By Makereta Komai, PACNEWS Editor in Milan, Italy
Fiji and Tonga have become the first Pacific developing member countries to give the Asia Development Bank (ADB) the greenlight to raise inshore and offshore bonds in their local currencies.
The two countries deposited their regulatory approval to the ADB at the 58th Annual Meeting, currently underway in Milan, Italy.
According to Annie Wang, the Assistant Treasurer at the ADB, Fiji had first sought approval in 2018.
“It’s not a new approval for Fiji. In 2018, we requested Fiji to allow us to issue ADB’s own debt security denominated in Fijian dollars in the international market. We found at that time it was difficult to raise it in the international market.
“There was a limited demand and our capability of converting the currency – to bring the money onshore and offshore and there were a lot of ‘kinks’ that we need to work through, so we decided to request the Fiji Government to allow us to issue ADB’s bonds in Fiji dollars onshore.
Instead of going international to raise the money, we tried to do it onshore. This way we don’t have to worry about bringing money in and out and converting it. It will be an issuer diversification for Fiji, Wang explained to PACNEWS in Milan.
In the market now, the Fiji Government is an issuer of the bond and the ADB is the diversified issuer.
“We are the diversified issuer giving the investors more choices. You can choose to buy government bonds or ADB bonds.
If you are an investor buying ADB bonds, you know we are using this money toward the development of our project.
“We are lending the money not for our profit. We are not taking money out of the Fiji market but we are raising these funds directly into our project lending for different development purposes in Fiji, may be an SME lending, a gender focus lending to more women, may be focusing on a specific sector, transport, clean energy, telecommunications, health or many different aspects of ADB’s projects, said Wang.
She said the ADB ensures this information is available publicly on the bank’s website.
“As a local Fijian investor, you will know exactly where your money is going. This is to support market development to support our projects.”
For Tonga, it was the island nation’s first approval request to the ADB.
“We raised our local currency approval request and they responded very quickly and favourably. On Sunday here in Milan, they delivered their regulatory approval for ADB to denominate bonds in Tongan Pa’anga both for onshore and offshore for the full suite of approval.
“They gave us the greenlight and welcomed us to the market and allowed us to develop the market and develop the project in local currency, said Wang.
The ADB will now do its due diligence and assess the market before it moves to build up projects for Tonga.
“It could take a while, depending on the condition of the market, depending on the interest, said Wang.
She said the ADB and other global multilateral development banks (MDBs) have been urged by the G20 to scale up local currency financing.
“The G20 has called on MDBs to increase lending in local currency. So, what the ADB is doing is to respond to that call from the G20.
In November last year 10 heads of global MDBs including the ADB agreed to scale up local currency financing to mobilise support for the private sector.
The ADB has had 20 years of pioneering in issuing local currency bonds.
Local currency finance, initially focused on private sector loans, is expanding into sovereign lending, signalling ADB’s evolving role in fostering financial innovation and development across the region.
About a third of ADB’s private sector loans are currently delivered in local currencies, with the Thai baht, Indian rupee, Chinese renminbi, Kazakhstan tenge, and Georgian lari featuring prominently.
ADB’s aggregate local currency portfolio reached more than USD$3.75 billion equivalent as of 31 October 2024 across more than 15 local currencies with local currency loans expected to reach 50 percent of private sector lending over the next years.
