Structural adjustment by any other name: International Financial Institutions and health in Ghana and Kenya

A look at the IMF’s programs in Ghana and Kenya reveals the continuity of more privatization, more cuts, and more threats to people’s right to health

November 05, 2022 by Tanupriya Singh
Health workers protest in Kenya. Credit: Citizen Digital

In October, the International Monetary Fund (IMF) concluded another staff-level visit to Ghana, amid negotiations over a $3 billion loan to Accra under an Extended Credit Facility (ECF). Talks over the program, which will be Ghana’s 17th with the Fund since independence, were announced in July, in the wake of protests against worsening economic conditions.

However, even as the situation grew more dire, progressive forces and unions in Ghana resolutely rejected any engagement with the IMF, recalling the disastrous impacts of previous arrangements. Ghana is not alone, in fact over half of the countries in Africa are currently either under, or are negotiating, an IMF program.

“The ECF is a direct descendant of the infamous Structural Adjustment Program (SAP), a joint IMF-World Bank program that caused so much suffering in developing countries throughout the 1980s to 1990s, and led to socio-economic-political changes that reverberate to this day,” Dian Maria Blandina, medical doctor, researcher, and People’s Health Movement (PHM) activist, told Peoples Dispatch. “The program entails the usual conditionalities of government spending cuts, privatization, deregulation, tax reform, as well as trade and financial liberalization.”

These have had a detrimental impact on health. The IMF has hampered the progress of public health systems and disease response in Africa, with conditionalities that require governments to adopt policies that prioritize “short-term economic objectives over investment in health and education.”

In West Africa, IMF policies have been linked to reduced government spending on health — macroeconomic targets set by the Fund have “crowded out” health concerns, limits on public-sector recruitment and the wage bill have impeded the hiring and retention of health workers, and administrative and fiscal decentralization has ended up being “insufficient” and caused “governance problems.”

As part of the cuts to spending imposed under SAP policies, Ghana implemented a “cash-and-carry” system in 1985, undoing years of years of free and universal health care provided since independence. Patients were now required to pay full user fees in advance to access any medications or treatment in public hospitals. Use of state healthcare subsequently declined by an estimated 60%.

People who could not afford the fees, were left to either delay seeking care or to go without it, which had the added threat of undermining Ghana’s ability to detect and respond to health crises. In 1986, health fees skyrocketed by 800 to 1,000%. Cuts to government spending also resulted in problems including low pay for health workers and understaffing.

These patterns can be traced throughout Ghana’s subsequent interactions with the IMF. Wage ceilings in the public sector were imposed in 2005 till late in 2006, during which healthcare staff reduced significantly– by 2007, the number of physicians had halved.

Reducing the public wage bill was also at the core of Ghana’s most recent IMF loan, an ECF program between 2015-2018. This led to a hiring freeze and a cap on nominal wage increases.  “This meant that while Community Health Improvement Compounds (CHIP) were without skilled personnel, trained nurses were picketing at the Ministry of Health and Ministry of Employment for jobs,” denounced the Ghana Trades Union Congress.

Over 41,000 trained health professionals could not be posted to health facilities due to IMF advice. A study by Action Aid found a 41% vacancy in health services. Constraints on the public sector wage bill disproportionately impact women, who comprise over 70% of the global health workforce, not only in terms of the burden of unpaid care work, but also access to decent work and health services.

IMF-imposed constraints on the public sector wage bill are driven, as ActionAid argues, by ‘infrastructure fundamentalism,’ which construes investment in the public workforce as somehow wasteful. Wage constraints, which especially impact teachers and health workers, are justified on grounds that that will free up funds for  infrastructure, however, “in very few cases do references to infrastructure include hospital beds or schools”. The emphasis on infrastructure also opens the door for private contracting and service provision.

As talks progress with the Fund, Ghanaian health workers have warned that any cuts or freezes in employment or inadequate compensation for workers will be “vehemently resisted”. A strike by tens of thousands of public sector and health workers was averted at the last minute in July, after the government and unions agreed to a 15% Cost of Living Allowance, much below inflation which had crossed 37% by September.

Blandina added further that while Ghana was eager to implement community-based primary care after independence, its efforts were obstructed by neoliberal policies. As a result, “primary care remains away from those who need it” and the “colonial legacy of medically-dominated health systems emphasizing secondary and primary care, and medical care maldistribution have continued to characterize Ghana’s health care delivery.”

It is because of this essential continuity of the SAP years that Blandina refers to present-day IMF arrangements as “structural adjustment loans” — “These loan programs, even though they have undergone cosmetic reforms, at their core, the structural reforms they are pushing are still the same.”

Foreign aid and healthcare privatization in Kenya

In 2021, Kenya reached an agreement with the IMF, the 22nd so far, for a 38-month, $2.3 billion loan under both an ECF and an Extended Fund Facility (EFF). Under the directive of the Fund, the government of President William Ruto announced that it would scrap subsidies on fuel and maize among other measures.

