Demand for concessional financing in Asia and the Pacific exceeds what the Asian Development Fund (ADF) can finance. ADB therefore adopts a system to fairly allocate ADF support among the many competing needs, and to direct the funds to where they will be used most effectively.
ADF eligibility continues to be fundamentally based on two criteria:
- gross national income (GNI) per capita, using the World Bank's GNI per capita estimates based on the Atlas method and the International Development Association's operational cut-off for eligibility; and
ADF countries consist of ADF-only and blend countries with access to ADF resources. These include 17 ADF-only countries and 12 blend countries.
ADB's performance-based allocation (PBA) policy guides the allocation of ADF resources. The policy supports poverty reduction and sustainable development by allocating ADF resources based on country performance. It also considers other factors such as country needs, absorptive capacity, and special circumstances.
ADB conducts Country Performance Assessments (CPAs) for all ADF countries. Each country's performance is assessed based on:
- the coherence of its macroeconomic and structural policies;
- the quality of its governance and public sector management;
- the degree to which its policies and institutions promote equity and inclusion; and
- the performance of its portfolio of ongoing projects and programs.
The PBA exercise determines allocation shares for ADF borrowers using a formula that considers:
- country performance;
- country size, as measured by population; and
- economic need, as measured by GNI per capita.
After distributing ADF resources according to the current PBA formula, ADB determines the proportion of grant assistance based on countries' debt-distress classification. See Debt Sustainability Analysis and Grants.