GHI 2013 and the Rise of Multilateralism

This is a joint post with Denizhan Duran.

The President’s budget request for 2013 is out: total money spent on GHI is reduced by 3.5% and PEPFAR’s budget shrinks by 10.8%. While both figures may be alarming, there is a bright spot: contributions to the Global Fund for AIDS, TB and Malaria go up by 27% to $1.65 billion. In addition to the Global Fund, GAVI, IDA, Asian Development Fund and the African Development Fund are all among agencies that are getting increases on their funding; notably, GAVI by 11.5%.

Why is this a good thing? Multilateral aid is more efficient. In a recent note, we recommended a shift towards more multilateral aid, which has lower administrative costs and greatly reduces burden on recipients. The Paris Declaration on Aid Effectiveness encourages donors to delegate aid to multilaterals which have expertise in partner countries, and can exploit efficiencies through pooled funding. Multilaterals also ease coordination and harmonization, making aid more efficient.

In the case of U.S. global health aid, potential gains from a shift to multilaterals may be large. We recently released a health aid effectiveness index, QuODA Health, showing that the Global Fund outperforms the United States on almost every dimension of aid quality. Multilateral donors allocate their aid more efficiently, reduce the burden on recipients through increased coordination, and foster institutions through allocating to countries with national health plans. Similarly, multilateral agencies, on average, perform significantly better than bilateral agencies (see graph below).

Multilateral includes Global Fund, GAVI, IDA, European Commission, African Development Fund, Inter-American Development Bank, UNICEF, UNFPA, UNAIDS, UNDP and WFP. Bilateral includes every other donor. The values in this table are standardized z-scores with an average of 0 and a standard deviation of 1. Positive values are above average compared to all other donors, and negative values are below average.

Looking across a couple of key indicators, we see that the Global Fund outperforms the U.S. in terms of allocating according to disease burden, giving untied aid, as well as having more significant aid relationships (see graph below).