Health Finance Digest: Innovative finance trends for 2021
1. Public and private investment shortfall during the COVID-19 pandemic
Official development finance is not enough to provide sufficient relief for LMICs to finance adequate public health, social and economic responses. So far, IMF members have not agreed to an allocation of special drawing rights of a similar or higher scale as in 2009. Bilateral donors are yet to show a willingness to increase their ODA commitments, which would be critical to avoid negative consequences when diverting funds from other important areas to support the COVID response. Further, the OECD estimated that external private finance inflows to developing economies could fall by $700 billion in 2020 compared to 2019 levels, a drop 60% greater than the immediate impact of the 2008 global financial crisis.
Innovative instruments, such as blended finance, will be a critical way to achieve scale as traditional financing mechanisms fall short. Convergence has argued that the role of blended finance is in the medium to long-term response to the pandemic by accelerating economic reconstruction, improving pandemic resiliency and responding to the global health crisis (where possible), and also in turbocharging the collective efforts towards the achievement of the SDGs.
2. Better impact reporting and transparency
As blended finance becomes a mainstream tool, calls for greater transparency around impact reporting and impact outcomes have been growing. As shown by Convergence data, over 40% of blended finance transactions do not publicly report impact (2014-19). The lack of transparency on impact outcomes reflects a larger issue in the official development community.
A consensus is emerging on the critical need for a DAC-specific response to the impact challenge. Therefore, the OECD is developing Impact Standards for Financing Sustainable Development (IS-FSD), which will be presented to the DAC for adoption in the first quarter of 2021. Read more here.
3. Geographical trends
Sub-Saharan Africa remains the most targeted region for blended finance; however, there is a shift towards greater blended finance activity in Asia. Asia is emerging as a new center of gravity for blended finance, with increased traction in East Asia and the Pacific. East Asia and the Pacific have experienced growth on both a proportional and an absolute basis in the blended finance market, representing 21% of transactions from 2017-2019, compared to 14% across all periods. Indeed, 38% of all transactions targeting East Asia and the Pacific were launched during or after 2017. Aggregate financing to the region has been proportionate to the number of deals; the region represents 21% of blended finance deals and 19% financing between 2017-2019. Read more here.
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Events
- The Davos Agenda, 25-29 January, hosted by the World Economic Forum
- WHO Global Meeting to Accelerate Progress on SDG target 3.4 on NCDs and Mental Health, 27 January, hosted by the World Health Organization, virtual and Muscat, Oman
- G20 Health Working Group Meeting, 26-27 January, hosted by the G20
- Global Health Practitioner Conference, 27-28 January, hosted by the CORE Group
- Prince Mahidol Award Conference, 29 January-3 February
- 2021 Blended Finance and Impact Week, 1-4 February, hosted by the OECD
Resources
January global health calendar
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