EN    EN EN 
EN    EN   
Brussels, 18.8.2008 
SEC(2008) 2381 
COMMISSION STAFF WORKING DOCUMENT 
ACCOMPANYING THE REPORT FROM  THE COMMISSION ON THE 
IMPLEMENTATION OF MACRO-FI NANCIAL ASSISTANCE TO THIRD 
COUNTRIES IN 2007 
{COM (2008) 520} 
EN 2   EN LIST OF ABBREVIATIONS  
CAMEL Capital, assets, management, ear nings, liquidity (parameters used in 
international system for rating banks) 
CBA Currency Board Arrangement CEECs Central and East European Countries CPI Consumer Price Index EC European Community EGPRSP Economic Growth and Poverty Reduction Strategy Paper EIB European Investment Bank ESAF Enhanced Structural Adjustment Facility EU European Union EUR Euro FDI Foreign Direct Investment FESAL Financial and Enterprise Structural Adjustment Loan 
FOREX Foreign Exchange FYROM The former Yugoslav Republic of Macedonia GDP Gross Domestic Product IFIs International Financial Institutions 
IMF International Monetary Fund 
MFA Macro-Financial Assistance NIS New Independent States PRGF Poverty Reduction and Gr owth Facility (formerly ESAF) 
SAA Stabilisation and Association Agreement SAF Structural Adjustment Facility SBA Stand-By Arrangement SOE State Owned Enterprise USD Dollar of the United States of America VAT Value Added Tax WTO World Trade Organisation 
EN 3   EN TABLE OF CONTENTS 
COMMISSION STAFF WORKING DOCUMEN T WORKING PAPER FROM THE 
COMMISSION SERVICES ON THE IMP LEMENTATION OF MACRO-FINANCIAL 
ASSISTANCE TO THIRD COUNTRIES IN 2007 .................................................................. 1 
List of Abbreviations.......................................................................................................... ........ 2 
Introduction ................................................................................................................... ............. 4 
Horizontal Section............................................................................................................. ......... 4 
1. Western Balkans........................................................................................................... 4 Country Sections ............................................................................................................... ......... 5 
2. Kosovo  (UNSC 1244).................................................................................................. 5 
2.1. Executive summary...................................................................................................... 5 2.2. Macroeconomic performance....................................................................................... 5 2.3. Structural reforms........................................................................................................ .6  
2.4. Implementation of macro- financial assistance............................................................. 7 
Horizontal section ............................................................................................................. ......... 9 
3. Eastern Neighbourhood Countries ............................................................................... 9 4. Georgia..................................................................................................................... .. 11 
4.1. Executive summary.................................................................................................... 11 4.2. Macroeconomic performance..................................................................................... 11 4.3. Structural reforms....................................................................................................... 1 2 
4.4. Implementation of macro- financial assistance........................................................... 14 
5. Republic of Moldova.................................................................................................. 16 5.1. Executive summary.................................................................................................... 16 5.2. Macroeconomic performance..................................................................................... 16 5.3. Structural reforms....................................................................................................... 1 8 
5.4. Implementation of macro- financial assistance........................................................... 19 
6. Lebanon..................................................................................................................... . 22 
6.1. Executive summary.................................................................................................... 22 6.2. Macroeconomic performance..................................................................................... 22 6.3. Structural reforms....................................................................................................... 2 3 
6.4. Implementation of macro- financial assistance........................................................... 25 
EN 4   EN INTRODUCTION  
This working document is published in parallel  with the Report from the Commission to the 
Council and to the European Parliament on the implementation of macro- financial assistance 
to third countries in 2007. This document provides economic and financial information 
regarding the situation of the beneficiary coun tries. Statistical data  sorting the different 
macro-financial assistance decisi ons since 1990, by date and by re gions, are included in the 
annex.  
HORIZONTAL SECTION  
1. WESTERN BALKANS  
The countries of the Western Balkans1 have moved closer to the EU. This reflects 
progress, albeit uneven, in reforms and in meeting established criteria and conditions. 
During 2007, Stability and Association Agreements2 have been signed with 
Montenegro and initialled with Bosnia-Her zegovina and Serbia. Important steps have 
also been taken in regional cooperation, su ch as the establishm ent of the Regional 
Cooperation Council which replaced the St ability Pact. The generally positive 
economic development of the region continued throughout 2007. The GDP growth 
rate was quite balanced th roughout the region, ranging betw een 6% and 7%, with the 
exception of Kosovo (3.5%). Inflationary te nsions further decreased during the first 
half of 2007, whereas in some countries (e specially Serbia, Montenegro and Kosovo) 
the CPI saw a sharp increase in the th ird and fourth quarter, mainly due to 
international food and energy price developments. However, the overall annual CPI increase came down to 3.9% on average. Ex ternal imbalances remained significant, 
with an average current account deficit of some 14.6% of GDP in 2007. General 
government balances turned on average fr om a small surplus in 2006 to a small 
deficit of 0.8% of GDP in 2007 (excluding Kosovo), with only Montenegro posting a 
surplus. State building, good governance, admini strative and judicial reform, rule of 
law including the fight against corrupti on and organised crime, socioeconomic 
development, and civil society developmen t, remain key reform priorities for the 
Western Balkans.  
                                                
 
1 The aggregated data are non-weighted averages and include the candidate countries Croatia and the 
former Yugoslav Republic of Macedonia, the potential candidate countries Albania, Bosnia-
Herzegovina, Montenegro and Serbia, and Kosovo (under UNSCR 1244). 
2 SAAs with fYROM (since 2004), Croatia (2005) and Albania (2006) had already been in force. 
EN 5   EN COUNTRY SECTIONS  
2. KOSOVO  (UNSC 1244) 
2.1. Executive summary 
The economic situation in Kosovo remains difficult: Its GDP per capita of around € 
1,200 is one of the lowest in Europe3. After a sharp increase of GDP in the 
immediate post-war period, boosted by fore ign reconstruction assistance and 
remittances, growth has been sluggish and negatively affected by declining donor support.  
On 17 February 2008, the territory declared it s independence from Serbia. It has been 
recognised since then by a majority of the EU member stat es, the US, some 
neighbouring countries, and some other co untries throughout the world. In its 
Conclusions on Kosovo of 18 February, the Council has reaffirmed its commitment 
to fully and effectively support the Europ ean perspective for the Western Balkans 
and asked the Commission to use community instruments to promote economic and political development.  
The Council approved in November 2006 MFA budget support of up to € 50 million. 
Yet, in 2006 and 2007 the budget execution led to the disappearance of the foreseen 
financing gap, mainly due to higher than expected revenues and capital 
underspending. Consequently, the payment of the assistance has been postponed, probably to the second half of 2008 or 2009. The conditionality attached to this 
assistance was agreed between the Commi ssion and the authorities of Kosovo and a 
Memorandum of Understanding was accordingly signed in December 2007. 
2.2. Macroeconomic performance 
For 2007, latest estimates point to GDP grow th of around 3.5%. This  is considerably 
higher than the authorities' initial assump tion for the budget 2007 of 1% growth. This 
higher growth is partly due to the delays in  the status settlement  with the accordingly 
delayed dismantling of UNMIK and its adve rse effect on domestic demand. Private 
consumption had a positive impact on growth. Overall, growth seems to become more robust compared to previous years, but remains low compar ed to countries in 
the region and considering th e very low starting point. 
The number of registered job seekers continued to increase in 2007 to 332,000 
persons as a yearly average, up by 8,500 compared to 2006. Long-term 
unemployment remains particularly high, i ndicating limited dynamics and flexibility 
of the Kosovan economy and labour market. However, the informal economy remains sizable and seems to employ ma ny of the officially unemployed. The 
unemployment rate is estimated at around 45%.  
After years of low –at times even negative-  inflation, it accelerate d in the second half 
of 2007 mainly due to food prices, reaching y- o-y rates of 10-11% in the last quarter. 
However, given a fairly low inflation in th e first half of the year, average annual 
inflation stood at 4.5% in 2007. Assuming that  the food price hike  will persist over 
                                                
 
3 There are indications, though, for a substantial upward revision of official GDP data. However, the 
resulting GDP per capita of approximately EUR 1,500 would still be comparatively low. 
EN 6   EN the medium term, it may turn into a seve re negative shock to disposable household 
income in Kosovo.  
The monetary framework remains anchored on the use of the euro as legal tender. 
The Central Banking Authority, therefor e, cannot implement any independent 
monetary or exchange rate po licy. Its role lies in supervising the financial sector and 
monitoring liquidity in the banking sector a nd credit expansion, w ith liquidity ratios 
and reserve requirements as main polic y tools. Despite conservative prudential 
requirements, annual credit growth accelerated to 41% by the end 2007 (November data; loans to non-financial co rporations), and 34% (loans  to private households), 
respectively. Interest rates remained fair ly high in 2007 with rates for short-term 
business loans ranging between 13%  and 17% over the year.  
The trade deficit widened to 57% of GDP in  2007, mainly due to a very weak export 
base. The current account deficit for 2007 is estimated at 24% of GDP (including foreign assistance), after 17% in 2006. It is mainly financed by remittances and 
increasing foreign direct investment relate d to privatisations. Kosovo currently does 
not assume any sovereign debt servicing obl igations. This situation would change if, 
as foreseen by the Ahtisaari proposals, so me sovereign loans cu rrently serviced by 
Serbia would be transferred to Kosovo. The amount of sovereign debt to be 
transferred to Kosovo is still uncertain an d will remain so for some time – it will 
most likely be determined by arbitration. Present estimates range around € 840m, or 
36% of GDP, with a high margin of uncertainty.  
The execution of the budget in 2007 was characterised by a one-off exceptional 
revenue of € 75 million for the licence of  a second mobile phone operator, higher 
revenue collection and a continuously weak  spending record, especially on capital 
items. Preliminary data point to an a nnual budget surplus of  6.5% of GDP. As a 
result, the cash balance of the governm ent rose from around € 200 million at the 
beginning of 207 to more than € 400 million (16% of GDP) by the end of the year 
2007. However, the high budget surplus may turn out to be of a quite temporary nature and masks a weaker structural budge tary position because it partly stems from 
one-off measures and is subject to substantial budgetary risk s, partly also related to 
status settlement. 
