Navigating the Fiscal Shock: How PFM Can Anchor Sustainable Health Financing in Africa

Our Health Economist Stefy Karugu explores the shift from aid dependence to fiscal resilience.

She outlines how Public Financial Management (PFM) reforms can anchor sustainable health financing across Africa.

Executive Summary

This report examines how PFM can stabilize health systems amid a sharp contraction in global health aid and the broader shift beyond aid in African health financing. For decades, many African countries relied heavily on external financing, with more than half of HIV, malaria, and TB spending funded by just two donors. That model is now under strain. Projections indicate that total health spending will decline in most low-income countries by 2030 unless domestic financing expands.

These pressures compound rising debt service costs and fiscal constraints, reinforcing the importance of aligning reforms withdebt sustainability in Africa. The report argues that transitioning from vulnerability to fiscal confidence requires strengthening domestic resource mobilization, protecting health budgets, and improving efficiency through robust public financial management systems.

PFM reforms such as program-based budgeting, multi-year expenditure frameworks, digital financial management systems, and strategic purchasing improve budget credibility and ensure funds reach frontline services. Evidence from Ghana, Rwanda, and Tanzania shows that sustained PFM reforms enhance accountability, equity, and value for money. Embedding these reforms within sustainable investment strategies for African health systems is essential for long-term fiscal resilience.

Key Takeaways

• The aid-dependent health financing model is contracting rapidly, accelerating the transition from aid dependency to fiscal resilience.
• Health spending is projected to decline in most low-income countries unless domestic resource mobilization increases.
• Weak PFM systems contribute to fragmentation, inefficiency, and misaligned health spending across the budget cycle.
• Low-income countries waste an estimated 13 percent of health budgets annually due to inefficiencies.
• Program-based budgeting and multi-year frameworks strengthen alignment between health priorities and fiscal allocations.
• Strategic purchasing and costed benefits packages improve efficiency and value for money.
• Digital PFM systems enhance transparency, real-time tracking, and accountability.
• Donors should shift from vertical program funding toward strengthening national systems and institutions.
• Aligning PFM reforms with National Health Insurance reforms in Africa can improve pooling, purchasing, and financial protection outcomes.
• Sustainable health financing in Africa depends on strong governance, fiscal discipli