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Review of Cost-Sharing Limits for Projects Financing as an Element of ADB's 1998 Graduation Policy

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I. Introduction

1. In December 1998, the Board of Directors of the Asian Development Bank (ADB) approved the policy paper, A Graduation Policy for the Bank’s Developing Member Countries.¹ The 1998 graduation policy included provisions on cost-sharing limits for loan and Technical Assistance operations. The cost-sharing limits refer to the maximum proportion of project costs that ADB may normally finance, which is determined by the classification or country grouping of each developing member country (DMC).

2. This paper focuses on ADB’s cost-sharing limits for project loans, taking into consideration similar policies and practices of other multilateral development banks (MDBs). Section II presents the need to review ADB’s cost sharing limits. Section III reviews other MDBs’ policies on cost-sharing limits that would provide a useful benchmark for determining appropriate cost-sharing limits for ADB. Section IV proposes an upward revision of the costsharing limits within the framework of the 1998 graduation policy. Section V contains conclusions and recommendations for the Board’s approval.

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