2.3. Structural reforms 
The privatisation process of socially-owned enterp rises continued in 2007. The 
Kosovo Trust Agency (KTA) is reported to have tendered around 545 New Companies and that 343 sales contracts ha ve been signed by the end of 2007. The 
total amount realised from th ese sales contracts signed is over 308 million Euros. 
However, since December 2007 the signing of contracts has been interrupted, 
because KTA is reflecting on a recent Sp ecial Chamber judgement in relation to 
privatisation of property. This judgement may have an effect on the privatisation 
process because it puts in question some elements of the currently implemented 
UNMIK Regulations on the Establishment of KTA which, according to the ruling, 
violate the European Convention for the Protection of Human Rights and 
Fundamental Freedoms by limiting the rights of former property owners. 
The restructuring of publicly-owned en terprises remains one of the biggest 
challenges of structural polic y. Infrastructure remained in sufficient and often of poor 
quality. In particular, the situ ation in the energy sector is  critical - the power supply 
infrastructure remained unreliable, with  frequent power cuts, affecting economic 
EN 7   EN activity at large. Furthermore, the effi ciency of the judiciary system and law 
implementation remained low and only little progress was made in enforcement of court rulings and the estab lishment of property rights. 
2.4. Implementation of macro-financial assistance 
On 30 November 2006 the Council adopte d a decision providing Kosovo with 
macro-financial assistance in the form of budget support (grants, up to € 50 million). This followed a needs assessment, pr epared by UNMIK and the Provisional 
Institutions of Self Government (PISG) , and coordinated with the Commission, the 
IMF and the World Bank. This assessment (the "Medium-Term Expenditure Framework" - MTEF) foresaw that by end 2006 or early 2007 the situation of the 
budget would become unsustainable wit hout donors support, as cash reserves 
financing the deficit were expected to dr y up. This assistance was thus initially 
conceived as bridge support, to be topped up by another package from the EC and 
other international donors upon status settlement.  
However, the general government balance for 2006 and 2007 turned out very 
differently than initially foreseen: after a surplus of 3.6% of GDP in 2006, an even 
higher surplus 6.5% of GDP) was preliminarily recorded for 2007, mainly due to 
good revenue performance and under-spendi ng of budgeted capital expenditure, due 
to the weak planning and implementation capacity for investment projects.  
Therefore, the outstanding EC support remain s available, but it wi ll, unlike initially 
foreseen, not serve as bridge  support pending status sett lement. A donor's conference 
is planned to take place on 11 July 2008 to address Kosovo's financing needs. 
Payments of EC budget support are now exp ected to take place towards the end of 
2008 or in 2009.  
Meanwhile, the Commission and the author ities of Kosovo have agreed on the 
Memorandum of Understanding (MoU) laying out the policy conditions for this assistance to be met and signed it in D ecember 2007. This MoU stipulates that the 
assistance will be paid if: (i) budgetary fi nancing needs occur; (ii) the authorities 
reach an understanding or arrangement with the IMF in support of sustainable economic and fiscal policies and implement it properly; and (iii) policy conditions 
attached to this assistance, mainly in th e area of public finance reform, management 
and control, are satisfactorily met.  
EN 8   EN SUMMARY STATUS OF ECONOMIC REFORM  
1. Price liberalisation 
The price setting mechanism is basically free. The authorities do not intervene, even in the case of 
housing prices. Current governance arrangements as regards publicly-owned enterprises, which remain under the authority of UNMIK – Pillar IV, normally ensure the absence of government interference in 
the price setting mechanism of their services. Howe ver, the government intervened in one case by 
refusing a raise in electricity prices proposed by the electricity regulator. 
2. Trade liberalisation 
Regional trade integration and liberalisation con tinued. In 2007, the Cent ral European Free Trade 
Agreement came into force between Albania, Bosnia and Herzegovina, Croatia, Kosovo (UN 1244), 
the former Yugoslav Republic of Macedonia, Moldova, Montenegro and Serbia.  
3. Exchange regime 
Kosovo continued to use the euro as sole legal tend er. The Central Banking Authority of Kosovo is in 
charge of regulating foreign exchange operations, providing payments services and supervising banks and other financial institutions.  
4. Foreign Direct Investment 
FDI inflows continued to increase slightly in 2007, mainly related to the privatisation process. FDI 
inflows, including privatisation proceeds, are esti mated to have reached 12% of GDP in 2007.  
5. Monetary policy 
The monetary framework remained anchored on the use of the euro  as sole legal tender (see also 
section 3 above).  
6. Public Finance 
The authorities finalised a revised Medium-Term Expenditure Framework in September 2007. The 
execution of the budget in  2007 was characterised by high revenues and low capital spending. 
Preliminary data point to an annual 2007 budget surplus of 6.5% of GDP. However, the high budget surplus may turn out to be of a quite temporary nature and masks a weaker structural budgetary 
position because it partly stems from one-off measures and is subject to substantial budgetary risks, 
partly related to status settlement (i. e. debt servicing). 
7. Privatisation and Enterprise Restructuring 
The privatisation of socially-own ed enterprises continued successf ully in 2007. However, since 
December 2007 the signing of contracts has been interrupted, because the Kosovo Trust Agency is 
reflecting on a recent Special Chambe r judgement which may affect the privatisation process because it 
puts in question some elements of the currently implemented UNMIK Regulations. 
8. Financial Sector Reform 
The financial sector in Kosovo appeared to be sound, profitable and well capitalised. It is entirely 
private and mostly foreign-owned. In December 2007, two local banks merged and a full banking 
license was granted to a Turkish owned institute. Altogether, 10 commercial banks operate in Kosovo. 
Credit supply is sufficient and banks have widened their range of products. However, competition remained limited. 
EN 9   EN HORIZONTAL SECTION  
3. EASTERN NEIGHBOURHOOD COUNTRIES  
Economic growth in the New Independent States (NIS), which is for some years now 
the second fastest growing region in the wo rld (behind East Asia), accelerated in 
2007 from about 7.5% to nearly 8.5%. The fastest growing economy is once again Azerbaijan (plus 25%). In all the other countries of the region but one (Moldova) 
GDP increased by more than 7%. In Mol dova, the economic growth was more than 
8% in the first half of 2007 but it was fi nally reduced to only 3%, due to a severe 
drought in summer 2007. The factors behind this growth differ from country to 
country, but in the majority of them, in cluding the two largest economies of the 
region, Russia and Ukraine, growth is dr iven primarily by domestic demand, boosted 
by profits of the enterprises, credit e xpansion and fiscal stimulation. Several 
countries of the region are benefitting al so from high commodity  prices (notably, 
energy) or capital transfers, mainly private.  
The improving general economic conditions a llowed a strong fiscal expansion in a 
number of countries of the region, which, as a rule, led to th e reduction of budget 
surpluses (e.g. Russia, Kazakhstan, Belarus)  or to the widening of deficits (e.g. 
Ukraine Georgia). Despite the worsening fi scal balances, the ove rall trend for the 
reduction of the public debt as part of GDP continued in 2007. One otable exception 
to this rule was Tajikistan, where due to the launch of large infrastructure projects financed by concessional credits exte nded by the Chinese Ex-Im Bank the budget 
moved from a surplus to a deficit of more  than 6% of GDP, and the public debt 
increased from 37 to over 40% of GDP.  
One of the effects of the fiscal loosening was its contribution to  the acceleration of 
inflation. The other factors behind this infl ation surge – price rises were again over 
10% or approaching this figure in the major ity of the countries of the region – are the 
international price rises and the monetary  expansion fuelled by the capital inflows 
resulting from either commod ity exports, foreign direct investments, or private 
capital transfers, in particular remittances from workers abroad. 
The region's variable endowment in natural resources translates in a very variable 
situation of the balance of payments – strong trade and current account surpluses for 
energy exporters, strong deficits for en ergy importers. Overall, demand-led import 
growth increased faster than exports, and therefore on average the current account balances in the region have deteriorated, with the current account surpluses going 
down (both as percentage of  GDP and in absolute numbe rs), and current account 
deficits widening, sometimes to very high proportions of GDP (Georgia – nearly 
20%, Moldova – nearly 16%). However, th ese deficits are generally comfortably 
financed by capital inflows, including foreign direct investments, on the rise in all the 
countries of the region. 
Progress in structural reforms has been uneven across the region and the 
implementation of second-phase institutio nal reforms supporting markets and private 
enterprise is still little  advanced in most NIS. Among the current and past 
beneficiaries of the Commun ity macro-financial assist ance, Georgia was probably 
the one to advance most. Also, Georgia is , together with Armenia, the two front-
runners in terms of the creation of a fa vourable business environment conducive to 
EN 10   EN investments and growth. This overall good r ecord in implementing market reforms is 
translating in a strong growth performan ce: both countries re gistered double-digit 
economic growth in 2007. 
EN 11   EN 4. GEORGIA  
4.1. Executive summary 
Economic growth accelerated to about 12%  in 2007, supported by inflows of foreign 
direct investment which comfortably fina nced a widening current account deficit. 
Strong growth in financial intermediation and infrastructure investment enhanced 
growth prospects in severa l sectors of the economy. 
Georgia's IMF-supported economic program remained on on-track, allowing the IMF 
Board to complete the fifth and sixth (final) reviews under  the PRGF (Poverty 
Reduction and Growth Facility) arra ngement in February and August 2007. 
Currently, the IMF continue post-progr am monitoring in Georgia but no new 
financing needs have been identified. 
Uneven progress was made by Georgia during the past year in the implementation of 
the agreed policy measures in public finance management. Therefore, the payment of the final grant instalment of the macro-fina ncial assistance was still pending at end-
2007 the enactment of a new law on external audit.  
In April 2008, a first progress report on the EU-Georgia European Neighbourhood 
Policy Action Plan was adopted, informing th e next directions in the deepening of 
the political and economic relations as well as  in closer cooperation in many sectors. 
