The economy wide impact of HIV/AIDS and the funding dilemma in Africa

This Blavatnik School Working Paper provides greater insight into the economic impact that HIV/AIDS has in Africa and how it can be resolved through greater government intervention and investment in treatment and prevention programmes.

The authors undertook a study that uses a Computable General Equilibrium (CGE) model (a set of simultaneous equations that capture the flow of household and government finances, determining the fiscal space of the economy) in order to measure the long-term economic impacts of HIV/AIDS and predict the effect of government interventions. They applied this data to Uganda, a country with the highest prevalence of HIV/AIDS in East Africa but the capacity to mobilise domestic resources to fund HIV treatment and prevention strategies.

The research demonstrates that without government funding, the Ugandan economy would experience a decline in productivity, labour supply and growth in GDP due the costs of dealing with HIV/AIDS among its population. However, with government funding, gained through foreign-aid or from direct taxation, GDP rates would grow by approximately 7.12% or 7.05% respectively.

This paper provides evidence that with targeted government investment, the initial costs of funding HIV treatment and prevention strategies are vastly outweighed by the long-term economic benefits. The evidence provided is aimed to be of particular relevance to other countries such as those of the Sub-Saharan region, which is home to 70% of people living with HIV and bears a disproportionately high burden of the disease in comparison to the rest of the world.