COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 27.04.1998 
COM(1998) 252 final 
COMMISSION REPORT TO THE BUDGETARY AUTHORITY 
ON GUARANTEES COVERED BY THE GENERAL BUDGET -
SITUATION AT 31 DECEMBER 1997 

-2-
This report describes the situation as regards budget guarantees at the date of the report. 
It is in response to the statement made by the Commission, when the vote was taken on 
supplementary and amending budget No 1/91, that it would report to the budgetary 
authority twice a year on budget guarantees and the corresponding risks. 
This report is presented in accordance with Article 134 of the Financial Regulation 
applicable to the general budget of the European Communities. 
The Commission has already presented thirteen reports to the budgetary authority. 
The report is in two parts with an annex: 
1) Events since the last report, the risk situation and the activation of budget guarantees. 
2) Evaluation of potential risks. Economic and financial situation of non-Community 
countries benefiting from the most important operations. 
3-
CONTENTS 
PART ONE: EVENTS SINCE THE REPORT AT 30 JUNE 1997, THE RISK SITUATION AND 
ACTIVATION OF BUDGET GUARANTEES 5 
I. INTRODUCTION: TYPES OF OPERATION 5 
LA OPERATIONS WITH MACROECONOMIC OBJECTIVES 5 
LB OPERATIONS WITH MICROECONOMIC OBJECTIVES 5 
II. EVENTS SINCE THE REPORT AT 30 JUNE 1997 5 
II.A GEORGIA, ARMENIA, TAJIKISTAN 5 
II.B UKRAINE 6 
ILC LOANS GRANTED BY THE EUROPEAN INVESTMENT BANK FOR INVESTMENT PROJECTS IN THE 
FORMER YUGOSLAV REPUBLIC OF MACEDONIA 6 
III. RISK SITUATION 6 
III.A AMOUNT OUTSTANDING AT 31 DECEMBER 1997 (TABLE 1) 7 
III.B MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET: OPERATIONS DISBURSED AT 31 
DECEMBER 1997 (SEE TABLE 2) 8 
III.C MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE COMMUNITY BUDGET (SEE TABLE 3) 8 
IV. ACTIVATION OF BUDGET GUARANTEES 13 
IV.A PAYMENTS FROM CASH RESOURCES 13 
IV.B ACTIVATION OF THE GUARANTEE FUND 13 
IV.C LATE REPAYMENTS 13 
IV.D SITUATION AS REGARDS UNPAID DEBTS AT 31 DECEMBER 1997 14 
V. ANALYSIS OF THE COMMUNITY'S THEORETICAL LENDING AND GUARANTEE 
CAPACITY IN RESPECT OF NON-MEMBER COUNTRDZS 14 
VI. RELATIVE SOLIDITY OF THE GUARANTEE FUND 15 
PART TWO: EVALUATION OF POTENTIAL RISKS: ECONOMIC AND FINANCIAL 
SITUATION OF THE NON-MEMBER COUNTRIES BENEFITING FROM THE MOST 
IMPORTANT LOAN OPERATIONS 17 
I. INTRODUCTION 17 
II. CENTRAL AND EAST EUROPEAN COUNTRIES 17 
III. NEWLY INDEPENDENT STATES 22 
IV. MEDITERRANEAN COUNTRIES 25 
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ANNEX 
I. EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED BY THE 
COMMUNITY BUDGET 28 
LA TABLES 1 TO 3 28 
I.A.J Authorised ceiling (Table 1) 28 
Î.A.2 Capital outstanding ( Table I) 28 
I.A.3 Annual risk (Tables 2 and 3) 29 
LB LOAN OPERATIONS COVERED BY A BUDGET GUARANTEE 30 
I.C EXPECTED SIGNATURE AND DISBURSEMENT OF EIB LOANS 35 
I.D PAYMENT OF THE BUDGET GUARANTEE 35 
I.D.I Borrowing/lending operations 35 
I.D. 2 Guarantees given to third parties 36 
II. METHODOLOGICAL NOTE ON THE ANALYSIS OF THE COMMUNITY'S ESTIMATED 
LENDING CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES OVER THE 
PERIOD 1997-99 UNDER THE GUARANTEE FUND MECHANISM (TABLE 4) 37 
II.A RESERVE FOR LOAN GUARANTEES TO NON-MEMBER COUNTRIES 37 
II.B BASES FOR THE CALCULATION OF THE PROVISIONING OF THE GUARANTEE FUND 37 
II.C BASIS FOR THE PROVISIONING OF THE FUND IN THE EVENT OF A PART GUARANTEE 38 
II.D PROVISIONING OF THE GUARANTEE FUND 38 
ILE MARGIN REMAINING IN THE GUARANTEE RESERVE 39 
II.F RESIDUAL LENDING CAPACITY 39 
ni. TABLES: COUNTRY-RISK INDICATORS 40 
5-
PART ONE: EVENTS SINCE THE REPORT AT 30 JUNE 1997, THE RISK 
SITUATION AND ACTIVATION OF BUDGET GUARANTEES 
I. INTRODUCTION: TYPES OF OPERATION 
The risks covered by the Community budget derive from a variety of lending and 
guarantee operations which can be divided into two categories: loans with macroeconomic 
objectives and loans with microeconomic objectives. 
LA Operations with macroeconomic objectives 
The first of these are the balance of payments loans for Member States or non-member 
countries, normally carrying strict economic conditions and undertakings. 
This category includes the loan of ECU 1 250 million to finance imports of agricultural 
products and foodstuffs into the former Soviet Union, since the risk involved in this 
operation depends to a large extent on macroeconomic and political developments in the 
recipient countries. 
I.B Operations with microeconomic objectives 
These are loans to finance projects which are usually repaid over the long term from fonds 
which these projects are expected to generate; as a rule, they are granted to companies, 
financial institutions or non-member countries and, in addition to the Community 
guarantee, are covered by the usual guarantees demanded by banks. 
This covers Euratom and NCI loans in Member States and the Euratom and EEB Joans 
outside the Community (Mediterranean, Central and Eastern Europe, certain non-member 
countries - developing countries of Asia and Latin America and South Africa). 
II. EVENTS SINCE THE REPORT AT 30 JUNE 1997 
The main events in the second half of 1997 were as follows: 
II.A Georgia, Armenia, Tajikistan 
Georgia, Armenia and Tajikistan were severely hit by the economic collapse resulting 
from the breaking up of the command economy and the disintegration of the Soviet 
Union. 
Owing to the exceptionally harsh conditions presently faced by Armenia, Georgia and 
Tajikistan, the Commission considered that exceptional assistance was required to support 
the implementation of the stabilisation and structural reform programmes agreed with the 
IMF. 
On 3 February 1997 the Commission therefore presented a proposal for a Council 
Decision providing exceptional financial assistance of ECU 170 million in the form of a 
loan with a maximum maturity of fifteen years and of ECU 50 million in the form of 
grants to Armenia, Georgia and, if appropriate, Tajikistan. 
On 17 November 1997 the Council decided to grant exceptional financial assistance of 
ECU 170 million in the form of long-term loans and of ECU 95 million in the form of 
grants to Armenia and Georgia. 
II.B Ukraine 
As part of an overall aid programme for Ukraine, on 12 November 1997 the Commission 
presented a proposal for a Council Decision providing additional macro-financial 
assistance of ECU 150 million to Ukraine in the form of a loan with a maximum maturity 
often years. The Council had not adopted any formal decision at the time this report was 
drawn up. 
II.C Loans granted by the European Investment Bank for investment projects in 
the former Yugoslav Republic of Macedonia 
On 13 January 1998 the Commission presented a proposal for a Council Decision granting 
a Community guarantee in respect of loans for investment projects in the former 
Yugoslav Republic of Macedonia. This guarantee is limited to a maximum of ECU 150 
million in the period up to 31 December 2000. The Council had not adopted any formal 
decision at the time this report was drawn up. 
III. 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 1997, giving the minimum 
level of risk to the Community assuming that there are no early repayments 
(see Table 2 below); 
- on a more forward-looking basis, by reference to all the operations decided by the 
Council or proposed by the Commission in order to estimate the impact on future 
budgets, giving the maximum risk borne by the Community assuming that the 
Commission's proposals are accepted (see Table 3 below). 
The latter exercise gives some idea about the future level of risks connected with the 
proposals made. However, a number of assumptions have to be made about dates of 
-7 
disbursement and terms of repayment (details are given in the annex) as well as interest1 
and exchange rates.2 
The results are shown in Tables 1 to 3 which assess the risk relating to countries inside the 
Community and countries outside the Community. 
The overall figures quoted cover risks of different types; loans to one country in the case 
of macrofmancial assistance and loans for projects guaranteed by the borrowers in the case 
of NCI and EEB operations, for example. 
The following analysis distinguishes between total risk, the risk in respect of Member 
States and the risk in respect of non-member countries. 
III.A Amount outstanding at 31 December 1997 (Table 1) 
The total risk at 31 December 1997 came to ECU 12171 million as against 
ECU 11 941 million at 30 June 1997, an increase of 2%.3 
The following table shows the operations which have had an effect on the amount 
outstanding since the last report. 
Amount outstanding at 30 June 1997 11 941.00 
Loan repayments 
Euratom -1.30 
NCI -110.70 
Financial assistance -825.00 
Former Soviet Union -115.33 
EIB -150.00 
Exchange rate differences between ecu and other currencies + 6.33 
Loans disbursed 
Financial assistance +195.00 
EIB +1231.00 
Amount outstanding at 31 December 1997 12 171.00 
1 An average interest rate of 10% is assumed for EIB loans. The average interest rate assumed for 
borrowing and lending operations is 4.4%. 
2 The exchange rate used for loans in currencies other than the ecu are those of 31 December 1997. 
3 In the case of loans in currencies other than the ecu, part of the change over the past six months is due to 
exchange rate differences. 
8-
The capital outstanding in respect of operations in the Member States was 
ECU 4 497 million at 31 December 1997, a fall of 3.2% compared with 30 June 1997. 
This fall is mainly due to the repayment of ECU 112 million in Euratom and NCI loans 
The amount outstanding from other operations in the Member States has remained stable. 
The capital outstanding from non-member countries at 31 December 1997 was 
ECU 7 674 million, an increase of 5.2% compared with 30 June 1997. 
III.B Maximum annual risk borne by the Community budget: operations 
disbursed at 31 December 1997 (see Table 2) 
The total annual risk, which comes to ECU 3 289 million in 1998, will increase to around 
ECU 3 682 million in 2000, although the situation in 1999 is special in that there will be 
no capital repayments for the balance-of-payments loans to the Member States and in that 
capital repayments on loans to Hungary, the Czech and Slovak Republics and the 
ECU 290 million loan to Bulgaria end in 1998. 
- The risk for 1998 in respect of the Member States comes to ECU 1 967 million. This 
figure changes in line with the capital repayments on balance-of-payment loans to 
Greece and Italy. The risk will reach ECU 2 734 million in 2000 when Italy's last 
repayment is due. 
- The risk for 1998 in respect of non-member countries comes to ECU 1 323 million as 
the following capital payments fall due: 
- ECU 100 million from Hungary; 
- ECU 123 million from the Czech Republic; 
- ECU 62 million from the Slovak Republic; 
- ECU 150 million from Bulgaria; 
- ECU 185 million from Romania; 
- ECU 288 million from EIB loans. 
From 1999 the amount of capital repayments on borrowing and lending operations will 
fall. The risk in respect of non-member countries will then average ECU 880 million 
over the period 1999-2005. 
III.C Maximum theoretical annual risk borne by the Community budget 
(see Table 3) 
This risk comes to ECU 3 400 million in 1998 and will increase to ECU 4 266 million in 
2000, before stabilising at an average of ECU 2 550 million between 2001 and 2005. The 
risk in 1999 will total ECU 1 544 million. 
-9 
The trend in the maximum risk in respect of the Member States is much the same as 
in Table 2 up to 2000 when the risk will amount to ECU 2 734 million. 
The risk in respect of non-member countries will rise from ECU 1 433 million in 
1998 to ECU 1 263 million in 1999. The risk will increase by an average of 20% a 
year from 2000 until 2005. 
10 
IABLEJ. 
CAPITAL OUTSTANDING IN RESPECT OF OPERATIONS DISBURSED 
(ECU million) 
Operation 
MEMBER STATES 
A.Balance of payments 
1. Greece 
2. Italy 
B.Others 
3. Euratom 
4. NIC and NCI earthquake 
5.EIB Mediterranean 
Spain, Greece, Portugal. 
MEMBER STATES - TOTAL 
THIRD COUNTRIES 
A.Financial assistance 
1. Hungary 
2. Czech Republic 
3. Slovak Republic 
4. Bulgaria 
5. Romania 
6. Algeria 
7. Israel (*) 
8. FYROM 
9. Baltic States 
10. Moldova 
11. Ukraine 
12. Belarus 
13.Georgia, Armenia 
14. Former Soviet Union (**) 
B.Other 
15. EIB Mediterranean 
16. EIB Central and Eastern Europ 
17. EIB Asia, Latin America 
18. EIB South Africa 
THIRD COUNTRIES - TOTAL 
GRAND TOTAL Authorised 
ceiling 
14000 
4000 
6830 
1500 
26330 
180 
250 
125 
650 
580 
600 
160 
40 
220 
60 
285 
55 
170 
1250 
8672 
8220 
1925 
675 
24117 
50447 Capital 
outstanding 
30.06.97 
500 
3455 
120 
327 
246 
4648 
180 
250 
125 
400 
510 
500 
160 
0 
135 
60 
185 
30 
0 
331 
2541 
1531 
301 
56 
7294 
11941 Capital 
outstanding 
31.12.97 
500 
3448 
118 
219 
212 
4497 
100 
123 
62 
260 
580 
250 
0 
25 
130 
60 
285 
30 
0 
216 
3150 
1919 
385 
100 
7674 
12171 Remainder to 
be disbursed 
31.12.97 
0 
0 
0 
0 
0 
0 
0 
0 
0 
250 
0 
100 
0 
15 
85 
0 
0 
25 
170 
0 
2513 
4052 
653 
199 
8062 
8062 
(*) Loan repaid in full at 31.12.1997. 
