Nakao noted that the situation in Asia and the Pacific region is now different compared to when ADB was established. At that time, most recipient countries were middle-income countries.

The Asian Development Bank (ADB) last week approved a series of new diversified financing terms for developing member countries that borrow only market-based loans from the institution.

The multinational lending bank said the reform reflects a regional landscape following the market shift in Asia and the Pacific region.

According to ADB, recipients of their funds are divided into three groups according to their per capita income levels and creditworthiness.

Group A countries are eligible for Asian Development Fund (ADF) grants and concessional loans, Group B countries have access to both concessional and market-based loans, and Group C countries have access only to market-based loans.

The financing terms offered to Group A and B countries are already differentiated with a combination of grants, concessional loans, and market-based loans while Group C countries have a wider spread of per capita incomes but are all offered the same financing terms.

“The current flat pricing structure offered to our recipient countries borrowing only market-based loans does not reflect the high level of diversity among these countries in their income levels, capacities to mobilize domestic resources, and access to capital markets,” outgoing ADB president Takehiko Nakao said.

With the new pricing in place, Nakao said the bank can now continue engaging with countries at a more advanced stage of development on terms that remain fair and competitive with other multilateral development banks.

Nakao noted that the situation in Asia and the Pacific region is now different compared to when ADB was established. At that time, most recipient countries were middle-income countries.

In the new pricing framework, Group C countries will be divided into several sub-groups according to their gross national income (GNI) — lower-middle-income, upper-middle-income, and high-income.

Meanwhile, higher-income sub-groups will pay higher maturity premiums for longer-term loans. For instance, upper-middle-income countries with GNI per capita of $6,976 to $12,375 will pay up to 30 basis points additional maturity premium depending on the loan tenor.

Moreover, the new pricing framework will provide more favorable terms to more vulnerable countries such as Small Island developing states and countries transitioning from Group B to Group C.

The additional income from the new pricing will supplement existing Technical Assistance Special Funds to support policy advice, institution building, and knowledge sharing in ADB’s developing member countries.

Effective 1 January 2021, pricing framework will also help build reserves for expanding ADB’s lending capacity in the long term.

These countries, though with relatively higher income and strong financial capacity, still need ADB’s support to tackle pockets of poverty, strengthen institutions, and address climate change and other areas with externalities

Approved in July 2018, ADB’s Strategy 2030 is set out in the direction where ADB would apply differentiated approaches to various groups of countries.