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Asian Development Fund

Donors: prioritize programs to support gender, environment, water, and private sector role

By Ian Gill ( igill@adb.org )
Principal External Relations Specialist

CHANGING LIVES An ADF loan to Sri Lanka is expanding access to safe water and sanitation, including in areas affected by civil war

Management and senior staff of the Asian Development Bank - ADB - met with donor representatives in Washington, DC from 14 to 15 April 2003 for a midterm review of the seventh replenishment of ADB’s Asian Development Fund (ADF).

The ADF is ADB’s concessional fund that targets assistance to the neediest people, making it an effective instrument of poverty reduction.

Donors emphasized that ADF lending operations should derive from the national poverty reduction strategies of borrowing countries, that there should be greater selectivity in ADF operations, and that higher priority should be given to supporting development programs for gender, the environment, water, and the role of the private sector.

“The review is crucial,” says ADB President Tadao Chino. “The need for concessional funds among our poorest developing member countries is more acute than ever. These funds are an important means of achieving our overarching goal of poverty reduction in Asia and the Pacific.”

ADF loans are typically repayable over 32 years, including an 8-year grace period, and carry an interest charge of 1% per annum during the grace period and 1.5% per annum thereafter. They are targeted at ADB’s developing member countries with a low per capita gross national product - GNP - and limited debt repayment capacity.

The Fund was established in 1973 and designated ADF I. It has been replenished seven times. The current replenishment period is known as ADF VIII. Typically, a replenishment period covers 4 years.

The ADF consists largely of contributions from ADB member countries. ADF VIII totaled $5.65 billion, consisting of $2.91 billion from donors and $2.74 billion from repayments of earlier ADF loans. It covers the period 2001–2004.

Over the years, the ADF has substantially contributed to sustainable development by tackling poverty through promoting economic growth, primary health, basic education, rural water supply and sanitation, good governance, environmental protection, and gender equity.

Several recently approved projects are being financed from the ADF: a $150 million loan to Afghanistan to support policy reforms, public infrastructure investment, and capacity building; a $45 million loan to Viet Nam to foster a more accountable, responsive, and efficient public administration; a $60.3 million loan to Sri Lanka to expand access to safe water and sanitation in three provinces, including in areas affected by civil war; a $60 million loan to Bangladesh to improve rural infrastructure in the country’s southwest; and a $33 million loan to Indonesia to rehabilitate and manage coral reefs.

The ADF is a key weapon in fighting poverty in Asia, where the majority of the world’s poor live. Moreover, it will increase ADB’s development effectiveness by measuring its progress against the Millennium Development Goals. These goals are to halve the proportion of people living in extreme poverty, achieve universal primary education, promote gender equality, reduce child mortality, improve maternal health, combat HIV/AIDS, ensure environmental sustainability, and foster a global partnership for development.

In addition, there is strong demand for concessional funds from conflict-affected countries that require extensive rehabilitation. ADB is committed to providing assistance in such countries, including Afghanistan, Sri Lanka, and Tajikistan.

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This issue of ADB Review and the next issue will focus on how ADF funding is being used to make a difference in some of the world’s poorest countries.

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