By Leika Kihara
HORSHAM, England, March 14 (Reuters) - Japan announced a $5 billion loan fund on Saturday to help developing nations, hard hit by the global credit crisis, to put in place running water, solar power systems and other environmental infrastructure.
Capital flight is plaguing emerging economies as U.S. and European investors retreat to repair their balance sheets and lending at home.
The outflow of funds from emerging markets — and the accompanying economic pain — was a major concern when financial leaders of the G20 developed and big emerging economies met over the weekend in the south of England.
“The G20 confirmed the importance of supporting economies, boosting bank capital, enhancing infrastructure and ensuring smooth trade finance to deal with a sharp change in fund flows to emerging nations,” Finance Minister Kaoru Yosano told a news conference after the meeting.
“These are things that Japan has been stressing all along.”
Under the initiative, announced by Yosano at the G20 meeting, Tokyo will offer the money over the next two years for public and private sector infrastructure projects mainly in Asia.
The loans will be extended to environmental projects such as promoting solar power and providing more efficient sewage and public transport systems.
Tokyo hopes the loans, to be made through state-backed trade financier Japan Bank for International Cooperation, will help stimulate Asian emerging economies hit by slumping global demand, while also boosting long-term infrastructure.
The $5 billion will be in addition to the $1 billion programme Tokyo unveiled at a G7 finance leaders’ meeting in Rome last month to support trade in Asian neighbours hit by shrinking global trade and liquidity.
Editing by Ruth Pitchford