Donors of the Asian Development Bank (ADB) have in principle approved tripling the bank’s capital base to boost lending, ending months of discussion linking the increase to reforms at the multilateral institution.

“The draft will now go to the Board of Governors (the governments of member countries) and replies are expected by April 29,” she said. The draft will be deemed approved if two-thirds of the bank’s 67 member nations reply with three-fourths of them assenting, she said.

The increase will allow the multilateral bank to increase lending to Asian nations.

Quon said lending under the main Ordinary Capital Resources window, which uses market-based interest rates, was likely to increase by about $8 billion over the next two years from the $8.7 billion in loans in 2008.

The ADB also gives soft loans under the Asian Development Fund window, which are funded separately.

The US, the biggest donor to the ADB along with Japan, has long called for more lending to aid poverty reduction in Asia’s poorer economies, away from fast-developing nations like India and China.

Some donors have also sought to link the increase in funding to speedier internal reforms at the development bank, including staff management issues.

But US director Curtis Chin said at Monday’s board meeting: “We believe that ADB will be in a stronger position to execute this general capital increase as a result of the critical reforms that it is undertaking. While much more work is to be done, we believe the ADB is headed in the right direction with the reform agenda.”

A copy of Chin’s speech was seen by Reuters on Tuesday.

He said the bank’s future engagement with fast growing economies should not be dependent on new loans and called for greater support for smaller and less developed nations.

Source: Reuters