The World Bank on Monday formally set aside $195.84 million from its pandemic emergency financing facility (PEF) for 64 poor countries to help in their fight against the coronavirus Covid-19 outbreak that began in China on December 31.
The move brings to a formal end the four-month wait to see whether and how the World Bank’s pandemic bonds and swaps, which supply the funds to the PEF through loss of principal, would pay out.
Independent calculation agent AIR Worldwide had already determined on April 17 that the bonds had been triggered, with the last remaining requirement – an exponential growth rate in cases in poor countries – having finally been met. That assessment followed an earlier finding that the growth rate had not met the required level at the first opportunity.
Even now the money has not yet begun to flow to the countries that will need it. The World Bank said that disbursements would begin “as soon as” next week, once it had received funding allocation requests from the governments of affected countries.
Some $425 million of pandemic bonds and swaps were placed with investors in 2017, with a complex trigger structure that could result in a maximum of $198.84 million being clawed back from the principal of those securities and paid out to countries within the World Bank’s International Development Association (IDA).
Since then the bonds have come in for criticism for their complexity and for the time taken for them to be able to be triggered – only after an initial 12-week period are they eligible to pay out, and then only if an outbreak is sufficiently widespread and sufficiently severe.
The financial aid available from the structure is intended only for IDA countries, although certain of the triggers for the bonds are dependent on data from other countries too.
There are widespread fears of under-reporting among countries that lack resources, raising the possibility that some are at a more advanced stage of the outbreak than may appear from the reported statistics
Announcing the allocation on Monday afternoon, the World Bank commented that the PEF funds would “provide a boost of financing to support the immediate health response early in the outbreak in IDA countries”.
According to World Health Organization (WHO) data as of Friday, IDA countries accounted for 33,195 cases since the start of the outbreak, or just 1.34% of cases.
It is on this basis that the World Bank argues the funds are being allocated at an early stage in IDA countries.
However, if the outbreak had started in one or more IDA countries, the same 12-week period would have been in place before any assessment could be made of whether the bond triggers had been met, meaning that an outbreak could have been already catastrophic in the region that the bonds are intended to help.
In any case, the bonds’ triggers are highly dependent on countries’ own abilities to test for and report cases effectively, which will be more difficult in poor countries where healthcare systems are challenged even in times of calm.
The World Bank’s own announcement acknowledges the difficulties faced by such countries, saying that the funds will be used “to help vulnerable countries scale up testing, quickly identify new cases and treat them”, although the triggering of those funds in the first place was at least partly dependent on reported case data from these countries.
There are widespread fears of under-reporting among countries that lack resources, raising the possibility that some are at a more advanced stage of the outbreak than may appear from the reported statistics.
Even if the data is more reliable than some fear, the rate of increase is picking up in IDA countries. As of March 31, the date that AIR Worldwide said was the point when all the bond’s triggers had been met, IDA countries had only reported 4,653 cases, meaning that cases in that group have gone up seven-fold in just over three weeks.
The pandemic bond funds will be allocated to countries according to a number of factors that include population size, reported cases and whether they are affected by conflicts. Allocations will be for a minimum of $1 million and a maximum of $15 million.
Sums of that nature highlight that for all the scrutiny of the pandemic bond structure, it remains a drop in the ocean when it comes to the World Bank’s broader assistance to countries, which now totals some $160 billion across its various programmes.