ADB Unlocks USD100 Billion in New Funding over Next Decade

The Asian Development Bank (ADB) today approved capital management reforms that unlock USD100 billion in new funding capacity over the next decade.

IDXChannel - The Asian Development Bank (ADB) today approved capital management reforms that unlock USD100 billion in new funding capacity over the next decade to address overlapping, simultaneous crises in the Asia-Pacific region. 

The reforms were introduced through an update of ADB’s Capital Adequacy Framework (CAF). They expand the bank’s annual new commitments capacity to more than USD36 billion—an increase of approximately USD10 billion, or about 40%. 

The expansion is achieved by optimizing ADB’s prudential level of capitalization while maintaining its overall risk appetite. The reforms also create a Countercyclical Lending Buffer to support ADB developing member countries (DMCs) facing unexpected crises. 

The measures, which will enable ADB to provide up to USD360 billion of its own financing to its DMCs and private sector clients over the next decade, are designed to ensure ADB maintains its AAA credit rating and its ability to provide DMCs with funding at low cost and with long maturities. 

The reforms further safeguard ADB’s AAA credit rating through the introduction of a recovery plan that would prevent capital erosion during periods of financial stress. ADB’s capital adequacy framework is reviewed every 3 years.

“These important reforms will significantly expand ADB’s ability to support a broad range of critical development efforts across Asia and the Pacific, including greater concessional resources for our vulnerable members,” said ADB President Masatsugu Asakawa in a media release on Friday (29/9/2023).

“Our decision today is part of ADB’s response to the call for multilateral development banks (MDBs) to do more with our resources and faster. These resources will help the region manage a complex set of overlapping crises, address gender inequality, and provide for basic needs in the context of the existential challenge of climate change. This extra lending power will be extended and leveraged further by renewed efforts to mobilize private and domestic capital and maximize the impact of our work," he explained.

Asia and the Pacific’s poor and vulnerable are acutely exposed to escalating and interconnected crises that jeopardize their health, educational outcomes, and livelihoods. An estimated 155 million people, or 3.9% of the region’s population, lived in extreme poverty in 2022 and many, in particular women, face a cost-of-living crisis that has made food and other essential commodities and services unaffordable.

The updated CAF is the latest of several initiatives by ADB to increase its lending capacity. In May, ADB established the Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP), which allows donors to guarantee parts of the existing sovereign loan portfolio on ADB’s balance sheet, thereby releasing capital for new climate projects. ADB has also entered into sovereign exposure exchange agreements with other MDBs to reduce portfolio concentration risks and leads the MDBs’ participation in the International Finance Facility for Education. (WHY)