Health Sector Budget Analysis: First Five Years of Federalism (January 2022)

Health Sector Budget Analysis: First Five Years of Federalism

Prepared by: 

Federal Ministry of Health and Population Policy Planning and Monitoring Division Government of Nepal January, 2022

Executive Summary:

The report “Health Sector Budget Analysis: First Five Years of Federalism” intends to enable the Federal Government (FG), Provincial Governments (PG), Local Level (LL) and their entities to understand the trends in health sector budget allocation in the first five years of federalism in Nepal, including the expenditure pattern for the four years from fiscal year (FY) 2017/18 to FY 2020/21. It further enables policy makers, planners, programme managers and external development partners (EDPs) to grasp how policy commitments are being funded through the annual work plan and budget (AWPB) in the context of federalism. It attempts to capture the spirit of federalism by analysing resource allocation to the health sector from all spheres of government, held against constitutional provisions. The report encompasses resource allocation in health beyond conditional grants from the FG, including other fiscal transfers (such as equalisation, matching and special transfers), and internal sources (revenue sharing and internal revenue) from subnational governments (SNGs). The analysi has been carried out using data from electronic annual work plans and budgets (e-AWPBs), the Government of Nepal’s Red Book, financial monitoring reports (FMRs), TABUCS, the Line Ministry Budget Information System (LMBIS), the Provincial Line Ministry Budget Information System (PLMBIS) and SuTRAs.

Macro-economic Indicators, Health Sector Budget and Expenditure (Amount in NPR millions)

In FY 2021/22, GoN allocated NPR 179.5 billion to health sector out which the health conditional grant to FMoHP is NPR 100.9 billion, and NPR 13.3 billion to ministries other than FMoHP.

Trends in Government Health Spending as a Percentage of GDP (Amount in NPR billions)

Nepal Government's health sector spending as a percentage of GDP rose from 1.5% in FY 2016/17 to 2.4% in FY 2020/21. 

Per Capita Health Spending in Real and Constant Terms (NPR and USD)

Per capita government spending gradually increased from NPR 1,594 (USD 15.0) in FY 2016/17 to NPR 3,432 (USD 29) in FY 2020/10 in real terms. However, in constant terms (base year fixed to FY2010/11), within the same time period, per capita government health spending has increased very little, from NPR 1082 (USD 7.3) to NPR 1973 (USD 11.3)

Percentage of Health Sector Budget Against National Budget (Amount in NPR billions)

The volume of the health sector budget has increased almost three fold, from NPR 60.4 billion in FY 2017/18 to NPR 179.5 billion in FY 2021/22. Up to FY 2018/19, the share of the healthsector against the national budget remained below or slightly above 5%.

Composition of the Health Sector Budget

Over the years, FMoHP has taken up the largest share of the health sector budget, followed by fiscal grant from the FG to PGs and LLs, and PGs to LLs. It is encouraging to observe that internal sources are emerging as an important source of funding to the health sector at the SNG level. This is a positive message in terms of increasing the fiscal space for health

Percentage Allocation of Health Budget to FG, PGs and LLs by FMoHP Organisation (Amount in NPR millions)

Since FY 2018/19, the proportion of health budget allocated in the form of conditional grants to SNGs has been in decline, going from 40% to 24% in FY 2021/22. By FY 2021/22, more than two thirds of the activities of the Department of Health Services and Department of Ayurveda and Alternate Medicine had been allocated to SNGs. However, activities from the centre remained at the federal level. 

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