COMMISSION OF THE EUROPEAN COMMUNITIES 
i1 «•) 1/ . Brussels, 05.06.1997 
COM(97) 273 final 
COMMISSION REPORT TO THE BUDGETARY AUTHORITY 
ON GUARANTEES COVERED BY THE GENERAL BUDGET -
SITUATION AT 31 DECEMBER 1996 
'"'Vi1' 
1 " ' 11" 

<£ 
REPORT ON GUARANTEES COVERED BY THE GENERAL BUDGET 
SITUATION AT 31 DECEMBER 1996 
This report describes the situation as regards budget guarantees at 31 December 1996. 
It is in response to the statement made by the Commission, when the vote was taken on 
supplementary and amending budget No 1/91, that it would report to the budgetary authority 
twice a year on budget guarantees and the corresponding risks. 
This report is presented in accordance with Article 134(g) of the Financial Regulation 
applicable to the general budget of the European Communities. 
The Commission has already presented eleven 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. 
^ 
CONTENTS 
PART ONE: EVENTS SINCE THE REPORT AT 30 JUNE 1996, THE RISK 
SITUATION AND ACTIVATION OF BUDGET GUARANTEES 
I. INTRODUCTION: TYPES OF OPERATION.. 
I. A OPERATIONS WITH MACROECONOMIC OBJECTIVES , 
LB OPERATIONS WITH MICROECONOMIC OBJECTIVES .. 
II. EVENTS SINCE THE REPORT AT 30 JUNE 1996 
IL A BULGARIA II 
II.B UKRAINE II 2 
II. C MOLDOVA II 2 
II.D LOANS GRANTED BY THE EUROPEAN INVESTMENT BANK IN THE OTHER NON-MEMBER COUNTRIES 
(DEVELOPING COUNTRIES OF ASIA AND LATIN AMERICA) WITH WHICH THE COMMUNITY HAS CONCLUDED 
COOPERATION AGREEMENTS 2 
III. RISK SITUATION 2 
III.A AMOUNT OUTSTANDING AT 31 DECEMBER 1996 (TABLE 1) 3 
III.B MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET: OPERATIONS DISBURSED AT 31 
DECEMBER 1996 (SEE TABLE 2) 4 
III. C MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE COMMUNITY BUDGET (SEE TABLE 3) 5 
IV. ACTIVATION OF BUDGET GUARANTEES 9 
IV-.AEIB LOANS TO NON-MEMBER COUNTRIES 9 
IV. B BORROWING/LENDING OPERATIONS OR LOAN GUARANTEES FOR NON-MEMBER COUNTRIES 9 
V. ANALYSIS OF THE COMMUNITY'S THEORETICAL LENDING AND GUARANTEE 
CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES 10 
VI. RELATIVE SOLIDITY OF THE GUARANTEE FUND 11 
PART TWO: EVALUATION OF POTENTIAL RISKS: ECONOMIC AND 
FINANCIAL SITUATION OF THE NON-MEMBER COUNTRIES 
BENEFITING FROM THE MOST IMPORTANT LOAN OPERATIONS 
L INTRODUCTION 13 
II. CENTRAL AND EAST EUROPEAN COUNTRIES 13 
III. NEWLY INDEPENDENT STATES 16 
IV. MEDITERRANEAN COUNTRIES 19 
ANNEX 
I. EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED BY THE 
COMMUNITY BUDGET 22 
I. A TABLES 1 TO 3 22 
LB LOAN OPERATIONS COVERED BY A BUDGET GUARANTEE 24 
I.C EXPECTED SIGNATURE AND DISBURSEMENT OF EIB LOANS 29 
I.D PAYMENT OF THE BUDGET GUARANTEE 30 
<J-L 
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 31 
II.A RESERVE FOR LOAN GUARANTEES TO NON-MEMBER COUNTRIES (1) 31 
II.B BASES FOR THE CALCULATION OF THE PROVISIONING OF THE GUARANTEE FUND (2) 31 
II.C BASIS FOR THE PROVISIONING OF THE FUND IN THE EVENT OF A PART GUARANTEE 32 
II.D PROVISIONING OF THE GUARANTEE FUND (3) 32 
ILE MARGIN REMAINING IN THE GUARANTEE RESERVE (4) 33 
II.F RESIDUAL LENDING CAPACITY (5) 33 
III. TABLES: COUNTRY-RISK INDICATORS 34 
PART ONE: EVENTS SINCE THE REPORT AT 30 JUNE 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. 
LA Operations with macroeconomic objectives 
The first of these are the balance of payments loans for Member States or non-member 
countries, normally carrying strict economic conditions and undertakings. 
This category includes the loan of ECU 1 250 million to finance imports of agricultural 
products and foodstuffs into the former Soviet Union, since the risk involved in this operation 
depends to a large extent on macroeconomic and political developments in the recipient 
countries. 
LB Operations with microeconomic objectives 
These are loans to finance projects which are usually repaid over the long term from funds 
which these projects are expected to generate; as a rule, they are granted to companies, 
financial institutions or non-member countries and, in addition to the Community guarantee, 
are covered by the usual guarantees demanded by banks. 
This covers Euratom and NCI loans in Member States and the Euratom and EEB loans 
outside the Community (Mediterranean, Central and Eastern Europe, certain non-member 
countries - developing countries of Asia and Latin America and South Africa). 
IL EVENTS SINCE THE REPORT AT 30 JUNE 1996 
The main events in the second half of 1996 were as follows: 
II.A Bulgaria II 
As part of G-24's new aid for 1992 and 1993, the Commission, on behalf of the Community, 
was empowered to borrow ECU 110 million in two tranches for a maximum period of seven 
years. The proceeds of this operation were to be on-lent to Bulgaria. Because of delays in the 
process of economic reform in Bulgaria, implementation of this operation was deferred until 
December 1994 when the first tranche of ECU 70 million was finally paid. The second 
tranche of ECU 40 million was paid in August 1996. It will be repaid in one instalment on 
29 August 2003 and the interest, which is at variable rates, is payable half-yearly. 
-2 
ILB Ukraine II 
As part of an overall aid programme for Ukraine, the Council Decision of 23 October 1995 
empowered the Commission, on behalf of the Community, to borrow ECU 200 million for a 
maximum period often years. The proceeds of this operation are to be on-lent to Ukraine in 
two tranches. 
Half of the first tranche, i.e. ECU 50 million of the ECU 100 million provided, was paid on 
29 August 1996. The loan is to be repaid in five equal annual instalments from the sixth year 
onwards. The full loan will have been repaid by 29 August 2006. The other half of the first 
tranche, i.e. ECU 50 million of the ECU 100 million provided, was paid on 30 October 1996. 
The loan is to be repaid in five equal annual instalments from the sixth year onwards. The full 
loan will have been repaid by 30 October 2006. The interest, which is at variable rates, is 
payable half-yearly. 
II.C Moldova H 
As part of an overall aid programme for Moldova, the Council Decision of 25 March 1996 
empowered the Commission, on behalf of the Community, to borrow ECU 15 million for a 
maximum period often years. The proceeds of this operation are to be on-lent to Moldova. 
The loan was paid in one tranche on 30 December 1996. The loan is to be repaid in five equal 
annual instalments from the sixth year onwards. The full loan will have been repaid by 
30 October 2006. The interest, which is at variable rates, is payable half-yearly. 
ILD Loans granted by the European Investment Bank in the other non~member 
countries (developing countries of Asia and Latin America) with which the 
Community has concluded cooperation agreements 
On 12 December 1996 the Council granted the EIB a 100% Community guarantee for loans 
to projects of mutual interest in certain non-member countries {developing<pcountries of Asia 
and Latin America) with which the Community has concluded cooperation agreements. This 
guarantee is restricted to an overall loan ceiling of ECU 275 million to be granted in 1996. If, 
on 31 December 1996, the loans granted by the EIB have not attained the overall amount of 
ECU 275 million, the period during which this Decision remains applicable will be 
automatically extended by six months. 
ffl. 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 31 December 1996, giving the minimum level 
of risk to the Community assuming that there are no early repayments (see Table 2 below); 
- on a more forward-looking basis, by reference to a!l 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 ED3 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 31 December 1996 (Table 1) 
The total risk at 31 December 1996 came to • ECU 11 876 million as against 
ECU 11 705 million at 30 June 1996, an increase of ECU 171 million.3 
1 An average interest rate of 10% is assumed. 
2 The exchange rate used for loans in currencies other than ecus are those of 31 December 1996. 
3 In the case of loans in currencies other than the ecu, part of the change over the past six months 
is due to exchange rate differences. 
4-
Table 1 shows the operations which have had an effect on the amount outstanding since the 
last report. 
in Mio ECU 
Amount outstanding at 30 June 1996 11.705 
Loan repayments 
Euratom 123 
NCI 187,5 
EIB 81 
Exchange rate differences between ecu and other -48,5 
currencies 
Loans disbursed 
NCI 0,01 
Bulgaria 40 
Moldova 15 
Ukraine 100 
EIB 456 
Amount outstanding at 31 December 1996 11.876 
The capital outstanding in respect of operations in the Member States was ECU 5 564 million 
at 31 December 1996, a fall of 7.03% compared with 30 June 1996. 
This fall is mainly due to the repayment of ECU 310,5 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 31 December 1996 was 
ECU 6 312 million, an increase of 10.35% compared with 30 June 1996. 
III.B Maximum annual risk borne by the Community budget: operations 
disbursed at 31 December 1996 (see Table 2) 
The total risk, which comes to ECU 3 095 million in 1997, will steadily increase to around 
ECU 3 546 million in 2t)00, 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. 
5-
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 2 757 million. 
The risk for 1997 in respect of non-member countries comes to ECU 1 666 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; 
- 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. 
The risk will then drop to ECU 1 275 million in 1998 and to ECU 806 million in 1999. 
ÎII.C Maximum theoretical annual risk borne by the Community budget (see 
Table 3) 
This risk comes to ECU 3 381 million in 1997 and will increase regularly until 2000 (except 
in 1999 when it will total ECU 2 072 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 ECJJ 3 154 million. It will fall to ECU 2 366 
million in 2003 and ECU 2 188 million in 2004. 
The risk in respect of non-member countries will rise from ECU 1 781 million in 1997 to 
ECU 1 396 million in 1999. The risk will increase from 2000 until 2004 when it will reach 
ECU 3 370 million. 
