COMMUNICATION FROM THE COMMISSION - EUROPEAN DEVELOPMENT FUND (EDF) - Estimate of the contributions needed for expenditure in the 2001 financial year and expenditure forecast for 2002, 2003, 2004 and 2005

PRELIMINARY REMARKS

Article 6 of the Internal Agreement on the financing and administration of the seventh and eighth EDFs stipulates, inter alia, that the Commission shall:

*send the Council a statement of the payments to be made for the following year (in this case 2001) and a schedule of calls for contributions, taking account of the EIB's estimates concerning the operations administered by it;

*also send with the annual forecasts for contributions its estimates for expenditure for each of the four years following the year relating to the call for contributions (2002-2005).

1. Introduction

In accordance with the Internal Agreements on the seventh and eighth EDFs, every year the Commission draws up a communication setting out the financial situation of the EDFs for the current year (in this case, 2000) and an expenditure forecast for the following year (2001). This forecast serves to determine the estimated amount of calls for contributions by the Member States to the EDF for 2001. The document also forecasts expenditure for the next four years (2002-2005).

2. State of EDF expenditure for the 2000 financial year (decisions and payments)

2.1. Non-Stabex decisions stood at EUR 2 444 million at 30 September 2000. A figure of EUR 3 850 million was forecast in Financial Information on the EDF. According to the estimates revised in late September, and comparing two possible scenarios, the one optimistic and the other pessimistic, by 31 December 2000, it should be reasonably possible to achieve a volume of decisions of EUR 3 525 million, meaning EUR 325 million less than initially forecast.

This difference is mainly due to the slowing down in implementation of cooperation with a number of ACP countries, and due to the longer than anticipated duration in the implementation of the "other initiatives" and the increase in venture capital proposed by the Commission.

Nevertheless, the above shows that the 8th EDF has now reached a cruising speed. When comparing the estimated level of decisions for 2000 (EUR 2 846 million excluding HIPC), all EDFs included, with that of 1999 (EUR 2 618 million) the 2000 figures are about 9 % higher.

However, one should not rule out the above mentioned pessimistic scenario, where total non-Stabex decisions would stand at only EUR 3 100 million and total decisions (excluding HIPC) at EUR 2 400, which is 9% less than in 1999.

2.2. Non-Stabex current expenditure for 2000 at 30 September 2000 (about EUR 1 038 million) is less than estimated in July 2000 in Financial Information on the EDF and in the document submitted to the Council in December 1999. At 30 September 2000 the volume of current expenditure for 2000 was about EUR 1 835 million compared with a target of EUR 2 385 million in payments set in July's revised estimates, EUR 550 million less than initial forecasts. This shortfall is due mainly to the low level of disbursements made under the national and regional indicative programmes. However, large disbursements under the structural adjustment facility, to the tune of EUR 330 million, and the HIPC initiative, of EUR 100 million, will lead to a substantial increase in payments by the end of the year which will ensure that the level of EUR 1 835 million is reached.

2.3. The figures for Stabex show an implementation rate for decisions of 56% at 30 September 2000 (EUR 223 million decided compared with the EUR 400 million forecast). However, the low level of payments under Stabex (28% of the forecast at 30 September 2000) should rise sharply towards the end of this year to reach 76% of the forecast.

Forecasts for 2000

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These figures take account of decisions in the pipeline.

The cash position forecast for 31 December 2000 stands at about EUR 16 million. This has to be compared with balances at the previous year-ends to see how available bank balances have been reduced:

EUR 473.00 million end 1995 EUR 297.81 million end 1996 EUR 330.55 million end 1997 EUR 306.57 million end 1998 EUR 140.84 million end 1999.

This confirms the sustained downward trend in the balance. However, as the balance at the end of 2000 is practically zero, provision should be made in the 2001 call for contributions for the establishment of a minimum cash cushion to ensure sufficient room for manoeuvre in the event that expenditure exceeds the level of the calls for contributions.

Cash position forecast at 31 December 2000

Current expenditure

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(1) Payments effected in the ACP countries but not yet finalised.

(2) Direct payments to be finalised at 30/9/2000.

