EN    EN EN 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 8.10.2009 
SEC(2009) 1279 
COMMISSION STAFF WORKING DOCUMENT 
ACCOMPANYING THE REPORT FROM THE COMMISSION TO THE COUNCIL 
AND THE EUROPEAN PARLIAMENT ON THE IMPLEMENTATION OF MACRO-
FINANCIAL ASSISTANCE TO  THIRD COUNTRIES IN 2008 
{COM (2009) 514}
EN 2   EN LIST OF ABBREVIATIONS  
CAMEL Capital, assets, management, ear nings, liquidity (parameters used in 
international system for rating banks) 
CBA Currency Board Arrangement CEECs Central and East European Countries CPI Consumer Price Index EC European Community EGPRSP Economic Growth and Poverty Reduction Strategy Paper EIB European Investment Bank ESAF Enhanced Structural Adjustment Facility EU European Union EUR Euro FDI Foreign Direct Investment FESAL Financial and Enterprise Structural Adjustment Loan 
FOREX Foreign Exchange FYROM The former Yugoslav Republic of Macedonia GDP Gross Domestic Product IFIs International Financial Institutions IMF International Monetary Fund 
MFA Macro-Financial Assistance 
NIS New Independent States PRGF Poverty Reduction and Gr owth Facility (formerly ESAF) 
SAA Stabilisation and Association Agreement SAF Structural Adjustment Facility SBA Stand-By Arrangement SOE State Owned Enterprise USD Dollar of the United States of America 
UNSCR  
VAT United Nations Security Council Resolution 
Value Added Tax 
WTO World Trade Organisation 
EN 3   EN  
TABLE OF CONTENTS 
COMMISSION STAFF WORKING DOCUMEN T ACCOMPANYING THE REPORT 
FROM THE COMMISSION ON THE IMP LEMENTATION OF MACRO-FINANCIAL 
ASSISTANCE TO THIRD COUNTRIES IN 2008 .................................................................. 1 
List of Abbreviations.......................................................................................................... ........ 2 
Introduction ................................................................................................................... ............. 4 
1. Kosovo (under UNSCR 1244/99) ................................................................................ 4 1.1. Executive summary...................................................................................................... 4 1.2. Macroeconomic performance....................................................................................... 4 1.3. Structural reforms........................................................................................................ .6  
1.4. Implementation of macro- financial assistance............................................................. 6 
2. Republic of Moldova.................................................................................................... 9 2.1. Executive summary...................................................................................................... 9 2.2. Macroeconomic performance....................................................................................... 9 2.3. Structural reforms....................................................................................................... 1 0 
2.4. Implementation of macro- financial assistance........................................................... 12 
3. Georgia..................................................................................................................... .. 14 
3.1. Executive summary.................................................................................................... 14 3.2. Macroeconomic performance..................................................................................... 14 3.3. Structural reforms....................................................................................................... 1 5 
3.4. Implementation of macro- financial assistance........................................................... 17 
4. Lebanon..................................................................................................................... . 19 
4.1. Executive summary.................................................................................................... 19 4.2. Macroeconomic developments................................................................................... 19 4.3. Structural reforms....................................................................................................... 2 1 
4.4. Implementation of macro- financial assistance........................................................... 22 
EN 4   EN INTRODUCTION  
This working document is published in parallel  with the Report from the Commission to the 
Council and to the European Parliament on the implementation of macro- financial assistance 
to third countries in 2008. This document provides economic and financial information 
regarding the situation of the beneficiary coun tries. Statistical data  sorting the different 
macro-financial assistance decisi ons since 1990, by date and by re gions, are included in the 
annex.  
1. KOSOVO (UNDER UNSCR  1244/99) 
1.1. Executive summary 
The IMF and the Kosovo authorities suggest  a real GDP growth of around 5¼% in 2008 
which would mean a continuation of the upward trend observed in previous years. However, 
the general picture that Kosovo lags behind its neighbours and th at growth is too sluggish to 
meet the substantial development needs remains unchanged. GDP per capita – some €1,800 in 2008 - is still one of the lowest in Europe.  
On 17 February 2008, Kosovo declared independ ence and was subsequently recognised by 22 
EU Member States, the US, Japan and a number  of other non-EU countries. On 15 June 2008, 
the new Kosovo Constitution came into force. In July 2008, Kosovo applied for membership 
to the IMF and the World Bank and became a member of both institutions on 29 June 2009 
The Council approved in November 2006 MFA budget support of up to € 50 million (Council 
Decision 2006/880/EC). Yet, the foreseen budget financing gap has so far not materialised, 
mainly due to higher than expected revenue s and capital under-spend ing. In addition, an 
agreement with the IMF on fiscal policies has so  far not been achieved, which is a preliminary 
condition for the release of the assistance. C onsequently, the assistan ce remains outstanding. 
However, it is expected that th e conditions for disbursement may be fulfilled in the course of 
2009, taking into account IMF membership and th e deteriorating economic situation which 
will have repercussions on Kosovo's budget. The conditionality attached to this assistance was agreed between the Commission and the author ities of Kosovo in 2007 and a Memorandum of 
Understanding was accordingly signed in December 2007. 
1.2. Macroeconomic performance 
Growth is estimated to have been relatively strong at 5¼% in 2008, after 4.1%  in 2007. Main 
contributors to growth were sustained donor ac tivity, workers' remittances, and a significant 
increase in public investment. As Kosovo's inte gration into global markets is limited and its 
financial sector is rather sha llow and poorly developed, the impact  of the international crisis 
has been limited so far. The use of the euro  as legal tender shelte rs Kosovo from currency 
depreciation and financial sector indicato rs remained robust. The falling prices for 
commodities, while reducing the size of the trade deficit, are an additional risk factor for 
fiscal revenue projections. As a consequence,  government finances ma y come under stress 
towards the end of the year, with fiscal reserves  – currently still at a favourable level – falling 
below required prudent levels. 
Strong domestic demand and deteri oration in the term s of trade widened the current account 
deficit (after foreign assistance) to an estim ated 22½% of GDP, compared to 17% in 2007. 
FDI net inflows are estimated to have reach ed only 9.3% of GDP in 2008, down from 12.3% 
of GDP in 2007, partly due to a vi rtual standstill in the priva tisation process in the first 8 
EN 5   EN months of 2008 after the shift of authority fr om UNMIK to the newly created institutions 
under the Kosovo Constitution. 
The coverage ratio of exported to imported goods (12-month moving average) has gradually 
increased albeit at a very low level fr om 8.5% in 2006 to 9.4% in 2007 and 11.2% in 
September 2008. However, the reduction of e xport demand experienced since autumn 2008 
has dramatically reduced Kosovo's exports whic h fell by over 13% year-on-year in the last 
quarter 2008. Overall, the value of exports  and imports in 2008 increased by 18.7% and 
22.3% respectively over 2007. The European Union and the countries of CEFTA remain the 
main trading partners of Kosovo.  
The monetary framework remains anchored on the use of the euro as legal tender. The Central 
Bank of Kosovo (CBK), therefore, cannot implem ent any independent monetary or exchange 
rate policy. Its role lies in supervising the financial sector and monitoring liquidity in the banking sector and credit expansion, with liqui dity ratios and reserve requirements as main 
policy tools. The banking sector  has shown only few signs of distress in 2008, and financial 
intermediation has progressed co ntinuously. At the end of 20 08, annual deposit growth stood 
at 24.4% and credit growth at  32.7%. The banking system c onsists of eight banks which 
mainly engage in domestic deposit-taking and lending. 
Inflation decelerated sharply du ring the final months of 2008, due mostly to falling food and 
energy prices, lowering twelve-month CPI inflation to 0.5% in December from its peak of 
14% in May-July. The persistence of this deflat ionary tendency cannot be ruled out in the first 
half of 2009 as base effects will continue to  put downward pressure on the measured price 
level. Average annual inflation in 2008 stood at 9.4%, after 4.4% in 2007 and 0.6% in 2006.  
Remittances have so far kept up well and, un til the end of 2008, have not shown any signs of 
weakening (officially recorded remittances st and at around 10% of GD P, however the true 
figure -recorded and unrecorded- is considered  to be closer to 20% of GDP). Migrant 
remittances constitute a majo r source of income for Kosovo which could dry out when 
workers are laid off in host countries as the economic crisis affects the sectors in which 
migrants typically work, such as construction, manufacturing as well as restaurants and hotels. 
The government estimates remittances to amount to around €450 million in 2008
1.  
Unemployment remains very high in Kosovo w ith significant differe nces between genders. 
The results of the Labour Force Survey 2007 ( published in August 2008) revealed rates of 
unemployment at 43.6% (male 38.5%, female  55.2%), of activity at 46.5% (male 65.2%, 
female 28.3%) and of employment at 26.2% (male 40.1%, female 12.7%). However, the 
significant size of the informal sector may some how distort the actual picture. The fact that 
most of the unemployment is long-term aggr avates the alarming situation on the labour 
market. 
Budgetary developments in Kosovo have been quite volatile and hard to predict in recent 
years. The primary balance turned from a de ficit of 3.1% of GDP in 2005 to surpluses of 
2.5% in 2006 and even 7.2% in 2007. 2008 is exp ected to show a deficit of around 1.3% of 
GDP after both current and capital spending increased substantially. The estimated budget 
outcome for 2008 displays revenues just sl ightly below the level of 2007. In 2008 tax 
revenues increased by 8.6% comp ared to 2007. On the spending side, capital investment 
                                                 
1 Remittances are therefore higher than foreign assi stance (estimated at €375 million in 2008). Foreign 
assistance to Kosovo is however unlikely to be substantially affected by the international financial 
crisis. Donors have made explicit commitments (mentioning specific amounts) at the donor conference 
for a period up to 2011. 
EN 6   EN spending rose by more than 70% in 2008. The execution rate of capital expenditures is 
estimated at 80% which could only be reached thanks to a dramatic acceleration of spending 
in the last two months of 2008 when almost half  of the funds appropriated for the whole year 
were allocated. However, also subsides and tr ansfers increased by more than 40% compared 
to 2007. At the end of 2008, the government's cash balance (reserves) amounted to the equivalent of 5 months of public expenditure. 
