Financing at a Crossroads: How the Global Fund Can Adapt to a Shrinking Aid Landscape

Amid widespread donor retrenchment, the Global Fund faces an era of austerity that threatens the sustainability of its donor-dependent, grant-based financing model. This paper models an alternative financial approach inspired by multilateral development funds such as the World Bank’s International Development Association. We propose combining grants for the poorest, highest-burden countries with loans on varying levels of concessionality for middle-income countries. Using Global Fund annual disbursement data, we construct a hypothetical cash flow model anchored in World Bank lending terms. We find that a combined grant and loan model could generate reflows of up to $1 billion annually by 2033—roughly 20 percent of the Global Fund’s current annual grant disbursements—while maintaining full grant financing for the poorest countries. A gradual shift toward a mixed grant and loan approach could enhance financial resilience, promote greater domestic fiscal ownership, and bring more external health spending on-budget. However, introducing loans also raises policy trade-offs and risks—including, but not limited to, possible shifts in country demand and gaps in service coverage. Importantly, the proposed model does not replace the Global Fund’s commitment to grants but adapts it to the realities of shrinking aid budgets by targeting them to the poorest countries and evolving the Global Fund’s financing relationship with middle-income countries. Ultimately, the key policy question is around how to balance financing volumes and terms. This paper aims to inform that debate and contribute to ongoing discussions on the future of global health financing.