COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 25.09.1997 
COM(97) 464 final 
COMMISSION REPORT TO THE BUDGETARY AUTHORITY 
ON GUARANTEES COVERED BY THE GENERAL BUDGET -
SITUATION AT 30 JUNE 1997 

This report describes the situation as regards budget guarantees at 30 June 1997. 
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 twelve reports to the budgetary authority. 
The report is in two parts with an annex: 
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 1996, THE RISK SITUATION 
AND ACTIVATION OF BUDGET GUARANTEES 4 
I. INTRODUCTION: TYPES OF OPERATION 4 
LA Operations with macroeconomic objectives 4 
LB Operations with microeconomic objectives 4 
II. EVENTS SINCE THE REPORT AT 31 DECEMBER 1996 4 
11.A Community guarantee to the European Investment Bank against losses under loans for projects 
outside the Community (Central and Eastern Europe countries, Mediterranean countries, Latin 
American and Asian countries and South Africa) 4 
IL. B Former Yugoslav Republic of Macedonia (FYROM) 5 
LLC Bulgaria 5 
LL.D Georgia, Armenia, Tajikistan 5 
III. RISK SITUATION 6 
LIL.A Amount outstanding at 30 June 1997 (Table 1) 6 
ILLS Maximum annual risk borne by the Community budget: operations disbursed at 30 June 1997 
(see Table 2) 7 
III. C Maximum theoretical annual risk borne by the Community budget (see Table 3) 8 
IV. ACTIVATION OF BUDGET GUARANTEES 12 
LV.A Payments from cash resources. 12 
IV.B Activation of the Guarantee Fund 12 
IV.CLate repayments 12 
IV.D Situation as regards unpaid debts at 30 June 1997 13 
V. ANALYSIS OF THE COMMUNITY'S THEORETICAL LENDING AND GUARANTEE 
CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES 13 
VI. RELATIVE SOLIDITY OF THE GUARANTEE FUND 14 
PART TWO EVALUATION OF POTENTIAL RISKS: ECONOMIC AND FINANCIAL 
SITUATION OF THE NON-MEMBER COUNTRIES BENEFITING FROM THE MOST 
IMPORTANT LOAN OPERATIONS 16 
I. INTRODUCTION 16 
II. CENTRAL AND EAST EUROPEAN COUNTRIES 16 
III. NEWLY INDEPENDENT STATES 19 
IV. MEDITERRANEAN COUNTRIES 22 
ANNEX 24 
I. EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED BY THE COMMUNITY 
BUDGET 25 
LA Tables 1 to 3 25 
L.B Loan operations covered by a budget guarantee 27 
L.C Expected signature and disbursement of ELB loans 32 
I. D Payment of the budget guarantee 33 
II. METHODOLOGICAL NOTE ON THE ANALYSIS OF THE COMMUNITY'S ESTIMATED 
LENDING CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES OVER THE PERIOD 1997-
99 UNDER THE GUARANTEE FUND MECHANISM 34 
II.A Reserve for loan guarantees to non-member countries (I) 34 
IL B Bases for the calculation of the provisioning of the Guarantee Fund (2) 34 
IL C Basis for the provisioning of the Fund in the event of a part guarantee 35 
IL D Provisioning of the Guarantee Fund (3) 35 
II.E Margin remaining in the guarantee reserve (4) 36 
II.FResidual lending capacity (5) 36 
III. TABLES: COUNTRY-RISK INDICATORS 37 
PART ONE: EVENTS SINCE THE REPORT AT 31 DECEMBER 1996, 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. 
I.A 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). 
II. EVENTS SINCE THE REPORT AT 31 DECEMBER 1996 
The main events in the first half of 1997 were as follows: 
II.A Community guarantee to the European Investment Bank against losses 
under loans for projects outside the Community (Central and Eastern 
Europe countries, Mediterranean countries, Latin American and Asian 
countries and South Africa) 
On 14 April 1997 the Council granted a global Community guarantee to the EEB on loans for 
investment projects carried out in the Central and Eastern European countries, in the 
Mediterranean countries, in the Latin American and Asian countries and in the Republic of 
South Africa. 
This guarantee is restricted to 70% of the aggregate amount of the credits opened, plus all 
related sums. The overall ceiling of the credits opened is equivalent to ECU 7 105 million, 
broken down as follows: 
5-
- Central and Eastern European countries: ECU 3 520 million 
- Mediterranean countries: ECU 2 310 million 
- Latin American and Asian countries: ECU 900 million 
- Republic of South Africa: ECU 375 million, 
and covers a period of three years beginning on 31 January 1997 for Central and Eastern 
European, Mediterranean and Latin American and Asian countries and on 1 July 1997 for the 
Republic of South Africa. If, on expiry of this period, the loans granted by the EIB have not 
attained the overall amounts referred to above, the period will be automatically extended by 
six months. 
The European Investment Bank is invited to aim to cover the commercial risk on 25%) of 
its lending from non-sovereign guarantees. 
H.B Former Yugoslav Republic of Macedonia (FYROM) 
As part of an overall aid programme for the former Yugoslav Republic of Macedonia, on 
22 May 1997 the Commission presented a proposal for a Council Decision providing macro-
financial assistance of ECU 40 million to FYROM with a maximum maturity of fifteen years. 
The loan was authorised by the Council Decision of 22 July 1997. 
H.C Bulgaria 
As part of an overall aid programme for Bulgaria, on 22 May 1997 the Commission 
presented a proposal for a Council Decision providing macro-financial assistance of ECU 250 
million to Bulgaria with a maximum maturity of ten years. The loan was authorised by the 
Council Decision of 22 July 1997. 
II.D Georgia, Armenia, Tajikistan 
Georgia, Armenia and Tajikistan were severely hit by the economic collapse resulting from 
the breaking up of the command economy and the disintegration of the Soviet Union. 
Owing to the exceptionally harsh conditions presently faced by Armenia, Georgia and 
Tajikistan, the Commission considered that exceptional assistance was required to support the 
implementation of the stabilisation and structural reform programmes agreed with the IMF. 
On 3 February 1997 the Commission therefore presented a proposal for a Council Decision 
providing exceptional financial assistance of ECU 170 million in the form of a loan with a 
maximum maturity of fifteen years and of ECU 50 million in the form of grants to Armenia, 
Georgia and, if appropriate, Tajikistan. On 7 February 1997 the Council (Economic and 
financial affairs) took the decision, in principle, to change this figure to ECU 95 million. 
-6-
III. 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 1997, 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 interest1 and 
exchange rates.2 
The results are shown in Tables 1 to 3 which assess the risk relating to countries inside the 
Community and countries outside the Community. 
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 EIB 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 1997 (Table 1) 
The total risk at 30 June 1997 came to ECU 11 720 million as against ECU 11 876 million at 
31 December 1996, a fall of ECU 156 million.3 
The following table shows the operations which have had an effect on the amount 
outstanding since the last report. 
1 An average interest rate of 10% is assumed. 
2 The exchange rate used for loans in currencies other than ecus are those of 30 June 1997. 
3 In the case of loans in currencies other than the ecu, pari of the change over the past six months 
is due to exchange rate differences. 
Amount outstanding at 31 December 1996 11 876 
Loan repayments 
Euratom -476 
NCI -416 
Former Soviet Union -34.1 
EIB -112.48 
Exchange rate differences between ecu and other currencies -59.62 
Loans disbursed 
EIB +942.2 
Amount outstanding at 30 June 1997 11 720 
The capital outstanding in respect of operations in the Member States was ECU 4 648 million 
at 30 June 1997, a fall of 16.46% compared with 31 December 1996. 
This fall is mainly due to the repayment of ECU 873 million in Euratom and NCI loans 
The amount outstanding from other operations in the Member States has remained stable. 
The capital outstanding from non-member countries at 30 June 1997 was ECU 7 072 million, 
an increase of 12.04% compared with 31 December 1996. 
IH.B Maximum annual risk borne by the Community budget: operations 
disbursed at 30 June 19974 (see Table 2) 
The total risk, which comes to ECU 3 096 million in 1997, will steadily increase to around 
ECU 3 635 million in 2000, although the situation in 1999 is special in that there will be no 
capital 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 1997 in respect of the Member States comes to ECU 1 429 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 2 739 million. 
- The risk for 1997 in respect of non-member countries comes to ECU 1 667 million as the 
following capital payments fall due: 
- ECU 80 million from Hungary; 
- ECU 127 million from the Czech Republic; 
- ECU 63 million from the Slovak Republic; 
At 30 June 1997, after taking account of repayments in the first half of the year, the residual 
risk for 1997 in Table 2 is ECU 2 057 million. 
- 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. 
- ECU 205 million from EIB loans. 
The amount of capital repayments on borrowing and lending operations will then fall in 1998 
and 1999. The risk in respect of non-member countries will thus drop to ECU 1 345 million 
in 1998 and to ECU 895 million in 1999. 
III.C Maximum theoretical annual risk borne by the Community budget5 (see 
Table 3) 
This risk comes to ECU 3 196 million in 1997 and will increase regularly until 2000 (except 
in 1999 when it will total ECU 1 726 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 2 739 million. 
- The risk in respect of non-member countries will rise from ECU 1 768 million in 1997 to 
ECU 1 445 million in 1999. The risk will increase from 2000 until 2004 when it will reach 
ECU 3 185 million. 
At 30 June 1997, after taking account of repayments in the first half of the year, the residual 
risk for 1997 in Table 3 is ECU 2 342 million. 
-9-
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. NIC and NCI earthquake 
5.EIB Mediterranean 
Spain, Greece, Portugal. 
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 and Eastern Europe 
15. EIB Asia, Latin America 
16. EIB South Africa 
THIRD COUNTRIES - TOTAL 
GRAND TOTAL Authorised 
ceiling 
14000 
4000 
6830 
1500 
26330 
1050 
250 
125 
400 
580 
600 
160 
220 
60 
285 
55 
1250 
8672 
8220 
1925 
675 
24527 
50857 Capital 
outstanding 
31.12.96 
500 
3479 
572 
748 
265 
5564 
180 
250 
125 
400 
510 
500 
160 
135 
60 
185 
30 
144 
2092 
1306 
204 
32 
6312 
11876 Capital 
outstanding 
30.06.97 
500 
3455 
120 
327 
246 
4648 
180 
250 
125 
400 
510 
500 
160 
135 
60 
185 
30 
110 
2541 
1531 
301 
56 
7072 
11720 Remainder to 
be disbursed 
30.06.97 
0 
0 
0 
0 
0 
0 
0 
0 
0 
0 
70 
100 
0 
85 
0 
100 
25 
0 
2197 
3135 
411 
125 
6247 
6247 
ANNEX TO TABLE 1 
SITUATION IN RESPECT OF EIB OPERATIONS (30.06.97) 
Operations 
Mediterranean Member States 
Third countries, old mandates 
Mediterranean Protocols 
Central and Eastern Europe I 
Central and Eastern Europe II 
Asia, Latin America I 
Asia, Latin America II 
South Africa 
Third countries, new mandates(*): 
Mediterranean 
Central and Eastern Europe 
Asia, Latin America 
South Africa 
Total Credit line 
authorised 
1500 
6362 
1700 
3000 
750 
275 
300 
2310 
3520 
900 
375 
20992 Loans made 
available minus 
cancellations 
1465 
5720 
1628 
3000 
647 
50 
176 
75 
12761 Amounts 
disbursed 
1603 
3703 
1128 
487 
258 
51 
56 
7285 Amounts 
outstanding 
at 30.06.97 
246 
2541 
1044 
486 
250 
51 
56 
4674 
(*) Council Decision of 14 April 1997 
NB: As the loans are disbursed in national currencies, the loan ceiling may be exceeded when the amounts 
disbursed up to the date ot the report are converted into ecus. 
