Fresh money for health? The (false?) promise of “innovative financing” for health in Malawi

Since 2013, the Government of Malawi has been pursuing a number of health reforms which includes plans to increase domestic financing for health through “innovative financing.” As part of these reforms, Malawi has sought to raise additional tax revenue through existing and new sources with a view of earmarking the revenue generated to the health sector. In this article, a systematic approach to assessing feasibility, and quantifying the amount of revenue that could be generated from potential sources is devised and applied. Specifically, the study applies the Delphi forecasting method to generate a qualitative assessment of the potential for raising additional tax revenues from existing and new sources, and the Gross Domestic Product (GDP)-based effective tax rate forecasting method to quantify the amount of tax revenue that would be generated. The results show that an annual average of 0.30 USD, 0.46 USD, and 0.63 USD per capita could be generated from taxes on fuel and motor vehicle insurance over the period 2016/17-2021/22 under the low, medium, and high scenarios, respectively. However, the proposed tax reform has not been officially adopted despite empirical evidence on the revenue potential. This could be attributed to the low amount of tax revenue that would be generated. The conclusion is that revenue generation potential of innovative financing for health mechanisms in Malawi is limited; and the study calls for efforts to expand fiscal space for health in Malawi to focus on efficiency enhancing measures, including strengthening of governance and public financial management.