Clemence Landers is a policy fellow at the Center for Global Development. She works, among other subjects, on the international financial institutions (IFIs). Since the beginning of the Covid19 health crisis, she has been following the IFIs’ Covid response closely.
1. As some of the international community seems to want to turn to international financial institutions in order to better address the preparation and response to health threats, what is your view on the growing role of IFIs on health issues?
International financial institutions (IFIs) must engage on global health issues. By virtue of the sheer volume of financing, they can bring to bear, for many countries they are the first line of defense during a crisis. Historically, they have played a significant role in investing in national health systems, in particular the World Bank (WB) and regional multilateral development banks.
While these institutions are based on country-led financing models, the IFIs system also needs to take a more regional and global approach to health issues. This is true for health but also for other looming global crises, such as climate. The IFIs need to adapt their model to focus on global actions and the financing of global public goods. This translates concretely in terms of health by, for example, playing a more important role in financing global health surveillance. For instance, the G20 has also been considering a global health threats board that would bring together finance and health ministers alongside international organizations to provide financial oversight and coordinate international efforts to mitigate future pandemics. Indeed, one of the weaknesses of IFIs in the global Covid19 response is that the response has been very nation-centric, each nation for itself kind of a response, which leads to being a suboptimal outcome on how the crisis is contained throughout the global.
2. What are your main observations in the monitoring of IFIs in the global response to Covid-19? What main risks have you observed? What is your view on the conditionalities required by the World Bank budget support and their effect on health systems?
From a macroeconomic perspective, let’s start by comparing the Multilateral Development Banks’ (MDBs) response to the 2008 global financial crisis to the COVID19 crisis. While the MDB system did increase their lending during the COVID19 crisis, they didn’t increase the scale of their lending as significantly as they did during the global financial crisis. In 2020 the multilateral development bank (MDB) lending grew by about 40% but during the financial crisis, the MDBs lending grew by 80%. Developed countries spent as much as 20 percent of their GDP on the Covid response while LIC spent closer to 2 to 4%. One main reason for the existence of IFIs is to help poor countries to close those counter-cycle financing gaps. Unfortunately, during the COVID response, it wasn’t the case. Likewise, even though MDBs financed health projects have increased, they remain a small percentage of what the MDBs do relative to other sectors.
In a recent paper on policy conditionality in World Bank budget support operations during COVID, I found that two-thirds of the conditionalities required by the World Bank to access financing for the general budget were reforms that were not linked to containing the COVID19 crisis. I think this was a missed opportunity for the WB to influence countries’ crisis response policies.
Another missed opportunity is on vaccines: 4% of the population in LIC is vaccinated today compared to up to 60-80% in high-income countries (HIC); the cost of this failure can be measured in human lives. A lot of poor countries found themselves at the back of the line for vaccinations. In the global response to Covid19, we missed an opportunity to help countries to acquire and distribute the vaccine early on.
3. What would be, in your opinion, the key changes to ensure that IFIS responses to health threats are more efficient?
We are going to need to focus on preparedness. In particular, there is an upcoming replenishment at the International Development Association (IDA), the number one source of finance for LIC, which is an opportunity to embed preparedness across IDA programs and allocate significant resources for this agenda.
From a macro aspect, speed is critically important in a crisis. During the Covid19 crisis, the speed at which money has been moved was too slow and IFIs need to identify ways to disburse funds faster when the next crisis hits.
Finally, the IFI’s country-based approach is being tested in a new era of increased synchronized global crisis. Part of an effective prevention agenda is a concrete and well-resourced global public goods agenda.