The Asian Development Bank (ADB) is changing its currency management practices to benefit borrowers from its concessional Asian Development Fund (ADF).

The current practice of managing ADF resources in as many as 15 currencies will be discontinued and an approach based on special drawing rights (SDR) introduced.

ADF has since 1973 been ADB’s major instrument of concessional financing to help fight poverty and improve the quality of life in ADB’s poorest developing member countries in Asia and the Pacific. Some 30 members of the ADB have provided direct contributions to ADF.

Under the new system, while ADF donor contributions will continue to be made in national currencies, US dollars or in SDR, ADB will convert these contributions along with ADF loan reflows into the currencies that constitute the SDR.

SDR is a unit of account of IMF and some other international organisations, valued based on a basket of key international currencies currently consisting of the euro, yen, sterling and US dollars.

Under current practice, borrowers’ obligation to repay ADB is effectively determined based on the currencies that ADB takes out of its liquidity pool for disbursement. Instead, in the future the borrowers’ obligations regarding repayment of new ADF loans will be determined purely in SDR.

The proposed currency practice will not change ADF’s replenishment framework or the terms and modalities of ADF concessional financing.