(**) The ECU 216 million outstanding corresponds to the principal due but not paid at 31.12.1997 
ANNEX TQ TABLE 1 
SITUATION IN RESPECT OF EIB OPERATIONS (31.12.97) 
Operations 
Mediterranean Member States 
Third countries, old mandates 
Mediterranean Protocols 
Central and Eastern Europe I 
Central and Eastern Europe II 
Asia, Latin America I 
Asia, Latin America II 
South Africa 
Third countries, new mandates!*): 
Mediterranean 
Central and Eastern Europe 
Asia, Latin America 
South Africa 
Total Credit line 
authorised 
1500 
6362 
1700 
3000 
750 
275 
300 
2310 
3520 
900 
375 
20992 Loans made 
available minus 
cancellations 
1465 
5736 
1628 
3000 
657 
153 
300 
934 
1466 
215 
0 
15553 Amounts 
disbursed 
1590 
4251 
1255 
762 
324 
78 
100 
114 
30 
0 
0 
8503 Amounts 
outstanding 
at 31.12.97 
212 
3036 
1128 
761 
307 
78 
100 
114 
30 
0 
0 
5765 
(*) Council Decision of 14 Apnl 1997 
NB: As the loans are disbursed in national currencies, the loan ceiling may be exceeded when the amounts 
disbursed up to the date ot the report are converted into ecus. 
IABJ£2 
MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 
(Estimate in ECU million based on all operations disbursed at 31.12.97) 
MEMBER STATES 
CAPITAL 
A. Balance of payments 
1. Greece 
2. Italy 
B. Structural loans 
3. Euratom 
4. NCI and NCI EQ 
5. EIB Med. Old. Prot. 
Sp. Gr, Port 
Capital - subtotal 
INTEREST 
A. Balance of payments 
1. Greece 
2. Italy 
B. Structural loans 
3. Euratom 
4. NCI and NCI EQ 
5. EIB Med. Old. Prot. 
Sp. Gr, Port 
Interest - subtotal 
MEMBER STATES - TOTAL 
NON-MEMBER COUNTRIES 
CAPITAL 
A. Financial assistance 
6. Hungary 
7. Czech Republic 
8. Slovak Republic 
9. Bulgaria 
10. Romania 
11. Algeria 
12. FYROM 
13. Baltic States 
14. Moldova 
15. Ukraine 
16. Belarus 
B. Guarantees 
17. EIB Mediterranean 
18. ElBC+EEur. 
19. EIB Asia Latin America 
20. EIB South Africa 
Capital - subtotal 
INTEREST 
A. Financial assistance 
6. Hungary 
7. Czech Republic 
8. Slovak Republic 
9. Bulgaria 
10. Romania 
11. Algeria 
12. FYROM 
13. Baltic States 
14. Moldova 
15. Ukraine 
16. Belarus 
B. Guarantees 
17. EIB Mediterranean 
18. ElBC+EEur. 
19. EIB Asia Latin America 
20. EIB South Africa 
Interest - subtotal 
NON-MEMBER COUNTRIES -
TOTAL 
GRAND TOTAL 
(Eastern Europe) 
(Other non-member countries) 1998 
500 
981 
91 
50 
45 
1667 
48 
209 
10 
16 
18 
300 
1967 
100 
123 
62 
150 
185 
5 
174 
92 
22 
912 
2 
3 
1 
8 
22 
16 
1 
7 
3 
13 
2 
185 
115 
18 
15 
410 
1323 
3289 
892 
430 1999 
15 
40 
40 
96 
155 
3 
13 
14 
184 
280 
190 
5 
200 
134 
27 
556 
5 
14 
16 
1 
7 
3 
13 
2 
178 
109 
15 
15 
378 
933 
1213 
482 
451 2000 
2467 
12 
40 
38 
2557 
155 
1 
10 
11 
177 
2734 
80 
95 
5 
215 
172 
34 
601 
5 
8 
16 
1 
6 
3 
13 
2 
164 
101 
15 
15 
347 
948 
3682 
490 
459 2001 
71 
21 
92 
7 
7 
15 
107 
70 
150 
9 
17 
6 
233 
183 
40 
34 
742 
5 
6 
16 
1 
1 
3 
13 
2 
149 
90 
14 
15 
315 
1056 
1163 
405 
651 2002 
23 
23 
2 
6 
7 
30 
55 
100 
25 
12 
37 
6 
243 
182 
43 
19 
721 
2 
6 
5 
1 
1 
2 
12 
1 
135 
79 
12 
9 
265 
986 
1016 
419 
566 2003 
22 
22 
2 
3 
5 
27 
40 
12 
57 
6 
250 
175 
50 
590 
2 
3 
1 
2 
11 
1 
119 
68 
11 
7 
225 
815 
842 
377 
438 2004 
17 
15 
32 
2 
2 
4 
36 
70 
12 
57 
6 
236 
172 
22 
575 
3 
1 
1 
8 
1 
104 
57 
10 
7 
192 
767 
803 
388 
380 2005 
8 
8 
1 
1 
8 
7 
57 
6 
226 
164 
23 
483 
1 
1 
5 
1 
90 
47 
9 
7 
160 
643 
652 
288 
356 TOTAL 
500 
3448 
118 
219 
211 
4496 
48 
519 
13 
51 
62 
693 
5189 
100 
123 
62 
260 
580 
250 
0 
130 
57 
225 
30 
1777 
1274 
260 
53 
5180 
2 
3 
1 
27 
62 
67 
9 
21 
18 
88 
13 
1124 
666 
104 
88 
2292 
7472 
12661 
3741 
3731 
12 
TABLE 3 
MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 
(Estimation in ECU million based on all operations disbursed, adopted and proposed by the Commission) 
MEMBER STATES 
CAPITAL 
A. Balance of payments 
1. Greece 
2. Italy 
B. Structural loans 
3. Euratom and NCI 
4. EIB Spain, Greece, Portugal 
Capital - subtotal 
INTEREST 
A. Balance of payments 
1. Greece 
2. Italy 
B. Structural loans 
3. Euratom and NCI 
4. EIB. Spain, Greece, Portugal 
Interest - subtotal 
MEMBER STATES - TOTAL 
THIRD COUNTRIES 
CAPITAL 
A. Financial assistance 
5. Hungary 
6. Czech Republic 
7. Slovak Republic 
8. Bulgaria 
9. Roumania 
10. Algeria 
11. FYROM 
12. Baltic States 
13. Moldova 
14. Ukraine 
15. Belarus 
16. Georgia 
17. Armenia 
18. Euratom C+E Europe 
B. Guarantees 
19. EIB Mediterranean 
20. EIB C+E Europe 
21. EIB Asia, Latin America 
22. EIB South Africa 
Capital - subtotal 
INTEREST 
A. Financial assistance 
5. Hungary 
6.Czech Republic 
7. Slovak Republic 
8. Bulgaria 
9. Romania 
10. Algeria 
11.FYROM 
12. Baltic States 
13. Moldova 
14. Ukraine 
15. Belarus 
16. Georgia 
17. Armenia 
18. Euratom C+E Europe 
B. Guarantees 
19. EIB Mediterranean 
20. EIB C+E Europe 
21. EIB Asia. Latin America 
22. EIB South Africa 
Interest - subtotal 
THIRD COUNTRIES - TOTAL 
GRAND TOTAL 
(Eastern Europe) 
(other non-member countries) 1998 
500 
981 
141 
45 
1667 
48 
209 
26 
18 
300 
1967 
100 
123 
62 
150 
185 
5 
174 
92 
22 
913 
2 
3 
1 
13 
22 
21 
2 
11 
3 
16 
3 
5 
3 
1 
205 
166 
26 
18 
520 
1433 
3400 
965 
468 1999 
55 
40 
96 
155 
15 
14 
184 
280 
190 
5 
200 
134 
27 
556 
15 
14 
21 
2 
11 
3 
19 
3 
5 
3 
5 
272 
267 
43 
25 
707 
1263 
1544 
673 
590 2000 
2467 
52 
38 
2557 
155 
11 
11 
177 
2734 
80 
95 
5 
215 
172 
34 
601 
15 
8 
21 
2 
10 
3 
19 
3 
5 
3 
14 
341 
385 
68 
35 
931 
1532 
4266 
816 
716 2001 
71 
21 
92 
7 
7 
15 
107 
70 
150 
9 
17 
6 
283 
267 
53 
40 
895 
15 
6 
21 
2 
5 
3 
19 
3 
5 
3 
30 
419 
513 
99 
44 
1186 
2081 
2188 
970 
1111 2002 
23 
23 
2 
6 
7 
30 
55 
100 
25 
12 
37 
6 
352 
360 
74 
31 
1052 
12 
6 
14 
2 
5 
2 
18 
2 
5 
3 
49 
469 
587 
123 
47 
1343 
2395 
2426 
1183 
1212 2003 
22 
22 
2 
3 
5 
27 
12 
37 
6 
1 
436 
470 
107 
23 
1092 
12 
3 
9 
2 
5 
2 
17 
2 
5 
3 
69 
476 
593 
135 
48 
1380 
2472 
2500 
1236 
1236 2004 
17 
15 
32 
2 
2 
4 
36 
70 
12 
72 
11 
5 
509 
596 
110 
35 
1420 
12 
3 
9 
2 
5 
1 
14 
2 
5 
3 
86 
457 
569 
136 
47 
1350 
2771 
2807 
1466 
1305 2005 
8 
8 
1 
1 
8 
31 
100 
17 
7 
87 
11 
14 
537 
631 
127 
42 
1604 
11 
4 
2 
5 
1 
11 
2 
5 
3 
98 
362 
519 
128 
42 
1192 
2796 
2805 
1452 
1344 TOTAL 
500 
3448 
337 
211 
4496 
48 
519 
65 
62 
693 
5189 
100 
123 
62 
251 
580 
350 
0 
147 
57 
250 
40 
0 
0 
20 
2706 
2722 
554 
171 
8133 
2 
3 
1 
105 
62 
120 
16 
57 
18 
133 
20 
39 
21 
352 
3001 
3599 
758 
306 
8613 
16746 
21935 
8764 
7982 
13 
IV. ACTIVATION OF BUDGET GUARANTEES 
IV.A Payments from cash resources 
The Commission draws on its cash resources under Article 12 of Council Regulation 
No 1552/89 of 29 May 1989 implementing Decision 88/376/EEC, Euratom on the system 
of the Communities' own resources to avoid delays and resulting costs in servicing its 
borrowing operations when a debtor is late in paying. 
IV.B Activation of the Guarantee Fund 
In the event of late payment by a recipient of a loan granted or guaranteed by the 
Community, the Guarantee Fund is called on to cover the default within three months of 
the date on which is payment is due. 
Penalty interest for the time between the date on which cash resources are made available 
and the date of activation of the Fund is drawn from the Fund and repaid to the cash 
resources. 
In the last six months the Fund has been called on to honour guarantees for the following 
debtor: 
"' ', ,L ', "T," •'— '•— ,", M! •——I..-..—I. • ! I ! I ! ! •••,.•••„ .,IIIL . ,U • LI. J. 1.1.1 •.!..__. II.. 1UII..ILII ——P—•—^— •• • ,l| —^-
Non-member country Date Amount (principal + interest) 
Former Yugoslavia 16.10.97 6134 806.85 
IV.C Late repayments 
During the period covered by this report, the following non-member countries repaid 
debts on which they had defaulted and for which the Guarantee Fund had already been 
activated. The amounts recovered are repaid to the Fund under Article 2 of Council 
Regulation (EC, Euratom) No 2728/94 of 31 October 1994 establishing a Guarantee 
Fund for external action. 
The former Yugoslav Republic of Macedonia (FYROM) has repaid all its arrears of 
ECU 19.7 million. 
Non-member country Repayment date Amount (principal + interest + 
default interest) 
Armenia 28.11.97 8 000 000.00 
FYROM 3.11.97 16 509 236.82 
FYROM 23.12.97 3195 400.83 
Total 27 704 637.65 
-14-
IV.D Situation as regards unpaid debts at 31 December 1997 
The following amounts had not been paid at 31 December 1997: 
Non-member country Amount (principal + interest + default interest) 
Tajikistan 72130 543.72 
Georgia 127 912 418.30 
Armenia 48 510 587.09 
Former Yugoslavia 67 207 757.63 
Total 315 761306.74 
V. ANALYSIS OF THE COMMUNITY'S THEORETICAL LENDING AND 
GUARANTEE CAPACITY IN RESPECT OF NON-MEMBER 
COUNTRIES . 
In practice, the Guarantee Fund and reserve facility limits the Community's lending and 
guarantee capacity to non-member countries since the appropriations available for 
provisioning the Fund whenever a new lending decision is adopted (or any annual tranche 
in the case of guarantees for multiannual operations) are limited by the amount entered for 
the guarantee reserve in the financial perspective.4 
At any given time, lending capacity corresponds to the margin remaining in the guarantee 
reserve. This margin is equal to the difference between the reserve and the estimated 
amount needed to provision the Guarantee Fund for operations which have already been 
adopted and which are in preparation. 
Table 4 contains an estimate of the Community's lending capacity in respect of non-
member countries over the period 1997-99 compatible with the Guarantee Fund 
mechanism. The method of calculation and references to legal texts are set out in greater 
detail in the Annex. 
On the basis of the decisions adopted by the Council and decisions proposed and in 
preparation (see Table 4), ECU 259 million is expected to be used from the guarantee 
reserve in 1998, leaving ECU 79 million available at the end of the year. 
Outstanding lending and loan guarantee operations for non-member countries plus 
unpaid interest due totalled ECU 7 961 million at 31 December 1997. 