1.3. Structural reforms 
Regulatory authorities have been set up for a ll major network and commodity industries, but 
their capacity remains weak. There have been fe w changes in the enterprise structure, which 
remains dominated by micro-enterprises. Howeve r, development of the financial sector has 
helped to increase the share and dynamism of th e services sector. In several instances, the 
potential positive effects of liberalisation have not been able to materialise due to weak corporate governance.  
In October 2008 the board of the new Privatis ation Agency of Kosovo (PAK) approved the 
business plan for the remainder of the year. This , together with the establishment of the new 
salary scheme, enabled PAK to recruit its staff and to resume the privatisation of state owned 
enterprises which had basically come to a stan dstill in the first thre e quarters of 2008. Three 
new waves of privatisations of social ly owned enterprises were launched.  
The restructuring of publicly-owned enterpri ses remains one of the biggest challenges of 
structural policy. Infrastructure remains insu fficient and often of poor quality. The energy 
sector remains crucial for Kosovo's economic development. Energy supplies suffer from the 
poor governance structure and weak management of the energy provider KEK combined with 
underinvestment, despite constant high subsidies from the budget, vested interests and weak 
political will to change the situation. Theft a nd non-payment of bills continue to be tolerated 
and contribute to inefficient use of a scarce  resource, even though some improvements have 
been noted in the billing and collection rate af ter the introduction of new measures in some 
pilot districts in the third qua rter of 2008 that incl ude the set-up of a re venue protection unit 
and the introduction of bonus system. The collec tion rate reached 91% in 2008, after 79% in 
2007. The government pursues the privatisati on of KEK which includes generation and 
distribution and the construction of a new power plant. Furthermore, the efficiency of the 
judiciary system remained low and only little progress was made in enforcement of court 
rulings and the establishm ent of property rights. 
1.4. Implementation of macro-financial assistance 
On 30 November 2006 the Council adopted a de cision (2006/880/EC) providing Kosovo with 
macro-financial assistance in the form of budg et support (grants, up to € 50 million). This 
followed a needs assessment, prepared by UNMIK  and the Provisional In stitutions of Self 
Government (PISG), and coordinated with the Commission, the IMF and the World Bank. 
This assessment (the "Medium-Term Expenditure Framework" - MTEF) foresaw that by end 2006 or early 2007 the situation of the budget would become unsustainable without donors support, as cash reserves financing the deficit were expected to dry up. This assistance was 
thus initially conceived as bridging support, to be topped up by another package from the EC 
and other international donors upon status settlement.  
However, the general government balance for the years 2006-2007 turned out very differently 
than initially foreseen and resulted in surp luses of 2.5% of GDP in 2006 and even 7.2% in 
2007. The expected budget deficit of  1.3% in 2008 could be finan ced from the cash balance. 
EN 7   EN Therefore, the outstanding EC support remains avai lable, but it will, un like initially foreseen, 
not serve as bridging support pending status settlement.  
A donor conference addressing Kosovo's socio-economic development took place on 11 July 
2008 and resulted in pledges of €1.2 billion out of which € 100 million possible additional 
MFA and € 358 million additional support from  the EU Instrument for Pre-Accession 
(IPA).As regards the already approved € 50 million MFA operation, payments of EC budget 
could take place towards the end of 2009 and/ or in 2010. Given the expected slowdown in 
economic activities and related downside risks to the budget, a significant financing gap is 
likely to materialise throughout the year. Reve nues may be negatively affected as imports 
may be much lower in value mainly due to lower prices2. Besides, given the tighter credit 
markets and weak international demand, the gove rnment may not be able to implement the 
planned privatisation agenda. In addition, the prospects for the authorities of reaching an agreement with the IMF on sound fiscal polic ies in 2009 – the other main condition for 
disbursement – have significantly improved. 
                                                
 
2 Some two thirds of public revenues depend on revenues collected via the taxation of imports. 
EN 8   EN  
SUMMARY STATUS OF ECONOMIC REFORM  
1. Price liberalisation 
The price setting mechanism is basically free. The authorities do not intervene,  even in the case of 
housing prices. Current governance arrangements as regards publicly-owned enterprises ensure the 
absence of government interference in the pr ice setting mechanism of their services.  
2. Trade liberalisation 
Regional trade integration and liberalisation conti nued. In 2007, the Central European Free Trade 
Agreement came into force between Albania, Bosnia and Herzegovina, Croatia, Kosovo (under 
UNSCR 1244/99), the former Yugoslav Republic of Macedonia, Moldova, Montenegro and Serbia. In December 2008, Kosovo started using ne w customs stamps that were not recognised by 
Serbia and Bosnia-Herzegovina. Efforts to resolve this trade dispute are ongoing. 
3. Exchange rate regime 
Kosovo continued to use the euro as sole legal tende r. The Central Bank of Kosovo is in charge of 
regulating foreign exchange ope rations, providing payments ser vices and supervising banks and 
other financial institutions.  
4. Foreign direct investment 
FDI net inflows are estimated to have reached only 9.3% of GDP in 2008, down from 12.3% of 
GDP in 2007, partly due to a virtual standstill in th e privatisation process in the first eight months 
of 2008 after the shift of authority from UNMIK to the newly created institutions under the 
Kosovo Constitution.  
5. Monetary policy 
The monetary framework remained anchored on the use of the euro as sole legal tender (see also 
section 3 above.).  
6. Public finance 
The authorities finalised a revised Medium-Term Ex penditure Framework in June 2008, prior to 
the donor conference in July. The execution of th e budget in 2008 was characterised by relatively 
high revenues and a substantial increase in capital spending. Preliminary data point to an annual 
2008 budget deficit of 1.3% of GDP.  
7. Privatisation and enterprise restructuring 
The privatisation of socially-own ed enterprises came to a stands till during the first three quarters 
of 2008 due to the transformation of the Kosovo Trust Agency that operated under UNMIK Pillar 
IV to the Privatisation Agency of Kosovo. Th e restructuring of publically-owned enterprises 
remains one of the major challenges of government actions in Kosovo.  
8. Financial sector reform 
The banking sector has shown only few signs of di stress in 2008, and financial intermediation has 
progressed continuously. Overall, the sector is sound, profitable and well capitalised, based on a 
very conservative banking model with the bulk of business carried out domestically. Both credit 
and deposit growth have slightly decelerated towa rds the end of 2008, but remained at comfortable 
levels. Altogether, eight commerc ial banks operate in Kosovo.  
 
EN 9   EN 2. REPUBLIC OF MOLDOVA  
2.1. Executive summary 
Moldova's economy grew more than 7% in 2007, driven once again by household 
consumption and investments, financed by capital inflows from abroad (including 
remittances). Yet, the financial crisis started affecting the econo my already at the end of 2008, 
and the situation deteriorated further in 2009. Inflationary pre ssures that had developed in 
2007 and early 2008 on the back of high global commodity prices ab ated in the second half of 
2008 and the economy entered into deflation in early 2009. In the run-up to parliamentary 
elections scheduled of April 2009, the authorities  relaxed gradually the fiscal stance. They 
also postponed the introduction of  crucial structural reforms nece ssary to adjust to the crisis 
environment. At the same time, the implem entation of the Nationa l Development Strategy 
(replacing the Economic Growth and Poverty Reduction Strategy) and of the EU-Moldova 
ENP Action Plan continued. In April 2009, the Commission issued the second progress report 
on the implementation of the ENP.  
The financing arrangement with the IMF concluded in May 2006 and supported by the Fund's 
PRGF (Poverty Reduction and Growth Facility) remained on track until the very end of 2008, 
allowing the IMF Board to complete in July 2008 the fourth programme reviews. The fifth 
programme review, planned for January 2009, was de layed in view of the deterioration of the 
economic situation and in the run-up to parl iamentary elections in April 2009. Later (in May 
2009), the PRGF arrangement expired. Despite the delay and later the ex piration of the PRGF 
arrangement without any follow up, the EU macro-financial assistance programme was 
completed successfully as all the conditions pe rtaining to the release of the assistance had 
been met.  
2.2. Macroeconomic performance 
Economic activity in Moldova, severely aff ected by the 2007 drought, rebounded strongly in 
2008. In the first three quarters of last year, real GDP increased by 7.6%. The deceleration of 
activity in the last months of 2008 resulting fr om the global financial turmoil did not affect 
too seriously the overall 2008 result: growth was s till 7.2%. Data by sector of origin indicate 
that Moldova’s improved performance in 2008 is mainly attributable to agriculture whose 
output increased by more than one-third (after a similar decline in 2007) and to the services 
sector, mainly trade and transport. At the same time, industrial output increased only 
marginally, by 0.3%, after a small decline in  2007, and the production of services expanded 
by less than 4%, after a 14% gr owth in 2007. The increase in output of tradable sectors 
(industry and agriculture) in 2008 (contrary to 2007) does not mean any fundamental change 
in Moldova's growth model which is based on the transfer of resources from abroad to 
accommodate fast growing domestic demand. Like  in previous years, for most of 2008, 
disposable income continued growing, reflec ting strong wage growth and the accommodative 
monetary policy of the Nationa l Bank of Moldova (NBM). Once again, the trade deficit was 
financed by capital from abroad: remittances fro m Moldovans abroad (still close to one-third 
of GDP) maintained the current account deficit at around 16% of GDP; growing foreign direct 
investment (FDI – about 11% of GDP for the se cond year in a row) or bank credit financed 
the current account deficit.  
Despite this overall benign pict ure, the global financial crisis  started affecting the Moldovan 
economy in the last months of 2008. The first elem ents of the crisis we re (a) the deceleration 
of trade growth, reflecting both lower demand of  main Moldova's trading partners (Russia, 
Ukraine, Belarus and the EU, all hit by the cris is at varying degrees)  and fading access to 
trade finance, and (b) lower remittances and FDI inflows. The contraction of external trade 
EN 10   EN accelerated sharply in the beginni ng of 2009: in the first quarte r, exports and imports were 
respectively 18 and 25% below their level in th e corresponding period of 2008. There are also 
indications that the contraction of remittances is equally accelerating.  
