•ir * COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 12.12.1996 
COM(96)631 final 
COMMISSION REPORT TO THE BUDGETARY AUTHORITY 
ON GUARANTEES COVERED BY THE GENERAL BUDGET 
SITUATION AT 30 JUNE 1996 

REPORT ON GUARANTEES COVERED BY THE GENERAL BUDGET 
SITUATION AT 30 JUNE 1996 
This report describes the situation as regards budget guarantees at 30 June 1996. 
It is in response to the statement made by the Commission, when the vote was taken on 
supplementary and amending budget No 1/91, that it would report to the budgetary authority 
twice a year on budget guarantees and the corresponding risks. 
This report is presented in accordance with Article 134(g) of the Financial Regulation 
applicable to the general budget of the European Communities. 
The Commission has already presented ten reports to the budgetary authority. 
The report is in two parts: 
1. Events since the last report, the risk situation and the activation of budget guarantees. 
2. Evaluation of potential risks. Economic and financial situation of non-Community 
countries benefiting from the most important operations. 
3 
Contents 
PART ONE: EVENTS SINCE THE REPORT AT 31 DECEMBER 1995, THE 
RISK SITUATION AND ACTIVATION OF BUDGET GUARANTEES 
I. INTRODUCTION: TYPES OF OPERATION 4 
LA. OPERATIONS WITH MACROECONOMIC OBJECTIVES 4 
LB. OPERATIONS WITH MICROECONOMIC OBJECTIVES 4 
n. EVENTS SINCE THE REPORT AT 31 DECEMBER 1995 4 
II. A. FURTHER MACROFINANCIAL ASSISTANCE FOR MOLDOVA ....4 
II.B. MACROFINANCIAL ASSISTANCE FOR THE SLOVAK REPUBLIC 5 
ffl. RISK SITUATION 5 
III. A. AMOUNT OUTSTANDING AT 30 JUNE 1996 ' .6 
III.B. MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET: OPERATIONS DISBURSED AT 30 JUNE 
1996 6 
III.C. MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 7 
IV. ACTIVATION OF BUDGET GUARANTEES 11 
IV. A. EIB LOANS TO NON-MEMBER COUNTRIES 11 
I V.B. BORROWING/LENDING OPERATIONS OR LOAN GUARANTEES FOR NON-MEMBER COUNTRIES 11 
V. ANALYSIS OF THE COMMUNITY'S THEORETICAL LENDING /IND GUARANTEE 
CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES 13 
VI. RELATIVE SOLIDITY OF THE GUARANTEE FUND 14 
PART TWO: EVALUATION OF POTENTIAL RISKS: GENERAL ECONOMIC 
SITUATION OF THE NON-MEMBER COUNTRIES BENEFITING FROM THE 
MOST IMPORTANT LOAN OPERATIONS 
I. INTRODUCTION 16 
II. CENTRAL AND EAST EUROPEAN COUNTRIES 17 
III. NEWLY INDEPENDENT STATES 19 
IV. MEDITERRANEAN COUNTRIES 22 
ANNEXE 
I. EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED BY THE 
COMMUNITY BUDGET 25 
LA. TABLES 1 TO 3 25 
LB. LOAN OPERATIONS COVERED BY A BUDGET GUARANTEE 26 
I.C. PAYMENT OF THE BUDGET GUARANTEE 40 
II. METHODOLOGICAL NOTE ON THE ANALYSIS OF THE COMMUNITY'S ESTIMATED 
LENDING CAPACITY IN RESPECT OF NON-MEMBER COUNTREES OVER THE PERIOD 1996-
99 UNDER THE GUARANTEE FUND MECHANISM 42 
II. A. RESERVE FOR LOAN GUARANTEES TO NON-MEMBER COUNTRIES (1) 42 
II.B. BASES FOR THE CALCULATION OF THE PROVISIONING OF THE GUARANTEE FUND (2) 42 
U.C. BASIS FOR THE PROVISIONING OF THE FUND IN THE EVENT OF A PART GUARANTEE 43 
ILD. PROVISIONING OF THE GUARANTEE FUND (3) 43 
ILE. MARGIN REMAINING IN THE GUARANTEE RESERVE (4) 44 
II.F. RESIDUAL LENDING CAPACITY (5) 44 
III. TABLES: COUNTRY-RISK INDICATORS 45 
PART ONE: 
EVENTS SINCE THE REPORT AT 31 DECEMBER 1995, THE RISK SITUATION AND 
ACTIVATION OF BUDGET GUARANTEES 
I. INTRODUCTION: TYPES OF OPERATION 
The risks covered by the Community budget derive from a variety of lending and guarantee operations 
which can be divided into two categories: loans with macroeconomic objectives and loans with 
microeconomic objectives. 
LA. Operations with macroeconomic objectives 
The first of these are the balance of payments loans for Member States or non-member countries, 
normally carrying strict economic conditions and undertakings. 
This category includes the loan of ECU 1 250 million to finance imports of agricultural products and 
foodstuffs into the former Soviet Union, since the risk involved in this operation depends to a large extent 
on macroeconomic and political developments in the recipient countries. 
LB. Operations with microeconomic objectives 
These are loans to finance projects which are usually repaid over the long term from funds which these 
projects are expected to generate; as a rule, they are granted to companies, financial institutions or non-
member countries and, in addition to the Community guarantee, are covered by the usual guarantees 
demanded by banks. 
This covers Euratom and NCI loans in Member States and the Euratom and EIB loans outside the 
Community (Mediterranean, Central and Eastern Europe, certain non-member countries - developing 
countries of Asia and Latin America and South Africa). 
n. EVENTS SINCE THE REPORT AT 31 DECEMBER 1995 
The main events in the first half of 1996 were as follows: 
II.A. Further macrofinancial assistance for Moldova1 
Moldova made considerable progress in financial stabilization and reform in 1994 and largely met the 
performance criteria laid down in the first IMF programme. In June 1994 the Council therefore decided to 
grant Moldova macrofinancial assistance up to a maximum of ECU 45 million in support of the country's 
stabilization and reform programme (see point U.C.2). The Moldovan authorities' new programme, which 
is backed by a new IMF stand-by agreement, covers the period March 1995-March 1996 and is intended 
to consolidate the progress made in stabilization and boost the structural reforms. This programme 
requires additional financing of around USD 50 million from the international community. 
The Council has therefore decided to grant Moldova further assistance up to a maximum of 
ECU 15 million in the form of a loan to support its balance of payments (Decision 96/242/EQ. 
Council Decision 96/242/EC of 25 March 1996 providing further macrofinancial assistance for Moldova. 
The Commission, on behalf of the Community, has been empowered to borrow this amount for a 
maximum period often years. The proceeds of this operation will be on-lent to Moldova in one tranche. 
The loan had not yet been disbursed at 30 June 1996. 
II.B. Macrofinancial assistance for the Slovak Republic2 
As part of the financial assistance for the Slovak Republic, the Commission, on behalf of the Community, 
was empowered by Council Decision 94/93 9/EC of 22 December 1994 to borrow, in two tranches, 
ECU 130 million for a maximum period of seven years. The proceeds of this operation were to be on-lent 
on the same terms to Slovakia. 
Because of the improvement in the macroeconomic situation and, in particular, the Slovak Republic's 
balance of payments and currency reserves and its access to international private capital markets, the 
Slovak authorities stated in April 1995 that they would no longer be calling on the aid granted by the IMF 
under the stand-by agreement to support the country's balance of payments. 
With the IMF stand-by arrangement expiring and the Slovak authorities not being prepared to agree on 
the economic policy measures to be attached to the implementation of the EU loan facility, the 
Commission therefore submitted to the Council a proposal cancelling the Decision of 22 December 1994 
in line with the conclusions to be drawn for the Community. This decision was repealed by the Council 
Decision of 25 July 1996 
m. RISK SITUATION 
There are two possible methods for evaluating the risks borne by the Community budget: 
- the method, often used by bankers, of the total amount of capital outstanding for the operations 
concerned on a given date; 
- the more budgetary approach of calculating the maximum amount which the Community could have to 
pay out in each financial year. 
The second approach itself has been applied in two different ways: 
- by reference only to actual disbursements at 30 June 1996, giving the minimum level of risk to the 
Community assuming that there are no early repayments (see Table 2 below); 
- on a more forward-looking basis, by reference to all the operations decided by the Council or proposed 
by the Commission in order to estimate the impact on future budgets, giving the maximum risk borne 
by the Community assuming that the Commission's proposals are accepted (see Table 3 below). 
The latter exercise gives some idea about the future level of risks connected with the proposals made. 
However, a number of assumptions have to be made about dates of disbursement and terms of repayment 
(details are given in the annex) as well as interest3 and exchange rates.4 
The results are shown in Tables 1 to 3 which assess the risk relating to countries inside the Community 
and countries outside the Community. 
2 Council Decision of 25 July 1996 repealing Decision 94/939/EC of 22 December 1994 providing macrofinancial assistance for the Slovak 
Republic. 
3 An average interest rate of 10% is assumed. 
The exchange rate used for loans in currencies other than ecus are those of 30 June 1996. 
The overall figures quoted cover risks of different types; loans to one country in the case of macrofinancial 
assistance and loans for projects guaranteed by the borrowers in the case of NCI and EDB operations, for 
example. 
The following analysis distinguishes between total risk, the risk in respect of Member States and the risk in 
respect of non-member countries. 
III.A. Amount outstanding at 30 June 1996 
(see Table 1) 
The total risk at 30 June 1996 came to ECU 11 705 million as against ECU 13 114 million at 31 
December 1995, a fall of ECU 1 409 million.5 
Amount outstanding at 31 December 1995 13114 
Loan repayments 
Greece 500 
Italy 500 
Euratom 32 
NCI 179 
Hungary 260 
Former Soviet Union 204 
EIB 121 
Exchange rate differences between ecu and other currencies 20 
Loans disbursed 
Former Soviet Union 1 
EIB 406 
Amount outstanding at 30 June 1996 11 705 
The capital outstanding in respect of operations in the Member States was ECU 5 985 million at 30 June 
1996, a fall of 17.6% compared with 31 December 1995. 
This fall is mainly due to the repayment of ECU 1 000 million in balance-of-payments loans to Greece 
(ECU 500 million) and Italy (ECU 500 million). 
The amount outstanding from other operations in the Member States has remained stable. 
The capital outstanding from non-member countries at 30 June 1996 was ECU 5 720 million, a fall of 
2.2% compared with 31 December 1995. 
III.B. Maximum annual risk borne by the Community budget: operations disbursed at 
30 June 1996 
(see Table 2) 
The total risk, which comes to ECU 3 149 million in 1996, will steadily increase to around 
ECU 3 500 million in 2000, although the situation in 1999 is special in that there will be no capital 
^ In the case of loans in currencies other than the ecu, part of the change over the past six months is due to exchange rate differences. 
repayments for the balance-of-payments loans to the Member States and in that capital repayments on 
loans to Hungary, the Czech and Slovak Republics and the ECU 290 million loan to Bulgaria end in 1998. 
The risk for 1996 in respect of the Member States comes to ECU 2 068 million. 
This figure changes in line with the capital repayments (every two years) on balance-of-payment loans to 
Greece and Italy. The maximum risk is highest in the even years up to 2000 when it will reach 
ECU 2 793 million. 
The risk for 1996 in respect of non-member countries comes to ECU 1 081 million. The risk will increase 
in 1997 to ECU 1617 million as the following payments fall due: 
- ECU 80 million from Hungary; 
- ECU 127 million from the Czech Republic; 
- ECU 63 million from the Slovak Republic; 
- ECU 140 million from Bulgaria; 
- ECU 250 million from Algeria; 
- ECU 160 million from Israel. 
- ECU 143 million from the Republics of the former Soviet Union. 
ni.C. Maximum theoretical annual risk borne by the Community budget 
(see Table 3) 
This risk comes to ECU 3 490 million in 1996 and will increase regularly until 2000 (except in 1999 when 
it will total ECU 2 255 million). 
The trend in the maximum risk in respect of the Member States is much the same as in Table 2 up to 2000 
when the risk will amount to ECU 3 188 million. It will fall to ECU 2 370 million in 2002 and 
ECU 2 197 million in 2003. 
The risk in respect of non-member countries will rise from ECU 1 253 million in 1996 to 
ECU 1 930 million in 1997. Compared with Table 2, the risk will increase from 1999, the date scheduled 
for the first repayments of the loans proposed for Turkey, Croatia and FYROM. 
-X ~ 
TABLE 1 
CAPITAL OUTSTANDING IN RESPECT OF OPERATIONS DISBURSED 
(ECU million) 
Operation 
MEMBER STATES 
A. Balance of payments 
1. Greece 
2. Italy 
B. Others 
3. Euratom 
4. NCI and NCI earthquakes 
5. EIB Mediterranean 
Spain, Greece, Port. 
MEMBER STATES - TOTAL 
THIRD COUNTRIES 
A.Financial assistance 
1. Hungary 
2. Czech Republic 
3. Slovak Republic 
4. Bulgaria 
5. Romania 
6. Algeria 
7. Israel 
8. Baltic States 
9. Moldova 
10. Ukraine 
11. Belarus 
12. Former Soviet Union 
B. Other 
13. EIB Mediterranean 
14. EIB Central & E. Europe I 
15. EIB Central & E. Europe II 
16. EIB Asia, Latin America 
17. EIB South Africa 
THIRD COUNTRIES - TOTAL 
GRAND TOTAL Authorized 
ceiling 
14000 
2200 
8000 
4000 
6830 
1500 
26330 
1050 
250 
125 
400 
580 
600 
160 
220 
60 
285 
55 
1250 
6362 
1700 
3000 
750 
300 
17147 
43477 Capital 
outstanding 
31.12.95 
1000 
4045 
720 
1113 
385 
7263 
440 
250 
125 
360 
510 
500 
160 
135 
45 
85 
30 
347 
1782 
837 
96 
149 
5851 
13114 Capital 
outstanding 
30.06.96 
500 
3512 
695 
932 
346 
5985 
180 
250 
125 
360 
510 
500 
160 
135 
45 
85 
30 
143 
1981 
884 
141 
191 
5720 
11705 Remainder to 
be disbursed 
30.06.96 
1200 
4000 
0 
0 
0 
5200 
260 
0 
0 
40 
70 
100 
0 
85 
15 
200 
25 
0 
3112 
733 
2865 
548 
300 
8353 
13553 
1) No disbursement is planned. 
2) The third and fourth tranches had still not been paid at 30.6.1996. So far, the Italian 
Government has not requested payment. 
ANNEX TO TABLE 1 
SITUATION IN RESPECT OF EIB OPERATIONS (30.6.96) 
Operations 
EIB Mediterranean 
Spain, Greece, Port. 
Third countries EIB Med. 
Central & Eastern Europe I 
Central & Eastern Europe II 
Asia, Latin America 
South Africa Credit line 
authorized 
1500 
6362 
1700 
3000 
750 
300 Loans made 
available, minus 
cancellations 
1465 
5128 
1647 
1999 
647 
101 Initial 
disbursement 
1572 
2984 
914 
141 
191 Amt outstnd. 
at 30.06.96 
346 
1981 
884 
141 
191 
Note: The fact that the initial disbursement sometimes exceeds the authorized ceiling is due to 
differences in the ecu rate between the date on which the contracts were signed and 30.6.1996. 
