Malawi faces wide-ranging challenges in Global Fund grant implementation

7. ANALYSIS
19 Mar 2019
Some relate to Global Fund processes, others to political and economic context

Malawi has made significant progress in the fight against HIV, tuberculosis (TB) and malaria since it started receiving Global Fund funding in 2003; more than 90% of people living with HIV knew their status in 2017, 71% were on treatment and 61% were virally suppressed. Malaria incidence and mortality has also reduced significantly. However, the country faces significant challenges in implementing Global Fund grants, such as weak health systems, low absorption for non-procurement-related funds, and low domestic financial contributions, which together may impede the country’s ability to achieve maximum impact.

Malawi is a low-income southern African country with a population of approximately 18 million. The Global Fund classifies Malawi as a ‘high-impact’ country due to huge Global Fund investments there – approximately $459 million in the 2017-2019 funding cycle alone – and a ‘mission-critical disease burden’. Malawi had the ninth-highest HIV prevalence in the world (9.6%) among the adult population aged 15-49 years in 2017; the country is also ‘high burden’ for both malaria and HIV/TB coinfection. The entire population of Malawi is at risk of malaria: in 2017, there were approximately 4.3 million cases of malaria resulting in 7,000 deaths.  Similarly, TB is a serious concern; an estimated 131 people per 100,000 population were infected with TB in 2017, and only 68% of these incident TB cases were put on treatment.

This article analyzes grant implementation in Malawi including challenges faced and lessons learned by the Global Fund and in-country partners such as the Country Coordinating Mechanism (CCM), Principal Recipients and the Global Fund Secretariat. Information for this article comes from publicly available documents, including the funding requests and grant performance reports, two audit reports and one investigation report on the Malawi grants by the Office of Inspector General (OIG) (see ‘Further reading’ below), as well as interviews with officials in Malawi and within the Global Fund Secretariat. 

Global Fund and other partner investments in Malawi

The Malawi health sector relies heavily on funding from external sources. HIV programs especially are almost entirely funded from external resources (95%): The Global Fund and the President’s Emergency Plan for AIDS Relief (PEPFAR). For the 2018-2020 implementation period, the Global Fund contributes 31% of total available HIV resources; while other external and domestic resources contribute 40% and 1% respectively in the 2018-2021 period, based on an Aidspan analysis on data reported in the funding landscape. The funding landscape is one of the documents submitted to the Global Fund during the funding application process; it describes the sources of funding for the three diseases relative to the needs and highlight the gaps in funding). The ‘unmet need’ gap for HIV stands at 28% (Table 1). The Global Fund also financed an estimated 20% and 17% of the TB and malaria responses.

Table 1: Overview of the funding landscape (2018-2021)

  HIV TB Malaria*
Fiscal Year Amount ($ million) As % of funding need Amount ($ million) As % of funding need Amount ($ million) As % of funding need
Estimated funding need 1,092,042,350   76,903,607   379,330,238  
Domestic resources 9,442,679 0.9% 2,800,490 4% 1,482,661 0%
             
Loans 3,401,354 0.3% 6,000,000 8% - 0%
             
External Resources (non-Global Fund) 436,260,201 40% 15,797,997 21% 91,976,139 24%
             
Total Global Fund resources 339,268,432 31% 15,718,404 20% 65,723,448 17%
             
Total resources available 788,372,666 72% 40,316,891 52% 159,182,248 42%
             
Unmet need gap 303,669,684 28% 36,586,716 48% 220,147,990 58%

SourceThe ‘Funding Landscape’ is part of a downloadable package of grant application (funding request) documents; it is available on the Malawi Overview page on the Global Fund website. To access the funding request documents, click on 'Applications' under the 'Documentation' section at the bottom of the page. Download both the 'Funding Request Malaria - 2017' and the 'Funding Request HIV/TB - 2017' to obtain the malaria and HIV/TB Funding Landscapes respectively.