The 2021 agreement was also conditional on a three-year pay freeze in the public sector. These were introduced in the wake of a long-drawn struggle by Kenyan health workers for better pay and working conditions, especially during the COVID-19 pandemic. An ongoing, years-long freeze on public sector hiring also remains in place to “ensure the wage bill remains within medium term targets”.

Between 2016 and 2021, the IMF advised Kenya to cut or freeze its public wage bill for 6 years, leading to an estimated loss of over 45,000 nurses. IMF policies and budget targets, that are products of a largely undemocratic and opaque process, have been found to be overly and unnecessarily restrictive, inhibiting the ability of Kenya to effectively implement and scale up health interventions especially in response to diseases such as HIV/AIDS and tuberculosis (TB).

While undermining Kenya’s public health system, a key feature of the Fund’s presence in the country has been the proliferation of foreign aid in the health sector. Aid is essentially weaponized through the IMF’s ‘signaling effect’, wherein compliance with the Fund’s loan programs is used to indicate to donor countries whether or not a government has the “right” policies in place to receive funding.

“It is important to see aid as what it is, it is not an altruistic gesture, but a mechanism created by those who benefit in seeing that the nations, who provide the markets for their products, do not collapse or completely default on debt, or worse? Withdraw from the capitalist system all together,” Blandina stated.

“Aid is simply the flip-side of debt, and supports the vicious cycle of payments crises and rescue operations that stretch into the indefinite future.”

While the presence of NGOs in African countries is not new, they have come to play a more prominent role under the ‘New Policy Agenda of neoliberalism’, as Dr. Julie Hearn argues— “the process of ‘NGO-isation’ is the clear outworking of western foreign policy aimed at redefining the central relationships between the state, society, and external actors.”

NGOs are then viewed as “the preferred channel for service provision in deliberate substitution for the state”.

Instead of promoting more public expenditure and a better economic performance to address Kenya’s health crisis, Hearn adds, strategies used by USAID involved the imposition of user fees, expanding insurance schemes, and most importantly, “reducing the role of the government as a health provider and encouraging the private provision of health care, particularly as regards expensive curative care”.

In 1994 for instance, around 95% of USAID aid disbursements in Kenya were to private voluntary organizations (PVOs), NGOs, and private firms. The shift towards private provision of curative care was justified on the grounds that it had a “comparative advantage”. This purported “advantage” is “deliberate and politically constructed”.

The crisis in Kenya’s health system has been compounded by devolution, which along with other forms of decentralization, has been a key feature of IMF prescriptions. At the county level, funding gaps have meant that local governments have been forced to rely on external partners, Peoples Health Movement-Kenya national coordinator Dan Owala told Peoples Dispatch. USAID, for instance, focuses its efforts mainly at this level.

A portion of the funds that county governments have is to be channeled into infrastructural development. However, the emphasis, Owala argues, has been more on the building of such facilities, the “contractual” aspect and the “kickbacks” people can get, rather than health service delivery—- “If you go to rural areas, you find very nicely built facilities, however, there is no equipment, there are no personnel stationed there.”

Owala added that an increasing number of people have shifted towards privately-run facilities, which are present at all levels of the health system. This has serious implications especially when it comes to the National Health Insurance Fund (NHIF) which covers both public and private health providers.

The World Bank has now urged the Kenyan government to include more private hospitals into the NHIF, supposedly to reduce out-of-pocket expenditures. However, Owala warns that the move will siphon even more funds into the private sector, commodify and privatize healthcare, and push households into poverty.

Private facilities have been reimbursed at much higher rates, he emphasized,— Between 2012 and 2021, while NHIF payouts for public facilities increased by 8.8 times, the figure surged by 30 times for the private sector.

“The insurance- and market-based model that is being pushed by the World Bank is driving a  large-scale privatization of healthcare in Kenya. The NHIF has been turned into a cash cow for the private sector”

Another iteration of the World Bank’s market-based model was the managed equipment services (MES) arrangement, Owala explained, under which the Kenyan government would lease medical machines from foreign countries to ease the burden on existing equipment. However, Owala stated that the leasing contracts were opaque, and were not put through public financial management systems.

He added that while the machines were brought in, Kenya’s health workers were not trained to use them, nor was there any infrastructure to set up the leased machines. While the contracts ran for years using taxpayer money, the equipment was effectively non-functional.

“At present, around 60 to even 80% of Kenya’s healthcare system is privatized. I do not think we can say that we have a functioning public healthcare system. The new government has also chosen the route of privatization,” Owala said.

As the IMF and the World Bank continue to tighten their grip on the economies of the global South, health activists have recalled the vision of the 1978 Alma Ata declaration. Released on the eve of what would be known as the African continent’s “Lost Decade,” the text affirmed that health was a fundamental human right, and called for a New International Economic Order for its full attainment.

“The term [NIEO] has since been twisted and misused… what it meant was an end to the global trade and economic system that have resulted in centuries of exploitation of most of the world’s population,” Blandina said.

“Instead what we have had is decades of adjustment programs promoted by the IMF and the World Bank geared towards maintaining the status quo, the exploitation of the global South by the global North continues.”