Two Windows COVID-19 and the World Bank’s Pandemic Emergency Financing Facility

The Ebola Crisis motivated the World Bank to launch the Pandemic Emergency Financing Facility in 2016. But how effective has the PEF been in dealing with COVID-19? 

Finance plays an instrumental role when battling a pandemic. However, timing can undermine the availability of funds e.g. the slower finance is mobilized, the faster pandemics spread. During the 2014/2015 West African Ebola Crisis, the World Bank estimated that a delay in funding led to a loss of about 11,000 lives with significant economic and social costs to the affected countries. This delayed response to financing was also, among other things, due to a deficit in timely and agile financing, and therefore motivated the World Bank to launch the Pandemic Emergency Financing Facility (PEF) in 2016. But how effective was the PEF when the next major health crisis, COVID-19, hit the continent?


The PEF is a financial mechanism housed by the World Bank to assist financially disadvantaged countries dealing with a prevalent disease. It consists of pandemic bonds, swaps and donations. A substantial portion of the PEF was raised from the private sector via the international capital market. Countries eligible to benefit under the PEF are mainly International Development Association (IDA) countries, including Nigeria and most African countries. Pay-outs under the PEF are done through two outlets called the ‘insurance window’ and ‘cash window’.

The Insurance Window

The insurance window, a key part of the PEF, provides coverage of up to $425 million raised from the private sector through the issuance of swaps and bonds of various classes. Class A includes $225 million in bonds and $50 million in swaps, while Class B is comprised of $95 million in bonds and $55 million in swaps . The annual interest rates on these instruments are 6.5 per cent plus Libor (Class A) or 11.1 per cent plus Libor (Class B) paid by donors including Japan and Germany for three years subject to a maximum extension period of 12 months. The insurance window covers any pandemic outbreak from the following groups of diseases: Influenza (new or novel influenza A virus), Coronaviruses (e.g. SARS, MERS), Filoviruses (e.g. Ebola, Marburg), Crimean Congo haemorrhagic fever, Rift Valley fever, and Lassa fever. Each of these diseases have a maximum pay-out should a pandemic occur: Pandemic influenza ($275 million), Coronaviruses ($195.93 million), Filoviruses ($150 million), Crimean Congo haemorrhagic fever, Rift Valley fever, and Lassa Fever ($75 million).

How this works is, if you invest $1,000 in this arrangement, you will receive a yearly sum of $65 plus Libor (Class A) or $111 plus Libor (Class B), and upon maturity, a repayment of the initial $1,000. However, if the specified contingency (outbreak) occurs, the interest payment stops, and you ‘lose’ the $1,000, which will then be paid as grant to the affected countries.

Before payment can be triggered under the insurance window, certain conditions must be fulfilled. For example, in case of a Coronavirus or an Ebola outbreak, such conditions include: 12 weeks must have passed from the date of the start of the event; the outbreak must be present in at least two countries. These countries should be eligible for IDA and International Bank of Reconciliation and Development (IBRD) funding. Additionally, each of the affected countries must have confirmed 20 deaths or more with growth rates exceeding zero. The total confirmed deaths must be greater than or equal to 250; the rolling total case amount must additionally be greater than or equal to 250.

Once an outbreak occurs, an independent agency conducts a review to determine if these conditions have been met and notifies the World Bank as appropriate. Where it is a regional outbreak affecting two to seven countries pay-out amounts would be disbursed in three stages as the number of total confirmed deaths increase. And for global outbreaks affecting eight or more countries, payments will also be disbursed in three stages.

Cash Window

Generally, the cash window allows flexibility for funding in covering diseases outside the purview of the insurance window. It also supplements pay-outs under the insurance window or in cases of single-country outbreaks. Payments under this window are subject to the approval of a steering body. Furthermore, funds in this window typically come from donations. Presently, the PEF has received a 50-million-euro donation from Germany (to which Australia added U$7 million in 2018) and is being supplemented by other World Bank money pots on an as-needed basis.


The World Bank has been a driving force in the field of innovative financing. It issued the first labelled green bonds in 2008 and played an essential role in the growth of catastrophe bonds. In 2018, the World Bank also launched the bond-i (blockchain operated new debt instrument), the world’s first bond to be created, allocated, transferred, and managed through its life cycle using blockchain. The launch of the PEF, particularly the pandemic bonds, is another example of innovative financing. Through the PEF, the World Bank created a new device for mobilizing funds from the private sector in mitigating pandemics. Naturally, to attract private sector funding for public projects, returns are required to compensate investors for risk-taking. The PEF ticked that box with interest payments and (probable) principal repayment. Also, since these funds are raised before the outbreak, it provides for quick dispensation when a pandemic occurs. Additionally, the defined parametric to trigger payment helps in objectively disposing funds to achieve their intended purposes.

For the investors, apart from the possibility of profit-making, the PEF provides a medium through which they can invest in activities that directly impact global health and social welfare. It has also been regarded as an economical means of diversifying portfolio, since the bonds price in a risk that is uncorrelated to the traditional sources of financial risks that investors are naturally exposed to. Another way of also viewing this is that if a pandemic occurs, investors will most likely lose money anyway, but by subscribing to the bonds, interest payments may set off future losses if a pandemic occurs. And even where the losses occur, they are put to good use in saving lives and preventing a negative domino effect. Given these perceived advantages, the markets welcomed the bond issuance with a 200 per cent oversubscription.


The Ebola Experience

Almost a year after the PEF was launched, Ebola resurfaced on 08 May 2018 in the Democratic Republic of Congo (DRC). Within 14 days, the PEF sprang into action disbursing $12 million from its cash window to combat the outbreak. By 24 July 2018, the outbreak was declared over. One may argue that the PEF responded speedily, although the World Health Organisation’s Contingency Fund for Emergencies (CFE) responded quicker by disbursing about $1 million within four hours after the outbreak was declared, and a total of $4.5 million to battle the outbreak. However, in terms of weighting, the PEF disbursed about three times that of the CFE. Nevertheless, this occurrence raises questions on PEF’s response speed, given its counterpart could disburse funding within four hours.

