World leaders’ must-do list in 2024: Next steps to secure pandemic financing

Authors: Ruchir Agarwal, Nita K. Madhav, Cristina Stefan, Carolyn Reynolds

Photo: G-20 Foreign Ministers Meeting starting in Rio de Janeiro. Lucas Landau/Bloomberg via Getty Images

After the compounding crises of the past few years, political leaders and publics are understandably keen to put pandemics in the rearview mirror and focus on other issues. Yet, the evidence is blinking red that delaying action to improve pandemic prevention, preparedness, and response will only increase the risk of catastrophic losses ―in lives and economies―given a very high likelihood of another COVID-severe pandemic in our lifetime. This blog captures key points from our discussion and lays out an agenda for action on pandemic financing in 2024 for world leaders (please watch the full event).

This insight was originally published by the Center for Global Development, here. 

As policymakers and financiers set their priorities for 2024, we gathered a group of experts who’ve been working on pandemics and pandemic financing from a range of perspectives including epidemiology, economics, insurance, policy, and advocacy. The purpose of our event was to map out the next steps for the pandemic financing agenda, and identify some specific and meaningful areas for policy and political action:

Global security and global public goods as rationale

Pandemics are not solely global development issues but also global security issues. The economic impact of pandemics is staggering. The global economy is estimated to have incurred costs of at least $13.8 trillion up to 2024 due to COVID-19. Moreover, the loss of over 20 million lives underscores the urgency of addressing pandemics from a security perspective. Investing in pandemic prevention, preparedness, and response is not only a moral imperative but also crucial for global security.

The global community must adopt a global goods perspective rather than only a country-by-country approach to pandemic financing. Existing funding mechanisms operate primarily on a country-by-country basis, but pandemics can originate anywhere and quickly spread globally. Therefore, funding mechanisms need to prioritise global and regional outcomes rather than individual country interests, although implementation of most preparedness and response activities will typically be carried out at the country level. Investments such as those made by the Coalition for Preparedness Innovations (CEPI) in developing vaccines for various pathogens exemplify the importance of this global perspective.

The large and underestimated risk of pandemics

A new working paper released by the Center for Global Development and the Disease Control Priorities (DCP-4) estimated epidemic and pandemic risk, to provide policymakers with a framework for prioritising investments in pandemic preparedness. The main message is that future pandemic risk is more substantial than generally believed and dominated by respiratory pathogens.

Madhav and colleagues estimated the global average annual loss from future epidemics and pandemics to be around 2.5 million deaths. This figure, comparable to the annual mortality from lower respiratory tract infections prior to COVID-19, underscores the gravity of the situation.

Contrary to popular belief, events on the scale of COVID-19 are not once-in-a-century occurrences. In any given year, there is a 2 to 3 percent chance of a COVID-level event occurring, translating to a more than 50 percent chance over a 25-year period. Moreover, these estimates are conservative, as they only consider a subset of potential pandemics, excluding other pathogens and factors such as the increasing frequency and severity of events caused by zoonotic viruses, non-natural sources of risk like bio-error and bioterror, and potential non-mortality impacts, such as morbidity or societal disruption.

Bolster monitoring systems and prevention efforts

Strategic investments in pandemic prevention, preparedness, and response can substantially reduce this risk. Despite notable progress, current monitoring infrastructure (for so-called ‘pandemic surveillance’) falls short of providing comprehensive data flows necessary for timely and informed decision-making.

Continuous monitoring systems and diagnostic capacity must be strengthened globally, with investments aligned with bolstering health systems to ensure resilience. Emerging technologies, such as wastewater and genomic surveillance, offer promising avenues for enhancing early warning systems and averting potential pandemics.

Additionally, prioritising prevention initiatives, particularly targeting geographical hotspots, may also have particularly high returns that accrue globally rather than to specific countries, necessitating investment as global public goods. It is also key to align incentives to reduce the penalties of countries which report.

Fully resource the Pandemic Fund

The good news is that leaders have taken some steps forward to improve the pandemic financing landscape in the wake of COVID-19 to address the global security threat posed by pandemics. Reflecting on the findings of the report of the G20 high-level independent panel on financing in July 2021, one key initiative that emerged was the creation of the Pandemic Fund, established by the G20 in late 2022 to help close the significant gap in external financing required for low- and middle-income countries (LMICs) strengthen their capacities for pandemic prevention and proactive preparedness.

Although the Fund is still in its infancy, it has shown considerable promise, with demand for its grants far exceeding available resources. Yet to date, it has attracted only $2 billion in pledges against a target $10.5 billion annual assessed need—literally equivalent to pennies or a rounding error when considering the trillions of dollars of economic losses as a result of the COVID-19 pandemic. The additional grant financing that the Fund can provide is particularly crucial for those countries facing severe fiscal constraints and debt distress exacerbated by the pandemic-induced economic downturn. The Pandemic Fund is currently in the process of preparing its medium-term strategy and is expected to hold a pledging moment later this year alongside the G20 meetings in Brazil. Existing sovereign contributors—starting with the G7—can and should commit much more to the Fund, while more countries, philanthropies, and the private sector should join and invest in this global public good.

Day-zero financing: pre-arranged and timely surge response financing

In addition to investing in preparedness and prevention, the global community still needs to prioritise day-zero financing, which refers to funding that can be activated at the onset of a deadly outbreak with pandemic potential. The early and swift release of financing is critical in pandemic response, as delays can significantly impact the effectiveness of interventions. Delays in vaccine purchasing during COVID-19 were partly responsible for the slow rollout of vaccines in many LMICs, which in turn contributed to prolonging the pandemic and its negative health and economic impacts and even the development and spread of variants.

