PEPFAR: Exploring Co-Financing as a Tool for Domestic Resource Mobilization

There’s rising stress on PEPFAR, the U.S. international HIV program, to extend its planning for sustainability, together with by way of home useful resource mobilization and, finally, transitioning financing not less than partially to recipient nations. Whereas that is linked to a broader push in international well being and improvement, pushed by a constrained financing surroundings and want to advertise extra nation possession of applications and companies, there are particular questions going through PEPFAR’s future. A Nationwide Academy report from 2017, for instance, advisable that PEPFAR look towards phasing down its spending and supporting nations of their transition from bilateral support to home financing for HIV. At a Senate listening to final yr, PEPFAR was requested the way it was working to extend home assets and beneath what situations would it not want much less assets to perform its targets. Current challenges in securing a five-year reauthorization of this system have solely served to intensify the concentrate on sustainability and home useful resource mobilization.  How PEPFAR does this, nevertheless, stays an ongoing query.

One potential instrument is “co-financing” (typically known as “cost-sharing” or “co-investment”) – that’s, to require nation recipients of PEPFAR funding to contribute assets to the HIV response. Co-financing is used for a wide range of causes, together with to assist share or unfold prices and to advertise possession and sustainability in applications.  Certainly, a number of international well being and improvement establishments make use of some form of co-financing association, as do some U.S. authorities applications.  Whereas PEPFAR, and most U.S. international well being and improvement applications, are certain by necessities beneath the International Help Act to make sure some degree of cost-sharing by nations, some stakeholders have particularly advisable that PEPFAR undertake a coverage both to mobilize extra assets or to facilitate diminished U.S. funding.

This coverage temporary identifies choices and points PEPFAR may contemplate if it strikes within the route of a brand new co-financing coverage, primarily based on the experiences of different international well being and improvement establishments. It first examines present U.S. legislation relating to co-financing and PEPFAR’s prior expertise with home useful resource mobilization. It then assesses the co-financing insurance policies of six different establishments to attract out questions and points for PEPFAR. The six establishments examined had been: Gavi, the Vaccine Alliance (Gavi); the World Surroundings Facility (GEF); the World Fund to Combat AIDS, Tuberculosis and Malaria (World Fund); the Inexperienced Local weather Fund (GCF); the Millennium Problem Company (MCC) and the Pandemic Fund (PF).

Present U.S. Regulation and PEPFAR’s Expertise

U.S. Regulation

The International Help Act (FAA), which governs U.S. overseas help and applications together with PEPFAR and different international well being efforts, has lengthy had a co-financing requirement (which it refers to as “cost-sharing”). Particularly, Part 110 of the FAA, as amended, states that:

“No help shall be furnished by the USA Authorities to a rustic beneath Sections 103 by way of 106 of this Act till the nation offers assurance to the President, and the President is glad, that such nation will present not less than 25 per centum of the prices of your entire program, undertaking, or exercise with respect to which such help is to be furnished, besides that such prices borne by such nation could also be offered on an “in-kind” foundation.”

The requirement applies to bilateral improvement and international well being help that’s obligated to a number nation (however to not grants, cooperative agreements, or contracts with public worldwide organizations, non-governmental organizations, or different implementing companions except obligated by way of a bilateral settlement with the host nation.)  Sources of cost-sharing are anticipated to return from host nation budgets, though in some instances, they could come from different nation assets. In-kind contributions (e.g., buildings, supplies, personnel, in addition to coverage actions or institutional adjustments that additional undertaking targets) are additionally allowable. There’s additionally an choice to waive the cost-sharing requirement (beneath Part 124(d) of the FAA) on a case-by-case foundation for “comparatively least developed nations”, outlined as nations on the DAC listing of support recipients categorized as “least developed nations” or “different low earnings nations” or these on the World Financial institution’s “closely indebted poor nations” (HIPC) listing.  This coverage, whereas assuring some degree of cost-sharing by nations, doesn’t require progressive or extra nation financing over time.

PEPFAR’s Expertise

Whereas created in 2003 as an emergency program, the significance of constructing sustainable capability  in PEPFAR nations was acknowledged from the onset, together with in PEPFAR’s authorizing laws and first technique. When this system was reauthorized 5 years later, in 2008, Congress positioned a good higher emphasis on sustainability and instructed PEPFAR to develop new compacts or framework agreements with nations to advertise sustainability that, amongst different issues, included “price sharing assurances” that met the necessities of FAA Part 110 (primarily reiterating the present legislation).   PEPFAR developed “Partnership Frameworks” steering and, along with the cost-sharing requirement, inspired nations to extend home assets the place attainable. For instance, the steering said: “For functions of Partnership Frameworks, selling sustainability means supporting the associate authorities in rising its capability to guide, handle, and finally finance its well being system with indigenous assets (together with its civil society sector), moderately than exterior assets, to the best extent attainable.” As well as, it known as for the event of a timeline of accelerating associate authorities monetary commitments and standards for monitoring such help. In the end, PEPFAR developed Partnership Frameworks with 22 nations and areas, however these had been time restricted preparations that ended after a five-year interval. As well as, an analysis recognized a number of challenges with realizing elevated home assets, together with: obscure indicators that made monitoring and measurement tough; the absence of financing commitments in some agreements or inclusion of non-domestic sources as commitments; the shortage of proof for elevated home funding; and financial hardship that made it tough for some nations to contribute assets.