Note: *Malawi did not include the Global Fund contributions towards malaria for the year 2021 in the funding landscape spreadsheet

Currently, three Principal Recipients (PRs) implement four active grants in Malawi (Table 1):

  • The Ministry of Health (MoH), which implements both HIV/TB and malaria grants focusing on treatment and care; and
  • Action Aid and World Vision, two non-state PRs, are responsible for non-biomedical interventions for HIV/TB and malaria respectively; those interventions include community mobilization and demand creation for care and treatment services.

These PRs were unchanged from the 2015-2017 implementation period.

 

Table 2: Active Global Fund grants in Malawi
Disease component Principal Recipient (PR) Grant number Signed amount
TB/HIV Ministry of Health MWI-C-MOH $364,229,296
Action Aid Malawi MWI-C-AA $29,376,543
Malaria Ministry of Health MWI-M-MOH $25,153,571
World Vision Malawi MWI-M-WVM $40,278,420
TOTAL $459,037,830

Note: All the grants listed in Table 2 run from January 2018 to December 2020

 

Low domestic contributions to the health sector

The government of Malawi spent 10.8% of its total public expenditure on health in 2015, an improvement from recent years – health expenditure was 8.8% in 2014, 8.6% in 2013 and 6.3% in 2012. However, these contributions still fall short of the 15% agreed on by the African Union Heads of States in the Abuja Declaration. To put these proportions in perspective, only two countries – Madagascar and Sudan - actually met the 15% threshold.

Government expenditure on health is just one source of health spending in Malawi and it accounted for 29% of the ‘current’ health expenditures in 2015. Other sources are development partners (54%) and households and employers (18%). Current health expenditures include expenditures for remuneration of personnel, rent payment, purchase of medications, reagents, and other health commodities.

Malawi has limited fiscal space, which restricts significant increases in government spending on health. The country has turned to loans to fill this gap in funding (Table 1); for instance, in the current 2017-2019 allocation period, the country has committed $33 million in co-financing i.e. domestic investments for the three diseases. Malawi has borrowed $10.5 million from the World Bank to help meet this commitment. The Global Fund’s Technical Review Panel, however, warned against the use of loans to fill the funding gaps citing increasing debt levels in Malawi. Indeed, the high levels of debt have been highlighted in  the Debt Sustainability Analysis by the International Development Association (IDA) of the World Bank and the International Monetary Fund (IMF).

Most of the current grant funds are for procurement of health commodities

Malawi’s portfolio is highly commoditized; the country plans to spend 85% of the total of its current Global Fund grants to purchase health products. The majority of these funds will purchase anti-retroviral medications for HIV and long-lasting insecticide nets (LLINs). Previously, the OIG, in the 2016 audit, had estimated that between 2009 and 2015 Malawi spent 89% of its Global Fund grants on procurement of health products.

Donors finance the procurement of health products to a huge extent, particularly for HIV. In fact, a procurement expenditure analysis by PEPFAR showed that the Global Fund pays for 99% of HIV-related commodities in Malawi, while PEPFAR pays for the remaining 1% (Table 3). The role of the government of Malawi cannot be underestimated, however, as it finances health systems strengthening (HSS), such as human resources, health infrastructure and equipment – 12% of the total HIV-related HSS expenditure - and, to a smaller extent, voluntary medical male circumcision (VMMC) (4%), prevention of mother-to-child transmission (PMTCT) (2%) and prevention for priority populations (1%). The government of Malawi also purchases essential medicines such as antibiotics.  Overall, the contributions of the Government of Malawi are critical for the functioning of the health system although the government does not purchase HIV-related health commodities.

 

Table 3: Annual procurement profile for HIV-related key commodities
Commodity Category  Total Expenditure ($) Sources of expenditure
Global Fund PEPFAR Other
ARVs 69,713,358.09 91.5% 80%.5% 0%
Rapid test kits 4,419,939.15 100% 0% 0%
Other drugs 8,922,233.44 100% 0% 0%
Lab reagents & Viral Load Commodities 18,739,435.02 92% 8% 0%
Condoms 3,478,645.97 70.5% 29.5% 0%
VMMC1 kits & commodities 2,591,461.00 0% 66% 34%2
HIV/TB 3,642,349.09 100% 0% 0%
Other commodities (lubricants)  96,000.00 0% 100% 0%
Total 111,603,421.76 99% 1% 0%

