Bonds designed to provide fast funding for poor countries branded ‘obscene’ because of complex payout criteria.
A flagship R7.7-billion World Bank scheme to help the poorest countries deal with a health emergency is “too little too late” for the coronavirus outbreak, say health experts.
The first pandemic emergency financing (PEF) bonds were launched in 2017 by Jim Yong Kim, the bank’s president at the time, after the Ebola outbreak in West Africa. Designed to potentially “save millions of lives and entire economies” by speedily funnelling money to nations facing pandemics.
But critics say the “insanely complicated” terms of the high-interest bonds are heavily skewed towards investors, while for the victims any payouts may come too late, if at all.
One economist described the bonds, payouts from which depend on how deadly the outbreak is, as “obscene”.
Olga Jonas, a senior fellow at Harvard Global Health Institute who was an economist at the World Bank for three decades, said: “The whole mechanism is highly unfortunate. The objectives were to help the poorest countries respond quickly to outbreaks. Infectious disease spreads exponentially and the coronavirus has a very rapid growth rate. But the bonds only get triggered when the disease has spread for a long time.”
Jonas, who has analysed the bonds’ terms, said they were “so convoluted, it is not at all clear whether they will pay out at all. It is too little, too late – and in this case, maybe never.
“What’s obscene is that the World Bank set it up this way. It waits for people to die.”
Funds can only be released after a certain amount of time and in accordance with complex criteria including outbreak size, growth rate, deadlines and death tolls. In the case of coronavirus, the bonds would not pay out until 12 weeks after the World Health Organization (WHO) publishes its first “situation report”, which would not be until 23 March. Another criterion is that the outbreak is still growing.
The bonds, funded by donor nations Japan and Germany, deliver interest payments to investors until the conditions for an infectious disease outbreak are triggered.
The value of the bonds has halved as the coronavirus outbreak has spread, raising fears investors could face losses.
Should we really bank on bonds to ensure global health security?
Meanwhile, the WHO has appealed for R10.4-billion for “frontline efforts” to contain coronavirus. The disease has infected more than 82 000 people and killed over 2 800 people in 51 countries to date, but has not yet been declared a pandemic by the WHO.
Clare Wenham, assistant professor in global health policy at the London School of Economics, said: “If you really wanted to ensure global health security you would link the payout of the bonds to a decision around declaring a public health emergency of international concern or a national emergency.”
Wenham co-authored a paper criticising pandemic bonds in which it was found that more money was paid out to investors than to countries facing disease outbreaks. Payments would have only been triggered in two out of more than 60 disease outbreaks analysed – Ebola in west Africa and rift valley fever in 2006, the paper found.
Wenham said: “If the aim of it is to prevent pandemics, why would you wait for arbitrary numbers? Global health security is predicated on prevention rather than response, so waiting for it to get to a certain number of deaths in a certain number of countries before they pay out, is counterintuitive. It is not fit for purpose.
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“No one has thought about it holistically. If public health officials have made a declaration of a global health emergency of international concern, there should be some mechanism for financing so that the WHO doesn’t have to go around the houses asking for money.”
Bodo Ellmers, director of Global Policy Forum’s sustainable development finance programme, said: “The idea was that it would be a quick instrument, but it was set up with such stringent criteria that the risk for investors is very low. The design, taking the number of dead people as a criteria, is very cynical.”
The scheme’s “fundamental flaw” is that it was aimed at preventing a pandemic but would only pay out when a pandemic was already underway, said Ellmers.
The World Bank said a PEF payout had been triggered after the Ebola outbreak of 2018 and 2019 in the Democratic Republic of the Congo, providing a total of R954 to fight the disease.
The bank added that it has rolled out a series of tools to better assist countries during critical outbreaks, epidemics and pandemic threats.
It is capable of fast-tracking funds via existing projects and could fund emergency operations within three months – although in past cases, such as Ebola, it had provided support within two weeks.
This feature was originally published as part of The Guardian’s Global Development project.