GFO Issue 465, Article Number: 4
ABSTRACT
This article explores the Global Fund’s introduction of new financial calculation methods as it attempts to manage donor pledges and currency fluctuations in the run-up to its Eighth Replenishment in November 2025. The method sets the exchange rate at the time of announcement, and permits corrections in case of significant changes, in order to have a fair valuation among the currencies. The adjustments were made to safeguard the real value of contributions and to ensure that funds are effectively targeted to life-saving health programs.
As the Global Fund to Fight AIDS, Tuberculosis and Malaria prepares to announce the result of its Eighth Replenishment in November 2025, a critical financial decision has been made that could have a major bearing on the level of resources to support essential health programs over the next three years. At its 28th meeting in Geneva on 10–11 July, the Fund’s Audit and Finance Committee (AFC) agreed to a new methodology for determining the value of donor pledges, which are stated in different currencies but must be converted to US dollars, the Fund’s operational currency. Though this might seem like a matter of technical adjustments, its implications go straight to how much funding there will be for countries fighting HIV, TB, malaria and to support health systems strengthening between 2026 and 2028.
Why pledge calculations matter ?
Each replenishment cycle, the Global Fund embarks on a replenishment cycle in which it mobilizes billions of dollars from donors — largely governments, but also from foundations and the private sector — that it uses to help save lives in low- and middle-income countries. It makes these pledges in a wide array of currencies, from the euro and the yen to the pound and the Canadian dollar. But the Fund disburses resources in U.S. dollars, so all these pledges must be translated into a common foreign currency according to a clear and open-ended formula.
At first glance, this might sound like technical exercise, the kind of bureaucratic task that is left to accountants and analysts. Yet the stakes are high in fact. The conversion rate for pledged funds from euros to dollars also determines how much money really gets to countries to provide live saving treatment for HIV, diagnose TB, prevent malaria and much needed health system strengthening. A mistake, or an inconsistency, could have undesired consequences.
A two-part financial safeguard
To avoid these types of risks, the Global Fund has implemented a two-pronged approach for managing the valuation of pledges.
- The fixing of exchange rates at the time of announcement: Whatever pledges are made in foreign currencies shall be converted to US dollars on the market exchange rate applicable on the date of the official announcement of replenishment results. This gives a fixed rate to every pledge, irrespective of currency or time.
- Permits adjustments when large currency shifts take place: The new method now permits adjustments, if a pledge is given after the official announcement, and there has been a substantial change in the exchange rate. If this change leads to a gain or loss greater than $20 million, the Fund shall adjust the currency conversion by converting all pledges made in such currency at the conversion using a single rate, calculated as a weighted average. This is to guarantee a level playing field for donors and to avoid a big gap created by currency fluctuations.
Lessons from history – learning from the UK
This revision is based on the experience of the Seventh Replenishment in 2022. The United Kingdom made its pledge after the official announcement. By then, the value of the currency had changed drastically, and questions arose about how the pledge would be valued and whether it would match those of other donors. Without a clear mechanism for adjusting, the entire system was confused, and the Fund was left holding the risk. With this post-announcement adjustment cushion in place from the start, the Fund is looking to move away from the above experience and to make sure the process goes more smoothly this time around.
From pledge to program: A funding cascade
After the Fund converts all announced pledges to U.S. dollar equivalents, it goes through a process that results in a determination of how much money will in practice become accessible to countries. This includes:
- Adjusting for pledge terms: Some pledges are conditional, with the final amounts to be deducted by the value of conditions such as technical assistance or earmarks.
- Adding unused funds: The left-over funds of the previous funding cycle are added to the pot.
- Less operating expenses: Some of the money is used to pay for the Fund’s administrative and operating costs.
- Ring-fencing catalytic investments: Money is also earmarked for cross-cutting, innovative efforts that support country grants.
- Calculating the final allocations: At the end of all these adjustment calculations the balance is the remaining amount to be allocated among the countries for Grant Cycle 8 (2027–2029).
