ADB lends to Cook Islands

The Asian Development Bank has approved an 5DR1.977 million ($3 million equivalent) loan to the Cook Islands for relending to the Cook Islands Development Bank (CIDB) for meeting medium and long-term demand for devel opment finance in the islands.

The loan will be drawn from the Bank’s Special Funds resources, with a service charge of one percent per annum and repayment over 40 years, including a 10-year grace period.

The project will result in private-sector investment in develop ment projects, thereby stimulating economic growth and creat ing employment. It will generate approximately 310 new jobs, incremental investment of $7 million and sales of $9 million.

In addition, an advisory technical assistance grant of $250,000 will be made available to support the consolidation of business advisory services within CIDB and the expansion of existing services to provide national coverage.

As the borrower, the Cook Islands will bear the foreign exchange risk and relend to CIDB, as an intermediary, in New Zealand dollars, at an interest rate adjusted semi-annually to equal the bank’s lending rate on multi-currency loans from ordi nary capital resources. Repayment by CIDB will be over 15 years, including a grace period of three years. CIDB will use the proceeds of the loan to make sub-loans to development projects.

It is expected that the loan will be fully committed with three years, and completely disbursed within four years, of the date of loan effectiveness. Sub-loans may range in size between $1,200 and $300,000 equivalents.

The project is the third credit line to the CIDB to support devel opment projects undertaken by the private sector. Two credit lines, each worth $1.5 million, were approved in 1982 and 1992.

The bank’s strategy for the Cook Islands focuses on the need for private-sector development, and for a reduction in the current excessive public-sector involvement in business activities. The bank’s role is identified to support development of a policy envi ronment conducive to business activity, together with direct interventions to support private-sector development and improve the operation of the financial system.

The ADB is an international development finance institution engaged in promoting the economic and social progress of its developing member countries in the Asia-Pacific region. Its strategic objectives are the promotion of economic growth; the reduction of poverty; the improvement in the status of women; the development of human resources, including population plan ning; and the sound management of natural resources and the environment. ■