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Public Sector (Sovereign) Financing

ADB offers a range of financing instruments, products, and modalities to provide developing member countries with flexibility in determining how they can achieve development results.

Operations - Project Design and Management: Project Cycle

The various stages from country programming to project completion and evaluation are known collectively as ADB's project cycle. Documents produced in the course of a project are disclosed throughout the project cycle according to the disclosure requirements specified under the Access to Information Policy.

ADB provides financing for projects that will effectively contribute to the economic and social development of the country concerned and have the strongest poverty reduction impact in conformity with the country and ADB strategies.

ADB Project Cycle

ADB works with each developing member country to define a medium-term development strategy and operational program called a country partnership strategy (CPS). The CPS is aligned with the country's development plan and poverty reduction goals, and its preparation with the DMC's development planning cycle.

ADB conducts thematic and sector analyses and assessment studies in preparation for a new CPS. These will be posted on ADB's web site as available.

A CPS is developed in close consultation with the government and other country stakeholders including civil society, nongovernment organizations, private sector, as well as the country's other development partners. The CPS is posted on ADB's web site at the same time they are circulated to ADB's Board of Directors for endorsement, subject to the country's consent. If country does not consent to early disclosure, the CPS will be posted upon its endorsement.

The CPS will be implemented through the country operations business plan which details the three-year rolling pipelines and the resources needed to support them.

Periodically, ADB's Independent Evaluation Department evaluates ADB's country strategy and assistance program for a country. Looking back at experience over a longer period, these country assistance program evaluations assess the development impact of ADB assistance.

View all country planning documents.
View the rolling list of new country partnership strategies (CPS), interim CPSs, and Regional Country Strategies (RCS).

Project Identification/Preparation

ADB often provides grants called project/program preparatory technical assistance (PPTA) to help the government identify and prepare feasible projects.

ADB posts on the web a brief factual summary of the project. Search ADB's project database for a summary of the project and to see all documents related to a project in one view.

During the early stage of the PPTA, a flagging exercise—called an initial poverty and social analysis—is conducted to identify those people who may be beneficially or adversely affected.

A technical assistance report is prepared as a recommendation for ADB to finance a technical assistance project.

ADB usually hires consultants to work with government counterpart staff to undertake the project's feasibility study. The consultants work closely with the various stakeholders including the government, civil society, affected people, and other development agencies working in those sectors. ADB closely monitors the consultants' work. The draft final report is reviewed at a tripartite meeting attended by representatives of the government, ADB, and the consultants. During this process, ADB with the government agrees on an executing agency for the project or program.

If the project requires resettlement of people or might adversely impact the environment, or indigenous peoples, certain safeguard assessments are prepared during this stage. The results of these assessments are disclosed and made available to affected people and other interested stakeholders in their draft forms (using appropriate form and language understandable to them) prior to or during consultations, and again after the documents are finalized.

Due Diligence

During project examination, ADB examines project feasibility.

The fact-finding mission—in consultation with the government and other stakeholders—examines the project's technical, financial, economic, environmental, marketing, and management aspects and potential social impact.

Detailed project risks and sensitivity analyses are carried out to assess viability of the proposed project. Loan terms and conditions for loan effectiveness are discussed to improve sector performance and address key policy issues.

One of the tools ADB staff use for project design is the design and monitoring framework. This is included in the Report and Recommendation of the President.

Loan Negotiation

The draft loan agreement and draft project proposal is submitted to all parties involved including the Government for review. Feedback is collected, and the Government is then called for negotiation with ADB.

Board Approval

After negotiations with the government, the loan proposal is submitted to ADB's Board of Directors for approval. This report is known as the Report and Recommendation of the President (RRP). It is posted on the web at the same time it is circulated to the Board for approval, along with the associated supporting electronically-linked documents, subject to country's consent. If country consent is not given, the RRP is posted on the web upon its approval.

Loan Signing

After Board approval, the document is sent to the borrowing country's Government for cabinet authorization. Following the authorization from the cabinet, the loan agreement is signed by ADB's President and the Representative of the Government. The loan agreement is posted on ADB's website upon its signing.

Loan Effectiveness

The loan takes effect once certain conditions are met. This is also known as loan effectiveness.

Generally, the conditions are limited to the legal requirements such as legal opinion, cross-effectiveness of cofinancing, and execution of subsidiary loan agreements. The requirements and deadline for loan effectiveness are stipulated in the loan agreement.

ADB's legal counsel and Project Officer review if the conditions are met, after which the loan is formally declared effective. Normally, loan documents allow 90 days for the loan agreement to become effective.

ADB-assisted projects are implemented by the executing agency according to the agreed schedule and procedures. A project administration manual sets out the project's implementation agreements and details.

Project consultants are recruited as needed to assist the Government. For example, in an infrastructure project, the detailed engineering design and bidding documents are prepared, machinery and equipment are procured, and civil works are constructed and installed.

The preparatory work for construction includes:

  • recruiting consultants
  • preparing tender documents and detailed designs
  • procuring equipment
  • selecting contractors for construction

These activities are encouraged to be completed prior to loan negotiation—except signing of contracts—to minimize any start-up delays in project implementation. As such, ADB promotes advance procurement action—recognizing that preparing tender documents, and establishing a project implementing unit with key staff are important part of the project readiness activities.

ADB's project divisions review the physical implementation progress as well as monitor achievement of development objectives in close coordination with the borrower and the executing agencies. ADB disburses the loan for approved expenditures, as provided in the loan agreement.

Implementation time generally ranges from two to five years but depends on the type and nature of the project. ADB's review missions assess the progress of project implementation by visiting it at least twice a year throughout the implementation period.

If a project has significant environmental or social issues, ADB will often require the borrower to submit regular safeguards monitoring reports, in addition to progress reports. Information on the project's implementation progress and status of development objectives and loan covenants is added to the project data sheet during this implementation phase.

Related link

Report: Improving Project Outcomes

After the project facilities and technical assistance activities are completed, ADB prepares a completion report to document the implementation experience. These reports are prepared within 12-24 months of the completion of the project.

Evaluation has changed with ADB. Early work concentrated on input-output relationships in projects, using economic analysis, but evolved to cover the entire results chain of inputs, outputs, outcomes, and impacts.

The focus of evaluation studies has shifted from the project to the country, informed by sector and thematic assessments as well as by evaluations of ADB's business processes. The full mix of lending and nonlending services that make up country assistance programs has now become the dominant preoccupation of evaluation, with priority attention to relevance, efficiency, effectiveness, and sustainability.