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ADB may cut its lending support due to constrained finance: P Chidambaram

Greater Noida, Sat, 04 May 2013 NI Wire

Asian Development Bank (ADB), the multilateral financial agency may cut its lending support to countries like India by 20 percent in the coming years, warned Union Finance Minister P Chidambaram while addressing the inaugural session of the 46th annual meeting of the ADB board of governors, at greater Noida on Saturday.

"Sustainable level of lending" by ADB was expected to decline, from $10.1 billion to $8.0 billion," said Chidambaram, by urging the nations to contribute more to ADB to eliminate its financial crisis.

"Thus, the support that ADB can deliver for economic development and poverty reduction in the region will be seriously constrained by the lack of adequate capital. We may hit the wall in about three years," said Chidambaram, who is chairing the ADB board of governors' meet.

He said the prevailing low interest environment had resulted in low investment income and limited the amount that can be ploughed back into equity for the ADB.

"The financial position of ADB is sound at the moment but is constrained. The prevailing low interest environment has resulted in low investment income and has limited the amount that can be ploughed back into equity for the Bank. I am afraid this low interest environment will continue for some more time," he said.

Chidambaram urged the member countries to increase their support to the multilateral agency.

"Fellow Governors, I call upon you to consider ways and means to increase ADB's resources to meet Asia's needs for infrastructure, economic growth and poverty reduction," he said.

Chidambaram pointed out that an estimated $8-10 trillion investment was required in physical infrastructure in Asia over the next decade.

In India, the estimated investment in infrastructure during the 12th five year plan (2012-17) period is nearly $1 trillion. Half of it is expected to come from private sector.

"Given the humongous sum of money that is required, government outlays for infrastructure need to be augmented by the private sector.

"ADB has its work cut out. It must continue to allocate a major portion of its sovereign lending for infrastructure development," Chidambaram said.

--With IANS Inputs--

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