Sovereign Cofinancing

Sovereign cofinancing is partner financing mobilized to directly contribute to ADB project outcomes. This is cofinancing from ADB’s bilateral and multilateral partners, as well as from philanthropy and the private sector. All ADB projects and technical assistance can be cofinanced, with details varying in terms of

• how much control and responsibility ADB has for the project (i.e., full administration, partial administration, or no administration)
• what terms apply (i.e., loans or grants)
• whether it is for a specific project (project-specific cofinancing) or theme (trust fund activities)

In 2022, sovereign cofinancing totaled $4.3 billion, declining by 13% from 2021’s total of $5 billion. This change is mainly due to cofinancing approval for several projects slipping to 2023 to ensure project readiness. A total of 124 sovereign projects and technical assistance benefited from these external resources.

More on ADB’s sovereign cofinancing in 2022.

Modalities

When cofinancing with ADB, the bilateral, multilateral, and private sector partners can choose from two modalities. They can opt for “project-specific cofinancing,” which refers to supporting individual projects, programs, or technical assistance. They can also choose to create a trust fund or contribute to one or more of ADB’s existing trust funds.

These modalities are arrangements that deepen and focus ADB’s partnerships with financing partners while offering them more entry points for cofinancing opportunities. They are instruments that seek partners’ commitment to support ADB’s program and project operations in line with agreed upon principles and procedures.

Partnership Framework Agreements

ADB also welcomes strategic and long-term partnerships for development. For partners who want to try this route, they can agree with ADB to set an indicative amount of development finance for a specific amount of time, to be distributed among specific projects or trust funds. ADB and the financing partner formalize this agreement through a partnership framework agreement (PFA).

Also expressed as framework cofinancing arrangements, memoranda of understanding, and similar terms, PFAs facilitate better strategic collaboration, cooperation, and complementarity. They involve a funding envelope to cover a broad range of planned and coordinated cofinancing activities over a period. They also serve as a tool for surfacing and resolving concerns that may arise during project negotiations.

In 2022, ADB amended and renewed PFAs with the following financing partners:

Partner	Timeframe	Highlights
France (with Agence Française de Developpement)	12 October 2022 - 12 October 2028	joint financing target of $3 billion with ADB for 2022-2025 areas of collaboration include natural resource management and biodiversity, the blue economy, and social imbalances and inequalities scope expands to the Pacific region
Germany (with KfW Development Bank)	2 July 2014 - 31 December 2025	amendment to the 2014 Cofinancing MOU extends the partnership until 2025 increases KfW's cofinancing target by $2 billion
United States (with United States Agency for International Development [USAID])	Continuous         15 August 2022 - 15 August 2027	amendment to the Regional Development Objective Agreement between ADB and USAID originally signed in 2019 expands the scope of collaboration to include trafficking in person and education regional agreement with ADB focused on the Pacific development objectives are to strengthen community resilience, advance resilient economic growth, and strengthen governance USAID commits to allocate up to $6.2 million to support the objectives
International Fund for Agricultural Development	17 December 2014 - 17 December 2023	retroactively extend the partnership up to December 2023
New Development Bank (NDB)	23 June 2022 - 23 June 2027	develop and facilitate collaboration set out areas for strategic cooperation toward the achievement of common objectives ADB and NDB intend to develop sector and thematic collaboration, collaborate on financial assistance for infrastructure and sustainable development project, and foster knowledge partnership

Implementation Arrangement

ADB’s work on sovereign cofinancing is also a partnership among ADB’s departments, with the regional departments leading the project design and implementation and the Strategic Partnerships Division (SPSP) of the Strategy, Policy and Partnerships Department and the Partner Funds Division (SDPF) of the Sustainable Development and Climate Change Department providing guidance and support vis-à-vis cofinancing operations.

SPSP takes the lead in partnership policy and strategy formulation as well as in the establishment of cofinancing partnerships. It spearheads the mobilization of external resources through project-specific cofinancing and broader cofinancing arrangements. Specifically, SPSP provides:

• Partner relationship management
• Support to internal clients
• Cofinancing policies and procedures

SDPF takes charge of the administration of broad-based single- and multi-donor trust funds. It assists other departments in administering existing trust funds, projects, and TA under project-specific cofinancing, and global funding initiatives after the signing of cofinancing agreements. The division also manages the single repository of bank-wide data and reports on sovereign cofinancing. SDPF takes charge of:

• Trust fund resource mobilization
• Design of new trust funds
• Cofinancing administration
• Fund manager support, guidelines, data & analytics

This partnership is active and in sync with the ADB project cycle, working on specific cofinancing actions in each of the five distinct stages of project implementation. During planning of the project cycle, SPSP helps identify mutual interests and areas of priority among partners, and then, as project preparation rolls around, it collaborates with partners, governments, and other stakeholders in the formulation of a joint terms of reference. At the project approval stage, SPSP is joined by SDPF, and together, they negotiate with donors and work on securing partner commitment.

During the project implementation stage, SDPF supports regional departments. They communicate directly with financing partners on project implementation and administration matters. When there is any change in the project that affects the cofinancing agreement, SDPF takes charge, with support from the Office of the General Counsel (OGC), of the drafting and signing of relevant amendments. When the project reaches completion, SPD and SDPF documents the cofinancing results in official reports such as the ADB Annual Report, Operations Statement, and Partnership Report.