10 
TABLE 2 
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. 
Sp. Gr. 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. 
Sp. Gr. 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 
21 EIB South Africa 
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. EIB C+E Eur. I + II 
20. EIB Asia Latin America 
21. EIB South Africa 
Interest - subtotal 
NON-MEMBER COUNTRIES -
TOTAL 
GRAND TOTAL 
(Eastern Europe ) 
(Other non-member countries) MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 
Estimate in ECU million based on all operations disbursed at 30.06.97) 
1997 
453 
532 
58 
1042 
48 
211 
42 
63 
23 
386 
1429 
80 
127 
63 
140 
160 
250 
144 
140 
50 
15 
1169 
18 
25 
13 
40 
51 
16 
50 
5 
14 
6 
19 
3 
140 
84 
11 
5 
498 
1667 
3096 
880 
787 1998 
500 
983 
91 
49 
46 
1669 
48 
209 
10 
16 
18 
300 
1969 
100 
123 
62 
150 
185 
172 
85 
21 
898 
10 
13 
6 
26 
51 
25 
0 
14 
6 
19 
3 
159 
95 
13 
8 
446 
1345 
3314 
946 
399 1999 
15 
40 
41 
96 
156 
3 
12 
14 
185 
281 
190 
195 
120 
26 
530 
11 
33 
25 
14 
6 
19 
3 
146 
89 
12 
8 
365 
895 
1176 
483 
413 2000 
2472 
12 
40 
38 
2562 
156 
1 
10 
11 
177 
2739 
80 
110 
5 
201 
145 
32 
572 
11 
13 
25 
14 
6 
19 
3 
133 
81 
11 
8 
324 
896 
3635 
485 
411 2001 
71 
21 
92 
7 
7 
15 
107 
70 
150 
9 
17 
6 
202 
149 
33 
36 
672 
11 
6 
25 
3 
5 
19 
3 
119 
72 
10 
8 
281 
953 
1060 
369 
585 2002 
23 
23 
2 
6 
7 
30 
55 
100 
25 
12 
37 
6 
199 
145 
34 
20 
632 
4 
6 
10 
3 
5 
17 
2 
105 
62 
9 
3 
226 
858 
888 
378 
480 2003 
22 
22 
2 
3 
5 
27 
40 
12 
37 
6 
200 
137 
40 
472 
4 
3 
13 
2 
92 
53 
8 
176 
647 
674 
307 
340 2004 
17 
15 
32 
2 
2 
4 
36 
12 
37 
6 
184 
135 
12 
386 
2 
9 
1 
78 
44 
8 
143 
529 
565 
247 
282 TOTAL 
500 
3455 
571 
749 
263 
5538 
95 
731 
55 
114 
84 
1080 
6617 
180 
250 
125 
400 
510 
160 
500 
144 
135 
50 
128 
24 
1495 
964 
212 
56 
5333 
28 
38 
19 
107 
159 
16 
160 
5 
59 
40 
132 
20 
972 
579 
83 
42 
2458 
7791 
14409 
4095 
3696 
-11 -
TABLE 3 
MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 
(Estimation 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 and NCI 
4. EIB Spain, Greece, Portugal 
Capital - subtotal 
INTEREST 
A. Balance of payments 
1 Greece 
2. Italy 
B. Structural loans 
3. Euratom and NCI 
4. EIB, Spain, Greece, Portugal 
Interest - subtotal 
MEMBER STATES - TOTAL 
THIRD COUNTRIES 
CAPITAL 
A. Financial assistance 
5. Hungary 
6. Czech Republic 
7. Slovak Republic 
8. Bulgaria 
9. Roumania 
10. Israel 
11. Algeria 
12. FYROM 
13. Ex-URSS 
14. Baltic States 
15. Moldova 
16. Ukraine 
17. Belarus 
18. Euratom C+E Europe 
B. Guarantees 
19. EIB Mediterranean 
20. EIB C+E Europe 
21. EIB Asia, Latin America 
22. 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. FYROM 
13. Ex-URSS 
14. Baltic States 
15. Moldova 
16. Ukraine 
17. Belarus 
18. Euratom C+E Europe 
B. Guarantees 
19 EIB Mediterranean 
20. BEI C+E Europe 
21. EIB Asia, Latain America 
22. EIB South Africa 
Interest - subtotal 
THIRD COUNTRIES - TOTAL 
GRAND TOTAL 
(Eastern Europe) 
(other non-member countries) 1997 
985 
58 
1042 
48 
211 
105 
23 
386 
1428 
80 
127 
63 
140 
160 
250 
144 
140 
50 
15 
1169 
18 
25 
13 
40 
55 
16 
55 
5 
18 
6 
24 
3 
1 
173 
124 
18 
6 
599 
1768 
3196 
935 
833 1998 
500 
983 
140 
46 
1669 
48 
209 
25 
18 
300 
1969 
100 
123 
62 
150 
185 
172 
85 
21 
898 
10 
12 
6 
39 
58 
35 
3 
22 
6 
29 
3 
6 
252 
218 
35 
16 
749 
1647 
3616 
1113 
534 1999 
55 
41 
96 
156 
15 
14 
185 
281 
190 
195 
120 
26 
531 
36 
40 
35 
4 
22 
6 
29 
3 
17 
325 
318 
54 
26 
914 
1445 
1726 
780 
665 2000 
2472 
52 
38 
2562 
156 
11 
11 
178 
2739 
80 
110 
5 
249 
210 
42 
3 
699 
36 
21 
35 
4 
22 
6 
29 
3 
34 
419 
436 
80 
43 
1167 
1866 
4605 
991 
875 2001 
71 
21 
92 
7 
7 
15 
107 
70 
150 
9 
17 
6 
309 
290 
59 
45 
955 
36 
13 
35 
4 
11 
6 
29 
3 
54 
497 
529 
106 
61 
1383 
2338 
2444 
1072 
1266 2002 
23 
23 
2 
6 
7 
30 
55 
100 
25 
12 
37 
6 
1 
389 
385 
79 
40 
1129 
29 
13 
20 
4 
11 
5 
27 
2 
72 
545 
576 
124 
75 
1502 
2631 
2661 
1255 
1376 2003 
22 
22 
2 
3 
5 
27 
65 
12 
57 
6 
7 
493 
499 
111 
38 
1288 
29 
7 
10 
4 
9 
3 
23 
2 
88 
566 
591 
134 
86 
1553 
2841 
2868 
1399 
1442 2004 
17 
15 
32 
2 
2 
4 
36 
50 
70 
100 
85 
12 
57 
6 
16 
547 
568 
105 
58 
1674 
13 
7 
10 
4 
9 
2 
17 
1 
101 
541 
579 
135 
92 
1511 
3185 
3220 
1593 
1592 TOTAL 
500 
3455 
1320 
263 
5537 
95 
731 
169 
84 
1080 
6617 
180 
250 
125 
475 
580 
160 
600 
144 
220 
50 
168 
24 
24 
2494 
2207 
458 
184 
8343 
28 
37 
19 
257 
212 
16 
235 
27 
5 
124 
40 
205 
20 
373 
3318 
3371 
686 
405 
9377 
17720 
24337 
9137 
8583 
- 12-
IV. ACTIVATION OF BUDGET GUARANTEES 
IV.A 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. 
LV.B Activation 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. 
In the last six months the Fund has been called on to honour guarantees for the following 
debtor: 
Country Date Amount (principal + interest) 
Georgia (loan of ECU 40 million) 15.04.97 34 894 595.09 
Former Yugoslavia 23.05.97 6 292 486.81 
IV.C Late repayments 
During the period covered by this report, the following non-member countries repaid 
debts on which they 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. 
The former Yugoslav Republic of Macedonia (FYROM) repaid ECU 7.6 million of its 
arrears for which the Fund had already contributed ECU 1.4 million. 
Country Repayment date Amount (principal + interest) 
Armenia 13.2.97 3 680 702.65 
Georgia 18.4.97 4 689 948.53 
FYROM 29.5.97 1446 515.51 
Total * 9 817 166.69 
- 13-
IV.D Situation as regards unpaid debts at 30 June 1997 
The following amounts had not been paid at 30 June 1997: 
Country Amount (principal + interest) 
Tajikistan 63 181 389.89 
Georgia 122 817 507.50 
Armenia 53920 610.55 
Former Yugoslavia 87 831143.77 
Total 327 750 651.71 
V. ANALYSIS OF THE COMMUNITY'S THEORETICAL LENDING AND 
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.6 
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 1997-99 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 Council and decisions proposed and in 
preparation (see Table 4), ECU 307 million is expected to be used from the guarantee reserve 
in 19,97, leaving ECU 22 million available at the end of the year. 
The Guarantee Fund could then amount to around ECU 864 million at the end of the year 
assuming: 
- no further defaults requiring activation of the Fund; 
- no late repayment of arrears by defaulting countries. 
ECU 300 million at 1992 prices. 
-14 
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 146 million to ECU 243 million for loans with a 100% guarantee under the 
Community budget; 
- from ECU 209 million ta ECU 347 million for loans with a 70% guarantee (new EIB 
loans). 
VI. RELATIVE SOLIDITY OF THE GUARANTEE FUND 
The ratio between the amount in the Fund at the end of 1996 (ECU 538 million) and the 
maximum annual risk for loans to non-member countries (defined as the total amount falling 
due) shown for 1997 in Table 3 (ECU 1 768 million) comes to 30%. 
The Fund should then correspond to 7.4%» of the total amount of guaranteed loans 
outstanding outside the Community. 
