COMMISSION OF THE EUROPEAN COMVIUNITIES 
COM(94) 364 final 
Brussels, 08.09.1994 
a'•••'•• • ' 
J REPORT FROM THE COMMISSION 
H '•:.•.. ••'••'.' 
|':;: '•'.:' .•: 
I ON GUARANTEES 
COVERED BY THE GENERAL BUDGET 
SITUATION AT 31 DECEMBER 1993 
REPORT ON GUARANTEES COVERED BY THE GENERAL BUDGET 
SITUATION AT 31 DECEMBER 1993 
This report describes the situation as regards budget guarantees at 31 December 1993. 
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. 
The Commission has already presented five reports to the budgetary authority. 
The report is in three parts: 
1. Description of operations entered in the budget and events since the last report. 
2. Situation at 31 December 1993 as regards risks for the budget in future years and 
guarantees already activated. 
3. Assessment of the economic and financial situation of non-Community countries 
benefiting from the most important operations. 
PART ONE: OPERATIONS ALREADY ENTERED IN THE BUDGET 
The budgetary authority has authorized 22 headings with token entries in the 1994 
budget to cover any payment of guarantees. These headings can be divided into three 
categories: borrowing and lending within the Community, borrowing and lending 
outside the Community and guarantees given to financial institutions. 
I. BORROWINGS TO BE ON-LENT WITHIN THE COMMUNITY 
A. COMMUNITY BORROWING OPERATIONS TO PROVIDE 
BALANCE-OF-PAYMENTS SUPPORT 
The Community is authorized to borrow on the capital markets or from financial 
institutions and make the sums raised available to Member States experiencing 
temporary balance-of-payments difficulties. 
The outstanding amount of loans granted to Member States for this purpose may 
not exceed ECU 14 billion in principal. 
At 31 December 1993 there were two operations in respect of Greece under the 
decisions of 9 December 1985 and 4 March 1991 and one operation in respect of 
Italy under the decision of 18 January 1993. 
At 31 December 1993 the amount outstanding was ECU 1 200 million in loans to 
Greece and ECU 3 989.8 million in loans to Italy (Table 1). 
B. EURATOM BORROWING OPERATIONS 
In 1977 the Commission was empowered to borrow funds to be used to help 
finance nuclear power stations. 
Loans are made to electricity producers and carry the usual guarantee demanded 
by banks. Recipients are often State-owned companies or companies enjoying a 
State guarantee. 
The maximum amount of borrowings authorized is ECU 4 billion, of which 
ECU 500 million was authorized by the 1977 decision, ECU 500 million in 
1980, ECU 1 billion in 1982, ECU 1 billion in 1985 and ECU 1 billion in 1990. 
The amount borrowed comes to around ECU 2 900 million, leaving 
ECU 1 100 million which may still be raised. 
At 31 December 1993 the total outstanding was ECU 1 018.2 million. 
On 9 December 1992 the Commission proposed that the balance of borrowings not 
used in the Member States could be used to finance the improvement of the degree 
of efficiency and safety of nuclear power stations in the countries of Central and 
Eastern Europe and in the CIS. 
C. BORROWING OPERATIONS FOR THE PROMOTION OF INVESTMENT IN 
THE COMMUNITY 
The Commission was empowered by a Council Decision of 16 October 1978 to 
borrow funds to be used to promote investment in the Community (New 
Community Instrument). 
The authorized borrowing ceiling was fixed at ECU 1 billion by the Decision of 
16 October 1978 and was then raised by ECU 1 billion by the Decision of 
15 March 1982. The ceiling was further raised by ECU 3 billion by the Decision of 
19 April 1983 and by ECU 750 million by the Decision of 9 March 1987. 
The proceeds of the operations are paid out in the form of loans granted by the EIB, 
acting for the Commission, to finance investment projects which contribute to 
greater convergence and growing integration and are consistent with the priority 
Community objectives in the energy, industry and infrastructure sectors, taking 
account of such factors as the regional impact of the projects and the need to 
combat unemployment. Support for small businesses was also made a priority 
objective by the Decision of 26 April 1982. 
A Decision of 20 January 1981 also empowered the Community to contract loans in 
order to provide exceptional aid of ECU 1 billion to the regions of Italy affected by 
the earthquake of November 1980. A similar decision involving ECU 80 million 
was adopted on 14 December 1981 for the regions affected by the earthquakes in 
Greece in February/March 1981. 
The maximum amount of borrowings authorized thus comes to ECU 6 830 million 
At 31 December 1993 the total outstanding was ECU 2 202 million, 33.7% less 
than on 31 December 1992. 
The risk is spread over a large number of borrowers In addition, most of the loans 
are global loans to financial institutions which guarantee repayment of the funds 
Every year the EIB provides the Commission with a list of debtors who, according 
to its information, risk defaulting in the coming year. So far, no names have been 
recorded on this list. 
U. LOANS RAISED FOR ON-LENDING TO NON-COMMUNITY 
COUNTRIES 
PROGRAMME OF BORROWINGS CONTRACTED BY THE COMMUNITY 
TO PROVIDE MEDIUM-TERM FINANCIAL ASSISTANCE TO HUNGARY 
(Hungary I) 
The Community is granting Hungary a medium-term loan of up to ECU 870 million 
in principal for a maximum of five years. The loan is intended to facilitate the 
adjustment of the Hungarian economy in a way which will enable it to derive all the 
benefits of a market-based economy. It is being made available in tranches. 
The first tranche of ECU 350 million was paid on 20 April 1990. A second tranche 
of ECU 260 million was paid on 14 February 1991. The third tranche, which is not 
to exceed ECU 260 million, was planned for 1992 but was not paid out as 
Hungary's balance of payments has been more favourable than expected. The 
tranches will be repaid in one instalment after five years and interest, which is at 
variable rates, is payable half-yearly. 
B. ADDITIONAL MEDIUM-TERM FINANCIAL ASSISTANCE TO HUNGARY 
(Hungary II) 
As the break-up of the Council for Mutual Economic Assistance (Comecon) and the 
Gulf crisis threatened to compromise the initial encouraging results of the reforms 
undertaken, it was decided to launch a supplementary borrowing and lending 
operation for ECU 180 million under an overall ECU 360 million G-24 aid 
programme. 
The first tranche of ECU 100 million was paid on 14 August 1991. It will be repaid 
in one instalment after seven years, and interest, which is at variable rates, is payable 
half-yearly. The second tranche of ECU 80 million was due paid on 
15 January 1993. It will be repaid in January 1997 and interest, which is at a fixed 
rate, is payable annually. 
C BORROWING CONTRACTED BY THE COMMUNITY TO PROVIDE 
MEDIUM-TERM FINANCIAL ASSISTANCE FOR THE CZECH AND 
SLOVAK FEDERAL REPUBLIC 
As part of G-24*s total aid of around ECU 750 million, the Commission, on behalf 
of the Community, was empowered to borrow, in two tranches, ECU 375 million 
for a period of seven years. The proceeds of this operation were to be on-lent on 
the same terms to the Czech and Slovak Federal Republic. 
The first tranche of ECU 185 million was paid on 14 August 1991. It will be repaid 
in one instalment after seven years, and interest, which is at variable rates, is payable 
half-yearly. 
The second tranche of ECU 190 million was paid on 2 March 1992 and will be 
repaid in one instalment after six years. 
Following the division of Czechoslovakia into the Czech Republic and the Slovak 
Republic on 1 January 1993, the Commission proposed that the loan be divided 
between the two Republics. 
Two thirds of the loan - ECU 250 million - would be for the Czech Republic and 
one third - ECU 125 million - for the Slovak Republic. 
D. BORROWING CONTRACTED BY THE COMMUNITY TO GRANT 
BULGARIA MEDIUM-TERM FINANCIAL ASSISTANCE 
As part of G-24's total aid of ECU 580 million, the Commission, on behalf of the 
Community, was empowered to borrow, in two tranches, ECU 290 million for a 
period of seven years. The proceeds of this operation were to be on-lent on the 
same terms to Bulgaria. 
The first tranche of ECU 150 million was paid to Bulgaria on 14 August 1991. It 
will be repaid in one instalment after seven years, and interest, which is at variable 
rates, is payable half-yearly. 
The second tranche of ECU 140 million was paid on 2 March 1992 and will be 
repaid in one instalment after five years. Interest, which is at variable rates, is 
payable quarterly. 
E. BORROWING CONTRACTED BY THE COMMUNITY TO GRANT 
BULGARIA ADDITIONAL MEDIUM-TERM FINANCIAL ASSISTANCE 
As part of G-24*s total aid of ECU 220 million in 1992 and 1993, the Commission, 
on behalf of the Community, was empowered to borrow, in two tranches, 
ECU 110 million for a period of seven years. The proceeds of this operation were 
to be on-lent to Bulgaria. 
Since the conditions for Community assistance had not been met by the end of 1993, 
neither of the two tranches have yet been paid out. 
BORROWING CONTRACTED BY THE COMMUNITY TO GRANT ISRAEL 
MEDIUM-TERM FINANCIAL ASSISTANCE 
As part of the financial assistance agreed for Israel and the population of the 
occupied territories, the Commission was empowered to borrow, on behalf of the 
Community, ECU 160 million in one tranche for a period of seven years. The 
proceeds were to be paid out to Israel on the same terms and are accompanied by an 
interest subsidy of ECU 27.5 million paid from the Community budget. 
This operation started on 2 March 1992. The borrowing is to be repaid in full on 
15 December 1997. 
G BORROWING CONTRACTED BY THE COMMUNITY TO GRANT 
ROMANIA MEDIUM-TERM FINANCIAL ASSISTANCE 
As part of G-24's total aid of ECU 750 million, the Commission, on behalf of the 
Community, was empowered to borrow, in two tranches, ECU 375 million for a 
period of seven years. The proceeds of this operation were to be on-lent on the 
same terms to Romania. 
The first tranche of ECU 190 million for a term of seven years was paid on 
22 January 1992. It will be repaid in one instalment on 1 February 1999, and 
interest, which is at variable rates, is payable half-yearly. 
The second tranche of ECU 185 million for a term of six years was paid on 
1 April 1992 and will be repaid in one instalment on 18 March 1998. Interest, 
which is at variable rates, is payable half-yearly. 
H BORROWING CONTRACTED BY THE COMMUNITY TO GRANT 
ROMANIA ADDITIONAL MEDIUM-TERM FINANCIAL ASSISTANCE 
As part of G-24's new aid of ECU 160 million, the Commission, on behalf of the 
Community, was empowered to borrow ECU 80 million for a maximum period of 
seven years The proceeds of this operation were to be on-lent on the same terms 
to Romania. 
In view of its size, the loan was paid out in a single tranche on 26 February 1993. It 
will be repaid in one instalment on 26 February 2000, and interest is payable half-
yearly 
I. BORROWING CONTRACTED BY THE COMMUNITY TO GRANT ALGERIA 
MEDIUM-TERM FINANCIAL ASSISTANCE 
The Commission, on behalf of the Community, was empowered to borrow 
ECU 400 million for a maximum period of seven years in two tranches of 
ECU 250 million and ECU 150 million. The proceeds of this operation were to be 
on-lent on the same terms to Algeria. 
A bridging loan was granted on 23 December 1991 to cover the first tranche and 
was repaid from the net proceeds of the borrowing contracted on 14 January 1992 
for a period of six years. 
The loan is to be repaid in one instalment on 15 December 1997 and interest is 
payable annually every 15 December. 
The second tranche has not yet been paid. 
J BORROWING CONTRACTED BY THE COMMUNITY TO GRANT 
MEDIUM-TERM FINANCIAL ASSISTANCE TO THE SOVIET UNION 
AND/OR ITS REPUBLICS 
The Commission has proposed a medium-term loan of up to ECU 1 250 million for 
the Soviet Union and/or its Republics in order to finance imports of agricultural 
products, foodstuffs and medicines from the Community and Eastern Europe. 
Parliament delivered a favourable opinion and the Council adopted its formal 
decision on 16 December 1991. The guarantee heading was set up when the 1992 
budget was adopted in December 1991. 
The loan will be divided between the various Republics of the former Soviet Union 
for a maximum period of three years. 
Most of the loan contracts were signed in the course of 1992: 
with Armenia (ECU 38 million), Kyrgyzstan (ECU 32 million), 
Turkmenistan (ECU 45 million) and Moldova (ECU 27 million) on 
10 July 1992; 
with Ukraine (ECU 130 million) on 13 July 1992; 
with Belarus (ECU 102 million), Tajikistan (ECU 55 million) and Georgia 
(ECU 70 million) on 24 July 1992; 
with Russia (ECU 150 million) on 9 September 1992, 
with Russia (ECU 349 million) on 9 December 1992; 
with Kazakhstan (ECU 25 million) on 15 December 1992; 
On 5 May 1993 two further contracts were signed with Armenia (ECU 20 million) 
and Georgia (ECU 10 million). 
These contracts were financed through the reallocation of ECU 30 million originally 
intended for Kazakhstan, which stated that it would not use all this amount since 
ECU 25 million was sufficient, and a reduction in the allocation of Uzbekistan. 
On 6 December 1993 a further loan contract of ECU 40 million was signed with 
Georgia. This amount had originally been allocated to Uzbekistan (whose initial 
allocation came to ECU 129 million). Neither Uzbekistan nor Azerbaijan (with an 
allocation of ECU 68 million) received Community loans in 1992-93 since they did 
not satisfy one of the criteria for eligibility - they do not accept joint and several 
responsibility for the debt of the former Soviet Union. 
At 31 December 1993 the amount of loans actually being used came to ECU 802.7 
million. This figure corresponds to the total outstanding at the end of December 
1993. 
The capital repayment and interest payment dates for this operation vary depending 
on the amount of the loan and on the Republic: 
- Armenia (ECU 38 million), Belarus, Georgia (ECU 70 million), Kyrgyzstan, 
Moldova, Tajikistan, Turkmenistan, Ukraine, Russia (ECU 150 million): 
- interest on 20 April and 20 October 
- capital on 20 August 1995 (20 August 1994 and 1995 for Belarus, 
Ukraine and Russia) 
- Armenia (ECU 20 million), Kazakhstan, Russia (ECU 349 million), 
Georgia (ECU 10 million and ECU 40 million): 
- interest on 15 January and 15 July 
- capital on 15 January 1996 (15 January 1995 and 1996 for Russia 
and 15 January 1997 for Georgia (ECU 40 million)). 
K BORROWING CONTRACTED BY THE COMMUNITY TO GRANT MEDIUM 
TERM FINANCIAL ASSISTANCE TO ESTONIA. LATVIA AND 
LITHUANIA 
As part of the G-24's total aid of ECU 440 million for these three countries, the 
Commission, on behalf of the Community, was empowered to borrow 
ECU 220 million for a period of seven years. The proceeds of this operation are to 
be on-lent on the same terms in two tranches: 
ECU 40 million for Estonia; 
ECU 80 million for Latvia; 
ECU 100 million for Lithuania. 
The first tranches of the loan for Estonia (ECU 20 million) and for Latvia 
(ECU 40 million) were paid on 31 March 1993. The loans are to be repaid in one 
9 
instalment on 31 March 2000 and interest is payable half-yearly every 31 March and 
30 September. 
The first tranche for Lithuania was paid on 27 July 1993; it is to be repaid in one 
instalment on 27 July 2000 and interest is payable annually every 27 July. 