The impact of the contraction of trade on the domestic economy is reflected in the very 
substantial drop of industrial production in the first quarter 2009. Indus trial output was down 
nearly 25% on its level in the same period of 2008. It is expected that the agricultural 
production will also contract as most of Moldova 's agricultural exports will be affected by low 
demand in its partner countries. 
The result of this double external shock was the building up of pressures on the financial 
sector and the national currency. Given that at the same time the international commodity prices eased (which led gradually to a very sharp slowdown of inflation, from 17% in May 
2008 to little more than 7% in De cember of that year and clos e to zero in April 2009), the 
NBM could intervene in both rela xing somewhat the monetary po licy to provide liquidity to 
the financial sector and to use part of the country's official reserves to defend the exchange 
rate of the Moldovan leu. Between September 2008 and February 2009, the NBU cut its main 
refinancing rate from 18.5% to 11%; at the same time, the official reserves were reduced by 
nearly 40% (the bulk of this  reduction took place in 2009).  
As the pressure on the exchange rate could so  far be contained, Moldova's depositors did not 
attempt to withdraw their bank deposits. Als o, Moldovan banks' exposure to foreign creditors 
is relatively modest. Thus the country's banki ng system was not put under strong pressure by 
the changing credit environment.  
The vulnerability of the economy has been furt her compounded in 2008, when, in the run-up 
to parliamentary elections in April 2009, the authorit ies implemented a less restrictive fiscal 
policy: in 2008, the general government defic it, although still mode st, was clearly above 
target. In the situation of th e unfolding financial and economic crisis, the authorities also 
refused to make any adjustment to lower fi scal revenue, which had, by the time of the 
elections, led to the near depl etion of government deposits. It  also prevented them from 
drawing the two last instalments under the PRGF (Poverty Reduction and Growth Facility) 
financing arrangement with the IMF that expired in May 2009.  
2.3. Structural reforms 
In 2008, the Moldovan government continued the implementation of the National 
Development Strategy (NDS) adopted in 2007. The NDS, which reflects largely the priorities 
of the EU-Moldova ENP Action Plan, adopted in  February 2005 for a period of three years 
and subsequently extended. Th e NDS is accompanied by Na tional Developments Plans, 
prepared for three-year peri ods, consistent with the medium-term budget planning in the 
framework of three-year Medium-Ter m Expenditure Frameworks (MTEF).  
In March 2008, the Government issued a pr ogress report on the im plementation of the 
National Strategy on employment for the period 2007-2015 . In December 2008, the ILO 
performed the audit of the labour  inspection to assess its capaciti es and signed a decent work 
country programme with Moldova for the years 2008-2011. The programme, developed with 
the participation of the social partners, fo cuses on better labour ad ministration, effective 
employment policy formulation and on the deve lopment of sound social  security policies 
based on social dialogue.  
Moldova continued its prepara tions for the negotiation of an Agreement on Conformity 
Assessment and Acceptance of Industrial Products . Moldovan legislation was harmonised to 
several sectoral EU directives and the c ountry continued adopting several EU and ISO 
EN 11   EN standards. In June 2008, the government adopted a decree on the State Main Inspectorate for 
Market Surveillance, Metrology and Consumer Protection. Market surveillance remains an 
area with many challenges.  
The new developments in company law and establishment include changes in legislation on 
Registration of Legal Persons and Individual Entrepreneurs and the creation, in November 
2008, of a “Licensing Agency”, a one-stop shop for issuing more than 80 different licenses. 
At the same time, business operators continue  facing practical difficu lties in the area of 
business regulations, such as VAT refund (d espite the adoption of  new regulations), 
acquisition of land or issui ng of construction permits.  
In the field of financial services, some li mited progress was made in strengthening the 
framework of supervision (notably when th e National Bank issued new recommendations to 
the commercial banks on how to improve their in ternal audit procedures), in the improvement 
of the inter-bank payments and in legislation on mortgages. In August 2008 the IMF’s revised 
Financial Sector Assessment Programme (FSAP)  provided a new set of recommendations on 
the strengthening of financial services. The National Commission on th e Financial Market 
(NCFM), as a unified supervision authority fo r non-banking financial services, prepared a 
Strategy for the Development of the Non- Banking Financial Sector in 2009-2011. Since 
October 2008, the NCFM can issue,  suspend and withdraw licenses for activity in the areas of 
insurance, administration of assets of non- state pension funds, and savings and loan 
associations.  
In June 2008 the parliament approved legislation to transfer all functions  of tax control, tax 
assessment and tax collection to the Main State Tax Inspectorate (MSTI) and to allow for the right to write off uncollectible tax arrears. The effects of the intr oduction of zero-rate 
corporate tax for reinvested pr ofits introduced in January 2008 in terms of new FDI remains 
to be evaluated. 
In the area of competition policy, the Nationa l Agency for the Protection of Competition 
(NAPC) still faces difficulties to conduct investigations and prosecute anti-competitive 
business practices. The adoption of the new legislation on competition was still pending in parliament. A new draft law on State Aid is  still under examinati on by the government.  
In the area of public procurement, In March 2008, Moldova adopted an action plan for the 
free public procurement portal, in place sin ce January 2008. A governmental Commission on 
Public Procurement was established in May 2008. The administrative capacity of the Agency 
for Material Resources, Public Procurement and Humanitarian Aid was increased over the 
reporting period. Public procurement was, together with the legislation on  social benefits and 
public internal financial control, one of the ar eas targeted by the macro-financial assistance 
programme implemented in 2008 (see below).  
New laws on accounting and auditing entered in to force in January 2008. The new accounting 
law provides for the compulsory use of internat ional financial reporting standards (IFRS) by 
public interest companies as from January 2009. The National Strategy for Development of 
Accounting and Auditing for 2008-2011 is under preparation. The strate gy will be based on 
the relevant EU Directives and IFRS. Still, the capacity of regulatory agencies for enforcing 
accounting standards should be re inforced. The Council of Audito rs started its activity and 
works closely with the association of auditors . Finally, the government approved amendments 
to the audit law in October 2008. 
In the area of management of public finances , amendments to the law on Budget Systems and 
Processes were introduced in June 2008 and en tered into force in January 2009. The new law 
EN 12   EN provides for accountability in the management of  public funds and for the implementation of 
a system of internal audit. A strategy for the development of public internal financial control 
in 2007-2009 was approved in January 2008. An inte rnal audit charter wa s also published in 
January 2008, while an amendmen t to the law on Budget System s and Processes in July 2008 
provided a legal basis for public internal financial control.  
On enterprise policy, a renewed strategy for development of small- and medium-sized 
enterprises (SMEs) was prepared. In July 2008, the Parliament adopted a law on Public-
Private Partnerships. Mechanisms for its  implementation are being finalised.  
Yet, in 2008 and early 2009, the authorities post poned number of crucial structural reforms 
necessary to adjust to the crisis environment. Particular areas where the authorities made little 
progress include the reforms necessary to widen the tax base, financial sector reforms whose 
weaknesses are threatening the fina ncial stability, and the reform of  the utilities sectors, still 
weighing on the government spending. 
Also, Moldova achieved last year less progress than planned in reforming the social 
protection system. Social programmes remain a major component of the public expenditure: 
about two thirds of Moldova’s State budget is sp ent on health, education and social assistance. 
Last year was no exception to this, as social  spending – including wages and pensions – was 
increased in view of the 2009 parliamentary elections. The new system of income support 
covering part of the utility costs of the populat ion based on means-tested individual incomes, 
whose preparation had started in 2007, was intr oduced in October 2008, as planned. However, 
the old system based on population categories wa s still maintained for a transition period. 
Progress was also limited in the pension reform. 
2.4. Implementation of macro-financial assistance 
In 2008 the Commission continued the implementa tion of the Council Decision of 16 April 
2007 on macro-financial assistance for the Republic of Moldova (Decision 2007/59/EC, 
published in the Official Journal of 28 April 200 8). The assistance was de signed to contribute 
to covering the country’s exte rnal financing needs in 2007-2 008 identified by the IMF in the 
context of the PRGF arrangement approv ed in May 2006. Under the decision, the 
Commission had made the first payment in October 2007. In 2008, the Commission disbursed 
the second and the third and final tranche, respectively in June 2008 (EUR 10 million) and December 2008 (EUR 15 million). In this way, th e assistance was fully disbursed by the end 
of 2008. Each disbursement had been preced ed by a programme review. Both reviews 
concluded that the Republic of Moldova was implementing the policies agreed in the Memorandum of Understanding in a satisfactory way.  
In the course of the implementation of the pr ogramme, that is now being a subject of an 
independent evaluations (whose findings will be  made available before the end of 2009), the 
Commission services promoted synergies with other Commission-run programmes, in 
particular budget support financed under the European Neighbourhood and Partnership 
Instrument, and with interventions by the IMF and the World Bank.  
EN 13   EN  
SUMMARY STATUS OF ECONOMIC REFORM  
1. Price liberalisation 
Most prices have been liberalised. 
2. Trade liberalisation 
Relatively liberal international trade policy,  but restrictions still exist on some key 
commodities. Moldova became a member of the WTO in June 2000. In early 2008 the EU 
granted the Republic of Moldova Autonomous Trade Preferences. 
3. Exchange regime 
For most of 2008, limited official interventi on by the National Bank of Moldova. Later in 
2008 and in early 2009, increasing sa les of foreign exchange to a void depreciation of the leu. 
No restrictions on current international transacti ons in conformity with Article VIII of the 
IMF’s Articles of Agreement. 
4. Foreign Direct Investment 
Unlimited repatriation of capital and profits and no limitations on holding foreign currency 
bank accounts. Adequate overall le gislation, but implementation is often problematic, which 
weakens the business climate. FDI increased to ove r 9% of GDP in 2007-8 but is expected to 
go down substantially with the economic crisis. 
