7The Impact of HIV/AIDS on Government Finance and Public Services

HIV/AIDS is a serious challenge to economic development. Increasingmortality and morbidity reduce living standards directly and have repercussions that affect all areas of the economy. Individuals and house-holds face increasing risks, both directly through the risk of infection, and indirectly as formal and informal social insurance mechanisms are eroded. Companies face productivity losses and increasing costs of med-ical and death-related benefits. At the macroeconomic level, economic growth declines as the population grows more slowly and as reduced national saving, rising costs, and declining economic prospects deter investment.1 Against this background, this chapter examines the implications of HIV/AIDS for government finance and public services. In countries afflicted by HIV/AIDS epidemics, governments ’ capacities are diminished by increasing mortality, and domestic revenue slows, even as the demand for certain government services, most notably in the health sector, expands.2 Along these lines, this chapter will address three broad questions