10 
ID. COMMUNITY GUARANTEE TO NON-COMMUNITY COUNTRIES 
A. EUROPEAN INVESTMENT BANK LOANS TO MEDITERRANEAN 
COUNTRIES GUARANTEED BY THE GENERAL BUDGET 
Under the terms of the Council Decision of 8 March 1977, the Community 
guarantees loans to be granted by the European Investment Bank as part of the 
Community's financial commitments towards the Mediterranean countries. 
This decision was the basis for the contract of guarantee signed by the European 
Economic Community and the European Investment Bank on 30 October 1978 in 
Brussels and 10 November 1978 in Luxembourg introducing a global guarantee 
of 75% on all credit lines made available for loans in the following countries: 
Portugal (Financial Protocol, pre-accession aid), Greece, Spain (financial 
cooperation), Malta, Tunisia, Algeria, Morocco, Turkey, Cyprus, Egypt, Jordan, 
Syria, Israel, Yugoslavia and Lebanon. 
In addition, by way of exception, a 100% guarantee covers loans allocated for 
emergency aid to Portugal in accordance with the Council Decision of 
7 October 1975. 
A new extension of the contract of guarantee is established for each new Financial 
Protocol. 
The loans authorized at 31 December 1993 total ECU 7 667 million, of which 
ECU 1 500 million is for Spain, Greece and Portugal and ECU 6 167 million for the 
non-member Mediterranean countries. At 31 December 1993 the total of 
outstanding loans came to ECU 2 168 million (taking account of the 75% limit), of 
which ECU 572 million was accounted for by Spain, Greece and Portugal and 
ECU 1 596 million by the non-member Mediterranean countries. 
There is also provision for EIB loans outside these protocols under Council 
Regulation (EEC) No 1763/92 of 29 June 1992 concerning financial cooperation in 
respect of all Mediterranean non-member countries. 
EIB loans under this operation must not exceed ECU 1 800 million. 
At 31 December 1993 ECU 317 million had been made available but no 
disbursements had taken place. 
In July 1993 the Council decided to conclude a new protocol with the Republic of 
Slovenia in order to finance projects to contribute to the country's economic 
development through loans totalling ECU 150 million from the EIB's own resources 
for a period of up to five years with a budget guarantee. 
11 
At 31 December 1993, the breakdown of authorizations by country (non-member 
countries only) was as follows: 
Algeria 640 
Cyprus 92 
?«*& 802 
Israel 
Jordan L L D 
Lebanon 198 
Malta 222 
Morocco 55 
Slovenia $ j j 
Syria. 150 
Tunisia 
Turkey 208 
Yugoslavia4 418 
90 
760 
Protocols - Total 4367 » 
Horizontal financial 1800 
cooperation 
Mediterranean - Total 6167 
The loans are generally for 15 years with 3 to 4-year periods of grace on capital 
repayments. 
The second protocol with Yugoslavia was suspended 
ECU 100 million of credits could still be granted. 
12 when 
B. LOANS GRANTED BY THE EUROPEAN INVESTMENT BANK IN 
COUNTRIES OF CENTRAL AND EASTERN EUROPE 
In response to a call made by the Council on 9 October 1989, the Board of 
Governors of the European Investment Bank decided on 29 November 1989 to 
authorize the Bank to provide loans from its own resources to finance investment 
projects in Hungary and Poland for a total amount not exceeding ECU 1 billion. 
These loans are granted to finance investment projects which satisfy the Bank's 
usual requirements for loans from its own resources. The contract of guarantee was 
signed on 24 April 1990 in Brussels and 14 May 1990 in Luxembourg. 
On 14 May 1991 the budgetary authority extended this guarantee to loans made in 
Czechoslovakia, Bulgaria and Romania up to a maximum of ECU 700 million. 
The extension of the contract of guarantee was signed on 31 July 1991. 
On 23 October 1992 the Commission presented a proposal for a Council Decision 
extending this Community guarantee to losses incurred by the EIB as a result of 
loans granted to Estonia, Latvia and Lithuania; this has been approved by the 
budgetary authority. 
The overall ceiling on loans which the EIB may grant in these countries was set at 
ECU 200 million for a period of three years. 
On 18 December 1992 the Commission also proposed the extension of this 
guarantee to losses incurred by the EIB as a result of loans granted in Albania. 
On 13 December 1993 the budgetary authority renewed the Community guarantee 
for a period of three years for loans granted by the EIB in the countries of Central 
and Eastern Europe (including the Baltic States and Albania) up to a maximum of 
ECU 3 billion. 
The loans are generally long-term: 15 years on average with 3 to 4-year periods of 
grace on capital repayments. 
At 31 December 1993, ECU 1 655 million had been made available in the Central 
and Eastern European countries but only ECU 300 million had been disbursed. 
13 
C LOANS GRANTED BY THE EUROPEAN INVESTMENT BANK IN NON-
MEMBER COUNTRIES 
At its meeting of 19 May 1992 the Council (Economic and Financial Affairs) 
adopted the guidelines proposed by the Commission for the extension of EIB 
activities outside the Community and asked it to grant loans in accordance with its 
statutes and its usual criteria to projects of mutual interest in countries with which 
the Community has concluded cooperation agreements. 
An overall limit of ECU 250 million per year has been set for a 3-year period, this 
ceiling will be reviewed at the end of the period. 
These loans benefit from Community budget guarantees. The Commission 
presented a proposal for a decision to this effect on 3 June 1992. The formal 
Council Decision followed on 15 February 1993. The contract of guarantee was 
signed on 4 November 1993 in Brussels and on 17 November 1993 in Luxembourg. 
The budgetary authority inserted a heading for this purpose in the 1993 budget. 
At 31 December 1993 credit lines of ECU 99 million had been signed but no 
disbursements had taken place. 
D. COMMUNITY CREDIT GUARANTEE FOR EXPORTS OF AGRICULTURAL 
PRODUCTS AND FOODSTUFFS FROM THE COMMUNITY TO THE 
FORMER SOVIET UNION 
The Community has decided to guarantee loans granted to the former Soviet Union 
by a pool of banks to finance imports of agricultural products and foodstuffs 
originating in the Community and the countries of Central and Eastern Europe. 
The Community guarantee covers 98%, up to a maximum of ECU 500 million, of 
any losses in principal (around ECU 408 million) and interest (around 
ECU 92 million). 
As the credit line has not been used in full and as the time limit for use has not been 
extended, the amount guaranteed comes to only ECU 375.5 million in principal and 
ECU 80.3 million in interest. 
The Community will receive a surety commission of 0.67% of the amount 
guaranteed in consideration for this guarantee. Half of this commission was paid on 
26 December 1991 under the terms of the contract. The balance corresponding to 
the Community guarantee was paid on 28 January 1993. 
14 
On 26 November 1991 the terms of the loan and the arrangements for the utilization 
of the funds were laid down in an exchange of letters between the Commission and 
the Soviet authorities. On the same day the Community and the banks signed a 
contract of guarantee. 
Following the disappearance of the Soviet Union, it has been decided that the funds 
will be used by the Russian Republic. 
The loan is for three and a half years from the date of signature. 
Interest will be payable half-yearly and the principal will be repaid in three 
instalments, 20, 31 and 42 months after the agreement has been signed. 
The first interest payment was due on 9 September 1992 and was made on 
25 September 1992. 
The second interest payment was due on 9 March 1993 and was made on 
2 April 1993 together with the interest for late payment of the September 
instalment 
The capital repayment due on 26 July 1993 and the third interest payment due on 
9 September 1993 were made on 18 November 1993 together with the interest for 
late payment of the instalments due on 9 March and 26 July. 
15 
PART TWO: 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 1993, giving the 
minimum level of risk to the Community assuming that there are no early 
repayments; 
on a more forward-looking basis, by reference to all the operations 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. 
For the latter exercise a number of assumptions have to be made about dates of 
disbursement, terms of repayment, interest and exchange rates, etc.; details are given in 
the annex. However, this method does give some idea about the future level of risks 
connected with the proposals made. 
The results are shown in the attached tables, 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 financial assistance and loans for projects guaranteed by the borrowers in the case of 
NCI and EIB operations, for example. 
The following analysis distinguishes between total risk, the risk in respect of Member 
States and the risk in respect of non-member countries. 
16 
I. TOTAL RISK 
A. AMOUNT OUTSTANDING AT 31 DECEMBER 1993 (Table 1) 
The total risk at 31 December 1993 came to ECU 14 377 million, 12% more than at 
30 June 1992. 
B. MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET: 
OPERATIONS DISBURSED AT 31 DECEMBER 1993 (Table 2) 
The total risk, which came to ECU 3 270 million in 1993, will drop to 
ECU 2 766 million in 1994 after which it will rise to ECU 3 033 million in 1996 and 
then fall again before increasing to ECU 3 204 million in 2000. 
C. MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE 
COMMUNITY BUDGET (Table 3) 
This risk comes to ECU 3 200 million in 1994 and will increase gradually to 
ECU 4 317 million in 1996; it will fall to ECU 4 050 million in 1997, increase to 
ECU 4 675 million in 1998, fall again in 1999 and reach ECU 7 971 million in 2000. 
II. RISK IN RESPECT OF THE MEMBER STATES 
A. AMOUNT OUTSTANDING AT 31 DECEMBER 1993 (Table 1) 
The amount of capital outstanding in respect of operations in the Member States 
came to ECU 8 982 million at 31 December 1993, an increase of 15.6% compared 
with 30 June 1992. 
This increase is mainly due to the operation in Italy which accounts for 
ECU 3 990 million. 
The amount outstanding from the other operations has fallen or remained stable. 
B. MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET: 
OPERATIONS DISBURSED AT 31 DECEMBER 1993 (Table 2) 
The risk for 1993 came to ECU 2 744 million. 
The risk will drop to ECU 2 091 million in 1996 and will again fall to a very low 
level in 1999 (ECU 291 million) before rising to ECU 2 771 million in 2000 when 
part of the loan granted to Italy falls due (ECU 2 655 million in principal and 
interest). 
17 
C. MAXIMUM THEEORETICAL ANNUAL RISK BORNE BY THE 
COMMUNITY BUDGET (Table 3) 
The trend is the same as in the previous case up to 1996 when the risk will amount 
to ECU 2 638 million. It will then drop to ECU 1 983 million in 1997, and increase 
to ECU 2 596 million in 1998 before reaching a peak of ECU 5 827 million in 2000. 
IH. RISK IN RESPECT OF NON-MEMBER COUNTRIES 
A. AMOUNT OUTSTANDING AT 31 DECEMBER 1993 (Table 1) 
The amount of capital outstanding at 31 December 1993 came to 
ECU 5 395 million, an increase of 6.4% compared with 30 June 1993. 
The increase in the first half of the year was 20.5%. 
B. MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET: 
OPERATIONS DISBURSED AT 31 DECEMBER 1993 (Table 2) 
The risk for 1993 came to ECU 526 million and will increase to ECU 1 597 million 
in 1995, mainly because two repayments of principal then fall due: 
ECU 350 million from Hungary; 
ECU 511 million from the Republics of the former Soviet Union. 
The risk will drop in 1996 and increase again in 1997 to ECU 1 276 million as the 
following payments fall due: 
ECU 80 million from Hungary; 
ECU 190 million from the Czech and Slovak Republics; 
ECU 140 million from Bulgaria; 
ECU 250 million from Algeria; 
ECU 160 million from Israel. 
At ECU 988 million, the risk will be smaller but still at a high level in 1998, but 
should fall to less than ECU 500 million in 1999 and 2000. 
18 
C- MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE 
COMMUNITY BUDGET (Table 3) 
The risk for 1995 should come to ECU 2 051 million; in particular, the Republics of 
the former Soviet Union are to repay principal of ECU 653 million that year. 
The risk will drop to ECU 1 680 million in 1996, rise again to ECU 2 067 million in 
1997, ECU 2 079 million in 1998, ECU 2 117 million in 1999 and 
ECU 2 144 million in 2000. 
19 
IV. ACTIVATION OF GUARANTEES 
In the second half of 1993, the EIB again called on the budget guarantee in respect 
of loans of around ECU 6.1 milhon to the Republics of former Yugoslavia (Bosnia-
Hercegovina, Macedonia and Serbia). Payments of ECU 13.5 million were made to 
the EIB on 7 September and 10 December 1993. 
At 31 December the Republics of former Yugoslavia still had to repay 
ECU 28.6 million in respect of debts paid by the Community. 
The Commission also made payments from 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: 
payment of principal and interest due from Russia on 26 July and interest 
due on 9 September 1993 in respect of a loan granted by a consortium of 
banks and guaranteed by the Community; 
payment of interest : 
due from three Republics of the former Soviet Union (Russia, Armenia, 
Kazakhstan) on 15 July 1993 in respect of the borrowing and lending 
operation of ECU 1 250 million for these Republics, 
due from nine Republics of the former Soviet Union on 20 October 1993 in 
respect of the same operation, 
due from Algeria and Bulgaria on 15 December 1993 in respect of the 
loans and financial assistance granted to each of these countries. 
These payments were eventually made by the debtors concerned, except in the case 
of Tajikistan which had still not settled its debt on 31 December 1993. 
20 
PART THREE: CHANGES IN POTENTIAL RISKS 
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. 
I. TYPES OF OPERATION 
The risks to which the above figures relate derive from a variety of operations which 
can be divided into two categories: operations with macroeconomic objectives and 
those with microeconomic objectives. 
A OPERATIONS WITH MACROECONOMIC OBJECTIVES 
The first of these are the balance of payments loans for Member States, normally 
carrying strict economic conditions and undertakings. 
Financial assistance operations are similar in nature but are intended for non-
member countries. 
Finally, this category includes the credit guarantee of ECU 500 million and the loan 
of ECU 1 250 million to finance imports of agricultural products and foodstuffs into 
the Soviet Union, since the risk involved in these two operations depends to a large 
extent on macroeconomic and political developments in the country. 
B OPERATIONS WITH MICROECONOMIC OBJECTIVES 
These are loans to finance specific 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 State companies or financial institutions and, in addition to the 
Community guarantee, are covered by the usual guarantees demanded by banks. 
They are the Euratom and NCI loans in Member States and the Euratom and EIB 
loans outside the Community (Mediterranean and Central and Eastern Europe). 
21 
ECONOMIC AND FINANCIAL SITUATION OF THIRD COUNTRIES 
RECEIVING EU ASSISTANCE UNDER OPERATIONS WITH 
MACRO-ECONOMIC OBJECTIVES5 
A. ALGERIA 
1. General economic situation 
GDP registered a 2% decline in 1993. Apart from the general climate of insecurity, 
economic activity was hampered by a shortage of inputs, spare parts and equipment goods 
due to a very strict administrative control of the use of available foreign exchange 
resources. The financial situation of the enterprise sector further deteriorated and industry 
subsidies continued to weigh heavily on the state budget. The government budget deficit 
deteriorated substantially to an unsustainable level of 14.9% of GDP. Growing 
government and state enterprises deficits resulted in increased credit volumes and a 
growth in the broad money supply by 21%. 
In spite of these inflationary pressures, inflation actually slowed down from 32% end 1992 
to 16% end 1993. This can only be explained in the light of continued administrative price 
controls and coercion, especially in the state enterprises sector. 
2. The balance of payments 
Export revenues, generated almost exclusively by hydrocarbon products, diminished by 
almost 20% as world oil prices fell. Given the strict foreign exchange allocation system 
established end 1992, this has provoked a sharp decline in imports, from around US$ 10 
billion in 1992 to US$ 7.8 billion only in 1993. The current account surplus declined to 
around US$ 1 billion. In view of the economic and security situation, foreign investments 
virtually disappeared. As the economic programme agreed with the IMF went off-track in 
1992 and no new programmes were agreed upon in 1993, official medium and long term 
financing resources diminished and were replaced, to a limited extent, by short-term 
commercial credits. 
