Payments from the World Bank’s Pandemic Emergency Financing Facility (PEF) to member countries of the International Development Association (IDA) could begin as early as next week, as the capital lost by holders of the triggered pandemic catastrophe bonds and swaps looks set to be mobilised rapidly.
As we were first to report on the day the triggering of the instruments occurred, the World Bank issued pandemic catastrophe bonds and pandemic risk-linked swaps were triggered and will pay out $195.84 million, to the benefit of IDA countries.
The Steering Body of the Pandemic Emergency Financing Facility (PEF), the facility established to provide a mechanism to bring additional capital to pandemic responses, announced that the US $195.84 million would be allocated to 64 of the world’s poorest countries with reported cases of COVID-19.
The PEF will focus on regions with the most vulnerable populations, especially in fragile and conflict-affected countries, in disbursing the money in the most effective way possible.
The capital from the insurance window of the PEF, which was backed by global insurance-linked securities (ILS) investors and dedicated catastrophe bond funds in supporting the pandemic bonds, as well as global reinsurance players in supporting the pandemic swaps, will be used to provide additional support to these countries in their COVID-19 response, including medical and protection equipment as well as other critical uses.
At the time this final trigger conditions was met, the World Bank explained that some 4,653 coronavirus cases, or 0.62% of reported COVID-19 cases globally, were from the IDA group of nations.
As of April 24th those figures have increased significantly, to 35,195 cases, or 1.34% of reported COVID-19 cases globally, suggesting that the payout of these pandemic bonds and swaps may be in time to make a significant contribution to the IDA countries ability to respond to the outbreak.
“This funding is in addition to the World Bank Group’s commitment of up to US$160 billion to fight COVID-19,” explained Annette Dixon, Vice President for Human Development at the World Bank. “PEF funding will supplement the critical emergency support operations underway to help save lives, detect, prevent and respond to coronavirus in poor countries.”
How much assistance an IDA country will receive is dependent on its population size and reported cases, ranging from a minimum of US $1 million and maximum of US $15 million going to each country.
A heavier weight will be given to countries classified as fragile or conflict-affected, to ensure they receive necessary support.
“COVID-19 will hit the poorest countries the hardest,” added Shigeru Ariizumi, Deputy Director General of the International Bureau, Ministry of Finance, Japan. “This funding from the PEF will help the poorest countries with the most vulnerable health systems boost their response to this unprecedented global health crisis.”
“We welcome that the PEF now provides urgently needed help for the poorest countries,” stated Gerd Müller, Minister of Economic Cooperation and Development of Germany. “Crisis and refugee regions in particular need rapid support for stabilization. This is an important lesson from past health crises.”
PEF Funds will be used to help the IDA countries scale up their testing for coronavirus cases, helping them to more rapidly identify new cases and treat them, as well as to rapidly trace and isolate their contacts. The financing will also be used to help train health workers and deliver essential health services to households.
“These funds directed at the most vulnerable countries show solidarity in the face of a common threat”, said Michael Ryan, Executive Director, WHO Health Emergencies Programme and co-chair of the PEF Steering Body.
Importantly, the World Bank explains that financial disbursements from the PEF payouts will start as early as next week, as IDA countries submit authorised funding allocation requests.
This means the capital can get to the countries in need at a time when they are experiencing increasingly rapid case growth from this pandemic, meaning it can be put to good use in helping their response to the virus be more effective.