Proposal for a Council Decision providing macro-financial assistance to Albania (98/C 302/05) COM(1998) 507 final - 98/0273(CNS)

(Submitted by the Commission on 3 September 1998)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 235 thereof,

Having regard to the proposal of the Commission,

Having regard to the opinion of the European Parliament,

Whereas the Commission has consulted the Monetary Committee before submitting its proposal;

Whereas Albania has made substantial progress on the path to recovery from the effects of the economic and social crisis of early 1997; whereas it has successfully implemented an economic recovery programme to address the immediate effects of the crisis;

Whereas trade, commercial and economic links between the Community and Albania are developing within the framework of the Cooperation Agreement;

Whereas Albania has agreed with the International Monetary Fund (IMF) on a comprehensive set of stabilisation and policy reform measures to be supported by a loan under the Enhanced Structural Adjustment Facility (ESAF);

Whereas Albania has agreed with the World Bank on a set of measures supporting banking reform and employment promotion, which are backed by a highly concessional Rehabilitation Loan; whereas it is intended that a Structural Adjustment Credit will support further structural adjustment measures;

Whereas Albania is undertaking fundamental reforms to promote economic reform and build institutions with a strong implementation capacity; whereas the focus of reforms will be strongly centred on institution-building, on public administration and judicial reforms, on the development of a strong and performing banking sector, on the establishment of a functioning agricultural land market and accelerating enterprise privatisation; whereas the Government is firmly committed to a speedy winding up of the pyramid scheme companies and to combating corruption;

Whereas the authorities of Albania have requested financial assistance for the first year of the medium-term programme from the international financial institutions, the Group of 24 industrialised countries (G-24), and the Community; whereas over and above the estimated financing which would be provided by the IMF and the World Bank, an important residual financing gap remains to be covered; whereas Paris Club rescheduling and undisbursed pledges made at the Donors' Conference in October 1997 should help cover part of the external financing needed during the first year of the medium-term programme;

Whereas assistance from the Community shall be instrumental in supporting Albania's institutional and structural reforms; whereas a Community long-term loan to Albania is an appropriate measure to help ease the country's external financial constraints, support the balance of payments and strengthen the reserve position;

Whereas Albania is a low-income country eligible to highly concessional loans and facilities from the World Bank and the IMF; whereas the Community will provide under the first year of the medium-term programme ECU 19,5 million support to the budget in the form grants through the PHARE Special Assistance and the Community Food Security programme; whereas, in these circumstances, the proposed ECU 20 million loan allows overall Community macro-financial support under the first arrangement under the ESAF to reach an appropriate degree of concessionality;

Whereas the Community loan should be managed by the Commission;

Whereas the Treaty does not provide, for the adoption of this decision, powers other than those of Article 235,

HAS DECIDED AS FOLLOWS:

Article 1

1. The Community shall make available to Albania a long-term loan facility of a maximum principal amount of up to ECU 20 million with a maximum maturity of fifteen years, with a view to ensuring a sustainable balance of payments situation and consolidating the country's reserve position.

2. To this end the Commission is empowered to borrow, on behalf of the European Community, the necessary resources that will be placed at the disposal of Albania in the form of a loan.

3. This loan will be managed by the Commission in close consultation with the Monetary Committee and in a manner consistent with any agreement reached between the IMF and Albania.

Article 2

1. The Commission is empowered to agree with the authorities of Albania, after consultation with the Monetary Committee, the economic and institutional policy conditions attached to the loan. These conditions shall be consistent with the agreements referred to in Article 1(3).

2. The Commission shall verify at regular intervals, in collaboration with the Monetary Committee and in coordination with the IMF, that the economic and institutional policy in Albania is in accordance with the objectives of this macro-financial assistance and that its conditions are being fulfilled.

Article 3

1. The macro-financial assistance shall be made available to Albania in two instalments. Subject to the provisions of Article 2, the first instalment shall be released on the basis of a successful completion of the mid-term review of the first year of the programme supported by a three-year ESAF arrangement between the IMF and Albania.

2. Subject to the provisions of Article 2, the second instalment shall be released on the basis of a satisfactory track record in the implementation of the ESAF programme and not before one quarter after the disbursement of the first instalment.

3. The funds shall be paid to the Central Bank of Albania.

Article 4

1. The borrowing and lending operations referred to in Article 1 shall be carried out using the same value date and must not involve the Community in the transformation of maturities, in any exchange or interest rate risks, or any other commercial risk.

2. The Commission shall take the necessary steps, if Albania so requests, to ensure that an early repayment clause is included in the loan terms and conditions, and that it may be exercised.

3. At the request of Albania, and where circumstances permit an improvement in the interest rate on the loan, the Commission may refinance all or part of its initial borrowings or restructure the corresponding financial conditions. Refinancing or restructuring operations shall be carried out in accordance with the conditions set out in paragraph 1 and shall not have the effect of extending the average maturity of the borrowing concerned or increasing the amount, expressed at the current exchange rate, of capital outstanding at the date of the refinancing or restructuring.

4. All related costs incurred by the Community in concluding and carrying out the operation under this Decision shall be borne by Albania.

5. The Monetary Committee shall be kept informed of developments in the operations referred to in paragraphs 2 and 3 at least once a year.

Article 5

At least once a year the Commission shall address to the European Parliament and to the Council a report, which will include an evaluation on the implementation of this Decision.