The ratio between the Fund's resources and outstanding capital liabilities within the 
meaning of the Regulation establishing the Fund was 10.83%. Since this is higher than 
the target amount of 10%, the surplus had to be "paid back to a special heading in the 
4 ECU 300 million at 1992 prices. 
-15 
statement of revenue in the general budget of the Communities", as provided for in the 
Regulation. The surplus came to ECU 66 million at the end of the 1997 financial year. 
The Guarantee Fund could amount to around ECU 1 100 million at the end of 1998 
assuming: 
- a transfer of ECU 259 million from the reserve in 1998; 
- no further defaults requiring activation of the Fund; 
- no late repayment of arrears by defaulting countries; 
- revenue of around ECU 40 million on investments from the Fund's assets. 
If account is taken of the effect on the guarantee reserve of the provisioning of the Fund in 
respect of loans already decided and loans proposed and in preparation for the period 
1998-99, the annual capacity available for loans varies: 
- from ECU 516 million to ECU 568 million for loans with a 100% guarantee under 
the Community budget; 
- from ECU 688 million to ECU 757 million for loans with a 70% guarantee (in 
accordance with the contract of guarantee signed between the Community and the 
EIB on 25 and 29 July 1997). 
VI. RELATIVE SOLIDITY OF THE GUARANTEE FUND 
The ratio between the amount in the Fund at 31 December 1997 (ECU 862 million) and 
the maximum annual risk for loans to non-member countries (defined as the total amount 
falling due) shown for 1998 in Table 3 (ECU 1 433 million) comes to 60%. 
-16 
TABLE 4 
THE COMMUNITTS THEORETICAL ESTIMATED LENDING & GUARANTEE CAPACITY 
IN RESPECT OF NON-MEMBER COUNTRIES 
OVER THE PERIOD 1997-1999 
under the Guarantee Fund mechanism(*) 
ECU million 
Reserve for loan guarantees to non-member countries Outturn 
31.12.1997 
329 
Bases for the calculation of the provisioning of the Guarantee Fund 
- EIB loans 
- Mediterranean (a) 
- Countries of Central and Eastern Europe (b) 
- Asia, Latin America (c) 
- South Africa (d) 
- EIB loans • Total 
- Euratom loans 
- Macrofinancial assistance 
Provisioning of the Guarantee Fund 
Margin remaining in the guarantee reserve 
Residual lending capacity (balance of payments loans, 
EIB loans and Euratom loans) 
- Maximum if used in full for 100% guarantee (e.g. BP loans) 
- Maximum if used in full for EIB loans (70% guarantee) 553 
850,5 
60 
125 
1588,5 
0 
305 
286 
43 
286 
409 Forecast 
1998 
338 
931,6 
665,7 
190,55 
17,5 
1805,35 
0 
50 
259 
79 
568 
811 Forecast 
1999 
346 
693,25 
710,5 
322 
105 
1830,75 
0 
125 
274 
72 
516 
737 
(*) The provisioning rate for 1998 and 1999 is 14%, the Fund having reached its target amount at the end of 1997. 
(see Council recommendations of 2 December 1996 and 27 January 1997) 
Description of the loans for which the Fund will be provisioned in the period 1997-1999: 
• EIB 
a. Mediterranean: 
- loans decided: 1994-96: ECU 115 million under the Fourth Financial Protocol with Syria (overall 75% guarantee). 
31.1.1997-31.1.2000: ECU 2 310 million for the renewal of the EIB mandate, covered by overall 70% guarantee 
- loans proposed or in preparation: 1998-2002: ECU 750 million for financial cooperation with Turkey. 
1998-2001: ECU 230 million for financial cooperation with Croatia. 1998-2000: ECU 150 million 
for financial cooperation with the Former Yugoslav Republic of Macedonia (FYROM). 
b. Central and Eastern Europe: 
- loans decided: 31.1.1997-31.1.2000: ECU 3 520 million for the renewal of the EIB mandate, covered by 
overall 70% guarantee. 
c. Asia and Latin America: 
- loans decided: 1993-1996: ECU 750 million. Loans of ECU 54.6 million cancelled. 
1996: ECU 275 million (100% guarantee). ECU 122 million still to be signed when the decision of 14.4.1997 
was adopted is now covered by the overall 70% guarantee. 
31.1.1997-31.1.2000: ECU 900 million for renewal of the EIB mandate, covered by overall 70% guarantee. 
d. South Africa: 
- loans decided: 1.7.1997-1.7.2000: ECU 375 million for the renewal of the EIB mandate, covered by 
overall 70% guarantee. 
- Euratom 
No loans proposed. 
Macrofinancial assistance 
- loans decided: 1997: loans of ECU 25 million to Belarus released and carried forward to 1999; loans of ECU 130 million to Slovakia 
cancelled. 
1998: loans of ECU 100 million to Algeria released in 1998 and carried forward to 1999; 
- loans proposed or in preparation: 1998: ECU 150 million in loans to Ukraine. 
17 
PART TWO 
EVALUATION OF POTENTIAL RISKS: ECONOMIC AND FINANCIAL 
SITUATION OF THE NON-MEMBER COUNTRIES BENEFITING FROM 
THE MOST IMPORTANT LOAN OPERATIONS 
I. INTRODUCTION 
The figures given in the previous parts provide information on the quantitative aspects of 
the risks borne by the general budget. However, these data should be weighted in 
accordance with aspects relating to the quality of the risk, which depend on the type of 
operation and the standing of the borrower. Recent events which may influence the 
portfolio country risk are analysed below. 
The country risk evaluation presented in this chapter provides a set of country risk 
indicators for all countries that have been recipients of macro-financial assistance in 
Central and Eastern Europe, the NIS and the Mediterranean area, in the form of a full-
page table per country. To complement this, textual analysis is provided for those 
countries where significant new information influencing the risk evaluation has become 
available since the previous report covering the first six months of 1997. Brief textual 
analysis is also provided for the countries which have still to repay loans outstanding in 
the context of the ECU 1250 million commercial credits made available to the then 
Soviet Union in 1991. 
The evaluation in this section does not deal with other regions than those mentioned, 
mainly because Community exposure elsewhere (notably through guarantees of EIB 
lending) represents only a small fraction of total exposure (less than 3 %) and is also 
well diversified among countries. Israel will no longer be included in the next report, as 
the country repaid in December 1997 the ECU 160 million loan granted by the 
Community in 1991. 
II. CENTRAL AND EAST EUROPEAN COUNTRIES 
BULGARIA 
Bulgaria's prospects continue to improve. The stand-by arrangement reached in Spring 
1997 with the International Monetary Fund remains on track. Foreign reserves are more 
than adequate to cover the central bank's liabilities under the currency board 
arrangement introduced on 1 July. 
The 1997 budget deficit was around 4% of GDP, some 2 percentage points smaller than 
the target agreed with the IMF. This is in part due to lower than expected interest rates, 
which reflect both successes in macroeconomic stabilisation and depressed demand for 
credit. 
Structural reform has speeded up. Prices of all but a handful of basic foodstuffs have 
been liberalised. Widespread privatisation of large enterprises is under way, and the 
18 
pace should accelerate in 1998. One bank has been privatised, and others may be sold 
soon. Foreign direct investment inflows in the first half of 1997 were substantially 
greater than in the full years 1995 and 1996 combined. 
Notwithstanding the progress which Bulgaria has made, its external finances are likely 
to remain somewhat fragile for some years to come: service on foreign debt continues to 
be substantial, at close to US$1 billion per year. Important to note in this context is the 
ECU 140 million repayment made in December 1997 by Bulgaria to the Community, 
out of the ECU 400 million disbursed so far, in the framework of the Community 
macro-financial assistance to this country, as well as the July 1997 Council Decision to 
provide to Bulgaria new macro-financial assistance for a maximum amount of up to 
ECU 250 million. A sustained reform effort will ensure continued support from the IMF 
and other international institutions, and attract larger flows of foreign direct investment. 
CZECH REPUBLIC 
Since the last report, the situation in the Czech Republic has remained unsettled. In the 
second half of 1997, growth slowed further to only 0.8% year-on-year. After poor 
output data for the first six months of the year, the Czech Republic suffered severe 
flooding over the summer, which dented hopes of a recovery of output in the third 
quarter. However, although many large industrial firms were forced to stop production 
for a few weeks, output in the third quarter, though not buoyant, was higher than for the 
same period of 1996. This slight improvement in the trend of industrial output 
continued into the final quarter, when some signs of a recovery appeared, led by 
manufacturing. Data on the construction sector, on the other hand, are not so 
encouraging: the sector is suffering badly from government investment expenditure cuts 
made in fiscal austerity packages earlier in the year. 
On the external side, the continued poor growth combined with the devaluation of the 
currency in May, resulted in a marked improvement in the evolution of the trade balance 
in the second half of the year. Despite the improvement of the trade balance and the 
current account, the currency remained unsteady. The main source of continuing 
currency turbulence has been the political instability, which culminated with the 
resignation of the Czech government at the end of November. The political uncertainty 
is due to continue until the country has fresh elections which are likely to be in mid-
1998 at the earliest. 
In December 1997, the Czech Republic repaid some ECU 127 million to the 
Community, out of the ECU 250 million granted by the Community in the context of its 
macro-financial assistance to this country. 
ESTONIA 
Despite recent financial turbulence, Estonia's risk assessment continues to be among the 
best in the region. The economy is expanding very rapidly (real GDP growth reached 
11.7% on a year-on-year basis in the first half of 1997), exports are growing strongly 
(during the first ten months of 1997, they were 38% higher, in dollar terms, than in the 
corresponding period of 1996) and the country recorded a budget surplus in 1997. 
19 
Foreign debt remains small as a proportion of GDP. In September, the country's good 
economic performance was acknowledged by two favourable sovereign risk ratings. 
Moody's gave Estonia a Baal, investment grade, long-term foreign currency rating, and 
ICBA gave a BBB, investment grade, long-term foreign currency rating. Moody's rating 
is the highest rating given to a country of the former Soviet Union and the same as that 
of the Czech Republic. 
The multiplication of overheating signs, in particular the growth of the current account 
deficit and the very fast pace of expansion of bank lending, led the authorities to take a 
number of restrictive measures in the last quarter of 1997. Fiscal policy was tightened, 
notably by depositing abroad a large share of extra fiscal revenues (500 million kroons 
in 1997) and by increasing the planned surplus for 1998. Also, the capital adequacy 
ratio was raised from 8% to 10% on 1 October and reserve requirements for banks were 
tightened. While these measures will slow down growth in 1998, they will address some 
of Estonia's macroeconomic imbalances. 
As a result of the difficult situation on the international financial markets and the 
authorities' measures to cool down the economy, Estonia experienced serious liquidity 
difficulties in the last quarter of 1997. This led to a significant increase in interbank 
interest rates and to massive selling on the stock market, which fell by more than 50% 
between end-August and end-November. These financial difficulties have dented banks' 
profit outlook, but have not prevented Estonian banks from continuing to tap the 
international financial markets. In November 1997, the authorities agreed with the IMF 
a new memorandum of economic policy but announced that they did not intend to make 
any purchase under the stand-by arrangement backing the memorandum. 
FYROM 
Since its independence in 1991, the former Yugoslav Republic of Macedonia has made 
substantial progress in economic stabilisation and liberalisation and has undertaken a 
number of structural measures to reform its economy. These efforts have reduced 
inflation to low single-digit rates, stabilised the exchange rate (except for a devaluation 
in July 1997), halted the output decline, and earned the former Yugoslav Republic of 
Macedonia a reputation for stability and willingness to reform. However, despite a 
resumption of GDP growth in 1996 of some 1 % and an increase of about 2 % in 1997, 
the output level is only 60 % of that prevailing in 1991, unemployment is very high, and 
the FYROM remains one of the poorest countries in Europe. 
In 1997, the country continued its transition to a market economy in the framework of 
an IMF ESAF arrangement approved in April 1997. Following a programme adjustment 
in July (accompanying the 14% devaluation), the programme was implemented 
satisfactorily and is now on track. One important element of the programme has been 
the clearance of the country's arrears vis-à-vis the Community and the EIB, which took 
place on 10 September. In support of the IMF programme, the Council decided on a 
Community loan of up to 40 MECU, of which the first tranche (25 MECU) was 
disbursed on 30 September. The release of the second tranche is expected for early 
1998. 
20 
The good track record of economic stabilisation and reform and the clearance of the last 
outstanding external arrears certainly are positive factors in the risk evaluation of the 
former Yugoslav Republic of Macedonia. In 1995 and 1996, the FYROM reached 
rescheduling agreements with the Paris and London Clubs respectively, and the last 
bilateral Paris Club agreements are being finalised. The country's debt increased to 38% 
of GDP in 1997, while the debt service fell to 8.7% of exports of goods and services, 
which is not overly high. However, the FYROM continues to have a relatively high risk. 
This is particularly due to the unstable political situation in the region, as well as to 
internal political difficulties related to the minority issue. Moreover, important progress 
in restructuring enterprises and strengthening the banking sector remains to be made. 
LATVIA 
The economic situation in Latvia remains favourable. In 1997, growth accelerated, 
reaching 4.6% in the first six months of the year. Moreover, inflation continued to fall, 
interest rates fell substantially throughout the year, and the fiscal position continued to 
improve - the budget outturn for 1997 showed a surplus. The imbalances on the external 
side continue to grow, but for the moment there is little threat to the stability of the 
currency. 
LITHUANIA 
During 1997, the Lithuanian economy continued to perform positively. GDP grew by 
2.5%o during the first half, driven by investment and consumption. Unemployment and 
inflation have stopped falling but remain relatively low, respectively at 5.9% and 9% 
year-on-year in October. Fiscal revenues have been higher than projected, and the 
budget deficit remained within the targeted 1.9% of GDP. 
