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Proposal for a Framework for Managing GCI Resources and Large Loans
The primary business of the Bank is to support the social and economic development efforts of its Regional Member Countries (RMCs) through the provision of development financing, advisory and other technical assistance services, to the extent permitted by its financial capacity and established credit risk and exposure management policies. Prior to the global financial and economic crises, the Bank’s financial capacity was deemed adequate to deliver its projected short to medium term operations. However, like other MDBs, the Bank was called upon by both borrowing and non-borrowing members and the international community to support its RMCs in countering the effects of the financial and economic crises. In response, the Bank quickly and substantially scaled up its operations and committed a record level of resources to certain RMCs in 2009. This included counter-cyclical large reform support and project loans as well as new trade finance and emergency liquidity facilities. As a result, not only has the size of the loans increased significantly (from an average size of UA 66 million between 2005 and 2008 to an average of UA 166 million in 2009 while the largest loan size before was UA 336 million vs. UA 1.7 billion in 2009) but also new instruments were added to the range of the Bank’s lending products. These laudable responses resulted in a rapid depletion of the Bank’s financial resource capacity, thereby accelerating the need for a General Capital Increase.