DOF: $500M in World Bank loan to pay for Moderna vaccines

MANILA, Philippines—New loan deals secured by the Philippines and signed last week were to take effect before the end of this month, allowing lenders to pay directly Moderna and other vaccine makers for supply contracts soon, according to the Department of Finance (DOF) on Tuesday (March 23).

Finance Undersecretary Mark Dennis Joven confirmed to the Inquirer World Bank documents showing that the DOF, on behalf of the Philippine government, and the Washington-based lender signed the agreement for the $500-million additional financing for the Philippines’ COVID-19 emergency response project last March 19.

Joven said the Philippines and the Manila-based Asian Development Bank (ADB) signed another loan agreement for the ADB’s $400-million contribution to the second health system enhancement to address and limit COVID-19 (Heal 2) project also on March 19.

For both World Bank and ADB loans, “effectivity requirements will be met before the end of [this] month, so money can be drawn before the end of the month to pay for vaccines,” Joven said.

The boards of World Bank and the ADB both approved the loans last March 11.

The board of the Beijing-based Asian Infrastructure Investment Bank (AIIB) was scheduled to discuss its $300-million share in financing for Heal 2 on Thursday (March 25), Joven said.

An AIIB representative last week told the Inquirer that the proposed loan to the Philippines would be discussed this week.

The total project cost of Heal 2, which will be implemented by the Department of Health (DOH), was $764.17 million, which would require the Philippine government to shoulder the balance of $64.17 million to add to the ADB and AIIB loans.

Bulk of the project cost, or 93.51 percent amounting to $714.57 million, will be spent to “efficiently and effectively” deliver coronavirus vaccines nationwide; $37.5 million will cover contingencies; while the remaining $12.1 million had been set aside for financing charges during implementation, ADB documents said.

Joven disclosed that the World Bank loan will cover vaccines to be purchased from American pharmaceutical giant Moderna Inc.

In a March 22 statement, Moderna announced that the Philippines secured an additional seven million vaccine doses, raising the pharmaceutical firm’s order commitment to the Philippines to 20 million confirmed doses.

Moderna said the additional doses had been “secured through a partnership with the private sector.”

The initial 14 million doses will be delivered by mid-2021, Moderna said.

ADB documents showed that its loan to the Philippines will cover advance payments for Covovax vaccines.

Loan documents for the Heal 2 project said ADB would finance the 10 percent advance payment to the Serum Institute of India (SII), which makes Covovax and Novavax vaccines, under a supply deal between the Philippine government and SII although Covovax “does not currently satisfy Apvax’s vaccine eligibility criteria.”

Apvax referred to ADB’s $9-billion Asia Pacific Vaccine Access Facility through which member countries can seek financing for mass vaccination programs.

The ADB loan, documents said, took into account “the global supply situation of vaccines, the Philippines’ legal restriction on financing advance payments and the urgency for the government to secure the vaccines.”

The Philippines, ADB’s host country, would be the first recipient of financing from Apvax after the loan agreement was signed and took effect this month, allowing ADB to directly pay vaccine suppliers for contract with the Philippine government as long as the vaccines pass the bank’s stringent requirements.

The Apvax facility will only pay vaccines which were procured via the COVID-19 Vaccines Global Access (Covax) facility, prequalified by the World Health Organization (WHO) or authorized by a regulatory authority, which is the Food and Drug Administration in the case of the Philippines.

ADB said if Covovax failed to meet Apvax’s vaccine eligibility criteria by Dec. 31, 2021 or another date agreed with ADB, the Philippine government “will repay the 10 percent advance payment in accordance with the terms of the loan agreement.”

If Covovax failed to meet the criteria, ADB said the Philippine government should get a refund of the advance payment from the manufacturer and return it to ADB within 30 days of the government’s receipt of the refund.

ADB said there’s an “ongoing discussion” in WHO’s Covax to have an advance purchase agreement with SII for Covovax and SII’s application for emergency use listing by WHO for its vaccine.

“It is further justified as SII is the world’s largest vaccine manufacturer in terms of number of doses produced for 28 WHO prequalified vaccines,” ADB said.

SII facilities, the bank said, “are certified as operating under good manufacturing practices.”

SII also makes vaccines for AstraZeneca which had been authorized by Canada, ADB said.

ADB financing of the second advance payment is subject to Covovax satisfying Apvax’s vaccine eligibility criteria.

The third payment is also subject to Covovax “continuing to satisfy Apvax’s vaccine eligibility criteria” and Covovax getting Philippine FDA authorization “consistent with loan disbursement conditions for other vaccines,” ADB said.

The ADB did not say how many doses of vaccines to be supplied by Novovax will be covered by its loan.

ADB officials earlier said the Philippine government preferred vaccines that can be stored at 2 to 8 degrees Celsius, like those of AstraZeneca and Novovax, since these would require only conventional facilities widely available in the country.

According to ADB documents, the total of $700 million in loans for the Philippines that it will co-finance with the AIIB for Heal 2 “will add only 0.3 percent (ADB) and 0.2 percent (AIIB) to the public debt stock and will not significantly affect the debt-to-GDP ratio and annual debt service obligations.”

“The ADB and AIIB loans jointly will raise the public debt-to-GDP ratio marginally above the baseline scenario, to 49.1 percent in 2020 and to 58.4 percent by 2024,” the documents said.

“The ADB’s debt sustainability analysis concluded that even with the additional loans, the debt-to-GDP ratio will remain sustainable,” the documents added.

Together with the World Bank loan, a total of $1.2 billion (about P58.4 billion) in concessional borrowings will finance bulk of the P82.5-billion vaccine budget for 2021.

While a total of P70 billion in unprogrammed appropriations had been set aside under the 2021 national budget for mass vaccination, Joven said “we do not need to fund the P11.6-billion balance at this point.”

Since the forthcoming AIIB loan will be partially administered by the ADB, it shall have the same borrowing terms: 10-year maturity plus up to three-year grace period and an interest rate at a spread of 50 basis points (bps) over LIBOR (London Interbank Offered Rate, an international benchmark of interest rates).

The ADB loan also carries a rebate or surcharge reflecting the cost of funds plus a commitment charge of 15 bps per year on undisbursed loan balance, while the AIIB portion carried 0.03-percent borrowing cost margin as well as maturity premium of 0.1 percent, ADB documents showed.

TSB