ADB funds to aid fiscal spending
The Asian Development Bank (ADB) will establish - pending Board of
Directors' approval - a US$3 billion fund to help developing member
countries (DMCs) swiftly ramp up the fiscal spending needed to overcome
the global economic crisis and help sustain longer-term growth.
The Countercyclical Support Facility (CSF) will provide short-term
loans faster and cheaper than under ADB's existing special program loan
(SPL) facilities, and will be available to DMCs who qualify for loans
from ADB's Ordinary Capital Resources (OCR), said ADB President Haruhiko
Kuroda, who announced plans for the new facility at a press conference
at ADB's 42nd Annual Meeting in Bali.
OCR is a pool of ADB funds available for lending to middle-income
countries at near market terms.
"I believe this will be a very welcome initiative to assist faltering
economies and, most importantly, protect the poor from the worst impacts
of the crisis,"Kuroda told journalists.
The CSF announcement comes just two days after the ADB's Board of
Governors agreed to triple ADB's capital base from $55 billion to $165
billion.
The 200 percent increase allows ADB to substantially increase its
support to countries affected by the global downturn. The new facility
would form part of that assistance.
Details of the CSF, together with other proposed ADB crisis-related
programs, were outlined in a report released by Kuroda at the press
conference.
The report, The Global Economic Crisis: Challenges for Developing
Asia and ADB's Response says ADB plans to increase its lending
assistance by more than $10 billion in 2009-2010, bringing total ADB
assistance for these two years to about $32 billion. This compares with
about $22 billion in 2007-2008.
The crisis support will include project investments, quick-disbursing
policy-based loans, guarantees, and new initiatives designed to address
specific crisis needs. ADB will also expand its support through grants
for policy analysis and capacity building.
Export-dependent Asia has been hard hit by slumping demand for its
goods in major global economies, such as the U.S. and Europe.
A number of governments in the region have boosted spending to spur
domestic consumption to counter falling offshore demand, but not all
governments are able to do so.
Moreover, with the global downturn likely to be deeper and longer
than previously expected, econ-omies in the region are likely to come
under increased pressure. That is set lower than the ADB's SPL facility
set up after the 1997-1998 Asian financial crisis to help the region
deal with balance of payments difficulties, which are not the problem
for many DMCs today.
The ADB forecasts economic growth in its 44 developing member
countries at 3.4 percent in 2009 and 6.0 percent in 2010.
The current account surplus as a percentage of gross domestic product
is likely to fall to 4.9 percent in 2009 from 5.3 percent in 2008 and
further drop to 4.7 percent in 2010.
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