Transition Economies Need Health and Educational Reforms

• Pages: 72-74

Page 72

Despite economic difficulties and strained financial resources, expenditures on health and education continue to rise in most transition countries at the expense of public investment and other expenditure categories, according to a new IMF Working Paper, Health and Education Expenditures in Russia, the Baltic States and the Other Countries of the Former Soviet Union, by Mark A. Horton. As a result, the health and education sectors in these countries have failed to absorb the brunt of fiscal adjustment up to now. At the same time, growing financial and administrative problems in these countries' health and educational sectors will require major improvements in the use of financial, administrative, and intellectual resources. The most basic changes need to include efforts to streamline sectoral planning, more clearly delineate operational responsibilities among governmental agencies, and replace physical production targets-so many beds, physicians, or teachers per person-with more market-oriented approaches to reaching health and education goals, according to Horton.

The Legacy

The collapse of the Soviet Union in 1990-91 left Russia, the Baltic states, and the other countries of the former U.S.S.R. with a health and education system in urgent need of reform. The core problems were attributable to an overemphasis on physical planning, weak price signals, and an absence of competition among service providers. This situation, in turn, led to serious shortages-from pharmaceuticals to pencils-and a visible deterioration of physical assets brought on by the collapse of secondary services (for example, school and hospital maintenance).

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The old system did achieve some important goals. During the Soviet era, the health and educational sectors registered major breakthroughs in abolishing some childhood diseases and providing universal education to a multiethnic population. But over the past decade, these advances have been undermined-if not reversed-by poor decisions on how financial resources are used and widespread administrative mismanagement. These are hobbling efforts to reform an overly centralized and increasingly obsolete public health and educational system.

Faced with an emerging crisis, the authorities in most of the transition countries have chosen to buy time rather than act. Efforts to reduce spending and...