The World Bank will lend or grant up to $500 million to help fight avian flu – and it claims a pandemic could cost as much as 4,000 times that amount.
The announcement comes as the banks worldwide consider their responses to a possible pandemic. “We worry all the time about avian flu, but we don’t know what to do about it,” Barclays president Bob Diamond admitted to Emerging Markets yesterday.
His co-president Grant Kvalheim added: “It’s an aspect of this business that things like SARS and 9/11 are just forced on to our industry.”
Many banks are believed to be stress-testing themselves for the impact of avian flu and developing contingency plans. For example, Deutsche Bank has compiled a detailed cost impact study.
A global funding programme from the world bank pledges IBRD loans, or IDA credits or grants, for new projects to combat existing forms of avian influenza and preparing for a possible human flu pandemic.
Eleven projects with combined commitments of $147.3 million had already been approved under a previous initiative by June this year, in countries including Laos, Turkey and Nigeria.
Total commitments are expected to reach $300 million to 30 countries by the end of June 2007.
Jim Adams, head of the World Bank’s avian flu taskforce, said the cost of a pandemic was estimated to be $800 billion. A severe pandemic could cost $1-$2 trillion, equivalent to between 3% and 5% of global GDP. “The economic threat remains real and remains substantial,” he said.
In the event of a pandemic the bank estimates that 60% of the costs would be from so-called “avoidance behaviour”, i.e. people changing their spending habits as a consequence of the outbreak. Only 40% would be related to mortality and illness.
Ian Porter, the Bank’s country director for Cambodia, Laos and Thailand, said the costs of compensation – for example, 70% of the market price of a chicken for people affected in Indonesia – was already steep.
David Nabarro, UN Avian Flu Coordinator, added: “There will be another influenza pandemic one day, but we don’t know when.”
In the last year avian flu has gone from the East Asian locations where it originated to countries in South Asia, Europe, the Middle East and Africa. The global death toll so far is 144 and 55 countries have reported outbreaks, most of them this year; about 220 million bird deaths have been attributed to the virus, the Bank said.