Asian Development Bank planning to consider Rupee-denominated bonds

Masatsugu Asakawa has suggested that the bank will explore issuing rupee-denominated bonds as long as the market circumstances and demand remain stable. 

Why the Rupee-denominated bonds?

Asakawa stated that the bank plans to enhance its local currency financing in order to lessen exchange risks for member countries such as India. He stressed that the bank is delighted to do so and is interested in expanding local lending as long as economic conditions and demand are favourable. In January 2021, the ADB listed 10-year rupee-denominated bonds worth ₹300 crores on India INX’s global securities market platform at International Financial Services Center- Gift City in Gujarat.

The President indicated at the start of the ADB’s yearly session that the anticipated $25 billion investment in India over the course of the next five years has yet to be confirmed and is pending Board approval. While expressing his desire to make such an investment, the President also stated that India has, at present, the highest demand for investment in South Asia. Although the details of his dialogue with Prime Minister Narendra Modi weren’t made public, the Prime Minister emphasised the necessity of moving forward to build infrastructure and renewable energy. When asked about the growth prospects of South Asian markets, the President expressed his belief that India’s economic growth would benefit the entire region, including countries like Sri Lanka and Pakistan, which are facing their own food and energy crises.

Although the ADB has lowered its GDP growth forecast for India in FY23 from 7% to 6.4%, it expects growth to accelerate to 6.7% in FY24 due to investment from private parties and industry growth. India has urged international lending agencies to increase funding for important sectors such as clean energy, infrastructure, and funding for climate change while also promoting financial inclusion. 

The Asian Development Bank recently announced plans to offer at least $14 billion in assistance from 2022 to 2025 to ease a deepening food crisis in Asia and the Pacific, with a focus on upgrading food systems to withstand the effects of climate change and biodiversity loss. The Russian invasion of Ukraine has disrupted food staples and fertiliser supplies, adding strain to a global food system that is already weakened by climate change and pandemic-related supply shocks.

ADB’s Climate Finance Project

Masatsugu Asakawa introduced the Asian Development Bank’s latest climate finance project, the Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP), during an interview with the media on Tuesday. Given the rising severity and frequency of climate-related incidents in the last year, Asakawa emphasised the importance of strong action. He hailed IF-CAP as an ambitious and significant programme that highlights the ADB’s role as the Asia-Pacific region’s climate bank. IF-CAP’s original partners are Denmark, Japan, South Korea, Sweden, the United Kingdom, and the United States. They are now in discussions with ADB about providing project preparation funds and guaranteeing portions of ADB’s sovereign loan portfolios. 

The guarantees will assist in reducing ADB’s risk exposure while freeing up funds for new climate-related loans. With a funding concept of “one dollar in, five dollars out,” the initiative’s original aim of $3 billion in guarantees could result in up to $15 billion in new loans for critical climate projects throughout the Asia-Pacific region.