As the novel coronavirus began spreading across the world last year, global organizations responded by rapidly planning a new mechanism to ensure all countries, especially those with the fewest resources, could get the vaccines they need to protect their citizens. Today, that mechanism—called the Covax Facility—is up and running. As of early June, it has delivered more than 82 million Covid-19 vaccine doses to nearly 129 countries. It’s on track to complete a goal of shipping 1.8 billion doses to lower-income countries by the end of the first quarter of 2022.
It took hard work, smart minds, and deft business and diplomatic skills to launch this complex organization in such a short time. It also required enormous infusions of financing for it to purchase more than 2 billion vaccine doses this year.
The Gavi Covax Advance Market Commitment, the part of the facility that purchases Covid vaccines for lower-income countries, has already raised close to $9.6 billion dollars from sovereign and private donors.
This level of financing reflects both donors’ generosity and a healthy self-interest. They know that we cannot beat Covid-19 if only part of the world’s population is vaccinated. Without such funding, lower-income countries will be left vulnerable, just as they were when wealthier countries bought up most of the supply of vaccines during the 2009 swine flu outbreak. So sovereign donors contribute to the Covax AMC realizing that their citizens will never be safe from the ravages of Covid until everyone is safe.
This appeal to donors is coming, of course, just as they are spending previously unimaginable amounts on their own health and economic recovery. The International Monetary Fund reports that, from January 2020 through April 2021, the pandemic has cost countries around the globe almost $10 trillion in additional fiscal spending and foregone revenues and another $6.1 trillion in monetary support (including equity injections, loans, and asset purchases or debt assumptions). Taken together these amount to, respectively, about 9% and 6% of global GDP.
Higher-income countries are supporting equally urgent efforts to address other challenges exacerbated by the pandemic. These include spikes in extreme poverty and hunger, alarming rises in the numbers of forcibly displaced people, a rash of exacerbated health problems and crowds of out-of-school children.
To take pressure off their immediate fiscal burdens, some sovereign donors are choosing to provide Covax with long-term funding—paid out over, say, 10 or 20 years—through the International Financing Facility for Immunisation. On the strength of these commitments, IFFIm sells bonds to investors in capital markets around the world to generate the flexible, liquid funding Covax can use today.
IFFIm has also pioneered a business model that’s proving to be a remarkably efficient way for its sovereign donors to target public capital on an important global priority. By deploying its resources through Gavi, the Vaccine Alliance, and engaging the World Bank Treasury for its capital raising and financial administration, IFFIm is accomplishing its sponsors’ goals without the need to create another international institution, with all of the associated costs. Obviously, this approach has potential across a number of the other key challenges facing the global community.
IFFIm’s Vaccine Bonds are backed by long-term contributions from 10 sovereign donors. IFFIm carries a strong, investment-grade credit rating (double-A) that has enabled it to raise more than $7.6 billion through 38 transactions in eight currencies for pressing global public health needs. The funding has come on excellent terms and has gone to Gavi (one of the co-leads of the Covax Facility) in support of its immunization programs in lower-income countries.
IFFIm bonds tap a deep pool of private capital around the globe, as well as a fast-growing appetite for socially responsible investments. Indeed, IFFIm’s bond offerings always have been fully subscribed and, more recently, vastly oversubscribed. It’s an indicator of the trust investors have in the bonds’ impact, and their increasing eagerness to put their capital to good social use. In October, IFFIm issued a $500 million 3-year bond to fund Gavi’s core immunization programs and for Covid-19 vaccines through Covax’s delivery mechanism. And just last month, IFFIm completed a 5-year bond that will provide another $750 million for the same needs.
Though IFFIm was established primarily to support Gavi’s core childhood immunization programs, it is proving to be a valuable tool for an emergency of the scale and urgency of Covid. Even before the pandemic loomed, IFFIm was pressed into service to frontload funding, based on commitments from Norway and Italy, for the Coalition for Epidemic Preparedness Innovation. CEPI is the part of Covax that has helped accelerate the research and development of a broad portfolio of Covid-19 vaccine candidates, including those from Moderna and Oxford University/
which are already in use.
The recent Vaccine Bond issues have so far have enabled IFFIm to generate $780 million in cash proceeds for Gavi to apply to the Covax AMC, with other proceeds being used for Gavi’s core immunization programs. And there’s more to leverage: donors have to date pledged a total of $1.2 billion through IFFIm for the Covax AMC.
Even as the world begins to contain the menace of Covid, much remains to be done. It is clear to us already that innovative financing tools like IFFIm and the Covax Facility have been essential—and will probably remain crucial as we continue the fight against Covid beyond this year. Indeed, the world will in all likelihood still be struggling to fully contain the virus in 2022, and there will be substantial need to finance vaccines aimed at suppressing emerging variants. We must do everything possible to get closer to the moment we have all been waiting for: the recovery and rebuilding of a healthy, economically prosperous, and stable world.
Marie-Ange Saraka-Yao is managing director of resource mobilization, private sector partnerships, and innovative finance at Gavi, the Vaccine Alliance. Kenneth Lay, senior managing director of the Rock Creek Group, an asset management firm, is chair of the International Finance Facility for Immunization and former treasurer of the World Bank.
Write to email@example.com