IFFIm begins review of its future as Lay hands reins to Baker

Ken Lay, who has chaired the International Finance Facility for Immunisation for five years, has handed over leadership of the organisation to Georgina Baker, a former vice-president of the International Finance Corp, at a critical moment in its evolution.

IFFIm, the vehicle that issues bonds to finance vaccinating children in the developing world, is 20 years old and about to undergo a strategic review. It also plans to issue about $1.5bn of bonds this year.

“I’m thrilled to be appointed chair,” said Baker (pictured). “It’s a big responsibility. There’s nothing wrong with IFFIm. We’re just trying to see what we can do better. Can it do more, be more efficient?”

IFFIm finances the Global Alliance for Vaccines and Immunisation (Gavi), the largest international organisation in the field, which now supports vaccinations for over half the world’s children.

Founded in 2000 by the Gates Foundation and other partners, Gavi lowers the cost of vaccines for developing countries by buying in bulk and giving pharmaceutical companies certainty on future orders.

IFFIm, proposed by the UK in 2003, enables Gavi to speed up its vaccine programmes by issuing bonds on the strength of cast iron promises of aid from donor countries, which give it Aa1/AA/AA- ratings.

These pledges can also extend far beyond Gavi’s normal five year horizon, giving drug suppliers greater confidence.

This bond programme dedicated to a humanitarian cause was the main precedent for the green bond market, started by the European Investment Bank and World Bank in 2007 and 2008.

Gavi has vaccinated more than 1.2bn children in 78 countries, saving an estimated 20.6m lives.

Since it began issuing in 2006, IFFIm has sold over $10bn of bonds. It passed that milestone with a £300m issue in June, its first in the currency for three years.

Gavi coordinates relations with donors — IFFIm donors are a subset of Gavi donors.

However, Gavi has faced difficulty raising funds for its sixth five year period, from 2026 to 2030.

At a replenishment conference in June, Robert F Kennedy Jr, the US health secretary, criticised Gavi’s attention to vaccine safety and withdrew US support until it had “re-earned the public trust”. The US, until now a big donor, did not contribute anything in 2025.

Despite pledges from a record number of other countries and the Gates Foundation, which committed $1.6bn over five years, Gavi has a $10bn budget for the new period, instead of the $11.9bn it had hoped for.

Gavi is trying to raise more from other donors to make up, but its success is still uncertain.

The chair and board of IFFIm, who are unpaid, play an important role in guiding policy on vaccine finance and optimising its results.

Lay, a former World Bank funding official and its treasurer until 2010, was IFFIm’s fourth chair, after Alan Gillespie, René Karsenti and Cyrus Ardalan.

Baker, who is British, retired from the IFC in 2023 after 32 years. She is a senior adviser to Boston Consulting Group on multilateral institutions and chair of investor Calvert Impact Capital.

IFFIm, a UK charity, has a very light structure, operating in between Gavi and the World Bank treasury, to which IFFIm outsources its financial operations.

Each year Gavi tells IFFIm and the World Bank how much it hopes IFFIm can disburse. The World Bank incorporates that in a proposed funding programme, which IFFIm considers. When the quantum is agreed, the World Bank raises the money in the most efficient way it can.

IFFIm’s eight member board meets about five times a year. “The board members have a great deal of expertise, particularly on the capital markets side,” said Lay.

They include Hassatou N’Sele, chief financial officer of the African Development Bank; Bertrand de Mazières, former director general of finance at the European Investment Bank; and Eila Kreivi, the EIB’s former head of capital markets.

Lay contrasted this small, “fully engaged” board with other organisations “where there are 25 board members but they’re not really engaging”.

Lay describes the board’s work as “a combination of oversight and advisory. Our fiduciary obligation is to IFFIm and its mandate, but on top of that it’s a very useful resource for the World Bank and Gavi in its advisory capacity.

“At the behest of Gavi as chair I found myself involved in brainstorming on a lot of areas about resource management at Gavi and the role of IFFIm in funding it — should we be thinking about a broader approach, and so on.”

The IFFIm board discusses these issues, and on the treasury side, “we review the transactions the World Bank arranges,” said Lay. “We pay a lot of attention to liquidity management, whether we’re maintaining the appropriate gearing ratios and the rating agencies.”

The World Bank presents periodic reviews to the board on its funding and investment management for IFFIm. “They are thorough in doing it — there is a lot of material for the board to review,” said Lay.

Gavi officials brief the board on the status of their programmes and replenishment discussions with donors.

IFFIm’s chair in turn briefs Gavi’s board and meets its donors. “We can hear from them ‘here’s what we think is working, where there is room for improvement’,” said Lay. “I had a very good relationship with the Gavi board chair.”

José Manuel Barroso, former prime minister of Portugal and president of the European Commission, stepped down as Gavi chair at the same time as Lay, at the end of 2025.

The new chair is Helen Clark, who was three times prime minister of New Zealand until 2008 and later administrator of the UN Development Programme.

