The multilateral funding agency Asian Development Bank plans to raise funds in rupee-denominated bonds to finance projects in the country. Image for representation purposes only. | photo credit: Reuters
AfDB President Masatsugu Asakawa said on May 2 that the bank would explore the possibility of raising resources through rupee-denominated bonds.
Raising funds in local currency reduces forex volatility, he said here.
“We are encouraged to increase our local currency funding to avoid any type of currency risk,” he said.
The decision will be based on market conditions, demand and supply, he added.
In the past, the multilateral financing agency Asian Development Bank (AfDB) raised funds in rupee-denominated bonds to finance projects in the country.
In January 2021, AfDB listed 10-year masala bonds or rupee-denominated bonds, worth ₹300 crore on India’s global securities market platform INX, the international stock exchange located at the Center International Financial Services – Gift City in Gujarat.
Earlier, the AfDB raised ₹850 crore, or about $118 million, through a new 10-year Indian Rupee-linked offshore bond issue.
It was the AfDB’s first new maturity raised in Indian rupees since 2017 and contributes to an established yield curve that stretches from 2021 to 2030 with ₹7,240 crore or $1 billion of bonds outstanding.
Besides the Indian rupiah, the AfDB has raised resources from other local currency bonds, including Georgian lari, Indonesian rupiah, Kazakh tenge and Philippine peso.
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Speaking to reporters at the start of the 56th annual meeting of his AfDB board of governors, he said the $25 billion investment in India over the next five years is subject to board approval and has not yet been decided.
“That is my ambition. However, India currently has the greatest needs in South Asia. During my conversation with Prime Minister Narendra Modi during the bilateral meetings, Prime Minister Modi emphasized the importance of continued construction of infrastructure and renewable energy,” he said.
Asakawa had told Prime Minister Modi during his visit in February that the AfDB’s intention to provide $20-25 billion in resources over five years was to advance the country’s aspirations for rapid, inclusive growth. and green.
Pointing out that India is the fastest growing major economy, Mr. Asakawa said India’s economic growth will benefit the entire South Asian region, including countries like Sri Lanka. and Pakistan, which faced food and fuel crises.
While the AfDB has cut India’s GDP growth forecast for FY23 to 6.4% from its previous projection of 7%, but for FY24 the growth rate is expected to be 6.7% thanks to consumption, private investment and industrial growth.
India has sought increased investment in priority sectors of clean energy, infrastructure spending and climate finance from multilateral lending institutions, even as it has pushed to boost financial inclusion.
Last month, the bank announced its intention to provide at least $14 billion over the period 2022-2025 to help alleviate a “worsening food crisis” in Asia and the Pacific, while aiming to improve security. long-term food supply by strengthening food systems against the impact of climate change and loss of biodiversity.
The Russian invasion of Ukraine has disrupted staple food and fertilizer supplies, straining a global food system already weakened by the impact of climate change and pandemic-related supply shocks.
Mr. Asakawa also announced the AfDB’s newest climate finance program: the Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP).
“The weather events we have experienced over the past 12 months are only going to increase in intensity and frequency, so we need to take bold action now. IF-CAP is an exciting and innovative program that will have real impact. And this is another example of how the AfDB serves as a climate bank for Asia and the Pacific,” he said.
The initial IF-CAP partners are Denmark, Japan, the Republic of Korea, Sweden, the United Kingdom and the United States.
These partners are in talks with the AfDB to provide a range of project preparation grants as well as guarantees for parts of the AfDB’s sovereign loan portfolios.
The reduced risk exposure created by the guarantees will allow the AfDB to free up capital to accelerate new lending for climate projects.
With a “$1 in, $5 out” model, the initial ambition of $3 billion in guarantees could create up to $15 billion in new loans for much-needed climate projects in Asia and the Pacific, a- he declared.