Building A Resilient Health System: Ministry Banks On Alternative Financing Models Amid Dwindling Aid

On October 14, 2025, government officials, international partners, and the private sector came together for a symposium on ways to tackle persistent health gaps in low- and middle-income countries. At the center of the discussions was a concept known as performance-based financing (PBF), which links financial support to measurable health outcomes and seeks to integrate new strategies to enhance health service delivery in developing countries like Ethiopia.

A central goal of the PBF initiative is to improve the quality and coverage of health services, particularly in underserved rural and pastoral areas where access has traditionally been limited and service quality low. By shifting the focus from funding inputs to rewarding verifiable results, the government hopes to increase efficiency and ensure that resources generate greater value.

Ethiopia launched its PBF pilot program in 2015 as part of a broader healthcare reform effort. The pilot project began in the Borana Zone of the Oromia region with support from Cordaid, a Dutch NGO, and the Embassy of the Netherlands, to provide a direct response to the systemic weaknesses of the traditional input-based financing model that had dominated the sector.

The introduction of PBF into Ethiopia’s health system was driven by the need to enhance staff motivation through financial and non-financial incentives linked to performance. The approach was designed to counteract the lack of incentives in the previous structure, strengthen institutional capacity, and align the health system more closely with national development priorities.

Officials see PBF as a key mechanism for aligning health system goals by directly linking financial payments to high-priority areas such as maternal and child health. It has become an essential tool in Ethiopia’s broader strategy to achieve sustainable improvements and ensure that funding delivers measurable results for the population.

Dereje Duguma (MD), the state minister of Health tasked with overseeing health services and programs, was among the officials who attended the symposium. A graduate of the medical school at Mekelle University, Dereje joined the Ministry after completing a graduate program in international public health at Università degli Studi di Parma, Italy in 2013.

The State Minister contends that Ethiopia’s decade-long engagement in PBF has registered successful results. The Reporter’s Abraham Tekle caught up with Dereje to discuss Cordaid’s contribution to Ethiopia’s health sector, the benefits of the PBF project model, perspectives on changes in the global health ecosystem, the decline in financial aid and strategies to address the resulting gaps, among other key issues. EXCERPTS:

The Reporter: The symposium’s theme was ‘From Local Change to Global Impact.’ What were its main objectives and what contributions have Cordaid and the government of the Netherlands made to the Ethiopian health sector?

Degree in Medicine (MD): Cordaid has been one of the longstanding partners supporting Ethiopia’s health sector for many years, as well as in other African countries and globally. During today’s event, the organization highlighted its decade-long contribution to improving healthcare services across various parts of Ethiopia.

As part of its broader project plan, Cordaid selects health institutions, provides financial support to help them deliver better services, and empowers healthcare workers to serve their communities more effectively. The main purpose of this support is to strengthen the health sector by ensuring equitable and improved services, particularly in remote areas, through better financing mechanisms by mobilizing resources from aid providers, communities, and governments to enhance healthcare delivery.

Our observations show that Cordaid’s initiatives have achieved notable results in the selected areas. Health professionals also have demonstrated increased motivation aligned with the benefits they receive. Moreover, data management systems have improved, reaching the family level within these communities. Their work has also contributed to reducing maternal and child mortality.

The PBF pilot project was one of the main discussion points. How has the Ethiopian health system benefited from the project model?

We’ve registered amazing achievements in terms of PBF in the landscape of the health sector over the past decade. The scale-up went from the Borena zone to many zones across different regions. Oromia, Amhara, Southern Ethiopia, Somali, and others have joined the scale-up. One of the things we have achieved is increasing the number of patients, especially outpatients, and I think this will be able to help the community in high-risk areas.

The second improvement has to do with the quality of the healthcare system. By quality, I mean availability and training, and we have especially motivated people in that specific area. The report received by the Ministry of Health is positive and there is an accountability framework, so it will be verified by a third party.

For example, maternal mortality has declined in areas where PBF is implemented. And also, communicable diseases have been presented in the controls in those areas. Another important thing that I’ve seen is the motivation of our healthcare workers, where staff retention has improved because they receive benefits and incentives through PBF.

