The Asian Development Bank (ADB) has approved additional funds worth $3.4 billion to help developing nations to tide over the global economic crisis.
To battle the raging turmoil, a major chunk of the funds to the tune of $3 billion would be provided to the countries to ramp up their fiscal spending.
ADB's board of directors has approved the allocation of $3.4 billion in additional funds to help developing member countries in responding to the global crisis, it said in a statement today.
The bank has established a $3 billion "Countercyclical Support Facility (CSF)" that would provide short-term, fast-disbursing loans.
"It will support Developing Member Countries (DMCs) aiming to ramp up fiscal spending to counter the crisis, but who lack the financial means to do so amid tight global credit conditions and a sharp increase in funding costs," the statement said.
The amount from the facility would be capped at $500 million for each country.
Also Read
Further, the multilateral lending agency would provide $400 million to the Asian Development Fund. This would benefit countries with no access to the bank's Ordinary Capital Resources (OCR).
Meanwhile, ADB said it plans to increase its lending assistance by more than $10 billion in 2009-2010, bringing the bank's total assistance for these two years to about $32 billion.
"This compares with about $22 billion in 2007-2008. Of the proposed $10 billion increase in lending, $1 billion is committed to support trade finance, $3 billion to the CSF and $6 billion to extending loans such as those for infrastructure investment," the statement said.
On the other hand, the Asian Development Fund resources are disbursed in the form of concessional loans and grants to low-income DMCs with limited debt repayment capacity.
According to the ADB, the additional Asian Development Fund resources would be used to provide funds to finance key development investments in low-income countries that are among the most fiscally constrained in responding to the crisis.
Conditions for accessing the Countercyclical Support Facility include a significant slowdown in growth, exports and remittances and fiscal constraints, among others.
ADB noted that loans under the new facility would have a five-year tenor, with a three-year grace period. The cost would be around "200 basis points over ADB’s financing cost, pricing that is lower than its special program loans facility set up to help the region in the wake of the 1997-1998 Asian financial crisis", it added.