Exchange rates and budgeting at the Zambian MoH
The question of exchange rates and the effectiveness of development assistance is almost un-researched. There are almost no publications of any sort on the topic. It is therefore with joy that we will present a recently published paper, that focuses on exchange rates and how they affect the Ministry of Health (MoH) in Zambia.
The paper is published in Oxford Health Policy and Planning, and is co-authored by Collins Chansa (Worldbank), Jesper Sundewall (Sida) and our own Númi Östlund.
The study looks at how the MoH was affected by exchange rate volatility, with really interesting findings. One important takeaway is the combined complexity that the MoH faced, working with many different donors and currencies.
The case is not at all unique to the MoH in Zambia, but a reality for many implementing partners and recipients. The study thus provides important knowledge both for donors and partners, when working to set up effective funding.
Uncertain funding from international donors
During the studied period, the MoH worked with a total of 26 international donors of different kinds. They disbursed funds in eight different currencies, with pledges denominated in the donor currencies.
The result was that the funding received by the MoH fluctuated with the involved exchange rates.
As illustrated in the graph above, the value of incoming funds (in USD) as compared to budgets fluctuated significantly from year to year. Its a mix of gains and losses, but the important thing here is not the results as such but the effect on predictability.
How do you budget and plan for effective service delivery when you are this uncertain about the value of your funding?
And this should really be emphasized: The fluctuations in funding we see here is in the funding that is committed and contracted. Even when you have a pledge from large governmental and multilateral donors, unmanaged exchange rates will create this uncertainty.
Uncertain costs in multiple currencies
The paper does however not only describe the uncertainty created in incoming funds but also touches on the cost side of the budget. The MoH has costs in multiple currencies which add to the complexity and uncertainty.
The main expenditures are in USD for different treatments and drugs and in Zambian Kwacha (ZMW) for district health care costs.
As illustrated by the two graphs above, the costs see a significant effect of fluctuating exchange rates. Again, there are gains and losses over the years but its the uncertainty that is most important. How to ensure quality in service delivery when you can't be sure about the budget?
The paper goes into these questions in more detail. And if you are interested in this topic, don’t hesitate to reach out. Númi would be delighted to talk more about the study, but also to learn more about similar work (both completed, ongoing or upcoming!).
If you know someone who faces these types of challenges — get in touch! There are a lot of solutions and lessons learned available!
