Seoul, Oct 20 : The Asian Development Bank (ADB) on Monday said it has signed a 3-billion-US-dollar sovereign exposure exchange agreement (EEA) with the World Bank to increase the ADB's lending capacity for its developing members.

The agreement is the ADB's first EEA with the World Bank and its sixth EEA with other multilateral development banks (MDBs) since 2020, bringing the cumulative exchanged amount to 9 billion dollars, the Manila-based bank said in a press release.

"In an era of overlapping challenges, strategic collaboration among MDBs has never been more critical," said ADB Vice-President for Finance and Risk Management Roberta Casali, reports Xinhua news agency.

"Exposure exchanges can be transformative because they will allow us to work together systemically, reduce concentration risk, and expand our reach precisely when our member countries need us the most," said Casali.

"This EEA with ADB demonstrates the World Bank's strong commitment to work hand in hand with other MDBs to utilise every opportunity to expand the overall lending capacity in the MDB sector," said Managing Director and World Bank Group Chief Financial Officer Anshula Kant.

A sovereign exposure exchange is a risk management tool to reduce portfolio concentration risks. By lowering exposure concentration, the ADB said it reduces its capital usage, thereby increasing its lending capacity.

It also lowers the net exposure to borrowers included in the exchanges, providing additional borrowing headroom under the ADB's limits framework.

Earlier on October 15, the ADB approved a policy-based loan of 500 million US dollars to help strengthen Indonesia's competitiveness, advance green growth, and accelerate trade under the third subprogram of the Competitiveness, Industrial Modernisation, and Trade Acceleration (CITA) Program.

Jiro Tominaga, ADB country director for Indonesia, said the loan supports the government's long-term goal of transforming Indonesia into a high-income economy by 2045 through structural reforms and sustainable growth.

"The reforms under the CITA subprograms will help attract more investment in green and sustainable businesses, reduce trade barriers, and empower local enterprises, particularly those owned by women," Tominaga said in a press release.

According to the ADB, the initiative seeks to enhance Indonesia's investment climate, modernise its industrial base, and strengthen its capacity to address climate-related challenges.

/IANS