4. ANALYSIS
29 Jun 2005

The Global Fund has predicted for some months now that it will need to receive a total of $7.1 billion in 2006 plus 2007. The total amount that it expects to receive in 2004 plus 2005 is $3.0 billion. Thus, the Fund needs to start receiving money at more than double the rate of the past two years. The reason for the increase is that starting this year, the Fund not only needs to start new Rounds of grants, it needs to renew existing grants that reach the end of their second year.

Donor countries will meet in London on September 5-6 for their final Replenishment Meeting, at which they will announce their pledges for 2006 and 2007. Subsequent to the March Stockholm meeting and the June Rome meeting, each of them is now considering what would be an appropriate contribution.

Over the years, several formulae have been advanced for calculating what might constitute each country's "fair share" of the Global Fund's financial needs. The most widely-discussed such formula was the Equitable Contributions Framework, a concept first advanced in 2002 within the NGO sector and then further developed by Aidspan, publisher of GFO. The basis of this formula is that countries should contribute in proportion to the size of their respective economies.

In preparation for the June 2005 Replenishment Conference in Rome, the Global Fund prepared a discussion paper in which it outlined five possible formulae, or "contribution scenarios," for obtaining the $7.1 billion that the Fund needs for 2006 plus 2007. (See www.theglobalfund.org/en/about/replenishment/rome.) These are:

Scenario 1 (the "Pro-Rata" scenario): Each country contributes a share of the need that is equal to its share of the contributions given to the Fund to date.

Scenarios 2, 3 and 4 are based on each country's share of contributions made to other international funds, and are not pursued further here.

Scenario 5 (the "Adjusted GNI" scenario): Each country contributes a share of the need that is equal to its share of global Gross National Income (GNI), adjusted by GNI per capita. (The adjustment is made so that if two countries have the same GNI, but one has a much larger population and hence a lower GNI per capita, the country with the smaller population contributes more, because it has a greater ability to give.) The Adjusted GNI scenario is very similar to the Equitable Contributions Framework.

To supplement these scenarios developed by the Fund, GFO has developed two "bad scenarios" to illustrate the underlying thinking of some donors:

Scenario 0 (the "No Increase" scenario): Each country contributes the same dollar amount per year that it has averaged in past years, even though the need has increased.

Scenario 6 (the "Minimum of '1' and '5' " scenario): Each country contributes the lesser of what it should contribute according to Scenarios 1 and 5. (For some countries, Scenario 1 will cost more; for others, Scenario 5 will cost more. So there is a real possibility that many will choose the less painful.)

As shown in the following table, if all countries follow Scenario 0, the Global Fund will only receive $2.4 billion of the $7.1 billion two-year need. This will mean that the Fund will not be able to launch any new Rounds, and will be $1 billion short of the $3.4 billion it will need during 2006-7 to renew existing grants.

And if all countries follow Scenario 6, in which each one chooses the less painful of Scenarios 1 and 5, the Fund will only receive $5.5 billion, $1.6 billion less than is necessary.

Given that Japan and the USA, the world's two largest economies, currently appear unlikely to contribute much more than their "Scenario 0" amount, the outlook is bleak for the Fund meeting its needs for 2006-7.

Table: Amounts that Might be Contributed to the Global Fund According to Four Scenarios

 

Donor

Average Annual Contribution

to date, $m.

Total Contribution for the two years 2006-2007, $m.

Scenario 0:

No Increase

Scenario 1:

Pro-Rata

Scenario 5:

Adjusted GNI

Scenario 6:

Minimum of

'1' and '5'

Australia

13.8

28

83

65

65

Austria

1.1

2

6

40

6

Belgium

9.9

20

60

47

47

Brazil

0.05

0

0

9

0

Canada

33.3

67

201

129

129

China

2.0

4

12

11

11

Denmark

14.9

30

90

41

41

European Commission

150.6

301

909

909

909

Finland

0.0

0

0

26

0

France

105.8

212

638

256

256

Germany

31.8

64

192

359

192

Greece

0.0

0

0

13

0

India

0.0

0

0

2

0

Ireland

11.1

22

67

20

20

Italy

115.0

230

694

183

183

Japan

82.2

164

496

1,015

496

Korea (Rep. of)

0.5

1

3

47

3

Kuwait

1.0

2

6

5

5

Luxembourg

1.9

4

11

6

6

Mexico

0.0

0

0

27

0

Netherlands

35.3

71

213

76

76

New Zealand

0.7

1

4

7

4

Nigeria

9.1

18

55

0

0

Norway

17.8

36

108

58

58

Portugal

0.5

1

3

10

3

Russia

3.3

7

20

7

7

Saudi Arabia

2.5

5

15

13

13

Singapore

0.2

0

1

13

1

South Africa

2.0

4

12

2

2

Spain

25.0

50

151

81

81

Sweden

27.2

54

164

51

51

Switzerland

4.1

8

25

83

25

Thailand

1.0

2

6

2

2

United Kingdom

59.5

119

359

324

324

USA

360.5

721

2,176

2,839

2,176

Other Countries

1.3

3

8

14

8

Private Sector

51.4

103

310

310

310

TOTAL

1,176.5

2,353

7,100

7,100

5,510

 

 

 

 

 

 

Total need:

n/a

7,100

7,100

7,100

7,100

Shortfall:

n/a

4,747

0

0

1,590

 

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