Proposal for a Council Decision concerning Exceptional Assistance for the Heavily Indebted ACP countries (98/C 141/09) COM(97) 129 final

(Submitted by the Commission on 25 March 1997)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Internal Agreement on the financing and administration of Community aid within the framework of the Fourth ACP-CEE Convention, signed on 16th July 1990, hereinafter referred to as 'the Internal Agreement`, and in particular Article 9, paragraph 1 thereof,

Having regard to the proposal from the Commission,

Whereas Article 9, first paragraph, of the Internal Agreement stipulates that the payments made to the Bank in respect of special loans, together with the proceeds and income from risk capital operations, shall be credited to the Member States in proportion to their contributions, unless the Council decides unanimously, on a proposal from the Commission, to place them in reserve or allocate them to other operations, and whereas it is appropriate to use this possibility in order to allocate these payments to support for structural adjustment and debt relief in heavily indebted ACP States,

Whereas a debt initiative for the Heavily Indebted Poor Countries, hereinafter referred to as the HIPC Initiative, was presented by the International Monetary Fund and the World Bank at their April 1996 Meetings and subsequently endorsed by the Interim and Development Committees at the Autumn 1996 Annual Meetings of the International Monetary Fund and the World Bank,

Whereas the Council recognizes the importance of the HIPC initiative as a way to ensure that the debt burdens of the HIPCs, implementing economic reform programmes, are reduced to sustainable levels, with the assistance of coordinated and comprehensive action by all creditors,

Whereas the Council recognizes the need for continued adequate levels of external assistance to the HIPCs and the European Community's role as a major development partner of the countries concerned,

HAS DECIDED AS FOLLOWS:

Article 1

The European Community shall participate in the HIPC initiative by providing exceptional assistance with a view to reducing the net present value of the Community exposure to the ACP countries defined as eligible for this initiative. For this purpose, the Community shall make available grant resources to be utilised to meet debt service obligations on outstanding Community claims. These grant resources shall primarily be used by the beneficiary countries to meet debt service obligations on special loans, including the possibility of prepayment on a net present value basis. If such action is not sufficient to attain the agreed level of debt relief, the beneficiary country shall use the allocated grant resources to meet outstanding risk capital obligations towards the Community.

Article 2

The Commission shall take, on a case-by-case basis, specific decisions for each eligible ACP country, providing for the amount of assistance in accordance with the rules and procedures laid out in Chapter IV of the Internal Agreement. The Commission's decisions on the amount of assistance to be provided in each case shall be guided by the level of resources necessary to permit a reduction of the net present value of that country's debt to the Community. This assistance, together with resources provided by all multilateral creditors, would allow the eligible country to achieve the debt sustainability targets, taking into account the debt relief to be provided by Paris Club creditors and at least comparable action by other official bilateral and commercial creditors under the initiative. The country specific decisions should further take into account the structure of the country's debt to the Community, the desire for administrative simplicity in the case-specific proposals chosen, the objective of securing full repayment of outstanding special loans and the need to ensure equitable and fair treatment between countries. The Monetary Committee will be kept informed, on a regular basis, on the implementation of this assistance.

Article 3

The ACP countries eligible for receiving this exceptional assistance shall be the countries which have been identified according to the procedures laid out in Chapter IV of the Internal Agreement. The grant assistance referred to in Article 1 shall be provided from an interest bearing single account to be opened for this purpose with the European Investment Bank, hereinafter referred to as the 'debt relief account`.

Article 4

From the payments, proceeds and income referred to in Article 9, paragraph 1 of the Internal Agreement, 25 million ECU shall be allocated in each of the years 1997, 1998, 1999 and 2000 for financing the grants referred to in Article 1. These amounts shall be transferred to 'the debt relief account`, mentioned in Article 3.

Article 5

1. The Commission shall report regularly to the Council and inform the Parliament on the implementation of the present decision within the context of the HIPC initiative.

2. At the end of the period of four years, mentioned in Article 4, or earlier if the Commission considers it appropriate, the Commission shall present a report to the Council containing a review of the possible needs for additional financing.

3. If, at the end of the period of four years, as mentioned in Article 4, no decision has been taken to continue the financing, aimed at in the present decision, for a longer period, the Commission may decide to close the account, mentioned in Article 4. Any remaining funds in the account shall be redistributed to the Member States.