Sovereign cofinancing is partner financing mobilized to directly contribute to ADB project outcomes. This is cofinancing from ADB’s bilateral and multilateral partners, as well from philanthropy and the private sector. In 2019, sovereign cofinancing reached $4.89 billion, further boosting ADB’s sovereign operations which reached $18.86 billion in the same year.
These funds supported 148 cofinancing activities across Asia and the Pacific. Of these activities, 55 covered multiple developing countries, while 11 were specifically done in Mongolia, 10 in Indonesia, 9 in Pakistan, and 8 in India. Three countries received 64% of the committed funds. These were the Philippines, Indonesia, and India. The region which had the most number of cofinanced activities was Southeast Asia (33), with commitments reaching about US$2.57 billion.
The bulk of the cofinancing activities in 2019 focused on three sectors and themes—transport, energy, and public sector management. Thirty-seven projects centered on these fields, with energy at the lead (26). These top 3 sectors and themes account for 89% of sovereign cofinancing in 2019.
From 2015 to 2019, cofinancing commitments from ADB’s various sovereign partners reached US$30.160 billion. As in 2019, the top three sectors that had the most cofinanced activities from 2015 to 2019 were energy, transport, and public sector management. By region, the top three were Southeast Asia, South Asia, and Central and West Asia.
ADB’s sovereign cofinancing activities has brought together development partners to make resources more accessible to developing countries. Through the partnerships cofinancing fosters, development projects run more smoothly and efficiently, and bring high-impact results that raise the quality of people’s lives.
When cofinancing with ADB, bilateral, multilateral, and private sector partners can choose from two modalities. They can opt for “project-specific cofinancing,” which refers to supporting individual projects, programs, or technical assistance. They can also choose to create a trust fund or contribute to one or more of ADB’s existing trust funds. For 2019, project-specific cofinancing made up 96% of sovereign cofinancing, while trust fund cofinancing accounted for 4%.
These modalities are arrangements that deepen and focus ADB’s partnerships with financing partners while offering them more entry points for cofinancing opportunities. They are instruments that seek partners’ commitment to support ADB support ADB’s program and project operations in line with agreed upon principles and procedures.
Project-specific cofinancing can either be a loan or a grant. If the cofinancing will be administered by ADB, a cofinancing agreement is signed by ADB and its partner. If not, they sign a memorandum of understanding.
ADB also accesses global funds for project-specific cofinancing. Global funds are funding initiatives managed by other multilateral banks.
These are single– or multi-partner channels of cofinancing resources that fund projects, programs, technical assistance, and other activities.
ADB administers contributions of financing partners as a trustee or administrator of about 45 trust funds, 14 of which fall under umbrella Financing Partnership Facilities.
Partnership Framework Arrangement
ADB also welcomes strategic and long-term partnerships for development. For partners who want to try this route, they can agree with ADB to set an indicative amount of development finance for a specific amount of time, to be distributed among specific projects or trust funds. ADB and the financing partner formalize this agreement through a partnership framework agreement.
Partnership framework arrangements (PFAs), also expressed as framework cofinancing arrangements, memoranda of understanding, and similar terms, facilitate better strategic collaboration, cooperation, and complementarity. PFAs involve a funding envelope to cover a broad range of planned and coordinated cofinancing activities over a period. They also serve as a tool for surfacing and resolving concerns that may arise during project negotiations. In 2019, ADB had active PFAs with 11 financing partners, with a total funding envelope of $20.25 billion.
ADB’s work on sovereign cofinancing is also a partnership among ADB’s departments, with the regional departments leading the project design and implementation and the Strategic Partnerships Division (SPSP) of the Strategy, Policy and Partnerships Department and the Partner Funds Division (SDPF) of the Sustainable Development and Climate Change Department providing guidance and support vis-à-vis cofinancing operations.
SPSP takes the lead in partnership policy and strategy formulation as well as in the establishment of cofinancing partnerships. It spearheads the mobilization of external resources through project-specific cofinancing and broader cofinancing arrangements. Specifically, SPSP provides:
- Partner relationship management
- Support to internal clients
- Cofinancing policies and procedures
SDPF takes charge of the administration of broad-based single- and multi-donor trust funds. It assists other departments in administering existing trust funds, projects, and TA under project-specific cofinancing, and global funding initiatives after the signing of cofinancing agreements. The division also manages the single repository of bank-wide data and reports on sovereign cofinancing. SDPF takes charge of:
- Trust fund resource mobilization
- Design of new trust funds
- Cofinancing administration
- Fund manager support, guidelines, data & analytics
This partnership is active and in sync with the ADB project cycle, working on specific cofinancing actions in each of the five distinct stages of project implementation. During planning of the project cycle, SPSP helps identify mutual interests and areas of priority among partners, and then, as project preparation rolls around, it collaborates with partners, governments, and other stakeholders in the formulation of a joint terms of reference. At the project approval stage, SPSP is joined by SDPF, and together, they negotiate with donors and work on securing partner commitment.
During the project implementation stage, SDPF supports regional departments. They communicate directly with financing partners on project implementation and administration matters. When there is any change in the project that affects the cofinancing agreement, SDPF takes charge, with support from the Office of the General Counsel (OGC), of the drafting and signing of relevant amendments. When the project reaches completion, SPD and SDPF documents the cofinancing results in official reports such as the ADB Annual Report, Operations Statement, and Partnership Report.