The exchange rate also remained under administrative control and depreciated by 5.5% 
only, thus leading to a substantial appreciation of the real effective exchange rate and a 
consequent loss of competitiveness for domestic industries. The margin between the 
official exchange rate and the parallel market rate widened to nearly 160%. 
3. Foreign debt 
In 1993, on average about 90% of all export revenues were used to service a foreign debt 
stock of some US$ 26.3 billion, requiring US$ 2.1 billion in interest payments and US$ 
7.1 billion in repayments of principal. Nearly three quarters of this debt stock consists of 
publicly guaranteed private sector credits. Non-guaranteed credits are non-existant. 
This section also provides information on the republics of the former Soviet Union. 
22 
About 13% are bilateral credits, mostly non-concessional. Short-term debt is marginal in 
the total stock, although its share may have increased recently. 
Towards the end of 1993, Algeria started, for the first time, to run into arrears on debt 
service. These may be, initially, of a purely technical nature. But the negative trend in 
export revenus, due to decreasing oil prices, causes concern as it undermines Algeria's 
debt service capacity. By the end of the year, the debt service-to-exports ratio climbed to 
close to 100%, up from an already very high 72% in late 1992. This created a situation 
which is unsustainable in the long run as the administrative compression of imports, in 
order to ensure external debt service, erodes the economy's productive capacity and 
creates consumer hardship. As this situation continued to aggravate early 1994, external 
debt reprofiling or rescheduling operations are now contemplated by the authorities. 
23 
B. BULGARIA 
1. General economic situation 
Stabilization and reform in Bulgaria slowed down in 1993. The budget deficit deteriorated 
significantly to some 11% of GDP (against 7% a year earlier). Financial discipline within 
state-owned enterprises also weakened. With virtually no external financing, the budget 
deficit was financed through domestic bank credit. Inflation remained high, at 64% in the 
year to December 1993 (79% in 1992). Real GDP is estimated to have dropped by 3 to 
4% in 1993. Unemployment rose to around 16% of the labour force in the first months of 
1993; it stabilized since. On the side of structural reform, the results of 1993 were 
disappointing although restitution of land and urban property advanced. 
In December 1993, the Bulgarian authorities reached an agreement with the IMF staff on 
an economic programme for 1994 that could be supported by a new twelve-month stand­
by arrangement. The programme is intended to restore domestic and external balances (it 
aims in particular to halve inflation - to 30% by year-end) and accelerate the 
transformation process, mainly in the areas of financial sector reform and privatization 
2. The balance of payments 
Bulgaria's external financial situation remained weak in 1993. Exports in convertible 
currencies that had grown in 1992 are likely to have remained stable (clearly, export 
performance in 1993 was adversely affected by UN sanctions against Serbia and 
Montenegro), while imports increased somewhat. As a result, the trade balance shifted 
from a slight surplus in 1992 to a déficit of some $0.5 billion (about 4% of GDP), and the 
current account deficit approached $1 billion. The effects of the sanctions (their impact on 
the current account is estimated by the IMF at up to $700 million in 1993) were 
compounded by lack of official external financing following the failure of Bulgaria to 
conclude a stand-by arrangement with the IMF before the very end of 1993. Bulgaria also 
remained cut off from private financing as it did virtually no servicing of the country's 
commercial debt inherited from the previous regime. Foreign direct investment remained 
marginal despite a particularly liberal foreign investment law. 
However, the national currency remained relatively stable in nominal terms until October 
1993, resulting in a strong real appreciation. Since then, there has been a sharp 
depreciation of the Lev. The Central Bank tried to limit it by raising interest rates and by 
intervening on the interbank foreign exchange market. These interventions amounted to 
some $250 million over the last three months of 1993, and international reserves declined 
to $700 million at the end of the year, against some $1 billion in 1992. 
In 1994, the trade balance is expected to improve marginally and the current account 
deficit to decline to $0.8 billion. The financing of the current account deficit, of the 
upfront cost of the DDSR agreement with the commercial banks (see below) and of a 
moderate increase in international reserves is assumed to be provided mainly through debt 
relief and official financial support. In this context, the Bulgarian authorities have 
requested assistance from the Community and the G-24 for some $330 million. 
24 
3. Foreign debt 
Bulgaria's external debt is estimated at $14 billion (equivalent to the GDP, or 400% of 
exports). It includes about $9.5 billion owed to some 300 commercial banks, out of which 
about half of which is made up of interest arrears (some $2 billion) and arrears on short-
term deposits and letters of credit. The debt-service ratio is around 70% of exports. 
In November 1993, Bulgaria reached an agreement in principle with the country's 
commercial creditors on the parameters of a comprehensive debt and debt service 
reduction (DDSR) deal. The reduction of the debt stock and of the debt servicing will be 
implemented through debt buy-backs and long-term securities (discount bonds at 50% of 
face value and interest reduction bonds). In the long run, the deal, which the parties hope 
will be implemented by mid-1994, is likely to improve substantially the country's prospects 
for attaining a viable external financial position. In the short run, however, it will cost 
Bulgaria up to $900 million upfront - more than the Central Bank's present international 
reserves. After the announcement of the agreement, the price of the Bulgarian debt on the 
secondary market, that had fluctuated below 30% earlier in 1993 (it was at about only 
20% in 1992), soared to almost 40%. It has decreased since then. 
Bulgaria will also need in 1994 to negotiate a new official debt rescheduling with the Paris 
Club (the previous agreement with the official creditors, concluded in December 1992, 
came to its end in April 1993) It is expected that the official creditors will grant Bulgaria 
the same traditional rescheduling terms as in the past. Since their agreement with the 
commercial banks, however, the Bulgarian authorities have repeatedly indicated their 
intention to seek similar treatment from the Paris Club. 
25 
C. THE CZECH REPUBLIC 
1. General economic situation 
Helped by the recovery of domestic demand and a strong performance of convertible 
exports, real GDP in the Czech Republic is estimated to have grown between 0 and 1% in 
1993, the first positive rate since real output began declining in 1990. The unemployment 
rate has remained at very low levels (3.5% at end-1993). In 1994, the economy is 
expected to grow by 1-3%. 
Following a 8.5% price jump in January 1993 associated with the introduction in that 
month of the VAT, inflation came down rapidly to about 0.5% per month in March-July, 
ending the year at 18.2%. 
Speculation against the currency, unfavourable wage and price developments and the need 
to drain the excess bank liquidity that resulted from the conversion of cash holdings and 
bank deposits ahead of the currency split, led the Czech National Bank to tighten 
monetary policy in the first months of the year. However, since the end of April 1993 
monetary policy has been gradually eased. Regarding fiscal policy, the state budget 
finished 1993 with a small surplus. For 1994, the government has presented a balanced 
budget. 
As far as structural reform is concerned, the second wave of large-scale privatization is 
already underway. As was the case in the first wave, almost one third of the assets will be 
sold through the voucher method. The second wave should be completed by end-1994, by 
which time about 90% of the assets of the economy will be in private hands. 
2. The balance of payments 
The Czech current account (excluding transfers to Slovak citizens of shares in enterprises 
privatized in the first wave of voucher-privatization) is tentatively estimated to have 
posted in 1993 a surplus of some US$ 600 mio (1.9% of GDP). This is a surprisingly 
good result given the acceleration of domestic demand and imports and the weakness of 
the Czech Republic's main export markets. 
After contracting by about 40% in the first quarter of 1993, trade with Slovakia has 
recovered somewhat and is now estimated to have declined by about 20% in the whole of 
1993 In recent months, the surplus of the clearing account with Slovakia has been 
growing rapidly. In response, in early December, the Czech crown was revalued by 3% 
against the clearing ECU and the Slovak crown was devalued by 5%. In early March 
1994, however, the revaluation of Czech crown was fully reversed in reaction to the 
introduction by Slovakia of a 10% import surcharge. 
Although the net inflow of FDI slowed down in 1993 to US$ 450 mio (from US$ 983 mio 
in 1992), the Czech Republic has been experiencing a surge in other capital inflows since 
the third quarter of 1993. Thus, net portfolio investment reached in 1993 about US$ 700 
mio and Czech enterprises borrowed abroad US$ 750 mio (basically in the form of bank 
credits). Furthermore, the Czech National Bank successfully placed several international 
26 
bond issues last year. This relatively high degree of access of the Czech Republic to the 
international capital markets has been reinforced by the upgrading to an investment grade 
of Moody's rating (from the Bal previously assigned to the CSFR, to Baa3) and by the 
assignment by Standard and Poor's of a comparable BBB rating. 
The combination of a healthy current account position and a strong capital inflow has put 
upward pressure on the nominal exchange rate and has resulted in a rapid growth of 
official foreign exchange reserves, which stood at US$ 3.8 bn at end-1993, compared to 
US$ 0.7 bn at end-1992. In order to stem the upward pressure on the exchange rate, the 
Czech National Bank is planning to make the crown fully convertible for current account 
transactions and to liberalize controls on capital outflows in a phased manner. 
Despite recent speculation on a possible revaluation of the Czech crown, the currency has 
remained stable against the reference basket of Western currencies used to peg its value. 
The persistence of a significant inflation differential between the Czech Republic and its 
main trading partners, however, has continued to appreciate the real exchange rate, which 
stands now at a level similar to that which prevailed before the 1990 devaluations. 
The IMF approved a 12-month, SDR 177 mio stand-by credit to the Czech Republic in 
March 1993. Granted in the wake of the sharp decline in reserves that accompanied the 
dissolution of the CSFR, the credit aimed at providing an early boost to reserves and 
helping the Czech authorities reestablish international confidence in its policies. 
The current account surplus is projected to disappear in 1994 and turn into a deficit of 
about 2% of GDP in 1995, reflecting the acceleration of domestic demand and imports 
and a further appreciation of the real exchange rate. Such a deterioration in the current 
account, however, is expected to be amply financed by a continued surge in the inflow of 
private capital, resulting in a further increase in foreign exchange reserves in those years. 
3. Foreign debt 
Despite a significant growth of convertible debt in 1993, mostly associated with strong 
foreign borrowing by Czech companies, the Czech Republic continues to enjoy a low 
foreign debt burden. Total convertible debt is estimated to have increased from US$ 6.9 
bn at end-1992 to US$ 9.0 bn at end-1993, but this still implies a relatively low debt/GDP 
ratio of 28.7% and a comfortable 55.3% debt/exports ratio. At US$ 1.5 bn in 1993, total 
debt service also remains moderate, having even decreased as a percentage of exports 
(from 9.5% in 1992 to 8.9%). While projections for 1994 point towards an increase in all 
debt and debt service indicators, they are expected to remain at fairly reasonable levels. 
27 
D. ESTONIA 
1. General economic situation 
Following sharp output contractions in 1991 (-12%) and 1992 (-23%) and a further 
decline in the first half of 1993, the economic situation in Estonia improved considerably 
in the second half of 1993. The economic rebound, which is expected to continue in 1994, 
reflects the successful implementation of the Estonian programme of macroeconomic 
stabilization and reform backed by the first IMF stand-by programme (mid-1992 to mid-
1993), its reorientation towards Western markets and support from the international 
community. The official unemployment rate barely rose in the course of last year; with 
only 1.7%, it does not yet reflect the production decline of the early 1990's. 
The Estonian authorities have been very successful in cutting inflation from 954% in 1992 
(year-end) to 36% in 1993. Apart from the virtual completion of price liberalization by 
the end of 1992, this is due to the strict monetary incomes policies. The central bank is 
also prohibited from extending credits to the Government which has been able to balance 
its budget in 1993, following a small surplus in 1992. 
Estonia has made continuing progress on structural reform. In 1993, Estonia advanced 
further in the area of privatization, especially for small enterprises. The Estonian 
Privatization Office was also created to better coordinate policies towards the enterprise 
sector. In some cases the bankruptcy law was applied. Banking supervision was improved. 
Following the banking crisis of 1993, the banking system was restructured. Estonia 
maintained liberal foreign trade and investment laws. 
2. The balance of payments 
In 1992, Estonia's current account was roughly in balance instead of a projected US$ 180 
mio deficit. The better than expected performance was largely due to a dynamic expansion 
of exports of goods to industrialized countries, limiting the trade deficit to some US$ 50 
mio, and increasingly also from services "earnings. In 1993, imports from Western 
countries grew very dynamically (101%). The trade deficit widened to some US$ 150 mio 
and the current account turned into deficit despite vigorous export expansion and an 
increased surplus in the services account. It is likely that the strengthening of domestic 
demand and the gradual reduction of the comparative advantage will lead to a further 
deterioration of the current account in 1994. 
The capital account surplus observed in 1992 (US$ 109 mio) expanded further in 1993, 
given the inflow of foreign official capital and an increase of foreign direct investment 
from US$ 58 mio in 1992. The continued capital inflow was supported by Estonia's liberal 
foreign exchange and investment law and the stability of its currency (pegged to the D-
Mark under a currency board system since June 1992). It permitted the Bank of Estonia 
to accumulate reserves in the order of US$ 200 mio in 1992 and some US$ 100 mio in 
1993, to a level equivalent to about 4.5 months of goods imports. 
28 
3. Foreign debt 
In the course of 1993, Estonia's external debt increased from US$ 38 mio to US$ 168 mio 
(nearly 10% of GDP). Nearly half of the increase in 1993 is due to purchases from the 
Fund (US$ 59 mio). Debt service stabilized at $20 mio in 1992 and 1993, with the ratio to 
exports of goods and services declining from 3.2% to 2%. 
29 
E. HUNGARY 
1. General economic situation 
In spite of a clear recovery of industrial production in the second half of the year, real 
GDP is estimated to have declined by 1% in 1993, basically as a result of the sharp fall of 
agricultural output and the partly related collapse of exports. After a peak in March 1993, 
the unemployment rate steadily declined to 12.1% by the end of 1993. In 1994, the 
recovery of agricultural production and exports from the very low 1993 base, and the 
gradual strengthening of domestic demand, should result for the first time since 1989 in a 
positive, though moderate, rate of growth of GDP. 
VAT increases aimed at controlling the budget deficit, combined with above-average price 
increases, have caused inflation pressures to remain high. At the end of December 1993, 
year-on-year inflation stood at 21.1%. 
As part of the SDR 360 million stand-by arrangement agreed with the IMF in September 
1993, fiscal policy is aimed at bringing, down the consolidated state budget deficit from 
7.8% of GDP in 1992 to 5.5% in 1994. The 1993 deficit target (7% of GDP) has been 
met. 
Regarding structural reforms, progress has continued to be made in the area of 
privatization, the strengthening of governance in state enterprises, the application of the 
1992 bankruptcy law, and the reform of the tax and social security systems. Also, a new 
bank consolidation scheme was launched in December 1993. 
2. The balance of payments 
Since the third quarter of 1992, the Hungarian current account has suffered a sharp 
deterioration and is estimated to have reached a deficit of about US$ 2.7 bn (7.5% of 
GDP) in 1993 (against a US$ 261 mio surplus in 1992). This is explained by four factors. 
First, domestic demand is experiencing a recovery at a time when Hungary's main Western 
export markets are suffering from recession or very weak growth. Second, agricultural 
production and exports have collapsed as a result of recent droughts and the 
disorganization caused by the privatization or transformation of state-owned farms and 
cooperatives. Third, exports have also been negatively effected by the observance of the 
UN embargo against Serbia and Montenegro. And fourth, Hungary has suffered an 
important loss of external competitiveness in recent years, as reflected in a cumulative 
appreciation of the forint's real exchange rate of around 35% (measured with consumer 
prices) since the beginning of 1990. 