4.2. Macroeconomic performance 
Strong economic performance continued in 2007, unabated by Russia's economic 
embargo and higher energy import prices. Af ter large-scale privatisation and the 
completion of oil and gas pipeline projects, foreign capital inflow s now contribute to 
growth in several other areas of the economy. Construction and financial 
intermediation in particular have been dr iving economic growth that accelerated to 
about 12% in 2007 against 9.4% in 2006. Mining and trade were other sectors of rapid growth. Infrastructure investment on transport and electricity generation also 
facilitates robust growth in the economy. Nominal GDP is estimated to be about 
USD 10 billion (about USD 2300 per capita). 
Central bank legislation is being amended to establish price stability as the main 
objective of the National Bank of Georgia, to be pursued through a monetary policy 
framework of inflation targeting. This will m ean that the lari will be allowed to float 
more freely with minimal interventions by the NBG. Although th e acceleration of 
consumer price inflation in 2007 to 11% partly owes to international commodity 
price trends, the rapid growth  in monetary aggregates did raise more concern for 
inflationary pressures. Accordingly, the NBG considerably tightened the monetary 
stance. Bank assets grew from 30.7% of  GDP to 43.5% by end-2007. As rapid credit 
growth continues to drive economic growth, systemic financial sector development is 
upmost important also for macroeconomi c stability. Higher monetisation of the 
economy is nevertheless a sign of enhanced confidence of busine sses and the public.  
Demand for imports increased in line with  growing incomes and brisk investment 
activity, leading to a widening trade defic it of about 28% of GDP. The import bill 
was also increased because of more expe nsive natural gas imports from Russia and 
Azerbaijan. Exports revenue growth, alt hough held back by the economic embargo 
by Russia of Georgian exports, was suppor ted by high world market prices for 
metals. Foreign capital inflows (mostly fo reign direct investment) financed the 
EN 12   EN current account deficit of nearly 20%. Wo rkers' remittances transferred through 
banks increased by 83% from 2006 (64% originating from Russia). Net FDI is estimated at about 15% of GDP in 2007.  
For the first time, international reserves of the National Bank of Georgia surpassed 
the level equivalent to three months of imports. Georgia's total external debt is at a 
low level of 17% of GDP as public external  debt has not been increased in nominal 
terms and the private sector (the leading banks) have gained access to international 
capital markets only in the past two years. In January 2008, Standard & Poor's confirmed a positive outlook for Georgia' s sovereign credit rating (B+). The 
sovereign credit rating is , however, constrained by a narrow economic structure, 
external imbalances and poli tical risks which also stem from Georgia's relatively 
weak institutional framework. 
Public spending was increased over the year in several supplement al budgets as tax 
revenues continued to perform strongly as  a result of robust nominal GDP growth 
and a strengthened tax administration. The ta x revenues to GDP ratio is estimated at 
25% which is a marked step up from th e average of 20% in 2004-2006. A priority 
was given to defence spending which surged to 30% of total spending in 2007 (9% of GDP). The public protests in November 2007 prompted the government to revise 
spending priorities for 2008, allocating more resources to pensi ons, salaries and 
social and employment programmes. Defen ce spending is projected to account for 
19% of total public expenditures in 2008. Pub lic debt (about 28% of GDP) and fiscal 
deficits (below 3% of GDP) are under cont rol, and the implemen tation of a planned 
new fiscal rule would furthe r ensure that balanced budgets  are the norm in the future. 
Any budget surplus would be saved in special  funds retained for future development 
projects. 
4.3. Structural reforms 
The government's efforts to tackle co rruption and to de regulate the economy 
continued to show results in several areas , as reflected in the World Bank's Doing 
Business Report. The World Bank ranks Georgia's business environment in 18th place in the world, a further improvement  from the 37th place from 2006. Equally, 
according to the Transparency International,  perceptions on the extent of corruption 
showed a reduction from the previous year, and Georgia's score improved from 2.8 (out of max 10) to 3.4. 
Putting in place new liberal legislative frameworks in taxation and customs, 
inspection, permits, certifica tion and standardisation has improved the business 
environment, and the main challenge now is to strengthen the public institutions which are tasked with their implementa tion. Another major priority for reform 
concerns the independence and accountability of the judiciary and law enforcement, 
which has become under focus for instan ce in the context of property rights' 
violations. Other positive developments include legislative changes in 2007 to 
shorten the maximum time for bankruptcy pr oceedings to five months. Corporate 
governance has been strengthened to provi de better investor protection also for 
minority shareholders. 
Georgia conducts a liberal trade policy in  a multilateral setting, having abolished 
most import tariffs apart from some agricu ltural goods and construc tion materials. In 
2007 Georgia finalised negotiati ons with Turkey on a free trade agreement which has 
not yet been implemented. Georgia qualifies for the EU's enhanced trade preferences 
EN 13   EN under the GSP+. Although the overall tax burden  on businesses is already fairly low 
(corporate income tax is reduced to 15%), the government has launched free 
industrial zones (for instance in the Black Sea port of Po ti) that would offer special 
tax and regulatory regimes. Georgia's expor t potential is not realised because of the 
lack of capacity to implement sufficient regulatory frameworks. The bottlenecks 
concern sanitary and phyto-sa nitory systems, conformity assessment, technical 
regulations and standards of industrial goods , whereas concerning imports to Georgia 
technical regulations of OE CD countries are fully rec ognised as such by Georgia. 
The impressive economic growth record  has not yet improved the aggregate 
employment situation markedly as large shif ts of labour from the public sector to the 
private sector have been underway. Th e government has launched short-term 
traineeship programmes in cooperation with the private sector. Fo r a sustainable job 
creation, the employers' requirements for sk ills and training need to be better 
addressed in the reforms of vocationa l and higher education. Unemployment has 
been fairly stable at about 14%. The relati vely large share of agriculture (55% of 
total employment) continues to be a prominent feature of the Georgian economy. The small plot sizes and low productivity ar e straining the agricultural sector's 
contribution to poverty reduction.  
Extreme poverty (10.7% in 2006) and the ove rall poverty rate (31 %) are declining as 
a result of government's measures such as targeted poverty be nefits and higher 
pensions. The targeting of the social assi stance still needs to be improved and the 
government has now a database to help th e targeting. Initially , the share of the 
extreme poor receiving the targeted social  benefit was estimated by the World Bank 
at 25% (2006). This share is planned to increase to at least 60%. The impact of higher gas tariffs is mitiga ted through voucher schemes a nd lifeline tariffs but the 
higher living costs (especially  food and energy) put a pressure on most households. 
Social and education spending has been in creased, reaching about one third of total 
public spending in 2008. 
Since the Georgian government is committed to limit the role of the state in every 
respect, efforts are focused mostly on improving service delivery by involving the 
private sector. The government is for instance implementing an ambitious health sector reform in cooperation with private s ector operators. Over three years, 100 new 
privately managed hospitals will be in ope ration. A new health insurance scheme will 
be put in place in 2008. Give n that the government depart ments and agencies have 
been in a flux and subject to frequent mana gement changes, the civil service reform 
has not been rooted yet. In the process, some areas such as the statistics department have become seriously under-resourced. In public finance management, the reform 
process has advanced in parallel both in budget planning and prepar ation as well as 
in treasury management and has now reached  a stage where the internal control and 
external oversight functions also need to be addressed in order to have a balanced, 
modern public finance management system. 
The EU and Georgia are implementing the European Neighbourhood Policy Action 
Plan which was endorsed by the EU-Geo rgia Cooperation Council in November 
2006. The first progress report was made  public in April 2008. In the economic 
policy area, the Commission has conducte d a feasibility study on a possible free 
trade area with Georgia so as to inform th e future directions fo r the enhancement of 
bilateral trade relations and the improvement  of the business and investment climate 
in Georgia.  
EN 14   EN 4.4. Implementation of macro-financial assistance 
On 24 January 2006 the EU Council decided to  provide macro-fina ncial assistance to 
Georgia up to EUR 33.5 million in grants  (Decision 2006/41/EC, published in the 
Official Journal of 28 January 2006). The first and second grant instalments were 
paid in 2006 (EUR 22 million in total). In parallel, Geor gia reduced the amount of its 
outstanding debt to the Community to EU R 57.5 million. Under the macro-financial 
assistance, the Commission focused its polic y dialogue with the Georgian authorities 
on public finance management. In this context the Commission has cooperated closely with the World Bank which is al so supporting the stre ngthening of public 
sector accountability, effici ency and transparency unde r its series of Poverty 
Reduction Support Operations (PRSO). During 2007, the Commission monitored 
progress in the areas of budget planning, budg et execution, internal controls and 
internal audit as well as ex ternal audit as had been agreed in the Memorandum of 
Understanding.  
Uneven progress was noted in the reform  process. Budget planning and execution 
progressed smoothly following major reform e fforts that had been started few years 
ago; whereas in the area of internal contro ls and internal audit the authorities have 
not yet decided how to develop in Georgia a coherent legal framework in line with 
EU principles and in external audit the ti meframe for the adoption of external audit 
standards (INTOSAI) has not been decided yet. As a consequence of the political 
turmoil that led to the pre-term pres idential elections in January 2008, the 
parliament's legislative process was also a ffected so that the adoption of the Law on 
the Chamber of Control was further delayed till 2008. The draft bill had been submitted to the parliament in 2006. Give n that the adoption of international 
standards in external audit will be an im portant step in the process of democratic 
reforms in Georgia, the release of the fina l grant instalment of the macro-financial 
assistance (EUR 11.5 million) was pending th e enactment of the Chamber of Control 
Law.  
EN 15   EN SUMMARY STATUS OF ECONOMIC REFORM  
1. Price liberalisation 
No administratively set prices exist outside the utilities sector. Administ ered prices account for 
about 5% of the CPI basket. 