5. Monetary policy 
The National Bank of Moldova is gradually movi ng to inflation targeting but inflationary 
pressures in 2007-early 2008, mostly resulting from capital inflows, did not allow a meaningful deceleration of infla tion. Inflation decelerated to transform into deflation in early 
2009. The National Bank has gradually cut interest  rates. There are fears that it will relax 
monetary policy further to compensate fo r reduction in revenue due to crisis.  
6. Public Finance 
Budget revenue hit by economic crisis in la te 2008-2009. For most of 2008, fiscal policy was 
relaxed in the run-up to parliamentary electi ons. Yet, for 2008 as a whole, the budget deficit 
remained moderate. Public debt  continued contracting, but th is trend may change in 2009. 
Reform of Public Finance Management conti nued, with progress achieved in particular in 
developing the Medium-Term Expenditure Fr amework, in moving towards the single 
Treasury account, in strengthening tax administration and in developing the system of public internal financial control.  
7. Privatisation and Enterprise Restructuring 
Structural reforms are being implemented in  the framework of the National Development 
Plan (NDP) and the EU-Moldova ENP Action Plan. Progress is being achieved in 
strengthening bankruptcy procedures, manageme nt of state property and simplification and 
streamlining of the regulatory environment of  the enterprises. Yet enforcement remains a 
serious concern and business environment suffers from state intervention and formal and informal business restrictions. Also, the priva tisation process was stalled for several years, 
only to be revitalized in 2008. Other key areas of structural reforms – public administration 
and social protection reforms – progressed, but less than expected.  
8. Financial Sector Reform 
Restructuring and consolidation of the financ ial sector progressed, with significant foreign 
investments. Further strengthening is crucial in the context of the financial and economic 
crisis.  
EN 14   EN 3. GEORGIA  
3.1. Executive summary 
Georgian growth performance in 2008 is character ised by a strong contra st between the first 
and the second halves of the year. Military c onflict with Russia and the global financial and 
economic crisis undermined the strong growth pe rformance of Georgian economy of the first 
half of the year. On the a nnual basis, its real  GDP grew by only 2.1 % in 2008 and a GDP 
contraction of 2.5% is expected for 2009. The vuln erabilities of the fina ncial system strongly 
limited the access to liquidity weakening domestic consumption while a drop in foreign direct investment inflows also negatively contributed to growth accounting.  
Large macroeconomic imbalances such as high  current account defi cit could be bridged 
through important inflows of international donor financing. 
A new IMF SBA programme was adopted in Se ptember 2008 and Georgia drew on the first 
tranche of the SBA of USD 250 million. The MFA programme of EUR 33.5 million put in 
place by a Council decision of 24th of January  2006 expired at the end of 2008. The third 
MFA tranche of EUR 11.5 million originally plan ned to be released in autumn 2007 could not 
be disbursed because one of the conditions agreed in the Memorandum of Understanding – 
the enactment of a new law on the supreme external audit institution – was not met by the Georgian in 2008. 
3.2. Macroeconomic performance 
In the first half of 2008, before the outbreak of the military conflict with Russia in August 
2008, real GDP growth was strong in Georgia. In the first two quarters of 2008, GDP growth 
rates reached 9.1% and 8.3% year on year, respec tively. Yet, the military conflict that erupted 
in August and the global financ ial and economic crisis that st arted in the USA but spread 
around the world in Autumn 2008 both had a negativ e impact on Georgian growth from the 
third quarter. Real GDP decreased by 3.9% and 2.5%  in the third and fourth quarter of the 
year, respectively, bringing th e real GDP growth for 2008 to 2.1%. The strong deceleration of 
real growth has been due to several factors. First, there was a lower net inflow of foreign 
direct investment in 2008 when compared to  the previous year. The net FDI of USD 1.3 
billion still accounted for 10% of country's GDP , but was substantially below its level of USD 
2.0 billion in 2007. The second factor behind this  development has been the drop in domestic 
demand. Yet, despite remittances remaining strong domestic demand decreased due to tightening of domestic credit and ailing consumer confidence.  
Georgia's trade relations in 2008 have been  characterised by continuous low level of 
diversification and a high concentration of exports in commodities and chemical products. 
Georgia's strong export sector s are ferrous metals, copper and fertilisers. This high 
concentration of exports in commodities has be en due to the rehabilitation of a number of 
large industrial metal producers and the rise of global prices for iron ore. On the other hand, 
since the Russian boycott of 2006, Georgia coul d not take full advantage of its competitive 
wine production despite its successful expans ion in the Ukrainian an d Kazakh markets. In 
2008, the share of alcoholic beverages in Georgi a’s exports diminished from 5% to 3% of 
exports. Georgia's trade also re mained highly imbalanced: the trad e deficit remained at close 
to one third of GDP. Also, as remittances did not  grow as fast as trade (even if both imports 
and exports experienced a decrease at the end of the year), the current account deficit widened 
from 19.6% of GDP in 2007 to almost 22.6% in  2008. While in the recen t past the current 
account was comfortably financed by private cap ital flows (FDI and bank credits), in 2008 it 
was public money provided by the in ternational donor community that  had to be used to cover 
EN 15   EN the financing gap. By the end of the year, count ry's external vulnerabi lity remained high as 
gross reserves covered only 2.1 months of the following year imports thus remaining below 
the three-month benchmark. 
As far as the monetary policy is concerned, ea rly in the year, the Central Bank of Georgia 
continued its policy of inflation targeting; yet inflation remained volatile. A part of this high 
inflation volatility is due to the August military crisis that put headline consumer inflation at 
its two-year-high of almost 13%  in August. While the end of period inflation was only 5.5%, 
the average annual consumer price inflation for 2008 accelerated to 10.1%. The August 2008 
military conflict also meant a correction of the exchange rate policy. A slow long-term appreciation of the lari (G EL) vis-à-vis the USD was reve rsed and the National Bank of 
Georgia had to intervene to mitigate the depreciation of the currency. During the military conflict, the authorities announced a temporary peg of the lari to  the USD in order to provide 
a confidence-boosting anchor. In September, Ge orgia increased its reserve level by drawing 
on the first tranche of USD 250 million under the IMF stand-by-arrangement. However, 
interventions in the exchange markets duri ng October and November 2008 proved unable to 
counter the pressure on the lari which resurf aced as the global financ ial crisis deepened. 
Consequently, in early November 2008, the author ities allowed the lari to depreciate – by 
around 17%– against the US dollar.  
The fiscal deficit widened in  2008 to 6.4% of GDP up from 4.7%  in 2007. Fiscal easing that 
went in parallel with tax reduction was the stra tegy of Government of Georgia to counter the 
negative economic effects of the military conflict with Russia and of the global financial and economic crisis of 2008. The budgetary deficit was however be financed comfortably by 
using international donor financ ing as well as the issue of a sovereign Eurobond of USD 500 
million (EUR 390 million) in April 2008. As far as  public indebtedness is concerned, despite 
its slight increase from 17.5% to 20.7% of GD P during 2007-2008 periods, the level of public 
debt is not considered as worrying.  
The economic stimulus package of the Georgian  authorities for 2008-2009 that includes a tax 
decrease and numerous infrastructure projects  accounts to GEL 2.2 billi on (EUR 1 billion) as 
of June 2009. A large part of the economic reco very package and of the re-financing of the 
banking sector came from donor financing in 2008. The total pledge of the international donor 
community in October 2008 Brussels donor conference amounted to USD 4.5 billion. Out of this amount, USD 403 million was disbursed to the public sector and USD 204 million to the 
private sector already during the course of  2008. The EU disbursed EUR 182 million in 2008 
to contribute to Georgia's recovery. This support has been a combination of budgetary 
support, sectoral programs, humanitarian aid and crisis rela ted instruments.  
3.3. Structural reforms 
Already early in 2008, th e country's authorities stepped up their efforts to strengthen the 
regulatory framework of the financial system . A Financial Supervisory Agency (FSA) was 
established in May 2008 following the Global Competitiveness of the Financial Services Sector Act adopted in March 2008. Among the tasks of the FSA is  to monitor, report on the 
quality of financial intermediation and to pe rform on-site inspections. As an independent 
body, it also assesses the quality of the banking a ssets and conducts contingency planning for 
bank resolution. Despite these important reforms in the financial sector, the global financial 
and economic crisis has not left Georgia unt ouched. At first sight, the Georgian banking 
system remained robust in 2008 with th e ratio of non-performing loans remaining 
substantially below the FSA requi rements. The capital adequacy ratio that measures the risk 
of bank deposits in relation to bank equity slightly  decreased in compar ison to two previous 
EN 16   EN years but remained high at 16-17%. The bank ing system follows Basel I principles for 
banking supervision.  
However, despite the up-beat picture that some of the financial sector indicators provide, the 
Georgian banking sector is characterised by a high level of fragility. This is linked to the fact 
that the banking sector is highly dollarized w ith 60% of domesti c bank lending ta king place in 
foreign currency. This is a challenge as currency  depreciation directly affects banks' portfolios 
as loan repayment capacity w eakens – many corporate and reta il clients have unhedged loans. 
Furthermore, although the majority of bank bo rrowing is long-term, the share of short-term 
borrowing has recently strongly increased and the banking debt maturing in 2009 is estimated at USD 700 million. Although banks are expected to be  able to roll-overt a large part of their 
debt through lending from the IFIs, this short-term debt further increases the vulnerability of the sector. As a short-term measure, the EBRD  had already to step in to recapitalise two 
systemic banks. In addition, certain risks might only materialise in the medium term: if lower 
depositor confidence expressed in deposit withdrawals, the limited access to international markets and the increased risk  aversion among banks remain th e features of the Georgian 
banking system as it has been the case in late 2008-early 2009, this can pose a systemic challenge to the functioning of the financial sector overall. 
