New Delhi: The Asian Development Bank (ADB) on Friday said that it has approved capital management reforms that will unlock about $100 billion in new funding capacity over the next decade to address major Asian crises including climate change.
The expansion of available funds will be further leveraged through mobilising private and domestic capital to tackle various crises, ADB said in a statement.
"The reforms were introduced through an update of ADB’s Capital Adequacy Framework (CAF). They expand the bank’s annual new commitments capacity to more than $36 billion—an increase of approximately $10 billion, or about 40%," it said.
"The expansion is achieved by optimizing ADB’s prudential level of capitalization while maintaining its overall risk appetite. The reforms also create a Countercyclical Lending Buffer to support ADB developing member countries (DMCs) facing unexpected," it added.
Multilateral development banks (MDBs) like ADB, World Bank, and others, will need to increase their annual spending by $3 trillion by 2030, including $1.8 trillion for additional climate action and $1.2 trillion for achieving other sustainable development goals (SDGs), according to the recommendations of a committee headed by N.K. Singh and Lawrence Summers, who are co-conveners of the G20 expert group on strengthening MDBs.
The first volume of the NK Singh and Lawrence Summers report, published in July, proposes effective solutions for addressing evolving issues like poverty alleviation and shared prosperity within MDBs.
The second part of the report, which will be released in October for discussion by finance ministers ahead of the G20 Annual meeting at Marrakech (Morocco), will set the road-map for the transformation of MDBs that will have to evolve to address the ongoing and upcoming challenges faced by the global economy.
"The measures, which will enable ADB to provide up to $360 billion of its own financing to its DMCs (developing member countries) and private sector clients over the next decade, are designed to ensure ADB maintains its AAA credit rating and its ability to provide DMCs with funding at low cost and with long maturities," ADB said in the statement.
"The reforms further safeguard ADB’s AAA credit rating through the introduction of a recovery plan that would prevent capital erosion during periods of financial stress. ADB’s capital adequacy framework is reviewed every three years," it added.
The important reforms fuelled by ADB will significantly expand its ability to support a broad range of critical development efforts across Asia and the Pacific, including greater concessional resources for our vulnerable members, said ADB President Masatsugu Asakawa.
“Our decision today is part of ADB’s response to the call for multilateral development banks (MDBs) to do more with our resources and faster. These resources will help the region manage a complex set of overlapping crises, address gender inequality, and provide for basic needs in the context of the existential challenge of climate change," Asakawa said.
"This extra lending power will be extended and leveraged further by renewed efforts to mobilize private and domestic capital and maximize the impact of our work," he added.
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