2. Trade liberalisation 
Liberal trade policy. Georgia has been member of the WTO since June 2002. In September 
2006, the number of tariff bands on imported goods was reduced from 16 to three (0%, 5%, and 
12%). The maximum tariff of 12% is applied to those agricultural products and building 
materials which compete with domestic goods. Th e average weighted tariff is estimated to be 
1½%. Non-tariff barriers allowed for environmenta l, security and health  reasons only (in line 
with the Partnership and Cooperation Agreemen t with the EU). A free trade agreement with 
Turkey was agreed in late 2007. 
3. Exchange regime 
Floating exchange rate of the lari with limited official intervention by the National Bank of 
Georgia. No restrictions on current international transactions in conformity with Article VIII of 
the IMF’s Articles of Agreement. 
4. Foreign Direct Investment 
Adequate overall legislation. Unlimited repatriation of capital and profits. Net inflows of FDI 
about 15% of GDP (2007 estimate).   
5. Monetary policy 
The NBG has developed monetary policy instruments, e.g. by introducing in 2006 certificates of 
deposits. The securitisation of government debt held by the NBG also introduced marketable securities for the NBG's open market operations. Amendments to the central bank legislation are 
underway to enshrine price stability as the NBG's prime policy objective, to be pursued through 
inflation targeting. Dollarisation of the economy has decreased in the past few years but still remains high at 65% of total deposits. 
6. Public Finance 
Total fiscal revenues (including grants) estimated at 27% of GDP (2007), of which tax revenues 
25% of GDP. Total expenditure and net lend ing estimated at about 30% of GDP (2007) 
implying a fiscal deficit of 3% on commitment basis. Under the Budget System Law, which became effective on January 1, 2004, the treasury system is reformed, with a fully functioning 
Single Treasury Account as of January 2006. A medium-term expenditure framework is in place 
and is further developed with stronger policy content. A new liberal tax code is effective as of January 1, 2005.  
7. Privatisation and Enterprise Restructuring 
The private sector now accounts for about 80% of GDP (against 65% in 2005). Small scale 
privatisation largely completed while large scal e privatisation also accelerated significantly 
since 2004. New legislation adopted in 2005 on land privatisation.  
8. Financial Sector Reform 
There are 17 operating banks (of which 10 foreign-owned). No state-owned banks. Further 
consolidation is expected as the minimum capital requirement is increased to GEL 12 million (approx. EUR 4.5 million). Banking supervision has been strengthened in the past few years. The areas still to be addressed include "fit a nd proper" criteria for bank owners and managers, 
identification of "true" owners, monitoring of connected lending and consolidated supervision. 
EN 16   EN 5. REPUBLIC OF MOLDOVA  
5.1. Executive summary 
The economy of the Republic of Moldova continued growing in 2007 despite a 
severe drought, but economic gr owth decelerated to just 3%. Moldova's surprisingly 
resilient performance is supported by inflow s of foreign capital, in the form of 
remittances (primarily) and direct investme nt; Capital inflows more than financed a 
trade deficit approaching 50% of GDP.  
The inflows of capital from abroad have tran slated in inflationary pressures and in a 
persistent and even accelerating inflation, despite the sterilisa tion efforts of the 
National Bank of Moldova and restrictive fi scal policy (the budge t deficit was very 
low and public debt as a share of GDP decreased markedly).  
The developments in 2007 suggest that Mol dova's growth model based primarily on 
households demand fuelled by inflows of capital from Moldova’s workers abroad is gradually changing. An increasing part of remittances seems to be going now into investments, and not just household consum ption and residential construction. This 
gradual change is confirmed by a modest in crease in output and employment in some 
manufacturing industries (particularly, textiles) where Moldova maintains a 
competitive advantage due to its low labour costs, despite strong appreciation of the 
real exchange rate.  
Moldova's financing arrangement with the IMF concluded in May 2006 and 
supported by the Fund's PRGF (Poverty Re duction and Growth Facility) was on 
track, allowing the IMF Board to complete in 2007 the second and third programme 
reviews. The World Bank is currently preparing the second Poverty Reduction 
Support Credit (PRSC 1 was disbursed in autumn 2006).  
The Republic of Moldova achieved progress in  several areas of structural reforms, 
including trade and enterprise policy, comp etition, financial sector regulation and 
supervision and public finance management. Yet, the business conditions and governance remain weak, and their improvement  still remains a key challenge for the 
policy agenda. The government's expectations are that furthe r progress in structural 
reforms implemented in the framework of the new National Development Strategy and of the EU-Moldova ENP Action Plan will gradually translate in better 
governance and higher quality market institut ions, and contribute to the improvement 
of the business conditions in Moldova. 
5.2. Macroeconomic performance 
Moldova's economic performance in the recent  period has been surprisingly strong in 
view of the external shocks faced by the country. In 2007, despite a severe drought 
that hit Moldova in summer and reduced ag riculture’s output by nearly a quarter (by 
23.1%, according to preliminary figures), the country's GDP increased by 3%. The 
non-agricultural GDP is estimated to have in creased by 8 to 9%. In the first half of 
2007, economic growth in Moldova had exceeded 8%.  
Like in the past, growth is exclusivel y due to the services sectors, notably 
construction and trade. Industrial producti on as a whole is reported to have 
contracted by an estimated 2.7%, after a drop of near ly 5% in 2006, reflecting 
EN 17   EN primarily the adverse conditions in wh ich food industry continued to operate 
(drought, but also the persistent effect s of the Russian ban on wine exports 
introduced in 2006, which are being overcome only gradually). Yet, there are indications that new small-sc ale industries are developing  and creating jobs (e.g. in 
the textiles sector). Growth is mainly driven by domestic demand, but unlike the 
previous years, growth in investments, both residential and, what is new, industrial, 
seems to be much stronger than growth in household consumption – more than 20% 
in 2007 against 4%.  
The slowdown in the output of the tradable s sectors (agriculture  and industry) and 
strong domestic demand translated in a furt her surge in imports, whose dollar value 
increased in 2007 by more than  37%. At the same time, growth of exports (which 
had stagnated in 2006) was more modest (30 %), which resulted in a widen ing of the 
trade deficit from USD 1.6 b illion to 2.3 billion. Trade defi cit is approaching 50% of 
Moldova’s GDP. This deficit was again on ly partly compensated by remittances 
from Moldova’s workers abroad (remittances  are estimated to amount to about one-
third of GDP). As a result, for a third year in a row, Moldova’s current account deficit increased and was in 2007 nearly 16 % of GDP. This deficit seems, however, 
sustainable in the short run as capital in flows, in the form of foreign direct 
investment (FDI) or credit to commercial ba nks or industrial enterprises (foreign debt 
of the non-government sector increased in  2007 to 50% of GDP  from 40% three 
years earlier), are well in excess of this amount. FDI almost doubled and exceeded 9% of GDP in 2007, but remains low in abso lute terms and per capita. Large capital 
inflows have also translated in an accumu lation of international reserves of the 
National Bank of Moldova (NBM) beyond the target of three months of imports set in the PRGF programme.  
Massive capital inflows are also generating inflationary pressures which, combined 
with the effects of the drought on food pric es, prevented the NB M from meeting its 
objectives in terms of cutting down consumer price rises, despite its continued efforts 
to sterilise the inflows of foreign exchange. Twelve-month inflation in 2007 remained well above the 10% level, at more than 13%; it accelerated further to 
15.6% by the end of the first quarter of 2008. Accelerating inflation, together with 
the appreciation of the exch ange rate of the Moldovan leu (the NBM is gradually 
shifting towards inflation targeting and a llowing exchange rate appreciation) is 
leading to loss of competitiveness of Mo ldova’s economy. The leu’s real effective 
exchange rate appreciated by more than 10% in 2007. 
The key challenge of Moldova's macroeconom ic policy – controlling inflation – is 
constrained by weak transmission mechan isms of monetary policy and by huge 
developments needs (Moldova remains the poorest country in Europe). Yet, in the 
near future, the fiscal policy is expected to continue supporting the disinflation efforts of the National Bank. In 2007, the budget deficit was lower than planned – 
just a quarter of a percent of GDP – reflecting primarily stronger revenue 
performance, while the government succeeded to keep spending increases below revenue rises. Restrictive fi scal policy has also allowe d a further reduction of public 
debt, to just over 25% of GDP (down from nearly 30% the year before and nearly 
40% in 2004). The bulk of this  debt is external debt; it increased slightly in dollar 
terms in 2007 but went down to less than 20% of GDP. 
EN 18   EN 5.3. Structural reforms 
Moldova's policy agenda is increasingl y defined by the govern ment's European 
ambitions. In 2007, the government adopted  a new policy document, the National 
Development Strategy (NDS), built on and replacing the Economic Growth and 
Poverty Reduction Strategy Paper (EGP RSP) adopted in 2004. The NDS, which 
reflects largely the priorities of the EU-Moldova ENP Action Plan, adopted in 
February 2005 for a period of three years, is  aimed at becoming the reference tool for 
defining short- and medium-term polic y government priorities. It will be 
accompanied by National Developments Plans, prepared for three-year periods, consistent with the medium-term budget pl anning in the framework of three-year 
Medium-Term Expenditure Frameworks (MTEF). This is indeed a very welcome development since until recently the budget priorities were often disconnected from the proclaimed policy priorities.  
In April 2008, the EU published the second progress repor t evaluating the 
implementation of the EU-Moldova ENP Acti on Plan. The report identifies a number 
of positive developments in the field of stru ctural reforms in 2007, some of which are 
reviewed below.  
In the area of trade policy, the Commission services concluded that the Republic of 
Moldova had made sufficient progress in  improving its institutional framework and 
system of controls and cer tification of origin of goods to meet the formal 
requirements for receiving additional Aut onomous Trade Preferences (ATPs) from 
the EU. The Commission’s proposal for gran ting additional ATPs to the Republic of 
Moldova was adopted in Janua ry 2008 and entered into force in March 2008. At the 
same time, while Moldova's trade regime remains generally open, the authorities have still not dismantled all the administrati ve restriction on trade. So, with the world 
prices for wheat increasing, proposals to limit or ban wheat exports were floated. 
