Multilateral funding agency Asian Development Bank is planning to raise money in rupee-denominated bonds to finance projects in the country. Image for representational purpose only. , Photo Credit: Reuters
ADB President Masatsugu Asakawa said on 2 May that the bank would explore the option of raising resources through rupee-denominated bonds.
He said here that raising funds in local currency reduces the volatility of foreign exchange.
“We are encouraged to increase our local currency funding to avoid any foreign exchange risk,” he added.
The decision will be based on market conditions, demand and supply, he said.
In the past, the multilateral funding agency Asian Development Bank (ADB) raised money in rupee-denominated bonds to finance projects in the country.
In January 2021, ADB listed the 10-year masala bonds or rupee denominated bonds on the global securities market platform of India INX, an international exchange based at the International Financial Services Center- GIFT City in Gujarat.
Earlier, ADB raised ₹850 crore, about $118 million, from a fresh issue of offshore Indian rupee-denominated 10-year bonds.
It represents ADB’s first new maturity in Indian rupees since 2017 and contributes to an established yield curve that extends from 2021 to 2030 with ₹7,240 crore or $1 billion of outstanding bonds.
In addition to the Indian rupee, ADB has raised resources from other local currency bonds, including the Georgian lari, Indonesian rupiah, Kazakhstan tenge, and the Philippine peso.
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Speaking to reporters at the beginning of the 56th Annual Meeting of the Board of Governors of ADB, he said that $25 billion investment in India over the next five years is subject to approval from the Board and is yet to be finalised.
He said, “This is my ambition. However, India’s biggest needs right now are in South Asia. In my conversation with Prime Minister Narendra Modi during the bilateral meetings, PM Modi emphasized the importance of continuous build out of infra and renewable energy “
Mr. Asakawa had apprised PM Modi during his visit in February ADB intends to provide $20 billion-$25 billion in resources over five years to advance the country’s aspirations for faster, inclusive and green growth.
Emphasizing that India is the fastest growing large economy, Mr. Asakawa said, India’s economic growth will be beneficial for the entire South Asian region, including countries such as Sri Lanka and Pakistan, which face food and energy crises. are doing.
Whereas, ADB cuts India’s GDP growth forecast for FY23 to 6.4% From its earlier projection of 7%, but for FY24, the growth rate is expected to be 6.7% due to increase in consumption, private investment and industry.
India is seeking increased investment from multilateral lending institutions in priority areas of clean energy, infrastructure spending and climate financing, even as it ramps up efforts to boost financial inclusion.
Last month, the bank announced plans to provide at least $14 billion over 2022-2025 in assistance to ease the “worsening food crisis” in Asia and the Pacific, while strengthening food systems against the impact of To improve long-term food security. Climate change and biodiversity loss.
The Russian invasion of Ukraine has disrupted food staples and fertilizer supplies, adding pressure to a global food system already vulnerable to the effects of climate change and supply shocks related to the pandemic.
Mr. Asakawa also announced ADB’s latest climate finance program: the Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP).
“The climate events we have experienced over the past 12 months will only increase in intensity and frequency, so we must take bold action now. IF-CAP is an exciting, innovative program that will have a real impact. example how ADB acts as the climate bank for Asia and the Pacific,” he said.
IF-CAP’s initial partners are Denmark, Japan, Republic of Korea, Sweden, the United Kingdom and the United States.
Those partners are in discussions with ADB about providing a series of grants for project preparation, as well as guarantees for parts of ADB’s sovereign loan portfolio.
The reduced risk exposure created by the guarantees would allow the ADB to free up capital to accelerate new loans for climate projects.
He said that with a model of ‘$1 in, $5 out’, the initial ambition of $3 billion in guarantees could build up to $15 billion in new loans for much-needed climate projects in Asia and the Pacific.