ADB Annual Report 2006
ADB Loans Jump to $7.4 Billion in 2006, Annual Report Says
Manila, Philippines – ADB approved a total $7.4 billion in loans in 2006, reflecting a 28% increase over the previous year’s level, according to the ADB Annual Report 2006, released ahead of the 40th Annual Meeting to be held 4–7 May 2007 in Kyoto, Japan.
“Sustainable economic growth was the most prevalent theme,” said ADB’s latest annual report, in describing the general thrust of the 67 projects supported by the loans approved in 2006.
Grants approved in 2006 amounted to $538.4 million, earmarked for 43 projects. This amount is less than half the $1.1 billion in grants approved in 2005, when more funds were needed to immediately address the destruction wrought by the December 2004 Asian tsunami and the earthquake that struck Pakistan in October 2005.
The People’s Republic of China received $1.6 billion, or 21%, of the total loans that ADB extended last year, making it the biggest loan recipient.
The finance sector was the top recipient of ADB loans last year, receiving $1.8 billion, or 24%, of total loans, sharply higher than the $261.2 million the sector secured in 2005. The transportation and communications sector received the largest share of loans that ADB provided in 2005.
Loans with government guarantees last year totaled $6.8 billion for 59 projects. Out of this amount, $5.5 billion for 26 loans came from the ordinary capital resources of ADB, while the balance, which financed 45 loans, was sourced from the concessional Asian Development Fund (ADF).
Overall, sovereign lending increased 30% over the $5.2 billion approved in 2005.
ADB approved two nonsovereign loans last year for state-owned enterprises worth $150 million. ADB also approved seven loans amounting to $425 million that did not carry government guarantees. Private sector loans declined 17% from the $513 million approved by ADB for six projects in 2005.
ADB approved eight multitranche financing facilities (MFFs) totaling $3.8 billion last year, compared with two MFFs amounting to $1.5 billion in 2005. ADB approved three MFFs for Pakistan totaling $2.2 billion; three others valued at $1.1 billion for India; a $430 million facility for Bangladesh; and a $50 million facility for the People’s Republic of China.
Of the total grants ADB approved last year, $274.9 million came from ADF IX, while $235 million came from external sources, with full or partial administration by ADB. The balance was sourced from the Asian Tsunami Fund and Pakistan Earthquake Fund.
In 2004, the 28 ADF donor-members of ADB agreed on a $7 billion replenishment of the ADF. The replenishment was referred to as ADF IX and covers the period 2005–2008. ADF IX grants help countries reduce the debt burden of development finance, make the transition from conflict to peace and stability, and combat HIV/AIDS and other infectious diseases.
In 2006, parallel grants of $111.9 million were also provided from multilateral and bilateral institutions without ADB administration services for five ADB-funded projects.
ADB approved 260 technical assistance projects valued at $241.6 million last year, of which 234 were new projects while 26 were supplementary projects. Last year’s technical assistance was 22% higher than the $198.5 million for 299 projects approved in 2005.
Of the total technical assistance projects, 73 were for project preparation, 98 were advisory, and 89 were for regional assistance. Of the total amount approved, $92.3 million came from the Technical Assistance Special Fund, $56.6 million from the Japan Special Fund, and the balance from other multilateral and bilateral sources.
Fourteen equity investments valued at $260.5 million were approved last year, compared with $196.5 million for eight equity investments in 2005.
Cofinancing and Guarantee Operations
In 2006, ADB arranged $1.5 billion direct value-added cofinancing for 103 projects, of which $1.4 billion supported 29 investment projects and $92.7 million helped finance 74 technical assistance projects.
Direct value-added cofinancing for investment projects comprised $124.8 million for 3 guarantee operations, $530 million for 5 syndication operations, $166.1 million for 12 grant operations, and $569.2 million for 11 official loan cofinancing operations.
Nondirect value-added cofinancing amounted to about $4.5 billion in the form of parallel grants and loans for 20 ADB-financed projects and programs.
ADB approved about $1.4 billion for financial markets and infrastructure nonsovereign projects in 2006. This assistance supported 14 equity investments valued at $260.5 million, seven private sector loans worth $425 million, two public sector loans totaling $150 million, two partial credit guarantees of $109.8 million, a political risk guarantee of $15 million, and $455 million in commercial loans under ADB’s B-loan program.
For the first time, ADB supported private sector projects in the Central Asian republics of Azerbaijan and Kazakhstan. ADB also approved for the first time public sector loans without a government guarantee: a $75 million to boost power generation capacity in India and a $75 million to transport gas from South Sumatra to West Java in Indonesia.
As of the end of 2006, ADB’s overall exposure of nonsovereign operations reached $2.6 billion, consisting of $915 million in equity investments, loans of $1.3 billion, and guarantees amounting to $401 million. ADB’s nonsovereign exposure is largest in the infrastructure sector with a total $1.2 billion, followed by the financial sector with $822 million, investment funds and capital markets with $446 million, and exposure to other sectors at $110 million. Nonsovereign exposure was largest in the People’s Republic of China with a share of 21% of total nonsovereign exposure, followed by Indonesia with 14%, India with 13%, and Kazakhstan with 9%.
Significant improvement was made in disbursement last year compared with the past 10 years.
In 2006, loan disbursements totaled $5.8 billion compared with $4.7 billion in 2005. Of the total, $4.4 billion were disbursements from ordinary capital resources while ADF disbursements accounted for the balance.
“In discussions with borrowers, countries highlighted the need for ADB to expand support for poverty reduction programs,” said ADB’s annual report. “The Board discussed a range of new financial mechanisms and business procedure reforms under the innovation and efficiency initiative to respond to client demands.”
The annual report said ADB continued to strengthen its results orientation in 2006. Its country strategies are becoming more selective, more responsive to country priorities, and have better monitoring frameworks, the report added. Project design frameworks have improved but more improvement is needed.
The proportion of projects at risk is declining and project performance has continued its upward trend, said the annual report.