-15 
TABLE 4 
THE COMMUNITY'S THEORETICAL ESTIMATED LENDING & GUARANTEE CAPACITY 
IN RESPECT OF NON-MEMBER COUNTRIES 
OVER THE PERIOD 1997-1999 
under the Guarantee Fund mechanismf) 
ECU million 19971998 1999] 
Reserve for loan guarantees to non-member countries (1) 329 338 345 
Bases for the calculation of the provisioning of the Guarantee Fund (2) 
- EIB loans 
- Mediterranean (a) 693 744,25 623 
- Countries of Central and Eastern Europe (b) 850,5 763 710,5 
- Asia, Latin America (c) 60 210 322 
• South Africa (d) 125 87,5 105 
- EIB loans - Total 1728,5 1804,75 1760,5 
• EURATOM loans (e) 0 200 350 
- Macro-financial assistance (f) 305 25 0 
Provisioning of the Guarantee Fund (3) 307 302 313 
Margin remaining in the guarantee reserve (4) 22 36 32 
Residual lending capacity (balance of payments 
loans, EIB loans and Euratom loans) (5) 
- Maximum if used in full for 100% guarantee (e.g. BP loans) 146 243 213 
- Maximum if used in full for EIB loans (70% guarantee) 209 347 304 
(*) 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 106 million a year for loans with a 100% guarantee and by ECU 152 million for loans with 
a 70% guarantee. 
Description of the loans for which the Fund will be provisioned in the period 1997-1999: 
-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). 
31.1.97- 31.1.2000: ECU 2 310 million for the renewal of the EIB mandate, covered by 
overall 70% guarantee. 
b. Central and Eastern Europe 
- loans proposed or in preparation: 31.1.97-31.1.2000: ECU 3 520 million for the renewal of the EIB 
mandate, covered by overall 70% guarantee. 
c. Asia and Latin America: 
- loans decided: 1993-1996: ECU 750 million 
31.1.97-31.1.2000: ECU 900 million for renewal of the EIB mandate, covered by overall 70% guarantee. 
d. South Africa: 
- loans decided: mid-1995 to mid-1997: ECU 300 million 
- loans proposed or in preparation: 1.7.97-1.7.2000: ECU 375 million for the renewal of the EIB mandate, 
covered by overall 70% guarantee 
e. - Euratom 
- loans decided: 1994-1999: ECU 1100 million 
f. - Financial assistance 
- loans decided: 1997: ECU 25 million loan to Belarus cancelled; ECU 130 million loan to Slovakia 
cancelled. 
ECU 250 million loan to Bulgaria; ECU 40 million loan to the Former Yugoslav Republic of Macedonia 
(FYROM). 
- loans proposed or in preparation: 1997: ECU 170 million in loans to the Republics of Georgia, Armenia 
and Tajikistan. 
16 
PART TWO 
EVALUATION OF POTENTIAL RISKS: ECONOMIC AND FINANCIAL 
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 borne 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 provides a set of country risk 
indicators for all countries that have been recipients of macro-financial assistance in 
Central and Eastern Europe, the NIS and the Mediterranean area, in the form of a full-
page table per country. To complement this, textual analysis is provided for those 
countries where significant new information influencing the risk evaluation has become 
available since the previous report covering the last six months of 1996. Brief textual 
analysis is also provided for the countries which have still to repay loans outstanding in 
the context of the ECU 1250 million commercial credits made available to the then 
Soviet Union in 1991. 
The evaluation in this section does not deal with other regions than those mentioned, 
mainly because Community exposure elsewhere (notably through guarantees of EIB 
lending) represents only a small fraction of total exposure (less than 3 %) and is also well 
diversified among countries. 
II. CENTRAL AND EAST EUROPEAN COUNTRIES 
BULGARIA 
Since the last report, Bulgaria's situation has improved. Inflation has been brought under 
control. The national currency, the lev, recovered some of the value it lost in 1996 and 
early 1997, before the exchange rate was fixed at 1000 leva per deutschemark under a 
currency board arrangement which took effect on 1 July. The budget deficit should meet 
in 1997 the target of 6.2% of GDP agreed with the IMF and has been mainly financed so 
far through sales of government paper to the commercial banks. 
There has been some acceleration of structural reform. Prices of all but a handful of basic 
foodstuffs have been liberalized. Some large state enterprises have been sold to foreign 
investors. Although many banks are still the subject of bankruptcy proceedings, the 
health of those which continue to operate has improved. 
The approval by the IMF of a stand-by arrangement in April and the adoption of the 
currency board arrangement helped to restore some economic confidence and stability. 
This was reflected in the strong recovery in the level of the central bank's international 
17 
reserves, which by mid-year had recovered most of the losses incurred in 1996. 
Nevertheless, service on foreign debt continues to be substantial, at close to US$1 billion 
per year. A manageable external situation remains dependent on a sustained reform 
effort, which will ensure continued support from the IMF and other international 
institutions, and encourage larger flows of foreign direct investment. 
CZECH REPUBLIC 
The overall picture in the Czech Republic has deteriorated since the last report: 
economic growth has slowed, the budget and trade deficits are both large, and there has 
been some political instability. This deterioration was reflected in nervousness on the 
foreign exchange markets about the Czech crown; throughout late April and May, strong 
downward pressure on the Czech crown developed, and on 27 May forced the Czech 
National Bank to abandon its currency peg and allow the Czech crown to float. 
GDP statistics for the first quarter of 1997 show a slowdown in economic growth: 
preliminary estimates indicate that year-on-year growth was only 1.5%, compared to 
4.4%> in 1996. The government is also facing a problem of a growing budget deficit, 
which in 1996 was kept to a low level only by sharp spending cuts at the end of the year. 
However, it is the external position which* continues to be of the greatest concern: 
because of a combination of declining exports and increasing imports, the trade deficit, 
which had reached 11% of GDP in 1996, rose further in the first quarter of 1997. 
In April 1997, the government introduced a package of measures aimed at boosting 
growth and tackling the growing budget and trade deficits. Most notably the measures 
included budget cuts, limits on public sector wage growth, and the introduction of an 
import deposit scheme. However, foreign exchange traders remained concerned at the 
large current account deficit, and nervousness was aggravated by the domestic political 
uncertainty that followed the announcing of the package. Several weeks of sustained 
attack on the currency forced the Czech National Bank to abandon its policy of pegging 
the Czech crown to a basket of the US$ and the DM, but not before an estimated $3bn 
(approximately one quarter) of foreign exchange reserves had been used to defend the 
currency. The Czech crown will now be subject to a managed float. The abandoning of 
the pegged exchange rate allowed the currency to depreciate by some 20%> against the 
dollar and over 7% against the DM compared with its levels at the end of 1996. In the 
weeks after the abandonment of the previous currency regime the currency looked 
relatively stable, but interest rates remained high. At the beginning of June, the Czech 
National Bank successfully negotiated a loan to replenish its foreign exchange reserves. 
In May, the government announced a further package of economic measures, including 
further cuts in the state budget for 1997. The government also narrowly won a 
confidence vote in the Parliament on 11 June. However, it seems that both the political 
and the economic situation will remain fragile in the short term. 
ESTONIA 
Estonia's risk assessment continues to be among the best in the region, but new sources 
of uncertainty associated with the rapid growth of the economy have appeared. The 
economy is expanding strongly (real GDP growth reached 7.3% on a year-on-year basis 
in the fourth quarter of 1996), and inflation has fallen dramatically in recent months (a 
yearly inflation of 10.8% was registered in May, compared to 26.7% in April 1996). 
Foreign debt remains small as a proportion of GDP. In April, the country received a 
BBB- sovereign risk rating from Thomson BankWatch, recently upgraded to BBB+. 
This is the highest rating given by the agency to a country of the former Soviet Union. 
Estonia has requested a rating from Moody's, which is expected to be released at the end 
of the year. 
However, there are signs that the economy is close to overheating: in 1996, consumption 
increased as a percentage of GDP, while investment declined; the trade and current 
account deficits reached 24.5% and 10.2% of GDP, respectively; foreign investment 
declined, and banks' borrowings abroad grew very fast, fuelling a strong expansion of 
domestic credit. These developments are a source of new macroeconomic risks. 
LITHUANIA 
During the first half of 1997, growth accelerated further while both inflation and 
unemployment continued to fall. Budget developments appear relatively satisfactory, as 
new fiscal measures seem to have reversed the downward trend in public revenues. The 
balance-of-payments situation remains satisfactory, even though imports are rising 
rapidly as the recovery picks up. The prudent strategy for abandoning the currency board 
seems to have calmed investors' initial fears about the policy intentions of the new 
coalition government. 
The banking sector continues its slow recovery as the authorities strengthen regulation 
and take a tougher stance against the weakest banks. Preparations for the privatization 
of state banks and large telecommunications and transport enterprises continue. In June, 
the improving macroeconomic situation and the acceleration in structural reforms led 
Standard & Poor's to award Lithuania an investment grade rating. 
ROMANIA 
Romania's country risk, while remaining one of eastern Europe' highest, improved 
during the first half of 1997, as a result of a radical change in course of the country's 
economic policy. Prices were liberalized, which caused monthly inflation to jump to 
30.5%) in March. Monthly inflation rates decreased sharply afterwards. At the same time, 
the authorities allowed a sharp nominal depreciation of the currency, aimed at reversing 
the deterioration in the external accounts that took place in 1996. Measures to restore 
public finances and limit inflationary pressures should lead to slower growth of GDP in 
1997, estimated at 3-4%, after 4.1% in 1996. Already in the first quarter, the balance of 
payments improved significantly, with the surplus on the capital account more than 
compensating for the (shrinking) deficit on the current account. Foreign direct 
investment has picked up, and residents have repatriated large amounts of hard 
currencies, indications of restored confidence. 
Important advances in structural reforms have been made in 1997. Between February 
and May, 800 firms were privatized. Reform of agriculture has begun, with effective 
privatization of a few large loss-making pig and poultry farms. A law on foreign 
ownership of land has been passed, and amendments to the law on foreign investments 
19-
have been introduced, which set clear rules for portfolio investment and profit 
repatriation. Trade policy has been liberalized, notably by a significant cut in agricultural 
tariffs. 
Although debt ratios worsened in 1996 and are set to deteriorate further in 1997, the 
central bank was able to increase its foreign exchange reserves from $850 million in 
March to $1.49 billion in May. Romania's new economic programme is strongly 
supported by the IMF, which approved on 22 April a 13-month, $430 million new stand­
by arrangement; by the World Bank, which approved on 3 June $550 million of new 
credits and the release of the $80 million second tranche of the FESAL loan frozen in 
1996; and by the EC, which will reactivate its macro-financial assistance, of which the 
balance amounts to ECU 70 million. At the end of June, despite the severe contraction of 
the purchasing power of wages, the government continued to enjoy considerable popular 
support. 
