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K.R. Srivats

New Delhi, Feb. 10 Asian Development Bank is seeking to accelerate trade finance support by increasing the size of its trade finance facilitation programme (TFFP) from the existing $150 million to $1 billion this year. Plans are also afoot to expand coverage by including more commercial banks in more countries.

Under the TFFP, guarantees are provided to commercial banks in Asia, which in turn provide trade finance to private importers/exporters.

“We intend to expand the list of commercial banks covering many more countries and many more sectors while utilising the $1 billion resources optimally,” Mr Haruhiko Kuroda, ADB President, told Business Line in an interview here.

He highlighted that the credit crunch situation had worsened in Asia after September 15 last year and even short-term credit was difficult to gain in such a situation.

Mr Kurodo said the impact of global financial crisis was seen through three channels —trade flows, capital flows and remittance flow. Since many Asian countries are export-led, the financial crisis has made the greatest impact on emerging Asia through decline in exports.

Even though the global financial crisis began in August 2007, the impact was largely felt through trade until September 2008. But now capital flows have also been seriously affected.

“So far, financial sector in Asia has been relatively safe and not much affected. If capital flows remain constrained, some form of negative impact on financial sector in Asia could emerge,” he added.

Mr Kuroda stressed the need for monitoring of the banking sector. He also sees decline in remittances in the coming days although India may not be largely impacted.

He also felt that countries should not in the current juncture depreciate their currencies to increase export growth and thereby avoid recession. “That would not work and would not be a good step. It would be detrimental to global economy,” he said.

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