The Stabex cash balance is somewhat different as Stabex funds are governed by different arrangements. When the 8th EDF came into force, funds for the five years of the system's application (1995-1999) were called on under the arrangements set out in the 8th EDF Financial Regulation (Article 54 and Annex II).

Stabex will come to an end when the revised Lomé IV expires as it will not be renewed in its present form in the new partnership agreement. A joint ACP-EU decision on the establishment of a reserve intended to finance decisions under Stabex and Sysmin in the period 2 August to 31 December 2000 was taken at the end of September 2000; this decision also provides for the transfer of the unexpended balance (EUR 1 105 672 002) from the Stabex account to the EDF special account. This transfer will take place gradually until 31 December 2001. Outstanding payments of certain Member States must also be settled by that date.

The following table shows that resources (1) are lower than the contributions (2) called for. This is because Member States are able under the Financial Regulation either to pay on the date on which the contributions were called for or to convert their contributions into an open debt.

Cash position forecast at 31/12/2000

Stabex expenditure

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3. Forecasts for 2001 (decisions and payments)

After a slow start, the 8th EDF maintained its 1999 levels in 2000. The faster rate observed over the past two years for decisions in particular will inevitably lead to a substantial increase in payments for 2001.

The amounts relating to the 6th EDF have been entered separately since the Fund has not been closed yet.

Forecasts for decisions under the 7th EDF concern only programmable aid (national and regional indicative programmes) for EUR 400 million, as funds have been used up for the other instruments. Payments under the 7th EDF (EUR 618 million) are expected to account for almost 30% of non-Stabex payments forecast for 2001 (EUR 2 063 million). They are exclusively for expenditure under the indicative programmes.

Non-Stabex decisions for the 8th EDF are expected to total EUR 2 993 million in 2001 as a result of an increase in decisions for programmable aid (notably indicative programmes) and the carryover to 2001 of the increase in risk capital and other initiatives.

Payments are expected to amount to EUR 1 912 million of which EUR 772 million will be for programmable aid.

Forecasts for Stabex concern only the 8th EDF. Decisions are expected to total EUR 240 million and payments EUR 475 million.

The total of decisions to be taken under all the EDFs comes to EUR 4 033 million; now that they have sped up, payments are likely to reach about EUR 2 538 million next year.

Forecasts for 2001

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The rates of disbursement since 1991 are given below. The table shows that the rate of payments picked up in 1998 once the 8th EDF came into force and this should continue in 2001.

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4. Call for contributions (rounded figures)

To cover 2001 expenditure and to re-establish a reasonable cash level, a total of EUR 2 300 million in contributions (excluding Stabex) will be called (7th EDF scale).

Stabex expenditure will be covered by the reserve established under the joint ACP-EU decision referred to on page 6 above. No more contributions will be called for from the Member States. As the cash balance in the Stabex account and Member State debts are to be transferred to the EDF special account by 31 December 2001, these amounts will be deducted from the contributions called from the Member States for current expenditure.

Working from a cash flow forecast and taking account of Member States' wish to curb spending, the Commission is proposing four tranches as follows:

EUR 600 million 20 January 2001

EUR 550 million 1 April 2001

EUR 600 million 1 July 2001

EUR 550 million 1 November 2001.

The sums transferred from the Stabex account will thus be deducted from these tranches, the transfers taking place on the same dates as the calls.

As usual, these amounts may be adjusted at each three-monthly call to take account of actual needs. Similarly, if forecasts are implemented at a more sustained rate the Commission will make use of Article 6 of the Internal Agreement to provide enough funding to meet requirements.

Cash position forecast at 31/12/2001

Current expenditure

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The table concerning the call for contributions for current expenditure (7th EDF scale) is given in the Annex.

5. EDF expenditure forecasts 2002 to 2005

Forecasts for 2002 to 2005 are only an approximate estimate of expenditure based on the rates in previous years.

Forecast of EDF decisions and payments

2002 to 2005

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In accordance with the information given by the Commission to Coreper on finalisation of the post Lomé negotiations (doc. Financial Allocation to the Ninth EDF of 3 November 1999 and the corrigendum of 30 November 1999)

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