Pandemic Bonds : The Indicator from Planet Money A few years ago, the World Bank issued bonds designed to get cash to needy countries in the event of a pandemic. Sounds like a great idea! But the bonds haven't paid out yet and they may never.

Pandemic Bonds

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Here in the U.S., trillions of dollars are being spent to address the economic impact of coronavirus. The same is happening in countries all over the world. Trying to slow the spread of this pandemic and treating those who have fallen ill and helping the affected businesses is proving to be enormously costly.


But what about countries that just don't have all that much money - places like Haiti, Cambodia, Afghanistan, Fiji, Kenya? What do they do when coronavirus hits? A lack of money and resources makes developing countries especially vulnerable to pandemics.

VANEK SMITH: That is part of why the World Bank helps the world's poorest countries in events like this. Mostly, this aid happens in the form of low-interest loans, but a few years ago, the World Bank got a little fancy. It started issuing something called pandemic bonds.

GARCIA: Yeah. These bonds were meant to raise hundreds of millions of dollars that could be deployed quickly in the case of a pandemic just like the one that the world is experiencing right now.

VANEK SMITH: And it would be packaged as an investment, using capitalism, wealthy investors and financial markets to raise money for the places that needed it most at the times when they would be the most desperate.

GARCIA: Like now. Pakistan has come to the World Bank for help getting money to fight COVID-19, and Ethiopia said this week that African countries will need around $150 billion to fight the coronavirus pandemic.


VANEK SMITH: And I'm Stacey Vanek Smith. Today on the show, pandemic bonds - they're supposed to get money to some of the poorest countries in the world to help fight the coronavirus pandemic. The bonds were reportedly due to pay out this week.

GARCIA: But the money may still be a few weeks in coming, and it might never come at all.


GARCIA: The idea behind pandemic bonds is actually kind of brilliant. Pandemics are incredibly expensive and unpredictable, and raising money as fast as you need to can be really hard.

VANEK SMITH: The World Bank created pandemic bonds in 2017 just after the Ebola virus had devastated parts of Africa. Raising money quickly to fight Ebola had proven really difficult, so the World Bank thought they could use financial markets to get some big money set aside for pandemics.

GARCIA: Olga Jonas is an economist and senior fellow at the Harvard Global Health Institute, and she was at the World Bank for more than 30 years. She says these bonds were aimed at pension funds and wealthy investors.

VANEK SMITH: Were they popular bonds? Like, did a lot of people...

OLGA JONAS: Oh, yeah. They were oversubscribed.


JONAS: Apparently, it was 200% oversubscribed.


GARCIA: It's easy to see why. For starters, investors got to feel charitable.

VANEK SMITH: And they made money - kind of a lot of money - between 6 and 11% return on their investment every year. Meanwhile, the World Bank would keep the principal, the money investors had used to buy the bonds. And if a pandemic didn't hit the poorest countries by July 2020, then the investors would get that money back plus all the payments that they'd gotten along the way.

GARCIA: And if a pandemic did hit, investors would lose the bond money, and the World Bank would then use the money from those bonds - hundreds of millions of dollars - as cash at the ready for the countries most in financial need. Most investors would lose the money, but they've gotten all these payouts along the way, and they know their money is going to help places that really need it.

VANEK SMITH: Pandemic bonds got a ton of press when they launched in 2017. Everybody was enchanted. Capitalism that helps people - what's not to love?

JONAS: You know, they go for photo ops, so-called announceables (ph).

VANEK SMITH: So yes, you don't seem to be a fan of pandemic bonds.

She's not. Olga says despite all the fanfare, pandemic bonds don't seem to be helping anyone. For one thing, says Olga, the bonds are way too complicated. There's all this red tape between the hundreds of millions of dollars stored up in the bonds and the countries in need.

GARCIA: Olga says the bonds come with a document called a prospectus that outlines the terms of the bond, like when they would pay out - a little like if you buy fire insurance. There's a document laying out the instances in which you would or wouldn't be paid - the fine print. Typically, says Olga, these are 10 to 15 pages long. On the other hand, the pandemic bond prospectus is...

JONAS: Three hundred eighty-six pages.

