If G-20 agrees, health financing might come from Currency transaction levy

By Bobby Ramakant
April 2, 2009
The author is a World Health Organization (WHO) Director General’s WNTD Awardee 2008, and writes extensively on health and development. Email: bobbyramakant@yahoo.com

There is a growing public movement globally to put pressure on the Group of Twenty (G-20) Finance Ministers and Central Bank Governors that will meet in London, UK, on 2 April 2009, to put a currency transaction levy of 0.005% to raise dedicated resources for funding health programmes. This currency transaction levy of 0.005% can potentially generate USD 30-40 billion a year.

It is vital to understand the health funding in these times of global economic meltdown. The single largest donor of AIDS, TB and Malaria programmes globally - the Global Fund to fight AIDS, TB and Malaria (GFATM) has just 37.5% of its estimated budget for 2009-2010. The donor countries haven’t kept their promises to fund the 'Fund'. The GFATM projected budget for 2009-2010 was USD 8 billion and it just has USD 3 billion in its kitty, falling short of USD 5 billion.

The donor countries that haven’t kept their promises include the United States of America that is also the biggest defaulter. It is not that US doesn’t have money, it gave about the same amount it owed to GFATM to Merrill Lynch as bail out money. It gave hundreds of times more to other private banks as bail out money. This was tax payers money of the people - which was handed over to the banks. The banks distributed this amount amongst themselves as 'holiday bonuses'. Outrageous? May be, but possibly the health advocates didn’t do a good job of convincing the policy makers that health investment is a smart investment, with promising returns.

Despite of African governments declaring tuberculosis (TB) as an emergency, Africa as a region, faces the largest funding gap of USD 10.7 billion to fully implement the Global Plan to Stop TB by 2015. This fact came in spotlight when the TB funding in Africa required to meet the TB-related targets of millennium development goals (MDG) by 2015 was analyzed, said Kenyan activist Lucy Chesire.

The countries in Africa had achieved a milestone by endorsing the African Union Abuja pledge of allocating 15% of national budgets to health, which was also reiterated at the 2008 African Union Summit in Egypt , the 2008 Conference of African Finance Ministers, and 2008 Special Conference of African Health Ministers. But they have bitterly failed to act on this pledge, said the activists. Only Botswana has kept the promise of allocating 15% of the national budget to health, the rest of the countries in Africa need to keep their promises.

"The current global economic crisis is all the more reason why high burden TB countries in Africa should invest in TB control. As per a report of World Bank and Stop TB Partnership (December 2007), high-burden TB countries are likely to recover 9-15 times of their investment in TB control" said Mayowa Joel of Nigeria . This report indicates that the economic cost of not treating TB to Africa between 2006 and 2015 would be USD 519 billion while TB can be controlled with USD 20 billion in the same period.

It is clear that health is not considered as a smart investment. Possibly imposing currency transaction levy of 0.005% can generate a pool of dedicated financial resources to strengthen health systems globally.

Trading volume in the foreign exchange (FX) market has now topped USD 1000 trillion a year. In this financial crisis, unlike most other areas of the finance industry, the FX market is still growing. This provides a very solid base from which the currency transaction levy can produce a sustainable and substantial income stream. As well, the market is fully electronic. Collection would be computerised with payment automatic every time a currency trade is settled. Thus it is efficient and inexpensive to implement with little scope for avoidance.

The proposed rate of 0.005% is too small to alter decision making in the FX market and yet high enough to yield a sizeable revenue stream. In recent work for the UN University, Professor Rodney Schmidt undertook the most detailed econometric modeling to date, showing this rate is too low to affect market structure whilst at the same time producing potential revenue of the order of USD 30-40 billion a year.

There are mechanisms like the currency transaction levy that have proven to work. Like the UNITAID. In 2006, France , Brazil , Chile , Norway and the United Kingdom decided to create an international drug purchase facility called UNITAID to be financed with sustainable, predictable resources. As an economically neutral tool the tax on air tickets was considered as the most suitable instrument. This mechanism seeks to fill a critical gap in the global health financing scenario: the need for sustained strategic market intervention to drive price reduction and increases in supply.

Potentially the currency transaction levy can radically change the global health financing landscape and bring in more sustainability but the world - for now the G-20 countries - need to be covninced why health financing is a smart investment.