TABLE 1 
CAPITAL OUTSTANDING IN RESPECT OF OPERATIONS DISBURSED 
(ECU million) 
Operation 
MEMBER STATES 
A. Balance of payments 
1. Greece 
2. Italy 
B. Others 
3. Euratom 
4. NCI and NCI earthquakes 
5. EIB Mediterranean, 
Spain, Greece, Port. 
MEMBER STATES - TOTAL 
THIRD COUNTRIES 
A. Financial assistance 
1. Hungary 
2. Czech Republic 
3. Slovak Republic 
4. Bulgaria 
5. Romania 
6. Algeria 
7. Israel 
8. Baltic States 
9. Moldova 
10. Ukraine 
11. Belarus 
12. Former Soviet Union 
B. Other 
13. EIB Mediterranean 
14. EIB Central & E. Europe I 
15. EIB Central & E. Europe II 
16. EIB Asia, Latin America 
17. EIB South Africa 
THIRD COUNTRIES - TOTAL 
GRAND TOTAL Authorized 
ceiling 
14000 
2200 
8000 
4000 
6830 
1500 
26330 
1050 
250 
125 
400 
580 
600 
160 
220 
60 
285 
55 
1250 
6362 
1700 
3000 
1025 
300 
17422 
43752 Capital 
outstanding 
30.06.96 
500 
3512 
695,2 
931,8 
345,9 
5985 
180 
250 
125 
360 
510 
500 
160 
135 
45 
85 
30 
143 
1981 
884 
141 
191 
5720 
11705 Capital 
outstanding 
31.12.96 
500 
3479 
572,48 
748 
265 
5564 
180 
250 
125 
400 
510 
500 
160 
135 
60 
185 
30 
144 
2092 
971 
335 
204 
32 
6312 
11876 Remainder to 
be disbursed 
31.12.96 
1200 
4000 
0 
0 
0 
5200 
260 
0 
0 
0 
70 
100 
0 
85 
0 
100 
25 
0 
2497 
602 
2645 
443 
69 
6896 
12096 
1) No disbursement is planned. 
2) The third and fourth tranches had still not been paid at 31.12.96. So far, the Italian 
Government has not requested payment. 
ANNEX TO TABLE 1 
SITUATION IN RESPECT OF EIB OPERATIONS (31.12.96) 
Operations 
EIB Mediterranean, 
Spain, Greece, Port. 
Third countries EIB Med. 
Central & Eastern Europe I 
Central & Eastern Europe II 
Asia, Latin America 
South Africa Credit line 
authorized 
1500 
6362 
1700 
3000 
1025 
300 Loans made 
available, minus 
cancellations 
1465 
5660 
1628 
2980 
647 
101 Initial 
disbursement 
1543 
3143 
1026 
335 
204 
32 Amount 
outstanding 
at 31.12.1996 
265 
2092 
971 
335 
204 
32 
NB: The fact that the initial disbursement sometimes exceeds the authorized ceiling is due to differences 
in the ecu rate between the date on which the contracts were signed and 31.12.96. 
-7-
(E 
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. ElBC+EEur. 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) TABLE 2 
MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 
Estimate in ECU million based on all opérations disbursed at 31.12.1996 
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 
493 
1662 
3090 
880 
782 1998 
500 
989 
92 
50 
44 
1675 
48 
211 
10 
16 
18 
301 
1976 
100 
123 
62 
150 
185 
162 
78 
19 
879 
10 
13 
6 
26 
51 
25 
0 
14 
6 
19 
3 
130 
81 
9 
5 
392 
1271 
3247 
926 
345 1999 
16 
40 
39 
95 
157 
3 
12 
14 
186 
280 
190 
175 
104 
20 
489 
11 
33 
25 
14 
6 
19 
3 
118 
76 
9 
5 
312 
801 
1082 
454 
347 2000 
2490 
12 
40 
37 
2579 
157 
1 
10 
11 
178 
2757 
80 
110 
5 
175 
119 
22 
511 
11 
13 
25 
14 
6 
19 
3 
106 
69 
8 
5 
273 
784 
3541 
448 
336 2001 
71 
20 
92 
7 
7 
14 
106 
70 
150 
9 
17 
6 
167 
123 
23 
32 
565 
11 
6 
25 
3 
5 
19 
3 
94 
61 
7 
5 
233 
798 
904 
332 
466 2002 
22 
22 
2 
5 
/ 
30 
55 
100 
25 
12 
37-
6 
162 
120 
24 
541 
4 
6 
10 
3 
5 
17 
2 
82 
53 
7 
188 
729 
758 
344 
385 2003 
21 
21 
2 
3 
5 
27 
40 
12 
37 
6 
163 
114 
8 
380 
4 
3 
13 
2 
71 
45 
6 
144 
524 
551 
277 
248 2004 
16 
15 
30 
2 
2 
3 
34 
12 
37 
6 
146 
114 
9 
324 
2 
9 
1 
59 
37 
5 
115 
439 
473 
219 
220 TOTAL 
500 
3479 
572 
748 
257 
5557 
95 
735 
55 
113 
83 
1082 
6638 
180 
250 
125 
400 
510 
160 
500 
144 
135 
50 
128 
24 
1289 
821 
141 
32 
4889 
28 
38 
19 
107 
159 
16 
160 
5 
59 
40 
132 
20 
800 
506 
62 
24 
2174 
7062 
13700 
3879 
3183 
TABLE 3 
MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 
(Estimate in ECU million based on all operations disbursed, adopted and proposed by the Commission) 
MEMBER STATES 
CAPITAL 
A. Balance of payments 
1. Greece 
2. Italy 
B. Structural loans 
3. Euratom + NCI 
4. EIB Sp.Gr.Port 
Capital - subtotal 
INTEREST 
A. Balance of payments 
1. Greece 
2. Italy 
B. Structural loans 
3. Euratom + NCI 
4. EIB Sp.Gr.Port 
Interest - subtotal 
MEMBER STATES - TOTAL 
NON-MEMBER COUNTRIES 
CAPITAL 
A. Financial assistance 
5. Hungary 
6. Czech Republic 
7. Slovak Republic 
8. Bulgaria 
9. Romania 
10. Israel 
11. Algeria 
12. Ex USSR 
13. Baltic States 
14. Moldova 
15. Ukraine 
16. Belarus 
17. Euratom, C+E Eur. 
B. Guarantees 
18. EIB Mediterranean 
19. ElBC+EEur. I + II 
20. EIB Asia Latin America 
21. EIB South Africa 
Capital - subtotal 
INTEREST 
A. Financial assistance 
5. Hungary 
6. Czech Republic 
7. Slovak Republic 
8. Bulgaria 
9. Romania 
10. Israel 
11. Algeria 
12. Ex USSR 
13. Baltic States 
14. Moldova 
15. Ukraine 
16 Belarus 
17. Euratom, C+E Eur. 
B. Guarantees 
18. EIB Mediterranean 
19. ElBC+EEur. I + II 
20. EIB Asia Latin America 
21. EIB South Africa 
Interest - subtotal 
NON-MEMBER COUNTRIES - TOTAL 
GRAND TOTAL 
(Eastern Europe ) 
(Other non-member countries) 1997 
985 
58 
1042 
48 
383 
105 
23 
559 
1601 
80 
127 
63 
140 
160 
250 
144 
140 
50 
15 
1169 
31 
25 
13 
40 
55 
16 
55 
5 
18 
6 
24 
3 
1 
173 
124 
18 
6 
612 
1781 
3381 
948 
833 1998 
500 
989 
141 
44 
1675 
48 
553 
25 
18 
644 
2318 
100 
123 
62 
150 
185 
162 
78 
19 
879 
36 
12 
6 
26 
58 
35 
22 
6 
29 
3 
6 
240 
209 
34 
11 
733 
1612 
3930 
1111 
501 1999 
55 
39 
95 
553 
15 
14 
582 
676 
190 
175 
104 
20 
0 
489 
26 
0 
11 
40 
35 
22 
6 
29 
3 
17 
328 
310 
61 
20 
907 
1396 
2072 
757 
639 2000 
2490 
52 
37 
2579 
553 
11 
11 
575 
3154 
80 
110 
5 
231 
187 
34 
1 
648 
26 
0 
11 
21 
35 
22 
6 
29 
3 
34 
436 
429 
93 
31 
1175 
1823 
4977 
962 
861 2001 
71 
20 
92 
340 
7 
7 
354 
446 
70 
150 
9 
17 
6 
0 
295 
268 
54 
40 
909 
26 
0 
11 
13 
35 
11 
6 
29 
3 
54 
525 
523 
122 
40 
1397 
2306 
2751 
1045 
1261 2002 
22 
22 
340 
2 
5 
347 
369 
55 
100 
25 
12 
37 
6 
1 
385 
365 
79 
17 
1082 
26 
0 
4 
13 
20 
11 
5 
27 
2 
72 
574 
571 
138 
45 
1507 
2589 
2958 
1231 
1358 2003 
2000 
21 
2021 
340 
2 
3 
345 
2366 
40 
0 
12 
57 
6 
7 
500 
482 
95 
28 
1227 
26 
4 
7 
10 
9 
3 
23 
2 
88 
594 
589 
145 
49 
1550 
2777 
5142 
1356 
1421 2004 
2000 
15 
2015 
170 
2 
2 
174 
2188 
260 
70 
100 
85 
12 
57 
6 
16 
558 
551 
119 
39 
1873 
26 
0 
7 
10 
9 
2 
17 
1 
101 
559 
575 
141 
49 
1497 
3370 
5559 
1795 
1575 TOTAL 
500 
7479 
1305 
257 
9541 
95 
3230 
169 
83 
3577 
13118 
440 
250 
125 
400 
580 
160 
600 
144 
220 
50 
168 
24 
24 
2446 
2085 
435 
125 
8276 
223 
37 
19 
107 
212 
16 
235 
5 
124 
40 
205 
20 
373 
3429 
3330 
752 
251 
9377 
17653 
30770 
9204 
8449 
IV. ACTIVATION OF BUDGET GUARANTEES 
IV.A EIB loans to non-member countries 
On 23 October 1996 the EIB called on the budget guarantee in respect of loans of around 
ECU 5.7 million to the Republics of former Yugoslavia (the Former Yugoslav Republic of 
Macedonia, Bosnia-Herzegovina arid Serbia). The payment was made to the EIB on 
28 January 1997. 
Of the ECU 84.4 million due but not paid, ECU 24 million was entered in the budget in 
respect of the amount owed from before 1994 and a total of ECU 60.4 million was called in 
from the Guarantee Fund on 11 January 1995 (ECU 5.3 million), on 30 January 1995 (ECU 
14.3 million), on 24 May 1995 (ECU 6.08 million), on 11 October 1995 (ECU 8.6 million), 
on 26 January 1996 (ECU 5.2 million), on 11 June 1996 (ECU 6.4 million), on 
4 October 1996 (ECU 8.9 million) and on 28 January 1997 (ECU 5.7 million). 
The Former Yugoslav Republic of Macedonia (FYROM) has repaid some of its arrears 
(ECU 4.7 million). 
