Aid securitisation: beyond IFFIm

The International Finance Facility for Immunization (IFFIm), which securitised future aid commitments by donor countries, has been quite successful in providing considerable predictable and front-loaded funding in support of immunisation programs in scores of poor countries. Since official development assistance (ODA) as well as private capital flows to poor countries is likely to remain scarce in the current financial environment, the paper evaluates the prospects of setting up IFFIm-like mechanisms to fund a broad range of development objectives. Two broad conclusions emerge. First, replicating IFFIm could prove challenging largely because donor pledges are likely to lack the desired credibility. Second, certain credit enhancements like third party guarantees, excess coverage, and channelling of pledges through a preferred creditor like the World Bank, however, could overcome this deficiency. Finally, advance market commitments (AMCs) and cash on delivery (COD) are alternatives that could be used to bring in some of the advantages of the IFFIm-like financial structures.