Introduction

In June 2025, the global health community was surprised by an unexpected announcement made by the Global Fund to Fight AIDS, Tuberculosis, and Malaria to reduce country allocations for its seventh grant cycle (GC7) by an average of 11 percent. For health ministries, civil society organizations, and donor governments, the numbers were staggering. In real terms, this adjustment meant a reduction of US$1.43 billion in funding for lifesaving programs over the next three years.

The timing of the announcement made it even more painful. Countries were still grappling with rising health system costs, fragile donor commitments, and the lingering effects of the pandemic. Programs that had carefully planned interventions in HIV, tuberculosis, malaria, and health system strengthening suddenly faced the prospect of scaling back.

For the Global Fund, a financing mechanism that has built its reputation on predictability and partnership, this decision was extraordinary. Mid-cycle contractions of this magnitude are virtually unheard of. Yet, the Global Fund argued that it had little choice; liquidity projections showed alarming risks. Without intervention, the organization could have promised more than it could deliver, leaving programs stranded.

To assure stakeholders that the reductions were handled responsibly, the Office of the Inspector General (OIG) stepped in with an unusual tool called a "rapid assurance review." Unlike traditional audits, which unfold over months, this review was designed for moments of crisis when speed is as important as thoroughness. The OIG released its findings in July. They shed light on not only the mechanics of the cuts, but also the risks and lessons for global health financing in an increasingly turbulent world.

The changing funding landscape

The reduction of GC7 country allocations was not unexpected. Since the beginning of 2025, the financial landscape for global health programs has changed in ways that few anticipated. The Global Fund, which relies heavily on donor pledges and their prompt conversion into actual disbursements, has been facing a wave of uncertainty, including delayed payments, unfulfilled commitments, and unexpected changes in bilateral support at the country level.

For years, the Global Fund’s comprehensive funding policy (CFP) served as a guardrail, ensuring spending commitments never exceeded available resources. However, in early 2025, projections began flashing red. With billions already committed in GC7 grants, the organization faced the real risk of a liquidity crunch if pledges were not converted on schedule. This was not merely a bookkeeping issue; it posed a systemic threat to the Global Fund’s credibility with countries and implementers.

Complicating matters further were the macroeconomic headwinds that impacted donor budgets and partner investments. Rising inflation, volatile exchange rates, and competing domestic priorities in donor capitals created uncertainty about what resources could reliably flow into the Fund’s coffers. Meanwhile, partner governments in low- and middle-income countries were facing fiscal constraints, leaving them less able to cushion the impact of reduced external financing.

Against this backdrop, the Global Fund Secretariat was forced to act. The Secretariat introduced a suite of mid-cycle adaptations designed to safeguard the institution’s financial health. These included:

• OPEX levers to cut back on operational expenses;
• a slowdown of grant activities at the country level;
• Most dramatically, it reduced GC7 country allocations.

The stakes were clear: Without decisive intervention, countries could end up spending far beyond what the Global Fund could support, leaving programs stranded mid-implementation. Equally concerning was the prospect of delays in revising funding envelopes, which would have reduced the time available for countries to effectively re-prioritize their programs.

The Secretariat opted for speed. Within just six and a half weeks, it designed and implemented a process that reduced GC7 budgets by US$1.43 billion. By late June, countries had been informed of their revised envelopes, setting the stage for programmatic reprioritization through streamlined grant revisions.

The OIG rapid assurance review process

When the Global Fund Secretariat moved swiftly to cut more than a billion dollars from GC7 budgets, the OIG faced a challenge of its own: how to provide credible oversight in real time, while decisions were still being made. A standard audit would have been too slow and too rigid. What was needed was a more agile tool, the one designed for moments of crisis and rapid change.

That tool is the ‘’rapid assurance review’’.

Unlike traditional OIG audits, which typically unfold over months and examine a process in retrospect, rapid reviews are fast-turnaround assessments. Their aim is not to produce exhaustive findings but to give the Global Fund Board timely, risk-based assurance that urgent decisions are being made with due diligence, even under pressure.

The OIG describes these reviews as particularly suited to three scenarios:

• When major decisions must be made quickly, with incomplete data.
• When critical processes don’t yet exist but must be created urgently.
• During organizational crises or emergencies, when early detection of risks can prevent larger failures.

The approach carries inherent risks. Compressing the oversight process raises questions about quality. How can findings be reliable if time is so short? It also calls into question the independence of the process, since the OIG must often provide iterative feedback to management while the process is still evolving. To counter these risks, the OIG has built safeguards into the process, such as consulting industry experts, performing quality checks, and maintaining a clear line between providing insights to management and making executive decisions.

For the GC7 allocation cuts, the OIG set out four core questions:

• Was the overall process to reduce allocations designed and implemented appropriately?
• Was the quantitative formula applied reasonably and equitably?
• Were the qualitative adjustments (QA) designed and implemented fairly?
• Was reporting to governance bodies sufficient and timely?

