Decision No 2/2001 of the ACP-EC Council of Ministers

of 20 December 2001

on settling all ACP HIPC LDCs' "special loans" remaining after full application of HIPC debt alleviation mechanisms

(2002/168/EC)

The ACP-EC COUNCIL OF MINISTERS,

Having regard to the ACP-EC Partnership Agreement signed in Cotonou on 23 June 2000 as put into early application by Decision No 1/2000 of the ACP-EC Council of Ministers,

Having regard to the Fourth ACP-EC Convention, as amended by the Agreement signed in Mauritius on 4 November 1995, and in particular Article 282(5) thereof,

Whereas:

(1) The ACP countries have consistently and repeatedly pressed for more ambitious initiatives to reduce their external debt, and, specifically, for 100 % cancellation of public debt.

(2) At the G7 summit in Cologne in June 1999 Ministers approved an Enhanced Initiative to provide faster, deeper and broader debt relief. As a result of the proposed improvements, the Community decided on a significant EC contribution to the Highly Indebted Poor Countries ("HIPC") Initiative, both as a creditor (EUR 320 million and the remaining amount of the previously earmarked EUR 40 million, both amounts from the European Development Fund ("EDF"), and as a donor (up to EUR 680 million from the EDF and EUR 54 million from the Community budget).

(3) Although significant debt alleviation is granted within the framework of the HIPC Initiative, so as to make debt burden sustainable, additional resources for highly indebted ACP Least Developed Countries ("LDCs") would boost development and poverty alleviation.

(4) Special loans, which are concessional long-term loans defined in and granted under the First to the Third ACP-EEC Conventions to ACP Countries, are not used any more since the Fourth ACP-EC Convention.

(5) The current Community participation in the Enhanced HIPC Initiative takes into account exposure both on special loans and risk capital, but requires that HIPC countries use the funds provided by the Community under the initiative first to repay debt on any outstanding special loans before they start repaying on risk capital.

(6) Risk capital loans, although they are concerned by standard HIPC debt alleviation mechanisms, are not concerned by this additional LDC initiative (see Estimates Table in Appendix).

(7) In many ACP LDCs, such standard HIPC debt alleviation mechanism is sufficient to settle all special loans, but it should not be the case for some countries.

(8) The settlement of all ACP LDCs HIPCs' special loans, which would remain after full application of the normal HIPC mechanism, should cost roughly EUR 55-60 million, which would come on top of the total estimated cost of the already decided Community contribution as a creditor (out of which EUR 320 + 40 million have already been set aside for the first countries to qualify). Should the total cost of the additional settlement exceed the EUR 60 million, the appropriate steps should be taken to provide for appropriate funding from EDF resources.

(9) Such decision would allow all ACP LDC countries having reached their decision point to benefit immediately from a total settlement of the debt service related to special loans, provided they are not concerned by Articles 96 and 97 of the ACP-EC Partnership Agreement.

(10) The financing of such further initiative should use the mechanisms governing the Community participation in the HIPC Initiative as a creditor,

HAS DECIDED AS FOLLOWS:

Article 1

Each least developed ACP country reaching its decision point under HIPC will benefit from a Community interim debt relief covering at least the whole debt service on special loans. After completion point, the Community will settle all special loans to least developed ACP countries qualified within the HIPC Initiative which will remain after full implementation of existing enhanced HIPC mechanisms. Nevertheless, the Community will remain creditor of those risk capital claims which will remain after full application of standard debt alleviation mechanisms under the Enhanced HIPC Initiative.

Article 2

The additional relief specified in Article 1 will be released in one tranche of EUR 60 million from resources of the 8th or previous EDFs or, after its entry into force, from the 9th EDF to the European Investment Bank ("EIB") Trust Fund dedicated to finance the Community contribution to the HIPC Initiative as a creditor. It will be exclusively devoted to ACP LDC additional special loans' settlements, and thus treated specifically within the EIB Trust Fund.

Article 3

Implementation of this specific strengthened debt relief will thus be integrated within the mechanism governing the existing Community contribution to the HIPC Initiative as a creditor, such as defined in the Financing Agreement between the Commission of the European Communities and the ACP States. For ACP HIPC LDCs, standard HIPC procedures will apply with a common reduction factor allowing at least a total settlement of all special loans: if the HIPC common reduction factor is sufficient for that purpose, nothing will be changed; if it is not, the Commission will unilaterally provide additional relief to achieve the said total settlement.

Article 4

Should the EUR 60 million not be fully utilised, the remaining funds shall be used to finance "standard" HIPC EC debt alleviation within the framework of the ACP-EC Decision regarding the Community contribution as a creditor, through the EIB Trust Fund dedicated to finance it.

Article 5

The Commission is requested to take the measures necessary to give effect to this Decision, which shall enter into force on the day it is adopted.

Done at Brussels, 20 December 2001.

The President of the ACP-EC Committee of Ambassadors by delegation, for the ACP-EC Council of Ministers

F. van Daele

ANNEX

TABLEAU ESTIMATIF

Coût indicatif d'une annulation des prêts spéciaux restant après application de l'initiative PPTE pour les ACP PMA

(sur la base des données de février 2000, avec un taux d'actualisation de 4,5 %)

>TABLE>