Source: Malawi Country Operational Plan (COP) 2018 (Strategic Direction Summary)

Notes:  
1VMMC - Voluntary Male Medical Circumcision
2World Bank
3The government does not purchase HIV-related commodities

 

The Global Fund also invests heavily in programs for key populations, adolescent girls and young women (AGYW), and other priority populations, and health systems strengthening in Malawi (Table 4). During the development process of the 2018-2020 funding request, there were calls by some in-country stakeholders to reduce allocations for procurement and to increase investment in prevention, according to one source. However, the national dialogue attended by all stakeholders and constituencies  prioritized the procurement of commodities for three reasons. First, the country implements the “test and treat” policy which increases the number of people on treatment,  second, the fact that the Global Fund is the only source of funding for ART, and finally the need to ensure no interruption in treatment.

 

Table 4: Annual investment profile by program area for 2017
Program Area Government of Malawi (%) Global Fund (%) PEPFAR (%) Other (%)
Clinical care, treatment and support  0% 75% 21% 4%
Community-based care, treatment and support 0% 0% 83% 17%
PMTCT1 2% 23% 75% 0%
HIV testing and counselling 0% 0% 100% 0%
VMMC2 4% 0% 89% 7%
Priority Population Prev. 1% 12% 42% 45%
AGYW3 Prevention  0% 100% 0% 0%
Key Population prevention   0% 28% 59% 14%
Orphans and vulnerable children 0% 0% 100% 0%
Laboratory 0% 0% 100% 0%
Strategic information, Surveys and Surveillance 0% 0% 58% 42%
Health systems strengthening (HSS) 12% 16% 32% 40%

Source: Malawi Country Operational Plan (COP) 2018 (Strategic Direction Summary)

Notes:  
1PMTCT - prevention of mother-to-child transmission
2VMMC - Voluntary Male Medical Circumcision
3AGYW – Adolescent girls and young women

 

Weak supply chain system may undermine gains made in procurement

Malawi’s weak supply chain system may undermine efficiencies made by procuring health commodities through the Pooled Procurement Mechanism (PPM). The Global Fund created this mechanism in 2009 to aggregate procurement orders, negotiate lower prices and ensure timely procurement of health commodities for Global Fund recipient countries. Malawi now has access to health products at the national level but inefficiencies in quantification and distribution result in stock-outs of malaria commodities and expiries of TB commodities at local health facilities as highlighted by the OIG in the 2016 audit. Theft and leakage of health commodities, particularly antimalarial drugs, have also been common in Malawi since 2010 prompting the government and other partners to put in place remedial measures. The government, for instance, established the Drug Theft Investigation Unit, revised laws to introduce severe penalties for drug thefts and intensified investigations and prosecutions of those suspected to steal medicines.

In the past, partners established parallel supply chain systems to circumvent these weaknesses in the existing national systems. For instance, the Global Fund Secretariat uses a third-party logistics provider to carry out the last-mile distribution of health products. However, the third-party logistics provider is not a long-term solution. The Secretariat is currently investing in building the capacity of the Central Medical Stores Trust (CMST) - the national procurement agency that procures, provides quality assurance, stores and distributes medicines and medical supplies – as well as integrates the existing parallel supply chains. This is part of the Global Fund’s supply chain initiative which includes the development of a supply chain strategy, and work with government and private sector partners to implement supply chain transformation projects. The Secretariat has not yet specified how much funding is available for the implementation of this initiative in Malawi.

Malawi absorbs less than half of the funds for in-country HIV/TB activities

Malawi absorbed 82% of its Global Fund grants in the 2015-2017 implementation period. This proportion is higher than the average for high-impact African countries (69%). Specifically, for HIV and TB, the Ministry of Health (MoH) absorbed 81% of its HIV/TB grant (grant number MWI-C-MOH, $285 million) in this period. These proportions conceal wide discrepancies in the absorption of funds for procurement, which is through the PPM, in comparison with funds for in-country activities. For instance, Malawi absorbed only 30% of the in-country activities budget for all the grants in the 2009-2015 period as reported by the OIG in the 2016 audit.

