Việt Nam's ineligibility for ADB's Asian Development Fund (ADF) 14 is a positive indication for the country, given its already high income level, said Tomuyuki Kymura, Head of the bank’s Strategy and Policy Department.

The ADB and donors have reached an agreement to replenish the ADF 14 and Technical Assistance Special Fund (TASF) 8 with a total of US$5 billion. The commitment was announced during the ADB President's press conference on May 3, which took place at the 57th Annual Meeting of the ADB in Tbilisi, Georgia.

The ADF is ADB’s largest source of grants for operations in its poorest and most vulnerable developing member countries and is replenished every 4 years. ADF 14 - marking the 13th replenishment since the fund’s establishment - will support grant operations during 2025 ­­­–28. The ADF 14 replenishment is about 22 per cent higher than the $4.1 billion available in ADF 13, and will provide eligible ADB members with the largest-ever volume of ADF grants. TASF 8 will provide grants to assist in project preparation, capacity building, and the provision of technical or policy advice.

“Grants are more important than ever as our poorest and most vulnerable members seek to reverse recent development setbacks and take urgent action to combat the climate crisis,” said ADB President Masatsugu Asakawa. “This remarkable replenishment demonstrates ADF donors’ continued partnership with ADB to address the pressing development challenges of those most in need.”

“Regarding ADF, Việt Nam’s income level is already very high. But we are now actually thinking about countries like Việt Nam, although they are not eligible for ADF, but facing serious climate challenge. How we can actually help come to that with Việt Nam, finance those projects, maybe providing some concessional financing. So it's still under discussion,” Kymura said.

Accordingly, ADF 14 prioritises dedicated assistance to small island developing states that are particularly vulnerable - especially to climate change - and to countries in fragile and conflict-affected situations.

ADF 14 will continue to play a critical role in supporting climate change adaptation and disaster risk reduction. It will enable expanded assistance for regional co-operation and regional public goods, and for transformative gender action. It will also provide agile assistance in the event of emergencies through its crisis response window.

More than $2.5 billion, or 51 per cent, of the replenishment will be funded by donors including two new countries: Armenia and Georgia. ADB will significantly increase its net income transfers to ADF, from just under $1.2 billion in ADF 13 to almost $1.6 billion in ADF 14, an increase of 35 per cent. The remaining $0.9 billion will comprise transfers from earlier ADF cycles and income from liquidity investments. In parallel, ADB intends to provide $16.7 billion in concessional loans, which have very low interest rates over long repayment periods, during the ADF 14 period. Overall, ADB will be able to provide more than $8 in grants and concessional loans for every $1 in donor contributions.

Kymura said: “I used to be the ADB country director in Việt Nam long time ago (from July 2022 to October 2015). So at that time, the Government was borrowing a lot from us, but now Government is actually not really borrowing much. But at the same time, private sector in Việt Nam is actually borrowing more from us, which is a healthy transition.”

“So depending on countries’ income level and their capacity to repay, we basically use three different types of views. Basically, we recently review our policy to manage our capital. Then we found that we can actually significantly increase our lending capacity. So far, ADB has been providing about $26 billion per year. Now we know we can increase this maximum by $10 billion. So how we can use this $10 billion. We can actually increase this relatively concessional loan so that countries like the Philippines, or India or Việt Nam can borrow more from us. At the same time, we're also increasing the size of this concessional loan used to be about $4.23 billion. Now it's going to be about $5 billion at least per year,” he added. — VNS