IV.B Borrowing/lending operations or loan guarantees for non-member countries 
IV B. I Payments from cash resources 
The Commission draws on its cash resources under Article 12 of Council Regulation 
No 1552/89 of 29 May 1989 implementing Decision 88/376/EEC, Euratom on the system of 
the Communities' own resources to avoid delays and resulting costs in servicing its borrowing 
operations when a debtor is late in paying. 
IV.B. 2 A ct i vat ion 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) 15.10.1996 855.862,78 
- 10-
IV. B. 3 Late repayments 
During the period covered by this report, the following 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. 
Country Repayment date Amount (principal + interest) 
Turkmenistan (loan of ECU 13.8.1996 11.386.081,43 
45mil,i°n) 9.10.1996 11.467.876,61 
13.12.1996 7.716.363,36 
Geor9'a 10.10.1996 710.997,54 
Total 31.281.318,94 
IV.B. 4 Situation as regards unpaid debts at 31 December 1996 
The following amounts had not been paid at 31 December 1996: 
Country Amount (principal + interest) 
Tajikistan 63.181.389,89 
Georgia ' 92.608.823,28 
Armenia 57.601.313,20 
Total* 213.391.525,37 
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.5 
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 
Two repayments totalling ECU 8.4 million have been made since 31 December 1996: 
ECU 3.7 million by Armenia and ECU 4.7 million by Georgia. 
ECU 300 million at 1992 prices. 
-11 
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 286 million is expected to be used from the guarantee reserve 
in 1997, leaving ECU 43 million available at the end of the year. 
The Guarantee Fund could then amount to around ECU 843 million at the end of the year 
assuming: 
- no further defaults requiring activation of the Fund; 
- no late repayment of arrears by defaulting countries. 
If account is taken of the effect on the guarantee reserve of the provisioning of the Fund in 
respect of loans already decided and loans proposed and in preparation for the period 1997-
99, the annual capacity available for loans varies: 
- from ECU 213 million to ECU 286 million for loans with a 100% guarantee 
under the Community budget; 
- from ECU 304 million to ECU 409 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 557 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 1 781 million) comes to 31%. 
The Fund should then correspond to 8.5% of the total amount of guaranteed loans 
outstanding outside the Community. 
-12-
TABLE 4 
THE COMMUNITY'S THEORETICAL ESTIMATED LENDING & GUARANTEE CAPACITY 
IN RESPECT OF NON-MEMBER COUNTRIES 
OVER THE PERIOD 1997-99 
under the Guarantee Fund mechanism* 
ECU million 1997 1998 1999 
Reserve for loan guarantees to non-member countries(l) 329 
Bases for the calculation of the provisioning of the Guarantee Fund(2) 338 345 
- EIB loans 
- Mediterranean (a) 
- countries of Central and Eastern Europe (b) 
- Asia and Latin America (c) 
- South Africa (d) 
- EIB loans - total 
- Euratom loans (e) 
- Macrofinancial assistance (f) 
Provisioning of the Gurantee Fund (3) 
Margin remaining in the guarantee reserve (4) 
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) 
Maximum if used in full for EIB loans (70% guarantee) 644 779,25 693 
787,5 728 752,5 
172 210 210 
125 87,5 105 
1728,5 1804,8 1760,5 
0 
165 
286 
43 200 
25 
302 
36 350 
0 
313 
32 
286 
409 243 
347 213 
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 1997-99: 
- EIB 
a. Mediterranean: 
- loans decided: 1994-96: ECU 115 million under the Fourth Financial Protocol With Syria 
1995-98: ECU 80 million under the Fourth Financial Protocol with Malta and Cyprus. 
- loans proposed or in preparation: 1996-2000: ECU 750 million for financial cooperation with Turkey 
and ECU 230 million for financial cooperation with Croatia. 1997-2000: ECU 150 million 
for financial cooperation with the Former Yugoslav Republic of Macedonia (FYROM). 
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 
- loans proposed or in preparation: 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: 1994-99: ECU 1 100 million. 
f. - Financial assistance 
- loans decided: 1997: ECU 25 million loan to Belarus cancelled; ECU 130 million loan to Slovakia cancelled. 
- loans proposed or in preparation: 1997: ECU 170 million in loans to the Republics of Georgia, Armenia and 
Tajikistan, ECU 150 million in loans to Ukraine. 
13 
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 extensive country 
risk indicators for all relevant countries in Central and Eastern Europe, the NIS as well 
as in the Mediterranean area, in the form of a full-page table per country. As a 
complement to this, a further textual analysis is provided for those countries where 
significant new information influencing the risk evaluation has become available since the 
previous report covering the first six months of 1996. 
It may be noted that the evaluation in this section does not cover EU exposure in other 
regions than those mentioned, mainly because this exposure (notably through guarantees 
of EIB lending) represents only a fraction of total exposure (less than 3 %) and is also 
well diversified among countries. 
II. CENTRAL AND EAST EUROPEAN COUNTRIES 
BULGARIA 
Since the last report, Bulgaria's situation has worsened significantly and GDP is 
estimated to have fallen by some 10% in 1996. Year-end inflation was over 300 % and 
the leva is experiencing a rapid and accelerating depreciation (70 leva/$ at start of 1996, 
to 250 by November, 500 at end-December, 1000 as of 30 January). In these 
circumstances, there is a clear risk of hyperinflation in the early months of 1997. The 
budget deficit has expanded very fast and has been financed in recent months directly by 
the central bank. At the end of December, internal debt reached BGL 1.053 trillion, up 
from BGL 345 billion at the end of 1995. Although privatisation has made some 
progress, structural reforms remain slow and the banking system continues to pose many 
problems. Several banks are currently subject to bankruptcy proceedings. 
During the Autumn, the World Bank and the International Monetary Fund suspended 
their financial assistance to Bulgaria. In November 1996, the International Monetary 
Fund proposed the introduction of a currency board as a mechanism to restore 
macroeconomic stability and confidence among economic agents. Technical discussions 
with the Bulgarian authorities started in December but negotiations have been delayed by 
the resignation of the Prime Minister. Political forces, from both the opposition and the 
ruling party seem, however, to have accepted the idea of a currency board. 
14 
The crisis has led to a sharp decline in international reserves - from US$ 1.3 billion at the 
end of 1995 to US$ 518 million at the end of 1996. Service on foreign debt continues to 
be very substantial - US$ 300 million in the first quarter of 1997 alone. In these 
conditions, external viability crucially depends on concluding rapidly an agreement with 
the IMF and other international creditors. 
ESTONIA 
Estonia's risk assessment continues to be among the best in the region although there are 
signs of possible turbulence ahead. In 1996, for the second consecutive year, real GDP 
growth was positive, although it appears to have been lower than in 1995 (3%). 
Construction and trade (wholesale and retail) recorded very positive performances while 
agricultural and industrial output were lower than in 1995. Trade is now more important 
than manufacturing. Nearly 20% of total exports are goods processed after being 
imported and another 13% are reported to be transit trade. 
Estonia introduced a Currency Board system in 1992 which provides for a strict link 
between money growth and the level of foreign exchange reserves. The exchange rate is 
pegged to the DM at a fixed rate. The system has been very successful to stabilise the 
macroeconomic situation: the general government deficit for 1996 is estimated at 1.5% 
of GDP (with revenues higher than planned) and inflation has continued to slow down 
(23%o vs. 29%o in 1995). Estonian exports have increased by roughly 5% in volume in the 
first three quarters of 1996, compared to the corresponding period of the previous year, 
and by 15% in value. 
However, the gradual appreciation of the currency has led to a surge of imports and a 
widening of the trade deficit to nearly 30% in the first three quarters of 1996. Also, 
whereas in the past the net capital inflow was more than sufficient to finance the current 
account deficit, the situation in the third quarter of 1996 was just about in balance. Other 
signs of uncertainties are the high relative level of direct investments outflows (superior 
to inflows in second quarter of 1996), the political situation (calls for the resignation of 
the Prime Minister) and the implications of Lithuania's wish to abandon its currency 
board regime. 
LATVIA 
Latvia's creditworthiness seems to have improved considerably. The Latvian economy is 
recovering from the banking crisis in 1995: economic growth is picking up and in the 
first nine months of 1996 it reached 2.3%. Foreign reserves and banking assets are back 
up to pre-crisis levels. Furthermore, inflation and interest rates have come down quite 
rapidly, the currency is stable, and the budget deficit for 1996 remained below target. For 
these reasons, and because of the country's relatively low external indebtedness 
(debt/GDP is below 10%), the international credit ratings agencies have awarded Latvia 
an investment grade rating in January 1997. However, the imbalances on the external 
side have increased, with the trade and current account deficits rising to 16% and 7% 
respectively. Foreign direct investment continues to be only modest. 
15 
LITHUANIA 
The Lithuanian economy is still recovering from the banking crisis of December 1995. 
During 1996, macroeconomic performance remained satisfactory in spite of the financial 
troubles. Growth accelerated driven by rising exports and by an upturn in domestic 
demand later in the year. The currency board system was maintained thanks to continued 
monetary and fiscal discipline.- Inflation fell further. The budget deficit remained 
moderate although it deteriorated slightly. The balance of payments situation would seem 
to have remained stable. 
The banking sector continues to be weak but supervision was strengthened and the 
government made some progress in sorting out the legacies of the 1995 crisis. 
Restructuring on the real side of the economy will make important progress if the 
authorities go ahead with the announced privatisation of large telecommunications and 
transport enterprises. This could also spark investors' interest and lead to a surge in 
foreign direct investment which continues to be disappointingly low. Finally, last 
September, Lithuania was the first former Soviet republic to receive a credit rating when 
Moody's rated it just below investment grade. 
ROMANIA 
Following the formation of a new Government in late 1996, Romania's risk assessment 
seems to have improved slightly. The new authorities aim at a rapid integration of 
Romania in the EU and in NATO and are committed to accelerating the pace of reform. 
On the basis of renewed negotiations with the IMF and the World Bank, the Romanian 
authorities have announced a comprehensive economic stabilisation and structural 
adjustment programme. 
