Phl is 5th biggest ADB borrower

Ted P. Torres - The Philippine Star

MANILA, Philippines - The Philippines is the fifth largest borrower of loans extended by the Asian Development Bank (ADB), accounting for 10 percent of disbursed loans or roughly $5.2 billion as of end-2012.

In terms of loans approved, the country ranked behind China (25.9 percent), India (22.3 percent), Pakistan (16.5 percent) and Indonesia (11.2 percent).

Total loans approved by the ADB last year amounted to $9.4 billion.

Total loans disbursed or released as of end-2012, meanwhile, stood at $52.814 billion, the biggest amount registered since 2007.

The top country/borrowers of released loans are China (24.9 percent), India (21.8 percent), Indonesia (18.1 percent), Philippines and Pakistan (9.9 percent each).

In terms of borrowings to sectors, the transportation and information and communications technology (ICT) accounted for 33.2 percent of total borrowings. It was likewise the largest borrower since 2003 accounting for an annual average 32 percent share.

The second largest borrower by sector is energy, accounting for 24.8 percent of total, followed by public sector management. The agriculture and natural resources sector accounted for nine percent of total borrowings, followed by the finance sector, and the industry and trade sector.

The ADB’s top 10 subscribers/creditors are: Japan, the United States, China, India, Australia, Indonesia, Canada, Korea, Germany, and Malaysia.

Both Japan and the US has equal number of shares (15.6 percent each) and voting power (12.8 percent each).

China and India are the third and fourth largest shareholders and voting rights holders, respectively. The two countries are also the two largest borrowers.

Meanwhile, Moody’s Investor Service gave ADB a “stable” outlook in its just-released report.

Moody’s has given ADB a long-term rating of Aaa and a short-term rating of Prime-1, the highest level in the rating agency’s scale.

The international credit rating agency said that the three main reasons for the high ratings were ADB’s prudent financial policies, strong support from its shareholders/subscribers, and its established preferred creditor status.

Moody’s said these ensure strong capital adequacy and substantial protection against a worst-case scenario.

“Nonetheless, were such a dire scenario to play out, the bank’s bondholders would still be protected by the large amounts of callable capital available to ADB, especially in the wake of the fifth general capital increase, which resulted in a more than two-fold increase in callable capital,” it added.

The report pointed out that ADB’s net income declined over the past year largely due to unrealized losses from fair value adjustments of swaps related to the bank’s borrowings, although operating income continues to be in surplus.

“The resulting decrease in profitability as represented by the return on earning assets does not pose a risk to usable equity given the recent increases in paid-in capital,” it explained.

Risk-weighted measures of capital adequacy have improved markedly in the past year, largely due to the upgrade of Indonesia’s sovereign rating. At the same time, the credit stresses mainly associated with Pakistan prompted the bank to increase loan loss reserves in 2012.

Nevertheless, ADB “preferred creditor status” is likely to be maintained in the case of any borrowing member debt default.

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