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p. 17 of 18 BACK | NEXT Executive Summary I. Introduction II. Long-Term Vision and Strategy for ADF III. Operational Priorites IV. Use of ADF VII Resources to Date V. Financial Management A. Long-Term Strategy for Financing ADF B. ADF Resource Management C. ADF VII Financing Structure and Burden Sharing VI. Conclusions

Asian Development Fund VII: Progress Report (1999) : V. Financial Management

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C. ADF VII Financing Structure and Burden Sharing

64. At the conclusion of the ADF VII negotiations in Tokyo, in January 1997, some members were not in a position to confirm their pledges, or the unit of obligation for their contribution, as reflected in Table 1 in ADF VII: Report of the Donors.³¹ Furthermore, while it was announced in Tokyo that Indonesia planned to provide a contribution to ADF VII, it was understood to be an additional contribution outside the formal framework of the ADF VII negotiations, which would require a separate acceptance by the Board of Directors, and therefore was not included in the Donors’ Report. Table 2 provides an updated overview of financing ADF VII and burden sharing as of 28 February 1999. The table shows that all donors have confirmed their pledges to the Bank and have defined the unit of obligation for their contribution. Indonesia’s additional contribution is also noted. The table shows total donor contributions amounting to $2,658 million; this amount is $342 million below the planned level of $3,000 million in donor contributions to ADF VII.

Table 2: Overview of Financing ADF VII and Burden Sharing (as of 28 February 1999)

Note: This table is based on the exchange rates referred to in para.11 of Resolution No. 247.

^a Japan considers its historic burden share to be 33.69 percent but has agreed, solely for the purpose of ADF VII, to the higher burden share indicated.

^b Indonesia was not a participant in the ADF VII negotiations; however, it has provided an “additional contribution” of US$10 million to ADF VII.

65. Appendix 3 provides information on individual donors on the status of deposit of ADF VII instruments of contribution and whether the instrument is considered to be unqualified or qualified,³² and on payment of the first and second installments, as of 28 February 1999. All donors have deposited their instruments of contribution and their first installment payment. Moreover, all donors that deposited unqualified instruments of contribution have made their second installment payment in full, with the exception of Italy.³³ The United States, which submitted a qualified instrument of contribution, has provided $23 million (or 23 percent) towards its second installment payment. Therefore, US arrears during 1999 are expected to be $77 million. In accordance with paragraph 9(c) of the ADF VII resolution, other donors may consider reducing the availability of their third tranche (i.e., the third installment equal to 25 percent of their contribution and payable on or before 1 November 1999) for operational commitments on a pro rata basis.³⁴ However, the US Administration’s current request to Congress for the FY2000 Budget includes an amount that would clear the $77 million balance of the second installment payment (and provide the full amount of the scheduled third installment). With this in mind, and further considering the direct relationship between additional donor-sourced commitment authority and receipt by the Bank of donors’ installment payments, the exercise of pro rata rights would drastically reduce the Bank’s ability to finance new ADF commitments in 1999. Thus, the Bank has requested, in writing, that other donors consider not exercising pro rata rights against the current outstanding balance of the second US installment payment to ADF VII.

66. Appendix 4 provides information (at 31 December 1998 exchange rates) on the projected overall financing for ADF VII. Total ADF VII resource availability is estimated to be $4,966 million, which when set against the planned level of $6,300 million for ADF VII operations, leaves a projected funding gap of $1,334 million. In this context, the Bank will continue its best efforts to increase EACA in a prudent manner during the remaining period of ADF VII. At the same time, the Bank requests donors to make their best efforts to provide further supplementary contributions to ADF VII for progress towards the planned level of $3 billion in donor contributions.

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