ADB debt issues seen increasing only slowly

NUSA DUA, Indonesia (Reuters) - Despite plans to sharply increase its lending program, the Asian Development Bank will only slowly increase its own borrowings from international capital markets, its treasurer said on Sunday.

Mikio Kashiwagi told Reuters that the triple A-rated ADB planned to borrow around $10 billion in 2009, about the same as last year, from bond issues and private placements.

"At this stage we would rather stay at this $10 billion borrowing program, given the market conditions," he said on the sidelines of the ADB's annual meeting, being held this year year on the Indonesian resort island of Bali.

But Kashiwagi said the bank's borrowing would increase as its lending operations grew.

"The ADB's borrowing program will stabilize at $13-15 billion over a five-year horizon," he said.

The ADB has said it will increase lending to developing nations in Asia by about 50 percent to $33 billion over 2009 and 2010. But Kashiwagi said these would only be loan commitments, and the bank needed to only fund disbursements, which typically are spread over several years.

The bank had a high level of liquidity reserves, while another reason for caution, he said, was the increasing cost of borrowings.

"It is becoming costly for everybody and that's why we are very prudent, cautious in borrowing," he said, adding that the costs had increased on average by more than 50 basis points since last year.

"Of course we are borrowing $10 billion, but we are not that keen to dramatically increase borrowing at current spread levels. Because we have choices, we like to be cautious about our funding operations. We are not in a hurry."

He said governments seeking to fund stimulus and rescue programs for their economies had led to perceptions that there would be a glut of issues on the market.

"There is a market perception, concern, about the coming over-supply situation of the triple-As," he said.

The ADB itself was more likely to tap non-U.S. dollar markets, although it would maintain a diverse portfolio, Kashiwagi said.

"Given the real significant change in market conditions, we are closer to tap non-dollar markets, like the euro, the Japanese yen," he said.

(Reporting by Raju Gopalakrishnan; Editing by Hans Peters)