AIIB’S special gesture * To support countries hit by West Asia conflict

Beijing, May 23:

The Asian Infrastructure Investment Bank (AIIB), in which India is the second-largest shareholder after China, has launched a USD 10-billion fund facility to provide support to member countries affected by the conflict in West Asia.

The Beijing-headquartered bank announced on Thursday that the Energy, Food Security and Economic Resilience Facility is open to its member countries whose development may have been affected by the conflict that has triggered energy shortages in large parts of the world.

Supplementing AIIB’s regular financing instruments, the facility offers a time-bound financing envelope of up to USD 10 billion over two years, which provides “exceptional financing support to its members and clients in addressing their acute needs for energy security, food security and economic resilience,” AIIB said in a statement.

The AIIB, which began functioning in 2016, has more than 100 approved members worldwide, which include China, India, Bangladesh, Pakistan, Iran, Iraq, Australia, Israel, Kuwait, Nepal, Oman, Russia, Singapore, Sri Lanka and the UAE.

It is capitalised at USD 100 billion and is AAA-rated by major international credit rating agencies. According to the bank’s official records, China is its largest shareholder with 26.54 per cent voting shares, followed by India (7.58 per cent), Russia (5.9 per cent) and Germany (4.1 per cent).

The financing facility will be provided in the form of fast-disbursing budgetary support, financing of critical expenditures and imports, and liquidity support to affected members and clients.

Through these instruments, the facility may support the members’ response programmes and economic resilience to address the fallout of the current conflict, as well as to support critical expenditures and imports, it said.

It may also offer liquidity financing to infrastructure companies or financial intermediaries to cover short-term working capital, refinancing and business continuity needs of companies as impacted by the conflict, it said.

The AIIB further said it will work closely together with peer multilateral development banks, the IMF, and other development partners to provide the financing support.

“This facility will enable members to address development impacts stemming from external shocks while strengthening long-term resilience,” AIIB President Zou Jiayi said.

“While providing financing to address members’ critical short-term needs, including access to energy and food, as well as sustaining their reform momentum, AIIB commits itself to continue strong engagement and support for our members’ efforts in infrastructure development, green transition and sustainable growth,” she said.

The AIIB’s initiative follows an announcement by a group of multilateral development banks which has pledged to strengthen support for countries affected by the economic fallout of the ongoing conflict.

In a joint statement issued on May 18, the Manila-based Asian Development Bank, African Development Bank Group, Council of Europe Development Bank, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank Group, and the World Bank Group, said they were responding to requests from governments and clients seeking assistance to address disruptions in energy and fertiliser markets, trade routes, and broader spill over effects on jobs, fiscal positions and external balances.

In view of the West Asia conflict and the closure of the Strait of Hormuz – a key trade route used for over one-fifth of the global supply of oil and gas – economies of several countries, including India, have been adversely affected.

The International Energy Agency has termed the crisis as the largest supply disruption in the history of the global oil market.