The trade balance has been deteriorating significantly as buoyant domestic demand has 
caused imports to grow faster than exports. As a result, the trade deficit for the first nine 
months of 1997 nearly equalled the deficit for the whole of 1996. Nevertheless, this 
increasing external imbalance was easily financed. Borrowing rates on the international 
capital market have continued to improve, and portfolio and foreign direct investment 
flows have been rising strongly. Official reserves increased during the first half of the 
year and provide more than two months of import coverage. The foreign debt grew 
rapidly in the first nine months of the year but remains low as a percentage of GDP. 
New regulations on external borrowing introduced a ceiling of 20% of GDP on total 
foreign debt. 
The banking sector continues its recovery from the 1995 crisis. The authorities have 
strengthened regulation and taken a tougher stance against the weakest banks. This 
caused the bankruptcy of one of the banks to which the proceeds of Community macro-
financial assistance were on-lent by the Lithuanian authorities at their own risk. In order 
to further the restructuring of the financial sector, the government is finalising plans for 
the privatisation of two of the three state-owned banks. 
21-
ROMANIA 
Romania's country risk, while still one of Eastern Europe's highest, continued to 
improve during the second half of 1997. A year after the Romanian authorities launched 
their radical and ambitious economic programme, much progress has been achieved in 
transforming the economy and accelerating the transition towards a functioning market 
economy. The implementation of the authorities' programme has continued to affect 
negatively the level of economic activity. GDP fell by about 6% in 1997. The 
macroeconomic framework continues to be fragile. After a period, during the summer, 
when inflation and interest rates fell to their lowest levels since the beginning of the 
year, inflation jumped in October to 6.5% on a monthly basis. Also, there have been 
delays in restructuring the large public sector enterprises and uncertainty with regard to 
the legal framework for foreign investment and privatisation. 
However, there has been significant progress in key areas. Fiscal policy has been very 
tight, with the government strictly controlling expenditures. For example, by the end of 
November, the public sector work-force had shrunk by 10%. The external accounts 
clearly improved during 1997. Relatively high capital inflows more than offset the 
current account deficit, allowing the National Bank of Romania to build up its reserves, 
from $700 million in February to $2.6 billion in November, equivalent to more than 
three months' imports. The current account deficit for 1997 amounted to $2 billion, a 
fall of almost 25% over 1996. Foreign investment, and in particular foreign direct 
investment (FDI), increased sharply in 1997, reflecting growing investor confidence. 
According to the Romanian Development Agency, FDI in the first nine months of 1997 
totalled $1.3 billion, which is about two thirds of the cumulative amount received 
between 1989 and 1996. 
Romania has passed successfully the first IMF review under the SBA. Already, three 
tranches of the SBA have been disbursed. Romania is also on track with the World 
Bank on the various loans approved in June. The EC also disbursed in the second half of 
1997 the remaining ECU 70 million, out of the ECU 125 million macro-financial 
assistance decided by the Council in 1994. Finally, the government reshuffle announced 
at the beginning of December 1997, and the nomination of reform-minded independent 
personalities at key economic ministries, is a positive sign of the authorities' strong 
determination to continue and accelerate economic restructuring. 
SLOVAKIA 
Slovakia's country risk remains moderate, but external balances are.still registering big 
deficits and foreign debt is increasing rapidly. Following the sharp deterioration of the 
current account in 1996, the external situation stabilised somewhat in 1997, but deficits 
remained high. After eight months, the current account deficit was reduced to about 
814%) of GDP, compared to 10% in 1996. Nevertheless, external debt continued to rise 
rapidly to finance the external deficit. 
The fast economic growth registered in 1995 and 1996 barely slowed down in the first 
half of 1997, which led to an overheating of the economy. Preliminary figures for the 
first two quarters of 1997 now show that economic activity was expanding by 6%, 
22 
compared to slightly below 7% in 1995 and 1996. Inflation has started to edge up after 
three years of uninterrupted decline. 
Because fiscal policy became more expansionary, monetary policy had to be tightened 
gradually to preserve the attained level of macroeconomic stability. Especially after the 
attack on the currency in May and June 1997, monetary policy became very restrictive, 
with high interest rates and very limited liquidity. Without a significant reduction of the 
government budget deficit, no significant improvement of the current account balance 
can be expected, while pressures to depreciate the currency might intensify. 
In December 1997, Slovakia repaid some ECU 63 million to the Community, out of the 
ECU 125 million granted by the Community in the context of its macro-financial 
assistance to this country. 
III. NEWLY INDEPENDENT STATES 
ARMENIA 
The Armenian economy continued to recover for a fourth consecutive year in 1997, but, 
it seems, at a slower pace than expected (3 % rise in GDP instead of the 6 % initially 
targeted). Although the average inflation rate fell further in 1997 to about 14 %, this is 
significantly above the Government's target of 9.5%. Moreover, partly because of the 
blockade imposed on the country, the current account deficit (excluding official 
transfers) widened in 1997 (to around US$ 450 million or about 28 % of GDP), while 
the foreign debt increased to around 50 % of GDP at year-end. The level of foreign 
direct investment is still very low (around US$ 25 million for 1997). 
Important progress has been made in price and trade liberalisation and with 
privatisation. However, much remains to be done in large enterprise restructuring, and 
in the banking sector, which is still fragile (high levels of non-performing loans and 
inadequate capitalisation). In June, the IMF approved the second annual credit (US$ 47 
million) of an ES AF arrangement. In the political sphere, the recent resignation of the 
Armenian President has cast doubts on the prospects for a peaceful settlement of the 
Nagorno-Karabakh conflict. Moreover, the expected settlement of Armenia's 
outstanding debt arrears towards the Community has not yet taken place. For all these 
reasons, Armenia remains in the category of high-risk debtors. 
BELARUS 
The assessment of the economy of Belarus has not changed significantly since the last 
report. Current economic and political developments are a matter of grave concern. The 
lack of elementary political and economic freedom represents a major constraint on the 
development of a market economy. 
Censorship and data manipulation prevent a proper evaluation of the real state of the 
economy. Real GDP is reported to have increased by 2.6% in 1996, and by more than 
10%) in the first half of 1997. Officially recorded growth of industrial production is 
particularly buoyant: above 18% in the first half of 1997 with respect to the 
23 
corresponding period of the previous year. However, this rise in output is unsustainable. 
It has been based exclusively on a policy of credit expansion and repayment of gas 
arrears to Gazprom through barter trade. Macroeconomic stability is in jeopardy. 
Monetary expansion has had an impact on inflation, which despite far-reaching price 
controls, was reported at 75% in October 1997 (year-on-year basis). 
Implementation of structural reforms has been very slow. Very little has been done to 
liberalise domestic prices and trade, promote competition through the entry of foreign 
companies, improve corporate governance, accelerate the privatisation of state 
enterprises and housing, and begin the privatisation of land. Belarus remains highly 
dependent on imported energy. Its export structure has remained almost unaltered since 
the Soviet times. The official external debt, however, remains low, at US$900 million or 
6.9 per cent of GDP. 
The overall risk remains high. Its reduction would require a major effort to tackle the 
fundamental disequilibria on the basis of a comprehensive blueprint encompassing 
macroeconomic, microeconomic, structural and institutional reforms. 
GEORGIA 
The growth of around 12 % achieved in 1997 continued the positive evolution registered 
in the Georgian economy since 1995. The tight monetary and credit policies resulted in 
a reduction in the state budget deficit to around 3.5 % of GDP (on a commitment basis) 
and end-of-period annual inflation rate declined to 8 % in 1997. The low level of budget 
revenue is, however, unsatisfactory. The level of foreign direct investment is still low 
(US$ 70 million expected for 1997). 
The implementation of structural reforms in line with IMF and World Bank 
expectations is encouraging. Very positive developments have occurred in privatisation 
and in bank restructuring. The energy sector, however, despite improvements, in 
particular with regard to the adoption of a sound legal and regulatory framework, 
remains a source of concern because of insufficient collection rates. The government is 
proceeding with the adoption of a market-oriented legal framework, and is now giving 
priority to the development of the enforcement capacity of the legal system. In October 
1997, the IMF Board formally approved the completion of the second mid-term review 
under the ESAF. Georgia is expected to clear shortly all its outstanding debt arrears 
towards the Community. This would allow the normalisation of the country's financial 
cooperation with the EU. Political difficulties persist: the Abkhazian and South Ossetian 
problems are still unresolved. As a result, the country risk remains high. 
MOLDOVA 
Moldova has made considerable progress towards macroeconomic stabilisation, but 
achievements in carrying out robust and rigorous macroeconomic policy need to be 
consolidated. The sustainability of macroeconomic stabilisation cannot be taken for 
granted, as the financial situation remains fragile. Inflation has been substantially 
reduced, and trend inflation is now estimated at about 10%. The exchange rate of the leu 
has shown a remarkable stability since May 1995. However, a widening budget deficit 
-24-
has put pressure on monetary policy and on the current account; tax collection remains 
inefficient; and wage, and especially pension, arrears are very large. There is also a lack 
of substantial progress in the process of agricultural reform, privatisation and 
restructuring. All this in a context of continuous output decline. 
On the whole, data for the second half of 1997 confirm the previous assessment of a 
deterioration in the country's risk. In particular, increasing reliance on external 
financing has contributed to a steady increase of the external debt, now well above 50% 
of GDP. This level is not particularly high. However, the debt has been increasing at a 
very rapid pace, almost doubling every year since 1993, and about one third is short 
term. This component could prove highly sensitive to the conditions prevailing in the 
international financial markets for emerging economies. Minimising its potential 
volatility will require improvements in Moldova's fundamentals, especially in the fiscal 
stance and in the balance of payments. Equally important will be to make significant 
efforts to revive the agricultural sector through privatisation, farm restructuring and the 
creation of a land market. 
TAJIKISTAN 
Output expanded by 4 %> in 1997, after the sharp decline (20.1 %) registered in 1996. 
Annual average inflation, which, as a result of tight credit and monetary policies, fell 
dramatically to 40 % in 1996, increased substantially in 1997 (80 % for the first seven 
months), because of directed credits from the National Bank and a large budget deficit 
(13 % of GDP in the first half of the year). However, the authorities implemented tighter 
monetary and fiscal policies for the remainder of 1997. The current account deficit 
improved slightly to 5 % of GDP in 1997, while the foreign exchange reserves increased 
to two weeks' imports. The external debt of Tajikistan amounts to 100% of GDP, but 
major creditors have agreed to reschedule the debt falling due in 1996 and 1997. Despite 
some minimum servicing of outstanding debts toward the Community, the country 
maintains important arrears. 
The Government attempted to apply direct control on the foreign exchange and foreign 
trade markets, but, since July, foreign exchange auctions have been restarted and the 
exchange rate is once again largely market determined. Export taxes have been 
eliminated, while plans are being developed to adopt a low uniform import tariff and to 
unify excise taxes. Privatisation in the enterprise and agricultural sectors is proceeding 
well and reform of the banking system has begun. In December 1997, a post-conflict 
facility was approved by the IMF Board. Despite recent adverse security developments, 
the political situation continues to improve. The risk remains very high in absolute 
terms, but a positive trend has been recorded in recent months. 
UKRAINE 
Although the pace of economic decline is decelerating in Ukraine, with real GDP 
expected to fall by 3.4% in 1997 compared to a contraction of 10% in 1996, macro-
economic stabilisation has slowed down considerably in recent months, as the country is 
entering a long pre-electoral campaign. Parliamentary elections are scheduled for March 
1998 and presidential elections for mid-1999. Spending has rapidly increased, and the 
-25 
cumulative budget deficit rose to 7.3% of GDP in the first nine months of 1997 
compared to an overall 4.6%) in 1996. The increased outlays led to the overshooting of 
the budget deficit targets of the stand-by arrangement with the IMF, but after revision 
the programme was put back on track in late November. The EC disbursed in the second 
half of 1997 the remaining ECU 100 million, out of the ECU 200 million macro-
financial assistance decided by the Council in 1995. In November, the central bank was 
forced to raise key interest rates and to intervene heavily in both the foreign exchange 
and Treasury bill markets after the national currency, the hryvnia, repeatedly fell out of 
the announced exchange rate band vis-à-vis the dollar. The external balances are 
deteriorating: the merchandise trade and services deficit rose to US$ 1.23 billion in the 
first half of 1997 compared to US$ 1.1 billion for the whole of 1996. Structural 
adjustment, and in particular privatisation, has almost stagnated in recent months. The 
overall risk assessment is unfavourable. 
IV. MEDITERRANEAN COUNTRIES 
ALGERIA 
While macro-economic stabilisation continued to be strong in 1997, Algeria's country 
risk remains high owing to the escalation of political violence and the vulnerable 
medium-term economic prospects. A key prerequisite for a more favourable outlook is 
the early establishment of a lasting civil peace. Despite the legislative and local 
elections in June and October 1997, respectively, and the announcement by the 
outlawed Front Islamique du Salut (FIS) of an end to its armed opposition, the security 
situation has deteriorated further in recent months. 
Progress in implementing the stabilisation and structural reform programme supported 
by the IMF three-year arrangement continued during 1997. All IMF performance 
criteria for end-June and end-September were met. Owing to the impact of a severe 
drought on agricultural production, real GDP growth was revised downward to around 
2.3%) in 1997. While industrial production continued to decline in 1997, the 
hydrocarbon sector expanded by more than 8%. As a result of a tight monetary policy, 
the 12-month rate of increase in consumer prices fell from 15% in December 1996 to 
3% in October 1997. Inflation was around 6% for the year as a whole. In September 
1997, Algeria decided to establish the convertibility of the dinar for current account 
transactions and accepted the obligations of Article VIII of the IMF's Articles of 
Agreement. The external current account and fiscal balances registered large surpluses, 
equivalent to about 6.7% and 2.3% of GDP, respectively. Gross foreign exchange 
reserves, which already doubled to US$ 4.2 billion in 1996, increased further in 1997 to 
reach about US$ 7.5 billion at end-year, covering about 9 months' imports. Algeria's 
outstanding external debt declined from 73.2% of GDP in 1996 to below 70%) of GDP 
at end-1997 and Algeria repaid in December 1997 ECU 250 million out of the ECU 500 
million disbursed so far by the Community in the context of its macro-financial 
assistance to this country. 