There are also improvements in hospital income and primary healthcare system financing, with more support coming from both regional administrations and community contributions. Hospitals are using these resources to enhance service quality and infrastructure. In some hospitals and health centers, for example, new maternal blocks have been constructed using funds mobilized through performance-based financing. These developments show a significant impact on the ground.

How do you see the global health ecosystem changing? What role do development partners play now?

The current global financial landscape is not at a comfortable level for us. In terms of financial assistance, the last few years, especially the last three, were not a good time for us. I think we need an innovative financial approach to the health sector. One is to have innovative finance, like performance-based financing, where we can mobilize resources from the private sector, from CSOs and the community, through the upwards activity of PBF users. That is one important thing.

The second is that the government must also enhance more resource-intensive sectors from trade areas. That is what we are doing now. I think partners in this specific area have to align with the strategies of the government, especially in terms of still bringing flexible and sustainable funding to the health sector. For example, we have the Lusaka Initiative and partners like Global Funds, Gavi, the Global Financing Facility, all aligned with the strategies of the government.

We need more alignment, more harmonization, and prioritizing government policy. And our partners have to invest in local capacity enhancement. We have many international partners, but we prefer local CSOs to be empowered. Going forward, we must also support the local systems, especially the primary healthcare system, as it is the foundation of the health sector.

Philanthropists are now venturing into health because they are the ones who can really support different governments when aid is going down. We need more integration and alignment in this dwindling financial landscape.

What collaborative approaches does the Ministry of Health employ when working with organizations such as Cordaid and other health service partners?

In terms of financial assistance to the country’s health sector, most of the funding has traditionally come from co-partners and donor organizations. However, over the past ten years, their contribution has shown a decline as the government’s share has gradually increased through additional financing obtained from the health insurance initiative, which supports considerable financial sustainability.

Despite this, the Ministry continues to receive substantial financial support from various co-partners and aid organizations, particularly in efforts to combat communicable diseases such as tuberculosis, HIV/AIDS, and malaria. The collaboration involves regular discussions with partners at both ministerial and technical levels, held every three months, to review progress and align efforts in different program areas.

In this process, resources are pooled together, evaluations are conducted to assess achievements and identify gaps, and feedback is provided to partners as part of the reporting process. Therefore, the Ministry maintains strong and effective partnerships with all co-partners, resulting in impactful collaboration. According to aid organizations, Ethiopia’s partnership framework is considered stronger compared to that of many other African countries.

What measures is the Ministry taking to address the financial gaps resulting from the decline in external financial aid in recent years>

It is true that in the past five years, financial aid to the health sector has been steadily decreasing, and in some cases, it has stopped entirely due to various reasons. This trend is not unexpected, as global circumstances have increasingly affected the flow of aid to countries like Ethiopia. In response, the Ministry has been exploring alternative options to address the financial gaps and strengthen the country’s overall financial capacity.

One of the key solutions has been to increase the government’s financial contribution to the health sector. Over the past two years, the government has injected additional funding to support healthcare services. Another major initiative is the health insurance program, which currently benefits more than 63 million Ethiopians by providing access to essential health services.

Through this initiative, the country has collected close to 20 billion Birr, with plans to mobilize additional financial support from other stakeholders. Despite existing limitations, the Ministry has managed to handle the situation effectively. Compared to other African countries, Ethiopia’s position remains relatively stable in terms of managing the financial challenges in its health sector, as PBF contributes to the improvements of Ethiopian healthcare.

Cordaid is celebrating one hundred years of work in health relief and development. Going forward, what would you like to see from the NGO in terms of its engagements in Ethiopia?

First of all, I would like to congratulate Cordaid for its achievement. At least with the journey that Cordaid has had in the Ethiopian health sector, we have seen remarkable support. As the government of Ethiopia, we are keen to work with Cordaid and see that Cordaid is supporting the whole health system by prioritizing the strategies of the government and priorities of the health sector. Here, I would like Cordaid to continue to work with us to mobilize more resources to bring different actors into the support mechanisms.