Reviewing his time as chair, Lay said: “The thing I felt most gratified about is that our board and Gavi were able to navigate the very difficult situation during the pandemic.”

Under Ardalan and Lay, IFFIm channelled and front-loaded over $1bn of government funding for Gavi’s Covax AMC programme, which provided Covid vaccines for 92 developing countries.

Lay added: “Being able to sustain the relationship with our donors has also been very important.”

But Lay and IFFIm have not been content to just keep following the same, preset course.

In choosing Baker, IFFIm has departed from the backgrounds of the last three chairs, which were firmly centred in the bond market.

Although her roles at IFC included deputy treasurer, Baker was not on the front line of bond issuance.

Those recruiting for IFFIm were fine with that, since the World Bank takes care of issuance — they were looking for other skills.

“The hardest thing is implementation,” said Baker. “You can come up with cool ideas — I’ve done lots of things at IFC that were quite complicated — but I saw them through to get them fully embedded in IFC’s backbone.”

Baker was heavily involved in the IFC beginning to engage in trade finance. Since 2004, it has provided about $150bn.

Another innovation was IFC’s Managed Co-Lending Portfolio Program, launched in 2013. Starting with the Chinese and Hong Kong governments, 18 investors and credit insurance companies have invested $19bn in the MCPP, co-lending alongside the IFC.

One of the first tasks for Baker will be IFFIm’s strategic review.

To conduct it, it has engaged Cygnum Capital, a London-based investment bank and asset manager focused on emerging and frontier markets.

Cygnum’s predecessor firm was co-founded by Christopher Egerton-Warburton, who while at Goldman Sachs in the 2000s worked with UK prime minister Gordon Brown on setting up the IFFIm bond programme.

Cygnum’s report is expected in mid-April.

The review will examine “what worked, and how can we broaden the mandate,” said Lay. “Twenty years is a good time to do that.”

Baker said Cygnum would consider “how we are operating — can we be more efficient? Are there tools we could bring in? People have looked at currency changes, guarantees, bonds issued in different places, but it was never needed because IFFIm was working so well. Now that budgets are more constrained, we’ve got to respond. We all need to try and do more with less.”

If Gavi is trying to fill gaps in its budget for the next five years, one way to do that would be to secure more pledges to IFFIm where the money comes in after 2030, but can be front-loaded with bonds now.

IFFIm has provided about 15% of Gavi’s resources since it started, but Gavi has considered trying to raise that to 20%.

Central to doing more with IFFIm is donors’ perceptions of its value.

The vehicle had originally been intended as a one-off, Lay said, to bring forward the benefit of what was originally $2.7bn of pledges from countries including the UK, Italy and France.

“Everybody began realising this was a useful ongoing tool in the fiscal toolkit, especially after Ebola and the [Covid] pandemic,” said Lay. “It offered a lot of flexibility to Gavi to access resources as needs arose. IFFIm has transitioned to being a core element in Gavi’s funding programme.”

Gavi has had no difficulty collecting the money due from governments under IFFIm pledges.

The formalised pledges so far have totalled $9.72bn-equivalent at the time they were made, by seven European countries plus Australia, Brazil, Canada and South Africa.

However, dollar appreciation has reduced the present dollar value of the pledges to $7.61bn-equivalent, using the figures in IFFIm’s financial report to December 2024.

As of that report, the grantors have so far paid $5.5bn and $2.26bn remains due, between now and 2038.

Some of the bonds IFFIm has issued were to refinance earlier bonds, but it has disbursed since inception $6.19bn to Gavi and has another $1.49bn of funds held in trust.

With $2.26bn of pledges still to be paid in and $1.49bn of cash and investments, IFFIm’s remaining resources total $3.75bn.

It has about $2.91bn of bonds still payable, including interest. That leaves roughly $840m it will still be able to provide to Gavi, less what it needs to pay for funding costs on future bonds and future running costs.

If it achieves that, it will have spent 92% of its total grants on Gavi programmes. IFFIm’s 2024 annual report says it believes its disbursements will total over 90% of total pledges over its lifetime.

Up to 2024, its cumulative disbursements to Gavi had totalled 96% of its total outlays.

Iffim's resources are also affected by movements on derivatives, since its pledges are paid in a variety of currencies, which are not necessarily those it borrows in or pays Gavi in.

Clearly, unless IFFIm can obtain fresh money, it will gradually dwindle away.

“What everybody is thinking about is: if we want this vehicle to continue to be a key part of Gavi’s resources, there are going to have to be more pledges,” said Lay.

The last new pledges formally recorded were in 2023: Canada, a new donor, promised C$125m ($90m) over seven years and Spain, an original one, €75m over 12 years.

Some countries have made pledges to IFFIm in 2025, including the largest donor, the UK, with another £300m, taking its total to £2.89bn.

However, the trend in overseas aid is severely down, with most of the biggest donor countries including the US, UK, France and Germany slashing budgets.

At the end of 2024 Gavi had $3bn of unconditional promises of donations due to it, of which 92% is coming in the next five years.