GARCIA: Three hundred and eighty-six pages.

VANEK SMITH: And those pages lay out all of these terms that a disease outbreak has to meet. A certain number of people have to have died from the disease over a certain period of time.

GARCIA: The deaths have to have happened in certain countries. The spread has to be happening at a certain pace.

JONAS: There are just so many conditions, exotic terms. And, you know, nobody I know could figure it out.


JONAS: So far, no. And I'm at Harvard - you know, lots of smart people.

VANEK SMITH: (Laughter) Really? So it's, like, that convoluted...

JONAS: Yeah.

VANEK SMITH: ...The terms of the payout.

JONAS: Right.

VANEK SMITH: One thing that's clear - the prospectus says it will be determined whether the pandemic bonds will pay out 12 weeks after the official start of the pandemic - that is, if the pandemic meets all the terms laid out by the bonds.

GARCIA: According to the World Health Organization, the official start of coronavirus was December 31, and that would mean that the bonds pay out this week.

VANEK SMITH: I think it's March 23 when the bonds are supposed to pay out.

JONAS: Oh, the latest is that it's April 6.

VANEK SMITH: Olga is right. So we asked the World Bank about this, and they told us, yes, the 12-week period does end this week. But now they need a few weeks to do the calculations to determine if coronavirus qualifies, if it meets all the terms of the pandemic bonds - in other words, if the bonds will be used to get money to the countries in need for coronavirus.

JONAS: You know, it is just completely baffling for a normal person.

GARCIA: Not only is it baffling, Olga says, but all of the red tape is doing real harm. Every day that the payouts get delayed hurts the countries that are not getting it. More than any other kind of disaster, Olga says - floods, fires, earthquakes, hurricanes - in a pandemic, you need to spend the money as soon as you possibly can. The longer you wait, the less money can do.

JONAS: The main principle of outbreak control is that you act as soon as possible because the contagion can grow exponentially, right? Like, two infect four infect 16 infect 84.


JONAS: You are always behind.

VANEK SMITH: Oh. Like, the money might stretch further or, like, be more effective if it goes into play earlier.

JONAS: Of course.

VANEK SMITH: That is if the bonds pay out at all. Some of the terms of the bond require that a certain number of deaths have to happen in the very poorest countries, and the disease has to be spreading at a certain speed in those countries. But Olga says that can be a problem.

GARCIA: For instance, Olga says if you look at the number of reported cases of coronavirus in countries like Kenya, Afghanistan and Haiti, places there would potentially stand to get money from the pandemic bonds, the number of cases looks really low - just a handful. But that does not mean that coronavirus isn't there and spreading fast. It could just mean that there are not many tests being done.

VANEK SMITH: Olga says all of this complication has meant that the very mission of the bonds - to get money to the poorest countries quickly - is not happening. In fact, the pandemic the bonds were created to address, Ebola, didn't even qualify for a payout.

GARCIA: Another Ebola epidemic erupted in 2018 in Africa, devastating an already war-torn Democratic Republic of Congo, and the pandemic bonds never paid out.

JONAS: It did not pay for Ebola.

VANEK SMITH: That did not count.

JONAS: Right.

VANEK SMITH: As the outbreak bonds were concerned, this was not a...

JONAS: Eligible event.


JONAS: It was a horrific situation, exactly the kind of situation where the country needs help.


JONAS: Extra help, OK? And here's the World Bank with a instrument that's called, you know, pandemic bond, and it doesn't do anything.

VANEK SMITH: More than 2,000 people died in that outbreak of Ebola. And meanwhile, the World Bank has doled out tens of millions of dollars in payments to pandemic bond investors since 2017.

GARCIA: Pandemic bonds aside, the World Bank has been getting billions of dollars to needy countries. It just announced a package of $14 billion to help countries fight the coronavirus pandemic.

VANEK SMITH: If you're looking for more news about coronavirus, NPR has a new daily podcast for just that. It's called Coronavirus Daily, with new episodes every weekday in the late afternoon.

GARCIA: This episode was produced by Leena Sanzgiri and fact-checked by Brittany Cronin. Our editor is Paddy Hirsch, and THE INDICATOR is a production of NPR.


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