Why you should care
The World Bank’s bid to aid countries battling Ebola is contingent on some strict conditions.
This month, Ebola moved from the Democratic Republic of Congo, where it re-emerged in August 2018, into neighboring Uganda. The World Health Organization confirmed that a 5-year-old boy was the first fatality from the virus in Uganda. Reuters reported on Thursday that the boy’s grandmother had also died, citing a health ministry official, and fanning fears that the spread of the virus has begun.
Since 2017, the World Bank has been issuing “pandemic bonds,” which use private investment to help developing nations tackle outbreaks of infectious diseases. The particular bond that covers Ebola, among other diseases, pays investors a coupon of 11.1 percent over Libor, funded by donor nations Japan and Germany. Since the first case of Ebola in August last year, almost 1,400 people out of 2,000 infected have died in eastern Congo, a region with rich mineral deposits but one of the poorest countries in the world, according to the UN. But that doesn’t mean they get the aid money. In fact …
The World Bank’s ”pandemic bonds” would not pay out until at least 20 people are confirmed to have died in Uganda.
Despite thousands of deaths in Congo, the bonds will only benefit affected nations once they jump international borders and a positive rate of growth of the outbreak is confirmed, according to a person familiar with the bonds. Then and only then would the Washington-headquartered World Bank pay $90 million to help both governments and international aid responders tackle the crisis. Additionally, since their introduction, pandemic bonds have yet to pay out to affected nations.
That person familiar with the bonds also says, “The criteria for the Pandemic Emergency Financing insurance window to activate is, among others, that the outbreak is affecting at least two countries, with each country having surpassed a specific threshold of severity.”
A representative from the World Bank notes, “We are deeply concerned about the Ebola outbreak in DRC and the recent developments in Uganda. The situation is very complex and fluid, especially in a crisis of this magnitude and severity.” Efforts to contain the spread of Ebola in the country have been hampered by chronic violence and suspicion of outsiders.
In February, the development bank gave the DRC $80 million in grants to help finance responses for the Ebola outbreak. But the bank’s readiness to allow the death toll to rise, before paying out fully on the insurance element of the facility, is likely to fuel criticism over the deal’s structure.
If the bonds mature without paying out, investors get their money back, plus the chunky coupons.
Bodo Ellmers, head of policy at the European Network on Debt and Development, told the Financial Times in February that “the financialization of risks is a new avenue for the privatization of profits and the socialization of losses.”
Such bonds are an example of a wider growing trend where private finance replaces traditional funding methods such as disaster relief aid. Catastrophe bonds attracted record levels of investment last year.
OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2019.