ADB, World Bank sign $3 billion agreement to boost lending capacity in Asia and the Pacific
The Asian Development Bank (ADB) has signed a $3 billion sovereign exposure exchange agreement (EEA) with the World Bank to increase ADB’s lending capacity for its developing member countries, the press service of the Bank reported.
The agreement is ADB’s first EEA with the World Bank and its sixth EEA with other multilateral development banks (MDBs) since 2020, bringing the cumulative exchanged amount to $9 billion.
In an era of overlapping challenges, strategic collaboration among MDBs has never been more critical, said ADB Vice-President for Finance and Risk Management Roberta Casali. "Exposure exchanges can be transformative because they will allow us to work together systemically, reduce concentration risk, and expand our reach precisely when our member countries need us the most."
In turn, Managing Director and World Bank Group Chief Financial Officer Anshula Kant said that this EEA with ADB demonstrates the World Bank’s strong commitment to work hand in hand with other MDBs to utilize every opportunity to expand the overall lending capacity in the MDB sector.
A sovereign exposure exchange is a risk management tool to reduce portfolio concentration risks. It provides capital relief for sovereign-focused MDBs by exchanging concentrated loan exposures with exposure to countries where their credit exposure is less or nonexistent. By lowering exposure concentration, ADB reduces its capital usage, thereby increasing its lending capacity. It also lowers the net exposure to borrowers included in the exchanges, providing additional borrowing headroom under ADB’s limits framework.
ADB continuously explores ways to effectively manage its capital to help the region address simultaneous crises. In 2023, it unlocked $100 billion in additional lending capacity over the next decade by updating its Capital Adequacy Framework.
Earlier, it was reported Kazakhstan’s Deputy Prime Minister – National Economy Minister Serik Zhumangarin attended a meeting of the Swiss Constituency of the International Monetary Fund and the World Bank Group last Friday.
