The Hindu Business Line : ‘India unlikely to get access to ADB’s soft loan window’

“Their (emerging economies in Asia) role in sustaining global economic growth is crucial as many developed countries are now having negative growth.” – Mr Haruhiko Kuroda

K.R. Srivats

New Delhi, Feb. 5 India and China are unlikely to get access to the interest-free and long-term loans from the Asian Development Bank (ADB) even at this juncture of global financial meltdown and its resulting adverse impact on emerging Asian economies.

“Even in the changed context, the donors are unlikely to expand the list of the recipient countries at this stage,” Mr Haruhiko Kuroda, President, Asian Development Bank, said in an interview with Business Line here today.

He was replying to a question on whether India would get access to the Bank’s soft loan window, the Asian Development Fund (ADF), in the changed circumstances. The ADF provides long-term interest-free loans, grants and policy assistance to poor countries in Asia to reduce poverty and spur economic growth.

Mr Kuroda noted that the resources for ADF assistance are replenished every four years.

“Last May, the donors agreed to ADF replenishment for years 2009-11. The amount of resources has been fixed at $11.3 billion. Annually, we can provide around $3 billion. The resources are fixed and the donors have also fixed recipient countries. China and India have not been recipients of ADF assistance. The donors had decided not to give ADF assistance to China and India,” he said.

The ADB President noted that the donors wished to distribute the limited ADF resources among small poor countries.

Mr Kuroda said that the emerging economies in Asia could contribute greatly to the global economic growth. “Their (emerging economies in Asia) role in sustaining global economic growth is crucial as many developed countries are now having negative growth. I have always argued that decoupling is not a tenable thesis, because the world is globalised,” he said.

He highlighted that the fiscal and monetary measures being implemented by Asian economies would help sustain growth and assist in recovery of global economy.

Mr Kuroda said that ADB is making its best effort to respond to the increased need of developing countries in Asia.

“Originally for 2009, we had planned something like $9 billion overseas capital resource assistance and about $3 billion ADF support. Now, on top of $9 billion, requests for additional $6 billion have come. How to respond to the request for additional assistance is a big challenge for ADB,” he said.

Stating that ADB’s capital base was quite small and that in the last 14 years there had been no increase in capital, Mr Kuroda said that ADB was now asking its shareholders to substantially increase capital – by around 200 per cent .

“Since capital increase does require sometime to implement, we can manage the request for additional $6 billion assistance through $2 billion of direct assistance and $4 billion through co-financing with our development partners.”

The $6-billion additional assistance requests are mainly for infrastructure investments by Governments in Asia wishing to expand their infrastructure development from both a medium term objective as well as from a short term countercyclical perspective.

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