- <?-
TABLE 2 
MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 
(Estimate in ECU million based on all operators disbursed at 30.6.1996) 
MEMBER STATES 
CAPITAL 
A. Balance of payments 
1. Greece 
2. Italy 
B. Structural loans 
3. Euratom 
4. NCI and NCI EQ 
5. EIB Med. Old. Prot. 
Spain, Greece, Port. 
Capital - subtotal 
INTEREST 
A. Balance of payments 
1. Greece 
2. Italy 
B. Structural loans 
3. Euratom 
4. NCI and NCI EQ 
5. EIB Med. Old. Prot. 
Spain, Greece, Port. 
Interest - subtotal 
MEMBER STATES - TOTAL 
NON-MEMBER COUNTRIES 
CAPITAL 
A. Financial assistance 
6. Hungary 
7. Czech Republic 
8. Slovak Republic 
9. Bulgaria 
10. Romania 
11. Israel 
12. Algeria 
13. Ex USSR 
14. Baltic States 
15. Moldova 
16. Ukraine 
17. Belarus 
B. Guarantees 
18. EIB Mediterranean 
19. ElBC+EEur. I + II 
20. EIB Asia Latin America 
Capital - subtotal 
INTEREST 
A. Financial assistance 
6. Hungary 
7. Czech Republic 
8. Slovak Republic 
9. Bulgaria 
10. Romania 
11. Israel 
12. Algeria 
13. Ex USSR 
14. Baltic States 
15. Moldova 
16. Ukraine 
17 Belarus 
B. Guarantees 
18. EIB Mediterranean 
19. ElBC+EEur. I + II 
20. EIB Asia Latin America 
Interest - subtotal 
NON-MEMB. CNTRIES - TOTAL 
GRAND TOTAL 
(Eastern Europe ) 
(Other non-member countries ) 1996 
500 
500 
153 
306 
73 
1533 
95 
255 
57 
95 
33 
535 
2068 
260 
204 
134 
30 
628 
26 
25 
13 
36 
51 
16 
50 
14 
14 
5 
9 
3 
123 
63 
6 
453 
1081 
3149 
751 
330 1997 
453 
541 
70 
1064 
48 
213 
43 
69 
26 
398 
1462 
80 
127 
63 
140 
160 
250 
143 
141 
46 
15 
1165 
18 
25 
13 
36 
51 
16 
50 
7 
14 
5 
9 
3 
130 
67 
9 
452 
1617 
3079 
846 
771 1998 
500 
997 
93 
91 
56 
1738 
48 
213 
10 
21 
20 
311 
2049 
100 
123 
62 
150 
185 
161 
67 
19 
867 
10 
12 
6 
22 
51 
25 
14 
5 
9 
3 
120 
64 
9 
348 
1215 
3264 
882 
333 1999 
16 
41 
50 
107 
158 
3 
12 
15 
189 
296 
190 
172 
88 
20 
470 
7 
33 
25 
14 
5 
9 
3 
108 
59 
8 
269 
738 
1034 
406 
332 2000 
2514 
13 
41 
45 
2613 
158 
1 
10 
11 
180 
2793 
80 
110 
5 
166 
96 
22 
479 
7 
14 
25 
14 
5 
9 
3 
96 
53 
7 
231 
710 
3503 
394 
316 2001 
71 
21 
92 
7 
7 
14 
106 
70 
150 
9 
17 
6 
156 
97 
22 
528 
7 
6 
25 
3 
4 
9 
3 
85 
46 
7 
193 
720 
827 
275 
445 2002 
23 
23 
2 
5 
7 
30 
55 
100 
25 
9 
17 
6 
151 
96 
23 
483 
6 
10 
3 
3 
7 
2 
73 
39 
6 
149 
631 
661 
268 
364 2003 
21 
21 
2 
3 
5 
27 
9 
17 
6 
151 
90 
8 
281 
2 
5 
2 
63 
33 
5 
110 
390 
417 
164 
226 TOTAL 
- 1000 
4012 
728 
1092 
359 
7190 
190 
998 
113 
216 
123 
1640 
8830 
440 
250 
125 
360 
510 
160 
500 
347 
135 
32 
51 
18 
1233 
611 
128 
4901 
54 
62 
32 
115 
210 
32 
210 
21 
73 
32 
63 
22 
797 
424 
57 
2203 
7103 
15934 
3986 
3117 
- io 
TABLE 3 
MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 
(Estimate in ECU million based on all operations disbursed, adopted and proposed by the Commission) 
MEMBER STATES 
CAPITAL 
A. Balance of payments 
1. Greece 
2. Italy 
B. Structural loans 
3. Euratom + NCI 
4. EIB Sp, Gr. Port 
Capital - subtotal 
INTEREST 
A. Balance of payments 
1. Greece 
2. Italy 
B. Structural loans 
3. Euratom + NCI 
4. EIB Sp. Gr. Port 
Interest - subtotal 
MEMBER STATES - TOTAL 
NON-MEMBER COUNTRIES 
CAPITAL 
A. Financial assistance 
5. Hungary 
6. Czech Republic 
7. Slovak Republic 
8. Bulgaria 
9. Romania 
10. Israel 
11. Algeria 
12. Ex USSR 
13. Baltic States 
14. Moldova 
15. Ukraine 
16. Belarus 
17. Euratom, C+E Eur. 
B. Guarantees 
18. EIB Mediterranean 
19. ElBC+EEur. land» 
20. EIB Asia Latin America 
21. EIB South Africa 
Capital - subtotal 
INTEREST 
A. Financial assistance 
5. Hungary 
6. Czech Republic 
7. Slovak Republic 
8. Bulgaria 
9. Romania 
10. Israel 
11. Algeria 
12. Ex USSR 
13. Baltic States 
14. Moldova 
15. Ukraine 
16. Belarus 
17. Euratom, C+E Eur. 
B. Guarantees 
18. EIB Mediterranean 
19. ElBC+EEur. I + II 
20. EIB Asia Latin America 
21. EIB South Africa 
Interest - subtotal 
NON-MEMB. CNTRIES - TOTAL 
GRAND TOTAL 
(Eastern Europe) 
(Other non-member countries) 1996 
500 
500 
459 
73 
1532 
95 
425 
152 
33 
705 
2237 
260 
204 
134 
30 
628 
57 
25 
20 
40 
55 
16 
55 
14 
18 
5 
19 
5 
1 
168 
112 
15 
1 
625 
1253 
3490 
864 
389 1997 
994 
70 
1064 
48 
553 
111 
26 
738 
1802 
80 
127 
63 
140 
160 
250 
143 
141 
46 
15 
1165 
44 
25 
26 
44 
58 
16 
60 
7 
22 
6 
29 
8 
6 
213 
170 
28 
4 
765 
1930 
3731 
1043 
887 1998 
500 
997 
184 
56 
1738 
48 
638 
30 
20 
736 
2474 
100 
123 
62 
150 
185 
161 
67 
1.9 
867 
36 
12 
20 
30 
58 
35 
22 
6 
29 
8 
17 
274 
249 
47 
9 
851 
1718 
4192 
1173 
545 1999 
57 
50 
107 
553 
15 
15 
583 
690 
190 
216 
143 
29 
2 
580 
26 
14 
15 
40 
35 
22 
6 
29 
8 
34 
345 
328 
69 
16 
985 
1565 
2255 
853 
712 2000 
2514 
54 
45 
2613 
553 
11 
11 
575 
3188 
80 
110 
5 
260 
213 
44 
5 
717 
26 
13 
15 
21 
35 
22 
6 
29 
8 
54 
394 
368 
85 
22 
1097 
1814 
5002 
969 
845 2001 
71 
21 
92 
340 
7 
7 
354 
446 
70 
150 
9 
17 
6 
1 
318 
288 
64 
10 
934 
26 
13 
15 
13 
35 
11 
6 
29 
8 
72 
411 
362 
90 
25 
1114 
2048 
2494 
944 
1103 2002 
2000 
23 
2023 
340 
2 
5 
347 
2370 
55 
100 
25 
12 
37 
11 
7 
392 
363 
85 
17 
1103 
26 
13 
8 
13 
20 
11 
5 
27 
7 
88 
409 
337 
88 
26 
1077 
2180 
4550 
1043 
1137 2003 
2000 
21 
2021 
170 
2 
3 
175 
2197 
260 
80 
70 
100 
85 
12 
57 
11 
16 
431 
377 
96 
21 
1616 
26 
8 
7 
10 
11 
3 
23 
6 
94 
383 
301 
45 
24 
941 
2557 
4753 
1447 
1110 TOTAL 
1000 
8012 
1819 
359 
11190 
190 
3571 
330 
122 
4213 
15402 
700 
250 
125 
440 
580 
160 
600 
347 
220 
38 
111 
28 
24 
2054 
1527 
352 
55 
7611 
267 
62 
118 
175 
263 
32 
285 
21 
139 
43 
211 
55 
366 
2597 
2227 
467 
127 
7454 
15065 
30468 
8336 
6729 
11 
IV. ACTIVATION OF BUDGET GUARANTEES 
IV.A. EIB loans to non-member countries 
On 7 March 1996 the EIB called on the budget guarantee in respect of loans of around ECU 6.4 million 
to the Republics of former Yugoslavia (the Former Yugoslav Republic of Macedonia - FYROM, Bosnia-
Herzegovina and Serbia). The payment was made to the EIB on 11 June 1996. 
On 2 July 1996 the EIB again called on the budget guarantee in respect of loans of around 
ECU 8.9 million to the Republics of former Yugoslavia (FYROM and Serbia). The payment was made to 
the EIB on 4 October 1996. 
At 30 June 1996 the total amount of debts settled by the Community and not yet repaid by the defaulting 
debtors came to ECU 72.4 million. These debts were owed by all the Republics of former Yugoslavia 
with the exception of Slovenia and Croatia, which have no payments overdue. 
Of the ECU 72.4 million due but not paid, ECU 28.6 million was entered in the budget in respect of the 
amount owed from before 1994 and a total of ECU 45.9 million was called in from the Guarantee Fund 
on 11 January 1995 (ECU 5.3 million), on 30 January 1995 (ECU 14.3 million), on 24 May 1995 (ECU 
6.08 million), on 11 October 1995 (ECU 8.6 million), on 26 January 1996 (ECU 5.2 million) and on 
11 June 1996 (ECU 6.4 million). 
The Former Yugoslav Republic of Macedonia (FYROM) has repaid some of its arrears 
(ECU 2.1 million). 
IV.B. Borrowing/lending operations or loan guarantees for non-member countries 
I V.B.J. Payments from cash resources 
The Commission draws on its cash resources under Article 12 of Council Regulation No 1552/89 of 
29 May 1989 implementing Decision 88/376/EEC, Euratom on the system of the Communities' own 
resources to avoid delays and resulting costs in servicing its borrowing operations when a debtor is late in 
paying. 
IV. B. 2. A ctivation of the Guarantee Fund 
In the event of late payment by a recipient of a loan granted or guaranteed by the Community, the 
Guarantee Fund is called on to cover the default within three months of the date on which is payment is 
due. 
Penalty interest for the time between the date on which cash resources are made available and the date of 
activation of the Fund is drawn from the Fund and repaid to the cash resources. 
12 
In the last six months the Fund has been called on to honour guarantees for the following debtors: 
Country Date Amount (principal + interest) 
Georgia (loan of ECU 10 million) 15.4.1996 10 106 572.43 
Georgia (loan of ECU 40 million) 15.4.1996 1 050 469.67 
Armenia (loan of ECU 20 million) 15.4.1996 19 604 806.06 
Total 30 761848.16 
IVB.3. Late repayments 
During the period covered by this report, the following country repaid debts on which it had 
defaulted and for which the Guarantee Fund had already been activated. The amounts recovered are 
repaid to the Fund under Article 2 of Council Regulation (EC, Euratom) No 2728/94 of 31 October 
1994 establishing a Guarantee Fund for external action. 
Country Repayment date Amount (principal + interest) 
Turkmenistan (loan of 7.5.1996 15 279 824.71 
ECU 45 million) 
IV.B. 4. Situation as regards unpaid debts at 30 June 1996 
The following amounts had not been paid at 30 June 1996: 
Country Amount (principal + interest) 
Tajikistan 63 181 389.89 
Georgia 92 463 958.04 
Armenia 57 601313.20 
Turkmenistan6 30 570 321.40 
Total 243 816 982.53 
6 Two capital repayments totalling ECU 22.8 million have been made since 30 June 1996 
13 
V. ANALYSIS OF THE COMMUNITY'S THEORETICAL LENDING ^ND GUARANTEE 
CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES 
In practice, the Guarantee Fund and reserve facility limits the Community's lending and guarantee capacity 
to non-member countries since the appropriations available for provisioning the Fund whenever a new 
lending decision is adopted (or any annual tranche in the case of guarantees for multiannual operations) 
are limited by the amount entered for the guarantee reserve in the financial perspective.7 
At any given time, lending capacity corresponds to the margin remaining in the guarantee reserve. This 
margin is equal to the difference between the reserve and the estimated amount needed to provision the 
Guarantee Fund for operations which have already been adopted and which are in preparation. 
Table 4 contains an estimate of the Community's lending capacity in respect of non-member countries 
over the period 1996-99 compatible with the Guarantee Fund mechanism. The method of calculation and 
references to legal texts are set out in greater detail in the Annex. 
On the basis of the decisions adopted by the Council8 and decisions proposed and in preparation9 (see 
Table 4), ECU 306 million is expected to be used from the guarantee reserve in 1996, leaving 
ECU 20 million available at the end of the year. 
The Guarantee Fund could then amount to around ECU 620 million at the end of the year assuming: 
- no further defaults requiring activation of the Fund; 
- no late repayment of arrears by defaulting countries. 
If account is taken of the effect on the guarantee reserve of the provisioning of the Fund in respect of 
loans already decided and loans proposed and in preparation for the period 1997-99, the annual capacity 
available for loans varies: 
- from ECU 1.8 billion to ECU 2 billion for loans with a 100% guarantee under the Community budget; 
- from ECU 2.4 billion to ECU 2.7 billion for loans with a 75% guarantee (EIB loans to Mediterranean 
countries). 
7 ECU 300 million at 1992 prices. 
Under transfer 5/96 the budgetary authority authorized the transfer of ECU 191.8 million from the guarantee reserve to the Guarantee Fund. 
The loans proposed and being prepared by the Commission for 1996 will have an impact of ECU 114 million on the guarantee reserve. 
14 
VI. RELATIVE SOLIDITY OF THE GUARANTEE FUND 
The ratio between the estimated amount in the Fund at the end of 1996 and the maximum annual risk 
(defined as the total amount falling due) shown for 1997 in Table 3 comes to 32%. 
The Fund should then correspond to 7.5%» of the total amount of guaranteed loans outstanding outside 
the Community. 
The ratio between the amount in the Fund at the end of 1996 and the amount due in 1997 from countries 
which have defaulted in the past is 11:1. 
