Innovative Financing
Estimates suggest that the poorest countries in the world need an increase in aid of at least $50 billion a year if the MDGs are to be met. The confirmation by the G8 in July 2005 that international donors will provide an additional $50 billion a year by 2010, compared with 2004, is an important step towards this. However, traditional increases in donor aid budgets will not be enough to provide these additional resources and meet the aid targets that have been set. Innovative financing mechanisms are needed to help deliver and bring forward the financing urgently needed to achieve the MDGs.
On 9 September, the UK - in partnership with France, Italy, Spain, and Sweden - launched an International Finance Facility for Immunisation (IFFIm). South Africa and Norway have since joined the scheme. Contributions from the Bill and Melinda Gates Foundation will be provided alongside the resources from Government donors to the IFFIm. This innovative new initiative will use frontloading principles to leverage money from international capital markets by issuing bonds. Bondholders will be repaid from future donor payment streams. IFFIm will provide an additional $4 billion by 2015 in support of the Global Alliance for Vaccines and Immunisation (GAVI) - which comprises UNICEF, WHO, World Bank, Vaccine Fund, Gates Foundation and a range of donor and recipient governments - tackling some of the deadliest diseases in some of the world's poorest countries. In addition to increasing the overall funding available for immunisation, this mechanism has the added merit of providing a predictable flow of resources to the immunisation challenge - where historically, the lack of secure financing has impeded programme planning and product development efforts.
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- UK press release on IFFIm (PDF 114KB)
- GAVI press release on IFFIm launch (PDF 20KB)
- Article on IFFIm by the Chancellor of the Exchequer and Graça Machel, Chair of The Vaccine Fund board (PDF 60KB)
- Bill Gates’ statement on IFFIm launch (PDF 7KB)
Without the use of frontloaded investments, it will not be possible to scale up immunisation coverage to the level needed to reduce child mortality and help meet the MDGs. By frontloading $4bn over 10 years through the IFFIm mechanism, an estimated 5 million lives could be saved in the years to 2015, and a further 5 million adult lives from death caused by hepatitis B in adulthood. These figures are additional to the 1.5 million lives that will be saved if GAVI support continues at the current level of resources.
One of the key technical issues for the IFFIm was the classification decision by Eurostat (the EU statistical office) on how donors should record commitments to the IFFIm in their national accounts.
On 2 August 2005, Eurostat approved the proposed accounting treatment for donor countries - IFFIm's borrowing will be recorded as that of a non-government unit, and not as the borrowing or debt of donor countries. And donors' payments to the IFFIm will only be recorded on an annual basis when they are made, and not upfront as public debt.