Past Partnership Frameworks, PEPFAR has, at different occasions, sought to emphasise the significance of and/or mobilize extra home assets from nations. For instance:

In its 2012 Blueprint for Creating an AIDS Free Era, PEPFAR said that it might work to “implement incentives for annual progressive will increase in home cofinancing that complement strategic investments by donors”.
In 2013, PEPFAR steering included the necessity for nations to extend and report on the usage of their very own assets for the HIV response, and categorized nations by their financial capability, together with nations that would “co-finance” extra of their response. Additionally at the moment, PEPFAR instituted Sustainability Plans as a strategy to work with nations to, amongst different issues, more and more finance the nationwide HIV response.
In 2019, PEPFAR launched “Minimal Program Necessities” (MPRs), certainly one of which was the necessity for nations to offer proof of elevated useful resource commitments by host governments yearly.
At present, PEPFAR is working to develop “Sustainability Roadmaps” with nations that can embrace the necessity to improve home financing of the HIV response.

Past the cost-sharing requirement that already exists beneath the FAA, nevertheless, PEPFAR has not instituted a coverage designed to mobilize extra home assets over time from nations, as some have known as for, and there’s restricted data out there on the standing of its prior efforts.

Concerns for PEPFAR

Ought to PEPFAR select to institute such a requirement, evaluation of the co-financing insurance policies of six different establishments raises questions and points for PEPFAR to contemplate, together with (see Field and Appendix):