The economic situation worsened significantly however in the last months of 1996, in 
particular because of a spending spree by the former Government in the run-up to the 
elections and largely financed by money creation. Inflation soared to 57% at the end of 
the year. The State budget deficit rose to 6% of GDP, and taking into account the deficit 
of state-owned companies and hidden subsidies to agriculture, to a higher level still. Very 
little progress has been achieved on structural reforms. The 1996 current account is 
estimated to show a US$ 2 billion deficit. Foreign debt has risen further by 30%» in 1996 
(to US$ 6.9 billion or 25.8% of GDP) after rising 18% in 1995. Debt service for 1997 
remains high at around US$ 1 billion. 
The new Government has already taken some steps towards adjustment and liberalisation 
of the economy. Monetary policy has been tightened. Fuel prices were raised by 90% at 
the beginning of January; and, since the beginning of January 1997, the official rate of the 
leu has been devalued by 41% against the dollar. These measures are necessary steps in 
order to end prices distortions and bring internal prices in line with international prices. 
The Government has now agreed in principle with the IMF a programme of adjustment 
and long-awaited structural reforms which entails very strong upfront measures (e.g. 
closure of 10 of the large loss-making enterprises in barely 5 weeks, laying off 5% of 
civil servants in the same period) . If properly implemented these measures are expected 
to enhance confidence and put Romania back on the path of a rapid and successful 
16 
transition towards a fully fledged market economy. However, the difficult period which 
lies ahead could undermine support for the Government both among the general public 
and within the ruling coalition. Furthermore, special interest groups retain a strong 
influence which could negatively affect the pace of reforms. 
SLOVAKIA 
Slovakia country risk remains relatively moderate but the country is increasingly relying 
on foreign savings. Macroeconomic performance was largely positive during 1996 with 
high real growth (up 7%), low inflation (5.9%) and falling unemployment. However, 
rising household and government consumption led to a sharp deterioration in the current 
account balancé (swinging from a surplus position of 3.6%» of GDP in 1995 to a deficit 
of 7.8%>) which may put the sustainability of the current policy stance into question. The 
National Bank sharply raised interest rates in December but may come under pressure to 
relax its policy in the run-up to the 1998 parliamentary elections. Capital inflows have so 
far been more than sufficient to finance the current account deterioration and debt 
service remains low. 
m. NEWLY INDEPENDENT STATES 
ARMENIA 
Armenia remains in the category of high-risk creditors. The economic recovery has 
continued for a third consecutive year in 1996 with GDP growth expected to have 
reached some 6%>. However, the slow pace of structural reforms - even if the 
privatization process started early after independence - has made Armenia largely 
dependent on external assistance. The external debt is estimated at about US$ 600 
million (some 35%> of GDP) by end 1996. The country has been facing difficulties in 
meeting its external financial obligations towards the Community but an understanding 
leading to the eventual full clearance of the existing arrears has now been reached with 
the Armenian authorities. The approval by the IMF Board in February 1996 of a 3-year 
economic programme may contribute to accelerate the pace of reforms and to improve 
the general economic situation in the medium-term. On the political side, no progress has 
been made concerning the Nagorno Karabakh issue. 
AZERBAIJAN 
Azerbaijan's risk assessment has improved somewhat in 1996. Economic recovery 
appears to have started and GDP is estimated to have grown by about 1% during 1996, 
following a sharp decline of some 40% in 1994-1995. The inflation rate also sharply 
improved, having declined from 400% in 1995 to some 20%) in 1996, while the fiscal 
deficit is expected to have declined to less than 3% of GDP. The external debt is rather 
low at about US$ 560 million (some 16 % of GDP) by end 1996. Concerning structural 
reform, Azerbaijan is lagging well behind most other NIS. A new economic programme 
has, however, been adopted, covering the 1996-99 period and designed to be supported 
by IMF credits. This programme, approved by the IMF Board in December 1996, aims at 
preparing the country for the prospective oil boom and is addressing the key stmctural 
reform issues. Azerbaijan's medium-term perspectives are potentially favourable, owing 
17 
mainly to its huge oil reserves. In the short run however, the combination of a still fragile 
economic situation, slow structural reforms and the unresolved conflict with Armenia on 
Nagorno Karabakh implies that the country risk remains high. 
BELARUS 
The political developments in. Belarus during 1996 have been preoccupying. In 
connection with the referendum in November doubts were raised as regards the 
Belarussian authorities' commitment to democratic principles. The prospect of a future 
political and/or economic union between Belarus and Russia adds further uncertainty to 
the picture. With regard to macro-economic developments, Belarus achieved real GDP 
growth of 2.6 % in 1996, but several macro-economic developments still raise concerns. 
Despite a sharp currency depreciation from April 1996, the Belarussian currency 
remained overvalued at the end of the year and the trade deficit had grown to US$ 1.7 bn 
or 14.1 % of GDP. In absence of restructuring, 20 % of enterprises were still working at 
a loss, unemployment remained high and hidden, while interentreprise arrears amounted 
to above 100 % of GDP. Towards the end of 1996, inflation accelerated (8 % monthly) 
as a result of lax monetary policy in the form of directed credits from the National Bank. 
The interruption in the structural reform process as well as the uncertainties regarding 
the political commitment to pursue economic reform were other sources of concern. The 
Belarussian economy remains unreformed in many areas and the state continues to play a 
major role in production and distribution. The structure of the economy remains de facto 
highly monopolistic and prices are to a high degree controlled. Overall risk therefore 
remains high. 
GEORGIA 
The risk assessment for Georgia has remained rather stable throughout 1996. Following 
the first signs of recovery registered in 1995, GDP growth of some 10% is expected for 
1996. The situation in public finances has worsened considerably, however, due to a 
collapse in revenues, which are far below programme targets. Georgia has accumulated 
foreign debt, estimated at some US$ 1.3 billion by end 1996 (27% of GDP), the main 
part of which represents import related payments arrears. Rescheduling arrangements 
have been reached with most creditors. Georgia is also in arrears of payments towards 
the Community but an understanding has now been reached with the Georgian 
authorities leading to the eventual full clearance of these arrears. The approval by the 
IMF Board in February 1996 of a 3-year economic programme may contribute to 
accelerate the pace of reforms and to improve the general economic situation in the 
medium-term. On the political side, the Abkhazia problem remains unresolved. 
MOLDOVA 
Moldova's economic and structural reform performance fell short of expectations in 
1996. GDP declined further by some 3 to 5%. Fiscal performance was poor as a result of 
weak tax collection, although corrective measures were implemented in 1996 to tackle 
this problem. Moldova's foreign debt was expected to reach some US$ 700 million by 
end-1996 (some 32% of GDP) and is mainly owed to international financial institutions. 
Important structural reforms still remain to be undertaken in key sectors such as 
privatization of agriculture and restructuring of enterprise and energy sectors. TJie 
18 
approval by the IMF Board in May 1996 of a 3-year economic programme, should 
contribute to accelerate the pace of reforms and to improve the general economic 
situation in the medium-term. The newly-elected President and the new government 
seem committed to reforms and may also give new impetus to the negotiations aiming at 
solving the issue of the autonomy of the proclaimed Dniestr Republic, part of Moldova's 
territory. 
TAJIKISTAN 
After an escalation of the military confrontation with the Islamic opposition until 
November 1996, the authorities and the opposition agreed on a ceasefire which appears 
to be holding. The macro-economic developments since early 1996 have been positive, 
with rapid reduction of monthly inflation (2.5 % in November 1996), budgetary 
performance broadly in line with the IMF programme and satisfactory credit and 
monetary policies. However, GDP has continued to fall (10%). The liberalization of the 
forex market, foreign trade and prices is well advanced. The pace of the enterprises 
privatization and of the land reform, slow until now, is expected to accelerate in 1997. At 
end 1996, the country had a foreign trade surplus of US$ 111 million, but foreign 
exchange reserves were still weak. The level of these reserves is expected to increase up 
to a level of 2 months of imports in 1997. 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, while rescheduling of debt service payments 
falling due in 1997 had begun. The country is in arrears of payments towards the 
Community but an understanding has now been reached with the Tajik authorities 
leading to the eventual full clearance of these arrears in the context of a Stand-By 
arrangement with the IMF expected to be agreed in the coming months. 
UKRAINE 
In the second half of 1996, Ukraine's transition to a market economy, which essentially 
had started in late 1994 after the election of President Kuchma, seems to have gained 
new momentum. The continuation of a relatively tight monetary policy was a 
determining factor in further reducing inflation, stabilizing the exchange rate and 
ensuring the successful introduction of the new national currency in September. The 
Central Bank Governor responsible for this policy was recently reconfirmed for a second 
term. The budget deficit was also brought down to some 3%, in line with targets agreed 
with the IMF, however at the cost of accumulating significant arrears on public wages, 
salaries and pensions, in the order of some 3.5% of GDP. The economic situation has 
remained very difficult, with GDP declining by another 10% in 1996. On the structural 
side, there was substantial progress in the area of privatization, demonopolization and 
banking supervision. 
With a view to continuing and reinforcing stabilization and reform, thereby laying the 
foundations for growth to resume, the Ukrainian government adopted in November a 
comprehensive medium-term reform programme. During the last few months however it 
became clear that it would take considerable time to have this package approved by 
Parliament, thereby also delaying the expected economic recovery. Once the reform 
package has been approved, Ukraine can expect financial assistance of US$ 1.9 bn from 
the IMF (Extend Financing Facility) and the World Bank to help meet its external 
- 19 
financing needs in 1997. In addition, official bilateral donors, including the Community, 
are expected to provide complementary financial assistance. Ukraine also plans to launch 
its first Eurobond issue once the Extended Financing Facility is in place and a credit 
rating has been obtained, both expected for Spring 1997. 
Ukraine's debt ratios have declined somewhat during the last two years and therefore 
remain fairly moderate. With the resumption of payments to Russia and Turkmenistan on 
previously rescheduled gas arrears, the debt service ratio is expected to rise somewhat in 
1997. 
UZBEKISTAN 
With the relative military stabilization in Afghanistan, prospects for Uzbek authorities to 
benefit from political stability in Central Asia are better. With regard to macroeconomic 
indicators, Uzbek real GDP is expected to have grown slightly (1.6 %) in 1996. 
However, annual inflation was picking up at 65 % towards the end of the year, owing to 
massive budgetary support to the agricultural sector in October and the budget deficit 
was higher than expected. In 1996, as a result of a big rise in imports, a fall in the price 
of cotton and bad harvests, the current account showed a deficit which resulted in a 
decrease of the foreign exchange reserves to the, still however comfortable, level of US$ 
1.8 billion (5 months of imports). With the Som under increasing pressure and the 
Government reluctant to use its hard currency reserves, Uzbekistan was hit by hard 
currency shortage on the forex market, while draconian foreign exchange controls were 
introduced, prompting the international donors to suspend their macro-financial support. 