The poor performance of exports since the third quarter of 1992 has led the authorities 
since early 1993 to increase the frequency and magnitude of the forint devaluations within 
the "crawling peg" in order to produce some real depreciation of the currency. With 
inflation remaining above 20%, however, the impact of this shift in policy on the real 
exchange rate has so far been very limited. 
30 
While exports are expected to grow substantially in 1994, as agricultural production and, 
to a lesser extent, foreign demand recover, this will be partly offset by the increase in 
imports as domestic demand accelerates. In this context, the current account deficit is 
expected to shrink only moderately in 1994 (to about 6.5% of GDP). 
Despite the very high current account deficit, official foreign exchange reserves expanded 
from US$ 4.4 bn at end-1992 to US$ 5.7 bn at the end of October 1993. This was made 
possible by a continuing strong inflow of FDI and by the placement by the National Bank 
of Hungary (NBH), taking advantage of favourable market conditions, of about US$ 4.5 
bn in international bonds in 1993. 
3. Foreign debt 
The negative side of the aggressive international borrowing programme of the NBH has 
been a rapid growth of foreign debt in 1993. Total convertible debt, which had decreased 
by US$ 0.9 bn in 1992, is estimated to have risen from US$ 21.5 bn at end-1992 to US$ 
24.9 bn at end-1993. The debt/GDP ratio has also deteriorated slightly, reaching an 
estimated 66.3% at the end of last year There has been, however, a significant 
improvement in the structure of the debt, with the proportion of medium and long-term 
debt increasing from 89.8% to 92.8%. 
Total debt service amounted to 4.3 bn, practically the same level as in 1992. However, 
with exports estimated to have fallen by about 20% in 1993, the debt service ratio has 
worsened, increasing from 43.9 to 48.1%. Principal repayments are expected to amount to 
around US$ 2 5 bn this year, down from US$ 2.8 bn in 1993, but they are projected to 
rise sharply in 1995 and 1996 to, respectively, US$ 3.4 bn and US$ 3.9 bn. With the 
current account deficit expected to remain at relatively high levels in those years, this 
"bunching" of amortizations could put considerable pressure on Hungary's balance of 
payments 
31 
F. ISRAEL 
1. General economic situation 
GDP increased by 3.5% only in 1993, the lowest growth rate since 1989. The closure of 
the Occupied Territories in the second quarter slowed down economic activity, but an 
increase was registered towards the end of the year, following the peace agreement with 
the Palestinians. While growth in the early 90s was driven mainly by immigrant inflows, 
privatisation and deregulation is now creating a basis for more sustainable long-term 
growth. 
The government budget deficit was reduced to 3.2% of GDP, following an acceleration of 
privatisation and a reduction in the housing programme and other subsidies for 
immigrants, including unemployment benefits. Budget revenue from privatisation was 
US$ 250 million only in 1992 and initially estimated at US$ 400 million for 1993, which is 
very small compared to the substantial share of state enterprises in the economy. The 
acceleration of privatisation, announced in August, is expected to increase revenue to over 
US$ 1 billion by end 1993. Unemployment continued to fall, from 11.2% end 1992 to 9% 
by end 1993, as the wave of immigration from Eastern Europe and the ex-Soviet Union of 
the early 1990s came to an end. Recent immigrants were gradually integrated into the 
economy. 
At the start of 1993, inflation accelerated sharply from 9% pa. end 1992 to 16% pa. in 
the first quarter of 1993. Consequently, monetary policy was tightened. By July, 
inflationary pressures had deceased sufficiently and monetary policy eased again. At the 
end of 1993, inflation had slowed down to 11.5% pa. which is still somewhat above the 
initial target of 10%. 
2. The balance of payments 
Foreign trade was further liberalised in 1993 with the cancelation of a 2% import duty 
surcharge, a 2% export subsidy and travel taxes, which constituted trade restrictions 
under the GATT rules. Thi^ led to the effectrv e unification of the exchange rate in July, 
for the first time in Israel's history. In September, Israel accented the obligations 
concerning the free movement of current account transactions under article VIII of the 
IMF Articles of Agreement. The Central Bank of Israel maintains a "crawling peg" 
exchange rate system with a target depreciation rate announced by the Central Bank, in 
line with expected inflation, and a 2% variation allowed around the targeted exchange 
rate. The announced rate of depreciation was reduced in July from 8% to 6?/0, thought to 
be in line with the slow-down in the inflation rate. 
Following the end of the Gulf War, external trade started to pick up again in 1992 and this 
^rend continued in 1993. The increase in exports, estimated at 10%, was a strong driving 
force for growth in 1993. Tourism also revived strongly As a result, the current account 
deficit were somewhat reduced from US$ 1.2 billion in 1992 to US$ 0.9 billion in 1993. 
Private capital inflows increased as monetary policy was tightened and interest rates 
increased. Long-term capital inflows also increased following the approval of a I S$ 10 
billion credit guarantees package by the US administration. 
32 
Officiai foreign exchange reserves reached a satisfying level of US$ 6.2 billion or the 
equivalent of nearly three months of imports. 
3. Foreign debt 
The credit guarantees obtained from the US government in 1992 have enabled the 
authorities to draw on medium and long-term credit lines for investment projects. Total 
external debt increased to US$ 34.6 billion of which nearly three quarters was public 
sector debt. The debt service to exports ratio improved slightly as export growth was 
strong in 1993. Other debt ratios remained more or less stable. 
At the end of 1992, the net external debt stock stood at US$ 15.1 billion and the net 
external debt service amounted to US$ 3 billion. Net debt and debt service ratios are less 
than half of the gross ratios 
33 
G. LATVIA 
1. General economic situation 
Following severe output contractions in 1991 (-8.3%) and 1992 (-33.8%), the Latvian 
economy stabilized in the course of 1993. For the year as a whole, output contraction was 
limited to some 10%, and it is expected that GDP will expand in 1994. During 1993, the 
official unemployment rate increased from 2.3% to 5.6%. Although this is more than 
double the unemployment rates of the other two Baltic countries, it still leaves much room 
for adjustment to the lower production level compared to the late 1980s. 
Last year, the Latvian authorities succeeded in bringing down inflation significantly in line 
with the plan set out in the IMF stand-by arrangement of September 1992. At the end of 
1993, the level of consumer prices was 31.3% higher than one year earlier (958.6% in 
1992). Apart from the virtual completion of price liberalization by the end of 1992, this 
was due to the tight stance of monetary policy (since the monetary reform of July 1992), 
as well as of fiscal and incomes policies. However, a substantial capital inflow in the 
course of 1993 caused a relatively rapid expansion of reserve money. 
During the first three quarters of 1993, the Latvian budget was in surplus. This was not 
only due to tight budget control, but also to higher than estimated profit and value added 
tax revenues and lower unemployment benefits. Following the approval of a 
supplementary budget in October 1993 authorizing increased expenditures for pensions 
and public sector wages, the budget recorded a small deficit. For 1994 a deficit of 1.7% of 
GDP is envisaged. 
In 1993, Latvia also advanced further in a number of areas of structural reform. In 
particular, significant progress was made in the area of banking sector reform. Banking 
supervision was also strengthened. In addition, progress was made in land restitution and 
privatization of small-scale enterprises. On the other hand, large-scale privatization did not 
progress much. This may have been partly linked to the Parliamentary election in June 
1993 and the subsequent reorganization of the Latvian Government; in this area the speed 
of reform picked up at the end of the year. 
2. The balance of payments 
Latvia's current account position was considerably better than expected under the first 
IMF programme both for 1992 and 1993. The surplus decreased from US$ 53 mio in 
1992 to some US$ 40 mio in 1993, compared to estimated deficits in the order of US$ 90 
mio and US$ 240 mio, respectively. To some extent, there may still be a problem of 
underreporting of imports from the former Soviet republics, but the situation also reflects 
a better than expected performance in the services account. The reorientation of trade 
towards Western markets continued in 1993, with exports to the CIS and Baltics declining 
by 45% in volume terms, while expanding another 21% to the rest of the world. It is likely 
that the strengthening of domestic demand and the gradually diminishing comparative 
advantage will lead to a deterioration of the current account in 1994. 
34 
As a consequence of the strong capital inflow in 1993, the Bank of Latvia accumulated a 
large amount of reserves (some US$ 360 mio), increasing its gross level to some US$ 530 
mio or an equivalent of 4.7 in months of total imports (from 1.8 at the end of 1992). 
3. Foreign debt 
La TVA's external debt increased from US$ 53 mio to US$ 504 mio (nearly 14% of gdp). 
the debt service barely increased from US$ 15 mio in 1992 to US$ 18 mio in 1993, with 
the ratio to exports of goods and services declining from 2% to 1%. 
35 
H. LITHUANIA 
1. General economic situation 
In Lithuania, output contraction seems to have halted at the end of 1993, and the overall 
GDP decline is estimated at 16% for the whole year, following declines of 13% in 1991 
and 38% in 1992. The official unemployment rate rose only moderately in the course of 
1993 and reached a mere 1.6% at the end of 1993. Hidden unemployment is estimated at 
some 7%. 
The Lithuanian authorities have reduced inflation in 1993, even though less rapidly than 
the other two Baltic States. The increase in consumer prices which reached 1163% at the 
end of 1992 fell to 189% at end-1993. Strict incomes and fiscal policies throughout the 
year, combined with a monetary policy that was tightened in Spring 1993, contributed to 
the strong deceleration of inflation during the Summer. However, as the central bank 
intervened in the foreign exchange to prevent a strong appreciation of the litas as a result 
of capital inflows, monetary expansion picked up and contributed to a pickup of inflation 
towards the end of the year. 
The Lithuanian authorities managed to keep public expenditures under tight control in 
1993. They also strengthened revenues through trade reforms and an increase in the 
general sales tax, such that the budget was broadly in balance, following a deficit in the 
order of 1% of GDP in 1992. For 1994, a deficit of some 1% of GDP is envisaged, which 
the Government plans to finance through the sale of treasury bills. 
Regarding structural reform, Lithuania also continued to progress in a number of areas as 
foreseen under the IMF stand-by arrangement of October 1993. Privatization advanced 
further; by January 1994, 2/3 of all companies eligible for privatization (1/3 of all state 
capital) had been privatized through vouchers, public share subscription and auctions. 
There were also additional price liberalization measures, including the abolition of profit 
margins. Progress in banking reform was relatively slow in 1993 and should speed up in 
1994. 
2. The balance of payments 
The current account shifted from a surplus of US$ 90 mio in 1992 (originally a deficit of 
US$ 160 mio had been expected) into an estimated deficit of about US$ 250 mio in 1993 
(8.4% of GDP). A major factor contributing to this deterioration in 1993 was Russia's 
move to world market levels for its energy exports to Lithuania in Fall 1992. The trade 
balance swung from a US$ 65 mio surplus to a deficit of US$ 270 mio. The reorientation 
of trade continued in 1993. It is expected that the current account will deteriorate further 
in 1994 to reach a deficit in the order of US$ 400 mio (some 8% of GDP). 
The deterioration of the current account in 1993 was accompanied by a substantial 
improvement in the capital account from a surplus of US$ 90 mio in 1992 to some US$ 
270 mio in 1993. Foreign direct investment increased substantially (from US$ 10 mio to 
US$ 40 mio), but remained low in comparison with that of the other two Baltic States, 
and Estonia in particular. The inflow of official transfers and medium- and long-term 
36 
loans roughly tripled to reach in total some US$ 280 mio in 1993. This capital inflow 
permitted the central bank to accumulate US$ 160 mio in reserves bringing the stock up 
to US $ 280 mio. In terms of months of imports, this signifies however a decrease from 
2.6 in 1992 to 1.8 in 1993, mainly reflecting the rise in imports. 
3. Foreign debt 
In 1993, Lithuania's external debt stock increased from US$ 99 mio to US$ 345 mio 
(some 11% of GDP) and the debt service increased from a mere US$ 2 mio in 1992 to 
US$ 15 mio (0.7% exports of goods and services). 
37 
I. ROMANIA 
1. General economic situation 
In the course of 1993, the decline in real GDP has apparently halted and annual GDP 
growth is expected to be around zero. The decline in industrial output has been reversed 
in the second half of 1993 and agricultural output has increased substantially. In 
December, 9.9% of the labour force was unemployed, compared to 8.8% in January. 
The expected consolidated government budget deficit for 1993 is in the range of 1-2% of 
GDP. A fundamental change in the revenue structure was achieved by the replacement of 
the turnover tax by a single-rate VAT in July 1993, which also led to a better-than-
expected outturn of fiscal revenues. The abolition of most consumer subsidies in May 
1993 as well as a restrictive public sector wage indexation policy have restrained 
expenditures. 
Most consumer prices had been liberalised and subsidies eliminated by May 1993. Prices 
of energy products remain controlled, with frequent adjustments to keep them broadly in 
line with border prices. Inflation increased from about 200% in 1992 to over 300% in 
1993 as monetary policy remained weak. 
Commercial bank interest rates as well as NBR (National Bank of Romania) refinancing 
rates have remained strongly negative in real terms throughout 1993. This has led to a 
flight out of the Leu into foreign currency holdings, as indicated by the growth of foreign 
currency deposits. 
Inter-enterprise arrears continued to accumulate, although at a slower pace. Privatisation 
of state-owned companies hardly made any progress, except for small businesses 
privatised through management and employee buyouts. 
The economic stabilisation and reform programme, agreed upon with the IMF, got off-
track in early 1993. However, by end 1993, an understanding on a new stabilization and 
reform programme had been reached. 
2. The balance of payments 
The NBR has continued to manage the official rate and multiple exchange rates have 
persisted throughout 1993. The official exchange rate depreciated from 433 Lei/US $ end 
1992 to 1360 Lei/US $ end 1993. As the speed of depreciation of the Leu was slowed 
down by the NBR during the last quarter of 1993, the gap between the official and the 
exchange bureaux' exchange rate widened substantially to more than 50% by the end of 
the year. A 20% depreciation of the official rate end December was not sufficient to 
substantially reduce this gap. 
Imports stabilised around the 1992 level as domestic demand remained weak. Exports 
registered an increase as the Interim trade agreement with the European Community 
became operational. As a result, the current account deficit slightly diminished to US$ 1.3 
38 
billion. The impact of the Interim Agreement and the granting of MFN status on the US 
market will further improve the current account in 1994. 
Direct foreign investment inflows remain very low as large-scale privatisations have not 
really started yet. Although macro-economic reform programmes were stalled in 1993, 
medium and long term official aid inflows continued at virtually the same levels as in 
1992. 
The overall balance of payments remained positive throughout 1992 and 1993, reflecting 
an increase in foreign exchange reserves held by commercial banks while the NBR foreign 
reserves shrank. They were below US$ 50 million by end 1993, equivalent to 3 days of 
imports, while commercial banks held some US$ 1 billion in foreign assets. 
3. Foreign debt 
Total external debt increased rapidly from virtually zero in 1989 to over US$ 5.8 billion or 
22% of GDP end 1993 and debt service accounted for 16.7% of export revenues. As 
foreign investment inflows are unlikely to increase rapidly, official medium and long term 
loans will remain the principal source of finance for the current account deficit and, 
consequently, the growth of the debt stock is projected to continue. 
