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Banking & Finance

Asian Development Bank to increase its capital base, lending

MANILA -- The Asian Development Bank plans to triple its capital base to $50 billion by incorporating funds for low-income countries into that capital base, sources told the Nikkei on Thursday.

     The move is intended to increase the bank's fund-raising and lending abilities as demand for social infrastructure soars in Asia.

     The ADB will deliberate its capital-boosting plans during its four-day annual meeting, which begins Friday in Kazakhstan.

     Currently, the Manila-based organization has a capital base of about $17 billion. Japan, the U.S. and other countries contribute a total of $33 billion to the Asian Development Fund, an ADB-affiliated fund for lending to low-income countries. The integration of the ADF is scheduled for 2017.

     The ADB issues bonds to raise cash equal to three times its capital base, then lends the cash to infrastructure projects in emerging countries.

     The ADF uses cash contributions from member countries to lend to low-income countries; it does not have the ability to raise funds from the markets.

     The sources said that the integration will enable the ADB to accumulate debts while maintaining its financial health.

     According to projections, by 2020 some $800 billion will be needed every year for infrastructure projects in emerging Asia. The ADB intends to use its larger capital base to increase its annual lending by 20%, to $15 billion.

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