SLOVAKIA 
Slovakia's country risk remains moderate, but external balances are deteriorating and 
foreign debt is increasing rapidly. The fast economic growth - some 7%> - registered in 
1995 and 1996 has led to an overheating of the economy. Inflation has started to edge up 
after three years of uninterrupted decline. In response, monetary policy was gradually 
tightened and became very restrictive in May and June 1997. 
Following the sharp deterioration of the current account in 1996 - a deficit of 10% of 
GDP was registered, compared to a small surplus in 1995 - and the rapid increase of the 
external debt to finance it, the external situation in the first months of 1997 deteriorated 
further. Up till the middle of May, the rising trade deficit could be financed without much 
difficulty, and foreign reserves remained approximately stable compared to the end of 
1996. However, as a result of pressure on the currency in the second half of May, 
reserves dropped by 20%. So far, the National Bank of Slovakia has managed to stabilize 
the exchange rate close to its central rate. However, this could only be achieved at the 
cost of a sharp monetary contraction, a loss in foreign reserves, and very high interest 
rates. Clearly, such a situation cannot be maintained for a prolonged period. 
III. NEWLY INDEPENDENT STATES 
ARMENIA 
GDP growth similar to the 5.8%» registered in 1996 is expected for 1997. Annual 
inflation, which was 5.7 %> in December 1996, is set to rise to 9.5 % this year. Weak tax 
collection continues to undermine the fiscal position. Armenia's current account deficit, 
which was around 27 % of GDP (16 % including official transfers) in 1996, partly 
because of the blockade imposed on the country in connection with the Nagorno 
Karabakh issue, is expected to decline to 19.5 % in 1997. Over the medium term, 
however, external sustainability could become a crucial issue. The external debt was 
estimated at about 30 % of GDP at end-1996. Net international reserves are still low 
(about US$ 50 million). Progress with structural reform is limited: much remains to be 
done in large enterprise restructuring and in the banking sector. In June, the IMF 
20 
approved the second year (US$ 47 million) of an ESAF arrangement. Meanwhile, recent 
armaments purchases and the nomination of a new Prime Minister have raised political 
tensions, and peace is more fragile than six months ago. In view of both economic and 
political uncertainties, Armenia remains in the category of high-risk debtors. 
AZERBAIJAN 
Economic recovery, which appears to have begun in 1996, should accelerate in 1997, 
with a projected 5% growth in GDP. The annual average inflation rate should decline to 
some 9 % by the end of 1997, and the budget deficit to 2 % of GDP. The current 
account deficit, which is expected to decrease to 16 % of GDP in 1997, will continue to 
be financed by growing foreign direct investment deriving from oil contracts (US$ 345 
million in 1996) and by official assistance. The level of foreign exchange reserves is 
expected to increase to 3 months' imports in 1997. The external debt was quite low, at 
about 16 % of GDP, at end-1996, and the debt service comfortable, at 9 % of exports. 
Azerbaijan has generally adhered very closely to the IMF ESAF programme performance 
criteria, and structural reforms have accelerated and are broadly on track. However, 
since May, the arrears in pension payments, as well as the pace of privatization and 
reform of the banking sector, have been causing concern. These factors, together with 
the unresolved conflict with Armenia over Nagorno Karabakh, imply that the country 
risk remains high. 
BELARUS 
Current economic and political developments in Belarus remain a matter of grave 
concern. The moderate progress made towards stabilization in the past is in jeopardy. 
Since the second half of 1996, state interference in the economy has intensified. The 
positive economic growth officially recorded in 1996 and in the first half of 1997 appears 
to be mostly the result of state orders, which were financed by cheap credit from the 
banking system and have led to a major surge of stocks. After a period of relative 
stability, inflation has accelerated significantly since the last quarter of 1996. Consumer 
prices increased at an annual average of 65% during the first five months of 1997. The 
external sector remains particularly fragile. Furthermore, there is a serious lack of 
progress with structural reforms, especially privatization. The overall risk is high and 
increasing. 
GEORGIA 
GDP growth of 9%, close to the 10.5% registered in 1996, is expected for 1997. The 
budget deficit, which fell to 4.5 % in 1996, is expected to decrease further in 1997, while 
annual inflation, which fell dramatically to 14 % in 1996, should decrease further to 11 % 
in 1997. The current account deficit (excluding official transfers) was equivalent to 10.5 
% of GDP in 1996, but is expected to narrow in 1997. Foreign direct investment is still 
low. Foreign exchange reserves (2.6 months' imports in 1996) are expected to remain 
stable. Since its independence, Georgia has accumulated a foreign debt which amounted 
to some 30 % of GDP at end-1996, but has reached agreements with most of its 
creditors, in particular an understanding leading to clearance of its arrears towards the 
Community. In March 1997, the IMF Board approved a second annual ESAF 
arrangement (US$ 76 million). However, in May, it expressed concern about the pace of 
-21 
privatization, enforcement of tax collection, corruption and the repayment of debt to 
Turkmenistan. Political difficulties continue: the Abkhazian problem is further than ever 
from being resolved. The country risk remains high. 
MOLDOVA 
Following three years of substantial progress in macroeconomic stabilization, serious 
problems have appeared in Moldova since the middle of 1996: a widening budget deficit, 
wage and pension arrears, lack of substantial progress in structural reform, all this in a 
context of almost continuous output decline. These negative phenomena persisted and 
even intensified in the first half of 1997. In particular, increasing reliance on external 
financing has contributed to a steady increase in the country's external debt, which by the 
end of May 1997 reached 51% of GDP. More than one-third of the debt is short-term, 
i.e. with maturities below 5 years. 
The overall risk deteriorated in the first half of 1997, as it seems that the political will 
which made for significant progress in the reform effort in the past few years has begun 
to weaken. Indeed, there are signs which suggest that the process of economic 
transformation may be slowing down. 
TAJIKISTAN 
Following the end of the civil war in December 1996 and the signing, in June 1997, of a 
peace agreement between conflicting parties, economic output is expected to expand by 
5 % in 1997, after the sharp decline - 16.7% - registered in 1996, Annual average 
inflation, which fell dramatically to 65 % in 1996, as a result of tight credit and monetary 
policies, is expected to decrease only slightly to 50 % in 1997, because of policy shifts 
following the inclusion of new parties in a coalition government and wage arrears that 
are due to be paid. The trade balance, which was in surplus (US$ 75 million or 7 % of 
GDP) in 1996, is expected to deteriorate slightly in 1997. Foreign exchange reserves, 
which were very low in December 1996, are expected to increase in 1997, mainly as a 
result of expected disbursements of external assistance. At the end of 1996, the external 
debt of Tajikistan was equivalent to the country's GDP. Major creditors, however, 
agreed to reschedule the debt falling due in 1996. Rescheduling of debt-service payments 
falling due in 1997 has begun. The liberalization of the foreign exchange market, foreign 
trade and prices is well advanced. The transformation into joint ventures of all remaining 
medium-sized and large enterprises is expected by end-year, while the agricultural sector 
and banking system have begun to be reformed. The conclusion of an IMF agreement is 
expected in the coming months. The risk assessment remains cautiously optimistic. 
UKRAINE 
Financial stabilization made further progress in Ukraine in the first half of 1997, mainly 
because of a decline in the financing needs of the budget deficit, which led to a further 
reduction in broad money growth and in the inflation rate. The exchange rate has 
remained stable, and the central bank announced a 10% trading band for the hryvnia in 
April 1997. Both the current account deficit and the foreign debt remain at manageable 
levels. The authorities have announced the current account convertibility of the hryvnia, 
with effect from September 1997. However, structural reform has practically stagnated 
22 
in recent months. The 1997 budget and the accompanying package of laws, including a 
comprehensive tax reform and further deregulation of the economy, have not yet been 
adopted, and it is becoming increasingly clear that they will be approved only in a revised 
and diluted form. Real economic performance continues to be disappointing. GDP fell by 
8%o in the first quarter of 1997, compared to the same period of last year. 
The recently signed Friendship Treaty with Russia settles a series of potentially explosive 
issues relating to the Black Sea fleet. However, since economic stabilization in Ukraine 
remains fragile because of a significant slow-down in the reform process, the overall 
assessment is that Ukraine represents a moderate risk. 
UZBEKISTAN 
GDP growth similar to the 1.6% registered in 1996 is expected for 1997. So far in 1997, 
the authorities have been implementing a stricter fiscal policy, so that the budget deficit 
has been kept within the target of 3 % of GDP. However, inflation remains high (5-6 % 
monthly), real interest rates are negative, while official exchange rates for the som are 
less and less realistic. In 1996, the current account balance showed a deficit of US$ 1.0 
billion (8 % of GDP), while the gross foreign exchange reserves were still high at US$ 
1.9 billion (4.8 months' imports). The deficit is expected to stabilize or even to decline in 
1997. Uzbekistan will continue to finance its deficit mainly through borrowing, although 
an upturn in foreign investment is expected. The country's external debt, which was US$ 
2.3 bn or 17 % of GDP at the end of 1996, is projected to remain moderate in 1997. 
With regard to structural reform, draconian foreign exchange controls and import 
restrictions have been reintroduced. The restructuring of the agricultural sector and of 
large enterprises is proceeding slowly, while the banking sector is in a poor condition. 
The IMF stand-by arrangement remains suspended. The risk assessment is still 
unfavourable. 
IV. MEDITERRANEAN COUNTRIES 
ALGERIA 
Although macro-economic indicators have continued to improve, Algeria's country risk 
remains high owing to doubts about medium-term economic prospects and the continued 
difficult security situation. 
The macro-economic performance achieved under the IMF-supported programme has 
recently improved further. Economic growth is projected to accelerate from 4% in 1996 
to 4.5%o in 1997. Inflation declined from 15.1%o in December 1996 (12 months) to 6.9%) 
in April 1997. The current account and fiscal balances remained in surplus during the 
first quarter of 1997 and are currently projected at 0.3%) and 1.3% of GDP, respectively, 
for the year as a whole. Gross foreign exchange reserves, which doubled to US$ 4.2 
billion in 1996 (4.5 months' imports), increased further to US$ 5.3 billion at end-March 
1997. They are currently projected to reach US$ 5.5 billion by the end of the year. 
Algeria's outstanding external debt declined slightly to 74.2% of GDP at end-1996, 
while the outstanding domestic debt was halved during the period 1993-96 to 22.2% of 
GDP. 
-23 
Despite these achievements, the economy remains poorly diversified and particularly 
vulnerable to the vagaries of world energy prices and weather conditions. Because of 
limited foreign direct investment and lack of access to international capital markets, a 
sound balance of payments continues to rely on sizeable concessional external financing 
from the Bretton Woods institutions, the Paris and London clubs, and other multilateral 
and bilateral creditors. In addition, the political situation and security problems continue 
to hinder economic progress, in particular structural reforms and the development of a 
dynamic private economy. Growing unemployment (estimated at 28.3%> in 1996) and 
mounting social difficulties could also jeopardize the reform momentum. 
