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Asian Development Fund (ADF)

ADF provides grants to ADB's lower-income developing member countries. Established in 1974, the ADF initially provided loans on concessional terms. Activities supported by the ADF promote poverty reduction and improvements in the quality of life in the poorer countries of the Asia and Pacific region.

Allocation of Concessional Resources

Demand for concessional financing in Asia and the Pacific exceeds what ADB can finance. ADB therefore allocates resources based on performance to direct the funds to where they will be used most effectively, on the principle that aid is most effective in accelerating economic growth and poverty reduction in countries where policy and institutional performance is strong. Other factors such as country needs, absorptive capacity, and special circumstances such as post-conflict situations are also given consideration.

The risk of debt distress determines the proportion of grants in the country allocation. The debt distress classification is based on debt sustainability analyses using the joint IMF-World Bank debt sustainability framework for low-income countries. ADB follows the same debt distress classification used by the International Development Association: no grants for low risk of debt distress, 50% grant for moderate risk of debt distress, and 100% grant for high risk of debt distress. A 20% volume discount is applied to the grant portion of the PBA. The grant allocations of post-conflict countries are not subject to the volume discount.

ADB's concessional assistance policy guides the allocation of concessional resources.

Country performance assessments (CPA) are the bedrock of performance-based allocation. ADB conducts its CPAs using the World Bank's country policy and institutional assessments questionnaire. Each country's performance is assessed based on the:

  • coherence of its macroeconomic and structural policies;
  • quality of its governance and public sector management;
  • degree to which its policies and institutions promote equity and inclusion; and
  • performance of its portfolio of ongoing projects and programs.

CPA Annual Reports