-IS-
TABLE 4 
THE COMMUNITY'S THEORETICAL ESTIMATED LENDING & GUARANTEE CAPACITY 
IN RESPECT OF NON-MEMBER COUNTRIES OVER THE PERIOD 1996-99 
under the Guarantee Fund mechanism* 
EÔU million 1996 1997 7353 7333 
Reserve for loan guarantees to non-member countries(l) 326 329 337 346 
Bases for the calculation of the provisioning of 
the Guarantee Fund (2) 
- EIB loans 
- Mediterranean (a) 201 281,75 195,5 150 
- countries of Central and Eastern Europe (b) 1114 
- Asia and Latin America (c) 521 
- South Africa (d) 120 55 
- EIB loans - total 1956 336,75 195,5 150 
- Euratom loans (e) 0 200 200 150 
- Macrofinancial assistance 165 -130 
Provisioning of the Guarantee Fund (3) 306 60 57 44 
Margin remaining in the guarantee reserve (4) 20 269 280 303 
Residual lending capacity (balance of payments loans, 
EIB loans and Euratom loans (5) 
- Minimum if used in full for 100% guarantee (e.g. BP loans) 134 1794 1865 2017 
- Maximum if used in full for EIB loans (75% guarantee) 179 2393 2486 2689 
(*) Assuming that the target amount is reached after 1999. For example, if the Fund reaches its target amount at 
1 January 1999 and the rate of provisioning is cut to 10% after the review provided for in Article 4 of the Regulation 
establishing the Fund, the Union's lending capacity in respect of non-member countries would be increased by 
ECU 1 143 million a year for loans with a 100% guarantee and by ECU 1 524 million for loans with a 75% guarantee. 
Description of the loans for which the Fund will be provisioned in the period 1996-99: 
• EIB 
a. Mediterranean: 
- loans decided: 1994-96: ECU 115 million under the Fourth Financial Protocol with Syria. 
1995-98: ECU 80 million under the Fourth Financial Protocol with Malta and Cyprus 
- loans proposed or in preparation: 1996-2000: ECU 750 million for financial cooperation with Turkey 
and ECU 230 million for financial cooperation with Croatia. 1997-2000: ECU 150 million for financial cooperation with 
the Former Yugoslav Republic of Macedonia (FYROM). 
b. Central and eastern Europe: 
- loans decided: 1994-96: ECU 3 000 million 
c. Asia and Latin America 
- loans decided: 1993-96: ECU 750 million 
- loans proposed or in preparation: 1996: ECU 410 million 
d. South Africa 
- loans decided: mid-1995 to mid-1997: ECU 300 million 
e. - Euratom 
- loans decided: 1994-99: ECU 1 100 million 
f. - Financial assistance 
- loans decided: 1996: ECU 15 million loan to Moldova; ECU 20 million loan to Belarus cancelled; ECU 130 million 
loan to Slovakia cancelled 
- loans proposed or in preparation: 1996: ECU 170 million in loans to the Republics of Georgia, Armenia 
and Tajikistan 
16 
Part Two 
Evaluation of potential risks: General Economic Situation of the non-
Member Countries benefiting from the most important loan 
operations 
I. INTRODUCTION 
The figures given in the previous parts provide information on the quantitative aspects of the risks bome 
by the general budget. However, these data should be weighted in accordance with aspects relating to the 
quality of the risk, which depend on the type of operation and the standing of the borrower. Recent events 
which may influence the portfolio country risk are analysed below. 
The country risk evaluation presented in this chapter is slightly different from previous reports. The 
present report is focusing more clearly on recent developments of direct relevance for the country 
risk evaluation in the respective countries. Less space is accordingly attributed to the more general 
description of economic developments in the countries concerned, which allows to shorten the text 
considerably. With that same goal in mind, some countries - where the overall risk level is considered 
low and recent developments not significant - are treated only summarily whereas countries where 
the financial exposure for the EU is great and/or a noteworthy change (deterioration or 
improvement) in the risk evaluation has taken place, are analysed more thoroughly. 
As an important complement to the textual analysis, extensive country risk indicators for all relevant 
countries in Central and Eastern Europe, the NIS and in the Mediterranean area are provided in the 
form of a full-page table per country. 
It may be noted that the evaluation does not cover EU exposure in other regions than those 
mentioned, mainly because this exposure (notably through guarantees of EIB lending) represents 
only a fraction of total exposure (less than 3%) and is also well diversified among countries. 
Generally, developments since the latest report indicate that overall EU exposure in the regions 
concerned (CEEC, NIS, Med.) has fallen marginally. Increases in CEEC and the Mediterranean are 
more than offset by the decrease for NIS. 
The development of risk associated with the three regions differs though. In Central and Eastern 
Europe risk levels are generally lower but with some important exceptions. The present uncertainties 
regarding future developments in Bulgaria seem particularly preoccupying but developments in 
Romania and Slovakia may also, although to a lesser extent, need close monitoring. 
In the NIS, the Far Eastern nations continue to present generally considerable risk, with Uzbekistan 
as an exception. The situation is equally fragile in the Caucasian region whereas Belarus, Moldova 
and Ukraine fare marginally better. 
In the Mediterranean area, finally, Algeria presents the most sensitive picture at this juncture. 
17 
H. CENTRAL AND EAST EUROPEAN COUNTRIES 
BULGARIA 
Bulgaria is in the middle of a serious economic and financial crisis. Progress in structural reform 
remains slow, in particular with respect to the closure of large loss-making state enterprises and 
restructuring of the severely hit banking sector. IMF has postponed and the World Bank has delayed 
further any additional financial assistance. GDP declined by 2.6 % in the first quarter of 1996, before 
the crisis came to a head. The currency continues to depreciate against the dollar by mid-September 
it had reached 230 leva/USD, compared with about 80 in mid-April. Simultaneously, inflation has 
accelerated sharply. The key interest rate has been raised from 108 % to 300 % in September in a 
short-term effort to support the leva. However, confidence in the currency, and in the banks, 
continues to be extremely low. The current account has improved only very slowly and was still in 
deficit in 1995. The servicing of Bulgaria's external debt is substantial during the rest of 1996 and 
continues to be high in the coming years. Returning the Bulgarian economy to a path of macro-
economic stabilisation and recovery hinges crucially on rapid success in implementing a revised 
economic programme in agreement with the IMF, without which Bulgaria would find itself 
effectively cut off from official credits. Presidential elections in October 1996 and parliamentary 
elections by the end of 1998 provide a rather short intermediate time span in which to implement 
strict economic policies. 
CZECH REPUBLIC 
Czech country risk has grown but remains very moderate relative to other transition countries. Real 
growth is high and driven by buoyant domestic investment. Unemployment is very low and inflation 
below 10%. However, the fiscal accounts have slipped into the red for the first time in years and the 
current account deficit remains sizeable. Financing the external disequilibrium will cause the net-debt 
ratio to rise from its very low level but the Czech Republic would have no problem raising the 
necessary finance on the international markets. Some macroeconomic adjustment may still be 
preferable but will be more difficult to deliver after the government lost its Parliamentary majority in 
the recent general elections 
ESTONIA 
Estonia's risk assessment has improved steadily over the last few years. The economy is recovering 
markedly as a consequence of sound policies pursued by the authorities and early liberalization and 
reform of the economy. Following the stabilization of GDP in 1994, it expanded by 3.2% in 1995 
and is expected to grow a further 4% in 1996. Inflation has come down to 29% in 1995 from the 
hyperinflation experienced in 1992 (1000%). The exchange rate of the Estonian Kroon is fixed to the 
D-Mark (8EEK=1DM) through a currency board system that links money growth to the balance of 
payments. Despite a substantial current account deficit during the past years (8% in 1995 excluding 
official transfers) the overall balance was always positive thanks to capital inflows, including in 
particular strong foreign direct investment (in the order of US$ 200 million). Despite the real 
appreciation over the past years, the exchange rate is still competitive, given the highly competitive 
starting point. Therefore capital inflows can be expected to continue for a number of years, but 
would eventually stop, having in the context of the currency board system a contractionary effect on 
the economy.] Debt and debt service ratios remain relatively low. 
18 
HUNGARY, 
The overall risk assessment for Hungary has.continued to improve, positive developments in the 
balance of payments and foreign debt indicators, a reduction in the budget deficit, the acceleration of 
he privatization process, and a relatively stable political context. In March 1996, the IMF approved 
i "precautionary" stand-by credit for Hungary and the economic programme remains on-track. 
Hungary's debt ratios however remain dangerously high, and further reductions in the current 
account and budget deficits are still needed. The forint was made fully convertible for current 
account purposes in January 1996. Hungary's international credit ratings remain stable at a sub-
investment grade level. 
LATVIA 
Latvia's economy had just emerged from recession, showing positive GDP growth of 2% in 1994, 
when a major banking crisis emerged in Spring 1995, which contributed to a contraction of GDP (-
1.6%) and a widening of the consolidated budget deficit to 3.3% of GDP (4.8% for the central 
government). As a consequence of the crisis, the SB A of April 1995 went off-track. Since May 1996 
a new SBA is in place and the economy seems to recover, with trade and industrial production 
expanding. As a consequence of the crisis, international reserves declined in the course of 1995, 
reducing the level, in months of imports, from 4.5 to 3.2, which still seems fairly comfortable. The 
external debt and debt service ratios have remained relatively low. 
LITHUANIA 
In late 1995, Lithuania's economy was hit by a banking crisis. Economic growth that started to be 
positive in 1994 and accelerated in 1995 has slowed down in 1996 with unemployment rising above 
8%. But the Lithuanian authorities reacted to the financial crisis by a mix of monetary relaxation and 
fiscal tightening thereby stabilizing financial conditions and preserving the currency board system that 
pegs the national currency, the Litas, to the US dollar. In addition, a plan has been developed with 
the support of IMF and World Bank to address the bad debt problem of the banking sector. 
In the first quarter of 1996, the balance of payments went into deficit for the first time since early 
1994. This is due to a sharp decrease in capital inflows and a worsening trade deficit which could be 
the result of the significant real appreciation of the Litas since April 1994. So far, Lithuania has not 
been very successful in attracting direct foreign investment, especially if compared to the smaller 
Estonia, the other Baltic country with a currency board arrangement, which obtains more than triple 
the amount of DFI each year. Steps are taken to create a more favourable and stable environment for 
DFI. The foreign debt and debt service ratios remain relatively low, but debt in terms of exports is 
rising steadily. 
ROMANIA 
Romania country risk has increased as the forthcoming general elections are influencing policy 
decisions. This may jeopardise the initially positive results achieved under the reform programme 
implemented with IMF support since 1994. Macroeconomic disequilibria are developing and timid 
microeconomic reforms have been halted and, at times, reversed. This was the case of the unification 
of the foreign exchange regime: a free interbank foreign exchange market was de facto abolished in 
March 1996 and state-run enterprises had their foreign earnings confiscated. As a consequence, 
Romania went off-track on its IMF stand-by and the disbursement of the second tranche of the EU 
balance-of-payments loan is delayed. Foreign liabilities do not yet raise any immediate concern but 
they present a very short-term structure and the debt-ratio has climbed up steeply. Access to the 
19 
private international capital market may become difficult if the reform effort is not resumed after the 
elections. 
SLOVAKIA 
Slovakia's risk assessment has deteriorated reflecting the rapid worsening of the current account 
since early 1996 but remains relatively favourable. Against the background of prudent fiscal, 
monetary and exchange rate policies, most macroeconomic indicators continue to show a positive 
evolution. Real GDP grew by 7% in the first half of 1996; unemployment is going down; annual 
inflation has stabilized at below 6%, the lowest rate among transition countries; official reserves and 
debt indicators remain at comfortable levels; and the budget deficit has been contained at around 2% 
of GDP. On the negative side, the current account is projected to move from a surplus of 3.6% of 
GDP in 1995 to a deficit of more than 4% of GDP in 1996. Furthermore, the outlook continues to be 
marred by political tensions (including the persisting conflict between the Prime Minister and the 
President of the Republic, and the issue of the Hungarian minority) and by sluggish, or insufficiently 
transparent, structural reforms. 
The worsening of the current account reflects the boom in domestic demand, weak economic activity 
in the EU, some accumulated appreciation of the real exchange rate and the reduction of duties on 
car imports. The current account deficit is being amply financed by strong capital inflows and, as a 
result, official reserves remain at a comfortable level (representing more than 4 months of imports in 
mid-September 1996). Slovakia reached Article VIII status at the IMF in October 1995. The import 
surcharge was reduced from 10% to 7.5% in July 1996 and the government intends to fully remove 
it by end-1996. The IMF stand-by arrangement expired in early 1996. The mid-term review of the 
stand-by programme was never completed, reflecting the failure of the government to implement 
commitments in the areas of privatization and banking sector reform. Slovakia's international ratings 
have remained stable since Moody's assigned to the country an investment grade mark in May 1995. 
III. NEWLY INDEPENDENT STATES 
ARMENIA 
Armenia remains in the high-risk category of creditors. The economic recovery, which started in 
1994 from a very low level, has continued in 1996 and inflation is under control. However, the slow 
pace of structural reforms - even though the privatization process started early after independence -
has made Armenia largely dependent on external assistance. The external debt of the country had 
reached 25% of GDP in end 1995 and this ratio has increased in 1996 with drawings on credit lines 
from the IMF and the WB. Moreover, the country has been in arrears towards the EU since August 
1995 and does not envisage a short-term solution to this problem on its own. The approval by the 
IMF Board in February 1996 of a 3-year ESAF-supported economic programme should however 
contribute to accelerate the pace of reforms and to improve the general economic situation in the 
medium-term. On the political side, the unsolved conflict with neighbouring Azerbaijan on the 
Nasorno Karabakh issue is a negative factor. 
4GV 
AZERBAIJAN 
Risk assessment for Azerbaijan is the highest among the three Caucasian countries. GDP is estimated 
to have declined further in the first months of 1996, following a sharp decline of about 40% in 1994-
1995. Growth is however expected to resume during the second part of the year. Inflation is under 
control and the fiscal deficit has also largely improved in the recent months. Concerning structural 
reforms, Azerbaijan is lagging well behind most other CIS countries. A series of areas have been 
20 
identified where the authorities are committed to achieve important progress in the short run. The 
second review under the IMF 12-month stand-by arrangement approved in November 1995 took 
place in May 1996: performance criteria were met and the drawing of the third tranche authorised. 
The external debt of the country is estimated at some US$ 500 million (about 15%» of GDP), mainly 
to Russia and Turkmenistan. Azerbaijan's medium-term perspectives are potentially favourable, 
owing mainly to its huge oil reserves. In the short run, however, the combination of a globally weak 
economic situation, slow structural reforms and the conflict with neighbouring Armenia on Nagorno 
Karabakh weighs markedly on the negative risk assessment. 
BELARUS 
A referendum to be held in Belarus in November 1996 is expected to settle the opposition between 
the Belarussian Parliament and the Presidency and decisively influence the pace of the structural 
reform process in the country. Since last year, as a result of inappropriate policies, the economic 
situation in Belarus has been deteriorating and several macroeconomic indicators performed worse 
than expected. So far, the authorities' main response has been to have recourse to command 
economy measures by increasing state intervention and controls, imposing trade and exchange 
market restrictions, increasing subsidization of the economy, and virtually slowing, halting or even 
reversing structural and institutional reforms. The IMF, World Bank and European Union 
disbursements have been suspended. The trade deficit level was sharply rising (US$ 750 million) in 
the first half of 1996 because of an unrealistic exchange rate level, while the capital account surplus 
was considerably reduced (US$ 100 million). As a result, foreign exchange reserves stood at the very 
low level of 3 weeks of imports in April 1996. However, the continuing nominal depreciation of the 
Belarussian currency (30 % from April 1996) is expected to restore some competitiveness. The stock 
of official debt increased to US$ 1.5 billion (15 % of GDP) at end-1995 and decreased to US$ 1 
billion after claims cancellation by Russia in April 1996. 
