Asian Development Bank (ADB) is currently updating its capital adequacy ratio (CAR) this year to expand its lending capacity by optimising its balance sheet. ADB president Masatsugu Asakawa said the bank is also carefully reviewing the recommendation made by G20.
“It is too early to draw a firm conclusion at this stage but I am under strong impression that ADB shareholders do not wish to change the overall risk appetite of ADB.
“I expect the new CAR coming out from this year’s review will continuously protect ADB’s rating to ensure that investment confidence is maintained and also to ensure that ADB has sufficient capital to continuously lend even at the time of crisis,” he said during a virtual programme on Rebounding Asia and the Pacific: Forging The Path Forward today.
The programme was held ahead of the annual meeting in Incheon, South Korea next week, where ADB will also be launching an Innovative Finance Facility forClimate in Asia and the Pacific (IF-CAP).
Masatsugu said ADB is also conducting a comprehensive review of other options to optimise its balance sheet, including increasing its investments in the climate change arena.
He noted that ADB has been working on the IF-CAP that would increase its climate financing by utilising guarantee mechanisms.
“This simply means when any borrowing country fails to repay its debts to ADB, the donor country will pay on its behalf. So ADB has no risks at all,” he added.
Masatsugu said the IF-CAP is piloting a guarantee mechanism where every US$1 guarantee can generate up to US$5 in new loans to accelerate climate action.
Meanwhile, ADB expects a 5.0 per cent economic growth rate for China and this would benefit commodity-exporting countries to China for countries that have close ties with the Chinese economy in terms of supply chain network as well as the tourism industry.
“If the Chinese economy ends up with an even stronger growth rate, then we are predicting that might add inflationary pressure on crude oil prices and other commodity prices. That is the upside risk that we have to bear in mind,” said Masatsugu.
