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Ethiopia’s remarkable socio-economic transformation over the last decade has been marked by: a reorientation of expenditure from recurrent to capital; a significant devolution of resources from Federal Government to Regions; and a clear prioritization of infrastructure spending, while protecting spending on education at four percent of GDP. The Government of Ethiopia has also leveraged external resources to boost spending in pro-poor sectors, particularly health and social protection. As a result, Ethiopia is home to the largest social safety net program in Africa, and has also achieved remarkable health outcomes using cost effective approaches. Recent investments have seen a significant build-up of capital stock, with capital spending at sector level pointing towards increased service capacity. The current public investment-led strategy requires to be complemented by increased budgetary provisions in operations and maintenance so that new investments translate into enhanced service coverage and delivery. As Ethiopia lays the foundation to become a middle income country, and the changing global environment implies declining external assistance, it is imperative that domestic taxation activity support this transition. The current tax-to-GDP ratio is low compared to peer countries, and the tax structure would benefit from increased contributions by direct tax sources. Therefore, there is an immediate need for advancing tax reforms and improve capacity and quality of tax administration. Broadening the tax bases, through review of exemptions, as well as review of tax rates might be venues to consider. Additional revenues will create the much-needed fiscal space to increase funding for operations and maintenance for service delivery, and support fiscal sustainability. As a follow-up to this Public Expenditure Review, the Government of Ethiopia has asked the World Bank to provide further analytical support, with a view to enhance domestic revenue mobilization through simpler and more efficient taxation, while retaining equity priorities in public finances.

This paper uses a set of national household surveys to study the regional Sub-Saharan Africa distribution of consumption expenditure among individuals during 1993 to 2008. The analysis puts the disparities in living standards that exist among persons in Africa into context with the disparities that exist within and between African countries. Regional interpersonal inequality has increased (from a Gini index of 52 percent in 1993 to 56 percent in 2008), driven by increasing disparities in living standards across countries, while there has been no systematic increase in within-country inequality. For the African distribution as a whole, growth of consumption expenditure (from household surveys) has been low (around 1 percent per year). This growth has been uneven and as a result the richest 5 percent of Africans received around 40 percent of the total gains, while the bottom third stagnated.

The report contains eight chapters. Chapter one leads off with the main macroeconomic and fiscal determinants to understand the general health financing situation in DRC. Its sections one and two provide a brief overview of the country’s macroeconomic and fiscal environment. Section three sheds new light on decentralization, a core health issue, and focuses on the fiscal implications of decentralization. Section 4 offers a brief analysis of the management of public finance, a key element for the effectiveness and quality of expenditure, especially in health. Chapter two starts with a brief overview of the main objectives and analyzes its organization and governance, with a focus on health care delivery. Chapter three discusses the performance of the main health system’s outputs and outcomes. Section one analyzes major changes in health outcomes based on different household surveys. Section two addresses service coverage with a focus on mother and child services. Section three explores service quality issues. In a detailed analysis of health financing sources, Chapter four looks at changes in public, external, and private sources over 2008–2013 (section one). Section two analyzes the adequacy of government funding for health financing needs, and assesses the prospects for expanding fiscal space for health. Chapter five examines government funds mobilized for health, both allocated in the budget and executed (or actuals). Government resources for health are taken to mean all domestic financing sources allocated to the Ministry of Public Health and other health entities. Section one examines changes in the health budget envelope over 2007–2013, while section two focuses on actual spending. Section three analyzes government executed expenditure by nature and section four reviews trends and types of personnel expenditure, the largest share of government health expenditure. Chapter six focuses on health expenditure performance in the light of three main parameters: financial protection; equity; and efficiency. Section one analyzes financial protection using standard indicators (share of out-of-pocket payments, catastrophic expenditure, and impoverishing expenditure). Section two scrutinizes health outcomes and service use disparities and inequalities based on income, gender, and place of residence. The last section presents an overview of the efficiency of health expenditure in DRC, primarily in comparison to its peer countries. Chapter seven analyzes health financing from the point of view of the provinces, the new ‘entitled’ authorities for the health sector, drawing on a survey of financial and fiscal data from six provinces. Section one presents an overview of health financing flows after decentralization. Section two focuses on financing sources for the health sector at the provincial level, examining provincial government funds, external assistance, and central government transfers. The chapter ends with an analysis of the volume and type of decentralized government health expenditure. The report concludes in a brief chapter eight with a series of recommendations to improve short- and medium-term health sector financing and performance.