Asian Development Bank may consider rupee-denominated bonds

INCHEON: The Asian Development Bank may look at rupee-denominated bonds if market conditions and demand for the bonds persist, president Masatsugu Asakawa said.

Responding to questions, he said that the bank intends to increase raising bonds in local currency so as to reduce the forex risks being faced by member countries like India.

“We are encouraged to increase our local currency finance for the countries to avoid the impact of foreign exchange risks. As long as market conditions are pertinent, as long as demand is there, we would very much like to increase the local financing,” he said.

In January 2021, the ADB listed 10-year masala bonds or rupee-denominated bonds, worth ₹300 crore on the global securities market platform of India INX, the international exchange located at International Financial Services Center- Gift City in Gujarat.

Speaking to reporters at the start of the ADB’s annual meeting of its Board of Governors, he said that the $25 billion investment into India over the next five years is subject to approval from the Board and not yet decided.

“It is my ambition. However, India is the largest requirement in South Asia right now. In my conversation with Prime Minister Narendra Modi during the bilateral meetings, although I can’t share details, but PM Modi emphasised the importance of continuous construction of infra and renewable energy,” he added.

In response to another question on the South Asia markets and their growth prospects, he said that India’s economic growth will be beneficial for the entire South Asian region, including countries like Sri Lanka and Pakistan that were facing separate food and energy crises.

While, ADB slashed India’s GDP growth forecast for FY23 to 6.4% from its earlier projection of 7%, but for FY24, the growth rate is expected to be 6.7% on the back of private investment and growth in industry. India has been seeking an increase in investments in priority sectors of clean energy, infrastructure spending and climate financing from multilateral lending institutions, even as it has been pushing for efforts to boost financial inclusion.

Last month, the bank announced plans to provide at least $14 billion over 2022-2025 as support to ease a “worsening food crisis” in Asia and the Pacific, while aiming to improve long-term food security by strengthening food systems against the impacts of climate change and biodiversity loss. The Russian invasion of Ukraine has disrupted food staples and fertilizer supplies, straining a global food system already weakened by climate change impacts and pandemic-related supply shocks.

On Tuesday, the Masatsugu Asakawa announced ADB’s newest climate finance program: the Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP). “The climate events we have experienced over the past 12 months will only increase in intensity and frequency, so we must take bold action now. IF-CAP is an exciting, innovative program that will have a real impact. And it is another example of how ADB serves as the climate bank for Asia and the Pacific.”

IF-CAP’s initial partners are Denmark, Japan, the Republic of Korea, Sweden, the United Kingdom, and the United States. Those partners are in discussions with ADB about providing a range of grants for project preparation along with guarantees for parts of ADB’s sovereign loan portfolios. The reduced risk exposure created by the guarantees will allow ADB to free up capital to accelerate new loans for climate projects. With a model of ‘$1 in, $5 out’, the initial ambition of $3 billion in guarantees could create up to $15 billion in new loans for much-needed climate projects across Asia and the Pacific.