Friday, May 1, 2009

ADB to Boost Lending Plans After Capital Increase, Nag Says

The Asian Development Bank plans to disburse an additional $10 billion in loans in the next two years to fund infrastructure projects and other development programs after its members tripled its capital.

The Manila-based lender will probably extend a total of $32 billion in loans this year and next, compared with initial plans to disburse $22 billion, Managing Director Rajat Nag said today in an interview in Bali, where ADB is holding its annual meetings. It approved a record $10.5 billion in loans in 2008.

“We will ramp up our operations very significantly,” Nag said. “The needs for the region are still very large, especially after the financial crisis.”

ADB governors last month approved a 200 percent increase in the lender’s capital to $165 billion. The boost in lending will help the bank in its efforts to reduce poverty in a region where more than half the population lives on less than $2 a day.

The capital increase will also allow the bank to sell more debt, Nag said. The ADB raised a record $9.4 billion in 2008, and may borrow more than the $10 billion that it had initially planned this year, he said.

“We will borrow even more so that we can lend more,” Nag said. “The borrowing program this year will probably change as we have a look at the needs, and now that we have a larger capacity.”

It extended $2.9 billion of loans last year to India, the largest borrower.

Asian Growth

Asian economic growth this year will slow to the weakest since the 1998 financial crisis as the global recession hurts exports, the ADB said in March. Asia excluding Japan will grow 3.4 percent this year, after expanding 6.3 percent in 2008, the organization predicts.

Economists are raising their estimates for the region’s growth this year amid expectations of a recovery in China and as indicators show production declines may have bottomed. The ADB predicts Asian economies will recover next year with a 6 percent expansion.

“It’s probably too optimistic to say that the worst is over, but we are seeing a slowing down in the decline,” Nag said. “The end is in sight in this downturn.”

Asia is better prepared to respond to an outbreak of the swine flu virus, formally known as H1N1, after its experiences with severe acute respiratory syndrome, or SARS, and the avian flu, Nag said.

“It’s an evolving situation but systems are in place to deal with it,” Nag said. “We have to watch very carefully but not overreact.”