Also, a new cumbersome system of approving meat and dairy imports was 
introduced in 2007. This new system will be removed and no new restriction should in principle be introduced. 
In the area of enterprise policy, several new laws were adopted in 2007 leading to 
some improvement of the business environm ent (i.e. Law on State Registration of 
Legal Entities and Individual Enterprises or Law on Joint Stock Companies). Also, 
the government decided to revi talize the privatisation proc ess that had been stalled 
for several years. So, the authorities are planning to speed up the privatisation of the telecom operator. 
Yet, there are still barriers to establishmen t of businesses, in particular due to the 
heavy and sometimes arbitrary administrati ve requirements and controls imposed on 
investors. Not surprisingly, the business envi ronment in Moldova is still perceived as 
not attractive. Indeed, Moldova’s ranki ng in the World Bank’s Doing Business 
survey remained essentially unchanged in 2007 (it even deteriorated  slightly from the 
90th position in the 2007 Doing Business Report to the 92nd in the 2008 Report).  
In the area of financial se rvices, progress was made in  the banking regulation and 
supervision. The Republic of Moldova c ontinued to implemen t the recommendations 
of the IMF’s Financial Sector Assessment  Programme (FSAP), but does not yet fully 
comply with them. Referring to the de velopment of the non-banking financial 
intermediation (insurance, securities markets), some progress in the area of 
EN 19   EN administrative capacity building was achieve d with the setting up of a new central 
regulating authority. Also, ne w legislation was adopted in  the area of insurance.  
In 2007 the Republic of Moldova took seve ral measures to implement the 2006-2010 
Strategy for the Development of the Tax Servi ce, such as the sett ing up of a Division 
for combating tax fraud and the strengtheni ng of the work of the Large Taxpayers 
Division. In April 2007 several amendments to  the existing taxati on legislation were 
approved. A 0% corporate income tax on undistributed income was introduced as 
from 1 January 2008 in replacement of all other investment incen tives. Moreover, a 
possibility for capital legalisation will remain open until 3 December 2008 and a 
fiscal amnesty for tax liabilities from before January 2007 was decided.  
There was good progress on competition polic y through the establishment of the 
National Agency for the Protection of Co mpetition as an i ndependent authority 
(NAPC) in February 2007. A number of inve stigations were car ried out in 2007 but 
to be fully operational th e NAPC would require additional budgetary means and 
trained personnel.  
Further progress was made with the entry into force in October 2007 of the new law 
on public procurement. Sound implementation of the law, along the lines of a specific Action Plan, now requires the reinforcement of the administrative and 
training capacities of the P ublic Procurement Agency as  well as awareness-raising 
activities of the contracting authoritie s and the stakeholders. The Republic of 
Moldova is not yet party to the WTO agreement on Public Procurement. 
Progress can be noted in the field of intern al and external audit and financial control 
and accounting with the entry into for ce in January 2008 of new laws which 
contribute to bringing legi slation closer into lin e with EU standards. 
5.4. Implementation of macro-financial assistance 
On 16 April 2007, the Council adopted a deci sion on macro-financial assistance to 
the Republic of Moldova (Decision 2007/59/EC, published in the Official Journal of 
28 April 2008). Under the decision, Moldova w ill receive grants of a total amount of 
EUR 45 million, in three instalments. The assistance is designe d to contribute to 
covering the country’s external financing needs in 2007-2008 identified by the IMF in the context of the PRGF arrangement approved in May 2006. It will be complementary to, inter alia, support provided by the Bretton Woods institutions (IMF financing under the PRGF and Wo rld Bank’s Poverty Reduction Support 
Credit) and budgetary support provided by the EU under the Food Security 
Programme (FSP) and the European Ne ighbourhood and Partnership Instrument 
(ENPI).  
Prior to the implementation of macro- financial assistance, the Commission 
conducted an operational assessment (OA) of fi nancial procedures and circuits in the 
Moldovan Ministry of Finance and in the National Bank. The results of the OA were 
one of the inputs to the policy dialogue w ith the authorities of the Republic of 
Moldova in the context of the implementati on of macro-financial assistance that the 
Commission focused on public finance manage ment. The particular areas identified 
in the course of this dialogue are the im proved financial management of the social 
benefits programmes (one of the top priori ties of Moldova’s government in the social 
policy area), the establishment of the f unctioning public internal financial control 
system (PIFC) and the reform and strength ening of the public procurement. In all 
EN 20   EN three areas, the Commission has cooperate d closely with the other donors involved, 
in particular the World Bank and the Co mmission’s EuropAid (implementing budget 
support under the FSP and the ENPI). 
The Commission made one disbursement under the programme in 2007: the first 
instalment of EUR 20 million was releas ed in early October. The Commission 
expects to disburse the second and the th ird tranches, amounting to respectively EUR 
10 and 15 million, before the end of 2008.  
EN 21   EN  
SUMMARY STATUS OF ECONOMIC REFORM  
1. Price liberalisation 
Most prices have been liberalised. 
2. Trade liberalisation 
Relatively liberal international trade policy, but restrictions still exist on some key commodities. 
Moldova became a member of the WTO in June 20 00. In early 2008 the EU granted the Republic 
of Moldova Autonomous Trade Preferences. 
3. Exchange regime 
Increasingly, floating exchange rate of the le u with limited official intervention by the National 
Bank of Moldova. No restrictions on current international transactions in conformity with Article 
VIII of the IMF’s Articles of Agreement. 
4. Foreign Direct Investment 
Unlimited repatriation of capital and profits and no limitations on holding foreign currency bank 
accounts. Adequate overall legislation, but impl ementation is often problematic, which weakens 
the business climate. A new investment law introducing equal treatment of domestic and foreign investors adopted in 2004. FDI increased to over 9% of GDP in 2007 but is still modest. 
5. Monetary policy 
The National Bank of Moldova is gradually moving to inflation targeting but inflationary 
pressures in 2007, mostly resulting from capital inflows, did not allow a meaningful deceleration of inflation. Inflation again accelerated in the beginning of 2008. The National Bank expected to pursue a tighter policy course aimed at increasingly privileging control of inflation over exchange 
rate stability while still continuing to accumulate forex reserves, which exceeded for the first time 
the equivalent of three months of imports.  
6. Public Finance 
Budget revenue continued increasing in 2007 reflecting rising revenue from taxation of 
consumption. As expenditure was also increased, the budget was still in small deficit (a quarter of 
a percentage point of GDP). Public external debt went down to less than 20% of GDP. Reform of Public Finance Management continued, with progress achieved in particular in developing the Medium-Term Expenditure Framework, in moving  towards the single Treasury account, in 
strengthening tax administration and in developing the system of public internal financial control. 
 
7. Privatisation and Enterprise Restructuring 
Structural reforms are being implemented in the framework of the National Development Plan 
(NDP) and the EU-Moldova ENP Action Plan. Progress is being achieved in strengthening 
bankruptcy procedures, management of state property and simplification and streamlining of the 
regulatory environment of the enterprises. Ye t enforcement remains a serious concern and 
business environment suffers from state interv ention and formal and informal business 
restrictions. Also, the privatisation process was stalled for several years, only to be revitalized in 
2008. Other key areas of structural reforms – public administration and social protection reforms – 
progressed.  
8. Financial Sector Reform 
Restructuring and consolidation of the financial sector progressed, with significant foreign 
investments. Further strengthening is crucial to mobilize savings and promote investment.  
EN 22   EN 6. LEBANON  
Mediterranean Countries taking part of the European neighbourhood Policy are 
eligible to MFA under the Genval Criteria. Le banon is the first country of this group 
benefiting from MFA since the balance of pa yments loan granted in 1994 to Algeria 
(Decision94/933/EC). 
6.1. Executive summary 
The economy is recovering from the 2006 c onflict with Israel in a context of 
continuous political stalemate and recurrent outbreaks of violence. Real GDP growth 
in 2007 is estimated to 4%, a much better resu lt than initially foreseen. Inflation has 
declined despite the depreciation of the US dollar, to which the Lebanese pound is pegged. Reflecting reconstruction needs, the current account deficit is estimated to 
have increased to 10.7% of GDP. However, it is largely financed  by official inflows 
and foreign direct investment. The fiscal  deficit was contained on the back of 
stronger than projected revenue collecti on. Public debt-to-GDP ratio decreased 
slightly (to 171% by the end of  2007), but remains very high. 
The government continues to strike a careful balance between reconstruction and 
social needs, and the challenges resulting from the large public debt overhang. Fiscal policy aims at containing the primary deficit while accommodating reconstruction 
and relief spending. Lebanon pursued its amb itious programme of structural reforms, 
but the difficult political context and the paralysis of legislative activity limited 
progress in many fields.  
Lebanon's financing arrangement with the IMF concluded in April 2007 under the 
Fund's Emergency Post-Conflict Assistance (EPCA) was successfully completed in 
early 2008.  
Since January 2007, Lebanon and the EU  are implementing an European 
Neighbourhood Policy Action Plan. The firs t progress report on the Action Plan 
implementation was issued by the Commissi on in April 2008, but it does not contain 
an overall assessment.  
In December 2007, the Council adopted a deci sion on a macro-financial assistance to 
Lebanon amounting to EUR 80 million – a comb ination of medium-term loans (EUR 
50 million) and grants (EUR 30 million). The disbursements under the assistance 
programme are expected to take place in 2008. 
6.2. Macroeconomic performance 
In 2007, the economy of Lebanon continued its slow recovery from the 2006 conflict 
with Israel in a context of continuous po litical stalemate and recurrent outbreaks of 
violence. Once again, it showed resilience to pressures, which was reflected in 
growth figures and financial conditions. R eal GDP growth of 4%  is well above the 
rates initially expected. The negative imp act of oil price increases and uncertain 
political environment was broadly compensated by boosted regional demand and high financial aid from the region. Despite th e difficult political situation, the current 
caretaker government of Prime Minister Siniora continues to ensure the regular administration of the country in accordance with the constitution. 
