A Graduation Policy for the Bank's DMCs

Abstract

Since 1977, the Bank has had a three-tier classification system that forms the basis for determining the eligibility of its developing member countries (DMCs) to borrow from the Asian Development Fund (ADF) and for applicable limits on Bank financing of project costs. DMCs are classified into three groups based on two criteria: (i) per capita gross national product (GNP); and (ii) debt repayment capacity. Group A DMCs are fully eligible for ADF, Group B DMCs (“blend” economies) are eligible for limited amounts of ADF in particular circumstances, and Group C DMCs are not eligible for ADF financing. While per capita GNP has been identified as a criterion, Bank policy is that cutoff points for the various groups should not be rigid. Also, the debt repayment capacity criterion is assessed in a qualitative way. Classification is determined at the time of entry. No borrowing country has been formally graduated from one group to the next to date. Further, no DMC has been formally graduated from Bank assistance, because the current policy does not envisage a stage beyond Group C.