Linking co-financing to mission and goals. All six establishments examined hyperlink co-financing to their organizational missions, priorities, and/or undertaking goals. For instance, Gavi’s co-financing requirement is restricted to the acquisition of vaccines; the GEF coverage is meant to help implementation of a GEF-financed undertaking or program and achievement of its goals; and the MCC requires contributions from nations towards assembly MCC goals. The World Fund has a mixture: it ties some co-financing to World Fund applications, but additionally to broader, well being system financing.  In PEPFAR’s case, co-financing could possibly be tied to the nationwide HIV program, because it was in its prior Minimal Program Requirement. This strategy would help Congressional intent to fight HIV, and sustainability of the HIV response particularly. Moreover, PEPFAR may contemplate tying co-financing to a selected HIV-related service or exercise solely (as Gavi does). Then again, a broader strategy, just like the World Fund’s tying co-financing to the well being system, might yield wider well being advantages (though not essentially for HIV).
Scaling co-financing to nation earnings/fiscal well being. Three establishments – Gavi, the World Fund, and the MCC – scale co-financing quantities or insurance policies to nation earnings classifications (requiring higher contributions from nations with greater incomes). Scaling a brand new co-financing coverage this fashion would defend PEPFAR recipient nations with much less fiscal capability and acknowledge the higher capability of nations with stronger economies. Nonetheless, since such an strategy might not seize the complete fiscal well being of a rustic or burden on people and households, PEPFAR may additionally think about using extra measures, resembling debt burden, share of family out-of-pocket expenditures on well being, and/or share of home revenues spent on well being, to evaluate nation fiscal capability.
What “counts” as a co-financing supply. The six establishments examined fluctuate within the sources and forms of assets they depend in the direction of fulfilling co-financing necessities. Whereas all six embrace home assets, solely the World Fund limits allowable co-financing to home revenues; in its case, these could possibly be home public assets (authorities revenues, authorities borrowings, social medical health insurance, and debt reduction proceeds) and/or home non-public assets (contributions from home companies and philanthropies). The others enable a number of sources to satisfy co-financing necessities, together with, in some instances, exterior donor help. Two establishments – the GEF and the MCC – explicitly embrace in-kind contributions as a supply of co-financing. If PEPFAR pursues a brand new coverage, assessing and figuring out allowable sources can be essential for setting clear expectations. Whether or not such sources are restricted to home revenues solely (as within the case of the World Fund) or broader sources (as within the case of different establishments) might rely upon PEPFAR’s targets (e.g., whether it is curious about mobilizing extra home revenues particularly or in substituting for U.S. authorities assets extra typically).
Specifying co-financing quantities/shares. Few establishments examined embrace a selected co-financing quantity. Exceptions are Gavi and the MCC (Gavi has particular worth per dose necessities and the MCC has particular proportion necessities, every scaled ultimately to nation circumstances). The World Fund, then again, has a extra normal requirement to extend the quantity invested over time and the GEF, GCF, and PF wouldn’t have any specs for nations or initiatives, although the GEF does have total co-financing targets at its full portfolio degree. PEPFAR may contemplate specifying an quantity or proportion of co-financing, which is likely to be simpler to measure and supply predictable projections of co-financing. Alternatively, it may contemplate a extra normal requirement to extend co-financing over time (akin to its earlier Minimal Program Requirement and the World Fund’s coverage), which can be simpler to implement and permit for extra flexibility for nations primarily based on their distinctive circumstances, however not present predictability and could possibly be more durable to measure.
Specifying progressive co-financing. Whereas all six establishments embrace the significance of “additionality” of their definitions (that co-financing brings extra assets to the undertaking, mission, or well being system) solely two establishments – Gavi and the World Fund – particularly require an rising share of assets to be offered over time. Gavi’s coverage is designed to have nations progressively co-finance their vaccines till they’re absolutely funding vaccine procurement. The World Fund requires nations to show progressive authorities expenditure on well being and rising co-financing of World Fund supported applications. Whereas not a requirement, the PF encourages nations to progressively decide to rising co-financing over time. Then again, the MCC’s requirement is static, set at a selected proportion that doesn’t change over time, and the GEF and GCF wouldn’t have any particular necessities for nations. If PEPFAR’s aim is to mobilize extra home assets it’d contemplate setting a co-financing degree above what a rustic does now or designing a progressive co-financing coverage, alongside the traces of what Gavi has performed (having nations more and more finance their very own applications over time).
Permitting for exceptions/waivers. All however one establishment (the GCF) contains an express provision relating to waivers of co-financing in distinctive circumstances, sometimes for fiscal or humanitarian crises. Together with such a provision is meant to guard nations after they encounter surprising or protracted difficulties or in any other case face difficult situations. U.S. legislation already permits for this in its cost-sharing requirement, albeit just for sure nations. PEPFAR may contemplate increasing this to use to any nation it helps, if it had been to institute a co-financing requirement.
Figuring out clear measurement, monitoring, and reporting standards. How establishments measure, monitor, and report on co-financing contributions varies considerably and is mostly extra stringent if co-financing is required and there are repercussions for non-compliance (see beneath). For instance, for Gavi, measurement and monitoring are primarily based on the precise buy of vaccine doses by nations. The MCC requires verifiable nation information and should conduct on-site monitoring and verification. The World Fund requires authorities letters of dedication and screens commitments primarily based on verified price range or different documentation. The PF, nevertheless, extra typically states that co-financing can be documented in annual studies. Selecting clear measurement and monitoring, in addition to reporting, standards, can be essential for the success and accountability of any new coverage.
Addressing non-compliance. Whereas all six establishments require co-financing data to be submitted in purposes, solely three – Gavi, The World Fund, and the MCC – state that they are going to take motion for non-compliance, together with the potential to lose monetary help. The opposite three don’t specify any penalties for non-compliance, though the GCF and PF say they rating purposes, partially, primarily based on submission of co-financing data. Whether or not PEPFAR decides to incorporate penalties for non-compliance will doubtless have an effect on the energy of the coverage but additionally may probably threat adversarial penalties on program outcomes (e.g., if non-compliance resulted in lack of funding that threatened very important companies). To handle this concern, PEPFAR may contemplate implementing “guardrails” that defend sure companies (e.g., antiretroviral remedy) or populations (e.g., key and susceptible populations) from lack of funding as a result of nation co-financing non-compliance.
Piloting or phasing-in a brand new coverage. As a result of a co-financing coverage would introduce a brand new aspect to PEPFAR’s relationships with nations, it may contemplate piloting the requirement in a subset of nations or for a subset of companies and/or phasing it in over time. Gavi, for instance, explored interim approaches to co-financing a number of years earlier than absolutely implementing its coverage for all nations. As a part of a pilot, PEPFAR may take a look at whether or not incentivizing nations, not less than within the quick time period (e.g., by providing extra matching funds for sure companies or guaranteeing a specific amount of help for a time frame), may help in a transition to co-financing, and assist mobilize nation assets over time.
Coordination with different donors. Lastly, if PEPFAR had been to resolve to institute a co-financing requirement, there’s a threat that such a coverage may overburden nations going through related necessities from different establishments, and/or create combined or cross-purpose incentives that would influence well being outcomes. Coordinating throughout establishments would assist to mitigate in opposition to these dangers. In PEPFAR’s case, coordination with the World Fund can be significantly essential, provided that each PEPFAR and the World Fund help most of the similar nations of their HIV response.

Whether or not PEPFAR finally decides to institute a brand new co-financing requirement stays to be seen, though Congress and different stakeholders are more and more asking this system to determine methods wherein it is going to promote sustainability and fewer reliance on U.S. authorities help over time. This evaluation of different institutional co-financing insurance policies affords a variety of questions and points for PEPFAR to contemplate ought to it transfer on this route.