ADB tweaks financing terms for members

Published November 19, 2019, 12:00 AM

by manilabulletin_admin

ADB tweaks financing terms for members

By Chino S. Leyco

The Asian Development Bank (ADB) will adopt diversified financing terms for its developing member countries starting January next year for fairness and competitiveness.

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In a statement, the Manila-based lender said yesterday that borrowing members will be divided into three groups according to their per capita income levels and creditworthiness.

The “Group A” are countries eligible for Asian Development Fund (ADF) grants and concessional loans, “Group B” nations have access to both concessional and market-based loans, and “Group C” have access only to market-based loans.

The financing terms offered to “A” and “B” countries are already diversified with a combination of grants, concessional loans, and market-based loans. The “C” nations have a wider spread of per capita incomes but are all offered the same financing terms.

In the new pricing framework, Group “C” will be divided into several sub-groups according to their gross national income—lower middle-income, upper middle-income, and high-income.

Higher income sub-groups will pay higher maturity premiums for longer term loans.

For instance, upper middle-income countries with GNI per capita of $6,976 to $12,375 based on 2018 prices will pay up to 30 basis points additional maturity premium depending on the loan tenor.

Meanwhile, the new pricing framework will provide more favorable terms to more vulnerable countries such as small island developing states and countries transitioning from “Group B” to “Group C.”

“The additional income from the new pricing will supplement existing Technical Assistance Special Funds to support policy advice, institution building, and knowledge sharing in ADB’s DMCs,” the bank said.

The pricing framework will also help build reserves for expanding ADB’s lending capacity in the long term.

Takehiko Nakao, ADB president said the current flat pricing structure offered to recipient countries borrowing only market-based loans does not reflect the high level of diversity among these countries.

“The new structure will enable us to continue engaging with countries at a more advanced stage of development on terms that remain fair and competitive with other multilateral development banks, and contribute to ADB’s long-term sustainability,” Nakao said.

ADB also said the latest reform reflects a regional landscape that has changed over the past 50 years.

“The situation in Asia and the Pacific region is now different compared to 1966 when ADB was established. Most ADB recipient countries are currently middle-income countries,” the lender said.

“These countries, though with relatively higher income and strong financial capacity, still need ADB’s support to tackle pockets of poverty, strengthen institutions, and address climate change and other areas with externalities,” it added.