Its donors include 23 countries, the European Union, the Gates Foundation and some other philanthropic bodies.

At Gavi’s replenishment conference in Brussels in June, Lay joined in talks with donors, including potential IFFIm donors.

Countries can pay money to Gavi up front or promise to pay it over several years. Countries such as Germany, China and Cameroon give multi-year donations to Gavi, but are not IFFIm donors.

Making their contributions an IFFIm donation is a further step: it requires making the pledge legally binding.

This is documented under the law of the donor country. “Canada came in recently,” said Lay. “We did a lot of work with the Canadian authorities to make sure the way the pledges were handled worked under Canadian law, while satisfying our requirements.”

Recruiting new IFFIm donors therefore takes effort, on the part of the country, IFFIm and Gavi.

To commit, the donor has to believe in the benefit. This is primarily a human one: Gavi can borrow against the pledge, meaning it can spend the money earlier to vaccinate children now before they get ill, saving lives.

Legally binding pledges are also even more reassuring to the drug companies.

Leaving aside any increase in pledges to IFFIm, there is some interest from donors in whether it can borrow more with the resources it has.

This is analogous to the pressure shareholders have been putting on multilateral development banks to raise more debt, believing them to be managed too conservatively.

IFFIm’s financial model, run by the World Bank treasury, and the rating methodologies that govern it “are quite consistent with what applies in the multilateral institution framework generally,” said Lay.

IFFIm has a maximum gearing ratio of bonds over pledges at a triple-A confidence level of 73.5%.

At the end of 2024, the fair value of its bonds, net of swaps, cash and investments, was 55.1% of the present value of pledges, net of pledge swaps.

It also holds liquidity to cover at least all contracted debt service payments for the next 12 months. At the end of 2024 it had $1.49bn of funds against a minimum requirement of $925m.

On both these metrics, therefore, there could be scope to increase borrowing.

However, unlike most MDBs, IFFIm is making grants, not loans. Spending money earlier means there will be less to spend later, unless donors are willing to supply more money.

Another important aspect of IFFIm is that its “model of front-loading forward pledges has become of interest in a lot of other contexts,” said Lay (pictured).

An impediment is national government accounting systems. Some countries’ rules require them to count the whole of a $1bn donation in the year the promise is made, even if the actual payments are spread over 10 years.

Spreading out payments is still beneficial to a country, because it will not have to borrow the money until it has to pay it out, but finance ministries struggle to fit large sums into annual budgets.

If they are going to have to count a large sum in this year’s budget, that greatly weakens the incentive to create certainty by making a multi-year pledge.

When IFFIm was set up, authorities in the US and some other countries insisted on counting multi-year donations up front — one reason why the US has not joined IFFIm.

The European Union statistical agency Eurostat was an outlier — it was willing to allow multi-year accounting. “That was a tremendous advantage from a fiscal management point of view,” said Lay.

However, when Gordon Brown tried to replicate the IFFIm model with an International Finance Facility for Education, Eurostat changed its approach and required donations to be counted when pledged.

For that reason IFFEd has a different structure. Donor pledges are used as paid-in capital to underwrite guarantees of MDB loans supporting education.

“I’m thinking it’s time to revisit this,” said Lay — meaning make a fresh effort to persuade statistical authorities to accept staggered recognition of donations. “We were able to work it out with Canada a couple of years ago. It could be of great interest to countries like Japan and others that have stayed out of IFFIm.”

Sceptics of IFFIm often argue that it would be cheaper for the system overall for governments to just borrow the money they have pledged and give it to Gavi.

“My attitude is that because you can get the diversification value of having multiple countries involved, for some countries it might be cheaper to pay up front, but for others front-loading as part of a diversified portfolio would be much better value,” said Lay.

Members such as Brazil and South Africa have higher borrowing costs than IFFIm.

Moreover, even for countries with low funding costs like the UK, if IFFIm borrows, the national treasury does not have to pay the interest until it actually makes payments to IFFIm.

Baker says she has two aims for her three year term as chair. “If I can help broaden the donor base, I would feel I have achieved something,” she said. “IFFIm may seem complicated — it takes some explanation. Sometimes government treasuries understand the flexibility IFFIm brings, but for the health ministry it’s a harder story. It all depends what governments want. Those that can see the value of IFFIm will come in.”

Japan is understood to be considering whether to commit.

Her other goal is “if I can help push through the implementation of anything that can make IFFIm more efficient through the strategic review, job done.”

Baker believes in “the magic of IFFIm flexibility” and points to what Gavi calls “market shaping” — how its demand can steer pharma companies’ planning on manufacturing vaccines.

The World Health Organisation approved the first vaccine for malaria in 2021, but supply was limited. In 2023 it greenlit a second, R21/Matrix-M.

“Gates and Gavi really supported this ground-breaking vaccination,” said Baker. “Gavi was funding it towards the end of its five year cycle. It was able to use IFFIm money to complete the purchase. An investment by IFFIm of $72m generated an estimated $90m of savings for Gavi and enabled the procurement of 30m vaccine doses.”