Similarly, Malawi underspent funds for in-country activities for the malaria grant in the 2015-2017 implementation period. Overall, Malawi absorbed 68% of the total allocation ($33 million) for malaria. MoH absorbed only 65% of the grant (grant number MWI-M-MOH, $26 million) whereas World Vision Malawi, the non-state PR implementing non-biomedical interventions, absorbed 90% of its allocation (grant number MWI-M-WVM, $6.6 million), according to the Secretariat.  To put this in perspective, 75% of the malaria grant was for procurement of health products. According to the Secretariat, the country spent most of the procurement funds. Part of the unspent funds were savings which resulted from significant price reductions in health products; the remaining underspent funds were mostly for in-country activities.  

The low absorption rate extends also to funds made available by the government as Malawi used only 30% of the year’s co-financing provided by government in the period between July 2015 and June 2016, according to the OIG, in the 2016 audit. However, according to the Secretariat, Malawi absorbed most of the commitment at the end of the grant implementation period (the exact proportion was unavailable).

In the same report, the OIG has attributed the low absorption rate for Global Fund funds allocated to in-country activities, i.e. funds not meant for procurement of health products, to inefficiencies in the country team’s management of the portfolio and fiscal agent processes, and limited capacity to implement activities, that are critical to overall success, such as TB active case finding and MDR-TB activities, procurement of malaria rapid diagnostic tests; and expansion of medicines storage infrastructure for priority districts.

In the current grants, Malawi plans to conduct an orientation for PRs and SRs on the Global Fund’s budgeting guidelines, operational financial manuals including the role of the fiduciary (fiscal) agent, according to the HIV/TB funding request. The absorption rate for in-country activities for year one of the 2018-2020 grant is not publicly available; the CCM asserts that  it has increased ‘significantly’. It is noteworthy that the MoH set up a Project Implementation Unit (PIU), in 2016, to manage the MoH grants; the now functional PIU actively monitors and tracks absorption regularly to inform quick decisions.

Inadequate performance by the HIV/TB non-state PR

The performance of Action Aid Malawi, which implements the prevention (non-biomedical) interventions within the HIV/TB response, was inadequate in the 2015-2017 implementation period. The Global Fund’s most recent rating for the Action Aid Malawi grant (grant number MWI-C-AA, available on the Global Fund’s website) was B2 (inadequate but potential demonstrated) for the period by June 2017. This rating is the second lowest in a five-tier rating system. By the end of the grant, in December 2017, the performance rating had improved to B1 (adequate), according to the Secretariat. (The Secretariat explained that the latest ratings will be available on the website in the next few weeks).

In contrast, the other two PRs performed well, either or. The Global Fund rated the Ministry of Health (MoH) HIV/TB and malaria grants A2 (meet expectation) and A1 (exceed expectations) , and the World Vision malaria grant A1 in the same period.

Action Aid Malawi also failed to use its total allocation ($29 million); the country absorbed only 64% of the grants in the 2016-2017 period. The OIG attributed the low absorption to delayed grant signing and disbursements, and delayed selection of sub-recipients. Action Aid Malawi also faced challenges such as recurrence of audit queries; incomplete and poor or late reporting for both finance and programs. The Secretariat explained that there has been and continues to be improved oversight from both the Global Fund and the CCM on Action Aid Malawi.

Conclusion

Malawi depends substantially on external funding to finance its health sector. Though the government has stepped up its contribution to the health sector in recent years despite the country’s limited fiscal space, a huge funding gap remains. It is noteworthy that despite the scarcity in available resources, Malawi does not fully absorb its domestic and Global Fund funds allocation. Malawi now needs to address the bottlenecks affecting the absorption of funds.

The Global Fund invests heavily in the procurement of health products; in fact, absorption of funds intended for procurement is very high. Weaknesses in the supply chain have affected the delivery of these health products and services at the various levels of health care. Remedial actions such as  integrated and strengthened supply chain system will address those weaknesses, ensuring the availability of quality-assured drugs and safeguarding against stock-outs, expiries and theft of drugs within the drug stores and health facility.

Further reading:

 

 


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