The scope was carefully defined. The review covered the process from the initial formulaic reductions to the communication of revised country funding envelopes to governance bodies. It did not extend to evaluating the design of the formula itself (which had already been approved by the Board), nor to reviewing reductions in catalytic investments, nor to assessing how countries later reprioritized their programs in response to the new budgets.

The Secretariat devised a two-step approach:

• Formulaic Reductions – a uniform, across-the-board cut to create a baseline adjustment.
• Qualitative Adjustments (QA) – a second stage to account for country-specific realities, such as fragile contexts, co-financing arrangements, and programmatic gaps.

This structure sought to balance fairness with nuance, while meeting the overriding requirement: speed.

But speed came with costs. Decisions had to be made with incomplete data, especially regarding bilateral funding and in-country fiscal capacity. Assumptions had to be layered into forecasts, increasing the risk of errors. As the OIG noted, the process became a delicate trade-off between acting quickly enough to remain solvent and acting carefully enough to preserve trust and program effectiveness.

In other words, this was a snapshot of a process in motion. The OIG acknowledged the limits of what it could conclude, given the compressed timeline and the gaps in available data. Yet its role was pivotal: to assure stakeholders that, even under extraordinary circumstances, the Global Fund’s decisions were grounded in reasonable assumptions, transparent processes, and a balance between speed and quality.

Formulaic reductions

The first stage was the formulaic reduction: a blunt but transparent instrument. The logic was simple: identify unspent portions of GC7 budgets and apply proportional cuts across the board.

The Secretariat’s initial model projected a US$1.6 billion reduction, equivalent to about 12 percent of total GC7 budgets, or 16 percent of projected unexecuted funds. After refinements, the figure settled at US$1.43 billion, averaging an 11 percent cut across country allocations.

The OIG’s review found the formula was applied consistently and equitably. While several assumptions underpinned the model such as average spending rates and forecast smoothing; these were judged materially accurate in the context of limited data. Importantly, no significant errors were found in the underlying numbers.

The outcome gave the process a degree of legitimacy. Countries could be assured that the pain was shared evenly, regardless of geography or grant size. Yet, as the OIG highlighted, forecasting expenditures is notoriously difficult. By mid-year, actual spending data might contradict assumptions, but those figures would arrive too late to inform urgent decisions.

In effect, the formula bought time. It provided a baseline adjustment, reducing the Global Fund’s financial exposure. But without nuance, it risked treating vastly different contexts as if they were identical.

The Qualitative adjustments

By recognizing the limitations of the formula, the Secretariat layered in a second stage called ‘’qualitative adjustments (QA)’’. These were designed to protect fragile programs and account for unique country circumstances.

The QA process unfolded in tiers:

• Country teams (CTs) proposed adjustments based on local knowledge and technical input.
• Departmental reviews consolidated and checked these proposals.
• Divisional leadership in grant management scrutinized consistency.
• Central QA sessions, involving senior leadership across divisions, made final determinations.

Despite the compressed timeline, this structure created multiple opportunities for review and challenge. In several countries, early scenario planning had been conducted months in advance, easing the rapid turnaround.

Ultimately, QA adjustments restored US$166 million to selected portfolios, lowering the net cut to US$1.43 billion. Criteria included:

• Challenging operating environments (COEs), where program fragility required more protection.
• Sustainability, transition, and co-financing (STC) considerations, where domestic commitments or co-financing risks needed to be factored in.
• Critical programmatic gaps, such as maintaining lifeline services for key populations.
• Impact of bilateral funding shifts, where known but incomplete and data pointed to vulnerabilities.

The OIG praised the process as “reasonably well implemented,” but flagged inefficiencies. Some proposals reflected regional “netting off” with offsetting cuts within departments rather than across the global portfolio which later had to be reversed. Attempts to integrate recoveries and co-financing penalties also proved unworkable.

Still, the QA process transformed a blunt fiscal instrument into a more tailored adjustment. Countries ended up with envelopes that reflected not just formulas but also realities on the ground.

Communication & Governance reporting

Once the numbers were finalized, the Global Fund Secretariat faced a different but equally sensitive task: how to communicate the cuts. Transparency and timeliness were critical. Countries needed clarity to re-prioritize programs without delay, while the Global Fund board and Strategy Committee required assurance that the process had been handled responsibly.

According to the OIG, the Secretariat met these expectations. By 30 June 2025, revised funding envelopes and indicative grant budgets had been communicated to in-country stakeholders, including principal recipients (PRs) and country coordinating mechanisms (CCMs). Within days, the outcomes were reported to the Strategy Committee. On 3 July, the first briefings were shared, and by the 28th Strategy Committee meeting (7–8 July), the full picture was presented.