As far as the further economic integration of th e Georgian economy is concerned, to achieve a 
sustainable external position and diversified economic fundamentals, intensifying trade 
relations with its direct neighbours and with EU countries is an absolute necessity for 
Georgia. Georgia already has fr ee trade agreements (FTA) with the CIS countries and with 
Turkey, one of its main trade partners. With the EU, a unilateral preferential trade agreement 
is in place. A feasibility study for a more advan ced form of trade inte gration between the EU 
and Georgia, a deep and comprehensive FTA, was finalised after the fact-finding mission of 
Commission services to Georgia in October 2008. It was handed ove r to the Georgian side in 
March 2009. Georgian authorities still proj ect to start negotia tions later in 2009.  
As far as industrial policy and fostering of entrepreneurship is concerned, the government 
strengthened its industrial zone s. To further develop the ente rprise policy a 'Cheap credit' 
programme was launched. Furthermore, the 'Inv est in Georgia' forum took place in June 2008. 
According to Transparency International that develops and monitors the index of corruption 
perception, Georgia's position in 2008 improve d in comparison to its 2007 level to 67
th place 
up from 79th position.  
Only limited progress can be reported in the fi eld of employment and social protection. In 
2008, 23.6% of Georgia’s population lived in poverty, while the o fficial unemployment rate 
stood at 13.3%. To improve the socio-economic situation, several polic y initiatives were 
launched in the field of employment and soci al policy. In January, a programme 'Georgia 
without poverty' for the period 2008-2012 was a dopted. In this framework, a number of 
reforms of the social safety net as well as of  pension and health sy stems were flagged out. 
Old-age pensions were doubled in the course of  2008 but they still remained at a very low - 
below subsistence - level. Social security spen ding amounted to about on e third of the overall 
budgetary spending but the welfare system of Ge orgia is strongly mean s-tested with a low 
effectiveness of social transfers. The poor are al so eligible to free hea lth care but th e share of 
the population eligible to this programme remains very low. Overall, the social security 
system of Georgia is heavily underdeveloped and does not provide sufficient protection for 
the old, poor and sick.  
During the election campaign, the government stepped up its initia tives in the field of active 
labour market policies. One initiative is the prog ramme to stimulate job creation in rural areas 
EN 17   EN set up in February 2008. To enhance profe ssional qualifications of the unemployed the 
government also launched a 'Vocational trai ning and retraining' programme. A National 
Professional Agency became operational in Janu ary 2008 and the elaboration of the reform 
strategy in the field of vocational education a nd training followed in December 2008 after an 
international conference.  
In the field of public finance management, under the Budget System Law, which became 
effective on January 1, 2004, the tr easury system is reformed, w ith a fully functioning Single 
Treasury Account as of January 2006. A medium -term expenditure framework is in place but 
annual budgetary plans are still not well integrat ed into the multi-annual programme. In the 
field of external auditing, a new law on the Ch amber of Control, the supreme audit institution, 
was approved by the Parliament in January 2009. In ternal auditing, on the other hand, is still 
weak in Georgia as there are few common procedures and standards.  
In the field of taxation, alt hough the current level of taxation in Georgia 2008 is in line with 
its regional neighbours, further tax reductions are planned for the coming years. The tax code 
was amended by the Parliament to further reduce income and dividend tax rates. The 
important reform of 2008 was unifying the income  and the social contributions taxes. While 
in 2007, a flat 12% income tax and 20% social  contribution tax app lied, in 2008, these two 
taxes were merged and their rate was decreas ed to 25%. The government of Georgia also 
further decreased the corporate profit tax from 20% to 15%. Furthermore, the Parliament 
approved a legal commitment to fiscal surplu ses from 2009 but grante d an exception for 2009 
in light of the economic crisis. The usefulness of an explicit fiscal rule that forces the 
government to run budget surplus is debated as it might be considered too rigid.  
3.4. Implementation of macro-financial assistance 
The macro-financial assistance programme of  EUR 33.5 million put in  place by a Council 
decision of 24 of January 2006 expired at the end of 2008. The first and second grant 
instalments amounting to EUR 22 million in tota l were paid in 2006. The third MFA tranche 
amounting to EUR 11.5 million could not be disbur sed as the Commission could not conclude 
successfully the programme review owing to  the non-fulfilment of one condition for the 
disbursement of the last tranche specified in the Memorandum of Understanding on MFA 
negotiated in 2006, namely the enactment of th e new law on the Chamber of Control. This 
new law, the preparation of wh ich had started already in 2006, was only adopted in January 
2009.  
In September 2008, following the conflict with Russia, Georgia asked the Commission for 
additional macro-financial assistance in the context of a new economic programme and of a 
new financing arrangement with the IMF. In October, at the Donor Conference organised by 
the Commission and the World Bank, the Commi ssion indicated that it was considering 
proposing a new MFA to Georgia amounting to EUR 46 million, in the form of grants. 
Shortly after the Donor Confer ence, the Commission has starte d the preparation of the new 
proposal.  
EN 18   EN  
SUMMARY STATUS OF ECONOMIC REFORM  
1. Trade regime 
Liberal trade policy. Georgia has been member of the WTO since June 2002. Import tariffs have 
been abolished on 90% of products. In September 2006, the number of tariff bands on imported 
goods was reduced from 16 to three (0%, 5%, and 12%). The maximum tariff of 12% is applied to those agricultural products and building materials which compete with domestic goods. The average weighted tariff is estimated to be 1½%.  Non-tariff barriers allo wed for environmental, 
security and health reasons only (in line with the Partnership and Cooperation Agreement with 
the EU). There are no quantitative restrictions on imports and exports. 
A preferential trade regime (GSP) is in pl ace with USA, Canada, Japan, Switzerland and 
Norway, a GSP+ that covers 7200 items is in  place with the EU since 2005. A free trade 
agreement with CIS countries and Turkey agreed since 1
st November 2008.  
2. Exchange regime 
Floating exchange rate of the lari with limited official intervention by the National Bank of 
Georgia. During the military conflict, the authorities announced a temporary peg to the USD and 
there have been strong interventions in the forex market during August-December 2008. 
There are no restrictions on current  international transac tions in conformity with Article VIII of 
the IMF’s Articles of Agreement.  
3. Foreign Direct Investment 
Adequate overall legislation. Unlimited repatriation of capital and profits. Net inflows of FDI about 12.2% of GDP (2008 estimate). The four largest contributor countries are UK, US, Kazakhstan and Turkey, they toge ther contributed to 55% of overall FDI inflows in 2008. 
4. Monetary policy 
Central bank's main policy objective is the price stability to be pursued through inflation 
targeting. Inflation spike was registered during the military crisis, yet it decreased at the end of the year due to overall growth decline an d the end-year inflation was low at 5%. 
5. Public Finance 
A new liberal tax code is effective as of January 1, 2005. Over the period of 2004-2008, the 
number of taxes was reduced from 21 to 6. In 2008, the corporate profit tax was reduced from 20% to 15%, while income and social tax merged into one income tax of 25%. The tax code was further amended and included measures related to improvement of tax collection. Tax revenue to 
the budget amounted to 30.7% of GDP in 2008, while these were only 25% in 2007. 
Expenditure including capital and net lending amounted to 37.1% of GDP implying a fiscal deficit of 6.4%. 
6. Vocational education and training 
To deal with structural unemployment especially among women and the economically vulnerable part of the population and to be better prepared for the challenges of the knowledge economy, the authorities stepped up their efforts in the policy field of vocational training and 
life-long learning. A National Professional Agency was set up and a policy programme in vocational training was elaborated in the course of the year.
 
7. Financial Sector  
The majority of Georgia's commercial banks are foreign owned. Since the beginning of the global crisis, the EBRD had to step in to r ecapitalise two systemic banks. A high level of 
fragility in the Georgian banking sector is linked to the fact that the banking sector is highly 
dollarized with 60% of domestic bank lending taking place in foreign currency. This is a 
challenge as currency depreciation directly aff ects banks' portfolios as loan repayment capacity 
weakens – many corporate and retail clients have unhedged loans.  
EN 19   EN 4. LEBANON  
Mediterranean Countries taking part in the European Neighbourhood Policy are eligible for 
MFA under the Genval Criteria. Lebanon is the fi rst country of this group benefiting from 
MFA since the balance of payments loan gr anted in 1994 to Algeria (Decision94/933/EC). 
4.1. Executive summary 
For a large part of 2008 the Lebanese economy continued its rapid recovery from the 2006 
conflict with Israel in a context of continuous political stalemate. Nevertheless with a delay, 
the economy started to suffer from the impact of  the global crisis. Real  GDP growth reached 
over 8% on average in 2008 but is expected to decrease markedly in 2009. Inflation declined 
after the surge until mid-2008 against the b ackground of soaring food and energy commodity 
prices. Partly reflecting recons truction needs, the current acc ount deficit remained high, at 
more than 10% of GDP. In 2008, the fiscal defi cit and debt ratios declined slightly, even 
though the debt ratio remained very high at more  than 160% of GDP. However, in the first 
quarter of 2009 public finances deteriorated ra pidly on the back of expenditure increases. 
The government faces severe policy challenges resulting from reconstruction and social 
needs, the large public debt overhang, and the drag on economic activity and remittances stemming from the global crisis. Implementatio n of the ambitious prog ramme of structural 
reforms concluded in the aftermath of the Pa ris agreements stalled as a consequence of 
political stalemate, which paralysed progre ss in legislative activity in many fields.  
Lebanon's financing arrangement with the IM F concluded in April 2007 under the Fund's 
Emergency Post-Conflict Assistan ce (EPCA) was successfully completed in early 2008. In 
November 2008 the IMF Executive Board ag reed on a follow-up EPCA assistance 
programme. 
Since January 2007, Lebanon and the EU have been implementing a European 
Neighbourhood Policy Action Plan. The sec ond progress report on the Action Plan 
implementation was issued by the Commission in April 2009. 
In December 2007, the Council adopted a decisi on on a macro-financial assistance to 
Lebanon amounting to EUR 80 million – a comb ination of medium-term loans (EUR 50 
million) and grants (EUR 30 million), to be disbursed in two tranches. The first tranche of grants and loans were disbursed in December 2008 and June 2009 respectively. The 
remaining disbursements under the assistance progr amme are expected to take place in 2009; 
to the extent conditions are met. 
