International Finance Facility for Immunisation (IFFIm) and Universal Access Robin Gorna, UK Department for International Development (for Carole Presern)

Innovative Finance zMonterrey and High Level Panel on Financing for Development 2001: an increase of US$50 billion p.a zG8 zUNGA 2005 and Special Session 2006 z1 March 2006 French Ministerial Conference on Innovative Finance, UNITAID zOther possibilities – debt swaps. But, need long term, guaranteed finance

What was the problem? zMDGs off-track zSignificantly more resources needed for for development (US $4 billion) z30 million children without basic vaccines annually, 3 million deaths zOutcomes needed now - frontloaded

How? zFrontloading principle zLong term pledges from donors used as security to issue bonds on capital markets zBonds provide immediate resources for investment in development outcomes (same principles apply for Universal Access) zRepaid over longer term by donors on annuity basis

What is the IFFIm? zAn IFF for immunization (IFFIm) has been proposed as a pilot for the IFF mechanism zOn 9 September 2005 IFFIm was launched in London with five donors - UK, France, Italy, Spain, and Sweden: now Norway and Brazil have announced contribution as well yEstimated disbursable of $3.2 billion before 2015 yOngoing effort to secure resources from additional donors to reach $4 billion resource goal yTarget date for first bond issuance is 4 October 2006 zWorks through GAVI Alliance; partnerships with WHO, UNICEF, Gates, World Bank and many others for technical expertise

Components of the IFFIm zDonors enter into 20 year legally binding commitments zThese commitments are leveraged in the bond market zProceeds distributed to countries and for supply procurement zResources nominally split 50/50 systems and vaccines yGAVI purchases under-used vaccines and strengthens health systems in 72 countries

Predictable, long-term flows can accelerate market forces GAVI’s significant resources have stimulated the entry of additional manufacturers for combination vaccines, resulting in a price drop ultimately delivering more vaccines to children For both WHO prequalified & non-prequalified vaccines Offers of DTP + HepB Vaccine to UNICEF Number of Manufacturers $0 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 Price per Dose Weighted average price

IFFIm Leverage in Market Source: CGD Working Paper “The costs and benefits of front-loading and predictability of immunization” Price per dose

Implications of the IFFIm zNew donors yCountries not previously contributing to GAVI attracted by innovative nature of IFFIm supplying additional resources zInfluencing the market yLong-term predictable commitments allow longer-term planning for supply strategy yMore flexibility for contracts with manufacturers with a potential to negotiate a lower price or accelerate supply through strategic use of long-term contracting zBetter planning and sustainability for countries yCommitments can be made to countries over longer-term allowing for better integration within national planning cycles and longer lead time to plan for country financing and eventual sustainability

Cost vs. Benefit The IFFIm raises additional monies through a borrowing mechanism (securitization)….. …but saves many additional lives more quickly. IFFIm Funds Continued growth of current funding Additional IFFIm impact Continued gains in lives saved due to growth of current funding

Is It Worth the Cost? zPrincipal IFFIm benefits are: yAccelerating coverage of immunisation with traditional and new and under used vaccines, and y‘pulling’ the vaccine industry through predictable market, leading to increased industry capacity and lower vaccine prices zKey benefits: 5.3 million additional children’s lives saved over 10 years (Africa 3.1 million, Asia 2.1 million and others 0.1 million) zA further 5 million adult lives saved through HepB zEstimated “financial cost” of IFFIm at 3.5% against IRR of accelerated benefits of 18%

Main criticisms of IFF zIs it an alterative to 0.7? zNew EU target? zBorrowing for development? zRepayments too high? zWhat happens to aid flows after 2015? zIs it additional? zAbsorptive capacity?

The case for frontloading zCenter for Global Development estimates rate of return of frontloading at over 30% zOther estimates between 20-90% zAgainst a borrowing cost of 5% zFirst bonds to be issued 4 Oct 2006 zIf frontloading US$4 billion can save US$4 billion then potential for other sectors or at higher scale very exciting

Fit with IDPF/UNITAID zComplementary – preventable diseases and three pandemics – largest contributors to morbidity and mortality zUK is actively engaged with UNITAID zActively increasing regular ODA, and has committed UK Stg 1.5 billion from regular ODA to AIDS over three years

Relevance for Universal Access zLarge amounts of innovative, traditional ODA, domestic finance will be needed to meet the MDGs zIFF is complementary: Critical mass of donors prepared to invest long term (as for UNITAID etc) zResource needs will grow, particularly in R and D, so all possible sources need to be tapped zDoes not complicate aid architecture: Working through established partnerships; country based allocation system