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On Friday, Spain approved a $240 million donation to GAVI's International Finance Facility for Immunization. Other IFFIm donors include France, Italy, Norway, Sweden, the United Kingdom, Brazil and South Africa.

IFFIm Overview (from Vaccines for Development):

IFFIm is a new financing mechanism that will increase the resources available for childhood vaccines in poor countries. Donors will make long term pledges of funding, on the basis of which GAVI can borrow money from financial markets in order to front-load spending on vaccination programs and to enter into long-term procurement contracts. The aim is that both developing countries and vaccine manufacturers will be able to plan ahead, in the knowledge that the necessary resources will be available. This is expected to secure lower prices, accelerate increased availability of new vaccines, and support the substantial system improvements required to absorb new vaccines. The goal is to scale up coverage to 90% in every country.

IFFIm aimed to secure commitments of at least $4 billion, which is estimated to prevent 5 million child deaths between 2005-2015 and more than 5 million future adult deaths. By April 2006, commitments to IFFIm had been made by Brazil, France, Italy, Norway, Spain, Sweden, South Africa and the UK.

The UK Government has advocated the idea that spending on international poverty reduction could be more effective if it were “front loaded” rather than spent over time as aid budgets allow. The proposal for an International Finance Facility suggests that the gains from bringing spending forward exceed the borrowing costs. Recent work by the Center for Global Development shows that this is most certainly true for vaccinations, regardless of whether it is true for aid spending more generally.

Front-loading spending on vaccination increases the cost-effectiveness of spending for three reasons. First, there are long term herd-immunity benefits from vaccination. By increasing immunization coverage rates today, the disease level falls and the risk of catching the disease is reduced in the future. This means that an immunization today is worth more than an immunization tomorrow. Second, the commitment of funds to IFFIm should enable purchasers to enter into long term contracts with vaccine suppliers, which in turn would allow producers to build larger plants and achieve significant returns to scale. This can reduce the costs of vaccination very substantially. Third, the long term commitment enables proper planning and sequencing of investment in systems, training and purchasing to strengthen immunization systems, delivering greater value for money than spending money on a year-to-year basis.

The argument for IFFIm rests on whether these benefits are large enough to outweigh the interest and financing costs. We find that even after taking the financing costs into account, front-loading spending on vaccines as envisaged by IFFIm increases value for money by 22 percent. Of that, about half of the benefit is the result of front-loading the spending, and half is impact of greater predictability that the mechanism permits.

GAVI intends to use IFFIm resources to complement its other activities, although it has yet to capitalize on the mechanism’s predictability by enabling purchasers to enter into long term purchasing arrangements.

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CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.