A directive from the Ministry of Finance obliges federal health centers and regional health bureaus to keep a clean balance sheet in order to receive their respective share of funding from donors and development partners.
Dubbed the ‘Channel Two Finance Administration’ directive, the legislation is the first of its kind and was approved by the Finance Ministry earlier this month. The directive sets guidelines on the disbursal of funds deposited directly to the Ministry of Health by donors and development partners.
The Finance Ministry designates external financing that goes directly from donors to public institutions as ‘Channel Two’, with ‘Channel One’ denoting funding that is received directly by the Ministry of Finance.
The Ministry of Health receives significant donations that it uses to fund regional health bureaus as well as federal and university hospitals.
The directive instructs Health officials to take into consideration the “implementation of the past year’s performance, [budget] allocation from the House of Federation, disease burden, and community health emergencies” when allocating Channel Two funds.
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The directive outlines the introduction of liquidity performance inspections on health bureaus, hospitals, and other health-related institutions, with results determining the amount of funding a health center can receive.
Health centers whose balance sheets are in the red for over a year will see deductions in their budget allocations, according to the directive.
“Those that have unpaid balances for over a year, and show no improvements over a year, might have the outstanding balance deducted from the following year’s budget,” it reads.
A source at the Ministry of Health spoke to The Reporter on condition of anonymity. He said the Ministry used to transfer donor funds to regional health bureaus without clear standards or consideration of the government budget.
“If the Health Ministry receives funding for malaria projects, for example, it will now have to be transferred to the regions in consideration of the House of Federation budget allocation and other standards,” he said.
The legislation from experts at the Finance Ministry also sets a list of duties and responsibilities for the Ethiopian Pharmaceutical Supply Service, as well as other government-run health institutions.
The directive rules that health implementers cannot transfer funds during the final quarter of a given fiscal year, running April to early July. It does, however, allow for exceptions in the case of a force majeure and approval from senior leadership, meaning a minister or state minister.
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