ADB approves additional US$ 3.4 billion to help region cope with crisis

The Asian Development Bank (ADB) has approved an additional US$ 3.4 billion in funding to help developing member countries (DMCs) in the region respond to the global economic crisis.

The ADB has established a US$ 3 billion Countercyclical Support Facility (CSF) that will provide "short-term, fast-disbursing loans" to DMCs aiming to "ramp up" fiscal spending to counter the crisis, but who lack the financial means to do so.

The CSF, which will be available to DMCs who qualify for loans from ADB's Ordinary Capital Resources (OCR), will be capped at US$ 500 million per country.

The ADB will also make available another US$ 400 million to the Asian Development Fund (ADF), which will benefit countries with no access to OCR.

ADF resources are provided in the form of concessional loans and grants to low-income DMCs with limited debt repayment capacity.

The additional ADF resources will be used to provide funds to finance key development investments in low-income countries that are among "the most fiscally constrained" in responding to the crisis.

Conditions for accessing the CSF include a significant slowdown in growth, exports and remittances; fiscal constraints; and difficulty in sourcing finance from international capital markets on favourable terms.

DMCs will also need to put in place a specific countercyclical development program, to be supported by CSF, which includes investment in public infrastructure, or a social safety net scheme targeting the poor and vulnerable.

Loans under the new facility will have a five-year tenor, with a three-year grace period, and will cost around 200 basis points over ADB's financing cost, pricing that is lower than its special program loans facility set up to help the region in the wake of the 1997-1998 Asian financial crisis.

The ADB plans to increase its lending assistance by more than US$ 10 billion in 2009-2010, bringing total ADB assistance for these two years to about US$ 32 billion.

This compares with about US$ 22 billion in 2007-2008. Of the proposed US$ 10 billion increase in lending, US$ 1 billion is committed to support trade finance, US$ 3 billion to the CSF and US$ 6 billion to extending loans such as those for infrastructure investment.

ADB will also expand its crisis-related support through grants for policy analysis and capacity building.