Contacts: Washington - Stevan Jackson (202) 458-5054 – office (202) 437-6295 - cell Sjackson@worldbank.org David Theis (202) 458-8626—office Dtheis@worldbank.org Broadcast Media – Cynthia Case McMahon (202) 473-2243 Ccase@worldbank.org WASHINGTON, December 1, 2004—Policymakers and analysts looking to address the economic issues facing countries severely affected by HIV/AIDS must take into account the numerous social, economic and fiscal effects of the epidemic, warns a new research report released today. In the absence of any government intervention, the report cautions that an otherwise growing economy severely affected by HIV/AIDS could contract to about one-third its size in three generations. Public intervention could prevent this, but it will have to be a substantial effort — to the tune of 3 to 4 percent of GDP over and above what is currently being spent. “The economic and social consequences of the increased mortality and morbidity associated with HIV/AIDS are serious and diverse,” says Markus Haacker, primary author of the report and Economist at the International Monetary Fund.“Economic growth slows for many reasons, most directly because the working-age population expands more slowly or contracts. But there is considerable uncertainty regarding the size of this effect, especially in the longer run. At the same time, the economic effects, from the individual and household perspective, are very diverse, with profound policy implications” The new report, The Macroeconomics of HIV/AIDS, analyses how HIV/AIDS adversely affects not only the accumulation human capital – that is, peoples’ life skills, knowledge and experience built up over a period of years – but also negatively affects physical capital, exacerbates poverty and inequality, debilitates welfare programs and impacts government finance and public services. “AIDS, like all causes of premature adult mortality, is also a potentially powerful generator of poverty and inequality,” says Shanta Devarajan, co-author of the new research findings, and Chief Economist of the World Bank’s South Asia Region. “AIDS does much more than destroy the existing ability and capabilities―the human capital―embodied in its victims; it also weakens the mechanism through which human capital is formed in the next generation and beyond.” The report notes the direct welfare effects of HIV/AIDS through increased mortality substantially outweigh even the worst projections of the impact on GDP per capita. HIV/AIDS also poses a tremendous challenge to governments facing severe epidemics. The simple fact that AIDS kills young adults can have profound implications for the whole economy. By killing young adults, often in the prime of their lives, AIDS has an effect not only on its victims, but on their children. Children of AIDS victims are less able to attend school, and also miss out on the life-skills that parents teach their children. In this way, AIDS cuts off the mechanism by which human capital--the engine of long-term economic growth--is transmitted from one generation to the next. If the outbreak of AIDS causes the next generation to be less educated, it means that they, in turn, are less able to provide for their children's education, and so on. “It is widely known, that in the most affected countries, the pandemic has eroded the economic and social gains of the past thirty years.” says Jean-Louis Sarbib, Senior Vice President of the World Bank’s Human Development Network. “ This new economic report is unique in that it provides us with the most comprehensive view to date of the impact of HIV/AIDS on every sector in society.” The Macroeconomics of HIV/AIDS was written for a broad readership, including officials in international organizations, donor agencies, implementing agencies, and country governments who formulate and carry out policies to fight the epidemic, and representatives of NGOs advocating an expanded response to HIV/AIDS worldwide. The new report brings together studies by authors from diverse backgrounds, including contributions from academics and multilateral institutions, and think tanks, such the Center for Global Development, International Labour Organization, International Monetary Fund, London School of Economics, University of California, Los Angeles, University of Heidelberg, UNAIDS, U.S. Bureau of Census and the World Bank. The Macroeconomics of HIV/AIDS report will be discussed at a forum to be held at the IMF’s headquarters in Washington in honor of World AIDS Day 2004. The report is the first IMF book focused on a public health issue, and it fills a gap between studies of specific sectors and the economy as a whole, and adds a comprehensive discussion of the epidemic’s fiscal effects. It emphasizes how HIV/AIDS affects society and the economy through its impacts on the individual and household level, and also how the macroeconomic impact, combined with the increase in mortality rates, affects the welfare of individuals and households. The IMF and HIV/AIDS The IMF has endorsed the call by the UN Secretary-General for this global campaign in the fight against HIV/AIDS, and is collaborating with other organizations, most notably the World Bank, to expand country-level HIV prevention and treatment programs . Such programs are important components of many Poverty Reduction Strategy Papers (PRSPs) which are prepared by low-income country governments in collaboration with civil society and development partners. PRSPs provide the operational basis for concessional lending by the Fund and Bank and for debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative. The IMF, in cooperation with the World Bank, is also helping poor countries to improve their public expenditure management systems and ensure that funds, including those for all health programs, are used efficiently and transparently. The World Bank and HIV/AIDS The Bank is active in fighting HIV/AIDS in all regions. Over the last few years, it has committed US$1.789 billion in grants, loans and credits for HIV/AIDS programs worldwide. The Bank is especially engaged in Sub-Saharan Africa, where more than 25 million adults and children are infected with HIV/AIDS. For the poorest countries, World Bank support for HIV/AIDS projects can be up to 100% grant financed. The Bank is a co-founding member of UNAIDS which was established in 1996. UNAIDS is an innovative joint venture of the UN family that brings together the efforts and resources of ten UN system organizations. - |
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