U.S. opposition endangers ADB's concessional fund
U.S. opposition endangers ADB's concessional fund
AUCKLAND (AFP): An Asian Development Bank (ADB) concessional fund for Asia's poorest countries is in danger of running out next year following U.S. opposition to talks on replenishing it, a senior bank source said here yesterday.
ADB President Mitsuo Sato met for two hours with the representatives of 23 donor countries on the eve of the bank's 28th annual meeting here in an effort to save the fast-shrinking Asian Development Fund (ADF) from extinction.
The source, who attended the meeting but asked not to be named, said Sato wanted to know the position of each donor on commencing talks on replenishing the fund, currently at about US$1.6 billion and due to run out in 1996.
Emerging Markets, the ADB conference newsletter, said the luncheon meeting with Sato was to be kept secret, but that the news had leaked out to the media.
The source said Sato and Western European donor countries stressed the need for opening negotiations, possibly in September, but that U.S. representatives remained opposed to such talks "at this time" because of budgetary problems.
The three-day meeting starting here Wednesday gathers central bank governors, finance ministers and other senior officials from the 55 member nations of the Philippine-based ADB.
Asked about the possibility the fund might be completely scrapped, the source told AFP that, if the meeting with Sato was to be a gauge, "it could happen if the United States doesn't change its position."
He added that this would be "catastrophic" for Asia's poorest countries, which still have to catch up with the region's robust economic growth.
The ADF is directly sourced from the budget of industrialized ADB member countries such as the United States and Western Europe. ADF funds are lent interest-free to poor Asian nations with a repayment period of up to 40 years and a token service charge of one percent a year.
Negotiation
"It takes time to negotiate," the source said, adding that the current ADF fund was equivalent to only one year of loans. He said the ADB might be forced to cut ADF concessional lending from its present $1.2 billion a year if the fund was to be stretched out.
He said that in theory, a U.S. refusal to give more money to the ADF would not affect other donors, but had held them up from committing funds.
Western European nations would find it hard to justify to their parliaments, as well as "public opinion in their home countries," to give more money to the ADF if the second largest donor, the United States, is reluctant.
The United States committed $680 million to the fund in 1992 but actually paid only $243 million, or 36 percent, the bank newsletter said.
Analysts said it would be harder now for the U.S. administration to get money for international aid because of the Republican-held Congress.
The source said he expected a clash between the United States and borrower countries during the three-day meeting as the poorer nations were expected to push for the opening of the talks.
He said the ADB was expected to discuss the issue of dwindling loan volumes during the meeting.
Overall ADB lending fell 29 percent to $3.7 billion last year as a result of a shift in policy focus from project quantity to quality, leading to stricter criteria in loan approvals.