39 
J. RUSSIA 
1. General economic situation 
Russia's economic performance has been particularly disappointing in 1992 and 1993. The 
fall of output (-19% in 1992) was still pronounced in 1993 (-12%). Investment has fallen 
to no more than half of its 1989 level. Financial policies have been loose for most of the 
period and inflation has remained very high - 20-25% per month. Living standards have 
declined markedly. Also, progress with putting in place the legislative and institutional 
framework for a market economy has been patchy, and structural reform slow in most 
respects. A bankruptcy law came into force in March 1993, but has not begun to be 
implemented, as was the case with many other key measures. However, a large share of 
small enterprises has been privatized and a mass privatization programme was developed, 
under which close to half of large enterprises had been privatized by the end of 1993. In 
October 1993, a decree was issued allowing for the first time the privatization of land. 
In May 1993, agreement was reached between the government and the Central Bank to 
reduce credit expansion, increase interest rates and limit the budget deficit. The measures 
implemented in the following months brought down money supply growth, which helped 
to reduce monthly inflation to 13% in December. The steep fall of the exchange rate was 
arrested. Progress in stabilization allowed the IMF to agree on 1 July on the disbursement 
of the first half of a $3 billion loan under its new Systemic Transformation Facility. 
However, as the curbs on government spending were often achieved by deferrals rather 
than by cuts, a renewed inflationary impulse was expected in early 1994. January 1994 
inflation was 22%, and the exchange rate of the rouble, that had remained fairly stable 
since the end of September, went down from around 1250 roubles per dollar to over 1600 
roubles since the beginning of 1994. 
As a result of the strong showing of nationalist and conservative forces in December 1993 
elections, economic policy looks set to give less attention to macroeconomic stabilization, 
but rather to safeguarding incomes, employment and production, with a greater use of the 
instruments of direct government control. 
2. The balance of payments 
Russia's external situation worsened substantially in 1992 and 1993, reflecting the impact 
of the systemic changes, the disruptions of traditional trade and payments arrangements 
and domestic macroeconomic policies. However, during this period Russia's gross foreign 
exchange reserves increased to close to $4.5 billion (they were virtually nil two years 
earlier). 
In 1992, official balance of payments support from the West (bilateral trade credits and 
grants and credit from the IMF of $1 billion under the first credit tranche arrangement) 
approached $17 billion. However, owing to a weaker export performance, a bunching of 
debt servicing obligations and large recorded or unrecorded capital flight (estimated to 
some $10 billion), this did not prevent either a sharp reduction of imports or a dramatic 
increase in debt arrears. In 1993, imports appear to have been further reduced and the 
40 
trade surplus is likely to have widened substantially, maybe to over $10 billion; also, the 
capital outflows were quite significant - certainly larger than new financing. This is due, at 
least in part, to lower levels of official external financing (around $9 billion) and not 
sufficiently strong domestic financial policies 
3. Foreign debt 
At the end of 1992, total foreign debt of the former Soviet Union approached $78 billion, 
up from $67 billion a year later. It was over $80 billion at the end of 1993. More than half 
of the debt is owed to official creditors. The debt remains, however, relatively modest in 
view of the size of the economy (some 60% of GDP at the end of 1993). In 1993, total 
scheduled debt servicing ($19 billion) represented almost 50% of exports. 
In December 1991-January 1992, the official and private creditors of the former Soviet 
Union agreed with the former republics on a deferral of some $7.1 billion (principal 
repayment obligations on credits extended to the USSR before 1991). The deferral 
proved, however, insufficient since Russia, the only former Soviet republic to have made 
any debt servicing in 1992 (the payments were supposed to be made by all the NIS made 
jointly and severally responsible for the debt), was unable to meet the still substantial 
obligations. Russia's debt payments in 1992 amounted to only $1.6 billion. As a result, 
arrears increased dramatically; at the end of 1992, they approached $12 billion. 
In early April 1993, a generous debt rescheduling agreement was reached with the Paris 
Club that reduced the official debt servicing in 1993 by some $15 billion. The agreement 
was this time concluded with Russia alone, making it the sole actual manager of the ex-
Soviet debt: The agreement goes well beyond the deferrals agreed earlier and the standard 
creditors' practice. It was granted before a fully fledged IMF programme was put in place; 
it covers credits extended in 1991, i.e. after the cut-off date agreed previously; it provides 
for a medium-term deferral of part of moratorium interest. The creditors have recently 
decided to prolong the validity of the 1993 agreement until the end of April 1994, but 
further negotiations may prove difficult in the absence of an IMF programme. 
Also, in July 1993, Russia reached an agreement in principle with the commercial banks 
on a long-term rescheduling of the ex-Soviet commercial debt ($24-26 billion is owed to 
some 600 banks). In parallel with progress in the negotiations with the commercial 
creditors, the price of the Russian debt on the secondary market that had been below 20% 
at the beginning of 1993, rose gradually to some 55% by early December. Subsequent 
delays in the final agreement due to unsettled legal issues and Russia's failure to make the 
payment of part of interest arrears due in 1993 ($450 million) have, however, led to a new 
fall of the price - to 35%. 
41 
K. OTHER NEWLY INDEPENDENT STATES 
1. General economic situation 
The situation in the other Newly Independent States varies considerably. All the former 
republics have suffered in 1992-1993 from the weakening of old structures which have not 
yet been replaced by market-oriented institutions and the collapse of inter-republican trade 
links. The decline in trade among the former republics (20-30% in 1992, probably of a 
similar magnitude in 1993) has had serious knock-on effects on output. Output declines in 
1992 ranged from around 10% in Belarus and Uzbekistan, to 40% in Georgia and 
Armenia. Declines in activity continued in 1993 (between 7% in Moldova and 25% in 
Tajikistan), but two countries (Turkmenistan and Uzbekistan) reported increased 
aggregate output in 1993. Loose financial policies in many NIS compounded the adverse 
effects of the external shocks. Inflation remained very high throughout the area. In 1992, 
it varied from around 6 times (in Azerbaijan) and over 16 times (in Ukraine). In 1993, 
inflation accelerated markedly in a number of NIS, and several new states (Armenia, 
Georgia, Ukraine) are clearly in hyperinflation. 
Far-reaching economic reform has begun in most NIS, and some of them have already 
made considerable strides in the transition to market-based system while implementing 
stricter financial policies. Kyrgyzstan, Moldova, Kazakhstan and Belarus have received 
financial support from the IMF (the first three, in the form of stand-by arrangements). 
Other States have yet done little to change the inherited economic structures. Some are 
hardly in a situation which allows them to contemplate systemic reform: Armenia is 
suffering a blockade, Tajikistan and Georgia are devastated by civil war or ethnic unrest. 
2. The balance of payments 
The balance of payments situation of the area is extremely weak, with probably the 
exception of Turkmenistan. Large trade deficits with Russia, linked primarily to higher 
prices for energy and raw materials imports from Russia, make the current account 
position of number of the new states hardly sustainable. The financial credibility of most 
NIS is further aggravated by lack of international reserves. 
In a longer term perspective, the new states present rather variable prospects. Some have 
considerable hard currency earning potential (Kazakhstan, Uzbekistan) and industrial 
capacity. Others are clearly close to developing countries and will therefore strongly 
depend on external assistance. Armenia and Kyrgyzstan have already been made eligible 
to highly concessional IDA lending. 
3. Foreign debt 
In 1993, the NIS have achieved substantial progress in clarifying their position vis-à-vis 
the question of the foreign debt of the former Soviet Union. Initially (at the end of 1991), 
the former republics were made jointly and severally responsible for such debt. The 
Memorandum of Understanding setting forth the principle of joint and several 
responsibility was signed on 28 October 1991. The April 1993 Paris Club agreement with 
Russia was accompanied by a change in legal arrangements on debt servicing within the 
FSU making in fact Russia the sole actual manager of the debt. Accordingly, the creditors 
acknowledged that the so-called "zero-option" agreements concluded by Russia with 
other former republics (by virtue of which Russia takes over the full amount of the ex-
Soviet debt, in exchange for the full amount of the ex-Soviet external assets) discharge 
them of any servicing of such debt. Already in 1992, Russia had concluded full zero-
42 
option agreements with Belarus, Kyrgyzstan; Turkmenistan and Uzbekistan; it had also 
signed temporary protocols with several other NIS. More recently similar agreements 
were concluded with Armenia, Azerbaijan and Moldova. 
43 
L. THE SLOVAK REPUBLIC 
1. General economic situation 
Slovak real GDP is estimated to have declined by 5-7% in 1993, implying a fourth 
consecutive year of recession, and is expected to show at best zero growth in 1994. The 
unemployment rate reached 14.4% at end-1993. 
The split of the CSFR has disrupted trade with the Czech Republic and has obliged the 
Slovak authorities to pursue restrictive macro-economic policies. Monetary policy had to 
be very tight in the first half of 1993 in order to defend the country's reserves amid 
speculation about a devaluation of the Slovak crown. While the monetary stance was 
gradually eased after the July devaluation, the reemergence of pressures on the exchange 
rate at the end of 1993 obliged the National Bank of Slovakia (NBS) to raise the discount 
rate on December 21. On the fiscal front, the authorities have made a significant effort to 
control the budget deficit after the termination of the fiscal transfers from the Czech lands, 
in spite of which the general government is estimated to have run a deficit of about 7% of 
GDP last year. 
Increases in indirect taxation and the 10% devaluation of the Slovak crown in July 1993 
have resulted in an increase in CPI inflation from 12.7% at end-1992 to 25.1% at end-
1993. 
With the first wave of large-scale privatization having been completed last spring, the 
Slovak government is now preparing a second wave that will primarily rely on traditional 
privatization methods, such as direct sales to foreign investors and tenders. Coupon 
privatization will still be used but in a much smaller scale than before. 
2. The balance of payments 
The loss of the fiscal transfers from the Czech Republic was expected to unmask a large 
deficit in the Slovak current account. In the event, however, the sharp compression of 
domestic demand and imports and the devaluation of the Slovak crown have avoided the 
emergence of a serious deficit. Thus, excluding transfers from the Czech Republic 
associated with the distribution of voucher-shares to Slovak citizens, NBS data show a 
total current account deficit of US$ 289 mio (or 2.9% of GDP) in the first 10 months of 
1993. 
Slovakia is, however, having problems to finance even this smaller-than-expected account 
deficit. At an estimated US$ 100 mio in 1993, net FDI continues to be of little 
significance. Furthermore, Slovakia lacks good access to the international capital markets, 
partly because, unlike the Czech Republic, Slovakia can no longer benefit from the solid 
international economic reputation that the federal government had built since the 
beginning of the reforms. Slovak borrowers have placed only two international bonds 
since the break-up of the CSFR. Finally, speculation about a devaluation of the Slovak 
crown has resulted both in the first half of 1993 and since the end of that year in a 
significant outflow of short-term capital. 
44 
To help ease its balance of payments constraint, the IMF granted to Slovakia an SDR 
64,35 mio (US$ 89 mio) Systemic Transformation Facility (STF) loan in July 1993. The 
IMF is also about to reach agreement with the Slovak authorities on an economic policy 
progamme that could be supported in the coming months by a stand-by arrangement and, 
possibly, a second purchase from the STF. In addition, the World Bank approved in 
November 1993 a US$ 80 mio Economic Recovery Loan. 
The weakness of Slovakia's balance of payments has been reflected in a very vulnerable 
foreign exchange reserves position. Capital flight in early 1993 practically depleted official 
hard-currency reserves. This led the authorities to introduce temporary restrictions in 
February6. While official reserves recovered between May and September, the NBS has 
again been losing reserves in recent months. Official foreign exchange reserves stood at 
only US$ 343 mio (two weeks of imports) at the end of January 1994. 
The balance of payments is expected to strengthen somewhat but remain weak in 1994. 
Depressed economic activity, the introduction of a 10% import surcharge on consumer 
goods in early March and, perhaps, a new devaluation of the currency could result in some 
reduction in the current account deficit. The capital account is also likely to improve, 
supported by substantial official financial assistance and by a reversal of capital flight once 
the exchange rate situation is clarified. This would be consistent with an increase in 
official reserves in 1994. 
On top of the 10% devaluation of the Slovak crown against convertible currencies, 
decided last July in the context of the adjustment programme agreed with the IMF, the 
currency has been devalued by 5% against the clearing ecu. 
3. Foreign debt 
Despite last year's significant growth of foreign debt, Slovakia continues to show a 
relatively low foreign debt burden. Total convertible debt is estimated to have increased 
from US$ 2.6 bn at end-1992 to US$ 2.8 bn at end-1993, a level which still implies 
relatively comfortable debt/GDP and debt/export ratios of, respectively, 28 and 42% 
Slovakia remains current in all its debt service obligations. Total debt service is estimated 
to have amounted to US$ 670 mio in 1993, practically unchanged from 1992. While the 
decline in exports has resulted in some deterioration in the debt service ratio, such a ratio 
is still at a reasonable level (10%). Principal repayments, however, are projected to 
increase considerably in the coming years, putting some additional pressure on the balance 
of payments. 
These restrictions were removed in December 1993. 
45 
«6 
ll-F-3 
Last update: 
28/02/94 Country Risk indicators 
Country: Algeria 
1991 1992 1993(1) 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) -2.8; 
10! 
20.2! 1.8 
-2.5 
21.9 -2.0 
n.a 
n.a 
Inflation rate 
Exchange rate (dinars per USD) 
Nominal effective exchange rate 
Real effective exchange rate 
(1990=100) (Dec/Dec) 
(change, Dec/Dec) 
(change, Q4/Q4) (• = depreciation) 
(change. Q4/Q4) (• - depreciation) 22.8! 
75.5! 
-50.01 
-38.6 ! 32.1 
6.5 
1.0 
25 0 161 
5.4 
(0.3703) 53 
(Q3/Q3) 22.4 
General government balance (as % of GDP) 1.0! -66 -149 
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 bn USD 
in months of imports of G&S 130 
26; 
-900; 
1 6 
2.0 122 
12 
40 0 
17! 
2.0! 10.3 
12 
n a 
19 
23 
External debt 
External debt 
(in convertible currencies, in bn USD. end of penod) 
medium and long-term (> 1 year) 
short-term (=< 1 year) 
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 27 2 
26 2 
1 0 
92 
67 
25 
63 3 
209 4 
705 
No 
No 
IMF arrangements 
Type/no 
(Date/-) 
On track/off track 
( - / Date) SBA 
(6/91-3/9?; 
Off-track 
Q1 1992 26.2! 
25 0! 
i.2i 
9.5j 
7.11 
2.4J 
57 6i 
2156; 
78.61 
No I 
No I 
No 257 
n.a 
n.a 
91 
7.0 
2.1 
55.9 
249.5 
89.3 
No 
No 
No 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of penod) 
S&P long-term foreign currency rating (end of period) 
EIU country risk service (2) 
Score (end of period) 
Rating (end of period) 
Euromoney 
Position in the ranking (3) 
(number of countries) 
The Institutional Investor 
Position in the ranking (3) 
(number of countries) 
Credit rating (4) Not rated 
Not rated 
Not rated 
Not rated 
83 
(130) 
Mar Sep 
47 52 Not rated 
Not rated 
Not rated 
Not rated 
66 
(169) 
Mar Sep 
53 57 
(111) (113)1(119) (126) 
37.9 34 2 33 1 28 9 Not rated 
Not rated 
Not rated 
Not rated 
Mar Sep 
68 79 
(169) (170) 
Mar Sep 
62 69 
(127) (133) 
28.2 27.1 
(1 ) For some data, preliminary estimates 
(2) Countries are given a rating between A - E and a score between 1-100. with E and 100 representing 
the highest risk. 
