SIGNIFICANTLY BETTER HIV PREVENTION IN AFRICA VITAL FOR MANAGING LONG TERM FINANCIAL IMPACT OF HIV/AIDS

News Release
2012/312/AFR

Significantly Better HIV Prevention in Africa Vital to Managing Long-Term Financial Impact of HIV/AIDS – World Bank Report
Analysis Shows Future Treatment Costs May Be Heaviest in Southern Africa and Uganda
WASHINGTON, March 14, 2012 – With much of the global economy facing slowing growth and uncertain prospects, especially in developed countries, a new World Bank report urges African governments and their development aid donors to do significantly more to prevent new HIV infections. Without a dramatic reduction in infections the World Bank says that existing national treatment programs for people living with HIV/AIDS could become unsustainable over the coming years.
After decades of relentless expansion, during which HIV/AIDS claimed the lives of more than 30 million people worldwide and infected more than 60 million, HIV prevalence rates are stabilizing globally and in Africa. More than 6 million people are now on life-saving treatment worldwide, and global financing for HIV/AIDS has substantially increased, rising from US$260 million in 1996 to US$15.9 billion by 2009. However, the report warns that treatments costs are spiraling and the result is further pressure on already strapped public finances, especially in southern Africa, where the epidemic is most intense.
According to the new report―The Fiscal Dimension of HIV/AIDS in Botswana, South Africa, Swaziland, and Uganda―an increasingly volatile global economy is causing anxiety about maintaining and expanding AIDS treatment programs in low-income countries such as Uganda, where HIV prevalence rates may be lower than in southern Africa, but with the heavy reliance on external financing contributing to 85 percent of total spending on HIV/AIDS programs, the viability of these hangs in the balance.
“How to finance the long-term response to HIV/AIDS is a complex question, especially because the cost of treating new infections is spread over several decades,” said Elizabeth Lule, the World Bank co-author of the new report. “Strategic investments in preventing new infections—while also meeting current treatment, care and support needs—can help countries plan for what will otherwise be an unmanageable fiscal burden.”
The report also warns that current spending on HIV/AIDS relates to past infections and is a potentially misleading indicator of the long-term public cost of the fight against HIV/AIDS. But public investments to combat the epidemic can shrink with improved fiscal planning, and by curbing new infections.
In Botswana, where about a quarter of the population aged 15-49 is living with HIV, the report projects that the fiscal costs of HIV/AIDS will peak at 3.5 percent of GDP around 2016, slowly falling to 3.3 percent of GDP by 2030 if new infections decline. With mining revenues slowing down relative to GDP, the fiscal costs of HIV/AIDS could rise to over 12 percent of government revenues by 2021, presenting an extraordinary fiscal challenge.
In South Africa, HIV/AIDS has significant implications for public finance and the government’s ability to achieve its other key social and health policy objectives. An important aspect of the fiscal dimension of HIV/AIDS in South Africa is the impact on social expenditures.
“By scaling up HIV prevention programs, South Africa stands to save (US$2,500) per infection,” said Ruth Kagia, World Bank Country Director for Botswana, South Africa and Swaziland. “Investing in collecting data on the drivers of the epidemic is key to making the national HIV/AIDS response more effective and achieving better health and social outcomes for people.”
In Swaziland, HIV/AIDS has more serious fiscal repercussions given declining government revenues and the macroeconomic situation. With the highest HIV prevalence in the world, Swaziland has contributed 60 percent of the costs of HIV/AIDS from its domestic resources over the past several years. However, costs of the HIV/AIDS program are rising and projected to increase to 7.3 percent of GDP by 2020. External financing will need to increase substantially to meet the financing gap in Swaziland.
In Uganda, the costs of the national response to HIV/AIDS are estimated to rise to over 3 percent of GDP, and external financing has contributed about 85 percent of the total spending on HIV/AIDS. Costs incurred by a single infection are estimated at about 12 times GDP per capita (US$5,900) per new infection as of 2010.
“Frequently, it is not countries with the highest HIV prevalence that face the heaviest burden in financing their HIV programs, but low-income countries where each infection costs several times more than GDP per capita, and domestic resources are fewer,” said Markus Haacker, a co-author of the report.
The report argues that governments need to better assess the financial sustainability and allocative efficiency of their national HIV/AIDS responses over time so as to sustainably manage the long-term burden of HIV/AIDS.