Foreign direct investment is however reported to have been high in 1996. With regard to 
structural reform, the restructuring of enterprises was progressing, whereas some 
reversals were observed in the liberalization process of the foreign trade and exchange 
market. 
IV. MEDITERRANEAN COUNTRIES 
ALGERIA 
Although economic indicators have recently improved, Algeria country risk remains high 
over the medium-term. The macro-economic improvement achieved under the IMF-
supported programme implemented since 1994 has recently been strengthened owing in 
part to good performances in agriculture and the hydrocarbon sector. Output growth, 
estimated at about 4 percent, continues to recover in 1996-97; inflation decelerated to 
below 20 percent and the up-swing in oil prices contributed to a budget surplus and 
external current account surplus of 2.7 percent of GDP and 0.3 percent of GDP, 
respectively. Foreign exchange reserves increased to US$ 4.2 billion at end-1996, 
representing more than 4 months of imports. According to the IMF, these trends are 
expected to continue in 1997. Despite these achievements, the political situation and 
security problems continue to hinder the medium-term prospects, including the pace of 
structural reforms and the development of a dynamic private economy. The most 
sensitive areas for important structural reforms (such as agriculture, public enterprise 
restructuring, privatization of large public enterprises, deregulation, and property rights) 
still have to be tackled. In addition, difficult social conditions, including persisting high 
20 
unemployment (estimated at 28 percent) and housing shortages, could undermine the 
reform momentum. Finally, Algeria external and domestic financial balances will remain 
vulnerable to the future vagaries of the oil prices. In particular, the overall external 
position will remain fragile over the medium-term with no access to the international 
capital markets, limited foreign direct investment, and continued support from 
international financial institutions and reschedulings from the London and Paris Clubs. 
21 
ANNEX 
I. EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED BY THE 
COMMUNITY BUDGET 22 
LA TABLES 1 TO 3 22 
LB LOAN OPERATIONS COVERED BY A BUDGET GUARANTEE 24 
I.C EXPECTED SIGNATURE AND DISBURSEMENT OF EIB LOANS 29 
I.D PAYMENT OF THE BUDGET GUARANTEE ; 30 
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 31 
II.A RESERVE FOR LOAN GUARANTEES TO NON-MEMBER COUNTRIES (1) 31 
II.B BASES FOR THE CALCULATION OF THE PROVISIONING OF THE GUARANTEE FUND (2) 31 
II.C BASIS FOR THE PROVISIONING OF THE FUND IN THE EVENT OF A PART GUARANTEE 32 
II.D PROVISIONING OF THE GUARANTEE FUND (3) 32 
II.E MARGIN REMAINING IN THE GUARANTEE RESERVE (4) : 33 
II.F RESIDUAL LENDING CAPACITY (5) 33 
III. TABLES: COUNTRY-RISK INDICATORS 34 
22 
I. EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED 
BY THE COMMUNITY BUDGET 
LA Tables 1 to 3 
The purpose of Tables 1 to 3 is to show the outstanding amount of guarantees and annual 
repayments of capital and interest in respect of borrowing and lending operations for which 
the risk is covered by the Community budget. The figures show the maximum possible risk 
for the Community in respect of these operations and must not be read as meaning that these 
amounts will actually be drawn from the budget. In the case of Table 3, in particular, it is not 
certain that all the operations described will actually be disbursed. 
LA. I Authorized ceiling (Table 1) 
This is the aggregate of the maximum amounts of capital authorized (ceilings) for each 
operation decided by the Council. 
In order to relate it to the risk which the budget might have to cover, account should be taken 
of the following factors which could affect it: 
Factor increasing the risk: the interest on the loans must be added to the authorized ceiling 
Factors reducing the risk; 
• limitation of the guarantee given to the EIB to 75% of the loans signed in the 
Mediterranean countries; 
• operations already repaid, since the amounts concerned, except in the case of 
balance of payments (Member States) support, are the maximum amount of 
loans granted and not outstanding amounts authorized; 
• the amounts authorized are not necessarily taken up in full. 
LA. 2 Capital outstanding ( Table 1) 
This is the amount of capital still to be repaid on a given date in respect of operations 
disbursed. 
Compared with the previous aggregate, the amount outstanding does not include loans 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. 
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; 
23 
b) disbursements, decisions still awaiting disbursement and Commission proposals 
still awaiting decisions (Table 3), in which case the capital to be repaid 
corresponds to the ceiling on loans authorized plus, where applicable, the amounts 
in respect of operations proposed by the Commission and not yet decided. 
-24 
LB Loan operations covered by a budget guarantee 
TABLE 5a 
Borrowing and lending operations: Member States 
Changes in amounts outstanding during six-month period 
ECU million 
COUNTRY Decision Date 
of decision Loan 
term 
(years) Loan situation 
• closed (a) 
• partially disbursed (b) 
• disbursed in full (c) 
• not yet disbursed (d) Amount 
decided Amount 
outstanding 
at 1.7.96 Operations in six-month 
period 
Amounts 
disbursed Amounts 
repaid Amount 
outstanding at 
31.12.96 
GREECE 
ITALY 
EURATOM 
NCI 
TOTAL 91/136/EEC 
93/67/EEC 04.03.91 
18.01.93 
(3) 
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 29.03.77 
20.12.79 
15.03.82 
05.12.85 
23.04.90 
16.10.78 
20.01.81 
14.12.81 
15.03.82 
19.04.83 
09.03.87 (3) (c) 
(d) 
(d) 
(c) 
(c) 
(d) 
(d) 
(c) 
(c) 
(c) 
(b)(4) 
(d)(4) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) 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 
750,00 500,00 
3.525,90 
589,50 24,80 500,00 
3.478,57 
572,48 '•n 
1 
935,60 0,01 187,50 748,11 
21.030,00 5.551,00 0,01 212,30 5.299,16 (5) 
(1) Exceptional aid for the reconstruction of areas hit by the earthquake in Italy in 1980. 
(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 94/179/Euratom of 21 March 1994 the Council decided to extend Euratom loans to the financing of projects in certain non-member countries. 
At 31 December 1996 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 1.7.96 Operations in six-month period 
Amounts 
disbursed Amounts 
reapid Amount 
outstanding 
at 31.12.1996 
HUNGARY I 
1st tranche 
2nd tranche 
3ème tranche 
HUNGARY II 
1st tranche 
2nd tranche 
CZECH REPUBLIC 
1 st tranche 
2nd tranche 
SLOVAKIA 
1st tranche 
2nd tranche 
BULGARIA I 
1st tranche 
2nd tranche 
BULGARIA II 
1st tranche 
2nd tranche 
ROMANIA I 
1st tranche 
2nd tranche 
. ROMANIA II 
ROMANIA III 
1 st 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 22.0290 
21.12.90 
24.06.91 
25.02.91 
2502.91 
24.06.91 
19.1092 
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) 
(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 
0,00 
190,00 
185,00 
80,00 
55,00 
0,00 
20,00 
0,00 40,00 0,00 
100,00 
80,00 
185,00 
190,00 
150,00 
140,00 
70,00 
40,00 
190,00 
185,00 
80,00 
0,00 
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 
1st 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 
94/933/EC 
91/408/EEC 
91/658/EEC Date of 
decision 
13.06.94 
25.03.96 
22.12.94 
23.10.95 
10.04.95 
23.09.91 
22.12.94 
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 1.7.96 
40,00 
0,00 
50,00 
25,00 
25,00 
20,00 
0,00 
85,00 
0,00 
0,00 
0,00 
30,00 
0,00 
250,00 
150,00 
100,00 
0,00 
160,00 
143,70 
2.523,50 Operations in six-month period 
Amounts 
disbursed 
15,00 
50,00 
50,00 
155,00 Amounts 
repaid 
0,00 Amount 
outstanding 
at 31.12.1996 
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 
2.678,70 
LOAN GUARANTEES TO EIB 
GEOGRAPHICAL AREA 
MED. financial protocols (1) 
MED. horizontal cooperation 
TOTAL MED. 
Central & Eastern Europe 
Central & Eastern Europe II 
Asia, Latin America I 
Asia, Latin America II 
SOUTH AFRICA 
TOTAL Decision 
R/1762/92/EEC 
90/62/EEC(4) 
91/252/EEC(5) 
93/696/EC(6) 
93/115/EEC 
96/723/EC 
95/207/EC Date of 
decision 
8.03.77 
29.06.92 
12.02.90 
14.05.91 
13.1293 
15.02.93 
12.12.96 
01 06.95 Rate of 
guarantee 
75% (2) 
75% (2) 
100% 
100% 
100% 
100% 
100% 
100% Loan 
term 
(years) 
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 Amount 
decided 
6062 
1800 
7862 
1000 
700 
3000 
750 
275 
300 
13887 Loans signed 
at 1.7.96 
5196 
1397 
6593 
(3) 
947 
700 
1999 
647 
101 
10987 during six-
month period 
129 
404 
533 
(3) 
-20 
981 
1494 Amount outstanding 
at 1.7.96 
2065 
261 
2327 
559 
325 
141 
191 
3543 at 31.12.96 
2057 
301 
2357 
615 
356 
335 
204 
32 
3898 
(1) including ECU 1 500 million for Spain, Greece and Portugal. 
(2) General guarantee 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% guarantee 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) Nori-member countries: Poland, Hungary, Czech Republic and Slovak Republic, Bulgaria, Romania, Baltic States and Albania. -
29-
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 (EB3 loans to non-member countries from its own resources). 
Expected signatures 
Mediterranean countries 
At 31 December 1996 a total of ECU 250 million was still to be signed in 1977 under current 
and former mandates (ECU 477 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. 
Central and Eastern Europe 
At 31 December 1996 a total of ECU 20 million was still awaiting signature under current 
and former mandates. 
Asia and Latin America 
At 31 December 1996 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 in 1997 comes to ECU 295 million. 
South Africa 
At 31 December 1996 a total of ECU 199 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 31 December 1996 ECU 6 256.3 million still had to be disbursed against loans signed at 
that date. The total breaks down as follows:6 
Mediterranean ECU 2 497.3 million 
Central and Eastern Europe ECU 3 247 million 
Asia and Latin America ECU 443 million 
South Africa ECU 69 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. 
