Bloomberg News

ADB in Talks for at Least $12 Billion Development-Fund Needs

February 22, 2012

(Updates with comment from economist in fourth paragraph.)

Feb. 22 (Bloomberg) -- The Asian Development Bank said it is in talks with donor countries to fund at least $12 billion required for loans and grants to projects in poor countries from 2013 to 2016.

The Asian Development Fund will need an estimated $12 billion to $13 billion for the period, and negotiations with donors to restock the fund will conclude by May, Kazu Sakai, director general of the ADB’s strategy and policy department, said in an e-mailed response to questions late yesterday. The last replenishment was $11.3 billion.

The ADB, formed in 1966 to improve the welfare of people in Asia and the Pacific, has boosted spending on infrastructure and poverty projects from Laos to Mongolia in the past decade as rising food and commodity prices hurt the region’s poorest. Asian nations are expected to contribute more to those efforts as a sovereign-debt crisis restricts European nations’ ability to provide funds, Sakai said.

“It is going to be more challenging to get money out of the Western Europe region,” said Robert Prior-Wandesforde, Singapore-based director of Asian economics at Credit Suisse Group AG. “Fortunately, Asian counties are in a better position to bear a greater burden of the cost. It’s an interesting reversal of fortune.”

Asian Growth

Asia has led global growth in recent years as developed economies in the U.S. and Europe faltered, even as two-thirds of the world’s poor reside in the region. Developing Asian economies expanded 7.9 percent in 2011, compared with 1.6 percent for advanced countries, according to the International Monetary Fund.

Countries outside the Asia-Pacific region accounted for more than 40 percent of member contributions to the current Asian Development Fund, according to the 2008 donor’s report. The U.S. accounted for about 10 percent, and the U.K. and Germany about 4.8 percent each. Other European donors included France, Italy and Spain. Member contributions totaled $4.2 billion for the $11.3 billion fund.

The ADB has 67 member economies, both from within and outside of the region. The bank will hold its annual meeting in Manila in May.

At the last replenishment in May 2008, donor countries pledged a 60 percent increase in the Asian Development Fund from $7 billion in the previous period ending 2008.

The size of the next replenishment to the development fund is still under discussion with donor countries, Sakai said. Funding for the next period will come from new donor contributions as well as internal resources, he said.

“The difficult fiscal situation of a number of European countries may indeed have an impact on the contributions of some of these donors,” Sakai said. “In view of the strong economic performance of Asian countries, there is indeed an expectation that these countries will make a stronger contribution to the ADF this time as compared to earlier replenishments.”

--Editors: Stephanie Phang, Shamim Adam

To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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