GEORGIA 
Georgia's risk assessment has remained rather stable in recent months, at an uncomfortable level. 
After a very sharp decline of the economy from 1990 to 1994, signs of recovery appeared in the 
course of 1995 and economic growth is expected for 1996. Inflation is also under control and the 
exchange rate of the new currency has remained stable in 1996. This fragile progress is, however, 
threatened by the dramatic situation in public finances, caused by a collapse in revenues. Since its 
independence, mainly to finance imports, Georgia has accumulated a huge foreign debt, estimated at 
some US$ 1.2 billion by end 1995 (44.7% of GDP), the main part of which represents payments 
arrears. Being unable to honour its debt repayments, Georgia has reached rescheduling 
understandings with some of its creditors (mainly Turkmenistan). The country has also been in 
arrears on payments towards the EU since April 1994 and cannot envisage a solution to these arrears 
on its own. The approval by the IMF Board in February 1996 of a 3-year ESAF-supported economic 
programme should however contribute to accelerate the pace of reforms and to improve the general 
economic situation in the medium-term. On the political side, the Abkhazia problem is also a 
negative factor. 
MOLDOVA 
Having been considered for long as a relative success story, Moldova's economic and structural 
reforms performances have fallen short of expectations recently. If inflation remains under control 
(9% for the first 8 months of 1996), a modest growth in GDP of some 3% is expected for this year. 
The fiscal performance has been badly influenced by the weakness of tax collection, but several 
21 
corrective measures have been implemented in 1996 to tackle this problem. Moldova's foreign debt is 
expected to reach some US$ 700 million by end-1996 (some 32% of GDP) and is mainly due to the 
EFI's. Important structural reforms are still expected in key sectors such as privatization of 
agriculture and restructuring of enterprise and energy sectors. The approval by the IMF Board in 
May 1996 of a 3-year EFF-supported economic programme, combined with a World Bank "Country 
assistance strategy" (CAS) programme, adopted in April 1996, should contribute to accelerate the 
pace of reforms and to improve the general economic situation in the medium-term. Politically, 
although the issue of the proclaimed Dniestr Republic - part of Moldova's territory - is complex, it 
does not considerably influence the overall risk assessment.. 
TAJIKISTAN 
The security situation in Tajikistan seems to have deteriorated and the recent developments in 
Afghanistan could affect the Tajik Government's relations with the Tajik opposition based abroad. 
The 1996 macro-economic developments have been positive so far with fast reduction of monthly 
inflation (4 % in September), satisfactory budgetary revenues and credit and monetary policies still 
on-track, and slightly positive trade balance. However, GDP has continued to fall (around 10%»). 
Moreover, the cotton harvest and budgetary expenditures (in particular defence and capital 
expenditures) are sources of concern. Enterprises privatization has been slow, but land reform has 
been proceeding faster. At end 1995, the external debt of Tajikistan (US$ 800 million) exceeded the 
country's GDP (150%), while foreign exchange reserves covered less than 1 week of imports. 
Several creditors have agreed to reschedule the debt falling due in 1996, while others are still 
negotiating. An additional rescheduling of debt service payments will be necessary to fill the residual 
* financing gap projected for 1997. The conclusion of a Stand-By Arrangement in early 1997 will 
depend on the progress in the current IMF programme. 
TURKMENISTAN 
The political situation in Turkmenistan r.i; hough complex- seems stable. The country's economic 
development remains heavily influenced by the inability of its largest customers tô pay and by 
Russia's and Iran's unwillingness with respect to the transportation of gas. Output is expected to 
increase strongly in 1996 owing to extra gas shipments but the overall economic situation remains 
weak. Monthly inflation, which fell from about 30 % in late 1995 to 3.5 %> in July 1996, was picking 
up at a level of 10 %> in August owing to excessive credit to the economy. The budget situation has 
not improved as a result of recurrent non-payments for gas deliveries. The large trade surplus of the 
balance of payments partly corresponds to credits to its customers. The still very high level of foreign 
exchange reserves (9 months of imports) can be used to meet the substantial external obligations 
falling due. Turkmenistan's government has been reluctant to move rapidly on structural reform, 
although recent declarations seem to indicate a change of attitude. 
UKRAINE 
Ukraine's risk is slowly diminishing, but it remains high. Economic conditions are improving 
gradually. Inflation has declined further in the course of 1996, but GDP continues to contract even if 
at a lower rate (estirnated decline of 8% in 1996). Since the adoption of the new SB A in May of this 
year, financial policies have been relatively tight. This is especially true for monetary policy. 
However, there are strong pressures on the budget (important wage arrears, demands for support of 
coal mines, etc.), and a loosening of fiscal policies remains a major risk. On 2 September 1996 the 
new national currency, hryvnia, was introduced. Given the announcement of a number of restrictive 
measures in the context of the currency'reform, the NBU had to intervene heavily in the foreign 
22 
exchange market to keep the exchange rate stable, thereby loosing substantial reserves (the level is 
below 1 month of imports). The political risk remains high. On the one hand, there is an ongoing 
struggle between pro-reform forces in the government, also backed by the President, and 
conservative anti-reform forces, including the majority of the Ukrainian Parliament. On the other 
hand, there are unsolved issues with Russia regarding for instance the Black. Sea Fleet and trade 
issues. 
For next year, the external financial situation remains tight. Although the export performance is 
strong and the services balances positive the current account deficit is expected to remain at over 
US$ 1 bn and to decline somewhat in % of GDP. Capital inflows, investment and long-term credits 
are expected to leave a financing gap of almost US$ 2 bn that cannot fully be covered by IMF and 
World Bank financing (of some US$ 1.5 bn). No dramatic changesjn debt and debt-service ratios are 
expected. 
UZBEKISTAN 
Provided new developments in Afghanistan do not significantly influence the Central Asian region, 
the Uzbek authorities, in spite of slow institutional reforms, are expected to maintain political and 
social stability and play a leading and constructive role in Central Asian politics. Bolstered by cotton, 
gold and oil revenues, Uzbek GDP in recent years has shrunk much less than in most CIS countries, 
and, with significant foreign investments and the energy sector still expanding, output is projected to 
stabilize in 1996. Fiscal and monetary tightening since mid-1994 brought about a sharp drop in 
monthly inflation from 100 % in 1994 to around 2 % in March 1996. The budget deficit, already 
smaller (4 % of GDP) in 1995, is expected to improve further in 1996. In 1995, the current account 
showed a deficit of 0.5 % of GDP, while the country was building up foreign exchange reserves (6 
months' imports). The current account deficit is expected to widen slightly in 1996/1997 and to 
decline by 2000. The external debt service/exports ratio is expected to remain comfortable. While the 
Som remained stable for most 1995 and 1996, it has been under increasing pressure from August 
1996 as a result of big rise in trade, fall in the price of cotton and bad harvests. As the Government 
has until now refused to use its sizeable hard currency reserves, Uzbekistan is hit by shortage of hard 
currency which could hamper further development of foreign trade. Economic and structural reforms 
in Uzbekistan, although introduced cautiously, have, with IMF and World Bank support, intensified 
lately, with progress in a wide range of areas: liberalization of prices, domestic trade, foreign trade 
and currency regime. The creation of SMEs has accelerated and the country is open to foreign 
investment. 
IV. MEDITERRANEAN COUNTRIES 
ALGERIA 
Algerian country risk remains high. The political situation and the security problems continue to 
hinder the pace of structural reform and the development of a dynamic private economy. The 
macroeconomic improvement achieved under the IMF-supported programme implemented since 
1994 has recently been strengthened by an up-swing in oil prices. However, unemployment remains 
above 20% and the most sensitive areas for crucial microeconomic reform (agriculture and public 
enterprise restructuring) still have to be tackled. Given limited structural change, both the fiscal and 
the external accounts remain vulnerable to the future vagaries of the oil price. The overall external 
position has improved but remains fragile with no access to the international capital market, 
negligible FDI and a persisting deficit in the overall balance of payments. External viability is 
23 
achieved only through the support of the multilateral institutions and the debt rescheduling agreed 
with the London and Paris Clubs (ending in 1998). 
ISRAEL 
The risk assessment for Israel has deteriorated somewhat reflecting the stalemate in the Middle East 
peace process, rising budget and current account deficits and inflationary pressures in the context of 
an overheating economy. These negative developments are only compensated in part by the approval 
by the Netanyahu government of expenditure cuts of Sk 4.9 bn to the 1997 budget deficit, its 
simultaneous adoption of a stringent multi-year deficit reduction plan and its commitment to 
accelerate privatization and other structural reforms. While Israel has a high gross foreign debt and a 
considerable political risk, the country-risk evaluation benefits from the implicit guarantee provided 
by the US's economic and political support. 
24 
Annexe 
ANNEXE 
I. EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED BY THE 
COMMUNITY BUDGET 25 
I.A. TABLES 1 TO 3 25 
I.B. LOAN OPERATIONS COVERED BY A BUDGET GUARANTEE 26 
I.C. PAYMENT OF THE BUDGET GUARANTEE 40 
n. METHODOLOGICAL NOTE ON THE ANALYSIS OF THE COMMUNITY'S ESTIMATED 
LENDING CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES OVER THE PERIOD 
1996-99 UNDER THE GUARANTEE FUND MECHANISM 42 
II. A. RESERVE FOR LOAN GUARANTEES TO NON-MEMBER COUNTRIES (1) 42 
II.B. BASES FOR THE CALCULATION OF THE PROVISIONING OF THE GUARANTEE FUND (2) 42 
U.C. BASIS FOR THE PROVISIONING OF THE FUND IN THE EVENT OF A PART GUARANTEE 43 
II.D. PROVISIONING OF THE GUARANTEE FUND (3) 43 
II.E. MARGIN REMAINING IN THE GUARANTEE RESERVE (4) 44 
II.F. RESIDUAL LENDING CAPACITY (5) 44 
in. TABLES: COUNTRY-RISK INDICATORS 45 
25 
L EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED BY 
THE COMMUNITY BUDGET 
LA. Tables 1 to 3 
The purpose of Tables 1 to 3 is to show the outstanding amount of guarantees and annual 
repayments of capital and interest in respect of borrowing and lending operations for which 
the risk is covered by the Community budget. The figures show the maximum possible risk 
for the Community in respect of these operations and must not be read as meaning that these 
amounts will actually be drawn from the budget. In the case of Table 3, in particular, it is not 
certain that all the operations described will actually be disbursed. 
I.A. 1. Authorized ceiling (Table 1) 
This is the aggregate of the maximum amounts of capital authorized (ceilings) for each 
operation decided by the Council. 
In order to relate it to the risk which the budget might have to cover, account should be taken 
of the following factors which could affect it: 
Factor increasing the risk: the interest on the loans must be added to the authorized ceiling 
Factors reducing the risk; 
- limitation of the guarantee given to the EIB to 75% of the loans signed in the 
Mediterranean countries; 
- operations already repaid, since the amounts concerned, except in the case of balance of 
payments support, are the maximum amount of loans granted and not outstanding 
amounts authorized; 
- the amounts authorized are not necessarily taken up in full 
LA. 2. Capital outstanding ( Table 1) 
This is the amount of capital still to be repaid on a given date in respect of operations 
disbursed. 
Compared with the previous aggregate, the amount outstanding does not include loans wliich 
have not yet been disbursed nor the proportion of disbursed loans which have already been 
repaid. It may be described as the amount of loans which exist on a given date. 
26 
LA. 3. Annual risk (Tables 2 and 3) 
Estimated amount of principal and interest due each financial year. 
This amount is calculated for: 
a) disbursements alone (Table 2), in which case the capital to be repaid corresponds to the 
amount outstanding; 
b) disbursements, decisions still awaiting disbursement and Commission proposals still 
awaiting decisions (Table 3), in which case the capital to be repaid corresponds to the 
ceiling on loans authorized plus, where applicable, the amounts in respect of operations 
proposed by the Commission and not yet decided. 
LB. Loan operations covered by a budget guarantee 
The budgetary authority authorized 31 headings with token entries in the 1996 budget to 
cover any payment of guarantees. These headings can be divided into three categories: 
borrowing and lending within the Community, borrowing and lending outside the Community 
and guarantees given to financial institutions. 
LB. 1. Borrowings to he on-lent within the Community 
IB. 1.1 Community borrowing operations to provide balance-of-pavments support 
The Community is authorized to borrow on the capital markets or from financial institutions 
and make the sums raised available to Member States experiencing temporary balance-of-
payments difficulties. 
The outstanding amount of loans granted to Member States for this purpose may not exceed 
ECU 14 billion in principal. 
At 30 June 1996 there was one operation in respect of Greece under the decision of 
4 March 1991 and one operation in respect of Italy under the decision of 18 January 1993. 
I.B.I..2 Euratom borrowing operations 
In 1977 the Commission was empowered to borrow funds to be used to help finance nuclear 
power stations. 
Loans are made to electricity producers and carry the usual guarantee demanded by banks. 
Recipients are often State-owned companies or companies enjoying a State guarantee. 
The maximum amount of borrowings authorized is ECU 4 billion, of which ECU 500 million 
was authorized by the 1977 decision, ECU 500 million in 1980, ECU 1 billion in 1982, 
ECU 1 billion in 1985 and ECU 1 billion in 1990. The amount borrowed comes to around 
ECU 2 900 million, leaving ECU 1 100 million which may still be raised. 
27 
On 9 December 1992 the Commission proposed that the balance of borrowings not used in 
the Member States could be used to finance the improvement of the degree of efficiency and 
safety of nuclear power stations in the countries of Central and Eastern Europe and in the 
CIS. 
The Council adopted a decision to this effect on 21 March 1994 (see Part II - Loans raised 
for non-Community countries). 
I.B.I..3 Borrowing operations for the promotion of investment in the Community 
The Commission was empowered by a Council Decision of 16 October 1978 to borrow funds 
to be used to promote investment in the Community (New Community Instrument). 
The authorized borrowing ceiling was fixed at ECU 1 billion by the Decision of 
16 October 1978 and was then raised by ECU 1 billion by the Decision of 15 March 1982. 
The ceiling was further raised by ECU 3 billion by the Decision of 19 April 1983 and by 
ECU 750 million by the Decision of 9 March 1987. 
The proceeds of the operations are paid out in the form of loans granted by the EIB, acting 
for the Commission, to finance investment projects which contribute to greater convergence 
and growing integration and are consistent with the priority Community objectives in the 
energy, industry and infrastructure sectors, taking account of such factors as the regional 
impact of the projects and the need to combat unemployment. Support for small businesses 
was also made a priority objective by the Decision of 26 April 1982. 
A Decision of 20 January 1981 also empowered the Community to contract loans in order to 
provide exceptional aid of ECU 1 billion to the regions of Italy affected by the earthquake of 
November 1980. A similar decision involving ECU 80 million was adopted on 
14 December 1981 for the regions affected by the earthquakes in Greece in February/March 
1981. 
The maximum amount of borrowings authorized thus comes to ECU 6 830 million. 
The risk is spread over a large number of borrowers. In addition, most of the loans are global 
loans to financial institutions which guarantee repayment of the funds. 
Every year the EIB provides the Commission with a list of debtors who, according to its 
information, risk defaulting in the coming year. So far, no names have appeared on this list. 
LB. 2. Loans raised for on-lending to non-Community countries 
I.B.2..1 Euratom borrowings for certain non-Community countries 
On 21 March 1994 the Council decided to amend Decision 77/270/Euratom to authorize the 
Commission to contract Euratom borrowings in order to contribute to the financing required 
for improving the degree of safety and efficiency of nuclear power stations in certain 
non-member countries. 
