Vertical funding and “common fund” approaches to health sector support in Mozambique: Best practices for donors

Context:

Health sector aid to Mozambique has increased markedly since 2003, driven by funding for AIDS, TB and malaria through PEPFAR, the Global Fund, and others. With this heightened attention has come a growing awareness that health system strengthening is essential to tackling Africa's health challenges. However, much of the new health support is channeled through “vertical” funding for short term NGO projects rather than the Ministry of Health, thus undermining system strengthening efforts.

Approach:

In 2003, Mozambique established a “common fund” mechanism in which donors provide financial support to the MOH and jointly participate in planning. The Global Fund and most bilaterals provide the majority of their health sector support to the fund. However, the greatest growth in aid has come from through PEPFAR, which channels nearly all its support directly to vertical NGO projects.

Outcomes and Challenges:

By 2008, 62% of all external health aid flowed to vertical projects, which accounted for $243 million out of $512 million, or 48% of total health sector spending. PEPFAR provided 67% of this vertical funding while 33% came from an array of bilaterals and UN agencies. With nearly half of all health spending channeled to NGOs, parallel NGO systems were created, MOH ownership has been compromised, and major opportunities missed for MOH capacity strengthening.

Key recommendations:

Donors should redirect their health sector support toward “common fund” mechanisms or direct budget support to ensure that aid resources succeed in strengthening the existing health system in Mozambique, and elsewhere in Africa.