The COVID-19 pandemic has brought unprecedented challenges to the world, causing significant loss of life, disruption, and economic damage. In response to this crisis, AIIB swiftly established the COVID-19 Crisis Recovery Facility (CRF) and responded with agility, compassion and expertise.
In April 2020, a month after the World Health Organization characterized the COVID-19 outbreak as a pandemic, the Asian Infrastructure Investment Bank (AIIB) launched its COVID-19 Crisis Recovery Facility to assist Members in responding to the economic, financial, and public health pressures arising from the crisis. The Facility was available to both public and private sector entities for any Member economy facing (or at risk of facing) serious adverse impacts due to COVID-19.
With an initial duration of 18 months and a financial envelope of USD5 billion, the Facility was extended twice due to client demand. The financing envelope was subsequently increased to USD20 billion and concluded on December 31, 2023.
AIIB utilized the Facility to respond swiftly, flexibly and relevantly to clients facing urgent situations. As the pandemic evolved, the Facility was likewise adapted. In the first 15 to 18 months, the Facility’s focus was on responding to health and social situations impacted by the pandemic, where the injection of liquidity became crucial in saving lives and businesses. In the second phase, the Facility used to address the economic effects of the pandemic to help Members recover.
Some of the ways the Facility has benefited clients included:
1. Urgent public health response. Financing the procurement of vaccines, essential treatments, and equipment to combat virus infections and strengthen national health systems for pandemic preparedness in the longer term.
2. Government reforms and initiatives. Supporting reforms and initiatives aimed at protecting or restoring livelihoods impacted by COVID-19; improving social inclusion, financial accountability, climate preparedness, and broader economic resilience in member economies.
3. Liquidity financing. For the first time, AIIB provided liquidity financing to clients through the Facility, alleviating working capital shortages and liquidity constraints faced by SMEs and infrastructure-related companies in key economic sectors during times of crisis.
4. Diversification of borrowing options: Joining forces with other multilateral development banks (MDBs), AIIB offered clients additional borrowing options, allowing them to diversify their sources of funding. Additionally, AIIB accommodated clients’ requests for currencies other than USD, such as EUR, GEL, and JPY, further enhancing the diversification of their borrowing portfolio.
"AIIB's establishment of the COVID-19 Crisis Recovery Facility marked a significant milestone in our commitment to supporting clients during times of crisis,” said Sir Danny Alexander, AIIB Vice President for Policy and Strategy. “The timely assistance provided by AIIB has been widely welcomed and recognized, showcasing our maximum flexibility and responsiveness to client needs. We take great pride in our success as part of the coordinated international response.”
Assessing the impact
As of December 31, 2023, USD18.48 billion was approved for 68 projects in 26 Member economies, accounting for 92% utilization of the earmarked financing envelope. The Facility prioritized low and lower-middle-income borrowers, accounting for 65% of the total approved Facility financing. Two-thirds of the financing went to Policy-based financing (PBF), another 20% to public health (including vaccine financing and other public health), and the rest went to financial intermediary/liquidity support and economic resilience.
To reduce the financial burden of lower-income members, AIIB established the Special Fund Window under the Facility in May 2020, used for interest buy-down. The initial resources were funded by a USD30 million carve-out from the Project Preparation Special Fund (PPSF) and later allocated to support four Facility projects in Bangladesh, Cambodia, Kyrgyz Republic, and the Maldives. In May 2021, an additional USD25 million carve-out from the PPSF was approved to continue supporting members facing challenges associated with financing the procurement of vaccines. By the end of 2023, two projects in Cambodia and Cote d’Ivoire utilized USD9.95 million for vaccine financing.
As the Facility was established and extended, AIIB joined forces with other MDBs in the coordinated global crisis response efforts, providing much-needed countercyclical financing to Members. The development of the Facility is a manifestation of the Bank’s expertise and agility in dealing with external shocks, as well as critical responsiveness to the evolving needs of clients.
Lessons learned and future plans
Client feedback to AIIB’s response to the pandemic has been positive. Members appreciated AIIB's agility and adaptability in responding to their changing needs throughout the crisis. AIIB’s financing diversified their financing portfolio, while the adoption of new technology provided added value.
Lessons learned from the successful implementation of the Facility led AIIB to develop new initiatives that will provide a broader range of services. For example, the Social Infrastructure Department was created in 2021 to support all aspects of social infrastructure, including health and education. One such project is a public health modernization project in Indonesia, which aims to increase the availability of functional equipment in public health facilities and improve the utilization of public health services. In light of the clear additional value of the Special Fund Window under the Facility, a Special Fund Window for Less Developed Members was established as a regular instrument in 2022. In 2023, the Board approved AIIB’s approach to Emergency Response to help Members respond to and recover from future eligible crises. In the same year, the Bank began offering Results-based financing among its products for sovereign clients.
"AIIB has demonstrated remarkable agility and responsiveness during these extraordinary and uncertain times,” added Alexander. “The COVID-19 Recovery Facility has not only brought mutual benefits to our clients and AIIB but has also allowed us to accumulate knowledge and pilot new instruments. The success of the Facility is widely recognized by our clients, who express their willingness for further engagement with AIIB. We are committed to enhancing our toolkit to provide timely assistance and support to our member countries for future crisis."
Through the Facility, AIIB and its staff have gained valuable knowledge and experience in crisis response. The Bank has been continuously learning, improving its capacity, establishing new and deepening collaboration with Members and international partners, and expanding its coverage and product offerings. AIIB will further enhance its toolkit to respond to both regular and emergency needs.