The reporting struck a balance between macro-level clarity and portfolio-level detail. At the aggregate level, governance bodies were shown the overall reduction of US$1.43 billion and its distribution across the portfolio. At a more granular level, they could see how the cuts affected key cohorts of countries:

• Challenging operating environments (COEs),
• low-income and high-disease-burden countries,
• and different regional portfolios.

The OIG judged this reporting to be both sufficient and timely. In its assessment, governance bodies received enough information to understand not just the scale of the reductions but also their implications for equity and prioritization across the Fund’s diverse portfolio.

Still, opportunities for improvement were noted. The Secretariat’s reporting could have gone further in acknowledging the data limitations underpinning the process for example, the gaps in bilateral funding information or uncertainties in domestic financing capacity. Likewise, more detail on how the QA process unfolded including where multiple factors led to adjustments in the same portfolio could have enhanced transparency.

These gaps did not materially undermine the reporting, but they highlighted a tension familiar to many global institutions: in moments of financial stress, there is often a premium on speed and reassurance, sometimes at the expense of full disclosure.

For the Global Fund, the ability to deliver clear and timely reporting under pressure was a crucial part of maintaining confidence not just among its board and committees, but also among countries suddenly forced to adjust life-saving programs to fit slimmer budgets.

Risks, challenges, and opportunities

Even as the OIG concluded that the GC7 allocation reduction process was appropriately designed and reasonably executed, it emphasized that future risks remain many of them outside the Secretariat’s immediate control. The review highlighted both vulnerabilities and opportunities that could shape how the Global Fund handles similar crises down the line.

1. The data gap on bilateral funding

The review highlighted a major gap which was a limited visibility into bilateral donor support at the country level. Because information on these funding shifts was incomplete, the Global Fund could not fully account for them in qualitative adjustments, meaning some portfolios may still need significant changes. The OIG recommended that the Secretariat collaborate more closely with in-country stakeholders to develop scenario plans for countries most at risk of bilateral funding shifts, enabling quicker and more targeted responses.

2. Volatility in market prices

Health product and equipment prices central to grant budgets remain vulnerable to unpredictable swings. Any sudden increase could render current assumptions obsolete, forcing yet another round of revisions. While the Global Fund’s Supply Operations Department has worked to stabilize prices through vendor engagement and updated reference prices, the risk of volatility persists.

3. Creating a buffer for the future

Looking ahead, the OIG suggested the Secretariat consider creating a funding buffer in future reduction exercises. This would mean initially de-allocating more than strictly necessary, leaving a central reserve that could be re-allocated later if conditions improve. Such a buffer would give the Global Fund flexibility to respond to unforeseen shocks—but at the cost of heavier cuts upfront and additional administrative complexity.

4. Clarifying recoveries and co-financing penalties

The first iteration of the QA process saw confusion over how to handle recoveries and co-financing penalties. Early attempts to fold them into adjustments had to be reversed, wasting time and effort. The OIG recommended that clearer upfront guidance could streamline future exercises and avoid duplicative work.

5. Reassessing the role of upper-middle-income countries (UMIs)

Another area flagged was the need to more systematically consider the domestic financing capacity of upper-middle-income countries. While some QA proposals factored this in, the OIG suggested building stronger guidance and more granular data into future processes to ensure that wealthier countries with greater capacity contribute more to absorbing shocks.

6. Preventing regional “netting off”

The OIG observed that some initial QA proposals effectively traded off reductions within regional departments, a practice known as “netting off.” While these were ultimately reversed at the central QA stage, the approach created inefficiencies. Stronger guidance and review checks earlier in the process could prevent such regional trade-offs from shaping proposals in the first place.

Implications for Countries and Donors

For recipient countries, the cuts mean tough choices. Ministries of health and civil society groups must decide which services to protect and which to scale back. In high-burden countries, this could mean prioritizing lifesaving interventions for key populations at the expense of broader program expansion.

Civil society groups have expressed concern that the reductions undermine predictability, a cornerstone of the Global Fund’s partnership model. For communities on the ground, reduced envelopes translate into delayed interventions, thinner coverage, and deferred ambitions.

Donors, meanwhile, see the event as a warning. Even a well-governed, rules-based multilateral fund is vulnerable when pledges are delayed or disrupted. The credibility of the Fund hinges on its ability to match commitments with actual cash flow a task made harder by volatile geopolitics and domestic fiscal pressures.

Conclusion

The Global Fund’s 2025 mid-cycle cuts acted as a stress test of its resilience. The OIG’s review confirmed the process was fair and defensible but warned that volatility in global health financing may become the norm. Going forward, the challenge will be to make cuts not just swiftly but wisely while safeguarding fragile programs, maintaining trust, and keeping people’s lives at the center of decisions.