In addition, an “over-allocation” factor is used — a tactic that assumes some funds will not be fully spent and permits the Fund to allocate slightly more than is technically available, providing flexibility for high-need countries.
Tackling the ongoing challenge of currency risk
Even with recent improvements in financial planning, currency fluctuations remain a constant challenge for the Global Fund. To minimize the risk of losing value due to changes in exchange rates, the Fund uses financial tools known as hedging strategies. These are strategies that can lock in exchange rates, providing more predictability when converting pledges and contributions into usable funds.
Under its Comprehensive Funding Policy, the Global Fund seeks to hedge 75% or more of contributions that have been signed and are included in its financial statements. It also seeks to hedge at least 50% of pledges that are still in progress—those that have been promised by donors but are not yet formalized. The goal is to complete these hedging activities as quickly as possible, ideally within five trading days of the replenishment announcement, and no later than 30 days afterward.
But even the best strategies can’t eliminate risk. The world financial scene is extremely unpredictable. Donor payments may be delayed for a variety of reasons, and sudden global events—such as shifts in interest rates, conflicts, or political instability—can lead to sharp swings in currency values.
It is for this reason that the newly approved financing methodology of the Global Fund is interpreted as more than a mere technical reform. It is an essential protective measure to safeguard the true value of resources raised. In so doing, the Fund can guarantee that the money pledged will reach as far as possible in supporting health programs, buying medicines and saving lives in low- and middle-income countries.
Looking ahead: What’s at stake
Having obtained AFC’s approval, the Fund is now gearing up to publish the official outcome of the Eighth Replenishment in November 2025. The replenishment outcome will serve as the foundation for the next country allocations cycle, which will cover the period 2026–2028. By then, new leadership will be in place, including a new Executive Director and Inspector General, who will oversee the implementation of these funds.
In the end, this is more than just a numbers game. The success of the Global Fund’s replenishment effort—and the accuracy of its financial methodology—will determine how many people gain access to antiretroviral therapy, how many children sleep under bed nets, and how many communities are equipped to detect and treat tuberculosis.
By further improving the mechanisms of how pledges are valued and protected, the Global Fund is reaffirming its stewardship position over global health financing. With the new methodology, it makes sure that it is not only fair and transparent but also adaptable in a financial world, which is characterized by uncertainty.
As the Global Fund to Fight AIDS, Tuberculosis and Malaria prepares to announce the result of its Eighth Replenishment in November 2025, a critical financial decision has been made that could have a major bearing on the level of resources to support essential health programs over the next three years. At its 28th meeting in Geneva on 10–11 July, the Fund’s Audit and Finance Committee (AFC) agreed to a new methodology for determining the value of donor pledges, which are stated in different currencies but must be converted to US dollars, the Fund’s operational currency. Though this might seem like a matter of technical adjustments, its implications go straight to how much funding there will be for countries fighting HIV, TB, malaria and to support health systems strengthening between 2026 and 2028.
Why pledge calculations matter ?
Each replenishment cycle, the Global Fund embarks on a replenishment cycle in which it mobilizes billions of dollars from donors — largely governments, but also from foundations and the private sector — that it uses to help save lives in low- and middle-income countries. It makes these pledges in a wide array of currencies, from the euro and the yen to the pound and the Canadian dollar. But the Fund disburses resources in U.S. dollars, so all these pledges must be translated into a common foreign currency according to a clear and open-ended formula.
At first glance, this might sound like technical exercise, the kind of bureaucratic task that is left to accountants and analysts. Yet the stakes are high in fact. The conversion rate for pledged funds from euros to dollars also determines how much money really gets to countries to provide live saving treatment for HIV, diagnose TB, prevent malaria and much needed health system strengthening. A mistake, or an inconsistency, could have undesired consequences.
A two-part financial safeguard
To avoid these types of risks, the Global Fund has implemented a two-pronged approach for managing the valuation of pledges.
- The fixing of exchange rates at the time of announcement: Whatever pledges are made in foreign currencies shall be converted to US dollars on the market exchange rate applicable on the date of the official announcement of replenishment results. This gives a fixed rate to every pledge, irrespective of currency or time.