EN 23   EN Fiscal outcomes in 2007 were be tter than expected at th e beginning of the year. The 
budget deficit reached 11% of GDP, a result comparable to that of 2006. It exceeded 
initial targets on the back of  stronger than projected revenue collection. Lower-than-
foreseen foreign financed capital expenditu re (partly on account of delays in donors' 
disbursements) contributed to this fiscal over-performance. External grants and loans 
helped to achieve a primary surplus of 1.8% of GDP (0.4% without foreign assistance). Public debt-to-GDP ratio decreased to 171% by the end of 2007 from 
177% in 2006.  
The deficit is expected to further decr ease in 2008 although risks of unforeseen 
expenditure, such as security measures and transfers to Electricité du Liban on 
account of higher oil prices, remain. The 2008 Budget foresees an increase of VAT 
rate to 12% from the current 10% and of taxes on interest income from 5% to 7%, in 
line with the programme of reforms suppor ted by the international donor community 
(agreed in the Paris III conference). Priv atisation should reduce public debt by about 
30 percentage points of GDP.  
The authorities succeeded in maintain ing macro-economic stability. Despite 
pressures on reserves, confidence loss a nd deposits outflows, the situation was 
managed and confidence restored fairly quickly. Money demand has remained 
robust. Interest rates remained unchange d. Bank deposits, which represent almost 
three times the size of the GDP (out of wh ich 77% in foreign currency), increased by 
10.5%. Profits of the banking sector rose by 10% compared to 2006. Gross reserves, 
excluding gold, remained stable. Saudi Ar abia deposited once again early 2008 USD 
1 billion at Banque du Liba n to bolster monetary and financial stability in the 
country. The value of Lebanon's gold reserv es, estimated to more than 9 million 
ounces of gold, surged thanks to the rise in price of the metal in international 
markets. Inflation has declined compared to 2006 despite the depreciation of the US 
dollar, to which the Lebanese pound is pegged.  
Reflecting reconstruction needs, the current  account deficit is estimated to have 
increased to 10.7% of GDP (2006: 6%) on account of a higher trade deficit. The 
current account deficit is largely financed by official inflows and sustained foreign 
direct investment. 
In April 2007, the IMF Board approved Em ergency Post-Conflict Assistance (EPCA) 
to Lebanon amounting to SDR 50.75 million. Th e full amount was disbursed shortly 
after, but the IMF continued monitoring th e implementation of agreed policy actions. 
In April 2008, the IMF Board concluded th at Lebanon has met comfortably all the 
indicative targ ets under EPCA. 
6.3. Structural reforms 
Lebanon pursued its programme of struct ural reforms focused on privatisation, 
improvements in the business climate and ope ning of markets. However, the difficult 
political context and the paralysis of legi slative activity limite d progress in many 
fields. The government took steps to prep are the ground for reforming the energy and 
social sector with the aim of limiting open-ended transfers from the budget while 
protecting capital and social expenditure . Addressing power sector losses will 
contribute to fiscal sustaina bility. In the telecom sector  measures were taken to 
prepare for the corporatisation of Liban Te lecom and for the privatisation of the two 
mobile operators. The valuation of the mob ile networks, the timing of the auction, 
EN 24   EN the impact of the privatisation on public fi nances and the role of  parliament remain 
uncertain. A Telecommunicati on Regulatory Authority was also created to ensure 
proper competition in the sector. Progr ess in this field has been, however, 
controversial and slower than expecte d. The government approved end October 2007 
a draft law on competition that aims to increase competition by fighting monopoly and non-competitive arrangements. The Law fo resees the creation of a Competition 
Council which would become the official  reference for all related issues.  
Despite some progress in reforms, Le banon regressed in the overall 2007 World 
Bank “Doing Business" rankings. The authori ties still need to improve investor 
protection laws and the system to en force commercial contracts. A Business 
Registration Simplification project that aims to reduce the time and cost of registering new companies is under preparation.  
The financial sector continued proving it s resilience to shocks despite the large 
public debt and significant exte rnal vulnerabilities. Its streng th is attributed to three 
factors: (i) perceived implic it guarantee from donors; (ii) Lebanon's track record of 
having never defaulted on external debt or deposits and (iii) unique market structure 
for Lebanese debt that is dominated by local banks and dedicated investors and 
depositors.  
In the area of trade policy, Lebanon did not succeed in 2007 to achieve WTO 
membership. Progress in negotiations has been halted by the paralysis of the legislative activity. In the meantime, th e efforts of the authorities focused on 
ensuring energy supply to the country under fa vourable conditions, which resulted in 
a renewed electricity agreement with Syri a and an agreement with Egypt on natural 
gas imports. Some protectionist actions have also been taken in contradiction of the 
Arab Free Trade Agreement.  
Lebanon’s position in various governance ra nkings deteriorated compared to 2006. It 
lagged behind other countries in the sout hern ENP region in the Transparency 
International Corruption percep tion Index in 2007 performing just slightly better than 
Egypt, Libya and Syria and at the same level as Algeria. Lebanon regressed as well in the rankings on the six World Bank gove rnance indicators. On the other hand, the 
Ministry of Finance was among the winners  of the United Nations Public Service 
Awards for 2007 for the category "Taxpayer Service". 
Regarding public finance management, th e government reform efforts focused on 
budget formulation and execution as well as medium-term planning and prioritisation 
of expenditures across ministries and public  agencies. Measures aiming at improving 
cash management and implementing a single treasury account are a key part of the 
government’s Medium-Term Public Financ ial Management Reform Action Plan. A 
global income tax law was adopted by the Council of Ministers in November 2007 
but still requires parl iamentary approval.  
The EU and Lebanon are implementing th e European Neighbourhood Policy Action 
Plan which was adopted in January 2007. Th e first progress report was made public 
in April 2008. Because of th e short period of implementa tion of the Action Plan, the 
Commission did not give an overall assessmen t of progress for any of the areas of 
cooperation, including the economic and financial partnership.  
EN 25   EN 6.4. Implementation of macro-financial assistance 
On 30 November 2006 the Council adopted a decision providing Kosovo with new 
On 20 August 2007, the Commission adopt ed a proposal for a Council decision 
providing macro-financial assistance to  Lebanon, with a view to supporting 
Lebanon's public finances and balance of payments. The Commission proposed that the assistance would be in the form of a combination of a me dium-term loan and a 
grant, of respectively EUR 50 and 30 milli on. The proposal was eventually adopted 
by the Council on 10 December 2007 (Counc il Decision 2007/860/EC, published in 
the Official Journal on 21 December 2007). Th e assistance seen as part of the EC 
assistance package will complement suppor t from the Bretton Woods Institutions, 
bilateral donors (including EU Member Stat es and Arab countries), and finally the 
EU's own grants (under the ENPI) and loans (by the EIB). Macro-fi nancial assistance 
is conditional, in particular, on progress in the implementation of the IMF EPCA 
arrangement and subsequent IMF-supported programmes.  
The EC macro-financial assistance aims prim arily at supporting the authorities' effort 
of fiscal consolidation. T hus, the specific reform measures to be targeted by the 
programme focus on public finance manage ment (PFM) and on two specific sectoral 
policies of particular importance for fiscal adjustment and debt reduction, namely the 
power sector and the social sector. 
In identifying the policy condi tions of the assistance, th e Commission staff used as 
inputs the government programme of reforms, specific sectoral strategies, such as the 
Medium Term Public Financial Management  Reform Action Plan, the results of the 
Operational Assessment of administrativ e procedures and financial circuits 
conducted by external experts for the Co mmission in October 2007 and discussions 
with major donors on the reform conditions attached to budget support. The agreement on the conditions to be attached to the disbursement of the assistance was 
expected to be finalised in April-Ma y 2008. The Commission intends to make the 
disbursements before the end of 2008. 
EN 26   EN  
SUMMARY STATUS OF ECONOMIC REFORM  
1. Price liberalisation 
Most prices are free. 
2. Trade liberalisation 
Liberal international trade policy, but protectionist measures are occasionally introduced. Lebanon is 
a founding member of GATT but it withdrew in 1949.  It is now negotiating the accession to WTO.  
3. Exchange regime 
Fixed exchange rate (peg to the USD). No restri ctions on current international transactions in 
conformity with Article VIII of the IMF’s Articles of Agreement. Lebanon has also achieved a substantial capital account convertibility. 
4. Foreign Direct Investment 
Unlimited repatriation of capital and profits and no limitations on holding foreign currency bank 
accounts. Legislation is overall adequate and an investment development authority exists but 
enforcement of contracts someti mes problematic in the absenc e of commercial courts and 
independent judiciary.  
5. Monetary policy 
The Banque du Liban (BdL)) uses a wide menu of monetary policy instruments to maintain financial 
stability and provide liquidity to the banking sector. It also occasi onally provides financing to the 
government (on a temporary basis). The exchange rate peg is regarded as a key factor in maintaining financial stability. Gross international reserves are increasing, partly because of higher gold prices 
(BdL holda a large gold stock). 
6. Public Finance 
Fiscal performance in 2007 was better than planned reflecting rising revenue from taxation and 
delays in spending. Public finance management reform focuses on budget formulation and execution 
and medium-term planning. 
7. Privatisation and Enterprise Restructuring 
Structural reforms programme focuses on priva tisation, improvement of business climate and 
opening of markets, but progress is limited due to the political situation. Government approved a draft law on competition. Yet business environment rating of Lebanon regressed in 2007.  
8. Financial Sector Reform 
Lebanon has a sophisticated and developed financial sector which proved resilient to shocks despite 
vulnerabilities.  
