ADB's lending capacity to go up 50pc
The Asian Development Bank's lending and grant capacity will rise to $20 billion in 2017, up 50 percent from the current level, which will particularly support poorer countries in the region, the multilateral lender said yesterday.
The announcement comes after the board of governors of the Manila-based lender approved a groundbreaking initiative to combine the lending operations of the bank's Asian Development Fund (ADF) with its ordinary capital resources (OCR) balance sheet.
The merger will also boost assistance to poor countries by up to 70 percent, the bank said in a statement.
ADB President Takehiko Nakao made the announcement at a news conference on the first day of the 48th ADB Annual Meeting in Baku, Azerbaijan.
He said the merger is an important milestone for ADB, as it will dramatically expand its lending capacity, particularly to poor countries, when it takes effect in January 2017.
The ADF, established in 1973, provides concessional loans (that have longer loan maturities and lower interest rates) and grants to poorer countries. The OCR loans are provided to middle-income countries at market-based rates.
Under the new initiative, the OCR equity will almost triple to about $53 billion from about $18 billion as of January 2017. Together with co-financing, ADB's annual assistance will reach as high as $40 billion in the coming years, up from $23 billion in 2014.
Poor countries currently eligible for ADF loans will continue to receive concessional loans from the expanded OCR on the same terms and conditions as the current ADF loans. The ADF will be retained as a grant-only donor fund to provide assistance to eligible countries.
"This initiative is a win-win-win situation because it increases financial support for poorer members, expands capacity for operations in middle-income countries and the private sector, and reduces the burden for ADF donors," Nakao said.
The merger will enhance ADB's risk-bearing capacity and strengthen its readiness to respond to future economic crises and natural disasters. Donor contributions to continued ADF grant operations will be reduced by up to 50 percent from the current $1.2 billion, beginning with the next ADF replenishment in 2017.
The ADB started deliberations on the initiative in the summer of 2013. Since then, the lender has had extensive consultations with its developing member countries, particularly ADF recipient countries and ADF donor countries, and with civil society organisations.
By the end of February 2015, all 34 of the ADF's donors gave their formal and unanimous consent to the merger, and ADB's board of directors delivered its endorsement the following month.
About 3,000 government officials, business leaders, academics and representatives from civil society and development organisations are attending the four-day event at Heydar Aliyev Centre in Baku.
In Baku, the flagship Governors Seminar will discuss the Asia and Pacific region's growth potential.