Governments of developing countries have done a fantastic job managing international aid money. Today, 44% of international health aid money cannot be traced in the budgets of the receiving countries. While many assume that the money disappears into somebody's pockets, it is unclear when nor on what it has been spent.

A recent study in The Lancet suggests that for every dollar of international health aid provided to governments, on average government health funding falls by $0.43–1.14. Since such findings could persuade people that aid money should not be dispersed through governments at all, the authors of an editorial in the same issue of the journal argue that the situation is far more complex. One cannot just assert, they say, that for every dollar rich countries spend on international assistance, poor countries spend one less.

For some countries, the domestic contribution indeed goes down in response to increasing international assistance, but for other countries the domestic contribution goes up. Global averages seem to mask important questions.

 Do governments shift money from their own health budget to other sectors as soon as aid money comes in? Do they put their own money aside, assuming external aid will run dry? Or do they spread the aid money over several years to avoid short peaks in the health service supply to their people? While at the same time tailoring their budget to give the impression that the donor money was immediately and fully used? Do governments keep the valuable hard currency, while reporting domestic expenditure as aid?

Every case is different, and there is much more work to be done to accurately trace health funding both from foreign and domestic sources.

The answer, say the authors of the The Lancet editorial, is a super duper, international social security fund managed by smarter, wiser government bureaucrats. Such a "Global Fund for Health" would make the use of international donor money a lot more transparent and efficient, they argue.

The Global Fund to fight AIDS, Tuberculosis and Malaria has shown that one can pool different streams of international assistance into one stable and reliable aid source. Why don't we broaden the mandate of the Global Fund to all elements of a comprehensive primary health care, into a World Social Health Insurance fund, to which every country contributes according to its means, and receives according to its needs?

Citations: Ooms et al., 'Crowding out: are relations between international health aid and government health funding too complex to be captured in averages only?', The Lancet, April 2010; doi:10.1016/S0140-6736(10)60207-3

Devi Sridhar, Ngaire Woods, 'Are there simple conclusions on how to channel health funding?', The Lancet, April 2010; doi:10.1016/S0140-6736(10)60486-2