EN 27   EN Annex 1A - COMMUNITY MACRO-FINANCIAL AND EXCEPTIONAL FINANCIAL ASSISTANCE
 TO THIRD COUNTRIES BY DATES OF COUNCIL DECISIONS
Status of effective disbursements as of end-December 2007 (in millions of euro) 
Authorisations Disbursements
Country Date of Reference of Maximum Dates of Amounts of Totals Undisbursed Dates of Amounts of Totals Outstanding
Council Decision Council Decision amount disbursements disbursements repayments repayments
Hungary I 22.02.90 90/83/EC 870 Apr. 1990 350 610 260 Apr. 95 350 610
(Structural adjustment loan) Feb. 1991 260 ( Suspended) févr-96 260
Czech and Slovak Federal Republic 25.02.91 91/106/EC 375 Mar. 1991 185 375 mars-98 185 375
(BOP loan) Mar. 1992 190 déc-97 190
Hungary II 24.06.91 91/310/EC 180 Aug. 1991 100 180 mars-98 100 180
(BOP loan) Jan. 1993 80 déc-97 80
Bulgaria I 24.06.91 91/311/EC 290 Aug. 1991 150 290 mars-98 150 290
(BOP loan) Mar. 1992 140 déc-97 140
Romania I 22.07.91 91/384/EC 375 Jan. 1992 190 375 févr-99 190 375
(BOP loan) Apr. 1992 185 mars-98 185
Israel   (1) 22.07.91 91/408/EC 187,5 Mar. 1992 187,5 187,5 déc-97 160 160
(Structural adjustment soft loan)
Algeria I 23.09.91 91/510/EC 400 Jan. 1992 250 400 déc-97 250 250 150
(BOP loan) Aug. 1994 150 août-01
Albania I 28.09.92 92/482/EC 70 Dec. 1992 35 70
(BOP grant) Aug. 1993 35
Bulgaria II 19.10.92 92/511/EC 110 Dec. 1994 70 110 déc-01 110
(BOP loan) Aug .1996 40 août-03
Baltics 23.11.92 92/542/EC 220 135 85 110 110 25
(BOP loans) (Suspended)
of which :
    Estonia (40) Mar. 1993 20 (20) (20) mars-00 (20)
    Latvia (80) Mar. 1993 40 (40) (40) mars-00 (40)
    Lithuania (100) Jul. 1993 50 (75) (25) juil-00 (50) (25)
Aug. 1995 25 août-02
Romania II 27.11.92 92/551/EC 80 Feb. 1993 80 80 févr-00 80 80
(BOP loan)
Moldova I 13.06.94 94/346/EC 45 Dec. 1994 25 45 From 12/2000 55 4 0
(BOP loan) Aug. 1995 20 From 08/2001
Romania III 20.06.94 94/369/EC 125 Nov. 1995 55 125 nov-02 125
(BOP loan) Sep. 1997 40 sept-04
Dec. 1997 30 déc-04
Albania II 28.11.94 94/773/EC 35 Jun. 1995 15 35
(BOP grant) Oct. 1996 20
Algeria II 22.12.94 94/938/EC 200 Nov. 1995 100 100 100 nov-02 100
(BOP loan) (Suspended)Repayments
Slovakia 22.12.94 94/939/EC 130 Jul. 1996 130
(BOP loan) (Cancelled)
Ukraine I 22.12.94 94/940/EC 85 Dec. 1995 85 85 From 12/2001 85
(BOP loan)
Belarus 10.04.95 95/132/EC 55 Dec. 1995 30 30 25 From 12/2001 30
(BOP loan) (Suspended)
Ukraine II 23.10.95 95/442/EC 200 Aug. 1996 50 200 From 08/2002 200
(BOP loan) Oct. 1996 50 From 10/2002
Sep. 1997 100
Moldova II 25.03.96 96/242/EC 15 Dec. 1996 15 15 From 10/2002 15
(BOP loan) in 5 tranches
fYRoM I 22.07.97 97/471/EC 40 Sep. 1997 25 40 oct-08 40
(BOP loan) Feb. 1998 15
Bulgaria III 22.07.97 97/472/EC 250 Feb. 1998 125 250 févr-05 250
(BOP loan) Dec. 1998 125 déc-05  
EN 28   EN Authorisations Disbursements
Country Date of Reference of Maximum Dates of Amounts of Totals Undisbursed Dates of Amounts of Totals Outstanding
Council Decision Council Decision amount disbursements disbursements repayments repaymentsRepayments
 
Armenia, Georgia and Tajikistan (2) 17.11.97 97/787/EC 375 294,5 80,5 138
(Structural adjustment loans and grants)
of which 28.3.00 00/244/EC
   Armenia (58) Dec. 1998 (loan) 28 58 0
Dec. 1998 (grant) 8
Dec.  1999 (grant) 4
Feb. 2002 (grant) 5,5
Dec. 2002 (grant) 5,5
June 2004 (grant) 5,5
Dec 2005 ( grant) 1,5
   Georgia (175) Jul. 1998 (loan) 110 141,5 33,5
Aug. 1998 (grant) 10
Sep. 1999 (grant) 9
Dec. 2001 (grant) 6
Dec 2004 (grant) 6,5
   Tajikistan (95) Mar. 2001 (loan) 60 95
Mar. 2001 (grant) 7
Dec. 2001 (grant) 7
Feb. 2003 (grant) 7
May 2005 (grant) 7
Oct 2007 (grant) 7
Ukraine III 15.10.98 98/592/EC 150 Jul. 1999 58 58 92 58
(BoP loan) 12.07.02 02/639/EC (Cancelled)
Albania III 22.04.99 99/282/EC 20 20
(BOP loan)
Bosnia I  (3) 10.05.99 99/325/EC 60 Dec. 1999 (grant) 15 60 20
(BOP loan and grant) Dec. 1999 (loan) 10
10.12.01 01/899/EC Dec. 2000 (grant) 10
Dec. 2000 (loan) 10
Dec. 2001 (grant) 15
Bulgaria IV 08.11.99 99/731/EC 100 Dec. 1999 40 100 100
(BOP loan) Sep. 2000 60
fYRoM II (4) 08.11.99 99/733/EC 80 Dec. 2000 (grant) 20 98 10
(BOP loan and grant) 18 Dec. 2000 (loan) 10
10.12.01 01/900/EC Dec. 2001 (loan) 12
Dec. 2001 (grant) 10
May 2003 (grant) 10
June 2003 (loan) 10
Dec. 2003 (loan) 18
Dec. 2003 (grant) 8
Romania  IV 08.11.99 99/732/EC 200 Jun. 2000 100 150 50 150
(BOP loan) July 2003 (loan) 50
Kosovo I (5) 19.02.00 00/140/EC 35 Mar. 2000 20 35
(Grant budgetary support) Aug. 2000 15
Montenegro (5) 22.05.00 00/355/EC 20 Aug. 2000 72 0
(Grant budgetary support) Dec. 2000 13
Moldova III 10.07.00 00/452/EC 15 15
(BOP loan) 19.12.02 02/1006/EC (Cancelled)
Kosovo II (3) 27.06.01 01/511/EC 30 Sep. 2001 15 30
(Grant budgetary support) Dec. 2002 15
Serbia and Montenegro (ex FRY) I (6) 16.07.01 01/549/EC 345 Oct. 2001 225 345 225
(BOP loan and grant) Oct. 2001 35
10.12.01 01/901/EC Jan. 2002 40
Aug. 2002 45
Ukraine IV 12.07.02 02/639/EC 110 110
(BOP loan)
Serbia and Montenegro II (ex FRY) (7) 05.11.02 02/882/EC 130 Dec. 2002 (grant) 30 105 25
Fev. 2003 (loan) 10
Aug. 2003 (grant) 35
Aug. 2003 (loan) 30
25.11.03 03/825/EC 70 Dec 2004 (grant) 10 50 20
07.12.2004 04/862/EC
April 2005 (loan) 15
Dec 2005 (grant) 25
Bosnia II (8) 05.11.02 02/883/EC 60 Fev. 2003 (grant) 15 60
Dec. 2003 (grant) 10
7/12/2004 04/861/EC
Dec 2004 (loan) 10
Jun 2005 (grant) 15
Feb 2006 (loan) 10
Moldova IV 19.12.02 02/1006/EC 15 15
Albania IV (9) 29.04.04 04/580/EC 25 Nov 2005 (grant) 32 5
March 2006 ( loan) 9
July 2006 (grant) 13
Georgia II         24.01.06 06/41/EC 33,5 August 2006 (grant) 11 22 11,5
Dec 2006 (grant) 11modified by
modified bymodified bymodified by
modified by
modified by
Kosovo 30.11.06 06/880/EC 50 50
Moldova 16.04.07 07/259/EC 45 Oct 2007 (grant) 20 20 25
Lebanon 10.12.07 07/860/EC 80 80
                                                            ------- ------- ------- ------- ------- -------
TOTAL 6404 5210,0 1194,0 2435 2435 1871
(1)
(2)
 countries.
(3)
(4) Includes a loan principal amount of up to € 50 million and grants of up to € 48 million.
(5) Exceptional financial assistance.
(6) Includes a loan principal amount of € 225 million and grants of € 120 million.
(7) Includes a loan principal amount of € 55 million and grants of € 75 million
(8) Includes a loan principal amount of € 20 million and grants of € 40 million
(9) Includes a loan principal amount of € 9million and grants of € 16 millionIncludes a loan principal amount of up to € 20 million and grants of up to € 40 million.Out of the global amount of euro 375 million, maximum amounts of euro 58 million, euro 175 million and euro 95 million were act ually agreed with the beneficiaryExceptional financial assistance, which includes a ceiling of euro 245 million for the loans and a ceiling of euro 130 million for the grantsAssistance to Israel includes a loan principal amount of € 160 million and grants of € 27.5 million in the form of interest sub sidies.