24 
ANNEX 
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 27 
I.C Expected signature and disbursement of EIB loans 32 
I.D Payment of the budget guarantee 33 
II. METHODOLOGICAL NOTE ON THE ANALYSIS OF THE COMMUNITY'S ESTIMATED 
LENDING CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES OVER THE PERIOD 
1997-99 UNDER THE GUARANTEE FUND MECHANISM 34 
II.A Reserve for loan guarantees to non-member countries (1) 34 
LL.B Bases for the calculation of the provisioning of the Guarantee Fund (2) 34 
IL C Basis for the provisioning of the Fund in the event of apart guarantee 35 
II.D Provisioning of the Guarantee Fund (3) 35 
ILE Margin remaining in the guarantee reserve (4) 36 
II.FResidual lending capacity (5) 36 
III. TABLES: COUNTRY-RISK INDICATORS 37 
25 
I. EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED 
BY THE COMMUNITY BUDGET 
I.A 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.J A uthorised ceiling (Table 1) 
This is the aggregate of the maximum amounts of capital authorised (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 authorised ceiling 
Factors reducing the risk: 
- limitation of the guarantee given to the EIB to 75%> of the loans signed in the 
Mediterranean countries; 
- limitation of the guarantee given to the EIB to 70% of the loans signed as part of lending 
operations with certain non-member countries authorised by the Council Decision of 14 
April 1997 and a sharing or risk between the Community and the EIB as the budget 
guarantee covers only political risks in some cases; 
- operations already repaid, since the amounts concerned, except in the case of balance of 
payments support (Member States), are the maximum amount of loans granted and not 
outstanding amounts authorised; 
- the amounts authorised are not necessarily taken up in full. 
I.A. 2 Capital outstanding ( Table I) 
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 which 
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-
I.A. 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 authorised plus, where applicable, the amounts in respect of 
operations proposed by the Commission and not yet decided. 
27 
I.B Loan operations covered by a budget guarantee 
Borrowing and lending operations: Member States 
Changes in amounts outstanding during six-month period 
COUNTRY 
GREECE 
ITALY 
EURATOM 
NCI 
TOTAL Decision 
91/136/EEC 
93/67/EEC 
77/270-271/Euratom 
80/29/Euratom 
82/170/Euratom 
85/537/Euratom 
90/212/Euratom 
78/870/EEC 
81/19/EEC(1) 
81/1013/EEC(2) 
82/169/EEC 
83/200/EEC 
87/182/EEC Date 
of decision 
04.03.91 
18.01.93 
29 0377 
20 12.79 
15.03.82 
05.12.85 
23.04.90 
16.10.78 
2001.81 
14.12.81 
1503.82 
19.04.83 
09.03.87 Loan 
term 
(years) 
(3) 
(3) Loan situation 
closed (a) 
• partially disbursed (b) 
• disbursed in full (c) 
• not yet disbursed (d) 
(c) 
(d) 
(d) 
(c) 
(c) 
(d) 
(d) 
(c) 
(c) 
(c) 
(b)(4) 
(d)(4) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) Amount 
decided 
2.200,00 
1.000,00 
600,00 
600,00 
8.000,00 
2.000,00 
2.000,00 
2.000,00 
2.000,00 
4.000,00 
500,00 
500,00 
1.000,00 
1.000,00 
1.000,00 
6.830,00 
1.000,00 
1.000,00 
80,00 
1.000,00 
3.000,00 
750.00 
21.030,00 Amount 
outstanding 
at 1.1.97 
500,00 
3.478,57 
572,48 
748,11 
5.299,16 Operations in six-month 
period 
Amounts 
disbursed 
0,00 Amounts 
repaid 
476,00 
416,00 
892,00 Amount 
outstanding at 
30.06.97 
500,00 
3.454,50 
119,60 
327,30 
4.401,40 (5) 
(1 ) Exceptional aid for the reconstruction of areas hit by the earthquake in Italy in 1 980. 
(2) Exceptional aid for the reconstruction of areas hit by the earthquake in Greece in 1981. 
(3) Long-term loans for which the schedule of repayments depend on the dates of disbursement. 
(4) By Decision 94/1 79/Euratom of 21 March 1 994 the Council decided to extend Euratom loans to the financing of projects in certain non-member countries. 
At 31 December 1 996 no loans had yet been granted in non-member countries. 
(5) Discrepancy caused by change in the rates of the other currencies against the ecu. 
TABLE 5b (1) 
Financial assistance to non-member countries 
Changes in amounts outstanding during six-month period, broken down by countries and tranche 
ECU million 
COUNTRY Decision Date of 
decision Loan 
term 
(years) Expiry date Loan situation 
- closed (a) 
- partly disbursed (b) 
- disbursed in full (c) 
- not yet disbursed (d) Amount 
decided Amount 
outstanding at 
1.01.97 Operations in six-month period 
Amounts 
disbursed Amounts 
reapid Amount 
outstanding at 
30.06.97 
HUNGARY I 
1st tranche 
2nd tranche 
3ème tranche 
HUNGARY II 
1 st tranche 
2nd tranche 
CZECH REPUBLIC 
1st tranche 
2nd tranche 
SLOVAKIA 
1st tranche 
2nd tranche 
BULGARIA I 
1 st tranche 
2nd tranche 
BULGARIA II 
1st tranche 
2nd tranche 
ROMANIA I 
1st tranche 
2nd tranche 
ROMANIA II 
ROMANIA III 
1st tranche 
2nd tranche 
BALTIC STATES 
ESTONIA 
1st tranche 
2nd tranche 90/83/EEC 
90/681/EEC 
91/310/EEC 
91/106/EEC 
91/106/EEC 
91/311/EEC 
92/511/EEC 
91/384/EEC 
92/551/EEC 
94/369/EC 
92/542/EEC 22.02.90 
21.12.90 
24.06.91 
25.0291 
25.0291 
24.06.91 
19.10.92 
22.07.91 
27.11 92 
20.06.94 
23.11.92 20.04.95 
14.02.96 
18.03.98 
15.12.97 
18.03.98 
15.12.97 
18.03.98 
15.12.97 
18.03.98 
15.12.97 
07.12.2001 
29.08.2003 
01.02.99 
18.03.98 
26.02.2000 
20.11.2002 
31.03.2000 (a) 
(a) 
(d) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) 
(d) 
(c) 870,00 
350,00 
260,00 
260,00 
180,00 
100,00 
80,00 
250,00 
123,30 
126,60 
125,00 
61,60 
63,30 
290,00 
150,00 
140,00 
110,00 
70,00 
40,00 
375,00 
190,00 
185,00 
80,00 
125,00 
55,00 
70,00 
220,00 
40,00 
20,00 
20,00 0,00 
100,00 
80,00 
123,30 
126,60 
61,60 
63,30 
150,00 
140,00 
70,00 
40,00 
190,00 
185,00 
80,00 
55,00 
0,00 
20,00 
0,00 0,00 
100,00 
80,00 
185,00 
190,00 
150,00 
140,00 
70,00 
40,00 
190,00 
185,00 
80,00 
55,00 
0,00 
20,00 
0,00 i 
TABLE 5b (2) 
Financial assistance to non-member countries 
Changes in amounts outstanding during six-month period, broken down by countries and tranche 
ECU million 
COUNTRY 
LATVIA 
1 st tranche 
2nd tranche 
LITHUANIA 
1st tranche 
2nd tranche 
MOLDOVA I 
1 st tranche 
2nd tranEC 
MOLDOVA II 
UKRAINE I 
UKRAINE II 
1/2 tranche 
1/2 tranche 
2nd tranche 
BELARUS 
1st tranche 
2nd tranche 
ALGERIA I 
1st tranche 
2nd tranche 
ALGERIA II 
1 st tranche 
2nd tranche 
ISRAEL 
REPS.OF FORMER USSR 
TOTAL Decision 
94/346/EC 
96/242/EC 
94/940/EC 
95/442/EC 
95/132/EC 
91/510/EEC 
94/938/EC 
91/408/EEC 
91/658/EEC Date of 
decision 
13.06.94 
25.03.96 
2212.94 
23.1095 
1004.95 
23.09.91 
22.1294 
22.07.91 
16.12.91 Loan 
term 
(years) 
7 
7 
7 
10 
10 
10 
10 
10 
10 
10 
5 
7 
7 
5 
3 Expiry date 
31.03.2000 
27.07.2000 
16.08.2002 
07.12.2004 
08.08.2005 
30.10.2006 
28.12.2005 
29.08.2006 
30.10.2006 
28.12.2005 
15.12.97 
17.08.2001 
27.11.202 
15.12.97 
28.09.97 Loan situation 
- closed (a) 
- partly disbursed (b) 
- disbursed in full (c) 
- not yet disbursed (d) 
(c) 
(d) 
(c) 
(b) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) 
(d) 
(c) 
(d) 
(c) 
(c) 
(c) 
(d) 
(c) Amount 
decided 
80,00 
40,00 
40,00 
100,00 
50,00 
50,00 
45,00 
25,00 
20,00 
15,00 
85,00 
200,00 
55,00 
30,00 
25,00 
400,00 
250,00 
150,00 
200,00 
100,00 
100,00 
160,00 
1.250,00 
5.035,00 Amount 
outstanding at 
1.01.97 
40,00 
0,00 
50,00 
25,00 
25,00 
20,00 
15,00 
85,00 
50,00 
50,00 
0,00 
30,00 
0,00 
250,00 
150,00 
100,00 
0,00 
160,00 
143,70 
2.678,50 Operations in six-month period 
Amounts 
disbursed 
0,00 Amounts 
repaid 
34,10 
34,10 Amount 
outstanding at 
30.06.97 
40,00 
0,00 
50,00 
25,00 
25,00 
20,00 
15,00 
85,00 
50,00 
50,00 
0,00 
30,00 
0,00 
250,00 
150,00 
100,00 
0,00 
160,00 
109,60 
2.644,60 i 
OJ 
O 
TABLE 6 
LOAN GUARANTEES TO EIB 
GEOGRAPHICAL AREA 
MED. financial protocols(l) 
MED. horizontal coop. 
TOTAL MED. 
