Debt Relief Can Help Fight HIV/AIDS,

1
Debt Relief Can Help Fight HIV/AIDS, Tuberculosis
and Malaria
2
Presenter Robert R. Filipp Head of Innovative
Financing The Global Fund, Geneva Tel. 41 (22)
791 robert.filipp_at_theglobalfund.org
Special thanks to Christoph Benn, David Bryden,
Jürgen Kaiser, Susanne Luithlen, Liza Munira,
Lorrayne Ward, Rosemarie Philips, Xay Xayakhom,
Paul Zeitz.
2/18
3
Content

• New Approaches to Funding Global Health
• The Case for Debt Conversion
• The Debt2Health Model
• Debt2Health as a Win-Win Scenario
• Status of Implementation

3/18
4
Funding Global Health through the Global Fund

• USD 6.8 billion raised between 2002-2006,
  disbursed USD 1.3 billion in 2006
• Innovative Financing (private public
  sectors) 3.5 of total disbursed in 2006 but
  growing rapidly (7 in 2007, 10 in 2008)

(Product) REDTM
4/18
5

The Case for Debt Conversion

• developing country debt is USD 2.6 trillion
• LIC debt has declined slightly as a result of
  HIPC and MDRI initiatives but overall debt has
  increased due to rise in LMICs
• some small multilateral financial institutions
  still hold debt in HIPCs

Medium Long-term Debt of Developing Countries
Based on data from the Global Development
Finance Report (GDF), 2005
6

The Case for Debt Conversion
Public Publicly Guaranteed Medium Long-term
Debt of Developing Countries
Based on data from the Global Development
Finance Report (GDF), 2005
7
The Case for Debt Conversion

• 24 countries are indebted above the HIPC
  threshold but are not included in HIPCs or MDRI
• 15 countries spend more than 20 of export
  earnings on debt servicing
• 14 countries show high disease burden with
  regards to HIV/AIDS, Tuberculosis or Malaria
• HIPC countries can benefit from D2H through
  inclusion of debts from small multilateral
  financial institutions
• Policy benefits from global alliance between debt
  campaigners and health advocates.

http//www.theglobalfund.org/en/files/GFDC_REPORT.
pdf
Based on Global Development Finance Report
data from 2002-2004
8
is a Global
Fund-facilitated debt swap agreement. In it, a
group of creditors agrees to cancel a portion of
ODA or ECA claims on the condition that the
beneficiary invests an agreed upon counterpart
amount in a Global Fund approved programme to
fight HIV/AIDS, tuberculosis and malaria.
9/18
9
The Case for Debt Conversion Indonesia Example

• 40.0 of budget spent on debt servicing
• 26.0 of export earnings spent on debt servicing
• 8.7 of GDP used for debt service
• 1.2 went to health and education
• Source UNDP Human Development Report, 2005 and
  Global Development Finance Report GDF, 2006.

7/18
10
The Case for Debt ConversionIndonesia Example
50 million Euro debt cancellation through
Debt2Health would increase the current Global
Fund portfolio (Rounds 1-6) by 25, affording

• bed nets to fight malaria
• treatments for malaria
• HIV tests
• patients on ARV treatment and
• patients on TB treatment

200,000 50,000 120,000 3,600 2,550

8/18
11
Expected Resources Flow through Global Fund
(Cumulative 2007-2011)
Target
Committed
Cost
6/18
12
The Model
(1) cancels agreed amount of debt
BENEFICIARY COUNTRY
CREDITOR
Counter-part Fund
(2) pays at agreed discount
Entry Points for health programme in Global Fund
cycle
Phase 2 or Round or RCC
Principal Recipient
GLOBAL FUND PROGRAMME
Legend RCC - Rolling Continuation
Chanel Board -Approval by Global Fund Board
13/18
13
Uses Existing Structures

• submission through Phase 2 Review, regular
  Round or RCC
• technical review (TRP)
• approval (Board)
• disbursement on
• performance-based funding
• monitoring evaluation

14/18
14
Exceptions

• source and location of funds
• treatment of funds in case of non-performance

14/18
15
A Win-Win Scenario for Creditors

• resolution of old loans
• claimable towards ODA according to OECD-DAC rules
• claimable towards Global Fund contribution
• high chance of programmatic success using proven
  performance-based funding

10/18
16
A Win-Win Scenario for Beneficiaries

• partial relief of debt burden
• increase in health spending
• high level of country ownership as counterpart
  funds come from domestic budget
• performance through existing and proven grant
  management system based on performance- based
  funding
• net contributor to the Global Fund

17
A Win-Win Scenario for the Global Fund

• scaled-up health targets reached faster
• use of Global Fund performance-based systems
  for domestic funds
• net contributors from the Global South

12/18
18
Status of Implementation

• countries selected Indonesia, Pakistan, Peru,
  Kenya
• criteria non-HIPC, non-MDRI, disease burden,
  solvency, Global Fund grant performance
• negotiations on first pilot about to commence
  between Germany and Indonesia in March 07
• possible expansion to additional countries
  through participation by small multilateral
  financial institutions

15/18
19
Status of Implementation Steps and Timeline for
First Pilot
Feb 07
Mar 07
Sep 07
May 07
Oct 07
Term Sheet Draft (KfW)
Negations
International Launch of D2H in Berlin Signature
of First D2H Agreement
International Meeting on Debt for
Health Additional Creditors
Implementation and Debt Cancellation
16/18
20
is supported by
(1)
17/18
(1) Subject to formal approval by VENRO Board
21
Thank you!