30 
I.D Payment of the budget guarantee 
I.D.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 authorized in advance by the 
budgetary authority. 
d) The re-use of amounts repaid by debtors who have defaulted, leading to activation 
of the Community guarantee, allows payments to be made within a short period of 
time always providing, of course, that there are recovered funds available. 
I.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 
tliree months of receiving the EEB's request. The EIB administers the loan with all the care 
required by banking practice and is obliged to demand the payments due after the guarantee 
has been activated. 
Since the entry in force of the Regulation establishing a Guarantee Fund for external action, 
the provisions of the Agreement between the Community and the EIB on management of the 
Fund state that, after the EIB calls in the guarantee in the event of a default, the Commission 
must authorize the Bank to withdraw the corresponding amounts from the Guarantee Fund 
within three months. 
31 -
If there are insufficient resources in the Fund, the procedure used for activating the guarantee 
is the same as for borrowing/lending operations. 
n. 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 
n.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 (75% or 100%): 
- to the loan guarantees authorized by the Council and to the loan guarantees 
proposed or being prepared by the Commission on the basis of the estimates of 
loan signatures contained in the financial statements (EIB and Euratom loans); 
- to the loans (for financial assistance) authorized by the Council and to the loans 
proposed or being prepared by the Commission. 
The annex to 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 
\ 
-32-
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 second half of 1996 the budgetary authority therefore adopted transfers 42/96 and 
52/96 to provision the Guarantee Fund in respect of the lending operations with non-member 
countries (loans to Moldova and EIB loans to Asian and Latin American developing 
countries with which the Community has concluded cooperation agreements). 
II.C Basis for the provisioning of the Fund in the event of a part guarantee 
For EIB loans covered by an aggregate 75% guarantee, the Fund is provisioned on the basis 
of 100%) of the annual forecast of signatures up to a level of 75%» of the total amount of 
operations authorized. 
II.D Provisioning of the Guarantee Fund (3) 
The amounts paid into the Fund are obtained by applying the appropriate rate of provisioning 
(15%) or 14%) to the calculation base set out above. 
The 15%) provisioning rate is applied to loans granted after guarantees under the Fund have 
been activated and until the amount involved in the default has been repaid to the Fund. 
Article 5 of the Regulation establishing the Guarantee Fund states, "If, as a result of the 
activation of guarantees following default, resources in the Fund stand below 75%> of the 
target amount, the rate of provisioning on new operations shall be raised to 15%> until the 
target amount has once more been reached or, if the default occurs before the target amount 
is reached, until the amount drawn under the activation of the guarantee has been fully 
restored". 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%). 
33 
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.) 
n.E Margin remaining in the guarantee reserve (4) 
The margin remaining in the guarantee reserve is equivalent to the difference between the 
reserve (1) and the heading for the provisioning of the Guarantee Fund (3). 
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. 
34 
in. TABLES: COUNTRY-RISK INDICATORS 
-35 
Country-risk indicators 
Country: Bulgaria 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of1 period) 
Inflation rate (end of period) 
Exchange rate (Leva per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of G&S (in bn USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official reserves, including gold (end of period) 
in bn USD 
in months of imports of G&S 
External debt 
External debt 
(In convertible currencies, in bn USD, end of period.) 
Convertible debt service (in bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in bn USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(D 
(2) 
(2) 
(3) 1994 
1.8 
7,8 
12,8 
121,9 
66,0 
-5,8 
' 5,3 
-2,0 
105 
1,3 
3,0 
10,3 
0,9 
0,5 
0,5 
118,9 
219,8 
18,4 
17,6 
(4) 
6,8 
4,6 
8,9 
(5)+(6) 
(3/94-3/95) 
(7) 
(09/94) 
(8) 
(8) 
03/94 09/94 
88 98 
(167) (167) 
03/94 09/94 
91 95 
(135) (135) 
19.8 20.8 1995 
2,5 
8,6 
11.6 
32,8 
70,7 
-5,7 
7,0 
-0,4 
90 
1,5 
2,8 
9,4 
0,8 
0,2 
0,6 
80,9 
155,1 
11,4 
(9) 
(9) 
7,3 
5,7 
7,7 
-
(8) 
(8) 
03/95 09/95 
90 90 
(187) (181) 
03/95 09/95 
93 94 
(135) (135) 
21.9 222 1996 
(10) (12) 
-10,0 
-1,1 
12,5 
311,0 
496,0 
-11,0 
4,4 (09/96) 
-0,1 
61 
0,5 
(11) 
9,9 (09/96) 
1,1 
0,5 
0,6 
280,0 
221,0 (09/96) 
(11) 
(9) 
(9) 
8,1 
6,5 
14,6 (09/96) 
-
(8) 
(8) 
03/96 09/96 
99 92 
(178) (178) 
03/96 09/96 
92 93 
(135) (135) 
23 1 23.5 
(1) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country may 
improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(4) London Club DDSR (July) Paris club resched. (Apr) 
(5) SBA 
(6) STF 
(7) SBA suspended 
(8) Not rated 
(9) No 
(10) Preliminary 
(11) Not available 
(12) Latest data or estimates (E) (in sheet * is being used) 
-36-
Country-risk indicators 
- Country: Czech Republic 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (CK's per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of G&S (in mio USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in bn USD 
in months of imports of G&S 
External debt (end of period) 
External debt 
(In convertible currencies, in bn USD, end of period.) 
Convertible debt service (in bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(2) 
(2) 
(3) 1994 
2,6 
2.1 
3,3 
10,2 
28,2 
-0,3 
14295 
-0,1 
762 
6,2 
4,2 
10,7 
2,5 
2,0 
0,5 
29,7 
56,6 
12,6 
(4) 
5,2 
3,4 
2,5 
(5) 
(3/93-3/94) 
(6) 
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 
9,2 
3,0 
7,9 
26,3 
-0,8 
17054 
-3,0 
2547 
14,0 
7,9 
16,5 
2,6 
1,5 
1,1 
35,8 
56,5 ' 
15,2 
(4) 
(4) 
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 
(7) 
4,8 
7,9 
3,0 
9,0 
27,0 
-0,6 
29920 
-6,5 
875 
12,4 
5,3 
16,1 
3,8 
3,0 
0,8 
30,6 
53,8 
12,7 
(4) 
(4) 
7,3 
3,6 
1,9 
-
Baal 
A 
03/96 09/96 
36 35 
(178) (178) 
03/95 09/95 
30 29 
(135) (135) 
60.1 62.0 
(1 ) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100. with 100 representing the least chance of default. A given country may 
improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(4) No 
(5) SBA 
(6) On-track. All debts to IMF paid ahead of schedule. 
(7) Projections (unless otherwise stated) 
-37. 
Country-risk indicators 
Country: Estonia 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate (end of period) 
Exchange rate (Kroons per USD) (end of period) 
General government balance (as % of GDP) 
Financial balance 
Fiscal balance 
Balance of payments 
Merchandise exports (in mio USD) 
Current account balance (in % of GDP) (excl. official transfers) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in mio USD 
in months of goods imports 
External debt 
External debt (incl. to IMF) 
(in convertible currencies, in mio USD, end of period) 
Convertible debt service (in mio USD) 
principal 
interest +charges to IMF 
External debt/GDP (%) 
External debt/merchandise exports (%) 
Debt service/merchandise exports (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(1) 
(2) 
(3) 
(3) 
(4) 1994 
-0,1 
3,5 
4,5 
41,6 
13,0 
2,9 
1,3 
1329 
-12,3 
212 
447 
3,2 
170,3 
8,1 
3,0 
5,1 
7,5 
12,8 
0,6 
(5) 
(5) 
0,4 
15,7 
2,0 
(6) 
(10/93-3/95) 
(7) 
(8) 
(8) 
03/94 09/94 
105 102 
(167) (167) 
03/94 09/94 
88 86 
(135) (135) 
20.7 23.6 1995 
3,2 
1,4 
4,1 
28,8 
11,5 
-0,4 
-0,8 
1861 
-8,2 
202 
583 
2,7 
246,8 
12,8 
3,5 
9,3 
7,1 
13,3 
0,7 
(5) 
(5) 
0.5 
16,5 
2,2 
(9) 
(4/95-6796) 
(7) 
(8) 
(8) 
03/95 09/95 
66 76 
(187) (181) 
03/95 09/95 
79 79 
(135) (135) 
254 26.3 1996 
(10) (12) 
3,1 
-0.7 
4,3 
23,1 
12,4 
(11) 
-1,5 
1980 
(11) 
42 (09/96) 
605 (09/96) 
2,3 (09/96) 
294 (10/96) 
21,4 
10,5 • * 
10,9 
(11) 
14.3 (10/96) 
(11) 
(5) 
(5) 
0,5 
13,8 
2,1 
(9) 
(4/95-6/96) (13) 
(7) 
(8) 
(8) 
03/96 09/96 
73 71 
(178) (178) 
03/96 09/96 
76 71 
(135) (135) 
28 9 31.1 
( 1 ) Financial balance does not take into account government net lending, whereas fiscal balance does. 
(2) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(3) The higher the ranking number, the lower the creditworthiness of the country. 
(4) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country may 
improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(5) No 
(6) SBA/STF 
(7) On-track 
(8) Not rated 
(9) SBA 
(10) Preliminary 
(11) Not available 
(12) Latest data or estimates (E) (in sheet * is being used) 
(13) The SBA (7/96-7/97) is also on track. 
-38-
Country-risk indicators 
Country: Hungary « 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end"of period) 
Inflation rate (Dec/Dec) 
Exchange rate (forints per USD) (end of period) 
Consolidated state budget balance (as % of GDP) (GFS definition) 
Balance of payments 
Exports of G+S (in mio USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official reserves (end of period) 
in bnUSD 
in months of imports of merchandises 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
Convertible debt service (in bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/Exports of G+S (%) 
Debt service/Exports of G+S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(2) 
(3) 
(3) 
(4) 1994 
2,9 
9,0 
10,9 
21,2 
111,0 
-6,3 
10219 
-9,5 
1100 
6,8 
7,2 
28,5 
6,2 
4,2 
2,0 
68,9 
278,9 
60,8 
(5) 
(5) 
16,5 
4,0 
11,3 
(6) 
(7) 
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 
14667 
-5,6 
4410 
12,0 
9,5 
31,7 
7,7 
5,3 
2,4 
70,8 
189,2 
52,5 
(5) 
(5) 
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 
(10) 
1,0 (09/96) 
2,3 (11/96) 
10,5 
19,8 
164,0 
-3,3 ' 
12788 (11/96) (8) 
-3,2 
1730 (11/96) 
13,8 (11/96) 
10,1 (11/96) 
26,4 (11/96) 
7,4 
5,1 
2,3 
59,1 
206,2 (8) 
43,6 (8) 
(5) 
(5) 
9,6 
2,9 
5,9 
(6) 
(3/96-2/98) 
(9) 
Baa3 
BBB-
03/96 09/96 
44 44 
(178) (178) 
03/96 09/96 
50 50 
(135) (135) 
43.6 44.7 
(1) Including early repayments 
(2) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(3) The higher the ranking number, the lower the creditworthiness of the country. 
