Introductory Notes
The main sources of financing for the health sector in Mozambique include the State Budget, allocated by the Ministry of Economy and Finance (MEF), taking into account the direct contributions of partners to the State Budget, PROSAUDE funds and resources from vertical programmes. The relative weight of external funds decreased over time to approximately 42% in 2022 from 49.7% in 2021, suggesting less fragility in the health sector and a reduction in the dependence of health expenditure on resources from external funds.
However, the relative weight of external funds has gained an increasing trend, in a context in which the level of execution of external investment expenditures presented a contrary trend. In 2017 alone, for example, only 1.2 billion meticais were executed against a planned allocation of approximately 4 billion meticais, equivalent to an execution level of 32%, well below what was planned. Likewise, throughout 2022, the external investment expenses presented an execution level of only 31%. This is due to the fact that, with the exception of the State Budget and PROSAUDE, most of the funds are outside the control of the Ministry of Health (MOH), making it difficult to plan adequately and leading to negative trends in the execution of total funding, which does not facilitate the achievement of universal coverage.
Some of the main sources for external funding in Mozambique, highlighted in the MOH REO, are: PROSAUDE, Global Fund, Global Financing Facility and Gavi Alliance which, according to the REO 2022, had weights of 25.2%, 18.5%, 44.9% and 9.2%, respectively. As mentioned above, external funds play an important role in financing health sector expenditure. Total external funds, for the external investment component in 2022, were 4.4 billion meticais.
However, donations are also made and presented in the medicine’s component, in kind and, in the year in reference, were 19.7 billion meticais, corresponding to about 75% of total external funds. However, in 2021, in-kind donations accounted for 87% of total external funds, showing an upward trend in these donations, largely caused by the Covid-19 pandemic, which was the motivation for external funding to rise. In this sense, external aid represents an insecure source of financing insofar as it can be altered according to variables that are not controlled in national public finances.
In nominal terms, health expenditure in Mozambique has shown an increasing trend in recent years. From 2015 to 2019, expenditure on the health sector grew by 32%, almost 4 times below the indicators observed in the previous five-year period. The degree of execution from 2020 shows unusual at the health sector level, since on average 11% of the planned budget was not realized in the period 2015-2022. From 2021 to 2022, both planned and realized expenditure showed increases of approximately 15.5%. In 2022, expenditure levels in the health sector had a realization level of 82%, about 1pp above the data observed in the previous year. Thus, the realization observed for the year 2022 was about 57 billion meticais, approximately 70 billion meticais (see graph 1).
Chart 1 – Allocation versus Achievement (MT billion)
Source: OCS based on MOH REO 2015-2022
Between 2015 and 2022, the health sector absorbed, on average, about 30.1 billion meticais, which in terms of total expenditure represents 10%, equivalent to 4% of GDP. The data points out that Mozambique is far from reaching the minimums envisaged in the Abuja Declaration – a commitment that presupposes that each African State invests 15% of its national budget in spending in the health sector.
Before the discovery of Illegal Debts, the government managed to maintain allocation levels, with an allocation of total expenditure at 12%, equivalent to 3% of GDP, in 2016. After the health expenditure allocation reached 14%, largely as a result of the implementation of the Covid-19 response plan, which relied heavily on external assistance. The budget allocated to the health sector in 2022 represented 13% of total expenditure and 4% of GDP in the same year.
Chart 2 – Health Sector Expenditure (MT billion)
Source: OCS based on the MOH REO 2015-2022
According to the REO, the MOH showed that the medicines component absorbs the largest share of resources in this sector, being only 46% in 2022. However, personnel expenses also absorb a large part of these resources, about 38.6% in 2022. On the other hand, we have investment expenses, which contribute directly to improving access and quality of services. These expenses absorbed only 9% of expenses in the year in reference (see figure 1).
Figure 1- Composition of Expenditure in the Health Sector in 2022
Source: OCS based on MOH REO 2022
Another critical point is that 85% of investment expenses depend on external resources, in a context in which there are several exogenous factors that create uncertainties about the disbursement of external donations. Thus, the large proportion of expenses that guarantee the growth and development of this sector, mostly outside of the Government’s control, is worrying. In this way, it is necessary to make a greater internal effort to reduce dependence on donors in the execution of expenses. According to MOH’s REO for 2022, 42% of the financing for the sector comes from external funds.