(3) The higher the score in the ranking, 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 rf also the average global rating for all rated countnes improves u 
II-F-3 Country Risk indicators 
Last update: Country : Bulgaria 
09/03/94 
1992 1993(1) 
Real GDP growth rate (in %) -5,4 - 4,0 
Industrial production (% change) -11,0 -9,0 
Unemployment rate (end of period) 15,6 16,4 
Inflation rate (Dec/Dec) 79,4 64,0 
Exchange rate (Leva per USD) (change, Dec/Dec) 12,4 36,0 
Nominal effective exchange rate (change, Q4/Q4) (- = depreciation) -15,7 (Q3/Q3) -3,1 
Real effective exchange rate (change, Q4/Q4) (- = depreciation) 43,6 59,2 
General government balance (as % of GDP) ^9_ -11,0 
Balance of payments 
Exports of G&S (in bn USD) 3,5 3,4 
Current account balance (in % of GDP) -4,4 -7,9 
Net inflow of foreign direct investment (in mio USD) 42,0 n.a. 
Official FX reserves (end of period) 
inbnUSD 1,0 0,7 
in months of imports of G&S 3j2 2,2 
External debt 
External debt (2) 12,0 12,4 
(in convertible currencies, in bn USD, end of period) 
medium and long-term (> 1 year) n.a. n.a. 
short-term (= < 1 year) n.a. n.a. 
Convertible debt service (in bn USD) 2,9 2,4 
principal 2,0 1,2 
interest 0,9 1,2 
External debt/GDP (%) 133,3 98,4 
External debt/exports of G&S (%) 368,0 412,0 
Debt service/exports of G&S (%) 85,0 69,0 
Arrears (on both interest and principal, in bn USD) 6,1 n.a. 
Debt relief agreements and rescheduling Paris Club London Cl. 
(resched.) (roll-overs, and 
London Cl. DDSR agreed in 
(roll-over) principle) 
IMF arrangements 
Type/no SBA No 
(Date/ - ) (04/92-04/93) 
On track/off track On track 
(-/Date) | ._ 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) N<~. rated No rated 
S&P long-term foreign currency rating (end of period) No rated No rated 
EIU country risk service (3) 
Score (end of period) 80 80 
Rating (end of period) E E 
Euromoney Mar Sep 
Position in the ranking (4) 91 118 125 
(number of countries) (169) (169) (170) 
The Institutional Investor Mar Sep Mar Sep 
Position in the ranking (4) 81 86 91 89 
(number of countries) (119X126) (127) (133) 
Credit rating (5) | 21,1 19,8 | 18,9 19,5 
( 1 ) For some data, preliminary estimates. 
(2) Any short-term debt is actually arrears. 
(3) Countries are given a rating between A - E and a score between 1 - 100, with E and 100 representing the highest risk. 
(4) The higher the score in the ranking, the lower the creditworthiness of the country. 
(5) Countries are rated on a scale of zero to 100, with 100 representing the least change of default. A given country may improve its rating and still fall in the 
ranking if also the average global rating for all rates countries improves. 
\A 
ll-F-3 
Last update: 
28/02794 Country Risk indicators 
Country: Czech Republic 
1992 1993(1) 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end of period) -7 1 I 
-10.6 
2.6! 05 
-5.4 
35 
Inflation rate 
Exchange rate (CK's per USD) 
Nominal effectrve exchange rate 
Real effective exchange rate (Dec/Dec) 
(change. Dec/Dec) 
(change. Q4/Q4) (- - depreciation) 
(change. Q4/Q4) (- = depreciation) 12 7 i 18.2 
3 8! 2 4 
1 0l(Q3/Q3) 3.7 
9 4 |(Q3/Q3)15.9 
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 bn USD 
in months of imports of G&S 
External debt (end of period) 
External debt 
(in convertible currencies, in bn USD. end of penod) 
medium and long-term (> 1 year) 
short-term (=< 1 year) 
Convertible debt service (in bn USD) 
pnncipal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
Anears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
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) (2) 
S&P long-term foreign currency rating (end of period) 
EIU country risk service (3) 
Score (end of period) 
Rating (end of period) 
Euromoney 
Position m the ranking (4) 
(number of countnes) 
The Institutional Investor (2) 
Position in the ranking (4) 
(number of countries) 
Credit rating (5) 04! 
14 8' 
04: 
983' 
0.7 
1 1 
6.9 
5 1 
1 8' 
1 4 
0.9 
0.5' 
254: 
46.8: 
95; 
No! 
No 
SEA 
(4/92-93) 
on-trac'K bat 
expiree «vith 
dissolution 
of CS^R 
Bai 
Not rated 
30 
B 
49 
(169) 
Mar - Sep 
37 39 
(119) (125) 
47 1 46 1 00 
163 
19 
450 
3.8 
2.7 
9.0 
6.8 
2.2 
1.5 
0.9 
0.6 
28.7 
55.3 
8.9 
No 
No 
SBA 
(3/93-3/94) 
On-track 
Baa3 
BBB 
25 
B 
Mar - Sep 
48 43 
(169) (170) 
Mar - Sep 
42 40 
(127) (133) 
44.6 46.6 
(1 ) For some data, preliminary estimates. 
(2) For 1992, rating or position in the ranking assigned to the former CSFR 
(3) Countries are given a rating between A - E and a score between 1-100. with E and 100 representing 
the highest risk. 
(4) The higher the score in the ranking, the lower the creditworthiness of the country 
(5) Countnes are rated on a scale of zero to 100, with 100 representing the least chance of default A given country 
may improve rts rating and still fall in the ranking if also the average global rating for all rated countries improves 
ll-F-3 
Last update: 
28/02/94 Country Risk indicators 
Country: Estonia 
1992 1993(1) 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) -23.0 
-38.7 
2.0 
Inflation rate (Dec/Dec) 
Exchange rate (Kroons per USD) 
Nominal effective exchange rate 
Real effective exchange rate (change. Dec/Dec) 
(change. Q4/Q4) (- = depreciation) 
(change. Q4/Q4) (- - depreciation) 953.5 
n a 
n.a 
n.a 
Balance of payments 
Exports of goods (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 -5.0 
-352 
1 7 
35 7 
8.2 
n.a 
n.a 
External debt 
External debt 
(in convertible currencies, in bn USD. end of penod) 
medium and long-term (> 1 year) 
short-term (=< 1 year) 
Convertible debt service (in mio USD) 
pnncipal 
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 650 
8.9 
57 9 
195.1 
"3.6 
38 1 ! 
n.a ! 
n.a 
208 
n.a 
n.a.| 
3.6 | 
5.9 ' 
3.2 | 
No' 
No 1000 
-1 7 
86 4 
344 9 
4 1 
1683 
n.a 
n a 
20 8 
n.a. 
n a 
9.7 
168 
2.1 
No 
No 
IMT- arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) SBA SBA/STF 
(9/92-9/93) ; (10/93-3/94) 
Cn track On track 
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) 
EIU country risk service (2) 
Score (end of penod) 
Rating (end of penod) 
Euromoney 
Position in the ranking (3) 
(number of countries) 
The Institutional Investor 
Position in the ranking (3) 
(number of countries) 
Credit rating (4) ; Not rated 
Not rated 
80 
i E 
1 117 
(169) 
Mar Sep 
I 68 74 
|(119) (126) 
I25 7 22.1 Not rated 
Not rated 
75 
D 
Mar Sep 
126 122 
(169) (170) 
Mar Sep 
81 84 
(127) (133) 
214 20.9 
(1 ) For some data, preliminary estimates 
(2) Countries are given a rating between A - E and a score between 1 - 100, with E and 100 representing 
the highest risk. 
(3) The higher the score in the ranking, 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 rf also the average global rating for all rated countries improves G^ 
ll-F-3 
Last update: 
28/02/94 Country Risk indicators 
Country: Hungary 
1991 1992 1993(1) 
r 
-11.9j 
-19.1 | 
8.0 i Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end of period) -4.4 | -1.0 
-9 8 | (Jan-Nov) 4.3 
12.3 1 12.1 
21 6 i 
8.0 | 
-8.5 J 
7.6 j 
i Inflation rate 
Exchange rate (forints per USD) 
Nominal effective exchange rate 
Real effective exchange rate (change. Dec/Dec) 
(change, Q4/Q4) (- = depreciation) 
(change. Q4/Q4) (- = depreciation) 32.2 
249 
-137 
105 21 1 
12.7 
-102 
54 
General government balance (as % of GDP) (GDS definition) 
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) 
m bn USD 
in months of imports of merchandises 
External debt 
External debt 
(in convertible currencies, in bn USD, end of penod) 
medium and long-term (> 1 year) 
short-term (=< 1 year) 
Convertible debt service (in bn 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 -4 4 
9258 
08 
1474 
4 0 
53 
22 4 
20 2 
22 
40, 
24 
1 6 
72 5 
242 0 
43 2 
No 
No -69 
10028 
08 
1471 
4 4 
6 1 -7.0 
(Oct) 
(Oct) 8184 
-6 1 
1200 
57 
69 
21 5; 
19 3 ! 
2.3 I 
4.4 i 
2.8! 
1 6 ! 
65 5! 
214 4 j 
439! 
Not 
Not 24 9 
23.1 
1.8 
4.3 
2.7 
1.6 
663 
278.8 
46 1 
No 
No 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) EFF EFF SBA 
(2/91-2/94) (9/93-12/94) 
On track Off track < On track 
Summer j 
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) 
EIU country risk service (2) 
Score (end of period) 
Rating (end of period) 
Euromoney 
Position in the ranking (3) 
(number of countries) 
The Institutional Investor 
Position in the ranking (3) 
(number of countries) 
Credit rating (4) Ba1 Ba1 
Not rated 8B + 
n.a 40 
n.a B 
44 46 
(130) ! (169) 
Mar Sep j Mar Sep 
41 42 | 42 43 
(111) (113);(119) (126) 
411 409.417 42 3 Ba1 
BB + 
50 
C 
Mar Sep 
47 46 
(169) (170) 
Mar Sep 
43 43 
(127) (133) 
44.3 44.8 
100, with E and 100 representing (1) For some data, preliminary estimates. 
(2) Countries are given a rating between A - E and a score between 1 
the highest risk. 
(3) The higher the score in the ranking, 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 rf also the average global rating for all rated countries improves •*so 
ll-F-3 
Last update 
01/03/94 Country Risk indicators 
Country: Israel 
1991 1992 1993(1) 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (average) 5.9 I 
8.0 j 
10 6! 6.5 I 
10.01 
11.21 3.5 
9.3 
9.0 
Inflation rate 
Exchange rate (shehels per USD) 
Nominal effective exchange rate 
Real effective exchange rate 
(1990=100) (Dec/Dec) 
(change. Dec/Dec) 
(change. Q4/Q4) (- = depreciation) 
(change. Q4/Q4) (- = depreciation) 
[General government balance (as % of GDP) 180 
11.5 
-9.4 
3.6 
5.9 9 0I 11.5 
21.1 | 6.8 
-9.3j (Q3/Q3) -3.1 
-4 5|(Q3/Q3) 2.5 
Balance of payments 
Exports (m bn USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of penod) 
in bn USD 
m months of imports of G&S -4.9 I 
External debt * 
External debt 
(in convertible currencies, in bn USD. end of period) 
medium and long-term (> 1 year) 
short-term ( = < 1 year) 
Convertible debt service (in bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports (%) 
Debt service/exports (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( -/ Dale) 12.2 | 
-0.3 I 
-161 j 
6.3' 
3.4, 
33.0 | 
i 
n.a 
n.a ' 
7.0: 
n.a 
n.a 
56.9, 
170.0' 
57.4 
No 
No: 133! 
-1 2: 
-340 
5 1 
2 5 
33 9; 
n a : 
n a 
6 3 
n a.i 
n a : 
53 3: 
155.0: 
47 4 
No 
No 
No CCFF 
(3/92-3/93) 
On-track 
ndicators 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) 
EIU country nsk service (2) 
Score (end of period) 
Rating (end of period) 
Euromoney 
Position in the ranking (3) 
(number of countries) 
The Institutional Investor 
Position in the ranking (3) 
(number of countries) 
Credit rating (4) Not rated 
BBB-
Not rated 
Not rated 
38 
(130) 
Mar Sep 
51 51 Not rated 
68B-
Not rated 
Not rated 
32 
(169) 
Mar Sep 
50 52 
(111) (113){(119) (126)1 
34.9 35.2 | 37 1 35.1 | -3.2 
14.7 
-0.9 
n a 
62 
2.9 
34.6 
n a 
n.a 
65 
n.a 
n.a 
54 
1350 
44 2 
No 
No 
No 
Not rated 
BBB + 
Not rated 
Not rated 
Mar Sep 
29 29 
(169) (170) 
Mar Sep 
46 46 
(127) (133) 
396 40.5 
(1) For some data, preliminary estimates 
(2) Countnes are given a rating between A - E and a score between 1 - 100, with E and 100 representing 
the highest risk. 
(3) The higher the score in the ranking, 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 
nT3~" 
Last update: 
28/02/94 Country Risk indicators 
Country: Latvia 
1992 1993(1) 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (end of penod) -33.8 
-35.1 
23 -10.0 
-38.0 
5.6 
Inflation rate (Dec/Dec) 
Exchange rate (Lats per USD) 
Nominal effective exchange rate 
Real effective exchange rate (change. Dec/Dec) 
(change. Q4/Q4) (- = depreciation) 
(change, Q4/04) (- = depreciation) 9586 
n a 
n.a 
n.a 31.3 
n.a. 
n.a. 
n.a. 
General government balance (as % of GDP) 00 -0.4 
Balance of payments 
Exports (in mio USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of penod) 
in mio USD 
in months of imports of G&S 831' 
4.0Î 
43j 
156; 
1 8' 1149 
1.0 
50 
522 
47 
External debt 
External debt 
(in convertible currencies, in mio USD. end of period) 
medium and long-term (> 1 year) 
short-term (=< 1 year) 
Convertible debt service (in mio USD) 
pnncipal 
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 53! 
n a : 
n a : 
15 1 ! 
n a j 
n.aj 
40i 
70; 
20; 
Noi 
No! 504 
n.a. 
n.a. 
18.0 
n.a. 
n.a. 
14.0 
, 28.0 
1.0 
No 
No 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( -/Date) SBA SBA/STF 
;?/92-9/93) ' (12793-3/95) 
On track On track (2) 
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) 
EIU country risk service (3) 
Score (end of period) 
Rating (end of period) 
Euromoney 
Position in the ranking (4) 
(number of countries) 
The Institutional Investor 
Position in the ranking (4) 
(number of countries) 
Credit rating (5) Not rated 
Not rated 
80 
E 
123 
(169) 
; Mar Sep 
i 72 77 
1(119) (126) 
'23 9 21.4 Not rated 
Not rated 
75 
D 
Mar Sep 
133 132 
(169) (170) 
Mar Sep 
89 87 
(127) (133) 
19 5 20.0 
(1) For some data, preliminary estimates 
(2) Following the review of fourth quarter 1993 performance criteria, it was decided that Latvia could not purchase the 
relevant tranche for failure of observing the criterion on reserve money. Next review expected for April 1994 
(3) Countries are given a rating between A - E and a score between 1 -100, with E and 100 representing 
the highest risk. 
(4) The higher the score in the ranking, the lower the creditworthiness of the country. 
(5) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. <l 
ll-F-3 
Last update: 
28/02/94 Country Risk indicators 
Country: Lithuania 
1992 i 1993(1) 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) -37.7 I 
-51.6 | 
vol -16.2 
-42.7 
1.6 
Inflation rate (Dec/Dec) 
Exchange rate (Litas per USD) 
Nominal effective exchange rate 
Real effective exchange rate (change, Dec/Dec) 
(change, Q4/Q4) (- = depreciation) 
(change. Q4/Q4) (- = depreciation) 1162.5 
n a 
n a.| 
n a.i 188.6 
n.a 
n.a 
n.a. 