28 
This Decision will allow a considerable proportion of Euratom's available borrowing capacity 
(some ECU 1 100 million) to be used to finance projects. For these projects to be eligible, 
they must relaté to: 
nuclear power stations or installations in the nuclear fuel cycle which are in service or 
under construction; 
or to the dismantling of installations which cannot be brought up to standard for 
technical or economic reasons. 
The following non-member countries qualify: 
Republic of Bulgaria 
Republic of Hungary 
Republic of Lithuania 
Romania 
Republic of Slovenia 
Czech Republic 
Slovak Republic 
Russian Federation 
Republic of Armenia 
Ukraine 
The idea of international financial aid for the closure of the Chernobyl nuclear power plant 
was entered in the conclusions of both the Corfu European Council of 24 and 25 June 1994 
and the G7 summit at Naples on 7 and 8 July 1994. 
LB.2..2 Programme of borrowings contracted bv the Community to provide 
macrofinancial assistance to the countries of Central and Eastern Europe 
• Hungary 
Hungary I 
i 
In 1990 the Community granted Hungary a medium-term loan of up to ECU 870 million in 
principal for a maximum of five years. The loan is intended to facilitate the adjustment of the 
Hungarian economy in a way which will enable it to derive all the benefits of a market-based 
economy. It is being made available in tranches. 
The first tranche of ECU 350 million was paid on 20 April 1990. A second tranche of 
ECU 260 million was paid on 14 February 1991. The third tranche, which is not to exceed 
ECU 260 million, was planned for 1992 but has not been paid out as Hungary's balance of 
payments has been more favourable than expected. The tranches will be repaid in one 
instalment after five years and interest, which is at variable rates, is payable half-yearly. 
Hungary repaid the first tranche of ECU 350 million in full on 20 April 1995. The second 
tranche of ECU 260 million was repaid on 20 April 1996. 
29 
Hungary II 
As the break-up of the Council for Mutual Economic Assistance (Comecon) and the Gulf 
crisis threatened to compromise the initial encouraging results of the reforms undertaken, the 
Council decided in June 1991 to grant additional macrofinancial assistance to Hungary in the 
form of a loan of ECU 180 million under a general G-24 programme of financial assistance. 
The first tranche of ECU 100 million was paid on 14 August 1991. It will be repaid in one 
instalment after seven years and interest, which is at variable rates, is payable half-yearly. The 
second tranche of ECU 80 million was paid on 15 January 1993. It will be repaid in 
January 1997 and interest, which is at a fixed rate, is payable annually. 
• Czech Republic and Slovak Republic 
- As part of G-24's overall financial assistance, the Commission, on behalf of the 
Community, was empowered to borrow, in two tranches, ECU 375 million for a 
period of seven years. The proceeds of this operation were to be on-lent on the same 
terms to the Czech and Slovak Federal Republic. 
The first tranche of ECU 185 million was paid on 14 August 1991. It will be repaid in 
one instalment after seven years, and interest, which is at variable rates, is payable 
half-yearly. 
The second tranche of ECU 190 million was paid on 2 March 1992 and will be repaid 
in one instalment after six years. 
Following the division of Czechoslovakia into the Czech Republic and the Slovak 
Republic on 1 January 1993, the Commission proposed that the loan be divided 
between the two Republics. 
Under the Council decision of 24 January 1994, two thirds of the loan -
ECU 250 million - will be for the Czech Republic and one third - ECU 125 million -
for the Slovak Republic. 
- Slovak Republic 
As part of the financial assistance for the Slovak Republic, the Commission, on behalf 
of the Community, was empowered by a Council decision 94/939/EC of 
22 December 1994 to borrow, in two tranches, ECU 130 million for a period of 
seven years. The proceeds of this operation were to be on-lent on the same terms to 
Slovakia. 
30 
Because of the improvement in the macroeconomic situation and, in particular, the 
Slovak Republic's balance of payments and currency reserves and its access to 
international private capital markets, the Slovak authorities stated in April 1995 that 
they would no longer be calling on the aid granted by the IMF under the stand-by 
agreement to support the country's balance of payments. 
With the IMF stand-by arrangement expiring and the Slovak authorities not being 
prepared to agree on the economic policy measures to be attached to the 
implementation of the EU loan facility, the Commission therefore submitted to the 
Council a proposal cancelling Decision 94/939/EC of 22 December 1994 in line with 
the conclusions to be drawn for the Community. This decision was repealed by the 
Council Decision of 25 July 1996. 
• Bulgaria 
Bulgaria I 
As part of G-24's overall financial assistance, the Commission, on behalf of the Community, 
was empowered to borrow, in two tranches, ECU 290 million for a period of seven years. 
The proceeds of this operation were to be on-lent on the same terms to Bulgaria. 
The first tranche of ECU 150 million was paid to Bulgaria on 14 August 1991. It will be 
repaid in one instalment after seven years, and interest, which is at variable rates, is payable 
half-yearly. 
The second tranche of ECU 140 million was paid on 2 March 1992 and will be repaid in one 
instalment after five years. Interest, which is at variable rates, is payable half-yearly. 
Bulgaria II 
As part of G-24's new aid for 1992 and 1993, the Commission, on behalf of the Community, 
was empowered to borrow ECU 110 million in two tranches for a maximum period of seven 
years. The proceeds of this operation were to be on -lent to Bulgaria. Because of delays in the 
process of economic reform in Bulgaria, implementation of this operation was deferred until 
December 1994 when the first tranche of ECU 70 million was finally paid. It will be repaid in 
one instalment on 7 December 2001 and the interest, which is at variable rates, is payable 
half-yearly. 
• Romania 
Romania I 
As part of G-24's overall financial assistance, the Commission, on behalf of the Community, 
was empowered to borrow ECU 375 million in two tranches for a maximum period of seven 
years. The proceeds of this operation were to be on-lent on the same terms to Romania. 
The first tranche of ECU 190 million for a term of seven years was paid on 22 January 1992. 
It will be repaid in one instalment on 1 February 1999, and interest, which is at variable rates, 
is payable half-yearly. 
31 
The second tranche of ECU 185 million for a term of six years was paid in April 1992 and 
will be repaid in one instalment on 18 March 1998. Interest, which is at variable rates, is 
payable half-yearly. 
Romania II 
As part of G-24's new aid, the Commission; on behalf of the Community, was empowered to 
borrow ECU 80 million for a maximum period of seven years. The proceeds of this operation 
were to be on-lent on the same terms to Romania. 
The loan was paid out in a single tranche on 26 February 1993. It will be repaid in one 
instalment on 26 February 2000, and interest is payable half-yearly. 
Romania in 
As part of G-24's new overall macrofinancial aid, the Commission, on behalf of the 
Community, was empowered by the Council Decision of 20 June 1994 to borrow 
ECU 125 million in two tranches of ECU 90 million and ECU 35 million for a maximum 
period of seven years. The proceeds of this operation are to be on-lent on the same terms to 
Romania. 
The first tranche of ECU 55 million for a term of seven years was paid on 
20 November 1995. It will be repaid in one instalment on 20 November 2002, and interest, 
which is at variable rates, is payable half-yearly. 
The second tranche had not yet been paid at 30 June 1996. 
IB.2..3 Borrowings contracted by the Community to grant macrofinancial assistance to 
the new independent States of the former Soviet Union 
• Medium-term loan of ECU 1 250 million 
In December 1991 the Council decided to grant a credit facility of up to ECU 1 250 million 
for the Soviet Union and its Republics in order to finance imports of agricultural products, 
foodstuffs and medicines from the Community and Eastern Europe for a maximum period of 
three years. 
After the Soviet Union broke up, the loan was divided between the various new independent 
States at the beginning of 1992. 
Loan contracts signed on the basis of the original breakdown 
Most of the loan contracts were signed in the course of 1992: 
- with Armenia (ECU 38 million), Kyrgyzstan (ECU 32 million), Turkmenistan 
(ECU 45 million) and Moldova (ECU 27 million) on 10 July 1992; the amount for 
Kyrgyzstan has since been reduced to ECU 23.7 million at the request of the 
Kyrgyzstan authorities; 
32 
- with Ukraine (ECU 130 million) on 13 July 1992; 
- with Belarus (ECU 102 million), Tajikistan (ECU 55 million) and Georgia 
(ECU 70 million) on 24 July 1992; 
- with Russia (ECU 150 million) on 9 September 1992; 
- with Russia (ECU 349 million) on 9 December 1992; 
- with Kazakhstan (ECU 25 million) on 15 December 1992. 
Loan contracts signed on the basis of the amended breakdown 
Some loan contracts were also signed in 1993 after the initial breakdown of the total amount 
of the loan had been changed: 
- On 5 May 1993 two further contracts were signed with Armenia (ECU 20 million) 
and Georgia (ECU 10 million). The amount represented by these two loans had 
originally been allocated to Kazakhstan. 
- On 6 December 1993 a further loan contract of ECU 40 million was signed with 
Georgia. This loan was financed by reducing Uzbekistan's allocation. 
- On 14 September 1994 a contract for ECU 59 million was signed with Uzbekistan. 
- On 12 October 1994 a contract for ECU 68 million was signed with Azerbaijan. 
Utilization of the ECU 1 250 million loan 
Loans 
Armenia a 
Armenia b 
Azerbaijan 
Belarus 
Georgia a 
Georgia b 
Geongia c 
Kazakhstan a 
Kazakhstan b 
Kyrgyzstan 
Moldova 
Russia a 
Russia b 
Tajikistan 
Turkmenistan 
Ukraine 
Uzbekistan 
Total Initial breakdown (1992) 
38 
68 
102 
70 
55 
32 
27 
150 
349 
55 
45 
130 
129 
1250 Breakdown at 30.6.1996 
38 
20 
68 
100,5 
70 
10 
40 
25 
0 
23,7 
27 
72,9 
349 
55 
45 
129,8 
59 
1132,9 Actual utilization at 
30.6.1996 
37,9 
19,6 
50,3 
100,5 
69,4 
9,8 
34,1 
24,9 
22,7 
27,0 
70,0 
299,7 
54,5 
44,9 
129,8 
58,8 
1053,9 
At 30 June 1996 the amount of loans actually being used came to ECU 1053.9 million. 
33 
Schedule for the repayment of capital and the payment of outstanding interest. 
The schedules for the repayment of capital and the payment of outstanding interest for this 
operation vary according to the date on which the loan contract was signed and the amount 
of the loan: 
- Georgia (ECU 40 million): 
- interest on 15 January 1997 
- capital on 15 January 1997. 
- Azerbaijan and Uzbekistan: 
- interest on 28 March and 28 September 
- capital on 28 September 1997. 
At 30 June 1996 Georgia, Armenia, Turkmenistan and Tajikistan had defaulted on principal 
and interest totalling ECU 243.81 million (see Part Two, Section IV - Activation of budget 
guarantees). 
• Macrofinancial assistance for Moldova 
As part of the Community's contribution to the international aid scheme for Moldova, the 
Commission, on behalf of the Community, was empowered by a decision of 13 June 1994 to 
borrow ECU 45 million in two tranches for a maximum period often years. The proceeds of 
this operation were to be on-lent on the same terms to Moldova. 
The first tranche of ECU 25 million was paid to Moldova in December 1994. The loan is to 
be repaid in five equal annual instalments from the sixth year onwards. The full loan will have 
been paid by 7 December 2004. The interest, which is at variable rates, is payable half-yearly. 
The second tranche of ECU 20 million for a term often years was paid on 8 August 1995. 
The loan is to be repaid in five equal annual instalments from the sixth year onwards. The full 
loan will have been paid by 8 August 2005. The interest, which is at variable rates, is payable 
half-yearly. 
Macrofinancial assistance for Ukraine 
As part of the overall aid programme for Ukraine, the Commission, on behalf of the 
Community, was empowered by the Council Decision of 22JDecember 1994 to borrow 
ECU 85 million for a maximum period often years. The proceeds of this operation are to be 
on-lent to Ukraine in one tranche. 
The loan was paid in one tranche on 28 December 1995. The loan is to be repaid in five equal 
annual instalments from the sixth year onwards. The full loan will have been paid by 28 
December 2005. The interest, which is at variable rates, is payable half-yearly. 
Ukraine II 
As part of an overall aid programme for Ukraine, the Council Decision of 23 October 1995 
empowered the Commission, on behalf of the Community, to borrow ECU 200 million for a 
34 
maximum period often years. The proceeds of this operation are to be on-lent to Ukraine in 
two tranches. 
At 30 June 1996 the first tranche had not yet been paid. 
• Macrofinancial assistance for Belarus 
As part of the overall aid programme for Belarus, the Commission, on behalf of the 
Community, was empowered by the Council decision of 10 April 1995 to borrow up to 
ECU 75 million for a maximum period of ten years. The proceeds of this operation were to 
be on-lent in two tranches. 
ECU 55 million of the ECU 75 million loan has been committed. As the country's economic 
situation is better than initially forecast by the IMF, the remaining ECU 20 million will not be 
paid. 
The first tranche of ECU 30 million was paid on 28 December 1995 and is to be repaid in five 
equal annual instalments from the sixth year onwards. The full loan will have been paid by 28 
December 2005. The interest, which is at variable rates, is payable half-yearly. 
IB.2..4 Borrowings contracted by the Community to grant macrofinancial assistance to 
the Baltic States. 
As part of the G-24's overall programme of financial assistance for these three countries, the 
Commission, on behalf of the Community, was empowered to borrow ECU 220 million for a 
period of seven years. The proceeds of this operation were to be on-lent on similar terms in 
two tranches: 
- ECU 40 million for Estonia; 
- ECU 80 million for Latvia; 
- ECU 100 million for Lithuania. 
The first tranches of the loan for Estonia (ECU 20 million) and for Latvia (ECU 40 million) 
were paid on 31 March 1991 The loans are to be repaid in one instalment on 31 March 2000 
and interest, which is at variable rates, is payable half-yearly every 31 March and 
30 September. 
The first tranche of ECU 50 million for Lithuania was paid on 27 July 1993; it is to be repaid 
in one instalment on 27 July 2000 and interest, which is at a fixed rate, is payable annually 
every 27 July. 
Half of the second tranche, i.e. ECU 25 million of the ECU 50 million planned, was paid to 
Lithuania on 16 August 1995; it is to be repaid in one instalment on 16 August 2002 and 
interest, which is at a variable rate, is payable half-yearly every 16 February and 16 August. 
I.B.2..5 Borrowings contracted bv the Community to grant macrofinancial assistance to 
the Mediterranean countries 
35 
• Israel 
As part of the financial assistance agreed for Israel and the population of the occupied 
territories, the Commission was empowered in June 1991 to borrow, on behalf of the 
Community, ECU 160 million in one tranche for a period of seven years. Thé proceeds were 
to be paid out to Israel on the same terms and are accompanied by an interest subsidy of 
ECU 27.5 million paid from the Community budget. 
This operation started on 2 March 1992. The borrowing is to be repaid in full on 
15 December 1997. 
At 30 June 1996 the amount outstanding on the borrowings for Israel came to 
ECU 160 million. 
• Algeria 
In September 1991 the Commission, on behalf of the Community, was empowered to borrow 
ECU 400 million in two tranches for a maximum period of seven years. The proceeds of this 
operation were to be on-lent on the same terms to Algeria. 
