Financing of pandemic response: where does the money come from?

Posted by aclimaadmin | abril 16, 2020 | Noticias del Sector

When pandemics strike, it is the foremost duty of national governments and national health systems to respond in a timely manner and minimize the consequent risks. However, such responses and risks can be a crippling burden for more economically vulnerable countries. This is where humanitarian aid can intervene to fund the potential gaps between a country’s capacities and its actual requirements in responding to a pandemic. Currently, pandemic preparedness and response is funded through the emergency or disaster relief mechanisms of humanitarian assistance. In the following article, a review of the available financial mechanisms for pandemic response is presented, as well as the current existing funding for COVID-19 mitigation.

The World Bank Group has announced a US$14 billion COVID-19 support package of new financing on a fast-track basis. The package is intended to help developing countries to strengthen their health systems and pandemic interventions and to work with the private sector to reduce the economic impact. Of the total World Bank package, US$8 billion will come from the International Financing Corporation and US$2.7 billion from the International Bank for Reconstruction and Development. Both of these channels will redirect the funding to mitigate the economic consequences of the pandemic.

From the total sum, US$1.3 billion will be allocated to part of the World Bank’s International Development Association (IDA) which will specifically target the strengthening of primary health care systems and public health preparedness in vulnerable countries. The IDA has several windows through which health related emergency funds can be accessed.

The Crisis Response Window was set up in 2011 with the purpose of strengthening the capacity of IDA countries to deal with natural or economic emergencies. IDA countries are those with low per capita income that lack the financial ability to borrow from the International Bank for Reconstruction and Development. In 2015, the IDA expanded the eligibility criteria for accessing the funding to include public health emergencies and epidemics. However, a country’s ability to access the fund early during a potential large-scale outbreak is limited.

The Immediate Response Mechanism is another IDA instrument for emergency response. It complements the other longer-term emergency response tools available to IDA countries, such as, the Crisis Response Window, by offering financial support within weeks rather than months of an emergency.

The IDA Catastrophe Deferred Drawdown (Cat DDO) can offer between US$20 million and US$250 million for the provision of immediate funding to enable countries to address emergencies, including health-related crises. Approval criteria include an adequate macroeconomic policy framework and a satisfactory disaster risk management program.

At the end of March, the World Bank announced that it was finalizing COVID-19-related projects in 60 countries worth up to $2.8 billion under the $14 billion Fast Track Facility.

Pandemic Emergency Financing Facility (PEF) was set up in 2016 by the World Bank as an insurance-based fund. PEF draws on funds from the private sector through bonds and swaps (a temporary agreement between two parties to exchange cash flows or liabilities from other financial instruments) in return for highly lucrative interest rates. The World Bank’s pandemic financing scheme was criticized for serving private sector interests at the cost of global health security. For the bond fund to be triggered, a number of pandemic related conditions have to be met, such as the growth rate of epidemic cases or the number of countries affected. In a statement from April 9th, the World Bank said that currently the outbreak hadn’t met the “exponential growth rate” criterion in eligible countries. The institution continues to review the situation and will issue its next report on April 17th.

The United Nations (UN) also recently announced that it has launched its humanitarian response plan to COVID-19 for which it has allocated US$2 billion for 51 countries across South America, Africa, the Middle East and Asia. The money will be distributed through the UN’s agencies for emergency response and disaster relief. To kick-start the response plan, the UN has currently allocated US$75 million to the Central Emergency Relief Fund while, in addition, country-based pooled funds have so far allocated more than $3 million.

Central Emergency Relief Fund is the United Nation’s main enabler of emergency assistance delivery. It was created in 2005 with the goal of raising and pooling emergency disaster relief funds. It provides rapid grants and loans for underfunded emergencies of various origins. Although it disbursed US$74.6 million for health emergencies in 2018, only 55.5% of its annual donor funding target of $1bn was met. The US$65 million allocation to CERF is the largest ever made and the fund will focus on the World Food Program and the World Health Organization.

The Contingency Fund for Emergencies (CFE) is the WHO’s instrument for mobilizing financing for health-related emergencies. It was created in 2015 and it could mobilize funds of up to $500 000 within 24 hours to ensure an effective response to disease outbreaks and humanitarian emergencies. Larger sums can be requested and, theoretically, there is no financial ceiling. Currently, the WHO has released US$ 9 million from CFE to respond to the COVID-9 pandemic with the money coming from the: Austria, Denmark, the Netherlands, Kuwait, Germany, Luxembourg and Canada.

Additionally, the WHO has set up a COVID-19 Solidarity Response Fund to which a number of countries, donor organizations and foundations have so far redirected almost US$250 million. In its Strategic preparedness and response plan for the new coronavirus, the WHO has called for a total resource requirement of US$675 million for pandemic mitigation.

The International Monetary Fund has also announced that it will provide up to a total of US$ 50 billion through its emergency instruments. The fund has two emergency facilities, the Rapid Credit Facility, (RCF) created in 2009, and the Rapid Financing Instrument (RFI) set up in 2011. The emergency facilities will assist member countries without the need for them to have a fully-fledged program in place.

USAID has also pledged assistance of up to $210 million for international efforts to combat COVID-19 from its Emergency Reserve Fund for Contagious Infectious-Disease Outbreaks (ERF) and the International Disaster Assistance. From the total sum, a proportion will be directed to the WHO, UNICEF and the UN Refugee Agency (UNHCR). Another percentage will be directed to a broad range of additional partners such as NGOs and other organizations responding on the ground to combat the outbreak.

So far, there is no single listing of all the aid funding available with regard to COVID-19 but the Kaiser Family Foundation is actively tracking publicly available information about donor funding from governments, foundations and private companies.

To increase the efficiency of the COVID-19 world response, DevelopmentAid will grant free access to COVID-19-related tenders and grant notices gathered together on its platform. Developmentaid publishes over 330 tender announcements and grant notices daily. There are currently over 1400 forecasted and open tenders related to the health and humanitarian sectors. To access these and fully benefit from this offer, register for free and Sign in to the DevelopmentAid database.

Fuente: Development aid

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