- Permits adjustments when large currency shifts take place: The new method now permits adjustments, if a pledge is given after the official announcement, and there has been a substantial change in the exchange rate. If this change leads to a gain or loss greater than $20 million, the Fund shall adjust the currency conversion by converting all pledges made in such currency at the conversion using a single rate, calculated as a weighted average. This is to guarantee a level playing field for donors and to avoid a big gap created by currency fluctuations.
Lessons from history – learning from the UK
This revision is based on the experience of the Seventh Replenishment in 2022. The United Kingdom made its pledge after the official announcement. By then, the value of the currency had changed drastically, and questions arose about how the pledge would be valued and whether it would match those of other donors. Without a clear mechanism for adjusting, the entire system was confused, and the Fund was left holding the risk. With this post-announcement adjustment cushion in place from the start, the Fund is looking to move away from the above experience and to make sure the process goes more smoothly this time around.
From pledge to program: A funding cascade
After the Fund converts all announced pledges to U.S. dollar equivalents, it goes through a process that results in a determination of how much money will in practice become accessible to countries. This includes:
- Adjusting for pledge terms: Some pledges are conditional, with the final amounts to be deducted by the value of conditions such as technical assistance or earmarks.
- Adding unused funds: The left-over funds of the previous funding cycle are added to the pot.
- Less operating expenses: Some of the money is used to pay for the Fund’s administrative and operating costs.
- Ring-fencing catalytic investments: Money is also earmarked for cross-cutting, innovative efforts that support country grants.
- Calculating the final allocations: At the end of all these adjustment calculations the balance is the remaining amount to be allocated among the countries for Grant Cycle 8 (2027–2029).
In addition, an “over-allocation” factor is used — a tactic that assumes some funds will not be fully spent and permits the Fund to allocate slightly more than is technically available, providing flexibility for high-need countries.
Tackling the ongoing challenge of currency risk
Even with recent improvements in financial planning, currency fluctuations remain a constant challenge for the Global Fund. To minimize the risk of losing value due to changes in exchange rates, the Fund uses financial tools known as hedging strategies. These are strategies that can lock in exchange rates, providing more predictability when converting pledges and contributions into usable funds.
Under its Comprehensive Funding Policy, the Global Fund seeks to hedge 75% or more of contributions that have been signed and are included in its financial statements. It also seeks to hedge at least 50% of pledges that are still in progress—those that have been promised by donors but are not yet formalized. The goal is to complete these hedging activities as quickly as possible, ideally within five trading days of the replenishment announcement, and no later than 30 days afterward.
But even the best strategies can’t eliminate risk. The world financial scene is extremely unpredictable. Donor payments may be delayed for a variety of reasons, and sudden global events—such as shifts in interest rates, conflicts, or political instability—can lead to sharp swings in currency values.
It is for this reason that the newly approved financing methodology of the Global Fund is interpreted as more than a mere technical reform. It is an essential protective measure to safeguard the true value of resources raised. In so doing, the Fund can guarantee that the money pledged will reach as far as possible in supporting health programs, buying medicines and saving lives in low- and middle-income countries.
Looking ahead: What’s at stake
Having obtained AFC’s approval, the Fund is now gearing up to publish the official outcome of the Eighth Replenishment in November 2025. The replenishment outcome will serve as the foundation for the next country allocations cycle, which will cover the period 2026–2028. By then, new leadership will be in place, including a new Executive Director and Inspector General, who will oversee the implementation of these funds.
In the end, this is more than just a numbers game. The success of the Global Fund’s replenishment effort—and the accuracy of its financial methodology—will determine how many people gain access to antiretroviral therapy, how many children sleep under bed nets, and how many communities are equipped to detect and treat tuberculosis.
By further improving the mechanisms of how pledges are valued and protected, the Global Fund is reaffirming its stewardship position over global health financing. With the new methodology, it makes sure that it is not only fair and transparent but also adaptable in a financial world, which is characterized by uncertainty.