Complete Book PDF (4.12MB) - World Bank eLibrary

Health Sector Corruption in Ethiopia 51
Foreign aid to Ethiopia for the health sector deserves special attention
because it is so large and increasing so fast. From 1998 to 2008,
foreign aid to Ethiopia’s health sector increased tenfold—from about
US$50 million to more than US$500 million. 7 Two very different structural
changes characterize this rapid expansion: One large part of this
money is being organized by donors into pooled funds that are channeled
through the government’s normal financial management and
procurement systems. Another major share is being channeled directly
to NGOs, civil society organizations, and consulting firms with independent
and parallel forms of financial supervision.
Ethiopia certainly needs these funds, but ensuring that they are used
properly is a major challenge. The international community has increasingly
recognized that new aid modalities create both challenges and
opportunities for reducing corruption, and this is also true for the health
sector (Kolstad, Fritz, and O’Neil 2008).
Corruption risks and mitigation. The efforts to pool funds and work
within the government’s financial management and procurement system
includes funds going into the PBS program, the MDTF, and the
MDG fund. In 2006, bilateral agencies and the World Bank provided
about US$90 million through the PBS program, part of which financed
local government block grants through MOFED, while the other part
financed pharmaceuticals and supplies through the FMOH. The
GFATM and GAVI Alliance are currently disbursing through government
channels as well, leaving PEPFAR as the major source of foreign
aid still disbursing outside of Ethiopia’s public financial management
and procurement systems.
Our research found concerns that abuses of foreign aid flows for the
health care sector might be occurring in three ways:
• Diversion and theft of commodities
• Embezzlement and fraud of funds channeled through the public sector
• Misuse of funds channeled outside the public sector.
However, three factors mitigate the risks of corruption affecting
foreign aid to Ethiopia:
• The funds that flow through the government’s normal procedures
should be verifiable and, if any abuses are detected, investigated and
prosecuted.