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AIDS: Impact on Economic Growth Low but High on Direct Welfare Costs in South Asia
Source Date: Wednesday, December 01, 2010
Focus: Institution and HR Management
Created: Dec 06, 2010

“While the impact of HIV and AIDS on economic growth is small in South Asia, the welfare cost on individuals and families is by no means negligible,” says Mariam Claeson, World Bank HIV and AIDS Coordinator for South Asia. AIDS accounts for 1.5% of all deaths in South Asia and about 2% of all deaths in India.

Recently, one has seen a flurry of news reports which have talked about the falling or stabilising rates of the AIDS epidemic in most parts of the world including South Asia. Undoubtedly, this is good news. But as we mark another World AIDS Day, it is important not to forget that HIV and AIDS continue to pose a serious economic and social development risk to countries in South Asia.

According to the World Bank, the threat would continue unless governments make the commitment to scale up prevention programmes, targeting vulnerable groups at high risk of infection. These include sex workers, men having sex with men and injecting drug users and their partners.

A report by the Bank, titled “HIV and AIDS in South Asia: An Economic Development Risk,” argues that, even if the overall prevalence rate is low (up to 0.5%), there is high and rising HIV prevalence among vulnerable groups at high risk for HIV infection, including sex workers and their clients, and injecting drug users and their partners. Without increasing prevention interventions among those at highest risk, these concentrated epidemics can further escalate.

The report finds the impacts of HIV and AIDS in South Asia on the aggregate level of economic activity to be small. For India, the effect on GDP (0.16%) corresponds to a one-off loss of about 1.5 weeks of GDP growth. However, the direct welfare costs of increased mortality and lower life expectancy are more substantial, accounting for 3% to 4% of GDP in India and Nepal, respectively.

The economic impact on individual households affected by the disease is substantial, the report says. In a household study on India, 36% of people living with HIV and AIDS who were able to retain their employment nevertheless reported an income loss, which averaged about 9%. Among those who lost their employment (about 9%), the income loss was severe, at about 66%.

In addition to shortfalls in income, which in some cases can be very significant, HIV and AIDS is also associated with an increased demand for health services, and increased household expenditures on care and treatment. Medical expenditures in one study account for 11% of total expenditure of HIV and AIDS-affected households, as compared with 3% for households not affected by HIV and AIDS.

Overall, the number of people living with HIV and AIDS in South Asia is about 2.6 million, of whom the lion’s share is in India. AIDS accounts for 1.5% of all deaths in South Asia and about 2% of all deaths in India. These numbers of deaths are comparable to the numbers from diabetes, tuberculosis, and measles.

“Even in the low HIV prevalence countries of South Asia, there cannot be any room for complacency,” said Mariam Claeson, World Bank HIV and AIDS Coordinator for South Asia. “While the impact of HIV and AIDS on economic growth is small in South Asia, the welfare cost on households is by no means negligible. HIV and AIDS also have an enormous disproportionate impact on vulnerable and often marginalised people at highest risk of infection, and on poor households with less access to information, preventive services and treatment.”

Many of the adverse development impacts of HIV and AIDS arise from its uneven impact on different population groups. Access to prevention and treatment, for example, is strongly linked to socioeconomic factors such as gender, education, and wealth. And, people’s ability to cope with the financial effects of HIV and AIDS differs strongly. For example, the report finds that HIV and AIDS have a disproportionate economic impact on HIV-positive widows who face the double burden of living with HIV and AIDS and the low socioeconomic status of women.

Many of the adverse development impacts of HIV and AIDS arise from its uneven impact on different population groups. Access to prevention and treatment, for example, is strongly linked to socioeconomic factors such as gender, education, and wealth. And, people’s ability to cope with the financial effects of HIV and AIDS differs strongly.

Access to antiretroviral treatment (ART) is low in South Asian countries, even compared to countries in other regions with much higher infection rates. The report says the fiscal cost of treatment could be very high if South Asian countries fail to contain the epidemic. This underscores the crucial role of effective prevention.

“At a time of global economic crisis, scaling up efforts to prevent new infections and sustaining care and treatment for those already affected and infected becomes even more important,” said Debrework Zewdie, Director, Global AIDS Program, World Bank. “The smallest gap created due to economic crisis and loss of momentum on the response will be more costly.”

Access to effective treatment is vitally important to mitigate the health and economic impacts of HIV and AIDS, the report says. At the same time, the medical costs of treatment can put a substantial proportion of the population living with HIV and AIDS at risk of poverty, especially in a region where most health services are paid for out of pocket.

“This analysis shows that failure to contain the epidemic at low levels may have serious economic consequences,” said Sadiq Ahmed, World Bank Acting Chief Economist, South Asia.

With the exception of Sri Lanka, three-quarters or more of health expenditures in South Asia are financed privately and little are covered by third-party payers like insurance agencies. With the limited ability of many households to pay catastrophic health expenses associated with HIV and AIDS, and the negative externalities associated with poor adherence, the report argues for a large and critical role for the public sector in the provision of ART.
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