Manila, Dec 22, 2005 AEST (ABN Newswire) - ADB (ASX: ATB) is changing its currency management practices to benefit borrowers from its concessional Asian Development Fund (ADF).
The current practice of managing ADF resources in as many as 15 currencies will be discontinued and an approach based on special drawing rights (SDR) introduced.
ADF has since 1973 been ADB's major instrument of concessional financing to help fight poverty and improve the quality of life in ADB's poorest developing member countries in Asia and the Pacific. Thirty members of ADB have provided direct contributions to ADF.
Under the new system, while ADF donor contributions will continue to be made in national currencies, US dollars or in SDR, ADB will convert these contributions along with ADF loan reflows into the currencies that constitute the SDR.
SDR is a unit of account of IMF and some other international organizations, valued based on a basket of key international currencies currently consisting of the euro, Japanese yen, pound sterling and US dollars.
Under the current practice, borrowers' obligation to repay ADB is effectively determined based on the currencies that ADB takes out of its liquidity pool for disbursement. Instead, in the future the borrowers' obligations regarding repayment of new ADF loans will be determined purely in SDR.
"The change in system is in line with the overarching objective for ADB to be more relevant, responsive, and client oriented," says ADB Treasurer Mikio Kashiwagi.
"The advantages are that it provides borrowers with a simplified and predictable currency system; offers a consistent loan product to borrowers; harmonizes ADB's practices with those of other multilateral development banks; and enables both borrowers and ADB to manage and mitigate exchange risk exposure."
The proposed currency practice will not change ADF's replenishment framework or the terms and modalities of ADF concessional financing.
Read the full paper here:
http://www.adb.org/Documents/Reports/ADF/currency-management-proposal.pdf
Contact
Graham Dwyer
Email: gdwyer@adb.org
Tel:+632 632 5253; +632 898 3413
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