The Asian Development Bank said Saturday it will establish a three-billion-dollar fund to boost developing member countries' fiscal spending capacity amid the global economic crisis. ADB president Haruhiko Kuroda announced plans for the new facility at the bank's annual meeting on the Indonesian island of Bali, saying it would provide short-term loans more quickly and more cheaply than existing programmes.
The Countercyclical Support Facility is subject to approval by the lender's board of governors, who will meet here Monday and Tuesday to discuss the impact of the global downturn on Asia's developing economies. "The CSF will provide emergency loans faster and cheaper than under ADB's existing special loan facilities," Kuroda said. "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."
The announcement comes just two days after the board agreed to triple the ADB's capital base, from 55 billion dollars to 165 billion, allowing the bank to boost lending support in the crisis. In a report released at the press conference Saturday, the bank revealed plans to increase its overall lending assistance by more than 10 billion dollars in 2009-2010.
That would bring total ADB assistance during the year to about 32 billion dollars, compared with about 22 billion dollars in 2007-2008, it said. "The crisis support will include project investments, quick-disbursing policy-based loans, guarantees, and new initiatives designed to address specific crisis needs," the bank said in a statement.
"ADB will also expand its support through grants for policy analysis and capacity building." The bank has said gross domestic product growth in developing Asian countries is projected to decline to just 3.4 percent this year from 9.5 percent in 2007.
At the lower rate more than 60 million extra people in the region will remain in extreme poverty than would have done if the higher rate had been maintained. Governments across the region have boosted spending and slashed interest rates in a bid to stimulate domestic demand to offset crashing external demand for their exports from Europe and the United States.
But the ADB fears the task may be beyond the capacity of some countries and Saturday's announcement is part of plans to help poorer member states cope with the crisis. "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," it said. "Moreover, with the global downturn likely to be deeper and longer than previously expected, economies in the region are likely to come under increased pressure."
Critics however said the massive increase in the bank's capital base had to come with tighter monitoring of the social and environmental impacts of its lending projects.
"In the midst of global calls for increased regulations around financing, the ADB will be going against the current if is does not strengthen its social and environmental safeguard policies," Joanna Levitt of the International Accountability Project said in a press release. "Without real improvements, we can expect to see more reckless use of Bank funds, resulting in more disastrous projects."
Responding to such concerns, the bank unveiled proposals to strengthen its internal monitoring processes to protect whistleblowers who report misconduct related to ADB-linked projects. "ADB maintains zero tolerance of corruption.... It is essential that we protect those willing to come forward with information," ADB auditor general Philip Daltrop said.
The bank warned in a report last month that climate change posed a long-term threat to poverty reduction and development plans across Southeast Asia, which would be hit harder by rising seas, storms and floods than other regions. Kuroda said it was vital new stimulus spending on infrastructure had environmental impacts in mind. "It will be crucial to focus such spending in areas like clean energy to mitigate Asia's carbon footprint and ensure a healthy and prosperous world for future generations," he said.
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