C and E Europe 1 
C and E Europe II 
Asia, Latin America 1 
Asia, Latin America II 
South Africa 
New mandates 
TOTAL Decision 
R/1762/92/CEE 
90/62/CEE(4) 
91/252/CEE(5) 
93/696/CE(6) 
93/115/CEE 
96/723/CE 
95/207/CE 
97/256/CE(7) Date of 
decision 
8.03.77 
29.06.92 
12.02.90 
14.05.91 
1312.93 
15.02.93 
12.1296 
01.06.95 
14.04.97 Rate of 
guarantee 
75% (2) 
75% (2) 
100% 
100% 
100% 
100% 
100% 
100% 
70% Loan term 
(years) 
15 
15 
15 
15 
15 
15 
15 
15 
15 Date of 
guarantee 
contract 
30.10.78/10.11.78 
09.11.92/18.11.92 
24.04.90/14.05.90 
19.01.93/04.02.93 
22.07.94/12.08.94 
04.11.93/17.11.93 
18.03.97/-
04.10.95/16.10.95 
25.07.97/29.07.97 Amount 
decided 
6062 
1800 
7862 
1000 
700 
3000 
750 
275 
300 
7105 
20992 Loans signed 
at 1.01.97 
5325 
1800 
7125 
(3) 
928 
700 
2980 
647 
101 
12481 during 
six-month 
period 
60 
0 
60 
(3) 
0 
20 
0 
50 
75 
205 Amount outstanding 
at 1.01.97 
2057 
301 
2357 
615 
356 
335 
204 
32 
3898 at 30.06.97 
2321 
466 
2787 
664 
380 
486 
250 
51 
56 
4674 
(1) Including ECU 1 500 million for Spain, Greece and Portugal. 
(2) General gurantee of 75% for all credits made available under lending operations under a guarantee contract signed between the Community and the EIB on 30.10.78 and 10 11.78 
By way of exception, a 100% gurantee applies to the emergency aid granted to Portugal in accordance with the Council Decision of 7 October 1975. 
(3) The Community has guaranteed ECU 5 379.4 million, of which ECU 141.5 million is covered by a 100% guarantee for Portugal. 
(4) Non-member countries: Poland, Hungary. 
(5) Non-member countries: Czech Republic and Slovak Republic, Bulgaria, Romania. 
(6) Non-member countries: Poland, Hungary, Czech Republic and Slovak Republic, Bulgaria, Romania, Baltic States and Albania. 
(7) Non-member countries: Central and Eastern Europe, Mediterranean, Asia and Latin America, South Africa. I 
32 
I.C Expected signature and disbursement of EIB loans 
The EIB 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 1997 a total of ECU 190 million was still to be signed in 1997 under current and 
former mandates (ECU 642 million, less ECU 227 million for the remainder from the first and 
second protocols with Yugoslavia which will no longer be signed). 
It is assumed that all the ECU 225 million under the third and fourth protocols with Syria will 
be signed in 1998; however, this assumption is very uncertain. 
Asia and Latin America 
At 30 June 1997 a total of ECU 20 million was still awaiting signature under the first 
mandate. As the Council decided to grant ECU 275 million on 12 December 1996, the total 
still to be signed comes to ECU 225 million. The total still to be signed in 1997 therefore 
comes to ECU 245 million. 
South Africa 
At 30 June 1997 a total of ECU 124 million was still to be signed in 1997 under the first 
mandate. 
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. 
At 30 June 1997 ECU 5 868 million still had to be disbursed against loans signed at that date. 
The total breaks down as follows:7 
Mediterranean ECU 2 197 million 
Central and Eastern Europe ECU 3135 million 
Asia and Latin America ECU 411 million 
South Africa ECU 125 million 
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. 
-33-
I.D Payment of the budget guarantee 
ID. I 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 authorised 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. 
/. D. 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 EIB'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 authorise the Bank to withdraw the corresponding amounts from the Guarantee Fund 
within three months. 
34 
If there are insufficient resources in the Fund, the procedure used for activating the guarantee 
is the same as for borrowing/lending operations. 
II. METHODOLOGICAL NOTE ON THE ANALYSIS OF THE 
COMMUNITY'S ESTIMATED LENDING CAPACITY IN RESPECT 
OF NON-MEMBER COUNTRIES OVER THE PERIOD 1997-99 
UNDER THE GUARANTEE FUND MECHANISM 
II.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 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 
resources. 
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 (70%, 75% or 100%): 
- to the loan guarantees authorised 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) authorised by the Council and to the loans proposed 
or being prepared by the Commission. 
The annex to Council 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 
-35 
tranches calculated on the basis of the annual amounts indicated in the financial statement 
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 1997 the budgetary authority therefore adopted transfer 9/97 so that, as at 
the start of every financial year, the amounts paid into the Funds could be adjusted and the 
annual tranche provided for in the financial statements for EIB loans to non-member countries 
(Central and Eastern Europe, Mediterranean countries, Asia and Latin America and South 
Africa) could be paid. 
II.C Basis for the provisioning of the Fund in the event of a part guarantee 
For EBB 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 authorised. 
The guarantee on the EIB loans authorised by the Council on 14 April 1997 is limited to 70%» 
of the total amount of credits opened. The basis for provisioning is 70% of the annual 
forecast of signatures. 
II.D Provisioning of the Guarantee Fund (3) 
The amounts paid into, the Fund are obtained by applying the appropriate rate of provisioning 
(15%o 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 
-36-
is reached, until the amount drawn under the activation of the guarantee has been fully 
restored". As the amounts drawn under the activation of the guarantee have not been 
restored, the rate of provisioning applied to the new operations is 15%. 
A 14%) provisioning rate is applied to the EIB loans granted before defaults were covered by 
the Fund if the financial statements provide for the signature of part of the loans in 1997. 
(Pursuant to Articles 2 and 4 of the 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.) 
ILE 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). 
II.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. 
37 
III. TABLES: COUNTRY-RISK INDICATORS 
38 
Country-risk indicators 
Country: Bulgaria 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (Leva per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official reserves, including gold (end of period) 
bnUSD 
months' imports of goods and services 
External debt 
Convertible currency external debt 
(bn USD, end of period.) 
Convertible debt service (bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal.bn USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of 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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(2) 
(2) 
(3) 1994 
1.8 
7,8 
12,8 
121,9 
66,0 
-5,8 
5,3 
-2,1 
105 
1.3 
3,0 
11.4 
0,9 
0,5 
0,5 
119 
220 
28 
17,6 
(4) 
6,8 
4,6 
8,9 
SBA/STF 
(3/94-3/95) 
no (5) 
none 
none 
03/94 09/94 
88 98 
(167) (167) 
03/94 09/94 
91 95 
(135) (135) 
19.8 20.8 1995 
2,1 
8,6 
11,6 
32,8 
70,7 
-5,7 
7,0 
-0,5 
90 
1.5 
2,8 
10,2 
0.9 
0,3 
0,6 
79 
151 
14 
none 
none 
7,3 
5,7 
7,7 
-
none 
none 
03/95 09/95 
90 90 
(187) (181) 
03/95 09/95 
93 94 
(135) (135) 
21.9 22.2 1996 
prelim. 
-10,9 
-8,3 
12,5 
310,8 
487,4 
-11,0 
6,1 (09/96) 
-0.0 est. 
.115 
0,8 
1.6 
9,7 
1,0 
0,4 
0,6 
99 
159 
17 
none 
none 
8,1 
6,5 
10,3 (09/96) 
SBA 
(7/96-2/98) 
no (5) 
none 
none 
03/96 09/96 
99 92 
(178) (178) 
03/96 09/96 
92 93 
(135) (135) 
23.1 23.5 
Footnotes 
(1) (2) (3) See explanatory notes 
(4) London Club DDSR (July) Paris Club rescheduling (April) 
(5) SBA suspended in 09/94 and 09/96 
-39 
Country-risk indicators 
Country: Czech Republic 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (CK's per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 
bnUSD 
months' imports of goods and services 
External debt 
Convertible currency external debt 
(bn USD, end of period.) 
Convertible debt service (bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of 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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(D 
(2) 
(2) 
(3) 1994 
2,6 
2,1 
3,2 
9,7 
28,8 
1,0 
18,9 
-0,1 
749 
6,2 
3,9 
10,7 
2,5 
2,1 
0,4 
27,9 
56,6 
13,2 
none 
none 
5,2 
3,4 
2,5 
SBA 
(3/93-3/94) 
yes (4) 
Baa2 (06/94) 
BBB+ (07/94) 
03/94 09/94 
40 39 
(167) (167) 
03/94 09/94 
40 39 
(135) (135) 
49.7 52.8 1995 
4,8 
8,7 
2,9 
7,9 
26,6 
0,6 
28,2 
-2,9 
2526 
14,0 
5,6 
16,5 
2,6 
2,0 
0,6 
35,1 
58,6 
9,2 
none 
none 
5,8 
2,6 
2,5 
-
Baal (09/95) 
A 
03/95 09/95 
35 41 
(187) (181) 
03/95 09/95 
33 30 
(135) (135) 
55.8 58.4 1996 
4,4 
6,8 
3,5 
8,6 
27,1 
0,0 
29,7 
-8,6 
1388 
12,4 
4,4 
20,4 
3,8 
3,0 
0,8 
39,2 
68,8 
12,8 
none 
none 
7,3 
2,8 
1,9 
-
Baal 
A 
03/96 09/96 
36 35 
(178) (178) 
03/96 09/96 
30 29 
(135) (135) 
60.1 62.0 
Footnotes 
(1) (2) (3) See explanatory notes 
(4) All debts to IMF paid ahead of schedule. 
-40-
Country-risk indicators 
Country: Estonia 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (Kroons per USD) (end of period) 
General government balance (as % of GDP) 
Financial balance 
Fiscal balance 
Balance of payments 
Exports of goods (m USD) 
Current account balance (% of GDP), excl. official transfers 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 
m USD 
months' imports of goods 
External debt 
Convertible currency external debt (incl. to IMF) 
(m USD, end of period) 
Convertible debt service (m USD) 
principal 
interest + charges to IMF 
External debt/GDP (%) 
External debt/exports of goods (%) 
Debt service/exports of goods (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of 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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(4) 
(4) 
(5) 
(1) 
(2) 
(2) 
(3) 1994 
-1,8 
3,5 
4,5 
41.7 
12,6 
2,9 
1,3 
1312 
-11,7 
214 
447 
3,2 
170,3 
8,1 
3,0 
5,1 
7,2 
12,8 
0,8 
none 
none 
0,4 
15,7 
2,0 
SBA/STF 
(10/93-3/95) 
yes 
none 
none 
03/94 09/94 
105 102 
(167) (167) 
03/94 09/94 
88 86 
(135) (135) 
20.7 23.6 1995 
4,3 
1,4 
4,1 
28,9 
11,5 
-0,4 
-0,8 
1838 
-7,4 
204 
583 
2,7 
246,8 
21,0 
6,0 
15,0 
7,8 
15,3 
1,1 
none 
none 
0,5 
16,5 
2,2 
SBA 
(4/95-6/96) 
yes 
none 
none 
03/95 09/95 
66 76 
(187) (181) 
03/95 09/95 
79 79 
(135) (135) 
25.4 26.3 1996 
4,0 est. 