A bridging loan was granted on 23 December 1991 to cover the first tranche of 
ECU 250 million and was repaid from the net proceeds of the borrowing contracted on 
14 January 1992 for a period of six years. 
The loan is to be repaid in one instalment on 15 December 1997 and interest is payable 
annually every 15 December. 
Payment of the second tranche of ECU 150 million was deferred because of delays in 
Algeria's economic reform programme and was not made until August 1994 when the 
process of structural adjustment resumed. The loan is to be repaid in full on 17 August 2001 
and interest is payable annually every 17 August. 
In December 1994 the Council decided to grant Algeria further macrofinancial assistance. 
The Commission, on behalf of the Community, was empowered to borrow ECU 200 million 
for a maximum period of seven years. The proceeds of this operation are to be on-lent to 
Algeria in two tranches. 
The first tranche of ECU 100 million for a term of seven years was paid on 
27 November 1995. It is to be repaid in one instalment on 27 November 2002 and interest, 
which is at a variable rate, is payable half-yearly. 
LB. 3. Community guarantee to non-Community countries 
IB.3..1 Breakdown bv geographical area 
• European Investment Bank loans to Mediterranean countries guaranteed by the 
general budget 
36 
Under the terms of the Council Decision of 8 March 1977, the Community guaraiitees loans 
to be granted by the European Investment Bank as part of the Community's financial 
commitments towards the Mediterranean countries. 
This decision was the basis for the contract of guarantee signed by the European Economic 
Community and the European Investment Bank on 30 October 1978 in Brussels and 
10 November 1978 in Luxembourg introducing a global guarantee of 75% on all credit lines 
made available for loans in the following countries: Portugal (Financial Protocol, pre-
accession aid), Greece, Spain (financial cooperation), Malta, Tunisia, Algeria, Morocco, 
Turkey, Cyprus, Egypt, Jordan, Syria, Israel, Yugoslavia and Lebanon. 
In addition, by way of exception, a 100% guarantee covers loans allocated for emergency aid 
to Portugal in accordance with the Council Decision of 7 October 1975. 
A new extension of the contract of guarantee is established for each new Financial Protocol. 
The loans authorized at 30 June 1996 total ECU 7 862 million, of which ECU 1 500 million 
is for Spain, Greece and Portugal and ECU 6 362 million for the non-member Mediterranean 
countries. At 30 June 1996 the total of outstanding loans came to ECU 2 066 million (taking 
account of the 75% limit), of which ECU 346 million was accounted for by Spain, Greece 
and Portugal and ECU 1 720 million by the non-member Mediterranean countries. 
There is also provision for EIB loans outside these protocols under Council Regulation 
(EEC) No 1763/92 of 29 June 1992 concerning financial cooperation in respect of all 
Mediterranean non-member countries. 
EIB loans under this operation must not exceed ECU 1 800 million. A 75% overall guarantee 
is provided. 
At 30 June 1996 ECU 1 396.5 million had been made available; of this total, ECU 261 million 
had been paid; this figure corresponds to the amount currently outstanding. 
37 
At 30.06.96, the breakdown of authorizations by country (non-member countries only) was 
as follows: 
ECU million 
Loans authorized 
Algeria 640 
Cyprus 142 
Egypt 802 
Israel 215 
Jordan 198 
Lebanon 222 
Malta 85 
Morocco 517 
Slovenia 150 
Syria 323 
Tunisia 418 
Turkey 90 
Yugoslavia10 ™ 
Protocols - Total 4 562 
Horizontal financial cooperation j 80Q 
Mediterranean - Total 6 362 
The loans are generally for 15 years with 3 to 4-year periods of grace on capital 
repayments. 
• Loans granted by the European Investment Bank in countries of Central and Eastern 
Europe 
In response to a call made by the Council on 9 October 1989, the RnarH of Governors of the 
European Investment Bank decided on 29 November 1989 to authorize the Bank to provide 
loans from its own resources to finance investment projects in Hungary and Poland for a total 
amount not exceeding ECU. 1 billion. These loans are granted to finance investment projects 
which satisfy the Bank's usual requirements for loans from its own resources. The contract of 
guarantee covering 100% of the lending operations was signed on 24 April 1990 in Brussels 
and 14 May 1990 in Luxembourg. 
On 14 May 1991 the budgetary authority extended this 100% guarantee to loans made in 
Czechoslovakia, Bulgaria and Romania up to a maximum of ECU 700 million. 
The extension of the contract of guarantee was signed on 31 July 1991. 
On 23 October 1992 the Commission presented a proposal for a Council Decision extending 
this 100%) Community guarantee to losses incurred by the EIB as a result of loans granted to 
Estonia, Latvia and Lithuania; this was approved by the budgetary authority in its decision of 
15 March 1993. 
The overall ceiling On loans which the EIB may grant in these countries was set at 
ECU 200 million for a period of three years. 
10 The second protocol with Yugoslavia was suspended when ECU 100 million of credits could still be granted. 
38 
On 18 December 1992 the Commission also proposed the extension of this 100% guarantee 
to losses incurred by the EIB as a result of loans granted in Albania. 
On 13 December 1993 the budgetary authority renewed the 100%» Community guarantee for 
a period of three years for loans granted by the EIB in the countries of Central and Eastern 
Europe (including the Baltic States and Albania) up to a maximum of ECU 3 billion. 
The contract of guarantee was signed on 22 July 1994 in Brussels and on 12 August 1994 in 
Luxembourg. 
The loans are generally long-term: 15 years on average with 3 to 4-year periods of grace on 
capital repayments. 
At 30 June 1996, ECU 3 646 million had been made available in the Central and Eastern 
European countries but only ECU 1 055 million had been disbursed. 
• Loans granted by the European Investment Bank in other non-member countries 
At its meeting of 19 May 1992 the Council (Economic and Financial Affairs) adopted the 
guidelines proposed by the Commission for the extension of EIB activities outside the 
Community and asked it to grant loans in accordance with its Statute and its usual criteria to 
projects of mutual interest in certain non-member countries (the developing countries of Asia 
and Latin America) with which the Community has concluded cooperation agreements. 
An overall limit of ECU 250 million per year has been set for a 3-year period; this ceiling will 
be reviewed at the end of the period. 
These loans benefit from 100% Community budget guarantees. The Commission presented a 
proposal for a decision to this effect on 3 June 1992. The formal Council Decision followed 
on 15 February 1993. The contract of guarantee between the Community and the EIB was 
signed on 4 November 1993 in Brussels and on 17 November 1993 in Luxembourg. 
At 30 June 1996 credit lines of ECU 647 million had been signed but only ECU 191 million 
had been disbursed. 
• Loans granted by the European Investment Bank in South Africa 
At its meeting of 1 June 1995 the Council adopted the guidelines proposed by the 
Commission for the extension of EEB activities to South Africa and asked it to grant loans in 
accordance with its Statute and its usual criteria to projects of mutual interest in that country. 
An overall limit of ECU 300 million has been set for a two-year period which could be 
extended to two and a half years. 
These loans benefit from 100% Community budget guarantees. The Commission presented a 
proposal for a decision to this effect on 5 December 1994. The formal Council Decision 
followed on 1 June 1995. The contract of guarantee between the Community and the EIB 
was signed on 4 October 1995 in Brussels and on 16 October 1995 in Luxembourg. 
39 
At 30 June 1996 credit lines of ECU 101 million had been signed but no amounts had been 
disbursed. 
LB.3..2 Expected signature and disbursement of EIB loans 
The ED3 has supplied the figures used for calculation of the assumptions made for drawing up 
Table 3 (EIB loans to non-member countries from its own resources). 
Expected signatures 
Mediterranean countries 
At 30 June 1996 a total of ECU 1 007.5 million was still awaiting signature under current and 
former mandates (ECU 1 234.5 million, less ECU 227 million for the remainder from the first 
and second protocols with Yugoslavia which will no longer be signed). Some 
ECU 460 million of this amount could be signed in the second half of 1996 and some 
ECU 320 million in 1997. 
It is assumed that half of the ECU 225 million under the third and fourth protocols with Syria 
will be signed in 1996 and half in 1997; however, this assumption is very uncertain. 
Central and Eastern Europe 
At 30 June 1996 a total of ECU 1 054 million was still awaiting signature under current and 
former mandates, less ECU 52.8 million for the remainder from the first terms of reference 
which will no longer be signed, leaving ECU 1 001.2 million actually to be signed in the 
second half of 1996. 
Asia and Latin America 
At 30 June 1996 a total of ECU 98 million was still awaiting signature under the first 
mandates. Some ECU 45 million could be signed in the second half of 1996 and the 
remainder in 1997. 
South Africa 
At 30 June 1996 a total of ECU 199 million was still awaiting signature under the first 
mandates. Some ECU 120 million could be signed in the second half of 1996 and the 
remainder in 1997. 
Disbursement forecasts 
As regards disbursement of the loans still awaiting signature, it is assumed that nothing will be 
paid in the year of signature, 10% in the second year, 25% a year between the third and fifth 
years and 15% in the sixth year. 
40 
At 30 June 1996 ECU 5 252.4 million still had to be disbursed against loans signed at that 
date. The total breaks down as follows:11 
Mediterranean ECU 2104.5 million 
Central and Eastern Europe ECU 2 596.7 million 
Asia and Latin America ECU 450.2 million 
South Africa ECU 101.0 million 
I.C. Payment of the budget guarantee 
/. C. 1. Borrowing/lending operations 
In this type of operation, the Community borrows on the financial market and on-lends the 
proceeds (at the same rate and for the same term) to Member States (balance of payments), 
non-member countries (medium-term financial assistance) or firms (NCI, Euratom). 
The loan repayments are scheduled to match the repayments of the borrowings due from the 
Community. If the recipient of the loan is late in making a repayment, the Commission must 
draw on its resources to repay the borrowing on the due date. 
The funds needed to pay the budget guarantee in the event of late payment by the recipient of 
a loan granted by the Community are raised as follows: 
(a) The amount required may be taken provisionally from cash resources in accordance 
with Article 12 of Council Regulation No 1552/89 of 29 May 1989 implementing 
Decision 88/376/EEC, Euratom on the system of the Communities* own resources. 
This method is used so that the Community can immediately repay the borrowing on 
the date scheduled in the event of late payment by the recipient of the loan. 
(b) If the delay extends to three months after the due date, the Commission draws on 
the Guarantee Fund to cover the default. The funds obtained are used to replenish 
the Commission's cash resources. 
(c) The transfer procedure can be used to provide the budget heading with the 
appropriations needed to cover the default; any margin available in the guarantee 
reserve is drawn on first. This method is used when there are insufficient 
appropriations in the Guarantee Fund and must be authorized in advance by the 
budgetary authority. 
(d) The re-use of amounts repaid by debtors who have defaulted, leading to activation 
of the Community guarantee, allows payments to be made within a short period of 
time always providing, of course, that there are recovered funds available. 
11 Based on a working assumption that 25% of the loan will be disbursed every year for four years and that the average term 
will be fifteen years with a three-year period of grace. 
41 
I. C. 2. Guarantees given to third parties 
The loan guarantee is in respect of loans granted by a financial institution such as the 
European Investment Bank (EIB). When the recipient of a guaranteed loan fails to make a 
payment on the due date, the EIB asks the Community to pay the amounts owed by the 
defaulter in accordance with the contract of guarantee. The guarantee must be paid within 
three months of receiving the EEB's request. The EIB administers the loan with all the care 
required by banking practice and is obliged to demand the payments due after the guarantee 
has been activated. 
Since the entry in force of the Regulation establishing a Guarantee Fund for external action, 
the provisions of the Agreement between the Community and the EIB on management of the 
Fund state that, after the EIB calls in the guarantee in the event of a default, the Commission 
must authorize the Bank to withdraw the corresponding amounts from the Guarantee Fund 
within three months. 
If there are insufficient resources in the Fund, the procedure used for activating the guarantee 
is the same as for borrowing/lending operations. 
42 
H. METHODOLOGICAL NOTE ON THE ANALYSIS OF THE COMMUNITY'S 
ESTIMATED LENDING CAPACITY IN RESPECT OF NON-MEMBER 
COUNTRIES OVER THE PERIOD 1996-99 UNDER THE GUARANTEE 
FUND MECHANISM 
H.A. Reserve for loan guarantees to non-member countries (1) 
As agreed at the Edinburgh European Council, the Interinstitutional Agreement of 
29 October 1993 on budgetary discipline and improvement of the budgetary procedure 
provided for the entry of a reserve for loan guarantees to non-member countries as a 
provision in the general budget of the European Communities. This reserve is intended to 
cover the requirements of the Guarantee Fund and, where necessary, activated guarantees 
exceeding the amount available in the Fund, so that these amounts may be charged to the 
budget. 
The amount of the guarantee reserve is the same as in the financial perspective, viz. 
ECU 300 million at 1992 prices. The amount in the reserve comes to ECU 326 million in 
1996 and ECU 329 million in 1997. 
The conditions for the entry, use and financing of the guarantee reserve are laid down in the 
following decisions: 
. Council Decision 94/729/EC of 31 October 1994 on budgetary discipline 
. Council Regulation (ECSC, EC, Euratom) No 2730/94 of 31 October 1994 
amending the Financial Regulation of 21 December 1977 applicable to the general 
budget of the European Communities 
Council Decision 94/728/EC of 31 October 1994 on the system of the Communities' own 
resource 
II.B. Bases for the calculation of the provisioning of the Guarantee Fund (2) 
The bases for the provisioning of the Fund are calculated by applying the appropriate rate of 
guarantee (75% or 100%): 
- to the loan guarantees authorized by the Council and to the loan guarantees proposed 
or being prepared by the Commission on the basis of the estimates of loan signatures 
contained in the financial statements (EIB and Euratom loans); 
- to the loans (for financial assistance) authorized by the Council and to the loans 
proposed or being prepared by the Commission. 
The annex to Counci/ Regulation (EC, Euratom) No 2728/94 of 31 October 1994 
establishing a Guarantee Fund for external actions, which relates to the arrangements for 
payments into the Guarantee Fund, states that, in the case of borrowing/lending operations or 
guarantees to financial bodies under a framework facility spread over a number of years and 
with a microeconomic and structural purpose, payments into the Fund will be made in annual 
tranches calculated on the basis of the annual amounts indicated in the financial statement 
43 
attached to the Commission proposal, adapted where appropriate in the light of the Council 
decision. 
For other Community borrowing/lending operations, such as loans for the balance of 
payments of third countries, whether made in one or more than one tranche, payments into 
the Fund are calculated on the basis of the total amount for the operation decided on by the 
Council. 
The annex to the Regulation establishing the Guarantee Fund states that, as from the second 
year (in the case of operations spread over a number of years), the amounts to be paid into 
the Fund will be corrected by the difference recorded on 31 December of the previous year 
between the estimates that were taken as a basis for the previous payment and the actual 
figure for the loans signed during that year. Any difference relating to the previous year will 
give rise to a payment in the following year. 
The annex states that, when it starts a payment procedure, the Commission will check the 
situation with regard to the performance of the operations which were the subject of previous 
payments and, where the commitment deadlines originally laid down have not been met, will 
propose that this will be taken into account in calculating the first payment to be made at the 
start of the following financial year for operations already under way. 
In the first half of 1996 the budgetary authority therefore adopted transfer 5/96 to adjust the 
amounts paid to the Fund and make the payments corresponding to the annual tranche 
provided for in the financial statements, as it does at the start of every financial year. 
