Catalog

Asian Development Fund Replenished
ADB Review [ July - August 2004 ]

Donors agree on $7 billion replenishment and on establishment of grants

JEJU, REPUBLIC OF KOREA

Twenty-eight donor members of ADB have agreed on a $7 billion total replenishment of the Asian Development Fund (ADF), which includes the introduction of grants, it was announced after the fourth and final donors’ meeting in Seoul, the Republic of Korea.

ADF IX, as the replenishment is called, will cover the four-year period from 2005 to 2008. The replenishment amount is significantly higher than the $5.65 billion agreed at the conclusion of ADF VIII, the last replenishment negotiations covering 2001–2004.

"I am truly gratified by this very strong show of support from ADB’s donors. It clearly demonstrates the commitment of shareholders to our institution"

President Tadao Chino, ADB

“I am truly gratified by this very strong show of support from ADB’s donors. It clearly demonstrates the commitment of shareholders to our institution,” said ADB President Tadao Chino. “The $7 billion replenishment will enable ADB to continue vigorously pursuing its mission of fighting poverty in the Asia and Pacific region.”

The successful conclusion of the ADF IX negotiations came on the eve of the Manila-based multilateral bank’s 37th Annual Meeting of the Board of Governors in Jeju.

ADF loans are provided on concessional terms to ADB’s poorer developing member countries with limited debt repayment capacity. They support poverty reduction through pro-poor sustainable economic growth, provision of social development such as education and health care, and the promotion of good governance. They typically carry minimal rates of interest over long repayment periods.

The donors have agreed to establish grants under ADF IX to take into account the burden of development finance in the poorest countries, as well as assist countries in transition from postconflict situations to peace and stability, combat HIV/AIDS and other communicable diseases, and support capacity building. Grants will represent 21% of the total ADF.

Under the new $7 billion ADF IX replenishment, donors pledged new contributions on a shared-burden basis of $3.2 billion, plus some additional voluntary contributions. The balance is expected to be met by additional contributions and/or internal resources.

Japan remains the largest ADF contributor with $1.18 billion, followed by the United States with $461 million, Australia with $218 million, and the United Kingdom with $202 million. Contributions from the Asia and Pacific region accounted for almost half of the total replenishment, with the Republic of Korea’s contribution increased to $113 million.

The People’s Republic of China is a first time contributor with $30 million, while Malaysia has made its first contribution since the ADF VII replenishment.

ADB approved its Poverty Reduction Strategy in November 1999. The Asia and Pacific region is home to almost two thirds of the world’s poor, with some 720 million people still living in extreme poverty.

The ADF negotiations were chaired by Mme. Huguette Labelle, Chancellor of the University of Ottawa, and cochaired by Peter McCawley, Dean of the Tokyo-based ADB Institute.

Donors agreed that reducing poverty in the region will require a continued focus on sustainable economic growth, inclusive social development, and good governance. This will be aided by greater support for gender equality, improving the environment, assisting countries affected by security threats and conflicts, and strengthening cooperation to address regional issues.

Donors also stressed the importance of improving development effectiveness of ADF IX operations through careful attention to results at the sector, country, and regional levels. Furthermore, ADB has made a commitment to donors to carry out initiatives including, among others, a new accountability mechanism, the further integration of the Millennium Development Goals into ADB operations, and a new public communications policy.

Established in 1973, the ADF has played a significant role in promoting sustainable economic development in low-income countries. In 2003 alone, 47 ADF loans were approved amounting to $1.38 billion.

Projects financed from the ADF have included the reform and improvement of education, health and sanitation, projects designed to raise the status of women, microfinance, environmental protection, and capacity building, in addition to the rehabilitation and building of physical infrastructure. ADF lending also supports regional cooperation to promote further social and economic development.

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