Yesterday, they were torn off, today nobody wants them anymore. "Pandemic bonds" have lost more than 50% of their value since the beginning of the epidemic of coronavirus originating in the Chinese city of Wuhan, reports the Qatari news channel Al-Jazeera, Thursday 18 February.

Investors who own it fear that the Covid-19 may become the trigger event causing them to lose part of their initial bet. These bonds, created by the World Bank in 2017, operate on a principle similar to insurance: as long as there is no pandemic, the buyers of these securities receive high annual interest and insurance premiums, but if a health crisis occurs, they must return all or part of their investment to a specific World Bank fund intended to fight pandemics. This money should then be used to help the poorest countries contain a disease or virus and limit the economic impact of the epidemic.

"Financial clumsiness"

For NGOs and actors in the health sector, the new coronavirus, which has infected nearly 80,000 people worldwide, including more than 2,600 fatally, represents a "critical test" for the viability of a very controversial mechanism, points out the Financial Times. Larry Summers, a former chief economist at the World Bank and ex-secretary of the Treasury to US President Bill Clinton, called "pandemic bonds" "financial clumsiness" and "embarrassing error". Olga Jonas, an economist who has become the most vocal critic of this mechanism after spending more than 30 years at the World Bank, believes that investors have been the only winners.

Why so much hatred? Originally, these "pandemic bonds" had, however, all a good idea. The World Bank developed them in response to the Ebola epidemic, which killed more than 11,000 people between 2014 and 2016. These financial instruments are intended to transfer part of the economic risk associated with a pandemic to the sector financial. The money must, moreover, be rapidly mobilized since investors are obliged to pay when predefined conditions are met. There is therefore no need to wait for the outcome of sometimes difficult political negotiations when raising funds from States to respond to a crisis.

The World Bank has issued two types of bonds. One covers a wide range of pandemic risks, such as coronaviruses, Ebola, Crimean-Congo haemorrhagic fever and even Rift Valley fever. It is considered more risky - and more lucrative - than the second "pandemic bond" because the conditions triggering reimbursement by investors are easier to meet. The other covers only the pandemic influenza and coronavirus hypotheses.

Investors - mainly pension funds and "catastrophe insurance" specialists - immediately rushed into these two financial vehicles and the World Bank had no trouble achieving its goal of selling $ 330 million in bonds . An eagerness which suggests that these financiers felt the good deal, writes the economist Olga Jonas in an article very critical with regard to the pandemic obligations published in the scientific journal Nature in 2019.

Too restrictive criteria?

The wolf was in the 386 pages of documentation detailing the functioning of the bonds and, above all, the conditions to be fulfilled for a pandemic to cause the transfer of money to the special fund of the World Bank. "The triggering of the reimbursement mechanism is calculated according to a complex formula taking into account the number of deaths in the country of origin [of the epidemic], deaths in another country and the acceleration of the number of 'infection and fatality rate,' summarizes the Financial Times.

The second Ebola epidemic illustrated the limitations of this World Bank tool. Begun in 2018 and still ongoing, this health crisis has already cost the lives of more than 2,200 people, almost exclusively in the Democratic Republic of Congo ... but has not moved a single dollar from the portfolio of holders of "bonds pandemic "to the World Bank. The reason: it would take at least 250 deaths in the country of origin of the epidemic and also 20 deaths in a second country to trigger the mechanism, which is not yet the case.

If the World Bank has established criteria that may seem restrictive, it is partly so that this insurance is triggered only in the event of a real risk of pandemic, but also "to attract investors", notes the Wall Street Journal. They could have been less inclined to participate in this adventure if the conditions had been less strict. It is also for this reason that the international institution has agreed to generous interest rates, which currently fluctuate around 10% for both types of pandemic bonds.

But to want to please investors too much, the World Bank would have neglected the interest of poor countries hit by an epidemic, denounce the detractors of the mechanism. The mechanism can only be triggered when the situation on the ground has already deteriorated sharply, while "to be effective, you have to be able to act early", underlines Olga Jonas.

Maybe this time, these bonds will be able to play their role? It is the fear of investors. But even if it did, critics fear it is "too little and too late," said Bodo Ellmers, an official with the Global Policy Forum, an NGO that tracks the work of international organizations, interviewed by the Financial Times.

Indeed, if the Covid-19 leaves 20 dead in a country outside of China (and which must be part of the list of poor countries of the World Bank, which excludes South Korea or Iran), l The money that can be mobilized will total a maximum of $ 195 million, notes Canadian public radio. In addition, it takes 84 days after the first WHO "situation report" on an epidemic before funds are mobilized. In the case of Covid-19, this first report was released on January 21, 2020, which means that poor countries that may need this financial support would not see the color of money until April.

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