Another case study for the PEF is the more recent Ebola outbreak that began in the Kivu province of the DRC the following month in August 2018. This time around it took about five months to activate the PEF. Unfortunately, it was not the insurance window, but the cash window that was activated, because even though the DRC had witnessed 534 deaths and 838 confirmed cases, it was yet to fulfil the threshold of at least 20 deaths in two countries. The pledge to disburse did come swiftly, three days after the request by the DRC government. In August 2019, another $30 million was approved from the PEF cash window.

Although the PEF disbursed significant funds, the advent of the Ebola crisis began to reveal cracks on PEF’s glass castle: how effective is the PEF, a facility built on speed, if it only responded to an outbreak about five months and 534 deaths later? Meanwhile, even though the PEF had disbursed a total of about $62 million to combat the Ebola crisis, as of December 2019, its steering body had approved the payment of US$114.51 million to investors. This has led to a submission that the PEF seemed to favour private investors at the cost of global health security.

Although we had observed the performance of the PEF cash window, it remained to be seen how the insurance window would fare. To observe the insurance window, the conditions to trigger the insurance window would need to be fulfilled including, potentially, an outbreak greater than the Kivu Province Ebola outbreak (which recorded over 2,000 deaths).


In December 2019, a public message began circulating reporting a strange case of pneumonia taking hold in the Wuhan province of China.

This turned out to be the inception of the coronavirus disease (Covid-19). By March 2020, the disease had spread to about 110 countries and territories, with over 118,000 confirmed cases, and over 4,000 deaths. Due to the severity of the disease, the WHO officially declared it a pandemic in that same month, labelling its risk assessment as very high on both regional and global levels. The international community waited for the insurance window to be triggered. The independent agency commissioned to verify whether the conditions required to trigger the insurance window had been met, reported in the negative. That meant if, by July 2020, the conditions had not been met, PEF investors would receive a payout under the insurance window in the middle of a pandemic.

It is important to note that even though the PEF was targeted at battling pandemics, it had its target countries, and the numbers in these countries were still relatively low. However, a problem here is that the data collection systems in many of these countries are poorly developed. Furthermore, the fear of stigmatization and local distrust toward the healthcare system encouraged self-medication. All these issues raised doubts about the numbers of reported cases.

Due to the growing spread of COVID-19, would it not have been justified for the insurance window to be triggered in March 2020? Even though the PEF structure did not accommodate this, a solution would have been to inject flexibility by constituting a steering body to approve pay-outs under the insurance window in cases where it will be necessary to prevent the spread of outbreaks in target countries. For example, where the disease is fatal, contagious, and affecting a certain number of countries, notwithstanding if the conditions had not been met. The steering body could be exclusively made up of representatives of the PEF investors (and could include the World Bank as a non-voting member). It is also advisable that a majority decision of its members is binding, with the weight of the voting powers residing in investors who own the highest stake in the PEF.

Although, it should be noted that in financial facilities like the PEF (particularly where private investors are included), reducing the possibility of a pay-out to eligible countries will generally lead to a reduction in the pricing of the facility (i.e. reduced interest rates) and vice versa. In this vein, it could be argued that including a steering body as described might reduce the possibility of financial returns to the investors, therefore leading to an increased interest rate. It is however possible that including investors as members of the steering committee might neutralize that impact. Moreover, it has been advised elsewhere that rather than receiving donor funding to finance interest payments under the PEF, such money should be diverted to other funds such as the CRE and the UN’s Central Emergency Relief Fund (CERF).

Eventually on 17 April 2020, after about 140,000 deaths and over 2 million cases worldwide, the insurance window was triggered. The World Bank reported that at the time of the trigger, that only 4,653 cases had been recorded across target countries. In the target African countries, moreover, total recorded deaths were reported by the WHO to be 182.

Underlying Flaws

Apart from the PEF, the World Bank has spent over $11 billion to combat Covid-19 in Africa. To put this into perspective, the total maximum payout for the PEF was $425 million, which is less than four per cent of the total amount spent in Africa alone. Therefore, it is clear that the PEF was not launched due to a lack of funding by the World Bank, but rather to complement other sources of funding. More importantly, it sought to solve the problem of delayed financing in addressing a pandemic, which arose from a deficit in timely and agile financing. Although, based on the examples provided in this article, it remains doubtful if the World Bank was able to solve this problem. Notwithstanding, the World Bank successfully tapped funding from the international capital markets albeit through a complex financial structure. In general, $107.2 million was paid to investors under the PEF and a total of $195.84 million was paid out of the PEF insurance window to combat Covid-19, bringing the net funding to $88.64 million. Looking at the net gain, it appears to be an expensive means of raising funds to be shared amongst 64 countries.

To make the PEF insurance window work effectively, efforts must be intensified to ensure the reliability of data in target countries. In addition, the conditions for receiving funding are quite stringent and should be revised, among other things, to prevent ‘a wait for death scenario’. Research from the London School of Economics and Political Science shows that only two outbreaks in the last 15 years would have met the criteria to activate PEF’s insurance payments. Additionally, a steering committee should be established to direct funding in exceptional cases.

Even though the World Bank had initially planned to renew the PEF, it has abandoned its plan for renewal. Could this be read as a tacit approval of its shortcoming or an intention to restrategize and relaunch? Only time will tell. Nevertheless, the PEF is a commendable effort at accessing private financing, and rather than being abandoned, it should be revised towards effectively achieving its objectives

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