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) 
medium and long-term (> 1 year) 
short-term (=< 1 year) 
Convertible debt service (in mio USD) 
pnncipal 
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 09 
999 
55 
10 
140 
2.6 
98 8 
n a.; 
n.a.j 
2.0 j 
n a.j 
n a.! 
54 i 
78! 
02' 
No i 
No -0 1 
1694 
-84 
40 
280 
18 
3453 
n a 
n a 
15.0 
n.a 
n.a 
11.2 
163 
07 
No 
No 
MF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( -/Date) SBA SBA/STF 
(10/92-9/93) (10/93-3/94) 
On track : On track 
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) 
EIU country risk service (2) 
Score (end of period) 
Rating (end of period) 
Euromoney 
Position in the ranking (3) 
(number of countries) 
The Institutional Investor 
Position in the ranking (3) 
(number of countries) 
Credit rating (4) Not rated 
Not rated 
80 
E 
118 
(169) 
Mar Sep 
73 80 
(119) (126) 
23.7 207 Not rated 
Not rated 
75 
D 
Mar Sep 
134 130 
(169) (170) 
Mar Sep 
91 93 
(127) (133) 
18.9 19.0 
(1 ) For some data, preliminary estimates 
(2) Countries are given a rating between A - E and a score between 1-100, with E and 100 representing 
the highest risk. 
(3) The higher the score in the ranking, 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 rf also the average global rating for all rated countries improves 
ll-F-3 
Last update: 
26702/94 Country Risk indicators 
Country: Romania 
1991 1992 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of penod) -15 1 | 
-19 6 ; 
6 1 i -154 
-22 1 
84 1993(1) 
1.0 
7.7 
9.9 
Inflation rate 
Exchange rate ( lei per USD) 
Nominal effective exchange rate 
Real effective exchange rate (Dec/Dec) 
(change. Dec/Dec) 
(change. Q4/Q4) (- = depreciation) 
(change. Q4/Q4) (- = depreciation) Z228\ 
433 1 ; 
-72 9 I 
-17 1 I 1985 
134.1 
-74.6 
-240 
General government balance (as */• of GDP) 06 -5.5 
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 3538 
-11 3 
37 
198 4286 
-11 6 
73 
93 
02 
External debt 
External debt 
(in convertible currencies, m bn USD. end of penod) 
medium and long-term (> 1 year) 
short-term (=< 1 year) 
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 1 1 
1 0' 
90 
13; 
77 i 
76 ' 
59 6 
25i 
No 
No 4 1 
29 
1.2 
444 
300 
144 
21 0 
95 1 
10.4 
No 
No 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) SBA SBA 
(4/91-4/92) (05/92-03/93), 
On track Off track : 
Dec 92 ; 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of penod) 
S&P long-term foreign currency rating (end of penod) 
EIU country nsk service (2) 
Score (end of period) 
Rating (end of penod) 
Euromooey 
Position in the ranking (3) 
(number of countries) 
The Institutional Investor 
Position in the ranking (3) 
(number of countries) 
Credit rating (4) 294.7 
214 1 
-56.9 
657 
-2.0 
4500 
-106 
50 
52 
0 1 
5.8 
46 
1.2 
750 
500 
250 
21.8 
129.6 
167 
No 
No 
No 
Not rated 
Not rated 
n a 
n a 
89 
(130) 
Mar Sep 
60 64 
(111) (113) 
279 267 Not rated 
Not rated 
60 
D 
72 
(169) 
Mar Sep 
69 68 
(119)(126) 
25.6 248 Not rated 
Not rated 
65 
D 
Mar Sep 
74 75 
(169) (170) 
Mar Sep 
73 75 
(127) (133) 
242 244 
(1 ) For some data, preliminary estimates. 
(2) Countries are given a rating between A - E and a score between 1 - 100, with E and 100 representing 
the highest risk 
(3) The higher the score in the ranking, 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 rf also the average global rating for alt rated countries improves <i 
îûFô 
Last update: 
01/03/94 Country Risk indicators 
Country: Russia 
1991 1992 1993(1) 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period - ILO definition) 
Inflation rate 
Exchange rate ( Rbs per USD) 
Nominal effective exchange rate 
Real effective exchange rate (Dec/Dec) 
(change. Dec/Dec) 
(change. Q4/Q4) (- = depreaaùon) 
(change. Q4/Q4) (- = depreciation) •129; 
-80; 
n a j -19.0 
-180 
n.a 
1601 2500 
n.a] 145 
-63.6 |(Q4/Q.1)-55.6 
-25 3|(Q4/Q1) 900 
-200i -100 
Balance of payments 
Exports of G&S (in bn USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in bn USD) 
Official FX reserves (end of penod) 
in mio USD 
in months of imports of G&S 
External debt 
External debt 
fin convertible currencies, in bn USD. end of penod) 
medium and long-term (> 1 year) 
short-term (=< 1 year) 
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 51 
n a : 
-0 1 
00 
00 
67 o: 
54 3. 
12 7 
n a 
n a ; 
n a ! 
n a.; 
131.0' 
n a . 
4.8 I 
Noi 41 , 43 
-1 6i (Jan-Sep) 6.3 
07! "11 
2.1 : 
07 45 
23 
77.7 (Q3) 820 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 64 7 
130. 
158 
10-4 i 
54! 
98 Ol 
190.01 
380! 
149; 
Pans Club ' 
(deferra's) 
London Club ; 
(roll-overs) i 
1st credit 
trancne 
Aug 92 72.0 
100 
200 
14.0 
6.0 
" 59.0 
- 190.0 
" 460 
n a 
Paris Club 
(resched ) 
London Club 
(roll-overs, and 
resched agr 
in principle) 
STF 
Jul 93 
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) 
EIU country nsk service (2) 
Score (end of penod) 
Rating (end of penod) 
Euromoney 
Position in the ranking (3) 
(number of countnes) 
The Institutional Investor 
Position in the ranking (3) 
(number of countries) 
Credit rating (4) ! Not rated ', Not rated 
Not rated 
n a 
n a 
n.a 
(130) 
Mar Sep Not rated 
95 
E 
129 
(169) 
Mar Sep 
- 73 
- (126) 
- 236 Not rated 
Not rated 
95 
E 
Mar Sep 
149 137 
(169) (170) 
Mar Sep 
87 92 
(127) (133) 
20 2 19.0 
(1) For some data, preliminary estimates. 
(2) Countries are given a rating between A - E and a score between 1 - 100, with E and 100 representing 
the highest risk. 
(3) The higher the score in the ranking, the lower the creditworthiness of the country. 
(4) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves <,S 
II-F-3 Country Risk indicators 
Last update: Country : Former CSFR 
25/02/94 
1991 1992 
Real GDP growth rate (in %) -15,9 -7,0 
Industrial production (% change) -21,2 -12,0 
Unemployment rate (end of period) 6^6 5.0 
Inflation rate (Dec/Dec) 52,0 12,7 
Exchange rate (korunys per USD) (change, Dec/Dec) -0,6 3,8 
Nominal effective exchange rate (change, Q4/Q4) (- = depreciation) -12,4 1,0 
Real effective exchange rate (change, Q4/Q4) (- = depreciation) 31,4 9,4 
General government balance (as % of GDP) -2,0 -4,3 
Balance of payments 
Exports of G&S (in mio USD) 12 595,0 14 070,0 
Current account balance (in % of GDP) 3,0 0,8 
Net inflow of foreign direct investment (in mio USD) 594,0 1055,0 
Official FX reserves (end of period) 
inbnUSD 3,2 1,3 
in months of imports of G&S L3 1,1 
External debt 
External debt 9 793,0 9 484,0 
(in convertible currencies, in mio USD, end of period) 
medium and long-term (> 1 year) 5 845,0 7 258,0 
short-term (= < 1 year) 2 635,0 2 226,0 
Convertible debt service (in mio USD) 1 778,0 1 984,0 
principal 1 184,0 1 294,0 
interest 594,0 690,0 
External debtyGDP (%) 28,2 • 28,5 
External debt/exports of G&S (%) 82,0 62,1 
Debt service/exports of G&S (%) 14,1 14,1 
Arrears (on both interest and principal, in mio USD) 4,0 No 
Debt relief agreements and rescheduling No No 
IMF arrangements 
Type/no SBA SBA 
(Date/-) (1/91-3/92) (4/92-4/93) 
On track/off track On track On track but 
( - / Date) expired with 
dissolution 
of CSFR 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) tJal Bal 
S&P Jong-term foreign currency rating (end of period) No rated No rated 
Euromoney 
Position in the ranking (1) 35 CR49 SR 58 
(number of countries) (130) (169) 
The Institutional Investor Mar / Sep Mar /Sep 
Position in the ranking (1) 32 34 37 39 
(number of countries) (111X113) (119) (126) 
Credit rating (2) | 50,3 48,3 | 47.1 46.1 
( 1 ) The higher the score in the ranking, the lower the creditworthiness of the country. 
(2) Countries are rated on a scale of zero to 100, with 100 representing the least change of default. A given country may improve its rating and still fall in the 
ranking if also the average global rating for all rates countries improves. 
ll-F-3 
Last update: 
28/02/94 Country Risk indicators 
Country: Slovak Republic 
1992 1993(1) 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end of period) ' -6.01 
-12.81 
1041 -9.0 
-8.6 
14.4 
Inflation rate 
Exchange rate (SK's per USD) 
Nominal effective exchange rate 
Real effective exchange rate (Dec/Dec) 
(change, Dec/Dec) 
(change, Q4/Q4) (- = depreciation) 
(change, Q4/Q4) (- = depreciation) 127! 
38 
10 
94 
General government balance (as 7. of GDP) -140 25.1 
12.7 
-4.9 
167 
-7.0 
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 bnUSD 
in months of imports of G&S 
External debt 
External debt 
(in convertible currencies, in bn USD. end of penod) 
medium and long-term (> 1 year) 
short-term (=< 1 year) 
Convertible debt service (in mio USD) 
pnncipal 
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 7617 | 
02i 
iooi 
04 
04 
2.6 
21 
04 
675 
415 
260 
257 
33.6 
8.9 
No 
No 6683 
-2.4 
100 
04 
04 
2.8 
24 
04 
670 
450 
220 
281 
41.9 
100 
No 
No 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) SBA 
(4/92^/93) 
on-track but 
expired with 
dissolution 
of CSFR STF 
(7/93- ) 
On-track 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) (2) 
S&P long-term foreign currency rating (end of period) 
EIU country nsk service (3) 
Score (end of period) 
Rating (end of period) 
Euromoney 
Position in the ranking (4) 
(number of countries) 
The Institutional Investor (2) 
Position in the ranking (4) 
(number of countries) 
Credit rating (5) Ba1 
Not rated 
Not rated 
Not rated 
58 
(169) 
Mar - Sep 
37 39 
(119) (125) 
47 1 46 1 Not rated 
Not rated 
Not rated 
Not rated 
Mar - Sep 
56 63 
(169) (170) 
Mar - Sep 
57 57 
(127) (133) 
31 30.6 
(1) For some data, preliminary estimates. 
(2) For 1992, rating or position in the ranking assigned to the former CSFR. 
(3) Countries are given a rating between A - E and a score between 1 -100, with E and 100 representing 
the highest risk. 
(4) The higher the score in the ranking, the lower the creditworthiness of the country 
(5) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves 
TABLE 1 
CAPITAL OUTSTANDING IN RESPECT OF OPERATIONS DISBURSED 
Operations 
MEMBER STATES 
A. Balance of payments 
1. Greece I 
2. Greece II 
3. Italie 
B.Others 
4. Euratom 
5. NIC and NlC.earthquakes 
6. EIB Mediterranean 
Spain,Greece, Port. 
MEMBER STATES TOTAL 
THIRD COUNTRIES 
A.Financial assistance 
1. Hungary 
2. Czechoslovakia 
3. Bulgaria 
4. Romania 
5. Algeria 
6. Israel 
7. Baltic States 
8. Former Soviet'Union 
B.Others 
9. EIB Med 
10. EIB Central and Eastern Europe 
11. EIB Central and Eastern Europe 
12. EIB Asia,Latin America 
12. Guarantees CIS 
THIRD COUNTRIES -TOTAL 
GRAND TOTAL Authorized ceiling 
14000 
1750 
2200 
8000 
4000 
6830 
1500 
26330 
1050 
375 
400 
455 
400 
160 
220 
1250 
6167 
1700 
3000 
750 
500 
16427 
42757 Capital 
outstanding 
30.06.93. 
200 
1000 
1979 
1144 
2813 
629 
7764 
790 
375 
290 
455 
250 
160 
60 
616 
1532 
191 
363 
5082 
12846 Capital 
outstanding 
31.12.93. 
200 
1000 
3990 
1018 
2202 
572 
8982 
790 
375 
290 
455 
250 
160 
110 
803 
1596 
300 
266 
5395 
14377 Remainder to 
be disbursed 
31.12.93 
0 
1200 
4000 
0 
0 
0 
5200 
260 
0 
110 
0 
150 
0 
110 
447 
3901 
1400 
3000 
750 
0 
10128 
15328 
1 ) No disbursement is planned. 
2) The third and fourth tranches could be paid on 1 February 1994 and 1995. So far, 
the Italian Government has not requested payment. 
ANNEX TO TABLE 1 
SITUATION IN RESPECT OF EIB OPERATIONS 
Operations 
EIB Méd. 
Spain, Greece, Portugal 
Third countries EIB Méd. 
Central and Eastern Europe I 
Central and Eastern Europe II 
Asia, Latin America Credit line 
authorized 
1500 
6167 
1700 
3000 
750 Loans made 
available, minus 
cancellations 
1465 
3573 
1650 
5 
99 Initial 
disbursement 
1620 
2266 
300 
0 
0 Amount 
outstanding 
at 31.12.93 
572 
1596 
300 
0 
0 
NB: The fact the initial disbursement sometimes exceeds the authorized ceiling is due 
to differences in the ecu rate between the date on whicl-Ube contracts were signed and 
31 December 1993. 
<e 
TABLE 2 
MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 
(Estimate in ECU milBon based on all operations disbursed at 31 December 1993) 
MEMBER STATES 
CAPITAL 
A Balance of payments 
1. Greece 
2 Italy 
B.Structural loans 
3 Euratom 
4 NCI et NCI EQ 
5. EIB Med.Old. Prot. 
Sp.Gre.Port 
Capital - subtotal 
INTEREST 
A. Bala nee of payments 
1. Greece 
2. Italy 
B.Structural loans 
3. Euratom 
4. NCI et NCI EQ 
5. EIB Med.Old Prot. 
Sp.Gre.Port 
Interest -subtotal 
MEMBER STATES TOTAL 
NON-MEMBER COUNTRIES 
CAPITAL 
A.Financial assistance 
6. Hunaarv 
7. Czechoslovakia 
8 Bulgaria 
9. Romania 
10. Algeria 
11. Israël 
12. ex-USSR 
13. Baltic States 
B Guarantees 
14. EIB Med. 
15. ElBC+EEuM 
16. Aid Russia 500 
Interest -subtotal 
INTERETS 
A.Financial assistance 
6. Hungary 
7. Czecoslovakia 
8. Bulgaria 
9. Romania 
10 Alqeria 
11 Israël 
12. ex-USSR 
13. Baltic States 
B.Guarantees 
14. EIB Med. 
15 EIB C+E Eur. I 
16 AidRussiA500 
Interest - subtotal 
NON-MEMBER COUNTRIES -TOTAL 
GRAND TOTAL 
(Eastern Europe ) 
(Other non-member countries ) 1993 
569 
358 
1177 
54 
2158 
147 
112 
296 
31 
586 
2744 
56 
103 
159 
81 
38 
29 
42 
25 
16 
30 
3 
61 
8 
34 
367 
526 
3270 
368 
158 1994 
200 
265 
663 
91 
1220 
110 
252 
81 
188 
50 
681 
1901 
112 
130 
2 
133 
377 
79 
38 
29 
46 
25 
16 
80 
11 
120 
21 
24 
488 
866 
2766 
— 
575 
290 1995 
46 
484 
84 
615 
95 
252 
61 
132 
42 
582 
1197 
350 
511 
139 
13 
133 
1145 
79 
38 
29 
46 
25 
16 
69 
11 
109 
21 
9 
452 
1597 
2794 
_. . . 
