International Finance Facility

HM Treasury and the Department for International Development launched a proposal for an International Finance Facility (IFF). The IFF is designed to frontload aid to help meet the Millennium Development Goals (MDGs).

Estimates suggest that the poorest countries in the world need an increase in aid of at least $50 billion a year if the MDGs are to be met. The confirmation by the G8 in July 2005 that international donors will provide an additional $50 billion a year by 2010, compared with 2004, is an important step towards this. However, traditional increases in donor aid budgets will not be enough to provide these additional resources and meet the aid targets that have been set. Innovative financing mechanisms are needed to help deliver and bring forward the financing urgently needed to achieve the MDGs. The IFF will specifically support efforts to bring forward donor commitments. Using existing and new resources, the IFF will be able to increase aid to the levels required to achieve the MDGs.

Based on donors’ legally binding, long term commitments, the IFF will leverage money from international capital markets by issuing bonds. Bondholders will be repaid from future donor payment streams. Pledges made by donor countries will not score on balance sheets until donors make actual cash payments to the IFF.

The Millennium Development Goals represent different indicators of the same basic poverty. Investments in different sectors must take place simultaneously to ensure sustainable progress. Education, health, access to water, roads and other infrastructure for growth must be tackled at the same time to ensure a lasting exit from poverty. Funding for debt relief should reinforce, not replace, funding to build a skilled work force and the infrastructure and capacity to trade. The IFF, as a stable financing vehicle, could provide the critical mass of additional and predictable funding needed to make lasting progress in all these areas.

The IFF:

is a financing mechanism which would provide up to an additional $50 billion a year in development assistance between now and 2015;
would leverage in additional money from the international capital markets by issuing bonds, based on legally-binding long-term donor commitments;
would be responsible for repaying bondholders using future donor payment streams; and
would disburse resources through existing multilateral and bilateral mechanisms.
The September 2005 proposal document is designed to facilitate the ongoing process of consultation and is available to download in Adobe Acrobat Portable Document Format (PDF). For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility page.