ADB Urged to Rethink Support for Upper Middle-Income Countries

According to the evaluation, issues such as slowing productivity growth, climate-related risks, demographic shifts and tighter fiscal conditions are becoming more prominent across these economies.

The Asian Development Bank (ADB) should reform its internal systems and strengthen its approach to upper middle-income countries (UMICs) if it wants to remain an effective development partner in a rapidly changing region, according to a new evaluation by its Independent Evaluation Department (IED).

The report argues that while ADB has a strong rationale for working with UMICs, its operational systems, incentives and engagement models have not consistently evolved to match the growing importance and changing needs of these economies. As more developing member countries reach upper-middle-income status, the evaluation says ADB faces increasing pressure to demonstrate its value beyond traditional lending.

Changing Needs Require a New Approach

Upper middle-income countries play a major role in Asia and the Pacific's economy and are increasingly influential in regional development. Many are facing a new generation of challenges that differ from those encountered during earlier stages of economic growth.

According to the evaluation, issues such as slowing productivity growth, climate-related risks, demographic shifts and tighter fiscal conditions are becoming more prominent across these economies.

IED Director General Emmanuel Jimenez said ADB must move beyond a standard set of development priorities and clearly show how it can add value in different national contexts.

The report notes that ADB's engagement with UMICs is largely driven by country demand, which reflects the diverse circumstances and development pathways of member countries. Yet this flexibility has not always translated into a clear strategic role for the institution.

Beyond Client Relationships

The evaluation argues that ADB should view upper middle-income countries not only as clients but also as contributors and collaborators in addressing regional and global challenges.

While the bank continues to provide relevant support where it offers a clear advantage, the report finds that it has not fully utilized the potential of UMICs to generate knowledge, mobilize finance or contribute to regional public goods.

ADB Senior Evaluation Specialist Michael Florian said these countries increasingly require targeted support that helps tackle complex structural challenges while encouraging innovation and long-term resilience.

The report identifies four areas that should receive greater emphasis in future engagement strategies: value addition, knowledge generation, finance mobilization and support for regional public goods.

Unlocking Greater Regional Impact

According to the evaluation, existing systems do not consistently encourage selectivity, innovation or higher-value interventions. Weak mechanisms for capturing and sharing knowledge limit opportunities to transfer successful experiences across countries.

The report also points to underperformance in mobilizing private sector finance, despite the more mature financial markets that exist in many upper middle-income economies.

Researchers argue that ADB can strengthen its relevance by adopting a more outcome-focused approach and aligning country programmes with clearly defined strategic objectives.

Such a shift would allow the institution to better leverage the experience, expertise and financial capacity of UMICs while supporting broader regional development goals.

The evaluation concludes that upper middle-income countries can play a much larger role in advancing regional cooperation, generating practical development solutions and contributing to global public goods. For ADB, strengthening those partnerships could help ensure it remains a valuable and influential development institution as the region continues to evolve.