However, despite continued structural reforms in external trade and the financial sector, 
restructuring of public enterprises, and privatisation, the economy remains poorly 
26 
diversified and particularly vulnerable to the vagaries of world energy prices and 
weather conditions. Although the Algerian authorities have announced that they will not 
seek a new IMF arrangement when the current programme expires in June 1998, 
Algeria's balance-of-payments viability will remain vulnerable in view of the lack of 
diversification of the export base, limited foreign direct investment, and absence of 
access to international capital markets. If the oil prices remain depressed at their present 
nominal level in the coming years, Algeria's external financial situation could 
deteriorate significantly. Algeria needs social cohesion and public support to embark on 
a new critical stage of its reform process aimed at developing a dynamic private 
economy. However, growing unemployment (estimated at 28.3 per cent in 1996) and 
mounting social difficulties, including a housing shortage, have somewhat slowed the 
reform momentum. 
27 
ANNEX 
ANNEX 
I. EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED BY THE 
COMMUNITY BUDGET 28 
LA TABLES 1 TO 3 28 
I.A.I Authorised ceiling (Table 1) 28 
I.A.2 Capital outstanding ( Table I) 28 
I.A.3 Annual risk (Tables 2 and 3) 29 
I.B LOAN OPERATIONS COVERED BY A BUDGET GUARANTEE 30 
I.C EXPECTED SIGNATURE AND DISBURSEMENT OF EIB LOANS 35 
I.D PAYMENT OF THE BUDGET GUARANTEE 35 
I.D.I Borrowing/lending operations 35 
I.D.2 Guarantees given to third parties 36 
H. METHODOLOGICAL NOTE ON THE ANALYSIS OF THE COMMUNITY'S ESTIMATED 
LENDING CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES OVER THE 
PERIOD 1997-99 UNDER THE GUARANTEE FUND MECHANISM (TABLE 4) 37 
II.A RESERVE FOR LOAN GUARANTEES TO NON-MEMBER COUNTRIES 37 
II.B BASES FOR THE CALCULATION OF THE PROVISIONING OF THE GUARANTEE FUND 37 
II.C BASIS FOR THE PROVISIONING OF THE FUND IN THE EVENT OF A PART GUARANTEE 38 
II.D PROVISIONING OF THE GUARANTEE FUND 38 
ILE MARGIN REMAINING IN THE GUARANTEE RESERVE 39 
II.F RESIDUAL LENDING CAPACITY 39 
m. TABLES: COUNTRY-RISK INDICATORS 40 
28 
I. EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED 
BY THE COMMUNITY BUDGET 
LA Tables 1 to 3 
The purpose of Tables 1 to 3 is to show the outstanding amount of guarantees and annual 
repayments of capital and interest in respect of borrowing and lending operations for 
which the risk is covered by the Community budget. The figures show the maximum 
possible risk for the Community in respect of these operations and must not be read as 
meaning that these amounts will actually be drawn from the budget. In the case of Table 3, 
in particular, it is not certain that all the operations described will actually be disbursed. 
I.A.I Authorised ceiling (Table 1) 
This is the aggregate of the maximum amounts of capital authorised (ceilings) for each 
operation decided by the Council. 
In order to relate it to the risk which the budget might have to cover, account should be 
taken of the following factors which could affect it: 
Factor increasing the risk: the interest on the loans must be added to the authorised ceiling 
Factors reducing the risk: At> 
• limitation of the guarantee given to the ELB to 75% of the loans signed in the 
Mediterranean countries; 
• limitation of the guarantee given to the ELB to 70% of the loans signed as part of 
lending operations with certain non-member countries authorised by the Council 
Decision of 14 April 1997 and a sharing of risk between the Community and the EIB 
as the budget guarantee covers only political risks in some cases; 
• operations already repaid, since the amounts concerned, except in the case of balance 
of payments support (Member States), are the maximum amount of loans granted and 
not outstanding amounts authorised; 
• the amounts authorised are not necessarily taken up in full. 
I.A.2 Capital outstanding ( Table 1) 
This is the amount of capital still to be repaid on a given date in respect of operations 
disbursed. 
Compared with the previous aggregate, the amount outstanding does not include loans 
which have not yet been disbursed nor the proportion of disbursed loans which have 
already been repaid. It may be described as the amount of loans which exist on a given 
date. 
-29-
I.A. 3 Annual risk (Tables 2 and 3) 
Estimated amount of principal and interest due each financial year. 
This amount is calculated for: 
a) disbursements alone (Table 2), in which case the capital to be repaid corresponds to 
the amount outstanding; 
b) disbursements, decisions still awaiting disbursement and Commission proposals still 
awaiting decisions (Table 3), in which case the capital to be repaid corresponds to the 
ceiling on loans authorised plus, where applicable, the amounts in respect of 
operations proposed by the Commission and not yet decided. 
30 
LB Loan operations covered by a budget guarantee 
TABLE 5a 
Borrowing and lending operations: Member States 
Changes in amounts outstanding during six-month period 
ECU million 
COUNTRY 
GREECE 
ITALY 
EURATOM 
NCI 
TOTAL Decision 
91/136/EEC 
93/67/EEC 
77/270-271/Euratom 
80/29/Euratom 
82/170/Euratom 
85/537/Euratom 
90/212/Euratom 
78/870/EEC 
81/19/EEC(1) 
81/1013/EEC(2) 
82/169/EEC 
83/200/EEC 
87/182/EEC Date 
of decision 
04.03.91 
18.01.93 
29.03.77 
20.12.79 
15.03.82 
05.12.85 
23.04.90 
16.10.78 
20.01 81 
14.12.81 
15.03.82 
19.04.83 
09.03.87 Loan 
term 
(years) 
6 
-
6 
6 
(3) 
(3) Loan situation 
- closed (a) 
- partially disbursed (b) 
• disbursed in full (c) 
- not yet disbursed (d) 
(c) 
(d) 
(d) 
(c) 
(c) 
(d) 
(d) 
(c) 
(c) 
(c) 
(b)(4) 
(d)(4) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) Amount 
decided 
2 200,00 
1 000,00 
600,00 
600,00 
8 000,00 
2 000.00 
2 000,00 
2 000,00 
2 000,00 
4 000.00 
500,00 
500,00 
1 000,00 
1 000,00 
1 000,00 
6 830,00 
1 000,00 
1 000,00 
B0,00 
1 000,00 
3 000,00 
750,00 
21 030,00 Amount 
outstanding 
at 1.7.97 
500,00 
3 454,50 
119,60 
327,30 
4 401,40 Operations in six-month 
period 
Amounts 
disbursed 
0,00 Amounts 
repaid 
1.30 
110.70 
112,00 Amount 
outstanding at 
31.12.97 
500.00 
3 447,80 
118.40 
218,60 
4 284,80 I 
(5) 
(1 ) Exceptional aid for the reconstruction of areas hit by the earthquake in Italy in 1980. 
(2) Exceptional aid for the reconstruction of areas hit by the earthquake in Greece in 1981. 
(3) Long-term loans for which the schedule of repayments depend on the dates of disbursement. 
(4) By Decision 94/179/Euratom of 21 March 1994 the Council decided to extend Euratom loans to the financing of projects in certain non-member countries. 
At 31 December 1996 no loans had yet been granted in non-member countries. 
(5) Discrepancy caused by change in the rates of the other currencies against the ecu. 
TABLE 5b (1) 
Financial assistance to non-member countries 
Changes in amounts outstanding during six-month period, broken down by countries and tranche 
ECU million 
COUNTRY 
HUNGARY 
1st tranche 
2nd tranche 
CZECH REPUBLIC 
1st tranche 
2nd tranche 
SLOVAKIA 
1st tranche 
2nd tranche 
BULGARIA I 
1st tranche 
2nd tranche 
BULGARIA II 
1st tranche 
2nd tranche 
ROMANIA I 
1st tranche 
2nd tranche 
ROMANIA II 
ROMANIA III 
1st tranche 
2nd tranche 
BALTIC STATES 
ESTONIA 
1st tranche 
2nd tranche 
LATVIA 
1st tranche 
2nd tranche Decision 
91/310/EEC 
91/106/EEC 
91/106/EEC 
91/311/EEC 
92/511/EEC 
91/384/EEC 
92/551/EEC 
94/369/EC 
92/542/EEC Date of 
decision 
24.06.91 
25.02.91 
25.02.91 
24.06.91 
19.10.92 
22.07.91 
27.11.92 
20.06.94 
23.11.92 Loan 
term 
(years) 
7 
5 
7 
5 
7 
5 
7 
5 
7 
7 
7 
6 
7 
7 
-
7 
-
7 
-Expiry date 
18.03.98 
15.12.97 
18.03.98 
15.12.97 
18.03.98 
15.12.97 
18.03.98 
15.12.97 
07.12.2001 
29.08.2003 
01.02.99 
18.03.98 
26.02.2000 
20.11.2002 
-
31.03.2000 
-
31.03.2000 
-Loan situation 
- closed (a) 
- partly disbursed (b) 
- disbursed in full (c) 
- not yet disbursed (d) 
(c) 
(a) 
(c) 
(a) 
(c) 
(a) 
(c) 
(a) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) 
(d) 
(c) 
(d) Amount 
decided 
180,00 
100,00 
80,00 
250,00 
723,30 
126.70 
125,00 
61.70 
63.30 
290,00 
150,00 
140.00 
110,00 
70,00 
40,00 
375,00 
190,00 
185.00 
80,00 
125,00 
55,00 
70.00 
220,00 
40,00 
20,00 
20,00 
80,00 
40.00 
40,00 Amount 
outstanding at 
1.07.97 
100.00 
80,00 
123.30 
126,70 
61,70 
63,30 
150,00 
140.00 
70,00 
40,00 
190,00 
185,00 
80,00 
55,00 
0.00 
20,00 
0.00 
40,00 
0,00 Operations in six-month period 
Amounts 
disbursed 
70,00 Amounts 
reapid 
80,00 
126,70 
63,30 
140,00 
5,00 Amount 
outstanding at 
31.12.97 
100,00 
0,00 
123,30 
0.00 
61,70 
0.00 
150.00 
0.00 
70,00 
40,00 
190.00 
185,00 
80,00 
55.00 
70,00 
15.00 
0.00 
40.00 
0.00 0J 
TARI F fin f?) 
Financial assistance to non-member countries 
Changes in amounts outstanding during six-month period, broken down by countries and tranche 
ECU million 
COUNTRY 
LITHUANIA 
1st tranche 
2nd tranche 
MOLDOVA I 
1st tranche 
2nd tranEC 
MOLDOVA II 
UKRAINE I 
UKRAINE II 
1/2 tranche 
1/2 tranche 
2nd tranche 
BELARUS 
1st tranche 
2nd tranche 
FYROM 
1st tranche 
2nd tranche 
ALGERIA I 
1st tranche 
2nd tranche 
ALGERIA II 
1st tranche 
2nd tranche 
ISRAEL 
REPS.OF FORMER USSR(') 
TOTAL Decision 
94/346/EC 
96/242/EC 
94/940/EC 
95/442/EC 
95/132/EC 
97/471/EC 
91/510/EEC 
94/938/EC 
91/408/EEC 
91/658/EEC Date of 
decision 
13.06.94 
25.03.96 
22.12.94 
23.10.95 
10.04.95 
22.07.97 
23.09.91 
22.12.94 
22.07.91 
16.12.91 Loan 
term 
(years) 
7 
7 
10 
10 
10 
10 
10 
10 
10 
-
15 
-
5 
7 
7 
-
5 
3 Expiry date 
27.07.2000 
16.08.2002 
07.12.2004 
08.08.2005 
30.10.2006 
28.12.2005 
29.08.2006 
30.10.2006 
28.12.2005 
-
27.09.2012 
-
15.12.97 
17.08.2001 
27.11.202 
-
15.12.97 
28.09.97 Loan situation 
• closed (a) 
- partly disbursed (b) 
- disbursed in full (c) 
- not yet disbursed (d) 
(c) 
(b) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) 
(c) 
(d) 
(c) 
(d) 
(a) 
(c) 
(c) 
(d) 
(a) Amount 
decided 
100,00 
50,00 
50,00 
45,00 
25,00 
20,00 
15,00 
85,00 
200,00 
55,00 
30,00 
25,00 
40,00 
25,00 
15,00 
400,00 
250,00 
150,00 
200,00 
100.00 
100,00 
160,00 
1 250,00 
4 205,00 Amount 
outstanding at 
1.07.97 
50,00 
25,00 
25,00 
20.00 
15.00 
85,00 
50,00 
50,00 
0,00 
30.00 
0.00 
0,00 
0,00 
250,00 
150,00 
100.00 
0.00 
160,00 
331,30 
2 866,30 Operations in six-month period 
Amounts 
disbursed 
100,00 
25,00 
195,00 Amounts 
repaid 
250,00 
160,00 
115.30 
940,30 Amount 
outstanding at 
31.12.97 
50,00 
25,00 
25,00 
20,00 
15,00 
85,00 
50,00 
50,00 
100,00 
30.00 
0,00 
25,00 
0,00 
0.00 
150.00 
100.00 
0.00 
0.00 
216.00 
2 121.00 f 
(*) The ECU 216 million outstanding corresponds to the principal due but not paid at 31.12.1997 
TABLE 6 
LOAN GUARANTEES TO EIB 
GEOGRAPHICAL AREA 
MED. financial protocols(l) 
MED. horizontal coop. 
TOTAL MED. 
