Gorik Ooms, Analysis and Advocacy Unit, Médecins Sans Frontières, explained 'fiscal space' for health expenditure as a country's capacity to finance health expenditure from domestic resources within a foreseeable future. Whenever the combination of present domestic resources and present foreign assistance exceeds fiscal space, the excess foreign assistance is saved, rather than spent.
One fiscal space tool includes a ceiling on the government wage bill, which is most often expressed in the form of a percentage of the Gross Domestic Product (GDP). Therefore, even if donors were willing to pay for more salaries for health workers or teachers, a government is not allowed to exceed the ceiling. Other fiscal space tools include: a ceiling on the domestic primary deficit, medium - term expenditure framework (MTEF) and IMF programming of the use of foreign assistance.
During 2004 - 2006, Mozambique saved the equivalent of 91% of additional foreign assistance. Are donors aware of this? A survey was conducted with the major stakeholders of Mozambique's health sector and when they were informed that Mozambique had saved 91% of all additional aid during 2004-2006, most reacted in disbelief.
Budget support might be the best funding method, to improve harmonization among donors, alignment with government priorities and for financing recurrent general health expenditure. However, as long as donors are aware of the real impact of fiscal space constraints, and therefore do not challenge them, project support is much more effective than budget support.
Health is a state of complete physical, mental and social well-being, and not merely the absence of disease or infirmity.