A rare triple-A bond designed to raise up to $1 billion for life-saving vaccines in the world's poorest countries will be launched in Europe by mid-November, World Bank treasury officials said on Thursday.
No specific date had been set for the initial bond offering, which will depend on market conditions, said Doris Herrera-Pol, head of the World Bank's capital markets operations.
The bond offering is the first of its kind that taps global capital markets to raise grant funding for immunisation projects to fight preventable diseases such as measles, polio and tetanus. The diseases kill between 2 million to 3 million children a year in impoverished countries.
The offering is expected to fetch up to $1 billion for the new development agency, International Finance Facility for Immunisation (IFFIm), which will be administered by the World Bank. The program is backed by six European countries -- Britain, France, Italy, Spain, Sweden and Norway -- and uses long-term development budgets of donor countries as collateral to raise funds.
Brazil and South Africa have also committed to join the financing facility after the first bond issue, with more countries waiting to see the outcome of the initial transaction. Proceeds from the bond will be used to fund health and immunisation programs through the GAVI Alliance, a partnership of public and private groups including UNICEF, the World Bank, the Bill and Melinda Gates Foundation and various vaccine manufacturers.
With markets brimming with liquidity and stepped up demand for new issues by investors who typically buy supranational paper, the bank believes the bond will attract central banks and other official institutions, investment funds, asset managers, pension funds and a new breed of "ethical" investor. "As IFFIm is a supranational, we are expecting that the same investors that buy World Bank bonds would find this one appealing," said Herrera-Pol.
The idea for immunisation funding facility was hatched by British finance minister, Gordon Brown, who hopes it will become a wider financing scheme that could double rich countries' development aid to $100 billion a year.
Susan McAdams, advisor for the bank's concessional finance and global partnerships, said the IFFIm agency plans to raise up to $4 billion in the markets over 10 years by selling bonds to retail and institutional investors through financial intermediaries.
She said the donor countries had committed to scheduled payments for IFFIm over the next 15 to 20 years, which have been authorised under their respective budgetary systems. "Far-sighted donors and developing countries are looking for ways to make long-term commitments to life-saving poverty reduction programs, within an aid system where flows are often unpredictable," she said.
"The IFFIm structure gives sovereign governments an opportunity to provide these longer-term funds, locking in their political commitments to increase aid with sensible safeguards," she added.
To protect its financial position, IFFIm will manage the level of bond obligations conservatively, and can limit funding for new immunisation programs as necessary, McAdams added.
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