C and E Europe 1 
C and E Europe II 
Asia, Latin America 1 
Asia, Latin America II 
Asia, Latin America II 
South Africa 
New mandates 
TOTAL Decision 
R/1762/92/CEE 
90/62/CEE(4) 
91/252/CEE(5) 
93/696/CE(6) 
93/115/CEE 
96/723/CE 
96/723/CE 
95/207/CE 
97/256/CE(7) Date of 
decision 
8.03.77 
29.06.92 
12.02.90 
14.05.91 
13.12.93 
15.02.93 
12.12.96 
12.12.96 
01.06.95 
14.04.97 Rate of 
guarantee 
75% (2) 
75% (2) 
100% 
100% 
100% 
100% 
100% 
70% 
100% 
70% Loan term 
(years) 
15 
15 
15 
15 
15 
15 
15 
15 
15 
15 Date of 
guarantee 
contract 
30.10.78/10.11.78 
09.11.92/18.11.92 
24.04.90/14.05.90 
19.01.93/04.02.93 
22.07.94/12.08.94 
04.11.93/17.11.93 
18.03.97/26.03.97 
21.10.97 
04.10.95/16.10.95 
25.07.97/29.07.97 Amount 
decided 
6062 
1800 
7862 
1000 
700 
3000 
750 
153 
122 
300 
7105 
20992 Loans signed 
at 1.07.97 
5385 
1800 
7185 
(3) 
928 
700 
3000 
647 
50 
0 
176 
75 
12761 during 
six-month 
period 
15 
0 
15 
(3) 
0 
-
-
10 
103 
52 
124 
2488 
2792 Amount outstanding 
at 1.07.97 
2321 
466 
2787 
664 
380 
486 
250 
51 
0 
56 
0 
4674 at 31.12.97 
2469 
779 
3248 
691 
437 
761 
307 
78 
0 
100 
144 
5765 
(1) Including ECU 1 500 million for Spain, Greece and Portugal. 
(2) General gurantee of 75% for all credits made available under lending operations under a guarantee contract signed between the Community and the EIB on 30.10.78 and 10.11.78. 
By way of exception, a 100% gurantee applies to the emergency aid granted to Portugal in accordance with the Council Decision of 7 October 1975. 
(3) The Community has guaranteed ECU 5 435.9 million, of which ECU 141.5 million is covered by a 100% guarantee for Portugal. 
(4) Non-member countries: Poland, Hungary. 
(5) Non-member countries: Czech Republic and Slovak Republic, Bulgaria, Romania. 
(6) Non-member countries: Poland, Hungary, Czech Republic and Slovak Republic, Bulgaria, Romania. Baltic States and Albania. 
(7) Non-member countries: Central and Eastern Europe, Mediterranean, Asia and Latin America, South Africa. I 
-35 
I.C Expected signature and disbursement of EIB loans 
The EEB has supplied the figures used for calculation of the assumptions made for drawing 
up Table 3 (EIB loans to non-member countries from its own resources). 
Expected signatures 
At 31 December 1997 a total of ECU 4 838 million was still to be signed: 
Mediterranean: former mandates ._«.. ooc .... . . . ... ~ . . ECU 225 million (protocols with Syria) 
Mediterranean countries: ECU 1 376 million 
Central and Eastern Europe: ECU 2 054 million 
Asia and Latin America: Decision of December 1996 ECU 70 million 
Asia and Latin America: ECU 738 million 
South Africa: ECU 375 million 
Disbursement forecasts 
As regards disbursement of the loans still awaiting signature, it is assumed that nothing 
will be paid in the year of signature, 10% in the second year, 25% a year between the third 
and fifth years and 15% in the sixth year. 
At 31 December 1997 ECU 7 417 million still had to be disbursed against loans signed at 
that date. The total breaks down as follows:5 
Mediterranean ECU 2513 million 
Central and Eastern Europe ECU 4 052 million 
Asia and Latin America ECU 653 million 
South Africa ECU 199 million 
I.D Payment of the budget guarantee 
I. D. 1 Borrowing/len ding operations 
In this type of operation, the Community borrows on the financial market and on-lends the 
proceeds (at the same rate and for the same term) to Member States (balance of payments), 
non-member countries (medium-term financial assistance) or firms (NCI, Euratom). 
5 Based on a working assumption that 25% of the loan will be disbursed every year for four years and that 
the average term will be fifteen years with a three-year period of grace. 
36 
The loan repayments are scheduled to match the repayments of the borrowings due from 
the Community. If the recipient of the loan is late in making a repayment, the Commission 
must draw on its resources to repay the borrowing on the due date. 
The funds needed to pay the budget guarantee in the event of late payment by the recipient 
of a loan granted by the Community are raised as follows: 
a) The amount required may be taken provisionally from cash resources in accordance 
with Article 12 of Council Regulation No 1552/89 of 29 May 1989 implementing 
Decision 88/376/EEC, Euratom on the system of the Communities' own resources. This 
method is used so that the Community can immediately repay the borrowing on the 
date scheduled in the event of late payment by the recipient of the loan. 
b) If the delay extends to three months after the due date, the Commission draws on the 
Guarantee Fund to cover the default. The funds obtained are used to replenish the 
Commission's cash resources. 
c) The transfer procedure can be used to provide the budget heading with the 
appropriations needed to cover the default; any margin available in the guarantee 
reserve is drawn on first. This method is used when there are insufficient appropriations 
in the Guarantee Fund and must be authorised in advance by the budgetary authority. 
d) The re-use of amounts repaid by debtors who have defaulted, leading to activation of 
the Community guarantee, allows payments to be made within a short period of time 
always providing, of course, that there are recovered funds available. 
I.D.2 Guarantees given to third parties 
The loan guarantee is in respect of loans granted by a financial institution such as the 
European Investment Bank (EEB). When the recipient of a guaranteed loan fails to make a 
payment on the due date, the EIB asks the Community to pay the amounts owed by the 
defaulter in accordance with the contract of guarantee. The guarantee must be paid within 
three months of receiving the EIB's request. The EEB administers the loan with all the care 
required by banking practice and is obliged to demand the payments due after the 
guarantee has been activated. 
Since the entry into force of the Regulation establishing a Guarantee Fund for external 
action, the provisions of the Agreement between the Community and the EIB on 
management of the Fund state that, after the EIB calls in the guarantee in the event of a 
default, the Commission must authorise the Bank to withdraw the corresponding amounts 
from the Guarantee Fund within three months. 
If there are insufficient resources in the Fund, the procedure used for activating the 
guarantee is the same as for borrowing/lending operations. 
37-
II. METHODOLOGICAL NOTE ON THE ANALYSIS OF THE 
COMMUNITY'S ESTIMATED LENDING CAPACITY IN RESPECT OF 
NON-MEMBER COUNTRIES OVER THE PERIOD 1997-99 UNDER THE 
GUARANTEE FUND MECHANISM (TABLE 4) 
II.A Reserve for loan guarantees to non-member countries 
As agreed at the Edinburgh European Council, the Interinstitutional Agreement of 
29 October 1993 on budgetary discipline and improvement of the budgetary procedure 
provided for the entry of a reserve for loan guarantees to non-member countries as a 
provision in the general budget of the European Communities. This reserve is intended to 
cover the requirements of the Guarantee Fund and, where necessary, activated guarantees 
exceeding the amount available in the Fund, so that these amounts may be charged to the 
budget. 
The amount of the guarantee reserve is the same as in the financial perspective, 
viz. ECU 300 million at 1992 prices. The amount in the reserve comes to 
ECU 338 million in 1998. 
The conditions for the entry, use and financing of the guarantee reserve are laid down in 
the following decisions: 
• Council Decision-94/729/EC of 31 October 1994 on budgetary discipline 
• Council Regulation (ECSC, EC, Euratom) No 2730/94 of 31 October 1994 amending 
the Financial Regulation of 21 December 1977 applicable to the general budget of 
the European Communities 
• Council Decision 94/728/EC of 31 October 1994 on the system of the Communities' 
own resources. 
II.B Bases for the calculation of the provisioning of the Guarantee Fund 
The bases for the provisioning of the Fund are calculated by applying the appropriate rate 
of guarantee (70%, 75% or 100%): 
- to the loan guarantees authorised by the Council and to the loan guarantees proposed 
or being prepared by the Commission on the basis of the estimates of loan signatures 
contained in the financial statements (EIB and Euratom loans); 
- to the loans (for financial assistance) authorised by the Council and to the loans 
proposed or being prepared by the Commission. 
The annex to Council Regulation (EC, Euratom) No 2728/94 of 31 October 1994 
establishing a Guarantee Fund for external actions, which relates to the arrangements for 
payments into the Guarantee Fund, states that, in the case of borrowing/lending operations 
or guarantees to financial bodies under a framework facility spread over a number of years 
and with a microeconomic and structural purpose, payments into the Fund will be made in 
annual tranches calculated on the basis of the annual amounts indicated in the financial 
38 
statement attached to the Commission proposal, adapted where appropriate in the light of 
the Council decision. 
For other Community borrowing/lending operations, such as loans for the balance of 
payments of third countries, whether made in one or more than one tranche, payments into 
the Fund are calculated on the basis of the total amount for the operation decided on by the 
Council. 
The annex to the Regulation establishing the Guarantee Fund states that, as from the 
second year (in the case of operations spread over a number of years), the amounts to be 
paid into the Fund will be corrected by the difference recorded on 31 December of the 
previous year between the estimates that were taken as a basis for the previous payment 
and the actual figure for the loans signed during that year. Any difference relating to the 
previous year will give rise to a payment in the following year. 
The annex states that, when it starts a payment procedure, the Commission will check the 
situation with regard to the performance of the operations which were the subject of 
previous payments and, where the commitment deadlines originally laid down have not 
been met, will propose that this will be taken into account in calculating the first payment 
to be made at the start of the following financial year for operations already under way. 
In the second half of 1997 the budgetary authority therefore adopted transfer 58/97 so that 
payments could be made into the Guarantee Fund in respect of loans to non-member 
countries (Bulgaria, the Former Yugoslav Republic of Macedonia, Georgia and Armenia). 
II.C Basis for the provisioning of the Fund in the event of a part guarantee 
For EIB loans covered by an aggregate 75% guarantee, the Fund is provisioned on the 
basis of 75%) of the total amount of operations authorised. 
The guarantee on the EIB loans authorised by the Council on 14 April 1997 is limited to 
70% of the total amount of credits opened. The basis for provisioning is 70% of the annual 
forecast of signatures. 
II.D Provisioning of the Guarantee Fund 
The amounts paid into the Fund are obtained by applying the rate of provisioning (14%) to 
the calculation base set out above. 
Pursuant to Articles 2 and 4 of the Regulation establishing the Guarantee Fund, the Fund 
is endowed by payments from the general budget equivalent to 14% of the capital value of 
the operations until it reaches the target amount. As the target amount was reached at 
31 December 1997, the Commission, in accordance with the Regulation, will submit 
proposals reviewing the rate of provisioning. These proposals will appear in the 
comprehensive report on the functioning of the Fund which the Commission has to draw 
up in accordance with Article 3 of the Regulation. 
-39 
ILE Margin remaining in the guarantee reserve 
The margin remaining in the guarantee reserve is equivalent to the difference between the 
reserve and the heading for the provisioning of the Guarantee Fund. 
II.F Residual lending capacity 
The residual lending capacity is the loan equivalent of the margin left in the reserve, 
allowing for the guarantee rates in force. 
40 
in. TABLES: COUNTRY-RISK INDICATORS 
-41 
Country-risk indicators 
Country: Bulgaria 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (Leva per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official reserves, including gold (end of period) 
bnUSD 
months' imports of goods and services 
External debt 
Convertible currency external debt 
(bn USD, end of period.) 
Convertible cuurency debt service (bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal.bn USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(2) 
(2) 
(3) 1995 
2,1 
8,6 
11,6 
32,8 
71 
-5,7 
7,0 
-0,5 
90 
1.5 
2,8 
10,2 
0,9 
0,3 
0,6 
79 
151 
14 
none 
none 
7,3 
5,7 
7,7 
-
none 
none 
03/95 09/95 
90 90 
(187) (181) 
03/95 09/95 
93 94 
(135) (135) 
21.9 22.2 1996 
-10,9 
-8,3 
12,5 
310,8 
487 
-11,0 
6,3 
0.9 
115 
0,8 
1.6 
9,6 
1,0 
0,4 
0,6 
99 
159 
17 
none 
none 
8,1 
6,5 
10,0 
SBA 
(7/96-2/98) 
no (4) 
none 
none 
03/96 09/96 
99 92 
(178) (178) 
03/96 09/96 
92 93 
(135) (135) 
23.1 23.5 1997 
-7,4 
-11,5 
13,7 
580 
1792 
-3,1 
3,0 
n.a. 
328 
2,3 
4,6 
9,7 
0,5 
0,3 
0,2 
n.a. 
n.a. 
n.a. 
none 
none 
5,7 
4,8 
15,5 
SBA 
(6/97-5/98) 
yes 
B3 
none 
03/97 09/97 
111 96 
(179) (180) 
03/97 09/97 
97 99 
(135) (135) 
22.5 22.2 (5) 
(6) 
(5) 
(01/97-06/97) 
(01/97-09/97) 
(06/97) 
(06/97) 
(06/97) 
(06/97) 
(01/97-06/97) 
(01/97-06/97) 
Footnotes 
(1)(2)(3) See explanatory notes. 
(4) SBA suspended in 09/96. 
(5) Preliminary 
(6) First nine months of 1997 compared to same period of 1996 
-42 
Country-risk indicators 
Country: Czech Republic 
Real GDP growth rate (%) 
Industrial production (% change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (CK's per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 
bnUSD 
months' imports of goods and services 
External debt 
Convertible currency external debt 
(bn USD, end of period.) 
