Intervention by Mr. Abd al-Fattah al-Gebali, Head of the Economic Research Unit at the Ahram Center for Political and Strategic Studies

I would first like to thank the EIPR, Mr. Hossam Bahgat and Dr. Alaa Ghanaam for the kind invitation to participate. I think that issues of health and education are the most important issues in Egypt today, and we must pay close attention to the latest developments, in particular the evolving role of the state in both of these fields, because they are the most important pillars of human and national development. Issues related to the health of individuals have a direct impact on society’s productivity. Thus, improvements to quality of life and other issues of human development are all closely linked to health expenditure.

In fact, spending on health achieves several basic development objectives by bringing health services to villages and hamlets across Egyptian society, which necessarily benefits larger segments of the population. Public spending on health is reflected in vaccination and other preventive programs and treating the spread of illness and endemic diseases, as well as fostering the Egyptian family’s ability to obtain treatment. All of this illustrates that health spending plays a very important role within development expenditure.

There has been a debate in Egypt recently on economic policies and which entity is best able to provide health services. Should it be the government or the private sector? Some are of the opinion that the private sector is best able to provide health services. To support their views, they look at economic growth rates. If the growth rate goes up, they believe it will necessarily have a positive impact on society as a whole and thus a positive impact on public health in general.

I do not believe this is all correct. The effect of growth is not distributed equally throughout society in the form of egalitarian income distribution, as it varies across different segments of the population. That is, we can achieve high economic growth rates without a broad segment of the population benefiting, and so it does not accurately reflect citizens’ ability to bear the costs of treatment. Secondly, a higher growth rate does not necessarily entail a positive impact on all aspects of health-care, which is more dependent on a general set of health policies.

It is for this reason that public finance describes health services as public goods, which are simply those goods that the government and state must play a fundamental role in administering, particularly because all development programs have shown that relying on the market alone has more negative effects than positive ones. Thus, the idea that the state, in some form or another, should abandon or reduce public health expenditure is unacceptable. Indeed, improving health and making health services available to all citizens must be a fundamental objective of government in any society, regardless of the country’s economic system.

I have closely followed public expenditure in Egypt, and so I will speak only about that. I will leave the topic of total (social) spending on health to Dr. Ghanaam. What I mean by public expenditure is expenditure from the closing accounts of the state budget, and this type of spending can be read as an expression of state health policy and its objectives. Regarding public health spending, there are two major objectives that must be addressed if we are to evaluate public health spending in Egypt: First of all, how do we facilitate citizen access to the basic basket of health services? And secondly, how do we guarantee health protection for the poor and spread health services across society, throughout the villages and hamlets?

The ideal level of public health spending depends on the level of social development. We should not address this issue in terms of the budget deficit or the relationship between health spending and the deficit but in terms of the relationship between health expenditure and prevailing socioeconomic conditions. Budget deficits can be discussed elsewhere, but when dealing with health expenditure, the issue is: How appropriate are spending levels to the nature of existing health problems and the structure of health expenditure itself? Health expenditure might be high, but at the same time, the structure of spending might not be conducive to efficient health expenditure.

There are several questions that can be raised here: What standards and criteria are used when we discuss government expenditure on health? How can this expenditure be funded? What are the impacts of government investment programs in the field of health? Which segments of society will benefit from government spending programs in the health sector? Finally, how can we better allocate public health expenditure in general?

It is not the case that more public spending on health automatically means a healthier society. On the ground, the services provided might be less efficient or of substandard quality, meaning that there is a substantial waste of resources. The key here is the structure, development and nature of spending.

When we look at the development of public health expenditure in Egypt, we find that the most recent state budget [2008–09], currently in effect, allocated LE12.1 billion to health in total public spending. Total spending on health came to only 3.6% of public spending in the state budget of 2008–09; it was only 1.2% in the state budget of 2001–02. If we examine this number—LE12.1 billion—we will find that most of it goes to pay salaries. Salaries and wages are the single largest subset of health expenditure, accounting for 50% of all health spending. Although this percentage could suggest that the wages of health-sector workers are high, in fact, they are not. Thus, there are two problems here: the high level of spending on wages as an element of public health spending, and the insufficiency of wages to guarantee a dignified life for health-sector workers, which has a negative impact on government performance.

In the health sector, we find a high rate of absenteeism in health units, particularly in rural and peripheral areas; we also find that health-sector workers hold down more than one job at a time to make a decent income. There are many other problems as well in rural health units, all of which, in my opinion, are largely attributable to low incomes.

At the same time, the money allocated for the purchase of materials and medications is not enough. For example, allocations for basic materials did not exceed LE1.6 billion, and only LE600 million was allocated to medications; an additional LE200 million was earmarked for patients’ food needs, in addition to a very small percentage for serums and vaccines. These meager sums are wholly inadequate to these institutions’ needs for medications and necessary serums. As a result, when patients go to the hospital, they are obliged to purchase their own syringes and other basic necessities. This is due not only to the low levels of spending allocated in the budget for purchasing materials, but perhaps even more to the purchasing system itself, which substantially raises the cost of materials and replaces some goods with cheaper ones (at the expense of quality) in government tenders. This is a point where we can do a great deal.

Now let’s turn to public investments, which have been decreasing annually for reasons linked to the government’s debt obligations to contractors and companies. In short, most companies refrain from bidding for the Ministry of Health tenders or substantially inflate their prices in order to make up for the gap between delayed payments from the Ministry and the receipt of required funds, which ultimately inflates the costs of services.

Regarding the details of public spending, we find gaps in public health spending between urban and rural areas of Egypt. Although Upper Egypt has a higher number of individuals who cannot afford health care, it does not receive the majority of health spending; on the contrary, a higher percentage of spending goes to Egyptian urban areas. The gap between spending in urban and rural areas is clear—roughly 67%. In addition, the lowest income bracket receives only 16% of public health spending, while the highest income bracket takes about 24%. If we add the private spending that goes to this highest income bracket, we find that this segment of society is the single largest recipient of health spending.

To recap, most public spending goes to wages; as a result, preventive medical services, curative services and other matters that shape health policy are unable to achieve health policy objectives in accordance with social public spending and budget analysis.

The basic issue here can be summarized in two points. First, how can we achieve effective public spending? In other words, how can this LE12 or 13 billion be used to benefit the greatest number of Egyptians? Public expenditure must be allocated in accordance with targeted objectives. Secondly, how can public health expenditure be increased in the state budget to become a priority? Of course, this is linked with the more general question of how the public budget can be shaped by society, and how civil society and NGOs like the EIPR can influence this process.

We have an advantage created by the recent constitutional amendments, one of which allows the legislative authority, represented by the People’s Assembly, to amend the state budget in full. This could be an important tool for civil society and NGOs if they become capable of understanding the budget and know exactly what they want to change. When the budget is up for discussion in parliament, civil society can exercise pressure on the legislature, by addressing parliament, by speaking in parliamentary committees, or through other channels. As such, civil society can restructure spending by demanding specific changes to certain articles and redirect public spending to achieve what it views as necessary objectives. It can exercise pressure in some form or other in this field.