(4) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country may 
improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(5) No 
(6) SBA 
(7) First review uncompleted 
(8) Exports of goods only for 1996 
(9) On-track 
(10) Latest data or estimates (E) (in sheet * is being used) 
39-
Country-risk indicators 
Country: Latvia 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (end of-period) 
Inflation rate (end of period) 
Exchange rate (Lats per USD) (end of period) 
General government balance (as % of GDP) 
Financial balance 
Fiscal balance 
Balance of payments 
Exports (in mio USD) 
Current account balance, excl. official transfers (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in mio USD 
in months of imports of G&S 
External debt 
External debt 
(in convertible currencies, in mio USD, end of period) 
Convertible debt service (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/merchandise exports (%) 
Debt service/merchandise exports (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(D 
(D 
(2) 
(3) 
(3) 
(4) 1994 
2,0 
-2,2 
6,5 
26 
0,55 
-1,7 
-4,0 
997 
-3,5 
155 
545 
4,5 
359 
50,0 
(5) 
(5) 
10,0 
36,0 
5,0 
(6) 
(6) 
0,7 
13,3 
4,8 
(7) 
(12/93-3/95) 
(8) 
(9) 
(9) 
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 
-2,7 • 
-3,3 
1306 
-4,4 
165 
527 
3,2 
423 
39,0 
(5) 
(5) 
9,0 
32,4 
3,0 
(6) 
(6) 
0,7 
12,3 
4,0 
(10) 
(4/95-4/96) 
(11) 
(9) 
(9) 
03/95 09/95 
106 116 
(187) (181) 
03/95 09/95 
91 89 
(135) (135) 
22.6 23.4 1996 
(12) 
2,5 
1,0 
7,2 
13,1 
0,55 
-1.2 
-1,8 
1430 
-6,8 
200 
649 
3,5 
500 
71,0 
(5) 
(5) 
9,0 
35,0 
5,0 
(6) 
(6) 
0,7 
10,4 
3,6 
(10) 
(5/96) 
(8) 
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 
(1) Financial balance does not take into account government net lending, whereas fiscal balance does. 
(2) Only EIB and 80P loans (outstanding disbursements) to CEEC, NIS and MED 
(3) The higher the ranking number, the lower the creditworthiness of the country. 
(4) Countries are rated on a scale of zero to 100. with 100 representing the least chance of default. A given country may 
improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(5) Not available 
(6) No 
(7) SBA/STF 
(8) On-track 
(9) Not rated 
(10) SBA 
(11) Off-track 
(12) Latest data or estimates (E) (in sheet * is being used) 
-40. 
Country-risk indicators 
Country: Lithuania 
• 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate (end of period) 
Exchange rate (Litas per USD) (end of period) 
General government balance (as % of GDP) 
Financial balance 
Fiscal balance 
Balance of payments 
Exports (in mio USD) 
Current account balance (in % of GDP), without official transfers 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period, gross foreign assets) 
in mio USD 
in months of imports of G&S 
External debt 
External debt 
(in convertible currencies, in mio USD, end of period) 
Convertible debt service (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(D 
(2) 
(3) 
(3) 
(4) 1994 
1,0 
-6,7 
3,8 
45,1 
4,3 
-1,5 
-4,2 
1930 
-4,2 
60 
587 
3,1 
448 
19 
(5) 
(5) 
8,0 
~3,2 
1,0 
(6) 
(6) 
0,9 
13,3 
3,1 
(7) (10/93-3/94) 
(10) (10/94-11/97) 
(8) 
(9) 
(9) 
03/94 09/94 
110 121 
(167) (167) 
03/94 09/94 
97 96 
(135) (135) 
18.4 20.0 1995 
3,1 
0,8 
6.1 
35,5 
4,0 
-1,8 
-3,3 
2210 
-3,2 
55 
819 
3,9 
757 
69 
(5) 
(5) 
9,7 
34,3 
3,1 
(6) 
(6) 
1,4 
13,9 
4,8 
(10) 
(10/94-10/97) 
(8) 
(9) 
(9) 
03/95 09/95 
108 118 
(187) (181) 
03/95 09/95 
95 90 
(135) (135) 
21.7 22.9 1996 
(11) 
3,6 (09/96) 
2,4 (09/96) 
6,4 (11/96) 
13,1 
4,0 
-1,9 
-3,4 
3361 
-2,7 
101 
838 (09/96) 
2,9 
1070 
120 
(5) 
(5) 
10,4 
42,7 
4,8 
(6) 
(6) 
1,4 
10,5 
3,3 
(10) 
(10/94-10/97) 
(8) 
Ba2 
(9) 
03/96 09/96 
85 59 
(178) (178) 
03/96 09/96 
89 90 
(135) (135) 
23.8 25.3 
(1) 
(2) 
(3) 
(4) 
(5) 
(6) 
(7) 
(8) 
(9) 
(10) 
(11) Financial balance does not take into account government net lending, whereas fiscal balance does. 
Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
The higher the ranking number, the lower the creditworthiness of the country. 
Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country may 
improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
Not available 
No 
STF 
On-track 
Not rated 
EFF 
Projections (unless otherwise stated) 
-41 -
Country-risk indicators 
Country: Romania 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate ('Dec/Dec; 
Exchange rate ( lei per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of G&S (in bn USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in mio USD 
in months of imports of G&S 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
Convertible debt service (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(2) 
(2) 
(3) 1994 
3,9 
7,2 
10,9 
61,7 
1767 
-1,0 
6,1 
-1,4 
341 
1596 
2,2 
5,5 
589 
313 
276 
18,3 
90,1 
9,6 
(4) 
(4) 
8,4 
10,7 
9,7 
(5) 
(5/94-12/95) 
(6) 
(7) 
(7) 
03/94 09/94 
74 77 
(167) (167) 
03/94 09/94 
76 74 
(135) (135) 
25.4 262 1995 
6.9 
5,2 
8,9 
27,8 
2760 
-2,8 
7,5 
-3,6 
417 
1110 
1,4 
6,6 
1038 
462 
576 
18,7 
88,0 
13,8 
(4) 
(4) 
10,2 
11,5 
10,1 
(8) 
(9) 
(7) 
(7) 
03/95 09/95 
68 64 
(187) (181) 
03/95 09/95 
73 71 
(135) (135) 
28.1 29.7 1996 
(11) 
4,4 
4,9 
6,1 
56,9 
4100 
-5,7 
6,4 
-3,4 
608 
1700 
2,3 
6,9 
1200 
477 
723 
22,0 
97,0 
13,7 
(4) 
(4) 
10,2 
11,0 
12,5 
(10) 
Ba3 
BB-
03/96 09/96 
67 61 
(178) (178) 
03/96 09/96 
68 72 
(135) (135) 
30.9 31.0 
(1) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country may 
improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(4) No 
(5) SBA/STF 
(6) On-track 
(7) Not rated 
(8) SBA extended through 1997 and augmented 
(9) On-track; Off track in 1996 
(10) SBA cancelled New programme to be approved by IMF Board 
(11) Latest data or estimates (E) (in sheet * is being used) 
42-
Country-risk indicators 
Country: Slovak Republic 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (SK's per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of G&S (in mio USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in mio USD 
in months of imports of G&S 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
Convertible debt service (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(2) 
(2) 
(3) 1994 
4,8 
7,0 
14,6 
11,7 
31,3 
-0,4 
8983 
6,0 
184 
1691 
2,3 
3,9 
791 
(4) 
(4) 
31,1 
43,4 
8,8 
(5) 
(5) 
2,9 
5,3 
2,3 
(6) 
(7/93 -7/94) 
(7) 
(7/94-3/96) 
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 
7,4 
9,6 
13,1 
7,2 
29,6 
0,7 
10921 
3,6 
157 
3400 
4,1 
5,8 
1045 
(4) 
(4) 
39,9 
53,1 
9,5 
(5) 
(5) 
4,1 
5,2 
2,8 
(7) 
(7/94-3/96) (8) 
Baa3 
BB+ 
03/95 09/95 
53 51 
(187) (181) 
03/95 09/95 
61 59 
(135) (135) 
33.2 35.7 1996 
(9) 
7,0 (09/96) 
2,6 (11/96) 
12,8 
5,4 
31,9 
-1,4 
7980 (09/96) 
-7,7 (10/96) 
189 (09/96) 
3473 
3,4 
6,3 (09/96) 
820 (09/96) 
(4) 
(4) 
33,4 (09/96) 
58,8 (09/96) 
7,7 (09/96) 
(5) 
(5) 
4,5 
5,6 
4,4 
-
Baa3 
BBB-
03/96 09/96 
48 49 
(178) (178) 
03/96 09/96 
57 53 
(135) (135) 
386 41.2 
(1 ) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country may 
improve its rating and still fall in the ranking if also the average global rating for all rated countries improves 
(4) Not available 
(5) No 
(6) STF 
(7) SBA f 
(8) The mid-term review of the programme, which had been scheduled for February 1995, was not completed 
(9) Latest data or estimates (E) (in sheet * is being used) 
•43 
Country-risk indicators 
Country: Belarus 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate ( Rbs per USD) (average) 
General government balance (as % of GDP) 
Balance of payments. . 
