The Global Fund's Uncertain Future

A funding shortfall has raised concerns about the organization’s ability to continue providing life-saving treatments and interventions

By Regina McEnery

A decade ago, the founding executive director of The Global Fund to Fight AIDS, Tuberculosis, and Malaria, Sir Richard Feachem, adopted the slogan “Raise It, Spend It, Prove It,” to underscore the non-profit organization’s role in dispersing life-saving drugs and interventions against these three major killers. But after the global economic downturn blew holes in the budgets of many of its major donors, and an internal review found evidence of misuse of donor dollars, the Fund, which provides about a quarter of all the money spent on international HIV/AIDS efforts and most of the malaria and tuberculosis (TB) spending in developing countries, is facing some major battles in upholding this slogan.

The Global Fund was created in 2001 after appeals by the G8 nations and the United Nations. A permanent Secretariat was established in Geneva in 2002. The idea behind the Fund was that the world was losing the battle against AIDS, TB, and malaria, and that to reverse course there was a need to dramatically increase resources and direct those resources to the areas of greatest need. The Global Fund worked hard at remaining true to that goal. Feachem, who presided over the non-profit public-private partnership from 2002 to 2007, says the agency resisted pressure to adopt other global health priorities and stuck to its role of raising large amounts of money and spending it as effectively as possible.

And raise money it did. Between 2001 and 2010, The Global Fund’s top 20 government donors contributed US$18 billion, led by the US with a $5.4 billion contribution. For the period from 2002 to 2015, governments have pledged $28.3 billion to the Fund, $20.7 billion of which has actually materialized. The money spent by the Global Fund since 2001 has put 3.3 million people on antiretroviral therapy, helped detect and treat 8.6 million cases of TB, and has been used to distribute 230 million insecticide-treated bed nets to households across sub-Saharan Africa.

But after years of steady growth in both the number of donors and the amount of their contributions, The Global Fund now faces a $2 billion shortfall that Feachem says will carry devastating consequences for developing countries unless the fund is replenished. “A decade of massive investment produced spectacular progress,” says Feachem, who now directs the Global Health Group at the University of California-San Francisco. “It would be unthinkable to let that progress be reversed. That is now a real possibility unless we can urgently mobilize additional resources.”

The Global Fund’s problems, both with funding and management, have played out very publicly. This has inspired many of its most ardent supporters to step up calls to rescue the Fund. A handful of Global Fund donors—notably the US and the UK—are considering hosting an emergency donors meeting in advance of the International AIDS Conference, which will be held in Washington, D.C., this July. At this meeting, they hope to raise $2 billion from the Fund’s biggest government donors and lobby political leaders for reassurances that the pledges made by countries will be fully paid. In the interim, the Bill & Melinda Gates Foundation has stepped in to help fill the gap. The Foundation announced in January at the World Economic Forum in Davos, Switzerland, that it would make an emergency $750 million donation to help tide the agency over until it could raise more money. Japan also announced in Davos that the recent tsunami and nuclear disaster would not prevent it from meeting its $800 million commitment to The Global Fund.

Whether The Global Fund will rebound and continue to grow remains to be seen, though many of its allies are cautiously optimistic. “This is something we can easily reverse if the donors come together and we make a decision to mobilize additional resources and ensure donors fulfill pledges that they have made,” says Joanne Carter, who sat on the Global Fund’s board and is now a member of its strategy, impact, and investment committee.

US Global AIDS Coordinator Eric Goosby, who oversees international HIV/AIDS funding, agrees. “I firmly believe that The Global Fund will come through this period of transition stronger than ever.”

The economy of health

The current trend in development aid for health is brighter than might be expected, given the economic downturn. An annual report prepared by the Institute for Health Metrics and Evaluation in Seattle noted that development aid for health, estimated to be $27.7 billion in 2011, has risen steadily over the last decade, even during the recent global recession, albeit at much slower rates. Development aid flowing through the GAVI Alliance—a Geneva-based global health partnership launched in 2000 to increase access to immunizations—was an exception, increasing by 31% between 2010 and 2011, and GAVI could be on track to spend even more money in the near future. At its first pledging conference in London last year, donors committed $4.3 billion, exceeding the $3.7 billion goal, to help scale up immunization programs in developing countries.


But for HIV/AIDS, the funding picture isn’t as bright. According to the Health Metrics and Evaluation report, the growth of development aid for HIV/AIDS, which is the primary reason foreign aid for health budgets ballooned over the last decade, slowed from 21% to 5% between 2007 and 2008, and increased at an even slower rate between 2008 and 2009 (the most recent years for which data is available in this report). The growth in aid for TB also slowed during the same period, though aid for malaria increased by 50%.

An HIV/AIDS report issued last year by the Kaiser Family Foundation (KFF) that analyzed the level of giving by donor governments suggests the funding of international HIV/AIDS programs actually declined in 2010, after flattening in 2009. The report noted that there were $6.9 billion in funds actually disbursed in 2010 compared to $7.6 billion in 2009. The KFF report also noted that the drop in funding in 2010 came after a nearly six-fold increase in disbursements by donor countries for international AIDS assistance between 2002 and 2008.

Despite the gloomy headlines, Feachem does not consider the Global Fund a “canary in the coal mine” with regard to the sustainability of international health agencies that have relied upon wealthy governments to support their causes, and says he does not foresee more Global Fund-like scenarios unfolding in the next several years. “It’s a specific and special case,” he says.

A sour economy

To a large degree, The Global Fund’s financial headaches are a consequence of the 2008 financial crisis that brought about a worldwide economic recession, and the European sovereign debt crisis. The Global Fund gets 95% of its money from governments, most of them in Europe, and given the financial downturn, unsurprisingly, donations to The Global Fund began to slip. Spain, which has been especially hard-hit by the Euro zone crisis, froze contributions indefinitely in 2010. Iceland ended payments altogether, while the Netherlands and Ireland reduced their contributions. According to The Global Fund’s 2010 annual report, Italy still owes the $172 million it pledged in 2009.