4.2. Macroeconomic developments 
The latest economic indicators s uggest a sharp deceleration of gr owth in Lebanon in the wake 
of the global financial crisis. Real GDP growth is expected to decrease to 2% in 2009, from 
the 8.5% growth estimated to ha ve been reached in 2008. During the first part of the year, 
economic activity was still strong. Economic activity and the financial sector proved 
remarkably resilient to the pol itically uncertain environment, which culminated in violent 
clashes before a deal on the formation of a tr ansitional national unity  government was struck 
in May 2008. But the negative im pact of the global financial crisis was increasingly felt 
towards year end, in the first instance through  external transmission channels. As an open 
economy, Lebanon is exposed to th e crisis via the trade channe l. Trade volumes decelerated 
rapidly from the last quarter of 2008 onwar ds, mirroring the slow down in major trading 
partners, notably Arab countries and the countri es in the European Union, which account for 
around two-thirds of Lebanese exports.  
EN 20   EN Another important channel of transmission is via the sizable remittance flows of Lebanese 
working abroad, estimated at 24% of GDP in  2007. Strong remittances were an important 
factor supporting buoyant consumer expenditure  during the recovery from the 2006 conflict 
between Israel and Hezbollah. From the thir d quarter of 2008 onwards, remittance inflows 
decreased markedly in view of the spreadi ng slowdown and concomitant labour shedding in 
the Gulf region, where many Lebanese expatria tes had been working. Against the background 
of a general increase in inve stor risk aversion, the planned issue of a government euro bond 
had to be postponed. Strong inflationary pressure s abated somewhat in the latter part of 2008. 
Consumer prices as measured by the CPI incr eased by more than 10% in 2008, with inflation 
moderating starting from in the latter part of th e year on the back of falling commodity prices. 
However, the delayed pass-thr ough of commodity price shocks and inefficiencies and mark-
ups in the distribution chain add to upside risks.  On the back of still re latively strong growth 
in 2008, the current account de ficit widened to around 11% of  GDP in 2008, from around 7% 
of GDP in 2007. The total external debt ratio is  estimated to have declined only moderately, 
to 190% of GDP in 2008.  
The elevated external debt ratio goes hand in  hand with a high public deficit and debt. The 
government budget balance (includi ng grants) is estimated to ha ve improved slightly in 2008, 
to a deficit of 10.0% of GDP (from 10.8% in 2 007). But the public debt ratio remained high, 
even though in 2008 it declined  strongly on the back of high  nominal GDP growth, to 162% 
of GDP in 2008, from the peak of 180% of GDP in 2005. International support should help 
alleviate the pressure on public finances.  
As regards the economic outlook and risks attached, economic activ ity is expected to remain 
weak in the near term, with risks stemming fr om the degree to whic h the global downturn can 
be mitigated and from the internal political situation. The high external deficit, heavy debt burden, and leveraged financial system (with private sector bank deposits accounting for 
around 270% of GDP at end-2008) render the Lebanese economy and banking sector sensitive 
to conditions in global financial markets, notably liquidity. The fiscal situ ation is particularly 
vulnerable to a stronger-than-expected econom ic slowdown and to changes in investor 
confidence, given the high public debt level.  The limited progress in implementing reforms 
makes it difficult to address the structural fiscal  deficit. Return of Lebanese workers who have 
lost their jobs abroad will depress remittance inflows and add to the domestic labour supply (though those returning bring valuab le skills and experience).  
On the positive side, the Lebanese  economy has so far been quite resilient to the direct impact 
of the global financial crisis on the financial system, in partic ular as regards the effects on 
banks.  Lebanese banks have long-standing experience  in operating in a strained economic and 
political environment, have had limited expo sure to structured products under long-standing 
directives by the central bank supervisors, an d have not borrowed heavily on international 
markets. The healthy development of the depos it base and a relativel y strong reserve position 
helped sustain the currency peg to the US dolla r as a strong nominal anchor. Thus, aggregate 
profits of listed banks increased by around 24% in 2008. To date, the construction sector has 
also held up well.  
In April 2007, the IMF Board approved Emerge ncy Post-Conflict Assi stance (EPCA) to 
Lebanon amounting to SDR 50.75 million. The full amount was disbursed shortly after, but 
the IMF continued monitoring the implementatio n of agreed policy act ions. In April 2008, the 
IMF Board concluded that Lebanon has met co mfortably all the indicative targets under 
EPCA. In November 2008, the IMF Board a pproved funding an additional amount of SDR 
25.375 million under EPCA in support of the aut horities' economic program for 2008-09. The 
EN 21   EN IMF-supported program aims to further redu ce the government debt-to-GDP ratio, build up 
the international reserve buffer, and start implementation of key reforms. 
4.3. Structural reforms 
During the reporting period the continued politic al divisions and consequent paralysis of 
legislative activity in the run-up to the June 2009 parliamentary elections held up progress on 
the reform agenda, notably on key aspect s of the Paris III programme. The economic 
headwinds make it difficult to proceed with intended privatisations and tax increases which in turn are weighing on already stretched public fina nces. The government is likely therefore to 
turn to the financial sector to meet its increa sing financing needs. The election results of early 
June 2009 essentially confirmed the previously ex isting political balances in parliament. It 
remains to be seen to what extent a newly formed government will be able to implement 
reform measures resulting from the pledges ma de at the Paris III conference of January 2007.  
Against this background, some of the measures  that were adopted aggravate the fiscal 
challenge going forward. The decision to subs tantially increase public  wages retroactively 
from May 2008 runs counter to earlier commitm ents by the government to contain the wage 
bill. The minimum wage in both the public and private sector was increased by two thirds. In addition, overall salary scales and public pens ions were raised while public sector wage 
increases decided around the turn of the century but not so far implemented will be paid 
retroactively. The estimated cost to the Tr easury for the period 2009-2011 is estimated at 
around 3 percent of GDP per year . Several potential countervaili ng measures to raise revenue 
have been put on ice. Yet, the government did ta ke advantage of the dec line in oil prices to 
introduce excises on gasoline. The government  continued with preparing the ground for 
reforming the energy and social sector with th e aim of limiting open-ended transfers from the 
budget while protecting capital and social expend iture, however not with concrete results. The 
intended privatisations of stat e-owned assets have been post poned in view of the difficult 
market circumstances.  
Draft laws on WTO-related issues, pension reform, capital market reform and public 
procurement, and the reform of the heavily subsidised electricity tariff system have all been held up by the political deadlock. Insufficien t progress was made in improving the business 
climate . However, Lebanon continued to implement the 2007 administrative simplification 
programme, involving the Lebanese post office (aimed at establis hing a one-stop shop in post 
offices to obtain company registration). So me progress has been made in reducing 
administrative regulation while tax procedures have been simplified as from 2009. The central 
bank has continued to take steps to improve its operating procedur es in financial services and 
towards adopting International Financial Reporting standard s. Regarding public finance 
management, measures aimed at improving budget formulation and execution as well as 
medium-term planning and prioritisation of expe nditures along with effo rts to improve cash 
management and implement a single treasury account, remain key parts of the Medium-Term 
Public Financial Management Reform Action Pla n. But concrete measures carried out in 2008 
were limited; noteworthy ones include the sett ing up of a cash management unit and a public 
debt department within the Ministry of Fina nce. The preparation of  a modern procurement 
code was launched recently, with  international assistance. 
The EU and Lebanon are implementing the European Neighbourhood Policy Action Plan 
which was adopted in January 2007. The second progress report was made public in April 
2009. In the overall assessment of the implemen tation of the Action Plan, the Commission 
noted that slow progress in economic reforms as we ll as in other fields (human rights, judicial 
reform, social sector reform, and regulatory ha s had an impact on the overall social, economic 
EN 22   EN and political situation in the c ountry as well as on the dial ogue in the framework of the 
European Neighbourhood Policy. 
4.4. Implementation of macro-financial assistance 
In 2008 the Commission started the implem entation of the Council Decision 2007/860/EC 
providing macro-financial assistance of EUR 80 million in the form of a combination of a medium-term loan and grant of EUR 50 and 30 million respectively. The assistance seen as 
part of the EC assistance package complement s support from the Bretton Woods Institutions, 
bilateral donors (including EU Member States a nd Arab countries), and finally the EU's own 
grants (under the ENPI) and loan s (by the EIB). Macro-financial assistance is conditional, in 
particular, on progress in the implementation of the IMF EPCA arrangement and subsequent 
IMF-supported programmes.  
The EC macro-financial assistance aims primarily at supporting the authorities' effort of fiscal 
consolidation. Thus, the specific reform measures  to be targeted by the programme focus on 
public finance management (PFM) and on two specific sectoral policies of particular 
importance for fiscal adjustment and debt reduc tion, namely the power s ector and the social 
sector. 
In identifying the policy conditions of the assi stance, the Commission staff used as inputs the 
government programme of reforms, specific sect oral strategies, such as the Medium Term 
Public Financial Management Re form Action Plan, the results of the Operational Assessment 
of administrative procedures an d financial circuits conducted by external experts for the 
Commission in October 2007 and discussions with major donors on the reform conditions 
attached to budget support. Agreement on the conditi ons to be attached to the disbursement of 
the assistance was reached in the course of  2008. Subsequently, the EUR 15 million first 
tranche of the grant was disbursed end-December 2008. The first tranche of a 5-year loan of EUR 25 million was disbursed on 4 June 2009. If conditions are met, the Commission intends 
to disburse second tranche at the end of 2009. 
EN 23   EN  
SUMMARY STATUS OF ECONOMIC REFORM  
1. Price liberalisation 
Most prices are free. 
2. Trade liberalisation 
Liberal international trade policy, but prot ectionist measures are occasionally introduced. 
Lebanon is a founding member of GATT but it with drew in 1949. It is now negotiating the 
accession to WTO.  
3. Exchange regime 
Fixed exchange rate (peg to the USD). No r estrictions on current international transactions 
in conformity with Article VIII of the IM F’s Articles of Agreement. Lebanon has also 
achieved substantial capita l account convertibility. 