H.C. Basis for the provisioning of the Fund in the event of a part guarantee 
For EIB loans covered by an aggregate 75% guarantee, the Fund is provisioned on the basis 
of 100% of the annual forecast of signatures up to a level of 75%» of the total amount of 
operations authorized. 
H.D. Provisioning of the Guarantee Fund (3) 
The amounts paid into the Fund are obtained by applying the appropriate rate of provisioning 
(15% or 14%) to the calculation base set out above. 
The 15% provisioning rate is applied to loans granted after guarantees under the Fund have 
been activated and until the amount involved in the default has been repaid to the Fund. 
Article 5 of the Regulation establishing the Guarantee Fund states, "If, as a result of the 
activation of guarantees following default, resources in the Fund stand below 75% of the 
target amount, the rate of provisioning on new operations shall be raised to 15% until the 
target amount has once more been reached or, if the default occurs before the target amount 
is reached, until the amount drawn under the activation of the guarantee has been fully 
restored". 
A 14%) provisioning rate is applied to other loans, i.e. the ECU 115 million loan to Syria, the 
ECU 750 million in loans to Asia and Latin America, the ECU 3 000 million in loans to 
Central and Eastern Europe and the Euratom loans. Pursuant to Articles 2 and 4 of the 
44 
Regulation establishing the Guarantee Fund, the Fund is endowed by payments from the 
general budget equivalent to 14% of the capital value of the operations until it reaches the 
target amount. 
H.E. Margin remaining in the guarantee reserve (4) 
The margin remaining in the guarantee reserve is equivalent to the difference between the 
reserve (1) and the heading for the provisioning of the Guarantee Fund (3). 
H.F. Residual lending capacity (5) 
The residual lending capacity is the loan equivalent of the margin left in the reserve, allowing 
for the guarantee rates in force. 
45 
IH. TABLES: COUNTRY-RISK INDICATORS 
- k€ ~ 
Country-risk indicators 
Country: Bulgaria 
Real GDP growth raie (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate (end of period) 
Exchange rate (Leva per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of G&S (in bn USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official reserves, including gold (end of period) 
in bn USD 
in months of imports of G&S 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
Convertible debt service (in bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in bn USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) (1) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (2) 
(number of countries) 
The Institutional Investor 
Position in the ranking (2) 
(number of countries) 
Credit rating (3) 1993 
-1,5 
-11,8 
16,4 
63,8 
32,7 
-10,8 
5,0 
-12,8 
40 
1,0 
2,0 
12,5 
1,6 
1,1 
0,5 
120,5 
266,5 
33,0 
n.a. 
London Club 
(roll-overs, and 
DDSR agreed 
in principle) 
5,6 
2,8 
7,1 
-
Not rated 
Not rated 
Mar Sep 
122 125 
(169) (170) 
Mar Sep 
91 89 
(127) (133) 
18.9 19.5 1994 
1,8 
7,8, 
12,8 
121,9 
66,0 
-5,8 
5,3 
-2,0 
105 
1,3 
3,0 
10,3 
0,9 
0,5 
0,5 
130,2 
194,3 
18,4 
17,6 
London Club 
DDSR (July) 
Paris Club 
resched. (Apr) 
6,8 
4,6 
8,9 
SBA+STF 
(3/94-3/95) 
SBA suspend. 
in Sep 94 
Not rated 
Not rated 
Mar Sep 
88 98 
(167) (167) 
Mar Sep 
91 95 
(135) (135) 
19.8 20.8 1995 
Preliminary 
2,5 
8,6 
11,6 
32,8 
70,7 
-5,7 
7,0 
-0,4 
82 
1,5 
2,8 
9,4 
0,8 
0,2 
0,6 
76,3 
134,3 
11,4 
0,0 
No 
7,3 
5,7 
7,7 
-
Not rated 
Not rated 
Mar Sep 
90 90 
(187) (181) 
Mar Sep 
93 94 
(135) (135) 
21.9 22.2 
(1) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
-4y 
Country-risk indicators 
Country: Czech Republic 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (CKs per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of G&S (in mio USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in bn USD 
in months of imports of G&S 
External debt (end of period) 
External debt 
(in convertible currencies, in bn USD, end of period) 
Convertible debt service (in bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) (1) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (2) 
(number of countries) 
The Institutional Investor 
Position in the ranking (2) 
(number of countries) 
Credit rating (3) 1993 
-0,9 
-5,3 
3,5 
18,2 
29,9 
0,8 
13077 
0,4 
538 
3,9 
2,8 
8,5 
1,4 
0,9 
0,5 
27,3 
65,0 
7,0 
No 
No 
4,6 
3,4 
2,2 
SBA 
(3/93-3/94) 
On-track 
Baa3 
BBB 
Mar Sep 
48 43 
(169) (170) 
Mar Sep 
42 40 
(127) (133) 
44.6 46.6 1994 
2,6 
2,1 
3,2 
10,2 
28,2 
-0,3 
14295 
-0,1 
762 
6,2 
4,2 
10,7 
2,5 
2,0 
0,5 
29,7 
74,8 
12,6 
No 
No 
5,2 
3,4 
2,5 
SBA 
(3/93-3/94) 
On-track 
All debts to IMF 
paid ahead of 
schedule. 
Baa2 (Jun) 
BBB+ (Jul) 
Mar Sep 
40 39 
(167) (167) 
Mar Sep 
40 39 
(135) (135) 
49.7 52.8 1995 
Latest data 
or estimates (E) 
4,8 
9,2 (Nov) 
2,9 
7,9 
26,3 (Oct) 
-0,8 (E) 
17054 (E) 
-4,2 
2547 
14,0 
7,9 
16,5 (E) 
2,6 
1,5 
1,1 
35,8 
96,7 
15,2 (E) 
No 
No 
5,8 
2,6 
2,5 
-
Baal (Sep) 
A (Nov) 
Mar Sep 
35 41 
(187) (181) 
Mar Sep 
33 30 
(135) (135) 
55.8 58.4 
(1) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
-4*-
Country-risk indicators 
Country: Estonia 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate (end of period) 
Exchange rate (Kroons per USD) (end of period) 
General government balance (as % of GDP) 
Financial balance (1) 
Fiscal balance (1) 
Balance of payments 
Merchandise exports (in mio USD) 
Current account balance (in % of GDP) (excl. official transfers) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in mio USD 
in months of goods imports 
External debt 
External debt (incl. to IMF) 
(in convertible currencies, in mio USD, end of period) 
Convertible debt service (in mio USD) 
principal 
interest +charges to IMF 
External debt/GDP (%) 
External debt/merchandise exports (%) 
Debt service/merchandise exports (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) (2) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (4) 
(number of countries) 
The Institutional Investor 
Position in the ranking (4) 
(number of countries) 
Credit rating (5) 1993 
-8.4 
-30,0 
3.9 
35.7 
13,2 
1.6 
-0,7 
812 
-4,9 
154 
388 
4.9 
140.5 
16,2 
13,5 
2.7 
8.4 
17,3 
2,0 
No 
No 
0,4 
16,7 
2,9 
SBA/STF 
(10/93-3/95 
On track 
Not rated 
Not rated 
Mar Sep 
126 122 
(169) (170) 
Mar Sep 
81 84 
(127) (133) 
21.4 20.9 1994 
-0,1 
3,5 
4.5 
41,6 
13.0 
2,9 
1,3 
1329 
-12.3 
212 
447 
3,2 
170,3 
8.1 
3,0 
5,1 
7,5 
12,8 
0,6 
No 
No 
0.4 
15,7 
2.0 
SBA/STF 
(10/93-3/95) 
On track 
Not rated 
Not rated 
Mar Sep 
105 102 
(167) (167) 
Mar Sep 
88 86 
(135) (135) 
20.7 23.6 1995 
Latest data 
or estimates (E) 
3.2 (E) 
. 1.4 
4.1 
28.8 
11.5 
-0.4 
-0,8 
1861 
-8.2 
202 
583 
2.7 
246,8 
12,8 
3,5 
9,3 
7.1 
13,3 
0.7 
No 
No 
0.5 
16,5 
2.2 
SBA 
(4/95-6/96) (3) 
On track 
Not rated 
Not rated 
Mar Sep 
66 76 
(187) (181) 
Mar Sep 
79 79 
(135) (135) 
25.4 26.3 
(1) Financial balance does not take into account government net lending, whereas fiscal balance does. 
(2) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(3) The SBA (7/96-7/97) is also on track. 
(4) The higher the ranking number, the lower the creditworthiness of the country. 
(5) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
-4-9-
Country-risk indicators 
Country: Hungary 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (forints per USD) (end of period) 
Consolidated state budget balance (as % of GDP) (GFS definition) 
Balance of payments 
Exports of G+S (in mio USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official reserves (end of period) 
in bn USD 
in months of imports of merchandises 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
Convertible debt service (in bn USD) 
principal (1) 
interest 
External debt/GDP (%) 
External debt/Exports of G+S (%) 
Debt service/Exports of G+S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) (2) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (3) 
(number of countries) • 
The Institutional Investor 
Position in the ranking (3) 
(number of countries) 
Credit rating (4) 1993 
-0,8 
4,0 
12,1 
21,1 
100,7 
-7,6 
10371 
-9,6 
2328 
6,7 
7,1 
24,6 
4,9 
3,3 
1,6 
63,8 
237,2 
47,4 
No 
No 
16,9 
4,3 
10,3 
SBA 
(9/93-12/94) 
On track 
Ba1 . 
BB+ 
Mar Sep 
47 46 
(169) (170) 
Mar Sep 
43 43 
(127) (133) 
44.3 44.8 1994 
2,9 
9,0 
10,9 
21,2 
111,0 
-6,3 
10219 
-9,5 
1100 
6,8 
7,2 
28,5 
6,2 
4,2 
2,0 
68,9 
278,9 
60,8 
No 
No 
16,5 
4,0 
11,3 
SBA 
First review 
uncomple­
ted 
Ba1 
BB+ 
Mar Sep 
44 46 
(167) (167) 
Mar Sep 
43 44 
(135) (135) 
46.1 46.2 1995 
Latest data 
1,5 
6,0 
10,4 
28,5 
139,5 
-3,8 
14667 
-5,6 
4410 
12,0 
9,5 
31,7 
7,7 
5,3 
2,4 
70,8 
189,2 
52,5 
No 
No 
13,0 
3,1 
6,6 
-
Ba1 
BB+ 
Mar Sep 
50 44 
(187) (181) 
Mar Sep 
45 48 
(135) (135) 
46.4 45.0 
(1 ) Including early repayments. 
(2) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(3) The higher the ranking number, the lower the creditworthiness of the country. 
(4) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
-so-
Country-risk indicators 
Country: Latvia 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate ' (end of period) 
Exchange rate (Lats per USD) (end of period) 
General government balance (as % of GDP) 
Financial balance (1) 
Fiscal balance (1) 
Balance of payments 
Exports (in mio USD) 
Current account balance, excl. official transfers (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in mio USD 
in months of imports of G&S 
External debt 
External debt 
(in convertible currencies, in mio USD, end of period) 
Convertible debt service (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/merchandise exports (%) 
Debt service/merchandise exports (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) (2) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (4) 
(number of countries) 
The Institutional Investor 
Position in the ranking (4) 
(number of countries) 
Credit rating (5) 1993 
-16,0 
-32,6 
5.3 
34,8 
0,60 
1.0 
0,6 
998 
4,8 
51 
510 
4,4 
225 
20,0 
n.a. 
n.a. 
10,0 
22,5 
2,0 
No 
No 
0,7 
20,8 
4,7 
SBA/STF 
(12/93-3/95) 
On track 
Not rated 
Not rated 
Mar Sep 
133 132 
(169) (170) 
Mar Sep 
89 87 
(127) (133) 
19.5 20.0 1994 
2,0 
-2,2 
6.5 
26,0 
0,55 
-1,7 
-4,0 
997 
-3,4 
155 
545 
4,5 
359 
50,0 
n.a. 
n.a. 
10,0 
36,0 
5,0 
No 
No 
0.7 
13,3 
4,8 
SBA/STF 
(12/93-3/95) 
On track 
Not rated 
Not rated 
Mar Sep 
104 125 
(167) (167) 
Mar Sep 
94 92 
(135) (135) 
19.6 21.3 1995 
Latest data 
or estimates (E) 
-1,6 (E) 
, -6.3 
6.1 
23,0 
0,54 
-2.7 
-3,3 
1306 
-4,3 
165 
527 
3,2 
423 
39,0 
n.a. 
n.a. 
9,0 
32,4 
3,0 
No 
No 
0.7 
12,3 
4,0 
SBA 
(4/95-4/96) 
Off track (3) 
Not rated 
Not rated 
Mar Sep 
106 116 
(187) (181) 
Mar Sep 
91 89 
(135) (135) 
22.6 23.4 
(1) Financial balance does not take into account government net lending, whereas fiscal balance does. 
(2) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(3) The new SBA (5/96 - 8/97) is on track. 
(4) The higher the ranking number, the lower the creditworthiness of the country. 
(5) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
-s*/-
Country-risk indicators 
Country: Lithuania 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate (end of period) 
Exchange rate (Litas per USD) (end of period) 
General government balance (as % of GDP) 
Financial balance (1) 
Fiscal balance (1) 
Balance of payments 
Exports (in mio USD) 
Current account balance (in % of GDP), without official transfers 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period, gross foreign assets) 
in mio USD 
in months of imports of G&S 
External debt 
External debt 
(in convertible currencies, in mio USD, end of period) 
Convertible debt service (in mio USD) •> 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
- Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) (2) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (3) 
(number of countries) 
The Institutional Investor 
Position in the ranking (3) 
(number of countries) 
Credit rating (4) 1993 
-24,2 
-29,8 
4,4 
188,7 
3,6 
0,9 
-3,1 
1709 
-8,4 
23 
412 
2,5 
281 
12 
n.a. 
n.a. 
9,8 
16,4 
0,7 
No 
No 
0,9 
20,8 
3,4 
SBA/STF 
(10/93-3/94) 
On track 
Not rated 
Not rated 
Mar Sep 
134 130 
(169) (170) 
Mar Sep 
91 93 
(127) (133) 
18.9 19.0 1994 
1,0 
-6,7 . 
3,8 
45,1 
4,3 
-1,5 
-4,2 
1930 
-4,2 
60 
587 
3,1 
448 
19 
n.a. 
n.a. 
7,5 
23,2 
1,0 
No 
No 
0,9 
13,3 
3,1 
STF (10/93-3/94) 
EFF (10/94-11/97 
On track 
Not. rated 
Not rated 
Mar Sep 
110 121 
(167) (167) 
Mar Sep 
97 96 
(135) (135) 
18.4 20.0 1995 
Latest data 
2,8 
0,8 
7,3 
35,7 
4,5 
-1,8 
-3,3 
2210 
-3,3 
55 
819 
3,9 
757 
69 
n.a. 
n.a. 
9,8 
34,3 
3,1 
No 
No 
0,9 
9,6 
3,3 
EFF 
10/94-10/97) 
On track 
Not rated 
Not rated 
Mar Sep 
108 118 
(187) (181) 
Mar Sep 
95 90 
(135) (135) 
21.7 22.9 
(1) Financial balance does not take into account government net lending, whereas fiscal balance does. 
(2) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(3) The higher the ranking number, the lower the creditworthiness of the country. 