Chart 3 – Own Revenues (MT Million)
Source: OCS based on MOH REO 2017-2022
The revenues from the sector are present in the Budget Execution Report of the MOH, referred to as Own Revenues. In the whole country, the health sector collected about 160.3 million meticais in 2019. This value decreased in 2020 by approximately 17% and in 2021, total own revenue was 168 million meticais, an increase of 27% in relation to the previous year. In 2022, the realization was 207.1 million meticais, corresponding to a 30% realization. It is noted, with these data, that the evolution of these revenues does not follow a logical trend, making it “unpredictable” in revenue collection, an unsafe resource modality for sustainable financing to the health sector.
Chart 4 – Health Expenditure and Own Revenues (MT Million)
Source: OCS based on MOH REO 2018-2022
Another critical point has to do with the execution of revenue, in the order of only 6.1% of the 53.8 million meticais foreseen in 2018, and 7.1% in 2021, compared to the allocation of about 2.4 billion meticais foreseen for 2021. Nevertheless, the uncertainty as to the degree of realization of own revenue in the health sector contributes to the unfeasibility of its adoption as a secure and sustainable source of funding. Furthermore, their share has been almost insignificant in relation to the total domestic revenue that finances the sector. In 2022, the weight of own revenues, in relation to total internal and external revenues, was only 0.6%.
The analysis of the IOF 2019/20 showed that, in the country, 10% of the poorest population holds only 0.8% of total expenditure and 10% of the richest population holds about 43.1% of total expenditure, with the average monthly expenditure in the urban area being twice that of the rural area. The high rates of socio-economic inequality in the country, associated with the growth of the social services market, with greater emphasis on health and education, in the private sphere, suggest the consolidation of the social division in these sectors, opening up access to these services for an elite group to the detriment of the majority of the poor population. The maintenance of this scenario, associated with demographic growth, justifies a projection of self-aggravating social and economic imbalances.
In addition to difficulties in access, the low quality of public services drags financially well-off populations to the private sector, evidenced in the IOF 2019/20. In other words, the wealthiest population is looking more for private health services, while the financially deprived populations (lower and middle classes) are looking mostly for public health services. On the other hand, the overwhelming majority remain in misery to such an extent that the country does not develop, since social sectors assume a transversal position, since they affect all galvanizing aspects of development.
The World Health Organization (WHO) predicts that the least developed countries should have a per capita expenditure on health of about USD 86 to guarantee the provision of essential health services. Analyzing the nominal per capita expenditure in the health sector, it can be observed that it showed an increasing trend between 2015 and 2022, with an average annual growth of approximately 10%. In 2015, this expenditure was USD 18.5 (equivalent to 710 meticais) per inhabitant, falling to USD 11.8 (equivalent to 737 meticais) in 2016, corresponding to a reduction of about 37%, in a context in which the population presented a growth rate of about 6%.
The effect of the exchange rate fluctuation, in turn, played a very relevant role in this variation. Between 2020 and 2021, as a consequence of Covid-19, which positively influenced the sector’s expenditure, per capita expenditure went from USD 15.4 to USD 25.1, a 63% growth. In 2022, these expenses were USD 28.2 (equivalent to 1804 meticais), the highest observed in the period analyzed. This allocation corresponds to the achievement of only 33% of the WHO target for allocation of per capita expenditure.
Chart 5 – Health sector expenditure per capita
Source: OCS based on MOH REO 2015-2022, based on current exchange rate
Main Findings
The 2022 health sector expenditure was 42% externally funded and reduced over time, with about 42% in 2022 compared to a dependency of 49.7% observed in 2021;
Budget execution for 2022 was 82%, 1pp above that observed in 2021;
About 46% of the sector expenditure was part of the medicines component, of which 75% came from in-kind donations, showing the continued high dependence of this component on external resources;
In the same case, external investment constituted 85% of capital expenditure;
Once again, the Abuja Declaration was not observed in the country, and the allocation to the health sector accounted for 13% of total expenditure;
The per capita budget allocation for health was just over 28 USD (equivalent to 1804 meticais), which is only 33% of the WHO target of allocating expenditure per capita to 86 USD (equivalent to 3831 meticais).