1.1 
4.3 
14,8 
12,4 
-1,5 est. 
-1,6 est. 
2074 
-12,0 
70 
640 est. 
2,4 est. 
296,5 
51,2 est. 
27,5 est. 
23,7 est. 
6,4 
13,5 
2,5 est. 
none 
none 
0,6 
15,6 
2,2 
SBA 
(7/96-8/97) 
yes 
none (6) 
none (6) 
03/96 09/96 
73 71 
(178) (178) 
03/96 09/96 
76 71 
(135) (135) 
28.9 31.1 
Footnotes 
(1) (2) (3) See explanatory notes 
(4) Financial balance does not take into account government net lending, whereas fiscal balance does. 
(5) Kroon figures have been converted using the yearly average exchange rate of the dollar. 
In 1996, Estonia repaid in advance some foreign loans. 
(6) Estonia has asked for a rating 
-41 
Country-risk indicators 
Country: Hungary 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (forints per USD) (end of period) 
Consolidated state budget balance (as % of GDP) 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official reserves (end of period) 
bnUSD 
months' imports of goods 
External debt 
Convertible currency external debt 
(bn USD, end of period) 
Convertible debt service (bn USD) 
principal, including early repayments 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of 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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(2) 
(2) 
(3) 1994 
2,9 
9,0 
10,4 
21,2 
111,0 
-6,3 
7,6 
-9,5 
1100 
6,8 
7,2 
28,5 
6,2 
4,3 
1,9 
68,4 
267,2 
48,7 
none 
none 
16,5 
4,0 
11,3 
SBA 
(9/93-12/94) 
no (4) 
Ba1 
BB+ 
03/94 09/94 
44 46 
(167) (167) 
03/94 09/94 
43 44 
(135) (135) 
46.1 46.2 1995 
1.5 
6,0 
10,4 
28,5 
139,5 
-6,8 
12.8 
-5,6 
4410 
12,0 
9,5 
31,7 
7,7 
5,3 
2,4 
72,3 
185,9 
43,8 
none 
none 
13,0 
3,1 
6,6 
-
Ba1 
BB+ 
03/95 09/95 
50 44 
(187) (181) 
03/95 09/95 
45 48 
(135) (135) 
46.4 45.0 1996 
1,0 
2,3 
10,5 
19,8 
164,0 
-3.3 
14,2 
-3,2 est. 
1987 
9,7 
6,9 
27,6 
7,4 
5,1 
2,3 
63,6 
144,1 
44,7 
none 
none 
9,6 
2,7 
5,2 
SBA 
(3/96-2/98) 
yes 
Baa3 
BBB-
03/96 09/96 
44 44 
(178) (178) 
03/96 09/96 
50 50 
(135) (135) 
43.6 44.7 
Footnotes 
(1) (2) (3) See explanatory notes 
(4) First review uncompleted. 
42 
Country-risk indicators 
Country: Latvia 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (Lats per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods (m USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 
m USD 
months' imports of goods and non-factor services 
External debt 
Convertible currency external debt 
(m USD, end of period) 
Convertible debt service (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods (%) 
Debt service/exports of goods (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of 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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(D 
(2) 
(2) 
(3) 1994 
2,0 
-2.2 
6.5 
26,3 
0,55 
-4,4 
988 
5,5 
155 
545 
4,5 
345 
50,0 
n.a. 
n.a. 
9,2 
34,1 
5,1 
none 
none 
0,7 
13,3 
4,8 
SBA/STF 
(12/93-3/95) 
yes 
none 
none 
03/94 09/94 
104 125 
(167) (167) 
03/94 09/94 
94 92 
(135) (135) 
19.6 21.3 1995 
-1,6 
-6,3 
6.1 
23,1 
0,54 
-3,4 
1304 
-0,4 
165 
527 
2,9 
403 
39,0 
n.a. 
n.a. 
9,2 
31,4 
3,0 
none 
none 
0.7 
12,3 
4,0 
SBA 
(4/95-4/96) 
no 
none 
none 
03/95 09/95 
106 116 
(187)(181) 
03/95 09/95 
91 89 
(135) (135) 
22.6 23.4 1996 
2,8 
1,4 
7,2 
13,0 
0,56 
-1,9 
1443 
-9,0 
171 
652 
2,9 est. 
409 
71,0 
n.a. 
n.a. 
8,2 
28,6 
4,9 
none 
none 
0,7 
12,4 
3,5 
SBA 
(5/96-8/97) 
yes 
Baa3 (01/97) 
BBB (01/97) 
03/96 09/96 
89 75 
(178) (178) 
03/96 09/96 
86 88 
(135) (135) 
24.7 25.7 
Footnotes 
(1) (2) (3) See explanatory notes 
43 
Country-risk indicators 
Country: Lithuania 
footnotes 1994 1995 1996 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (Litas per USD) (end of period) 1.0 
-6,7 
3,8 
72,2 
4,3 3,0 
0,8 
7,3 
39,6 
4,0 3,6 
-1,5 
6,2 
13,1 
4,0 
General government balance (as % of GDP) 
Financial balance 
Fiscal balance (4) 
(4) -1,5 
-4,2 -1,8 
-3,3 -1,9 
-3,6 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (% of GDP), excl. official transfers 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period, gross foreign assets) 
m USD 
months' imports of goods and services 1,9 
-4,2 
60 
587 
3,1 2,7 
-3,2 
55 
819 
3,9 3,3 
-2,7 
152 
834 
2,4 
External debt 
Convertible currency external debt 
(m USD, end of period) 
Convertible debt service (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 448 
19 
n.a 
n a. 
8,0 
23,2 
1,0 
none 
none 757 
69 
n.a. 
n a. 
13,9 
34,3 
3,1 
none 
none 1076 
120 
n a 
n.a. 
15,6 
32,7 
3,6 
none 
none 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) (1) 0,9 
13,3 
3,1 1,4 
13,9 
4,8 1,4 
10,2 
3,3 
IMF arrangements 
Type 
(Date) 
On track STF (10/93-3/94) 
EFF (10/94-10/97) 
yes EFF 
(10/94-10/97) 
yes EFF 
(10/94-10/97) 
yes 
Indicators of market's perception of 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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating (2) 
(2) 
(3) none 
none 
03/94 09/94 
110 121 
(167) (167) 
03/94 09/94 
97 96 
(135) (135) 
18.4 20.0 none 
none 
03/95 09/95 
108 118 
(187) (181) 
03/95 09/95 
95 90 
(135) (135) 
21.7 22.9 Ba2 
none 
03/96 09/96 
85 59 
(178) (178) 
03/96 09/96 
89 90 
(135) (135) 
23.8 25.3 
Footnotes 
(1) (2) (3) See explanatory notes 
(4) Financial balance does not take into account government net lending, whereas fiscal balance does. 
44 
Country-risk indicators 
Country: Romania 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (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 goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 
m USD 
months' imports of goods and services 
External debt 
Convertible currency external debt, incl. short-term debt 
(bn USD, end of period) 
Convertible debt service (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of 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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(D 
(2) 
(2) 
(3) 1994 
3,9 
3,3 
8,1 
61,7 
1767 
-2,0 
7,2 
-1,4 
341 
1596 
2,2 
5,5 
589 
313 
276 
18,3 
76,6 
15,4 
none 
none 
8,4 
10,7 
9,7 
SBA 
(5/94-12/95) 
yes 
none 
none 
03/94 09/94 
74 77 
(167) (167) 
03/94 09/94 
76 74 
(135) (135) 
25.4 26.2 1995 
7,1 
9,4 
8,0 
27,8 
2760 
-2,6 
9,4 
-4,6 
367 
1523 
1,9 
6,6 
1366 
1073 
293 
18,7 
73,9 
14,5 
none 
none 
10,2 
11,5 
10,1 
SBA 
(5/94-12/95) 
yes 
none 
none 
03/95 09/95 
68 64 
(187) (181) 
03/95 09/95 
73 71 
(135) (135) 
28.1 29.7 1996 
4,1 
9,9 
6,3 
56,9 
4035 
-3,9 
9,8 
-5,8 
555 
2099 
2,1 
8,3 
1980 
1524 est. 
456 est. 
23,5 
85,0 
20,2 
none 
none 
10,2 
9,4 
8,0 
SBA 
(4) 
no (5) 
Ba3 
BB-
03/96 09/96 
67 61 
(178) (178) 
03/96 09/96 
68 72 
(135) (135) 
30.9 31.0 
Footnotes 
(1) (2) (3) See explanatory notes 
(4) The SBA approved in May 1994 was augmented and extended through 1997. 
(5) Suspended in March 1996. New SBA approved by IMF Board on 22 April 1997 
-45-
Country-risk indicators 
Country: Slovak Republic 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (SrCs per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 
m USD 
months' imports of goods and services 
External debt 
Convertible currency external debt 
(bn USD, end of period) 
Convertible debt service (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of 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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(D 
(2) 
(2) 
(3) 1994 
4,9 
4,8 
14,8 
11,7 
31,3 
-1,3 
8,9 
4,8 
184 
1691 
2,3 
4,2 
766 
497 
269 
30,5 
46,9 
8,6 
none 
none 
2,9 
5,3 
2,3 
STF 
(7/93 -7/94) 
yes 
Baa3 (05/94) 
BB- (02/94) 
03/94 09/94 
64 66 
(167) (167) 
03/94 09/94 
59 59 
(135) (135) 
31.6 33.1 1995 
6,8 
8,3 
13,1 
7,2 
29,6 
0,1 
11,0 
2,3 
157 
3400 
4,1 
5,7 
1390 
1130 
260 
32,9 
52,0 
12,7 
none 
none 
4,1 
5,2 
2,8 
SBA 
(7/94-3/96) 
no (4) 
Baa3 
BB+ 
03/95 09/95 
53 51 
(187) (181) 
03/95 09/95 
61 59 
(135) (135) 
33.2 35.7 1996 
6,9 
2,5 
12,8 
5,4 
31,9 
-1,3 
10,9 
-10,1 
189 
3473 
3,4 
7,7 
1444 
1186 
258 
40,6 
70,6 
13,3 
none 
none 
4,5 
4,5 
3,2 
-
Baa3 
BBB-
03/96 09/96 
48 49 
(178) (178) 
03/96 09/96 
57 53 
(135) (135) 
38.6 41.2 
Footnotes 
(1) (2) (3) See explanatory notes 
(4) The mid-term review of the programme, which had been scheduled for February 1995, was not completed. 
