIV/AIDS in their countries and still achieve a positive economic impact, argues a new paper from the African Development Bank (AfDB).

The working paper from the AfDB's Chief Economist's department, entitled “The Role of Fiscal Policy in Tackling the HIV/AIDS Epidemic in Southern Africa”, uses the case studies of Botswana, Lesotho and Swaziland. G overnment fiscal action on HIV/AIDS treatment could increase these countries' productivity and gross domestic product, say the authors.

These three countries have the highest adult HIV in the world. The proportion of people living with HIV in Swaziland is 25.9 per cent, in Botswana it is 24.8 per cent, and in Lesotho the rate is 23.6 per cent. By contrast, the figure is some 18 per cent for their larger neighbour, South Africa.

Overall, the paper notes, sub-Saharan Africa (SSA) carries the greatest burden of HIV/AIDS in the world. Almost 23 million people are living with HIV in SSA. This represents 68 per cent of the global total, while SSA accounts for little more than 10 per cent of the world's population. Thirty-four per cent of all people in the world living with HIV in 2009 were living in the 10 countries of sub-Saharan Africa.

The paper argues that, if the three governments increased spending on medical care such as on antiretroviral therapy (ART), the expenditure would slow down HIV infection and AIDS and would translate into economic benefits.

The imperative for the governments to act is all the stronger as international funds start to fall or dry up. Annual funding for HIV/AIDS programs fell to USD15 billion in 2010 from USD15.9 billion in 2009. The authors state: "This is well below the USD22 to USD 24 billion that UN agencies estimate is needed by 2015 to pay for a comprehensive, effective global response."

As the authors of the paper note: "This is particularly important given the current concerns about dwindling foreign aid (particularly the Global Fund), and the fiscal deterioration and sustainability in these countries. At a time of fiscal crisis in developed countries and dwindling HIV/AIDS resources, the future of effective and efficient Africa is clearly domestic."

However, the authors asked themselves the question: "if these countries use public revenues to fund the intervention against HIV/AIDS, will there not be an increase in their debt burden or some negative externalities on other public funded programs?"

However, they found that this would not be the case "if public finances are used accordingly to achieve socially optimal reduction targets in the HIV prevalence rate. Instead, it will eventually alleviate the debt burden of these countries."

The authors use a sophisticated mathematical model to assess the economic returns from public spending on HIV/AIDS treatment.

One effect of ART treatment is increased life expectancy for people living with HIV (PLHIV) and therefore employment productivity. As the authors say: "PLWHA who get access to ART treatments can be considered as healed."

Without a treatment programme, the population hit by AIDS would mushroom. The paper notes: "For the three countries....if there were no intervention to curb the epidemics, by 2020 more than half the population would be affected by AIDS."

With an optimal treatment programme, the authors calculate, there would be large economic benefits. Acting optimally, the debt burden of Botswana, Lesotho and Swaziland could be alleviated by five per cent, one per cent and 13 perc ent of GDP respectively, says the report.

View this article on the All Africa website.


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