LONDON — A controversial World Bank bond designed to deliver funding to help the world’s poorest countries to tackle fast-spreading diseases is set to pay out, the lender said, though it is unclear when funds will reach the countries in need.
The instrument was launched after the 2013-2016 Ebola outbreak that ravaged Sierra Leone, Guinea and Liberia and killed at least 11,300 people under the World Bank’s Pandemic Emergency Financing (PEF) umbrella in 2017 to establish a mechanism that would speedily deploy funds where needed.
It first came under scrutiny when it failed to pay out as the 2018 Ebola epidemic raged through the Democratic Republic of Congo for about a year, killing more than 2,000 people.
However, the instrument now will pay out, the lender said.
“All activation criteria including outbreak size, spread and growth have been met,” the World Bank said in an update on its website, referring to the coronavirus outbreak, adding PEF bonds and swaps were expected to pay out $195.84 million.
A steering body will now meet to determine how to allocate the funds to so-called IDA countries – a group of 76 of the world’s poorest nations, the World Bank said. The committee is made up of Australia, Germany, Japan, the World Health Organization, UNICEF, the World Bank, and two IDA countries – currently Haiti and Liberia.
The bonds, issued by the World Bank’s International Bank for Reconstruction and Development (IBRD), had offered investors high coupons in return for the risk of having to forgo some or all their money in the event of pandemic outbreaks of a number of infectious diseases, with the funds channeled instead to countries in need of aid.
While developed economies are funneling trillions of dollars into their virus stricken economies, many emerging nations lack the financial means to mitigate the harsh economic hit from the global economy tumbling into recession or to shore up their often fragile healthcare systems.
IDA countries such has Laos, Yemen or Honduras are all to receive millions in help from the World Bank already, though not through the PEF instrument designed to deliver quick funds
Campaigners have been critical of the complex instrument which now paying out only after reported cases of coronavirus have crossed more than 2.26 million globally and killed more than 154,613 people.
“The utter inadequacy of pandemic bonds as a tool to support countries in preventing crises has been clearly exposed,” said Mark Perera, Policy and Advocacy Manager at Eurodad – the European Network for Debt and Development.
“Such a market-based solution is designed to favor investors, not development needs.”
Campaigners have also been critical of the complex structure of the instrument, which requires five variables on the number of deaths, the velocity of its spread and its geographical spread to be reached before paying out.
This had been an obstacle to quick deployment, said Bodo Ellmers, director of sustainable development finance at Global Policy Forum, an independent policy watchdog.
“If those funds had been paid out earlier they could have been used to prevent the spread in some of those poor countries – the later you intervene the costlier it gets, in terms both of lives and money needed to remedy the situation,” he said. (Reporting by Karin Strohecker; editing by David Evans)