ADF grants still important in a more developed Asia: ADB chief Nakao

MANILA — Asia-Pacific countries may be becoming more developed but Asian Development Bank President Takehiko Nakao says the bank’s grant assistance remains significant for the region, including the Pacific.

“I still believe ADF [Asian Development Fund] concessional window for grant operations is important to support fragile and conflict-affected countries like Afghanistan, and also small island countries like Pacific island countries.

“By using [the] grant, we can support climate change adaptation, gender issues, disaster recovery, and so on,” he said during a press conference on Thursday, the second day of the bank’s 52nd annual meeting taking place in Fiji.

Present discussions on the future of the Asian Development Fund come in the lead up to its 13th replenishment, which the bank is set to conclude at next year’s annual meeting. The first formal replenishment for ADF 13 is happening in Manila in November. The second will be in February 2020.

ADF was originally the bank’s concessional loan window. In 2005, ADF added grant assistance, particularly for developing member countries with moderate to high risk of debt distress. The merger in 2017 of the bank’s ordinary capital resources and ADF’s concessional lending, however, provided the latter to become a grant-only operation.

At present, there are 15 individual countries eligible to accept grants under ADF. The majority of them are small island economies in the Pacific.

Afghanistan, however, remains its largest recipient, with an allocation of $1.96 billion for 2017-2020. Kyrgyz Republic comes in second with an allocation of $890 million for the same period, according to ADF 12’s midterm review released last February.

In his opening remarks before ADF donors on May 1, Nakao said a paper analyzing the need for ADF 13 replenishment demonstrated it remains critical to address outstanding and emerging development challenges in the region.

ADB lending to China

In the same press conference, Nakao spoke about the bank’s lending to middle-income countries, including China, which has sparked interest in recent years, given these countries’ financial capabilities. China, for instance, has been providing loans to countries in the Asia-Pacific.

Bank lending commitments to China has declined from 19% in 2013 to 12% in 2018, he said. The bank’s next country partnership strategy for China, to be discussed next year, also provides an opportunity to consider the bank’s approach in the years ahead.

But the ADB chief argued lending, particularly in a more developed Asian context, is not just about giving money, but a means to share knowledge too.

“The relationship between ADB and our client countries are not one-way,” he said. “We do things together, and we learn together, and we use that knowledge to other countries.”