4. Foreign Direct Investment 
Unlimited repatriation of capital and profits a nd no limitations on holding foreign currency 
bank accounts. Legislation is ove rall adequate and an investment development authority 
exists but enforcement of contracts someti mes problematic in the absence of commercial 
courts and independent judiciary.  
5. Monetary policy 
The Banque du Liban (BdL) uses a wide menu of monetary policy instruments to maintain financial stability and provide liquidity to th e banking sector. It also occasionally provides 
financing to the government (on a temporary basi s). The exchange rate peg is regarded as a 
key factor in maintaining financial stability.  Gross international reserves are increasing, 
partly due to foreign inflows into Lebanon in the wake of the financial crisis and partly 
because of higher gold prices (BdL  holds a large gold stock). 
6. Public Finance 
Fiscal performance improved somewhat in 2008 Public finance management reform focuses 
on budget formulation and execution and medium -term planning. However, in early 2009 
public finances have been deteriorating rapi dly due to increases in public spending and a 
slowdown in the economy. 
7. Privatisation and Enterprise Restructuring 
Structural reforms programme focuses on privatisation, improvement of business climate, privatisations, and opening of markets, but progress has been stalled due to the political 
situation. 
8. Financial Sector Reform 
Lebanon has a sophisticated and developed financial sector whic h proved resilient to shocks 
despite vulnerabilities.  
EN 24   EN Annex 1A - COMMUNITY MACRO-FINANCIAL AND EXCEPTIONAL FINANCIAL ASSISTANCE
 TO THIRD COUNTRIES BY DATES OF COUNCIL DECISIONS
Status of effective disbursements as of end-December 2008 (in m illions of euro) 
Authorisations Disbursements
Country Date of Reference of Maximum Dates of Amounts of Totals
Council Decision Council Decision amount disbursements disbursements
Hungary I 22.02.90 90/83/EC 870 Apr. 1990 350 610
(Structural adjustment loan) Feb. 1991 260
Czech and Slovak Federal Re public 25.02.91 91/106/EC 375 Mar. 1991 185 375
(BOP loan) Mar. 1992 190
Hungary II 24.06.91 91/310/EC 180 Aug. 1991 100 180
(BOP loan) Jan. 1993 80
Bulgaria I 24.06.91 91/311/EC 290 Aug. 1991 150 290
(BOP loan) Mar. 1992 140
Romania I 22.07.91 91/384/EC 375 Jan. 1992 190 375
(BOP loan) Apr. 1992 185
Israel   (1) 22.07.91 91/408/EC 187,5 Mar. 1992 187,5 187,5
(Structural adjustment soft loan)
Algeria I 23.09.91 91/510/EC 400 Jan. 1992 250 400
(BOP loan) Aug. 1994 150
Albania I 28.09.92 92/482/EC 70 Dec. 1992 35 70
(BOP grant) Aug. 1993 35
Bulgaria II 19.10.92 92/511/EC 110 Dec. 1994 70 110
(BOP loan) Aug .1996 40
Baltics 23.11.92 92/542/EC 220 135
(BOP loans)
of which :
    Estonia (40) Mar. 1993 20 (20)
    Latvia (80) Mar. 1993 40 (40)
    Lithuania (100) Jul. 1993 50 (75)
Aug. 1995 25
Romania II 27.11.92 92/551/EC 80 Feb. 1993 80 80
(BOP loan)
Moldova I 13.06.94 94/346/EC 45 Dec. 1994 25 45
(BOP loan) Aug. 1995 20
Romania III 20.06.94 94/369/EC 125 Nov. 1995 55 125
(BOP loan) Sep. 1997 40
Dec. 1997 30
Albania II 28.11.94 94/773/EC 35 Jun. 1995 15 35
(BOP grant) Oct. 1996 20
Algeria II 22.12.94 94/938/EC 200 Nov. 1995 100 100
(BOP loan)
Slovakia 22.12.94 94/939/EC 130 Jul. 1996
(BOP loan)
Ukraine I 22.12.94 94/940/EC 85 Dec. 1995 85 85
(BOP loan)
Belarus 10.04.95 95/132/EC 55 Dec. 1995 30 30
(BOP loan)
Ukraine II 23.10.95 95/442/EC 200 Aug. 1996 50 200
(BOP loan) Oct. 1996 50
Sep. 1997 100
Moldova II 25.03.96 96/242/EC 15 Dec. 1996 15 15
(BOP loan)
fYRoM I 22.07.97 97/471/EC 40 Sep. 1997 25 40
(BOP loan) Feb. 1998 15
Bulgaria III 22.07.97 97/472/EC 250 Feb. 1998 125 250
(BOP loan) Dec. 1998 125
 
EN 25   EN Authorisations Disbursements
Country Date of Reference of Maxim um Dates of Amounts of Totals
Council Decision Council Decision amount disbursements disbursements  
Armenia, Georgia and Tajikistan (2) 17.11.97 97/787/EC 375 294,5
(Structural adjustment loans and grants)
of which 28.3.00 00/244/EC
   Armenia (58) Dec. 1998 (loan) 28 58
Dec. 1998 (grant) 8
Dec.  1999 (grant) 4
Feb. 2002 (grant) 5,5
Dec. 2002 (grant) 5,5
June 2004 (grant) 5,5
Dec 2005 ( grant) 1,5
   Georgia (175) Jul. 1998 (loan) 110 141,5
Aug. 1998 (grant) 10
Sep. 1999 (grant) 9
Dec. 2001 (grant) 6
Dec 2004 (grant) 6,5
   Tajikistan (95) Mar. 2001 (loan) 60 95
Mar. 2001 (grant) 7
Dec. 2001 (grant) 7
Feb. 2003 (grant) 7
May 2005 (grant) 7
Oct 2007 (grant) 7
Ukraine III 15.10.98 98/592/EC 150 Jul. 1999 58 58
(BoP loan) 12.07.02 02/639/EC
Albania III 22.04.99 99/282/EC 20
(BOP loan)
Bosnia I  (3) 10.05.99 99/325/EC 60 Dec. 1999 (grant) 15 60
(BOP loan and grant) Dec. 1999 (loan) 10
10.12.01 01/899/EC Dec. 2000 (grant) 10
Dec. 2000 (loan) 10
Dec. 2001 (grant) 15
Bulgaria IV 08.11.99 99/731/EC 100 Dec. 1999 40 100
(BOP loan) Sep. 2000 60
fYRoM II (4) 08.11.99 99/733/EC 80 Dec. 2000 (grant) 20 98
(BOP loan and grant) 18 Dec. 2000 (loan) 10
10.12.01 01/900/EC Dec. 2001 (loan) 12
Dec. 2001 (grant) 10
May 2003 (grant) 10
June 2003 (loan) 10
Dec. 2003 (loan) 18
Dec. 2003 (grant) 8
Romania  IV 08.11.99 99/732/EC 200 Jun. 2000 100 150
(BOP loan) July 2003 (loan) 50
Kosovo I (5) 19.02.00 00/140/EC 35 Mar. 2000 20 35
(Grant budgetary support) Aug. 2000 15
Montenegro (5) 22.05.00 00/355/EC 20 Aug. 2000 72 0
(Grant budgetary support) Dec. 2000 13
Moldova III 10.07.00 00/452/EC 15
(BOP loan) 19.12.02 02/1006/EC
Kosovo II (3) 27.06.01 01/511/EC 30 Sep. 2001 15 30
(Grant budgetary support) Dec. 2002 15
Serbia and Montenegro (ex FRY) I (6) 16.07.01 01/549/EC 345 Oct. 2001 225 345
(BOP loan and grant) Oct. 2001 35
10.12.01 01/901/EC Jan. 2002 40
Aug. 2002 45
Ukraine IV 12.07.02 02/639/EC 110
(BOP loan)modified by
modified bymodified bymodified by
 
EN 26   EN Authorisations Disbursements
Country Date of Reference of Maxim um Dates of Amounts of Totals
Council Decision Council Decision amount disbursements disbursements  
Serbia and Montenegro II (ex FRY) (7) 05.11.02 02/882/EC 130 Dec. 2002 (grant) 30 105 25
Fev. 2003 (loan) 10
Aug. 2003 (grant) 35
Aug. 2003 (loan) 30
25.11.03 03/825/EC 70 Dec 2004 (grant) 10 50 20
07.12.2004 04/862/EC
April 2005 (loan) 15
Dec 2005 (grant) 25
Bosnia II (8) 05.11.02 02/883/EC 60 Fev. 2003 (grant) 15 60
Dec. 2003 (grant) 10
7/12/2004 04/861/EC
Dec 2004 (loan) 10
Jun 2005 (grant) 15
Feb 2006 (loan) 10
Moldova IV 19.12.02 02/1006/EC 15 15
Albania IV (9) 29.04.04 04/580/EC 25 Nov 2005 (grant) 32 5
March 2006 ( loan) 9
July 2006 (grant) 13
Georgia II         24.01.06 06/41/EC 33,5 August 2006 (grant) 11 22 11,5
Dec 2006 (grant) 11
Kosovo 30.11.06 06/880/EC 50 50
Moldova 16.04.07 07/259/EC 45 Oct 2007 (grant) 20 45
Jun 2008 (grant) 10
Dec 2008 ( grant) 15
Lebanon 10.12.07 07/860/EC 80 Dec 2008 (grant) 15 15 65
                                                            ------- ------- -------
TOTAL 6297 5251,0 1046,0
(1)
(2)
 countries.
(3)
(4) Includes a loan principal amount of up to € 50 million and grants of up to € 48 million.
(5) Exceptional financial assistance.
(6) Includes a loan principal amount of € 225 million and grants of € 120 million.