1308 
289 
_ 1996 
500 
500 
152 
330 
77 
1559 
95 
252 
57 
93 
35 
532 
2091 
260 
179 
137 
22 
598 
44 
38 
29 
46 
25 
16 
18 
11 
99 
20 
345 
943 
3033 
666 
276 1997 
434 
533 
76 
1044 
46 
213 
44 
65 
27 
395 
1439 
80 
190 
140 
250 
160 
140 
26 
987 
18 
38 
29 
46 
25 
16 
11 
88 
18 
289 
1276 
2715 
596 
680 1998 
500 
992 
92 
95 
58 
1737 
46 
213 
10 
17 
21 
307 
2044 
100 
185 
150 
185 
144 
29 
794 
10 
19 
15 
46 
11 
78 
16 
195 
988 
3032 
767 
222 1999 
16 
40 
51 
107 
157 
3 
8 
16 
184 
291 
190 
140 
28 
358 
27 
11 
67 
14 
119 
477 
768 
270 
208 2000 
2498 
12 
40 
46_ 
2596 
157 
1 
5 
11 
174 
2771 
80 
110 
129 
26 
345 
8 
11 
57 
12 
88 
433 
3204 
247 
186 TOTAL 
1769 
3990 
1376 
3363 
537 
11035 
539 
1496 
369 
804 
233 
3441 
14476 
790 
375 
290 
455 
250 
160 
802 
110 
1015 
146 
369 
4763 
311 
209 
160 
307 
125 
80 
197 
80 
679 
129 
67 
~ -
2344 
7107 
21582 
479T 
2309 
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 Commissionion 
MEMBER STATES 
CAPITAL 
A.Balanceof payments 
1. Greece 
2. Italy 
B.Structural loano 
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 SD.Gr.Port 
Intérêts- subtotal 
MEMBER STATES - TOTAL 
NON - MEMBER COUNTRIES 
CAPITAL 
A.Financial assistance 
5. Hungary 
6. Czechoslovakia 
7. Bulgaria 
8. Romania 
9. Israel 
10. Algeria 
11.EX-USSR 
12. Baltic States 
13. Euratom, C+E Eur. 
B.Guarantees 
14. EIB Med. 
15. EIB C+E Eur.l + II 
16. ElB.Asia, Latin America 
17.Aid Russia auar.500m 
Interset - subtotal 
INTEREST 
A.Financial assistance 
5. Hungary 
6. Czechoslovakia 
7. Bulgaria 
8. Romania 
9. Israel 
10. Algeria 
11. Ex-USSR 
12. Baltic States 
13. Euratom, C+E Eur. 
B.Guarantees 
14. EIB Med. 
15.EIBC+EEur.letll 
16. EIB, Asia, Latin America 
17. Aid Russia auar.500m 
Interest - subtotal 
NON-MEMBER COUNTRIES -TOTA 
GRAND TOTAL 
(Eastern Europe ) 
(Other non-member countries ) 1993 
569 
1535 
54 
2158 
147 
408 
31 
586 
2744 
56 
103 
159 
81 
38 
29 
42 
16 
25 
30 
3 
61 
8 
34 
367 
526 
3270 
368 
158 1994 
200 
929 
91 
1220 
170 
425 
270 
50 
915 
2134 
191 
130 
2 
133 
456 
92 
38 
35 
46 
16 
40 
102 
17 
8 
143 
47 
2 
24 
610 
1066 
3200 
735 
331 1995 
531 
84 
615 
215 
595 
193 
42 
1045 
1660 
350 
653 
139 
13 
133 
1288 
105 
38 
40 
46 
16 
40 
106 
22 
25 
193 
113 
10 
9 
763 
2051 
3711 
1653 
398 1996 
500 
500 
482 
77 
1559 
215 
680 
149 
35 
1079 
2638 
260 
406 
137 
22 
825 
70 
38 
40 
46 
16 
40 
41 
22 
45 
270 
204 
23 
855 
1680 
4317 
1194 
486 1997 
967 
76 
1044 
166 
638 
109 
27 
940 
1983 
80 
190 
140 
160 
250 
180 
70 
4 
1074 
44 
38 
40 
46 
16 
40 
22 
65 
345 
298 
39 
993 
2067 
4050 
1033 
1034 1998 
500 
1000 
187 
58 
1745 
166 
638 
27 
21 
851 
2596 
100 
185 
150 
185 
245 
139 
12 
1016 
36 
19 
26 
46 
15 
22 
85 
394 
367 
53 
1063 
2079 
4675 
1360 
719 1999 
600 
56 
51 
707 
120 
553 
10 
16 
698 
1406 
260 
190 
10 
324 
227 
27 
1038 
26 
11 
27 
15 
22 
102 
414 
400 
62 
1079 
2117 
3523 
1275 
842 2000 
600 
4498 
53 
46 
5196 
60 
553 
6 
11 
630 
5827 
55 
80 
150 
110 
23 
379 
301 
39 
1137 
11 
8 
15 
22 
107 
392 
390 
62 
1007 
2144 
7971 
1107 
1037 TOTAL 
2969 
5996 
4739 
537 
14243 
1259 
4081 
1172 
233 
6744 
20988 
1050 
375 
345 
455 
160 
400 
1250 
110 
33 
1590 
774 
82 
369 
6993 
454 
209 
232 
307 
80 
230 
279 
152 
437 
2212 
1827 
251 
67 
6736 
13729 
34717 
8724 
5005 
U' 
o 
EXPLANATORY NOTES 
The purpose of these tables is to show the 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, it is not certain that all the 
operations described will actually be disbursed. No account has been taken of interest 
on late payment or any additional costs such as lawyers' fees. 
I. TYPES OF OPERATION AND PAYMENT OF THE BUDGET 
GUARANTEE 
A. Types of operation 
The risk covered by the Community budget results from two types of operation: 
- borrowing/lending operations; 
- guarantees given to third parties. 
In the first 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 defaults, the Commission 
must draw on its budgetary resources to repay the borrowing on the due date. 
The loan guarantee is in respect of loans granted by a financial institution (EIB or 
commercial banks in the case of the former Soviet Union). When the recipient of 
a guaranteed loan fails to make a payment on the due date, the bank asks the 
Commission to pay the amounts owed by the defaulter. 
B. Mobilization of funds 
The funds needed to pay the budget guarantee can be raised in three ways: 
- 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 
funds available. 
- The transfer procedure can be used to provide the budget heading with 
the appropriations needed to cover the default. This method is used 
when there are insufficient appropriations for re-use and must be 
authorized in advance by the budgetary authority. 
;-a 
- The amount required may be taken provisionally from cash resources in 
accordance with Article 12 of the Financial Regulation. This method is 
used, in particular, when the Community has so short a deadline for the 
payment of a guarantee that the budgetary authority has no time to 
approve a transfer. 
This operation is subsequently regularized by means of a transfer or a 
supplementary and/or amending budget. 
H. CALCULATION 
Some of the amounts indicated are the result of estimates made on the basis of the 
following assumptions. 
Generally speaking, the exchange rates for loans in currencies other than the ecu 
are assumed to have been stable since 31 December 1993. However, borrowing 
and lending operations should not involve exchange risks for the Community. 
Unless otherwise stated, the average rate of interest is estimated at 10%. This 
rate is probably a little high for EIB loans, which often attract interest subsidies 
under the protocols. 
A. Member States 
1. Greece: The existing BOP loan to Greece has run its course and there will be no 
further disbursements. There are no plans for any new loans. 
2. My.: The Council decision of 18 January 1993 granted a ECU 8 000 million 
balance-of-payments loan to Italy. The loan is to be made available in four 
instalments amounting to ECU 2 000 million each and - with the exception of the 
first instalment - is conditional on the attainment of agreed targets on Italy's 
public debt and deficit. 
The first two instalments were released in 1993. Concerning the coming period, 
the Council Decision states that the third instalment could be released as of 
1 February 1994 (but the Italian Government has not yet applied for it). The 
fourth instalment may be released not earlier than 1 February 1995. 
If the Italian Government decides to apply for the release of the third and fourth 
instalments and the conditions are deemed to be fulfilled ECU 2 000 million in 
1994 and ECU 2 000 million in 1995 will be disbursed to the Italian Republic. 
3. EIB. Mediterranean, old protocols: Spain. Greece. Portugal: These are 
Community guarantees for EIB operations in these countries prior to accession. 
The amounts are now final, since all the loans authorized have been disbursed. 
U 
B. Non-member countries 
a. Financial assistance 
1. Hungary I: The amounts of the first two tranches are final and certain. The third 
tranche of the macrofinancial assistance decided in 1990 is not expected to be 
disbursed in 1994 or 1995. 
2. Hungary II: ECU 180 million has been granted and paid out in full. 
3. Czechoslovakia: ECU 375 million has been granted in two tranches for a 
maximum term of seven years (bullet), with a first tranche of ECU 185 million 
and a second tranche of ECU 190 million for a term of six years. 
4. Bulgaria I: ECU 290 million has been granted in two tranches for a maximum 
term of seven years (bullet), with a first tranche of ECU 150 million for a term 
of seven years and a second tranche of ECU 140 million for a term of five years. 
5. Bulgaria II: The financial assistance of ECU 110 million decided in 1992 has not 
been disbursed since Bulgaria has failed to meet the necessary conditions. 
6. Romania I: An estimated ECU 375 million in two tranches for a maximum term 
of seven years (bullet). The first tranche of ECU 190 million was disbursed in 
1992 with a term of seven years and the second was disbursed in 1992 with a 
term of six years. 
7. Romania II: The new operation involving ECU 80 million for a maximum term 
of seven years was disbursed in 1993. 
8. Baltic States: The first tranche of a loan of ECU 220 million was paid in 1993. 
The second should be paid in 1994. The two tranches will be repaid in 2000 and 
2001 respectively. 
9. Algeria: ECU 400 million has been granted in two tranches of ECU 250 million 
and ECU 150 million. The first was paid in December 1991 for a term of six 
years. The second tranche has not been disbursed since Algeria has failed to 
meet the necessary conditions. This tranche may be disbursed in 1994 as a result 
of Algeria's new economic programme. 
10. Israel: A loan of ECU 160 million has been paid in full and is repayable in 
1997. 
b. Guarantees 
1. EIB 
Figures provided by the EIB for loans disbursed at 31 December 1993. 
For subsequent loans, we have made the following assumptions concerning the 
signature of loans (ECU million). 
Year 1994 1995 1996 TOTAL 
Mediterranean countries 890 870 870 2630 
Central and Eastern Europe7 705 965 1270 3000 
Other non-member countries 150 250 250 650 
In the case of these loans and those already signed at the end of December 1993 
but not yet disbursed (ECU 1 307 million for the Mediterranean countries and 
ECU 1 350 million for the countries of Central and Eastern Europe), we have 
assumed that an average of 10% of the loan will be disbursed in the year of 
signature and 30% in each of the three following years. In the case of the new 
operations following the renewal of EIB loans of ECU 3 000 million in the 
countries of Central and Eastern Europe for a period of three years, it is assumed 
that the signatures will take place as indicated in the financial statement drawn up 
by the Commission. 
It is estimated that the average term will be fifteen years with a three-year period 
of grace. 
2. Food aid for the former Soviet Union 
(a) Guarantee 
This is a guarantee for a bank loan of ECU 500 million, with principal and 
interest fully covered by the budget, for a term of three and a half years with 
three repayments at intervals of eleven months starting from the twentieth month. 
ECU 375 million has been used. 
(b) Borrowing/lending 
An operation involving ECU 1 250 million for a maximum term of three years. 
This borrowing will be divided between the various Republics of the former 
Soviet Union. Loans amounting to less than ECU 100 million will be repaid in 
one instalment three years after the start of the period in which the funds may be 
drawn. Borrowings exceeding ECU 100 million will be repaid in two instalments 
two years, and three years after the start of the period in which the funds may be 
drawn. 
Depending on the type of contract, there are two periods in which funds may be 
drawn; one starts on 20 August, the other on 15 January. 
It is assumed that the balance of ECU 448 million still to be used at 31 December 
1993 will be disbursed in 1994. 
3. Euratom, countries of Central and Eastern Europe 
Of the ECU 1 100 million involved, it is assumed that ECU 150 million will be 
disbursed in 1994, ECU 200 million in each of the four following years and 
ECU 150 million in 1999. 
It is assumed that the loans will be for an average term of twenty years with a 
five-year period of grace. 
Including renewal from 1993. 
.U 
ANNEX 
DEFINITION OF FIGURES USED IN THE REPORT 
A. Authorized ceiling (Table 1) 
This is the aggregate of the maximum amounts of capital authorized (ceilings) for 
each operation decided or of the amount proposed by the Commission for 
operations for which there has not yet been a Council decision. 
In order to relate it to the risk which the budget might have to cover, account 
should be taken of the following factors which could affect it: 
- factor increasing the risk: the interest on the loans must be added to the 
authorized ceiling; 
- factors reducing the risk: 
limitation of the guarantee given to the EIB to 75 % of the loans 
signed in the Mediterranean countries; 
operations already repaid, since the amounts concerned, except in the 
case of balance of payments support, are the maximum amount of 
loans granted and not outstanding amounts authorized; 
the amounts authorized are not necessarily taken up in full. 
The breakdown of authorizations is as follows: 
Member States 
Balance of payments 14 0008 
NCI 6 830 
Euratom 4 0009 
EIB; Spain, Greece, Portugal 1 500 
Member States - total 26 330 
Authorized amount outstanding: once this figure is 
reached, further loans may be granted as previous 
operations are repaid. 
Including ECU 1 100 million which may be granted to 
the countries of Eastern Europe and the CIS. 
& 
Non-member countries 
Hungary I 870 
Hungary II 180 
Czechoslovakia 375 
Bulgaria I 290 
Bulgarian 110 
Romania I 375 
Romania II 80 
Israel 160 
Algeria 400 
former Soviet Union I 408 
former Soviet Union II 1 250 
Baltic States 220 
EIB, old protocols 3 032 
EIB, Eastern Europe I 1 700 
EIB, Eastern Europe II 2 750 
EIB, Baltic States 200 
EIB, Albania 50 
EIB, new protocols 1 435 
EIB, horizontal cooperation 1 800 
Other non-member countries 750 
Non-member countries - total 16 185 
Grand total 42 515 
B. 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. 
C. Annual risk 
Estimated amount of principal and interest due each financial year. 
This amount is calculated for: 
- disbursements alone (Table 2), in which case the capital to be repaid 
corresponds to the amount outstanding; 
- 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. 
U-
BSN 0254-1475 
COM(94) 364 final 
DOCUMENTS 
EN 01 
Catalogue number : CB-CO-94-380-EN-C 
ISBN 92-11-12261-3 
Office for Officiai Publications of the European Commnmties 
L-2985 Luxembourg