(4) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
-s-2-
Country-risk indicators 
Country: Romania 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate ( lei per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of G&S (in bn USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in mio USD 
in months of imports of G&S 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
Convertible debt service (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposureAotal EU exposure (%) (1 ) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (2) 
(number of countries) 
The Institutional Investor 
Position in the ranking (2) 
(number of countries) 
Credit rating (3) 1993 
1,5 
8,2 
10,2 
295,5 
1276 
-0,1 
4,9 
-4.6 
87 
970 
1,6 
4,3 
323 
146 
177 
16,1 
87,7 
6,6 
No 
No 
8,7 
12,8 
11,2 
No 
Not rated 
Not rated 
Mar Sep 
66 75 
(169) (170) 
Mar Sep 
73 75 
(127) (133) 
24.2 24.4 1994 
3,9 
7,2 ' 
10,9 
61,7 
1767 
-1.0 
6,1 
-1,4 
341 
1596 
2,2 
5,5 
589 
313 
276 
18,3 
90,1 
9,6 
No 
No 
8,4 
10,7 
9,7 
SBA/STF 
(5/94-12/95) 
On track 
Not rated 
Not rated 
Mar Sep 
74 77 
(167) (167) 
Mar Sep 
76 74 
(135) (135) 
25.4 26.2 1995 
Latest data 
or estimates (E) 
6,9 
5,2 
8,9 
27,8 
2578 
-2,5 
7,5 
-3,6 
417 
1110 
1,4 
6,6 (E) 
1038 (E) 
462 (E) 
576 (E) 
18.7 (E) 
88,0 (E) 
13.8 (E) 
No 
No 
10,2 
11,5 
10,1 
SBA extended 
through 1997 
and augmented 
On track 
(Off track in1996) 
Not rated 
Not rated 
Mar Sep 
68 64 
(187) (181) 
Mar Sep 
73 71 
(135) (135) 
28.1 29.7 
(1 ) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
- 5-3-
Country-risk indicators 
Country: Slovak Republic 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (SK"s per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of G&S (in mio USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in mio USD 
in months of imports of G&S 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
Convertible debt service (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) (1) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (2) 
(number of countries) 
The Institutional Investor 
Position in the ranking (2) 
(number of countries) 
Credit rating (3) 1993 
-4,1 
-8,6 
14,4 
25,1 
33,2 
-7,6 
7568 
-5,4 
134 
416 
0,6 
3,4 
674 
490 
184 
30,8 
44,5 
8,9 
No 
No 
2,4 
4,5 
2,0 
STF 
(7/93 - 7/94) 
On-track 
Not rated 
Not rated 
Mar Sep 
56 63 
(169) (170) 
Mar- Sep 
57 57 
(127) (133) 
31 30.6 1994 
4,8 
7,0 • 
14,6 
11,7 
31,3 
-2,7 
8983 
6,0 
184 
1691 
2,3 
3,9 
791 
n.a. 
n.a. 
31,1 
43,4 
8,8 
No 
No 
2,9 
5,3 
2,3 
STF 
(7/93 - 7/94) 
SBA 
(7/94-3/96) 
Baa3 (May) 
BB- (Feb) 
Mar Sep 
64 66 
(167) (167) 
Mar Sep 
59 59 
(135) (135) 
31.6 33.1 1995 
Latest data 
or estimates (E) 
7,4 
9,6 
13,1 
7,2 
29,6 
0,4 
10921 
3,6 
157 
3400 
4,1 
5,8 
1045 (E) 
n.a. 
n.a. 
39,9 
53,1 
9,5 (E) 
No 
No 
4,1 
5,2 
2,8 
SBA 
(7/94-3/96) (4) 
Baa3 (May) 
BB+ (Apr) 
Mar Sep 
53 51 
(187) (181) 
Mar Sep 
61 59 
(135) (135) 
33.2 35.7 
(1 ) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given cou' *-y 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(4) The mid-term review of the programme, which had been scheduled for February 1995, was not completed. 
-s-*-
country risk indicators 
Country: Belarus 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate 
Exchange rate ( Rbs per USD) (Dec/Dec) 
(average) 1993 
-10,6 
-10,9 
1,4 
1994 
269 1994 
-12,2 
-19,3 
2,1 
1957 
3651 T995~ 
-10,2 
-11,5 
2,7 
244 
11532 
Genera! government balance (as % of GDP) -1,8 -2,6 -1,9 
Balance of payments. 
Exports of G & S (in mio USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) in mio USD 
in months of imports 2941 
-8,7 
18 
91,0 
0,3 2641 
-12,4 
10 
101,0 
0.3 4621 
-2,5 
7 
377,0 
0,7 
External debt 
External debt 
(in convertible currencies, in mio USD, end of period) 
Convertible debt service (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G & S (%) 
Debt service/exports of G & S (%) 
Arrears (on both interest and principal, in bn USD) 
Debt rescheduling agreement 964,0 
14,7 
n.a. 
n.a. 
25,0 
32,8 
0,5 
n.a. 1251,0 
123,0 
n.a. 
n.a. 
25,9 
47,4 
4,3 
493 
with Russia 
on gas arrears 1513,0 
178,0 
n.a. 
n.a. 
14,7 
32,7 
3,4 
460 
ar. on Rus. gas 
cancel, agreem. 
02/96 - 08/96 
Indicators of EU exposure 
EU exposure/total EU exposure (%) (1) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 1,9 
12,2 
4,0 0,9 
4,8 
2,3 0,5 
2,6 
0,8 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) STF 
(08.93 - 8.94) 
Off track 
See footnote 
(4) STF 
(01.95) 
See footnote 
(4) SBA 
(12.95-11.96) 
Off track 
(5) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (2) 
(number of countries) 
The Institutional Investor 
Position in the ranking (2) 
(number of countries) 
Credit rating (3) Not rated 
Not rated 
Mar Sep 
148 139 
(169) (170) 
Mar Sep 
100 
(127) (133) Not rated 
Not rated 
Mar Sep 
145 138 
(167) (167) 
Mar Sep 
109 109 
(135) (135) 
15.5 15.7 
(1 ) Only EIB, BoP and 1250 loans (outstanding disbursed) 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
(3) may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
IMF 1993 STF programme went off track in early 1994. However, IMF staff considered favourably the government 
(4) programme adopted in Autumn 1994, which was supported with the second STF tranche by end-January 1995. 
(5) The first quarterly review of the programme, initially scheduled for December 1995, has not been completed so far. Not rated 
Not rated 
Mar Sep 
135 134 
(187) (181) 
Mar Sep 
112 112 
(135) (135) 
15.2 15.5 
- JTS" -
Country-risk indicators 
Country: Moldova 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end of period) 
Inflation rate (end of period) 
Exchange rate (leu per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Merchandise exports (in mio USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in mio USD 
in months of imports of merchandises 
External debt 
External debt 
(in convertible currencies, in mio USD, end of period) 
Convertible debt service (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/ merchandise exports (%) 
Debt service/ merchandise exports (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) (1) 
EU exposure/external debt (%) 
EU exposure/merchandise exports (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (2) 
(number of countries) 
The Institutional Investor 
Position in the ranking (2) 
(number of countries) 
Credit rating (3) 1993 
-1,2 
-7,2 
n.a. 
837 
3,64 
-6,8 
451 
-9,3 
14,0 
76,6 
1,4 
168,0 
5,0 
n.a. 
n.a. 
23,0 
37,3 
1,1 
No 
No 
0,5 
17,7 
6,6 
SBA 
(3/93-3/94) 
On-track 
Not rated 
Not rated 
Mar Sep 
159 160 
(169) (170) 
Not rated 1994 
-31,2 
-30,0 
1,0 
116 
4,27 
-8,7 
618 
-12,9 
18,0 
179 
2,9 
343,0 
12,3 
n.a. 
n.a. 
30,0 
55,5 
4,0 
No 
No 
0,9 
18,0 
10,0 
SBA 
(12/93-3/95) 
On-track 
Not rated 
Not rated 
Mar Sep 
148 155 
(167) (167) 
Not rated 1995 
Preliminary 
-3,0 
-10,0 
2,0 
24 
4,50 
-5,5 
741 
-6,8 
72,0 
257 
3,2 
675,0 
91,0 
n.a. 
n.a. 
38,0 
91,1 
11,0 
No 
No 
0,8 
• 8,7 
7,9 
SBA 
(3/95-3/96) 
On-track 
Not rated 
Not rated 
Mar Sep 
157 141 
(187) (181) 
Not rated 
(1 ) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
- sç~ 
Country: Ukraine 
Real GDP growth (% change) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (Krb per USD) (end of period) 
- auction / interbank 
-cash 
General government balance (as % of GDP) 
Balance of payments 
Exports of G&S (in bn USD) 
Current account balance (excl. transfers) (in % of GDP) 
Net inflow of foreign direct investment (in bn USD) 
Gross official FX reserves in mio USD 
in weeks of imports of G&S 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
Convertible debt service paid (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) (1) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (2) 
(number of countries) 
The Institutional Investor 
Position in the ranking (2) 
(number of countries) 
Credit rating (3) 1993 
-17,1 
-25,1 
0,3 
10155 
12610 
25000 
-10,1 
14,4 
-5,9 
0,2 
193 
0,8 
4,1 
202 
n.a. 
n.a. 
12,1 
28,5 
1,3 
548 
2,3 
3,5 
1,0 
-
Not rated 
Not rated 
Mar Sep 
142 146 
(169) (170) 
Mar Sep 
95 96 
(127) (133) 
18.2 18.2 1994 
23,0 
-28,5 
0,3 
401 
108196 
128000 
-8,2 
14,8 
-6,0 
0,09 
646 
2,3 
7,2 
1794 
n.a. 
n.a. 
29,2 
48,0 
12,1 
2722 
rescheduling of 
debt owed to 
Russia/Turkm. 
1,6 
1,6 
0,8 
STF 
26 Oct 94 
On track 
Not rated 
Not rated 
Mar Sep 
149 147 
(167) (167) 
Mar Sep 
111 113 
(135) (135) 
15.1 14.5 1995 
Estimates (E) 
-12,0 
-11,7 
0.4 (E) 
182 
179400 
186000 
-5,0 
15.1 (E) 
-4,4 
0,27 
1100 
3,7 
8,1 
1531 
986 
545 
23,3 
53.6 (E) 
9,3 
236 
rescheduling of 
debt owed to 
Russia/Turkm. 
1,5 
1,4 
0,7 
SBA 
Dec. 1995 
Off track * 
Not rated 
Not rated 
Mar Sep 
145 138 
(187) (181) 
Mar Sep 
109 111 
(135) (135) 
* 15.5 15.7 
"7J1 Only EIB, BoP and 1250 loans (outstanding disbursed) 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
* : New SBA approved in May 1996. On track. 
-?Y-
Country risk Indicators 
Country: Algeria 
Real GDP growth rate (in %) 
Hydrocarbon production ( % change) 
Inflation rate (Dec/Dec) 
Exchange rate (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of G&S (in bn USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves in bn USD 
in months of imports of G&S 1993 
-2,0 
-0,6 
16,1 
24,0 
-8,7 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
Convertible debt service (in bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling (bin US$) 
Indicators of EU exposure 
EU exposure/total EU exposure (%) (1 ] 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 11,0 
1,6 
0,0 
1,5 
1,9 
26,4 
8,7 
7,0 
1,7 
62,9 
240,0 
82,2 
No 
No 
7,4 
1,8 
4,2 1994 
-0,2 
-2,5 
38,6 
42,9 
-4,4 
8,9 
-4,34 
0,0 
2,6 
2,9 
29,5 
5,1 
3,4 
1,7 
70,6 
331,5 
48.6 (4) 
No 
4,5 
9,9 
2,4 
7,8 1995 
4,3 
3,5 
21,9 
52.2 
-1,4 
10,2 
-5,6 
0,0 
2,1 
2,1 
31,7 
3.8 
2.2 
1.6 
76,4 
310,8 
43,8 
No 
4,8 (4) 
(4) 
(4) 
12,2 
2,9 
8,9 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track No SBA 
(5. 94 - 5. 95) 
On-track SBA 
(5. 94 - 5. 95) 
EFF 
(5. 95 - 5. 98) 
On-track 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of per.) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (2) 
(number of countries) • 
The Institutional Investor 
Position in the ranking (2) 
(number of countries) 
Credit rating (3) Not rated 
Not rated 
Mar Sep 
68 79 
(169) (170) 
Mar Sep 
62 69 
(127) (133) 
28.2 27.1 Not rated 
Not rated 
Mar Sep 
92 96 
(167) (167) 
Mar Sep 
75 78 
(135) (135) 
26.3 24.6 Not rated 
Not rated 
Mar Sep 
102 107 
(187) (181) 
Mar Sep 
89 91 
(135) (135) 
23.5 22.8 
(1 ) Only EIB, BoP and 1250 loans (outstanding disbursed) 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(4) Afjer rescheduling. 
- S & -
Country risk indicators 
Country: Israël 
Real GDP growth rate (in %) 
Industrial production ( % change) (at constant 1990 prices) 
Unemployment rate (average) 
Consumer Price Index (Dec/Dec) 
Exchange rate (shekel per USD) (end of period) 
Central government overall deficit (as % of GDP) 
Balance of payments 
Exports of G & S (in bn USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Gross official FX reserves in billions US$ 
in months of imports of G&S 
External debt 
External debt (gross external liabilities) 
(in bn USD, end of period) 
Debt service (in bn USD) 
principal 
interest (gross) 
External debt/GDP (%) 
External debt/exports of G & S (%) 
Debt service/exports of G & S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) (1 ) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (2) 
(number of countries) 
The Institutional Investor 
Position in the ranking (2) 
(number of countries) 
Credit rating (3) 1993 
3,5 
6,5 
10,0 
11,3 
2,986 
-2,5 
22,1 
-1,8 
-141 
6,382 
2,4 
36,1 
4,1 
1,9 
2,2 
55,8 
163,4 
14,0 
No 
No 
4,7 
0,8 
1,4 
No 
Not rated 
BBB+ 
Mar Sep 
29 29 
(169) (170) 
Mar Sep 
46 46 
(127) (133) 
39.6 40.5 1994 
6,5 
7,2 
7.8 
14,5 
3,018 
-2,0 
24,2 
-3,0 
-357 
6,689 
2,5 
41 
4,6 
2,2 
2,4 
54,2 
169,4 
14,9 
No 
No 
4,4 
0,8 
1,3 
No 
Not rated 
BBB+ 
Mar Sep 
30 33 
(167) (167) 
Mar Sep 
46 43 
(135) (135) 
43.4 46.5 1995 
Estimates (E) 
7,1 
8,4 
6,3 
8,1 
3,140 
-3,2 
25,9 
-4,5 
806 
8,158 
2,6 
44 
3.9(E) 
n.a. 
n.a. 
57 
170,0 
15(E) 
No 
No 
4,4 
0,7 
1,3 
No 
A3 
A-
Mar Sep 
31 31 
(187) (181) 
Mar Sep 
43 42 
(135) (135) 
47.9 49.2 
(1 
(2) 
(3) The higher the ranking number, the lower the creditworthiness of the country. 
Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
- s^_ 
ISSN 0254-1475 
COM(96) 631 final 
DOCUMENTS 
EN 01 
Catalogue number : CB-CO-96-662-EN-C 
ISBN 92-78-13210-1 
Office for Official Publications of the European Communities 
L-2985 Luxembourg