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International Finance Facility

In January 2003, HM Treasury and the Department for International Development launched a proposal for an International Finance Facility (IFF). The IFF is designed to frontload aid to help meet the Millennium Development Goals (MDGs).

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. The IFF will specifically support efforts to bring forward donor commitments. Using existing and new resources, the IFF will be able to increase aid to the levels required to achieve the MDGs.

Based on donors’ legally binding, long term commitments, the IFF will leverage money from international capital markets by issuing bonds. Bondholders will be repaid from future donor payment streams. Pledges made by donor countries will not score on balance sheets until donors make actual cash payments to the IFF.

The Millennium Development Goals represent different indicators of the same basic poverty. Investments in different sectors must take place simultaneously  to ensure sustainable progress. Education, health, access to water, roads and other infrastructure for growth must be tackled at the same time to ensure a lasting exit from poverty.  Funding for debt relief should reinforce, not replace, funding to build a skilled work force and the infrastructure and capacity to trade.  The IFF, as a stable financing vehicle, could provide the critical mass of additional and predictable funding needed to make lasting progress in all these areas.

The IFF:

  • is a financing mechanism which would provide up to an additional $50 billion a year in development assistance between now and 2015;
  • would leverage in additional money from the international capital markets by issuing bonds, based on legally-binding long-term donor commitments;
  • would be responsible for repaying bondholders using future donor payment streams; and
  • would disburse resources through existing multilateral and bilateral mechanisms.

The September 2005 proposal document is designed to facilitate the ongoing process of consultation and is available to download in Adobe Acrobat Portable Document Format (PDF). For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility page .

PDF of International Finance Facility proposal  (505KB)

International Finance Facility for Immunisation

As a first step, on 9 September, the UK - in partnership with France, Italy, Spain, and Sweden - launched an International Finance Facility for Immunisation (IFFIm). 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 the frontloading principles of the main IFF to ensure the provision of an additional $4 billion over the next ten years in support of the work of The Vaccine Fund and 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.

PDF of UK press release on IFFIm  (114KB)
PDF of GAVI press release on IFFIm launch  (20KB)
PDF of article on IFFIm by the Chancellor of the Exchequer and Graça Machel, Chair of The Vaccine Fund board  (60KB)
PDF of Bill Gates’ statement on IFFIm launch  (7KB)

The IFFIm will demonstrate the technical feasibility of the larger IFF and the clear economic benefits of frontloading resources. Without the use of frontloaded investments, it will not be possible to scale up immunization 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 5million 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.

PDF of IFF for Immunisation proposal  (141KB)

Link to IFFIm website
 
One of the key technical issues for the IFFIm in recent months has been 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.

PDF of Eurostat press release  (152KB)
PDF of ONS press release  (172KB)


Air ticket levies and the IFF

On 9 September 2005, the UK and France made a joint statement on the IFF, IFFIm and air ticket levies. This sets out that the UK and France will implement an air ticket solidarity levy.  This levy could be differentiated between European and non-European flights, as well as between economy and first/ business class passengers. The UK already has such an air ticket levy. Part of the revenues of such a levy will finance health development projects, in particular the purchase of drugs against HIV/AIDS, TB and malaria. France and the UK will implement the International Finance Facility and are ready to participate using part of the revenues from the air ticket solidarity levy. A working group will be set up to consider the detailed implementation issues of the IFF financed by an air ticket levy and will deliver its conclusions on these issues before next January.

PDF of UK/France statement on air ticket levies/IFF  (60KB)

Support for the International Finance Facility

The IFF is building real momentum and is a central feature of the Development agenda for the UK Presidencies of the G8 and EU in 2005. The IFF proposal has received support from more than 80 countries, including France, Italy, Sweden, Brazil, China, and South Africa, as well as from faith leaders, the business community and NGOs.

G8

At the 2005 G8 Summit, that took place in Gleneagles, Scotland, on the 5-6 July, Ministers agreed that: that: “A group of... countries... firmly believe that innovative financing mechanisms can help deliver and bring forward the financing needed to achieve the Millennium Development Goals. They will continue to consider the International Financing Facility (IFF), a pilot IFF for Immunisation and a solidarity contribution on plane tickets to finance development projects, in particular in the health sector, and to finance the IFF .”

PDF file of G8 Africa Communiqué  (108KB)

EU

An EU Financing for Development statement was presented to the 14-16 September UN Millennium Review Summit (UN MRS), announcing that a group of willing countries will implement the IFF as a component of a wider EU development financing package - along with debt relief, aviation tax, and the new EU ODA target.

PDF of EU statement to UN MRS


UN

The IFF has been at the forefront of UN debates throughout 2005. It was strongly endorsed by UN Secretary General Kofi Annan in his March 2005 Report, In Larger Freedom: “The international community should in 2005 launch an International Finance Facility to support an immediate front-loading of ODA, underpinned by scaled-up commitments to achieving the 0.7 per cent ODA target no later than 2015.” 

At the UN MRS on the 14-16 September, the Lula Group - a technical working group set up by President Lula of Brazil in January 2004 to investigate innovative sources of financing - announced their commitment to work further on the IFF and work further on and support pursuing the project of solidarity contributions, first of all a solidarity contribution levied on air tickets. The UK supported this statement. The UN MRS Outcome Document recognizes the value of developing innovative sources of financing, and notes that some countries will implement the International Finance Facility.

PDF of UN MRS Outcome Document  (166KB)
Link to In Larger Freedom, UN website  (external site)

World Bank/International Monetary Fund

The 2004 final report by the Bank and the Fund on Aid Effectiveness and Financing Modalities noted that the IFF is “technically feasible” and the “most advanced proposal to frontload aid”. At the Spring Meetings in April 2005, the World Bank Development Committee Communiqué noted: “… negotiations among interested parties on the proposed pilot IFF for Immunization are well advanced; and the analysis of technical feasibility of the IFF has created the conditions for the necessary political decisions on participation. We encourage interested donors to proceed with these proposals.”

PDF of April 2005 Communiqué of the World Bank Development Committee  (external site)
PDF of April 2005 Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund  (external site)

Commission for Africa

The March 2005 Commission for Africa Report, Our Common Interest, states that: “Ways of financing the doubling of aid to Africa should include the immediate launch of the International Finance Facility.”

Link to Commisision for Africa report  (external site)

The UK continues to consult with governments, international institutions, faith communities, NGOs and business in both developed and developing countries to build on the existing support for the IFF and IFFIm as an immediate and concrete step towards achieving the MDGs.