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- The World Bank has scrapped plans to issue a second set of pandemic bonds for the relief of developing nations suffering from the COVID-19 outbreak, according to the Financial Times.
- When the coronavirus began to spread around the world in April this year, the bank triggered roughly $133 million in aid to developing nations battered by the outbreak.
- But its efforts have been met with criticism on grounds that the amount pales in comparison to what is actually needed to limit contagion.
- The World Bank has previously called these specialized bonds one of its critical tools to facilitate financial lending.
- Visit Business Insider’s homepage for more stories.
The World Bank has dropped plans to issue a second round of pandemic bonds after being criticized for dragging its feet on handing out aid to deprived nations, the Financial Times reported on Monday.
In April when the coronavirus was starting to decimate economies — especially the developing nations — the World Bank said it would pay out about $133 million through “pandemic bonds” to those worst affected.
But critics said the amount was too little, too late.
The payout medium offered highly attractive yields to investors at the risk of losing the principal payment amount.
In a $320 million deal, the pandemic bonds were first launched in 2017 in response to the outbreak of the Ebola virus in North Africa.
Around early 2019, the Washington-based institution said it would modify the structure of the bonds before marketing its latest product in May 2020. However, the planned repeat of the “pandemic emergency financing facility,” or PEF, has been shelved, the FT said.
“There are no plans for a PEF 2.0,” the newspaper said, citing a spokesperson.
An assistant professor of public health policy at the London School of Economics referred to the World Bank’s pandemic bonds as an “awful scheme” and said the concept of financing pandemics must be re-evaluated.
“We need to somehow engage with private money because public money isn’t enough or isn’t fast enough,” Clare Wenham, the public health professor, told the FT.
The specialized bonds were meant to channel “surge funding” to developing countries that suffered from infectious diseases. Originally, the PEF enabled a provision of over $500 million to finance developing countries through a combination of bonds and derivatives priced at real-time.
At first, the bonds were well-received and saw a 200% oversubscription by investors displaying a high level of confidence in the sponsored instrument.
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