Convertible currency debt service (bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(2) 
(2) 
(3) 1995 
4,8 
8,7 
2,9 
7,9 
26,6 
0,3 
28,2 
-2.9 
2526 
14,0 
5,6 
16,5 
2,6 
2,0 
0,6 
35,1 
58,6 
9,2 
none 
none 
5,8 
2,6 
2,5 
-
Baal (09/95) 
A 
03/95 09/95 
35 41 
(187) (181) 
03/95 09/95 
33 30 
(135) (135) 
55.8 58.4 1996 
4,4 
6,8 
3,5 
8,6 
27,1 
-0,4 
29,7 
-8,6 
1388 
12,4 
4,4 
20,4 
3,8 
3,0 
0.8 
39,2 
68,8 
12,8 
none 
none 
7.3 
2,8 
1,9 
-
Baal 
A 
03/96 09/96 
36 35 
(178) (178) 
03/96 09/96 
30 29 
(135) (135) 
60.1 62.0 1997 
1.1 (4) 
2,3 (5) 
5,2 
10,0 
34,4 
-1,7 (09/97) 
21,5 (01/97-09/97) 
-7,4 (01/97-06/97) 
845 (01/97-09/97) 
11,0 (10/97) 
4,6 (10/97) 
21.2 (06/97) 
n.a. 
n.a. 
n.a. 
41.3 (06/97) 
73,8 (06/97) 
n.a. 
none 
none 
5,9 
2.3 (06/97) 
2,2 (06/97) 
-
Baal 
A 
03/97 09/97 
37 37 
(179) (180) 
03/97 09/97 
28 28 
(135) (135) 
62.8 63.1 
Footnotes 
(1)(2)(3) See explanatory notes 
(4) First nine months of 1997 compared to same period of 1996. 
(5) First eleven months of 1997 compared to same period of 1996. 
-43 
Country-risk indicators 
Country: Estonia 
Real GDP growth rate (%) 
Industrial production (% change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (Kroons per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods (m USD) 
Current account balance (% of GDP), excl. official transfers 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 
mUSD 
months' imports of goods 
External debt 
Convertible currency external debt (incl. to IMF) 
(m USD, end of period) 
Convertible currency debt service (m USD) 
principal 
interest + charges to IMF 
External debt/GDP (%) 
External debt/exports of goods (%) 
Debt service/exports of goods (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) " 
Credit rating footnotes 
(4) 
(D 
(2) 
(2) 
(3) 1995 
4,3 
1,4 
4,1 
28,9 
11,5 
-1,2 
1838 
-7,4 
199 
583 
2,7 
268,6 
21,0 
6,0 
15,0 
7,5 
14,6 
1,1 
none 
none 
0,5 
16,5 
2,2 
SBA 
(4/95-6/96) 
yes 
none 
none 
03/95 09/95 
66 76 
(187) (181) 
03/95 09/95 
79 79 
(135) (135) 
25.4 26.3 1996 
4.0 
1,1 
4,3 
14,8 
12.0 
-1,5 
2074 
-11,7 
111 
640 
2,4 
295,2 
51,2 
27,5 
23,7 
6,8 
14,2 
2,5 
none 
none 
0,5 
13,8 
2,0 
SBA 
(7/96-8/97) 
yes 
none 
none 
03/96 09/96 
73 71 
(178) (178) 
03/96 09/96 
76 71 
(135) (135) 
28.9 31.1 1997 
11,7 
13,4 
3,6 
12,5 
13,9 
0,4 
2892 
-12,0 
152 
830 
1.8 
246,2 
51,7 
40,1 
11.6 
5,3 
8,3 
1,8 
none 
none 
0.6 
19,9 
1.7 
SBA 
(11/97-12/98) 
yes 
Baal 
BBB+ 
03/97 09/97 
69 63 
(179) (180) 
03/97 09/97 
65 63 
(135) (135) 
33.6 36.9 (5) 
est. 
(01/97-06/97) 
(01/97-09/97) 
(12/97) 
est. 
est. 
-
Footnotes 
(1 ) (2) (3) See explanatory notes 
(4) Kroon figures have been converted using the yearly average exchange rate of the dollar. 
In 1996 and 1997, Estonia repaid foreign loans in advance. 
(5) First half of 1997 compared to same period of 1996, on an annual basis. 
-44-
Country-risk indicators 
Country: FYROM 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (denar per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official reserves, including gold (end of period) 
mUSD 
months' imports of goods and services 
External debt 
Convertible currency external debt 
(bn USD, end of period.) 
Convertible currency debt service (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling (m USD) 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(4) 
(5) 
(6) 
(1) 
(2) 
(2) 
(3) 1995 
1,6 
10,0 
23,7 
8,6 
38,0 
-1,3 
1.2 
-6,2 
13 
270,0 
1,9 
1,1 
141,0 
84,0 
57,0 
28,5 
78,0 
10,4 
n.a. 
326,0 
SBA 
(05/95-04/96) 
yes 
none 
none 
03/95 09/95 
108 118 
(187) (181) 
none 
none 1996 
0,9 
3,0 
24,9 
0,7 
41,3 
-0,4 
1,1 
-7,4 
12 
267,0 
2,0 
1,1 
124,0 
70,0 
54,0 
30,8 
86,1 
9,5 
34,0 
37,0 
SBA 
(05/95-04/96) 
yes 
none 
none 
03/96 09/96 
85 59 
(178) (178) 
none 
none 1997 
(8) 
2,0 
2,7 
27,0 
5,0 
55,2 
-0,6 
1,2 
-8,4 
16 
279,0 
2,0 
1,2 
117,0 
47,0 
69,0 
38,2 
88,6 
8,7 
none 
87,0 
0,3 
2,4 
2,4 
ESAF 
(04/97) 
yes (7) 
none 
none 
03/97 09/97 
107 151 
(179) (180) 
none 
none 
Footnotes 
(1 ) (2) (3) See explanatory notes 
(4) Discontinuities in the trade series due to changes in the coverage of trade data, particularly in 1996. 
(5) The current account deficit may be overestimated due to unreported remittances. 
(6) Debt service excluding IMF; it includes an estimate of debt service due to commercial creditors. 
(7) Following a programme adjustment in July, the mid-term review was completed on 31 October 1997. 
(8) Projections. 
45-
Country-risk indicators 
Country: Hungary 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (forints per USD) (end of period) 
Consolidated state budget balance (as % of GDP) 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official reserves (end of period) 
bnUSD 
months' imports of goods 
External debt 
Convertible currency external debt 
(bn USD, end of period) 
Convertible currency debt service (bn USD) 
principal, including early repayments 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(4) 
(1) 
(2) 
(2) 
(3) 1995 
1,5 
4,6 
10,4 
28,5 
139,5 
-6,8 
12,8 
-5,8 
4453 
12.0 
9,5 
31,7 
7,7 
5.3 
2.4 
72,3 
185,9 
43,8 
none 
none 
13,0 
3,1 
6,6 
. 
Ba1 
BB+ 
03/95 09/95 
50 44 
(187) (181) 
03/95 09/95 
45 48 
(135) (135) 
46.4 45.0 1996 
1,3 
3,4 
10,5 
19,8 
164,0 
-3,3 
14,2 
-3,9 
1987 
9,7 
6,9 
27,6 
7,4 
5,1 
2,3 
63,6 
144,1 
44,7 
none 
none 
9,6 
2,7 
5,2 
SBA 
(3/96-2/98) 
yes 
Baa3 
BBB-
03/96 09/96 
44 44 
(178) (178) 
03/96 09/96 
50 50 
(135) (135) 
43.6 44.7 1997 
4,0 
11,2 
10,4 
18,4 
195,4 
-4,6 
22,2 
n.a. 
1835 
8,7 
5,0 
22,8 
n.a. 
n.a. 
n.a. 
n.a. 
n.a. 
n.a. 
none 
none 
8,6 
3,1 
3,2 
SBA 
(3/96-2/98) 
yes 
Baa3 
BBB-
03/97 09/97 
46 41 
(179) (180) 
03/97 09/97 
48 46 
(135) (135) 
47.6 49.7 (5) 
(5) 
(08/97) 
(5) 
(01/97-11/97) 
(01/97-11/97) 
(11/97) 
(11/97) 
(11/97) 
(11/97) 
(11/97) 
Eootnotes 
(1)(2)(3) See explanatory notes 
(4) For 1995 and 1996, goods only. 
(5) Preliminary 
46 
Country-risk indicators 
Country: Latvia 
Real GDP growth rate (%) 
Industrial production (% change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (Lats per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods & services (m USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 
mUSD 
months' imports of goods and non-factor services 
External debt 
Convertible currency external debt 
(m USD, end of period) 
Convertible currency debt service (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods & services 
Debt service/exports of goods & services 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The. Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
d) 
(2) 
(2) 
(3) 1995 
-0,8 
-6,3 
6,1 
23.1 
0,54 
-3,4 
2088 
-0,4 
180 
527 
2,9 
403 
39,0 
n.a. 
n.a. 
9,2 
19,3 
3,0 
none 
none 
0,7 
12.3 
4,0 
SBA 
(4/95-4/96) 
no 
none 
none 
03/95 09/95 
106 116 
(187) (181) 
03/95 09/95 
91 89 
(135) (135) 
22.6 23.4 1996 
2.8 
1.4 
7.2 
13,0 
0,56 
-1,9 
2628 
-8,3 
288 
652 
2,9 
409 
71,0 
n.a. 
n.a. 
8,2 
15,6 
4.9 
none 
none 
0,7 
12.4 
1.9 
SBA 
(5/96-8/97) 
yes 
none 
none 
03/96 09/96 
89 75 
(178) (178) 
03/96 09/96 
86 88 
(135) (135) 
24.7 25.7 1997 
5,6 
6.1 
6,7 
7,0 
0.59 (4) 
n.a. 
1304 
-8.0 
165 
n.a. 
n.a. 
394 
n.a. 
n.a 
n.a 
7.5 
15,1 
n.a. 
none 
none 
0.7 
14,8 
4,5 
SBA 
(9/97-2/99) 
yes 
none 
BBB 
03/97 09/97 
63 59 
(179) (180) 
03/97 09/97 
79 74 
(135) (135) 
29.1 32.6 (01/97-06/97) 
(01/97-06/97) 
(01/97-06/97) 
(10/97) 
(10/97) 
(10/97) 
(10/97) 
(06/97) 
Footnotes 
(1 ) (2) (3) See explanatory notes 
(4) First nine months of 1997 compared to same period of 1996. 
-47-
Country-risk indicators 
Country: Lithuania 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (Litas per USD) (end of period) 
General government balance (as % of GDP) 
Financial balance 
Fiscal balance 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (% of GDP), excl. official transfers 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period, gross foreign assets) 
mUSD 
months' imports of goods and services 
External debt 
Convertible currency external debt 
(m USD, end of period) 
Convertible currency debt service (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(4) 
(4) 
0) 
(2) 
(2) 
(3) 1995 
3,0 
5,3 
7,3 
35,7 
4,0 
-1.8 
-3,3 
3,2 
-3,2 
71 
819 
3,9 
757 
69 
n.a. 
n.a. 
13,9 
34,3 
3,1 
none 
none 
1.4 
13,9 
4,8 
EFF 
(10/94-10/97) 
yes 
none 
none 
03/95 09/95 
108 118 
(187) (181) 
03/95 09/95 
95 90 
(135) (135) 
21.7 22.9 1996 
4,2 
3,7 
6,2 
13,1 
4,0 
-1,9 
-3,6 
4,2 
-2,7 
153 
834 
2,4 
1076 
120 
n.a. 
n.a. 
15,3 
32,7 
3,6 
none 
none 
1,4 
10,2 
2,6 
EFF 
(10/94-10/97) 
yes 
Ba2 
none 
03/96 09/96 
85 59 
(178) (178) 
03/96 09/96 
89 90 
(135) (135) 
23.8 25.3 1997 
6,4 (5) 
0,7 
6,7 (11/97) 
8,6 
4,0 
n.a. 
n.a. 
3,7 (01/97-09/97) 
n.a. 
256 (01/97-09/97) 
1063 
2,1 
1407 
n.a. 
n.a. 
n.a. 
15,4 (6) 
n.a. 
n.a. 
none 
none 
1,6 
9,4 (10/97) 
3,6 (06/97) 
EFF 
(10/94-10/97) 
yes 
Ba1 
BBB-
03/97 09/97 
72 62 
(179) (180) 
03/97 09/97 
85 80 
(135) (135) 
27.4 31.1 
Footnotes 
(1)(2)(3) See explanatory notes 
(4) Financial balance does not take into account government net lending, whereas fiscal balance does. 
(5) First nine months of 1997 compared to same period of 1996. 
(6) Preliminary. 
48 
Country-risk indicators 
Country: Romania 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (lei per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 
mUSD 
months' imports of goods and services 
External debt 
Convertible currency external debt, incl. short-term debt 
(bn USD, end of period) 
Convertible currency debt service (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(2) 
(2) 
(3) 1995 
7,1 
9,4 
8,0 
27,8 
2760 
-2,6 
7,9 
-5,0 
417 
334 
0,4 
6,5 
1366 
1073 
293 
18,1 
68,7 
14,5 
none 
none 
10,2 
11,5 
10,1 
SBA 
(5/94-12/95) 
yes 
none 
none 
03/95 09/95 
68 64 
(187) (181) 
03/95 09/95 
73 71 
(135) (135) 
28.1 29.7 1996 
4,1 
9,9 
6,3 
56,9 
4035 
-3,9 
8,1 
-7,2 
263 
551 
0,6 
8,2 
2000 
1632 
368 
23,1 
85,1 
20,7 
none 
none 
10,2 
9,2 
12,5 
SBA 
(4) 
no (5) 
Ba3 
BB-
03/96 09/96 
67 61 
(178) (178) 
03/96 09/96 
68 72 
(135) (135) 
30.9 31.0 1997 
-6,5 (6) 
-8,2 (11/96-11/97) 
8,8 
151,4 
8023 
-4,5 est. 
7,1 (01/97-10/97) 
-5,4 est. 
806 m (01/97-09/97) 
2555 (12/97) 
2,8 (10/97) 
8,8 (08/97) 
2600 est. 
1900 est. 
700 est. 
27.2 est. 
89,0 est. 
23,8 est. 
none 
none 
11,0 
10,2 (08/97) 
12,6 (10/97) 
SBA 
(4/97-5/98) 
yes 
Ba3 
BB-
03/97 09/97 
75 75 
(179) (180) 
03/97 09/97 
64 67 
(135) (135) 
32.7 34.1 
Footnotes 
(1) (2) (3) See explanatory notes 
(4) The SBA approved in May 1994 was augmented and extended through 1997. 
