World Bank, ADB to back Asian loans
The World Bank and the Asian Development Bank (ADB) want to guarantee more bank loans and bonds issued by crisis-hit Asian countries and corporates as part of a joint effort to help reflate the region's economies.
Japan may also co-operate under the auspices of its US$30 billion regional aid plan.
A joint strategy is being drafted, details of which should emerge during this week's Asia-Pacific Economic Co-operation (Apec) summit, World Bank vice-president for East Asia Jean-Michel Severino said.
'Guarantees are a good way to leverage more money and to find a compromise between classical World Bank or ADB direct, straight-forward lending and full market financing,' Mr Severino said.
He said it was likely such guarantees would be targeted at helping finance expansionary budget deficits as well as assisting the private sector to raise funds.
The World Bank recently agreed to partially guarantee a $300 million bond by the Electricity Generating Authority of Thailand, enabling the state firm to attract a much better spread.
Mr Severino said the World Bank was particularly keen to help utilities raise financing, and the Thai issue could be used as a model.
The World Bank said in a report that for every 1 per cent worth of GDP in fiscal expansion throughout the region, including the mainland and Japan, there would be a boost to growth of 2 per cent in crisis-hit nations.
To help this happen, Mr Severino said the World Bank and other multilateral development organisations were reviewing how best to help countries temporarily finance budget deficits.
'We are not afraid of the funding of the budget deficits,' Mr Severino said.
Tokyo's vice-finance minister for international affairs, Eisuke Sakakibara, confirmed his ministry was in on the talks.
Several Asian countries, including Thailand and the Philippines, are already negotiating with the World Bank and ADB for loan guarantees.
International Monetary Fund (IMF) deputy managing director Stanley Fischer yesterday threw his support behind the idea after a two-day meeting with senior Asian central bank and finance ministries in Kuala Lumpur.
Mr Fischer said: 'The general consensus was that it would be useful to have guarantees of some parts of loans in order to entice the private sector banks.
'But in the long-run, you wouldn't want to make that a permanent feature.' In their joint statement, the 14 Asia-Pacific countries at the talks noted several recent positive developments, including signs of stability and strengthening in financial markets, falling interest rates in industrialised countries and progress made towards providing the IMF with new cash.