Asian Development Bank (ADB) President Masatsugu Asakawa recently announced new, more concessional lending terms for small island developing states (SIDS) to support efforts to meet their infrastructure needs, strengthen social services, and scale up investments in climate adaptation and disaster risk reduction.
Mr. Asakawa made the announcement during a meeting with Fiji Minister of Finance and ADB Governor Biman Prasad in Suva.
The new lending terms, which took effect on 1 October 2023, represent the most concessional financing available from ADB, aside from grants. The terms include a 1% interest rate, a 10-year grace period, a 40-year maturity, and principal repayments of 2% per year for the first 10 years after the grace period and 4% per year thereafter. The new terms will help reduce future debt service obligations of SIDS, which have seen eroding fiscal space and rising debt burdens due to the lingering impacts of the pandemic and subsequent global shocks.
“ADB is a long-standing partner in development with the Pacific and is committed to continuously refining its differentiated approach to helping SIDS build resilience amid intensifying vulnerabilities,” Mr. Asakawa said. “This significant improvement in concessional lending terms will help SIDS ramp up critical investments, including for climate operations and other global and regional public goods.”
With these changes, all ADB SIDS members are eligible for highly concessional funding or grants. The Cook Islands, Fiji, Niue, Palau, Papua New Guinea, Solomon Islands, Timor-Leste, and Vanuatu are eligible for the concessional ordinary capital resources lending. Solomon Islands and Vanuatu are also eligible for grants from the Asian Development Fund, which provides grants to ADB’s poorest and most vulnerable developing member countries, along with the Federated States of Micronesia, Kiribati, Maldives, the Marshall Islands, Nauru, Samoa, Tonga, and Tuvalu.
By helping SIDS address vulnerabilities and incentivizing investments in global and regional public goods, the shift to more concessional financing terms contributes to ADB’s ongoing alignment with the multilateral development banks’ evolution agenda.