 
EN 29   EN Status of effective disbursements as of  end-December 2007 (in millions of euro) 
Authorisations Disbursements
Country Date of Reference of Maximum Dates of Amounts of Totals Undisbursed Dates of Amounts of Totals Outstanding
Council Decision Council Decision amount disbursements disbursements repayments repayments
A. EU Accession countries
Baltics 23.11.92 92/542/EC 220 135 85 110 110 25
(BOP loans) (Suspended)
of which :
    Estonia (40) Mar. 1993 20 (20) (20) mars-00 (20)
    Latvia (80) Mar. 1993 40 (40) (40) mars-00 (40)
    Lithuania (100) Jul. 1993 50 (75) (25) juil-00 (50) (25)
Aug. 1995 25 août-02
Bulgaria I 24.06.91 91/311/EC 290 Aug. 1991 150 290 mars-98 150 290
(BOP loan) Mar. 1992 140 déc-97 140
Bulgaria II 19.10.92 92/511/EC 110 Dec. 1994 70 110 déc-01 110
(BOP loan) Aug .1996 40 août-03
Bulgaria III 22.07.97 97/472/EC 250 Feb. 1998 125 250 févr-05 250
(BOP loan) Dec. 1998 125 déc-05
Bulgaria IV 08.11.99 99/731/EC 100 Dec. 1999 40 100 100
(BOP loan) Sep. 2000 60
Czech and Slovak Federal Republic 25.02.91 91/106/EC 375 Mar. 1991 185 375 mars-98 185 375
(BOP loan) Mar. 1992 190 déc-97 190
Hungary I 22.02.90 90/83/EC 870 Apr. 1990 350 610 260 Apr. 95 350 610
(Structural adjustment loan) Feb. 1991 260 ( Suspended) févr-96 260
Hungary II 24.06.91 91/310/EC 180 Aug. 1991 100 180 mars-98 100 180
(BOP loan) Jan. 1993 80 déc-97 80
Romania I 22.07.91 91/384/EC 375 Jan. 1992 190 375 févr-99 190 375
(BOP loan) Apr. 1992 185 mars-98 185
Romania II 27.11.92 92/551/EC 80 Feb. 1993 80 80 févr-00 80 80
(BOP loan)
Romania III 20.06.94 94/369/EC 125 Nov. 1995 55 125 nov-02 125
(BOP loan) Sep. 1997 40 sept-04
Dec. 1997 30 déc-04
Romania  IV 08.11.99 99/732/EC 200 Jun. 2000 100 150 50 150
(BOP loan) July 2003 50
Slovakia 22.12.94 94/939/EC 130 Cancelled 130
(BOP loan) (Jul. 1996) Cancelled
------- ------- ------- -------
TOTAL A 3305 2780 525 760RepaymentsAnnex 1B - COMMUNITY MACRO-FINANCIAL AND EXCEPTIONAL FINANCIAL ASSISTANCE
 TO THIRD COUNTRIES BY REGION
B. Western Balkans
Albania I 28.09.92 92/482/EC 70 Dec. 1992 35 70
(BOP grant) Aug. 1993 35
Albania II 28.11.94 94/773/EC 35 Jun. 1995 15 35
(BOP grant) Oct. 1996 20
Albania III 22.04.99 99/282/EC 20 20
(BOP loan) ( Cancelled)
Bosnia I  (1) 10.05.99 99/325/EC 60 Dec. 1999 (grant) 15 60 20
(BOP loan and grant) Dec. 1999 (loan) 10
10.12.01 01/899/EC Dec. 2000 (grant) 10
Dec. 2000 (loan) 10
Dec. 2001 (grant) 15
fYRoM I 22.07.97 97/471/EC 40 Sep. 1997 25 40 40
(BOP loan) Feb. 1998 15
fYRoM II (2) 08.11.99 99/733/EC 80 Dec. 2000 (grant) 20 98 10
(BOP loan and grant) Dec. 2000 (loan) 10
10.12.2001 01/900/EC 18 Dec. 2001 (loan) 12
Dec. 2001 (grant) 10
May 2003 (grant) 10
June 2003 (loan) 10
Dec. 2003 (loan) 18
Dec.) 2003 (grant) 8modified bymodified by
 
EN 30   EN Authorisations Disbursements
Country Date of Reference of Maximum Dates of Amounts of Totals Undisbursed Dates of Amounts of Totals Outstanding
Council Decision Council Decision amount disbursements disbursements repayments repaymentsRepayments
Kosovo I (3) 19.02.00 00/140/EC 35 Mar. 2000 20 35
(Grant budgetary support) Aug. 2000 15
Kosovo II (3) 27.06.01 01/511/EC 30 Sep. 2001 15 30
(Grant budgetary support) Dec. 2002 15
Montenegro (3) 22.05.00 00/355/EC 20 Aug. 2000 7 20
(Grant budgetary support) Dec. 2000 13
16.07.01 01/549/EC 345 Oct. 2001 (grant) 35 345 Oct.-16 225
modified by Oct. 2001 (loan) 225
10.12.2001 01/901/EC Jan. 2002 (grant) 40
Aug.2002 (grant) 45
05.11.02 02/882/EC 130 Dec. 2002 (grant) 30 105 25
Fev. 2003 (loan) 10
Aug. 2003 (grant) 35
Aug. 2003 (loan) 30
25.11.03 03/825/EC (7) 70 Dec 2004 (grant) 10 50 20
07.12.04 04/862/EC
April  2005 (loan) 15
Dec 2005 (grant) 25
05.11.02 02/883/EC 60 Fev. 2003 (grant) 15 60
Dec. 2003 (grant) 10
Dec 2004 (loan) 10
07.12.04 04/861/EC June 2005 (grant) 15
Feb 2006 (loan) 10
29.04.04 04/580/EC 25 Nov  2005 (grant) 3 25 -------
Mar 2006 (loan) 9Jul 2006 (grant) 13
Kosovo  30.11.06 2006/880/EC 50 50
TOTAL B 1088 973 115 70
------- ------- -------
(1)  Includes a loan principal amount of € 20 million and grants of € 40 million.(2)  Includes a loan principal amount of up to € 50 million and grants of up to € 48 million.(3) Exceptional financial assistance.(4)  Includes a loan principal amount of € 225 million and grants of € 120 million.(5) Includes a loan principal amount of € 55 million and grants of € 75 million(6) Includes a loan principal amount of € 20 million and grants of € 40 million(7) Includes a loan principal amount of € 25 million and grants of € 45 million(8) Includes a loan principal amount of € 9 million and grants of € 16 millionmodified by
Bosnia II (6)
(BOP loan and grant)
modified by
(loan and grant)Serbia and Montenegro I 
(ex FRY) (4)
Serbia and Montenegro II 
( ex FRY) (5)(BOP loan and grant)
Albania IV (8)
 
EN 31   EN Authorisations Disbursements
Country Date of Reference of Maximum Dates of Amounts of Totals Undisbursed Dates of Amounts of Totals Outstanding
Council Decision Council Decision amount disbursements disbursements repayments repaymentsRepayments
C. New Independent States (NIS)
Armenia, Georgia and Tajikistan (9) 17.11.97 97/787/EC 375 294,5 80,5 138
(Structural adjustment loans and grants) modified by
of which 28.3.00 00/244/EC
   Armenia (58) Dec. 1998 (loan) 28 (58) 0
Dec. 1998 (grant) 8
Dec.  1999 (grant) 4
Feb. 2002 (grant) 5,5
Dec. 2002 (grant) 5,5 7
Jun 2004( grant) 5,5
Dec 2005(grant) 1,5
   Georgia (175) Jul. 1998 (loan) 110 (141,5) (33,5)
Aug. 1998 (grant) 10
Sep. 1999 (grant) 9
Dec. 2001 (grant) 6Dec. 2004 (grant) 6,5
   Tajikistan (95) Mar. 2001 (loan) 60 (95)
Mar. 2001 (grant) 7
Dec. 2001 (grant) 7
Feb 2003 (grant) 7
May 2005 (grant) 7
Oct 2006 (grant) 7
Belarus 10.04.95 95/132/EC 55 Dec. 1995 30 30 25 From 12/2001 30
(BOP loan) (Suspended)
Moldova I 13.06.94 94/346/EC 45 déc-94 25 45 From 12/2000 55 4 0
(BOP loan) Aug. 1995 20 From 08/2001
Moldova II 25.03.96 96/242/EC 15 Dec. 1996 15 15 From 10/2002 15
(BOP loan) in 5 tranches
Moldova III 10.07.00 00/452/EC 15 15
(BOP loan) 19.12.02 02/1006 EC (cancelled)
19.12.02 02/1006/EC 15 15
(15)
Ukraine I 22.12.94 94/940/EC 85 Dec. 1995 85 85 From 12/2001 85
(BOP loan)
Ukraine II 23.10.95 95/442/EC 200 Aug. 1996 50 200 From 08/2002 200
(BOP loan) Oct. 1996 50 From 10/2002
Sep. 1997 100
Ukraine III 15.10.98 98/592/EC 150 Jul. 1999 58 58 92 58
(BoP loan) 12.07.02 02/639/EC (cancelled)
12.07.02 02/639/EC 110 110
(15)
Georgia II         21.01.06       06/41/EC 33,5 Aug 2006 11 22 11,5
Dec 2006 11
Moldova        16.04.07      07/259/EC 45       Oct 2007 20 20 25
------- ------- ------- -------
TOTAL C 1143,5 769,5 374 566
D. Mediterranean countries
Israel   (10) 22.07.91 91/408/EC 187,5 Mar. 1992 187,5 187,5 déc-97 160 160
(Structural adjustment soft loan)
Algeria I 23.09.91 91/510/EC 400 Jan. 1992 250 400 déc-97 250 250 150
(BOP loan) Aug. 1994 150 août-01
Algeria II 22.12.94 94/938/EC 200 Nov. 1995 100 100 100 nov-02 100
(BOP loan) (Suspended)
Lebanon 10.12.07      07/860/EC 80 80
------- ------- ------- -------
TOTAL D 867,5 687,5 180 2435 250
TOTAL A+B+C+D 6404 5210,0 1194,0 1646
9)   Exceptional financial assistance, which includes a ceiling of euro 245 million for the loans and a ceiling of euro 130 mil lion for the grants
        
beneficiary countries
(10)    Assistance to Israel includes a loan principal amount of ECU 160 million and grants of ECU 27,5 million in the form of interesr subsidies.Ukraine IV
Out of the global amount of euro 375 million, maximum amounts of  euro 58 million, euro 175 million and euro 95 million were act ually agreed with theMoldova IV
(BOP grant)
(BOP loan)