(5) Suspended in March 1996. New SBA approved by IMF Board on 22 April 1997 
(6) First half of 1997 compared to same period of 1996. 
49-
Country-risk indicators 
Country: Slovak Republic 
Real GDP growth rate (%) 
Industrial production (% change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (SK's per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 
mUSD 
months' imports of goods and services 
External debt 
Convertible currency external debt 
(bn USD, end of period) 
Convertible currency debt service (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(D 
(2) 
(2) 
(3) 1995 
6,8 
8,3 
13,1 
7,2 
29,6 
0,1 
11,0 
2,3 
134 
3418 
4,1 
5,7 
1390 
1130 
260 
32,9 
52,0 
12,7 
none 
none 
4,1 
5,2 
2,8 
SBA 
(7/94-3/96) 
no (4) 
Baa3 
BB+ 
03/95 09/95 
53 51 
(187) (181) 
03/95 09/95 
61 59 
(135) (135) 
33.2 35.7 1996 
6,9 
2,5 
12.8 
5,4 
31,9 
-1,3 
10,9 
-10,1 
106 
3473 
3,4 
7,7 
1444 
1186 
258 
40,6 
70,6 
13,3 
none 
none 
4,5 
4,5 
3,2 
-
Baa3 
BBB-
03/96 09/96 
48 49 
(178) (178) 
03/96 09/96 
57 53 
(135) (135) 
38.6 41.2 1997 
6,0 (5) 
2,0 
12,5 
6,4 
34,8 
n.a. 
9,2 (01/97-10/97) 
8,4 (01/97-10/97) 
61 (01/97-10/97) 
3299 
3,2 
9,6 (01/97-09/97) 
n.a. 
n.a. 
n.a. 
50,6 (01/97-09/97) 
87,4 (01/97-09/97) 
n.a. 
none 
none 
4,3 
3,6 (09/97) 
3,8 (09/97) 
-
Baa3 
BBB-
03/97 09/97 
53 54 
(179) (180) 
03/97 09/97 
52 52 
(135) (135) 
43.9 44.8 
Footnotes 
(1 ) (2) (3) See explanatory notes 
(4) The mid-term review of the programme, which had been scheduled for February 1995, was not completed. 
(5) First nine months of 1997 compared to same period of 1996. 
50-
Country-risk indicators 
Country: Moldova 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (yearly average) 
Exchange rate (leu per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods (m USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 
mUSD 
months' imports of goods 
External debt 
Convertible currency external debt 
(m USD, end of period) 
Convertible currency debt service (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods (%) 
Debt service/exports of goods (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods(%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(2) 1995 
-1,9 
-6,0 
1,4 
24 
4,50 
-5,9 
739 
-8,1 
63,7 
257 
3,2 
696,3 
91,0 
n.a. 
n.a. 
38,0 
91,1 
11,0 
none 
none 
0,8 
8,7 
7,9 
SBA 
(3/95-3/96) 
yes 
none 
none 
03/95 09/95 
157 141 
(187) (181) 
none 
none 1996 
-8,0 
-5,1 
1,8 
15 
4,59 
-10,0 
801 
-18,8 
40,0 
315 
4,1 
818,2 
n.a. 
n.a. 
n.a. 
57,6 
102,1 
n.a. 
none 
none 
1,0 
9,3 
9,5 
EFF 
(5/96-5/99) 
yes 
none 
none 
03/96 09/96 
134 125 
(178) (178) 
none 
none 1997 
(3) 
-0,5 
n.a. 
1,6 
11 
4,68 
-4,5 est. 
573,2 (01/97-09/97) 
n.a. 
15,7 (01/97-06/97) 
358 
n.a. 
935,0 
n.a. 
n.a. 
n.a. 
n.a. 
n.a. 
n.a. 
none 
none 
0,8 
n.a. 
n.a. 
EFF 
(5/96-5/99) 
no 
Ba2 
none 
03/97 09/97 
113 104 
(179) (180) 
none 
none 
Footnotes 
(1 ) (2) See explanatory notes 
(3) Preliminary, unless otherwise indicated. 
51 
Country-risk indicators 
Country: Belarus 
Real GDP growth rate (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (yearly average) 
Exchange rate ( Rbs per USD) (average) 
General government balance (as % of GDP) 
Balance of payments. 
Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 
mUSD 
months' imports of goods and services 
External debt 
Convertible currency external debt 
(bn USD, end of period) 
Convertible currency debt service (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt rescheduling agreement 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(D 
(2) 
(2) 
(3) 1995 
-10,4 
-11,5 
2,7 
244 
11500 
-2,3 
4,7 
-4.7 
7 
377,0 
0,7 
1,5 
178,0 
n.a. 
n.a. 
14,7 
32.7 
3,4 
460 
none 
0,5 
2,6 
0,8 
SBA 
(12/95-11/96) 
no (4) 
none 
none 
03/95 09/95 
135 134 
(187) (181) 
03/95 09/95 
112 112 
(135) (135) 
15.2 15.5 1996 
2,6 
3,3 
3,9 
39,3 
15500 
-1,8 
5,4 
-9.1 
6 
10,0 
0.0 
1,0 
163,2 
n.a. 
n.a. 
8.1 
17,6 
3,0 
n.a. 
none 
0,5 
4,0 
0,7 
SBA 
(12/95-11/96) 
no (4) 
none 
none 
03/96 09/96 
128 142. 
(178)(178) 
03/96 09/96 
116 118 
(135) (135) 
14.5 14.6 1997 
9,8 
17.6 
2,3 
63,8 
31000 
-2,0 
6,4 
n.a. 
n.a. 
n.a. 
n.a. 
0,9 
170,4 
n.a. 
n.a. 
7,9 
n.a 
n.a 
n.a 
none 
0,4 
3,8 
n.a. 
. 
none 
none 
03/97 09/97 
154 131 
(179) (180) 
03/97 09/97 
118 121 
(135) (135) 
14.5 14.2 est. 
(01/97-11/97) 
Footnotes 
(1)(2)(3) See explanatory notes 
(4) The first quarterly review of the programme, initially scheduled for December 1995, has never been completed. 
-52 
Country-risk indicators 
Country: Ukraine 
Real GDP growth (%) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (Krb per USD) (Hrv per USD for 1996) 
- auction / interbank (end of period) 
- cash (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (excl. transfers) (% of GDP) 
Net inflow of foreign direct investment (bn USD) 
Gross official foreign exchange reserves 
mUSD 
weeks' imports of goods and services 
External debt 
Convertible currency external debt 
(bn USD, end of period) 
Convertible currency debt service (m USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
' (1) 
(2) 
(2) 
(3) 1995 
-11,8 
-11,7 
0,6 
182,0 
179400 
186000 
-5,0 
16,4 
-5,0 
0,27 
1134 
3,7 
8,1 
1531 
986 
545 
23,3 
53.6 
9,3 
236 
(4) 
1,5 
1,4 
0,7 
SBA 
(04/95-04/96) 
no (5) 
none 
none 
03/95 09/95 
145 138 
(187) (181) 
03/95 09/95 
109 111 
(135) (135) 
15.5 15.7 1996 
-10,0 
-5,1 
1,3 
39,7 
1,9 
1,9 
-3,2 
20,3 
-3,9 
0,52 
1994 
5,3 
9,2 
1221 
716 
505 
21,2 
45,3 
6,0 
n.a. 
(4) 
3,0 
2.6 
1,2 
SBA 
(05/96-02/97) 
yes 
none 
none 
03/96 09/96 
136 135 
(178) (178) 
03/96 09/96 
107 111 
(135) (135) 
16.7 16.6 1997 
(6) 
-3,0 
-1,9 (7) 
2.6 (08/97) 
15,0 
1,7-1.9 
1.7-1,9 
-4.6 
20.9 
-3.6 
0.41 
2406 
6,0 
10,3 
1500 
944 
556 
19,4 
49,2 
7,1 
n.a 
(4) 
4,0 
3,1 
#VALUE! 
SBA 
(07/97-06/98) 
yes 
none 
none 
03/97 09/97 
136 129 
(179) (180) 
03/97 09/97 
109 105 
(135) (135) 
17.6 19.8 
Footnotes 
(1)(2)(3) See explanatory notes 
(4) Rescheduling of debt owed to Russia and Turkmenistan. 
(5) Suspended in November 1995. 
(6) IMF projections, unless otherwise indicated. 
(7) Second quarter of 1997 compared to same period of 1996. 
53-
Country-risk indicators 
Country: Algeria 
Real GDP growth rate (%) 
Hydrocarbon production ( % change) 
Inflation rate (Dec/Dec) 
Exchange rate (dinars per USD) (end of period) 
General government balance (as % of GDP) 
Balance of payments 
Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves 
bnUSD 
months' imports of goods and services 
External debt 
Convertible currency external debt 
(bn USD, end of period) 
Convertible currency debt service (bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling (bn US$) 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods and services (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of per.) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(D 
(2) 
(2) 
(3) 1995 
3,9 
4.4 
21,9 
52.2 
-1,4 
10,3 
-5,4 
0,0 
2,1 
2,1 
32,5 
9,4 
7,1 
2.3 
78,6 
297,1 
42,5 
none 
4,9 
12,2 
2,8 
8,9 
SBA/EFF 
(5/94 - 5/95) 
yes 
none 
none 
03/95 09/95 
102 107 
(187) (181) 
03/95 09/95 
89 91 
(135) (135) 
23.5 22.8 1996 
3,8 
6.3 
15,1 
56,2 
3,0 
13,2 
2,7 
0,3 
4,2 
4,5 
33,5 
7,4 
5,2 
2.2 
73,2 
240,1 
29,2 
none 
3,5 
11,6 
2,7 
6,8 
EFF/CCFF 
(5/95 - 5/98) 
yes 
none 
none 
03/96 09/96 
109 97 
(178) (178) 
03/96 09/96 
95 95 
(135) (135) 
21.5 22.8 1997 
(4) 
2,3 
8,3 
6,1 
58,0 
2,3 
13,9 
6,7 
0,4 
7,6 
9,0 
32,6 
6,4 
4,2 
2,2 
69,5 
238,0 
33,1 
none 
2,2 
7,7 
1,9 
4,5 
EFF 
(5/95-5/98) 
yes 
none 
none 
03/97 09/97 
102 97 
(179) (180) 
03/97 09/97 
96 96 
(135) (135) 
23.2 24.5 
Footnotes 
(1) (2) (3) See explanatory notes 
(4) Projections. 
54 
Country-risk indicators 
Country: Israel 
Real GDP growth rate (%) 
Industrial production (% change) 
Unemployment (yearly average) 
Consumer Price Index (yearly average) 
Exchange rate (shekel per USD) (end of period) 
Central government overall deficit (as % of GDP) 
Balance of payments 
Exports of goods (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (bn USD) 
Gross official foreign exchange reserves 
bnUS$ 
months' imports of goods 
External debt 
Convertible currency external debt 
(bn USD, end of period) 
Convertible currency debt service (bn USD) 
principal 
interest (gross) 
External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 
Indicators of EU exposure 
EU exposure/total EU exposure (%) 
EU exposure/external debt (%) 
EU exposure/exports of goods (%) 
IMF arrangements 
Type 
(Date) 
On track 
Indicators of market's perception of creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating footnotes 
(1) 
(2) 
(2) 
(3) 1995 
7.1 
8.4 
6,9 
8,1 
3,12 
-3,1 
29,2 
-4.4 
1,2 
8.7 
2,6 
45,2 
5.6 
2,5 
3.1 
51.2 
155.9 
19,2 
none 
none 
4,4 
0,7 
1,7 
-
A3 
A-
03/95 09/95 
31 31 
(187) (181) 
03/95 09/95 
43 42 
(135) (135) 
47.9 49.2 1996 
4,5 
5,4 
6,7 
10,6 
3,24 
-4.2 
31,0 
-5,6 
1,7 
11,8 
3,6 
48,1 
5,5 
2,2 
3.3 
49.3 
155,2 
17,7 
none 
none 
3.9 
0,6 
1,6 
-
A3 
A-
03/96 09/96 
33 32 
(178) (178) 
03/96 09/96 
41 40 
(135) (135) 
50.8 52.2 1997 
(6) 
2.0 
3,2 (4) 
8,1 (5) 
6,8 
3,53 
-3,2 
32,9 
-3.6 
2,4 
20,3 
6,3 
50,8 (9/97) 
6,8 
3,4 
3,4 
50,7 
154,4 
20,7 
none 
none 
1.5 
0,2 (9/97) 
0,4 
-
A3 
A-
03/97 09/97 
35 33 
(179) (180) 
03/97 09/97 
39 40 
(135) (135) 
52.2 52.9 
Footnotes 
(1 ) (2) (3) See explanatory notes 
(4) First nine months of 1997 compared to same period of 1996. 
(5) Seasonaly-adjusted data for the third quarter. 
(6) Projections, unless otherwise indicated. 
-55-
Explanatory notes for country-risk indicators 
Standard footnotes 
(1 ) Includes only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(2) The higher the ranking number, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100; 100 represents the least chance of default. A 
given country may improve its rating and still fall in the ranking if the average global rating 
for all rated countries improves. 
Abbreviations and English words used in tables 
S&P Standard and Poor's 
CCFF= Compensatory and Contingency Financing Facility 
EFF= Extended Financing Facility 
SBA = Stand-By Arrangement 
STF= Systemic Transformation Facility 
est.= estimates 
n.a. = not available 
prelim.= preliminary 



c 56 
ISSN 0254-1475 
COM(98) 252 final 
DOCUMENTS 
EN 01 09 17 
Catalogue number : CB-CO-98-271-EN-C 
ISBN 92-78-35341-8 
Office for Official Publications of the European Communities 
L-2985 Luxembourg