-46-
Country-risk indicators 
Country: Belarus 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (yearly average) 
Exchange rate ( Rbs per USD) (average) 
General government balance (as % of GDP) 
Balance of payments. 
Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 
m USD 
months' imports of goods and services 
External debt 
Convertible currency external debt 
(bn USD, end of period) 
Convertible debt service (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt rescheduling agreement 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of 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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(D 
(2) 
(2) 
(3) 1994 
-12,6 
-19,9 
2,1 
1960 
10600 
-1,6 
2,5 
-12,4 
10 
101,0 
0,3 
1,3 
123,0 
n.a. 
n.a. 
25,9 
47,4 
4,3 
493 
(4) 
0,9 
4,8 
2,3 
STF 
(07/93-06/94) 
no (5) 
none 
none 
03/94 09/94 
145 138 
(167) (167) 
03/94 09/94 
109 109 
(135) (135) 
15.5 15.7 1995 
-10,4 
-11,5 
2,7 
244 
11500 
-2,3 
4,7 
-4,7 
7 
377,0 
0,7 
1,5 
178,0 
n.a. 
n.a. 
14,7 
32,7 
3,4 
460 
none 
0,5 
2,6 
0,8 
SBA 
(12/95-11/96) 
no (6) 
none 
none 
03/95 09/95 
135 134 
(187) (181) 
03/95 09/95 
112 112 
(135) (135) 
15.2 15.5 1996 
2,6 
3,3 
3,9 
39,3 
15500 
-1,8 
5,4 
-9,1 est. 
6 est. 
10,0 
0,0 est. 
1,0 
163,2 est. 
n.a. 
n.a. 
8,1 
17,6 
3,0 
n.a. 
none 
0,5 
4,0 
0,7 
SBA 
(12/95-11/96) 
no (6) 
none 
none 
03/96 09/96 
128 142 
(178) (178) 
03/96 09/96 
116 118 
(135) (135) 
14.5 14.6 
Footnotes 
(1) (2) (3) See explanatory notes 
(4) With Russia for gas arrears 
(5) IMF 1993 STF programme went off track in early 1994. However, IMF staff regarded favourably the government programme 
adopted in Autumn 1994, which was supported with the second STF tranche by end-January 1995. 
(6) The first quarterly review of the programme, initially scheduled for December 1995, has never been completed. 
47 
Country-risk indicators 
Country: Moldova 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (yearly average) 
Exchange rate (leu per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods (m USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 
m USD 
months' imports of goods 
External debt 
Convertible currency external debt 
(m USD, end of period) 
Convertible debt service (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods (%) 
Debt service/exports of goods (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods(%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of 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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(2) 1994 
-30,9 
-12,0 
20,6 
116 
4,27 
-5,9 
618 
-12,9 
11,6 
179 
2,9 
506,2 
12,3 
n.a. 
n.a. 
30,0 
55,5 
4,0 
none 
none 
0,9 
18,0 
10,0 
SBA 
(12/93-3/95) 
yes 
none 
none 
03/94 09/94 
148 155 
(167) (167) 
none 
none 1995 
-1.9 
-6,0 
24,5 
24 
4,50 
-5,9 
739 
-8,1 
63,7 
257 
3,2 
696,3 
91,0 
n.a. 
n.a. 
38,0 
91,1 
11,0 
none 
none 
0,8 
8,7 
7,9 
SBA 
(3/95-3/96) 
yes 
none 
none 
03/95 09/95 
157 141 
(187) (181) 
none 
none 1996 
-8,0 
-5,1 
23,4 
15 
4,59 
-10,0 
801 
-18,8 
40,0 
315 
4,1 
818,2 
n.a. 
n.a. 
n.a. 
57,6 
102,1 
n.a. 
none 
none 
1,0 
9,3 
9.5 
EFF 
(5/96-5/99) 
yes 
none 
none 
03/96 09/96 
134 125 
(178) (178) 
none 
none 
Footnotes 
(1) (2) See explanatory notes 
48 
Country-risk indicators 
Country: Ukraine 
Real GDP growth (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (Krb per USD) (Hrv per USD for 1996) 
- auction / interbank (end of period) 
- cash (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (excl. transfers) (% of GDP) 
Net inflow of foreign direct investment (bn USD) 
Gross official foreign exchange reserves 
m USD 
weeks' imports of goods and services 
External debt 
Convertible currency external debt 
(bn USD, end of period) 
Convertible debt service paid (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of 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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(D 
(2) 
(2) 
(3) 1994 
23,0 
-28,5 
0,3 
401 
108196 
128000 
-8,2 
14,7 
-6,0 
0,09 
646 
2,3 
7,2 
1794 
n.a. 
n.a. 
29,2 
48,0 
12,1 
2722 
(4) 
1,6 
1.6 
0,8 
STF 
(04/93-04/95) 
yes 
none 
none 
03/94 09/94 
149 147 
(167) (167) 
03/94 09/94 
111 113 
(135) (135) 
15.1 14.5 1995 
-11,8 
-11,7 
0,6 
182 
179400 
186000 
-5,0 
16,4 
-5,0 
0,27 
1134 
3,7 
8,1 
1531 
986 
545 
23,3 
53.6 
9,3 
236 
(4) 
1,5 
1.4 
0,7 
SBA 
(04/95-04/96) 
no (5) 
none 
none 
03/95 09/95 
145 138 
(187) (181) 
03/95 09/95 
109 111 
(135) (135) 
15.5 15.7 1996 
-10,0 
-5,1 
1,3 
40 
1,9 
1,9 
-3,2 
20,3 
-3,9 
0,52 
1994 
5,3 
9,2 
1221 
716 
505 
21,2 
45,3 
6,0 
n.a. 
(4) 
3,0 
2,6 
1,2 
SBA 
(05/96-02/97) 
yes 
none 
none 
03/96 09/96 
136 135 
(178) (178) 
03/96 09/96 
107 111 
(135) (135) 
16.7 16.6 
Footnotes 
(1) (2) (3) See explanatory notes 
(4) Rescheduling of debt owed to Russia and Turkmenistan. 
(5) Suspended in November 1995. 
-49 
Country-risk indicators 
Country: Algeria 
Real GDP growth rate (%) 
Hydrocarbon production ( % change) 
Inflation rate (Dec/Dec) 
Exchange rate (dinars per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves 
bn USD 
months' imports of goods and services 
External debt 
Convertible currency external debt 
(bn USD, end of period) 
Convertible debt service (bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling (bn US$) 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of per.) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(2) 
(2) 
(3) 1994 
-0,9 
-2,5 
38,6 
42,9 
-4,4 
8,9 
-4,4 
0,0 
2,6 
2,9 
29,5 
8,9 
7,1 
1,8 
70,0 
307,5 
48,6 
none 
4,5 
9,9 
2,4 
7,8 
SBA 
(5/94 - 5/95) 
yes 
none 
none 
03/94 09/94 
92 96 
(167) (167) 
03/94 09/94 
75 78 
(135) (135) 
26.3 24.6 1995 
3,9 
4,4 
21,9 
52.2 
-1,4 
10,3 
-5,3 
0,0 
2,1 
2,1 
32,5 
9,4 
7,1 
2,3 
78,4 
297,1 
42,5 
none 
4,9 
12,2 
2,8 
8,9 
SBA/EFF 
(5/94 - 5/95) 
yes 
none 
none 
03/95 09/95 
102 107 
(187) (181) 
03/95 09/95 
89 91 
(135) (135) 
23.5 22.8 1996 
4,0 
6,3 
15,1 
56,2 
3,0 
13,2 
2,8 
0,3 
4,2 
4,5 
33,5 
7,4 
5,2 
2,2 
73,3 
240,1 
29,2 
none 
3,5 
11,6 
2,7 
6,8 
EFF/CCFF 
(5/95 - 5/98) 
yes 
none 
none 
03/96 09/96 
109 97 
(178) (178) 
03/96 09/96 
95 95 
(135) (135) 
21.5 22.8 
Footnotes 
(1 ) (2) (3) See explanatory notes 
50 
Country-risk indicators 
Country: Israel 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (yearly average) 
Consumer Price Index (yearly average) 
Exchange rate (shekel per USD) (end of period) 
Central government overall deficit (as % of GDP) 
Balance of payments 
Exports of goods (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (bn USD) 
Gross official foreign exchange reserves 
bn US$ 
months' imports of goods 
External debt 
External debt (gross external liabilities) 
(bn USD, end of period) 
Debt service (bn USD) 
principal 
interest (gross) 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of 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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(2) 
(2) 
(3) 1994 
6,8 
7,4 
7.8 
14,5 
3,01 
-2,3 
16,0 
-3,2 
0,6 
6,6 
2,4 
41,8 
3,8 
2,2 
1.6 
56,2 
171,0 
15,5 
none 
none 
4,4 
0,8 
1,9 
none 
none 
BBB+ 
03/94 09/94 
30 33 
(167) (167) 
03/94 09/94 
46 43 
(135) (135) 
43.4 46.5 1995 
7,1 
8,4 
6,9 
8,1 
3,12 
-4,2 
17,9 
-5.6 
2,0 
9.1 
2,8 
45,1 
4,2 
2,5 
1.7 
53,8 
165,0 
15,4 
none 
none 
4,4 
0.7 
1,7 
none 
A3 
A-
03/95 09/95 
31 31 
(187) (181) 
03/95 09/95 
43 42 
(135) (135) 
47.9 49.2 1996 
4,4 
5,4 
6,7 
10,6 
3,24 
-3,6 
19,1 
-5,6 
2,4 
10,0 
2.8 
48,0 
4,5 
2,8 
1,7 
51,1 
164,0 
15,4 
none 
none 
3,9 
0.6 
1,6 
none 
A3 
A-
03/96 09/96 
33 32 
(178) (178) 
03/96 09/96 
41 40 
(135) (135) 
50.8 52.2 
Footnotes 
(1) (2) (3) See explanatory notes 
-51-
Explanatorv notes for country-risk indicators 
Standard footnotes 
(1) Includes 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; 100 represents the least chance of default. A 
given country may improve its rating and still fall in the ranking if the average global rating 
for all rated countries improves. 
Abbreviations and English words used in tables 
S&P Standard and Poor's 
CCFF= Compensatory and Contingency Financing Facility 
EFF= Extended Financing Facility 
SBA = Stand-By Arrangement 
STF= Systemic Transformation Facility 
est.= estimates 
n.a. = not available 
prelim.= preliminary 


c^ 
ISSN 0254-1475 
COM(97) 464 final 
DOCUMENTS 
EN 01 06 09 10 
Catalogue number : CB-CO-97-479-EN-C 
ISBN 92-78-24930-0 
Office for Official Publications of the European Communities 
L-2985 Luxembourg