Exports of G & S (in mio USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in mio USD 
in months of imports 
External debt 
External debt 
(in convertible currencies, in mio USD, end of period) 
Convertible debt service (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G & S (%) 
Debt service/exports of G & S (%) 
Arrears (on both interest and principal, in bn USD) 
Debt rescheduling agreement 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
» 
(D 
(2) 
(2) 
(3) 1994 
-12.2 
-19,3 
2.1 
1957 
3651 
-2,6 
2641 
-12.4 
10 
101,0 
0,3 
1251,0 
123,0 
(4) 
(4) 
25,9 
47,4 
4,3 
493,0 
(5) 
0,9 
4,8 
2,3 
(6) 
(01/95) 
7) 
(8) 
(8) 
03/94 09/94 
145 138 
(167) (167) 
03/94 09/94 
109 109 
(135) (125) 
15.5 15.7 1995 
-10,2 
-11.5 
2.7 
244 
11532 
-1,9 
4621 
-2,5 
7 
377,0 
0,7 
1513,0 
178,0 
(4) 
(4) 
14,7 
32,7 
3,4 
460 
(9) 
0,5 
2,6 
0,8 
(10) 
(12/95-11/96) 
(11) 
(12) 
(8) 
(8) 
03/95 09/95 
135 134 
(187) (181) 
03/95 09/95 
112 112 
(135) (135) 
15.2 15.5 1996 
(13) 
2,6 
3,2 
3,9 
39 
(4) 
-2,0 
5264 
-14,1 * 
6* 
(4) 
0,7* 
950,0 
163,2 * 
(4) 
(4) 
8,1 
15,4 
3,1 
(4) 
(9) 
0,5 
4,0 
0,7 
(10) 
(12/95-11/96) 
(11) 
(12) 
(8) 
(8) 
03/95 09/95 
128 142 
(178) (178) 
03/95 09/95 
116 118 
(135) (125) 
14.5 14.6 
(1) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country may 
improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(4) Not available 
(5) With Russia on gas arrears 
(6) STF 
(7) IMF 1993 STF programme went off track in early 1994. However, IMF staff considered favourably the government programme 
adopted in Autumn 1994, which was supported with the second STF tranche by end-January 1995. 
(8) Not rated 
(9) Arr. on Rus. gas cancel, agreem. 02/96-08/96 
(10) SBA 
(11) Off track 
(12) The first quarterly review of the programme, initially scheduled for December 1995, has never been completed. 
(13) Estimates (E) (in sheet * is being used) 
-44-
Country-risk indicators 
Country: Moldova 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end of period) 
Inflation rate (end of period) 
Exchange rate (leu per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Merchandise exports (in mio USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in mio USD 
in months of imports of merchandises 
External debt 
External debt 
(in convertible currencies, in mio USD, end of period) 
Convertible debt service (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/ merchandise exports (%) 
Debt service/ merchandise exports (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposures 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/merchandise exports (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(D 
(2) 
(2) 
(3) 1994 
-31,2 
-30,0 
1,0 
116 
4,27 
-8,7 
618 
-12,9 
18,0 
179 
2,9 
343,0 
12,3 
(4) 
(4) 
30,0 
55,5 
4,0 
(5) 
(5) 
0,9 
18,0 
10,0 
(6) 
(12/93-3/95) 
(7) 
(8) 
(8) 
03/94 09/94 
148 155 
(167) (167) 
(6) 1995 
-3,0 
-10,0 
2,0 
24 
4,50 
-5,5 
741 
-6,8 
72,0 
257 
3,2 
675,0 
91,0 
(4) 
(4) 
38,0 
91,1 
11,0 
. (5) 
(5) 
0,8 
8,7 
7,9 
(6) 
(3/95-3/96) 
(7) 
(8) 
(8) 
03/95 09/95 
157 141 
(187) (181) 
(8) 1996 
(9) (11) 
-5,0 
-17,7 (11/96) 
2,0 
15 
4,65 
-3,4 
563 (09/96) 
-6,8 
(4) 
292 
3,4 
700,0 
(4) 
(4) 
(4) 
32,0 
124,3 (09/96) 
11,0 
(5) 
(5) 
1.0 
11,1 
13,9 (09/96) 
(10) 
(5/96-5/99) 
(7) 
(8) 
(8) 
03/96 09/96 
134 125 
(178) (178) 
(8) 
(1) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default A given country m3y 
improve its rating and still fall in the ranking if also the average global rating for all rated countries improves 
(4) Not available 
(5) No 
(6) SBA 
(7) On-track 
(8) Not rated 
(9) Projections (unless otherwise stated) 
(10) EFF 
(11) Latest data or estimates (E) (in sheet * is being used) 
45-
Country-risk indicators 
Country: Ukraine 
Real GDP growth (% change) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (Krb per USD) (Hrv per US$ for 1996) 
- auction / interbank (end of period) 
- cash (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of G&S (in bn USD) 
Current account balance (excl. transfers) (in % of GDP) 
Net inflow of foreign direct investment (in bn USD) 
Gross official FX reserves in mio USD 
in weeks of imports of G&S 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
Convertible debt service paid (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(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 
14,8 
-6,0 
0,09 
646 
2,3 
7,2 
1794 
(4) 
(4) 
29,2 
48,0 
12,1 
2722 
(5) 
1,6 
1,6 
0,8 
(6) 
10/94 
(7) 
(8) 
(8) 
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 
15.1 
-4,4 
0,27 
1134 
3,7 
8,1 
1531 
986,0 
545,0 
23,3 
53.6 
9,3 
236 
(5) 
1.5 
1.4 
0,7 
(9) 
08/95 
(10) 
(8) 
(8) 
03/95 09/95 
145 138 
(187) (181) 
03/95 09/95 
109 111 
(135) (135) 
15.5 15.7 1996 
(11) . 
-10,0 * 
-5,1 
1.3 
39,7 
1.89 
1,89 
-3,2 
15,6* 
-3,2* 
0,4* 
1994 
5,3 
9,2 
1221 
716 
505 
21,2 
45,3 
6,0 
(5) 
3,0 
2,6 
1,5 
(9) 
5/96 
(7) 
(8) 
(8) 
03/95 09/95 
136 135 
(178) (178) 
03/95 09/95 
107 111 
(135) (135) 
16.7 16.6 
(1) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country may 
improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(4) Not available 
(5) Rescheduling of debt owed to Russia/Turkm. 
(6) STF 
(7) On-track 
(8) Not rated 
(9) SBA 
(10) Off track; New SBA approved in May 1996. On track. 
(11) Estimates (E) (in sheet * is being used) 
-46-
Country-risk indicators 
Country: Algeria 
Real GDP growth rate (in %) 
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 G&S (in bn USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves in bn USD 
in months of imports of G&S 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
Convertible debt service (in bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling (bin USS) 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of G & S (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of per.) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(D 
(2) 
(2) 
(3) 1994 
-0,9 
-2,5 
38,6 
42,9 
-4,4 
8,9 
-1,8 
0,0 
2,6 
2,9 
29,5 
8,9 
7,1 
1,8 
70,3 
307,5 
48,6 
(4) 
4,5 
9,9 
2,4 
7,8 
(5) 
(5/94 - 5/95) 
(6) 
(7) 
(7) 
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 
-2,2 
0,0 
2,1 
2,1 
32,5 
9,4 
7,1 
2,3 
78,4 
297,1 
42,4 
(4) 
4,9 
12,2 
2,8 
8,9 
(5) 
(5/94 - 5/95) 
(6)/(8) 
(5/95 - 5/98) 
(7) 
(7) 
03/95 09/95 
102 107 
(187)(181) 
03/95 09/95 
89 91 
(135) (135) 
23.5 22.8 1996 
4,0 
5,4 
15,1 
56,0 
2,6 
12,6 
0,2 
0,2 
3,7 
3,9 
32,7 
7,6 
5,2 
2,4 
72,4 
230,8 
32,7 
(4) 
3,3 
11,6 
2,7 
7,1 
(8) 
(5/95 - 5/98) 
(6) 
(7) 
(7) 
03/95 09/95 
109 97 
(178) (178) 
03/95 09/95 
95 95 
(135) (135) 
21.5 22.8 
(1) Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country may 
improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(4) No 
(5) SBA 
(6) On-track 
(7) Not rated 
(8) EFF 
-47-
Country-risk indicators 
Country: Israel 
Real GDP growth rate (in %) 
Industrial production ( % change) (at constant 1990 prices) 
Unemployment rate (average) 
Consumer Price Index (average) 
Exchange rate (shekel per USD) (end of period) 
Central government overall deficit (as % of GDP) 
Balance of payments 
Exports of goods (in bn USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in bn USD) 
Gross official FX reserves in billions US$ 
in months of imports of goods 
External debt 
External debt (gross external liabilities) 
(in bn USD, end of period) 
Debt service (in bn USD) 
principal 
interest (gross) 
External debt/GDP (%) 
External debt/exports of G & S (%) 
Debt service/exports of G & S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods (%) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Da'e) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term fcregn currency rating (end of period) 
Euronnoney 
Position in the ranking 
(number of countries) 
The Institutional investor 
Fosition in the ranking 
(number of countries) 
Credit rating footnotes 
0) 
(2) 
(2) 
(3) 1994 
6,5 
7,2 
7.8 
12,3 
3,018 
-2,4 
16,7 
-3,2 
-0,2 
6,792 
3,6 
41 
4,6 
2,2 
2,4 
54,2 
169,4 
14,9 
(4) 
(4) 
4,4 
0,8 
1,9 
(4) 
(5) 
BBB+ 
03/94 09/94 
30 33 
(167) (167) 
03/94 09/94 
46 43 
(135) (135) 
434 46.5 1995 
7,1 
7,9 
6,3 
10,1 
3,135 
-4,2 
19,0 
-4,5 
1.2 
8,119 
3.6 
46 
3.9 
(6) 
(6) 
53,0 
170,0 
15 
(4) 
(4) 
4,4 
0,7 
1,7 
(4) 
A3 
A-
03/95 09/95 
31 31 
(187)(181) 
03/95 09/95 
43 42 
(135) (135) 
47.9 49.2 1996 
(7) 
4,3 
2,7* 
6,3 
11,5 
3,244 
-4,3 
19,9 
-5,6 
(6) 
10,05 
4,2 
(6) 
(6) 
(6) 
(6) 
54 
(6) 
(6) 
(4) 
(4) 
3.9 
(6) 
1,5 
(4) 
A3 
A-
03/95 09/95 
33 32 
078) (178) 
03/95 09/95 
41 40 
(135) (135) 
50.8 52.2 
Only EIB and BCP loans (outstanding disbursements) to CEEC, NIS and MED 
The higher the rarkmg number, the lower the creditworthiness of the country. 
Countries are rated on a scale of zero to 100 with 100 representing the least chance of default. A given country may 
improve its rating and still fall in the ranking if .ilso the average global rating for all rated countries improves 
No 
Not rated 
Not availab'e 
Estimates (E) •."'• ïhoet * s being used> 



w 
ISSN 0254-1475 
COM(97) 273 final 
DOCUMENTS 
EN 01 09 
Catalogue number : CB-CO-97-269-EN-C 
ISBN 92-78-20846-9 
Office for Official Publications of the European Communities 
[.,-2985 Luxembourg