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What better time to expand the IFFIm model


Take advantage of low borrowing rates to enact ambitious social programmes. That is economists' message to governments in the developed world right now. The message could also apply elsewhere.

The low cost of servicing debt makes it attractive to get on with spending now: especially since the coronavirus crisis has made the spending itself that much more pressing.

This is the case for governments, and it could also apply to NGOs, other agencies, and even new multilateral initiatives. They may be able to emulate the International Finance Facility for Immunisation (IFFIm), which has pioneered use of the debt capital markets in order to frontload the spending ability of Gavi, an international vaccination organisation.

When developed countries pledge money but do not hand it all over straight away, IFFIm can take advantage of those promises sooner by issuing debt instruments backed by them.

Bond investors essentially provide bridge financing at exceptionally low rates; IFFIm benefits from an Aa1/AA/AA- credit rating. Its three year dollar-denominated bond issued on Thursday was priced with a 0.375% coupon.

IFFIm has worked with the International Federation of Red Cross and Red Crescent Societies (IFRC), which has comparable financial plans, but with the aim of tackling cholera.

Cyrus Ardalan, chair of the board of directors at IFFIm, recently suggested the structure could be used for disaster response. Governments would pledge to give aid in the event of a disaster. If one occurs, they would only have to pay over time, but a funding entity could borrow cash straight away.

Combining whizzy financial engineering with deep-rooted international cooperation may sound a bit too technocratic for the current age, but where there is a will, there's a way.

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