The Asian Development Bank (ADB) today said it will provide about USD 6 billion loan to India over the next three years, even as the multilateral lender stated it is facing the challenge of raising resources.
“Our idea is ADB will maintain its lending level to India, approximately USD 2 billion over next three years.
“We are now working on the country partnership strategy and we are planning to maintain the level of lending to India,” ADB President Takehiko Nakao said at the concluding day of the 46th annual meeting of the funding agency here.
India is the biggest borrower of ADB.
The Manila-based multilateral lender had extended USD 2.4 billion loan to India in 2012 across sectors like transport, energy, commerce, industry, trade and finance.
Asked about whether ADB has identified projects, Nakao said it is too premature to talk about any specific ones but ADB team is looking at various concrete projects.
He also said that the bank will continue to lend USD 10 billion a year across the member-nations despite generating lower return from investments.
Stating that ADB is facing a resource challenge, he said this issue will require urgent and careful attention. “We will look at all options for ensuring that our lending level remains adequate.”
Actively investing in different kinds of assets can be one of the options for larger revenue, he said, adding that “financial safety and return is the key objective while making investment”.
Asked whether there was discussion on augmenting the capital of the bank at the Board of Governors meeting, Nakao said: “That is a very difficult issue. At this point I want to mention what kind of objections we are getting to maintain the level of lending. I don’t want to specify what kind of idea we have at this moment.”
ADB’s capital was tripled in 2009. The fund enhancement came after a gap of 15 years.
On economic growth in Asia, Nakao said the region is recovering from the slowdown caused by the global meltdown.
“I think growth momentum is strong, supported by strong domestic demand, consumption and production capacity of the region. So, Asia is becoming more and more the consuming Asia, or factory Asia. So, I have a very positive view of Asia and the future of Asia,” he said.
With regards to quantitative easing being carried out by developed nations, he said it is needed for supporting growth in these countries which have been facing slowdown.
He, however, cautioned countries against spillover effects which could be in the form of asset price bubble or overheating (of the economy).
“If there is a problem, countries, of course, have the ability to manage it through micro economic or macro prudential measures,” he said.
As part of quantitative easing to boost domestic consumption, the European Central Bank yesterday had cut interest rates by 0.25 per cent to a record low 0.50 per cent. It further indicated possibility of a further policy action to support the recession-hit euro zone economy.
On proposed BRICS Bank, Nakao said if it comes up ADB would cooperate and collaborate in meeting the huge infrastructure funding requirement of the region.
“There are huge financing needs, especially for infrastructure in the region. There is reason, people want to have another channel for mobilising money for infrastructure. I think it is a very good idea to have another bank, and I don’t think we should consider it a rival,” he said.
“If that kind of bank is successfully launched, I hope we can cooperate with each other…I hope successful launch of the bank,” he added.
He, however, said there are many challenges for setting up a new bank and difficulties in banking operations.
The grouping of Brazil, Russia, India, China and South Africa (BRICS) in March had decided to establish a new development bank — BRICS Bank — to finance infrastructure projects and to create a USD 100 billion contingency fund to tackle any financial crisis in emerging economies.
The decision is seen as a major win for India’s campaign to reform global financial architecture.
The development bank, mooted by India last year, was originally proposed to be started with a capital of USD 50 billion with USD 10 billion from each of the members.
Developing countries have been demanding more assistance from multilateral agencies like World Bank, IMF and ADB to meet their infrastructure funding requirements.
Meanwhile earlier in the day while addressing the Board of Governors, Deparment of Economic Affairs (DEA) Secretary Arvind Mayaram said: “The meeting provided an excellent opportunity to exchange views on pressing agenda items.”
“We covered many development issues, including poverty reduction and had lively discussions on the future direction of ADB,” he said.
The 47th Annual Meeting of ADB will be held in Astana, Kazakhstan next year, Mayaram said.
He said this year’s meeting has engaged the attention of all the developing countries. “This is also the secret key to inclusive growth. Looking to the future, it will be more important than ever to ensure that growth is economically, socially and environmentally sustainable and inclusive.”
Besides, he said: “I am gratified that we emerge from our deliberations with a broad-based consensus on ADB’s continuing key role in the development of Asia and the Pacific.”
Calling on all the ADB’s members and shareholders, the Secretary said, “We need to continue working together to support ADB. By doing so, we all can make a lasting contribution to development that improves the living standards of the Asia-Pacific’s poorest citizens.
—PTI