The Global Fund has also been hindered by the decline of the Euro, and the US’s budgetary approval process, which gives the president the authority to submit a budget but grants the US Congress the power to approve spending limits and appropriate the money. Over the past two years, Congress has only appropriated about $2 billion for The Global Fund, and with only a year left in their commitment, there are concerns the US may come up short on its $4 billion pledge.

Seeking to alleviate those concerns, US President Barack Obama included in his administration’s 2013 proposed budget about $1.7 billion for The Global Fund, though he also sliced $542 million from the bilateral President’s Emergency Program for AIDS Relief (PEPFAR), the single biggest provider of ARV treatment for HIV-infected individuals in developing countries.

In the midst of the worldwide economic downturn, The Global Fund also found itself the unwanted center of a public relations disaster triggered after the agency posted on its website in late 2010 results of an audit that uncovered what the Fund later described as the “grave misuse” of some of the funds awarded to four recipient countries—Mali, Mauritania, Zambia, and Djibouti. The audit also prompted further investigations in nine other countries that the Fund supports. This resulted in a maelstrom of negative media coverage and prompted Sweden and Germany to temporarily suspend contributions. The Global Fund responded to the scandal by demanding an accounting of the missing money—estimated to be about $34 million of the $13 billion in total disbursements by the fund between 2002 to 2010—and commissioned an outside review of its procedures.

The review panel, led by former US Health and Human Services Secretary Michael Leavitt, reported in September that the organization lacked sufficient safeguards to prevent fraud and recommended widespread changes in how the Fund conducts its business. In January, the board appointed Gabriel Jaramillo, former chairman and chief executive of Sovereign Bank and a member of the panel assigned to review The Global Fund’s accounting procedures, to the newly created position of general manager. Then, The Global Fund’s executive director for the past five years, Michel Kazatchkine, announced soon after that he would be stepping down.

Gathering clouds

Signs that giving to The Global Fund had grown anemic surfaced in 2010—the same year the mishandling of funds was first reported and the Fund held its replenishment drive. The organization conducts the drive every three years, seeking higher pledges from public and private donors. In past cycles, the group had been extremely adept at building its support base. In 2010, however, The Global Fund was only able to raise $11.7 billion in pledges, and while the figure exceeded what it had raised during the previous drive in 
2007, the amount was still short of the $13 billion necessary to maintain its current programs in the 140 countries that The Global Fund has committed support to through 2014, let alone expand its presence in existing countries or add new countries to its recipient list.

Another problem that beset The Global Fund, as well as other non-profit organizations, is that even when government donors committed money, the full amount was not always disbursed. The Institute for Health Metrics and Evaluation report noted that prior to the recent recession, donor disbursements to the Fund were approximately the same as commitments. However, in 2009, donors disbursed only 94% of commitments, and only 78% of the amount pledged in 2010 was actually delivered. Preliminary data from the Fund suggest that donor disbursements continued to decline in 2011.

The resulting shortfall led The Global Fund to announce last November that it would continue to support existing programs, but that it would not be accepting any new grant applications for its next funding cycle—round 11—and that it would be issuing no new grants until at least 2014. “That may be OK for those whose grants are carried through 2014, but for countries not successful in rounds 9, 10, or 11, it is a crisis,” says Feachem. “Those countries will fall over the cliff with very serious potential consequences. With HIV/AIDS people will start dying within weeks.”

Feachem says The Global Fund probably could have minimized some of its financial problems had it realistically projected lower levels of giving after the global recession hit four years ago. “It was pretty obvious from 2008 that this would have a big impact and The Global Fund should have adjusted,” he says. “They did, but the adjustments came too late.”

Feachem suggests in a recent commentary that The Global Fund also needs to do more to achieve a performance-based funding system that had been an important founding principle of the venture (1).

The Global Fund has committed to prioritizing funding for low-income countries but acknowledged that middle-income countries, particularly those in Eastern Europe where the incidence of HIV is rising and the rates of TB are high, won’t receive any additional funding and may even go unfunded. The Global Fund predicted that vulnerable groups such as men who have sex with men, injection drug users, and commercial sex workers would be particularly hard hit by the Global Fund shortfall because their needs are typically not covered by government-funded programs.

The decision by The Global Fund to cancel its latest round of new funding caught many public health advocates off guard. Alan Whiteside, who directs the Health Economics and HIV/AIDS Research Division at the University of KwaZulu-Natal in South Africa, says the situation there is not catastrophic. Nonetheless, he warned that “We are at some risk of seeing a noble experiment fall flat on its face.”

And Jeffrey Sachs, who directs the Earth Institute at Columbia University in New York City, says, “Since the financial crisis, governments have cut back on spending in general, but many have found it convenient to cut back on spending on the world’s poorest people,” says Sachs. “This is, of course, a double tragedy. We have cutbacks on these highly effective, very inexpensive, but crucial life-saving interventions.”

Goosby says The Global Fund investment has been critical in helping PEPFAR reach its goals. “We are jointly funding many country programs and specific service sites, and as we review our country PEPFAR programs, again and again we see that the success of The Global Fund grants is a critical factor in the success of our work.”

And in his annual letter, Bill Gates, whose Foundation is the biggest non-government supporter of The Global Fund, discussed the impressive track record the organization has had. “I am confident that this is one of the most effective ways we invest our money every year,” wrote Gates. As for the mishandling of funds, he wrote, “Given the places where The Global Fund works, it is not surprising that some of the money was diverted for corrupt purposes.”

1. Lancet 378, 1764, 2011