(7) Includes a loan principal amount of € 55 million and grants of € 75 million
(8) Includes a loan principal amount of € 20 million and grants of € 40 million
(9) Includes a loan principal amount of € 9million and grants of € 16 millionIncludes a loan principal amount of up to € 20 million and grants of up to € 40 million.Out of the global amount of euro 375 million, maximum amounts of euro 58 million, euro 175 million and euro 95 million were act ually agreed with the beneficiaryExceptional financial assistance, which includes a ceiling of euro 245 million for the loans and a ceiling of euro 130 million for the grantsAssistance to Israel includes a loan principal amount of € 160 million and grants of € 27.5 million in the form of interest sub sidies.modified by
modified by
 
EN 27   EN Status of effective disbursements as of end-December 2008 (in millions of euro) 
Authorisations Disbursements
Country Date of Reference of Maxim um Dates of Amounts of Totals
Council Decision Council Decision amount disbursements disbursements
A. EU Accession countries
Baltics 23.11.92 92/542/EC 220 135
(BOP loans)
of which :
    Estonia (40) Mar. 1993 20 (20)
    Latvia (80) Mar. 1993 40 (40)
    Lithuania (100) Jul. 1993 50 (75)
Aug. 1995 25
Bulgaria I 24.06.91 91/311/EC 290 Aug. 1991 150 290
(BOP loan) Mar. 1992 140
Bulgaria II 19.10.92 92/511/EC 110 Dec. 1994 70 110
(BOP loan) Aug .1996 40
Bulgaria III 22.07.97 97/472/EC 250 Feb. 1998 125 250
(BOP loan) Dec. 1998 125
Bulgaria IV 08.11.99 99/731/EC 100 Dec. 1999 40 100
(BOP loan) Sep. 2000 60
Czech and Slovak Federal Re public 25.02.91 91/106/EC 375 Mar. 1991 185 375
(BOP loan) Mar. 1992 190
Hungary I 22.02.90 90/83/EC 870 Apr. 1990 350 610
(Structural adjustment loan) Feb. 1991 260
Hungary II 24.06.91 91/310/EC 180 Aug. 1991 100 180
(BOP loan) Jan. 1993 80
Romania I 22.07.91 91/384/EC 375 Jan. 1992 190 375
(BOP loan) Apr. 1992 185
Romania II 27.11.92 92/551/EC 80 Feb. 1993 80 80
(BOP loan)
Romania III 20.06.94 94/369/EC 125 Nov. 1995 55 125
(BOP loan) Sep. 1997 40
Dec. 1997 30
Romania  IV 08.11.99 99/732/EC 200 Jun. 2000 100 150
(BOP loan) July 2003 50
Slovakia 22.12.94 94/939/EC 130 Cancelled
(BOP loan) (Jul. 1996)
------- -------
TOTAL A 3305 2780Annex 1B - COMMUNITY MACRO-FINANCIAL AND EXCEPTIONAL FINANCIAL ASSISTANCE
 TO THIRD COUNTRIES BY REGION
 
EN 28   EN Authorisations Disburse m
Country Date of Reference of Maximum Dates of Amounts of
Council Decision Council Decision amount disbursements disbursements  
B. Western Balkans
Albania I 28.09.92 92/482/EC 70 Dec. 1992 35 70
(BOP grant) Aug. 1993 35
Albania II 28.11.94 94/773/EC 35 Jun. 1995 15 35
(BOP grant) Oct. 1996 20
Albania III 22.04.99 99/282/EC 20
(BOP loan)
Bosnia I  (1) 10.05.99 99/325/EC 60 Dec. 1999 (grant) 15 60
(BOP loan and grant) Dec. 1999 (loan) 10
10.12.01 01/899/EC Dec. 2000 (grant) 10
Dec. 2000 (loan) 10
Dec. 2001 (grant) 15
fYRoM I 22.07.97 97/471/EC 40 Sep. 1997 25 40
(BOP loan) Feb. 1998 15
fYRoM II (2) 08.11.99 99/733/EC 80 Dec. 2000 (grant) 20 98
(BOP loan and grant) Dec. 2000 (loan) 10
10.12.2001 01/900/EC 18 Dec. 2001 (loan) 12
Dec. 2001 (grant) 10
May 2003 (grant) 10
June 2003 (loan) 10
Dec. 2003 (loan) 18
Dec.) 2003 (grant) 8
Kosovo I (3) 19.02.00 00/140/EC 35 Mar. 2000 20 35
(Grant budgetary support) Aug. 2000 15
Kosovo II (3) 27.06.01 01/511/EC 30 Sep. 2001 15 30
(Grant budgetary support) Dec. 2002 15
Montenegr o (3) 22.05.00 00/355/EC 20 Aug. 2000 7 20
(Grant budgetary support) Dec. 2000 13
16.07.01 01/549/EC 345 Oct. 2001 (grant) 35 345
modified by Oct. 2001 (loan) 225
10.12.2001 01/901/EC Jan. 2002 (grant) 40
Aug.2002 (grant) 45
05.11.02 02/882/EC 130 Dec. 2002 (grant) 30 105
Fev. 2003 (loan) 10
Aug. 2003 (grant) 35
Aug. 2003 (loan) 30
25.11.03 03/825/EC (7) 70 Dec 2004 (grant) 10 50
07.12.04 04/862/EC
April  2005 (loan) 15
Dec 2005 (grant) 25
05.11.02 02/883/EC 60 Fev. 2003 (grant) 15 60
Dec. 2003 (grant) 10
Dec 2004 (loan) 10
07.12.04 04/861/EC June 2005 (grant) 15
Feb 2006 (loan) 10modified by
Bosnia II (6)
(BOP loan and grant)
modified bymodified bymodified by
Serbia and Montenegro I 
(ex FRY) (4)
Serbia and Montenegro II 
( ex FRY) (5)
(BOP loan and grant)
 
EN 29   EN Authorisations Disbursements
Country Date of Reference of Maxim um Dates of Amounts of Totals
Council Decision Council Decision amount disbursements disbursements
 
29.04.04 04/580/EC 25 Nov  2005 (grant) 3 25
Mar 2006 (loan) 9
Jul 2006 (grant) 13
Kosovo  30.11.06 2006/880/EC 50
TOTAL B 1088 973
------- -------
(1)  Includes a loan principal amount of € 20 million and grants of € 40 million.
(2)  Includes a loan principal amount of up to € 50 million and grants of up to € 48 million.(3) Exceptional financial assistance.(4)  Includes a loan principal amount of € 225 million and grants of € 120 million.
(5) Includes a loan principal amount of € 55 million and grants of € 75 million
(6) Includes a loan principal amount of € 20 million and grants of € 40 million(7) Includes a loan principal amount of € 25 million and grants of € 45 million(8) Includes a loan principal amount of € 9 million and grants of € 16 million(loan and grant)Albania IV (8)
 
EN 30   EN Authorisations Disbursements
Country Date of Reference of Maxim um Dates of Amounts of Totals
Council Decision Council Decision amount disbursements disbursements  
C. New Independent States (NIS)
Armenia, Georgia and Tajikistan (9) 17.11.97 97/787/EC 375 294,5
(Structural adjustment loans and grants) modified by
of which 28.3.00 00/244/EC
   Armenia (58) Dec. 1998 (loan) 28 (58)
Dec. 1998 (grant) 8
Dec.  1999 (grant) 4
Feb. 2002 (grant) 5,5
Dec. 2002 (grant) 5,5
Jun 2004( grant) 5,5
Dec 2005(grant) 1,5
   Georgia (175) Jul. 1998 (loan) 110 (141,5)
Aug. 1998 (grant) 10
Sep. 1999 (grant) 9
Dec. 2001 (grant) 6
Dec. 2004 (grant) 6,5
   Tajikistan (95) Mar. 2001 (loan) 60 (95)
Mar. 2001 (grant) 7
Dec. 2001 (grant) 7
Feb 2003 (grant) 7
May 2005 (grant) 7
Oct 2006 (grant) 7
Belarus 10.04.95 95/132/EC 55 Dec. 1995 30 30
(BOP loan)
Moldova I 13.06.94 94/346/EC 45 déc-94 25 45
(BOP loan) Aug. 1995 20
Moldova II 25.03.96 96/242/EC 15 Dec. 1996 15 15
(BOP loan)
Moldova III 10.07.00 00/452/EC 15
(BOP loan) 19.12.02 02/1006 EC
19.12.02 02/1006/EC 15
(15)
Ukraine I 22.12.94 94/940/EC 85 Dec. 1995 85 85
(BOP loan)
Ukraine II 23.10.95 95/442/EC 200 Aug. 1996 50 200
(BOP loan) Oct. 1996 50
Sep. 1997 100
Ukraine III 15.10.98 98/592/EC 150 Jul. 1999 58 58
(BoP loan) 12.07.02 02/639/EC
12.07.02 02/639/EC 110
(15)
Georgia II         21.01.06       06/41/EC 33,5 Aug 2006 11 22
Dec 2006 11
Moldova        16.04.07      07/259/EC 45      Oct 2007 20 45
Jun 2008 10
Dec 2008 15
------- -------
TOTAL C 1036,5 794,5Ukraine IVMoldova IV
(BOP grant)
(BOP loan)
 
EN 31   EN Authorisations Disbursements
Country Date of Reference of Maximum Dates of Amounts of Totals
Council Decision Council Decision amount disbursements disbursements  
D. Mediterranean countries
Israel   (10) 22.07.91 91/408/EC 187,5 Mar. 1992 187,5 187,5
(Structural adjustment soft loan)
Algeria I 23.09.91 91/510/EC 400 Jan. 1992 250 400
(BOP loan) Aug. 1994 150
Algeria II 22.12.94 94/938/EC 200 Nov. 1995 100 100
(BOP loan)
Lebanon 10.12.07      07/860/EC 80          Dec 2008 15
------- -------
TOTAL D 867,5 702,5
TOTAL A+B+C+D 6297 5251,0
9)   Exceptional financial assistance, which includes a ceiling of euro 245 m illion for the loans and a ceiling of euro 130 million for the grants
        
beneficiary countries
(10)    Assistance to Israel includes a loan principal amount of ECU 160 m illion and grants of ECU 27,5 million in the form of interesr subsidies.Out of the global amount of euro 375 m illion, maximum amounts of euro 58 million, euro 175 m illion and euro 95 million were actually agreed with the