The design of any future surge pandemic financing mechanism must be informed by learnings from past experiences and principles for effectiveness. Despite the many justifiable critiques and design flaws of the Pandemic Emergency Financing Facility of the World Bank, which was set up in 2016 in response to the lessons learned from Ebola in West Africa, it remains to date the only large-scale, sovereign-level pre-arranged financial instrument ever developed to respond to severe epidemic and pandemic events in World Bank International Development Association-recipient countries. Its wholesale discontinuation in 2021 left a gap in the financial architecture for response in terms of pre-arranged finance. Early-phase analysis conducted by The Centre for Disaster Protection suggests that more than 85 percent of epidemic response finance in recent years has been channelled through instruments not dedicated specifically to pandemic and epidemic response nor pre-arranged ahead of an outbreak.

In 2023, the G7 Health Ministers’ communiqué emphasised the importance of surge financing and proactively addressing future pandemic risk, with a proposal for a new three-layer financial approach for early-stage containment of pandemics to deploy funds quickly and efficiently without accumulating idle cash, similar to mechanisms in disaster finance. G20 leaders have also agreed that an early surge finance mechanism is necessary, and 2024 is the time to get it done.

To ensure the effectiveness of any new surge finance mechanism, however, several principles must be upheld. First, funds need to be activated early, ideally within days and weeks rather than months, to initiate early response measures and reduce transmission. This activation process should be pre-agreed between providers and recipients of finance and could resemble similar trigger mechanisms used in the insurance industry, signalling the occurrence of an epidemic event and providing proof of loss or sustained transmission. These triggers need to be undisputable, transparent, and reliable in the long-term to be an effective signal for early response.

Second, building an evidence base is essential to understand and calculate the impact of early finance and identify the best-positioned interventions, and more work is needed in this area. Finally, there is the difference between commitments and disbursements: Response finance mechanisms can only be viable if proper national-level mechanisms and plans are first established to hold and absorb finance dedicated to response. Better alignment is needed around reliable conditions for funds release in advance, as well as the conditions for activation and the coordination mechanisms between international actors.

Revisit old tools, scale-up new tools

To strengthen pandemic risk financing, policymakers and financial leaders should also ensure that the existing financial instruments are fit for purpose and better utilised, starting with the multilateral development banks (MDBs). Pandemic preparedness should be a top priority for financing from the World Bank’s International Development Association (IDA21), which is the world’s largest source of concessional financing for low-income countries and is asking donors to contribute to a record-high 21st replenishment this year.

Financial instruments such as contingent loans have become, during COVID-19, the most common and sizeable form of pre-arranged financing available for health emergencies. Contingent loans were a major source of financing for governments during the COVID-19 response, in some cases used on an exceptional basis to grant quick funding to countries. They have since been made a standard loan product by most development banks. However, they are heavily concentrated in countries with stronger macroeconomic conditions and are far less likely to be accessible to low-income countries, where some of the deadliest epidemics occur. These tools can be further tailored to the specific needs of countries to be more accessible and adaptable to diverse country circumstances. Other potential sources of capital remain untapped, such as the International Monetary Fund’s Resilience and Sustainability Trust and the inclusion of debt pause clauses in loan agreements to trigger when deadly epidemics strike.

In terms of exploring novel approaches, risk pools have historically been an untapped source of financial innovation. These pools act as global mutual insurance entities often set up and mostly still supported by the international community, including MDBs. The intended role of risk pools as development insurers places them at the heart of the risk finance agenda for LMICs and historically, these pools have provided technical assistance and risk coverage exclusively for climate shocks. However, given economies of scale and a long-lasting relationship with their member countries, there is no reason why risk pools could not be taking forward the pandemic risk finance agenda similar as they are doing for climate risk, by scaling up their product offerings to include sovereign products for epidemics and pandemics. The successful implementation of a sovereign outbreak insurance cover, such as the one launched for the government of Senegal in 2022, underscores the feasibility and efficacy of this approach.

Repurpose unspent COVID funds and existing institutional arrangements

Advancing day-zero financing does not necessarily require new financing outlays or institutions. Indeed, donors can and should leverage existing multilateral channels and secure donor commitments to facilitate this endeavour effectively. The donor community should closely examine the residual funds for COVID-19 on the order of a few billion dollars that remain unspent by Gavi and the Global Fund. Such significant amounts sitting idle have significant opportunity costs, paid as the lost social return of the money that could be used to address other unfunded pandemic-related efforts. The reallocation of those residual COVID-19 funds necessitates clear governance mechanisms to ensure transparent and efficient utilisation of resources for maximum impact in line with their original intended, taxpayer-approved purposes for pandemic response. To that end, one possible use of these residual funds could be to provide the seed capital necessary for a new day-zero pandemic surge financing mechanism, or to supplement the Pandemic Fund.

Sharpening attention amidst competing priorities

March 2024 marks the fourth anniversary of the COVID-19 pandemic, and the risk of the next deadly and costly pandemic happening soon is much higher than most people realise. This year, world leaders must prioritise closing these critical gaps in pandemic financing to ensure the world is better prepared, using a plethora of upcoming resource mobilization moments (including the World Bank IDA21 replenishment, Gavi replenishment, Pandemic Fund pledging moment, World Health Assembly, and G7 and G20 leaders’ summits). Concerted efforts and political will are needed to ensure that pandemic risk is not deprioritised, and enlisting new champions beyond the health sector is essential. COVID-19 taught us that pandemics affect everyone in society―particularly the most vulnerable communities―and every sector of the economy, so we must urgently invest to “pandemic-proof” all our critical systems and our world before the next one arrives.

The authors acknowledge editorial support for this blog from Swati Sureka.