COMMUNICATION FROM THE COMMISSION Financial Information on the European Development Funds

Contents

Preliminary remarks

Summary

I. Status of European Development Funds at 31.12.1999

1. General table

2. Implementation of the Funds at 31 December 1999

II. Financial implementation forecasts for 2000

III. Financial implementation forecasts for 2001

ANNEXES

Preliminary remarks

This document is submitted as an annex to the draft budget for 2001, in accordance with the 1979 agreements on budgetary procedure.

To make the budgetary authority's task as easy as possible, the information given in this document is restricted to the key data. However, as in previous years, it shows:

- EDF implementation at 31.12.1999;

- financial implementation forecasts for the current year;

- expenditure forecasts for 2001.

Further details on EDF implementation at 31 December 1999 are given in the Commission communication to the Court of Auditors, Parliament and the Council containing the balance sheets and accounts of the 6th, 7th and 8th EDFs for 1999.

SUMMARY

1. With payments standing at EUR1 275.38 million, implementation of the EDF in 1999 will be below the forecast of EUR1 955 million presented to the Member States in November 1998, i.e. a rate of 70% excluding Stabex (65.22% including Stabex). However, the size of this gap was corrected in the "Financial Information on the EDF" report presented to the Council in July 1999 when the forecast was revised down to EUR1 460 million, giving an implementation rate of 87.35% of the forecast.

1999 was a record year for decisions, however, compared with the recent average. Current expenditure totalled EUR2 617.81 million, while Stabex reached EUR75.01 million, a total of 120% of the November 1998 forecast of EUR2 245 million for all instruments.

To put the size of the gap between decisions and payments in perspective, account should first be taken of the late entry into force of the 8th EDF in July 1998 and the reasonable time-lag between the decision on a project and its actual implementation.

In a political and economic climate that continues to fluctuate sharply and is sensitive to changes in the world economy, official development aid granted by the European Union to the ACP States and OCTs constantly reflects these external factors.

As in 1998, the domestic situation in a number of recipient countries continued to fluctuate throughout the year - deterioration of the situation in Rwanda, Equatorial Guinea, Democratic Republic of Congo, Sierra Leone, etc. - -and this affected the pace and estimated amount of disbursements.

2. With decisions forecast at EUR4 250 million and payments at EUR2 635 million for 2000, the upswing in EDF activity should pick up pace appreciably following the entry into force of the 8th EDF and the decisions taken on the debt-relief initiative for heavily indebted poor countries and the increase in the structural adjustment facility.

To finance this expenditure, a call for contributions totalling EUR1 600 million was agreed in December 1999 to cover current payments plus EUR360 million for Stabex expenditure as laid down in the Financial Regulation for the 8th EDF. The level of contributions takes account only of decisions actually taken to date.

3. Forecast expenditure in 2001 is EUR2 553 million for current operations and 0 million for Stabex.

I. Status of European Development Funds at 31.12.1999

1. General table

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ECU 1 120 million from the 6th EDF, ECU 1 225 million from the 7th EDF and ECU 1 693 million from the 8th EDF should be added to the above allocations (from EIB own resources).

2. Implementation of the Funds at 31 December 1999

(a) EDF expenditure in 1999: EUR1 275.38 million.

TRENDS IN PAYMENTS (EUR million)

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COMPARISON DECISIONS/PAYMENTS (7th & 8th EDFs - EUR million)

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For the second year running, the level of decisions showed a definite upturn with the start-up of implementation of the 8th EDF and although this has not yet been reflected in the level of payments, it is inevitable in due course. Despite a low level of decisions in 1999, Sysmin managed to keep up a steady rate of payments.

(b) EDF operations were financed normally in 1999

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The amount of cash available for all accounts at the end of the year was EUR1 022.84 million, EUR140.84 million for current expenditure and EUR882.00 million for Stabex. In addition to the EUR882.00 million, at the 1999 year end, the Commission also had a credit with some Member States totalling EUR563.76 million for Stabex.

As there is a special bank account for Stabex operations, the possibilities of reducing these funds are closely bound up with the level of transfers decided on.

(1) The amounts entered for calls for contributions to Stabex take account only of actual Member State payments, excluding credits. The amount of payments (EUR397.54 million in 1998 and EUR461.93 million in 1999) is higher than calls (EUR360 million) as a result of some Member States settling previous credits.

II. Financial implementation forecasts for 2000 (as at 01.2000)

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1. Forecasts for decisions have been revised upwards compared with the forecasts in November 1999. This has been done to take account of the guidelines laid down at the December 1999 CFD/ACP meeting in Accra where the following initiatives were agreed:

- debt relief totalling EUR1 000 million for the heavily indebted poor countries;

- an increase of EUR250 million in the structural adjustment facility, EUR100 million of which has been earmarked for 2000.

Forecasts, other than for Stabex, which has gone down from EUR500 million to EUR400 million owing to the availability of more accurate data, have not changed, thus justifying the Commission's ambitious programming targets.

An extra heading, 'Other', has been included to take account of the Commission's intention of presenting by the end of the year operations involving several ACP countries at once which are currently being studied and/or finalised (increase in venture capital funding, support for health initiatives in cooperation with WHO, etc.)

2. EDF expenditure at 31/05/2000 compared with the January 2000 forecasts

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As with the decision forecasts, the payments forecasts have also been revised upwards to take account of the necessary additional disbursements for the HIPC initiative and the increase in the structural adjustment facility this year.

Despite an implementation rate of 20.62% at 31 May 2000, below the normal average for that date, the Commission is keeping to its forecast as the high level of decisions must soon bring about a substantial increase in disbursements.

III. Implementation forecasts for 2001

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1. The 2001 forecasts are as submitted to the Member States in the schedule drawn up in the post-Lomé negotiations at the final talks on the size of the 9th EDF; the main differences between these figures and the ones sent to the Council in December 1999 are as follows:

- the amounts for the 6th EDF have been entered separately since the Fund has not been closed yet;

- the figures have been calculated on the basis of the present programmes in the light of the more ambitious objectives established internally (these figures will be revised in further detail in November in the light of implementation);

- the HIPC debt-relief initiative has now been quantified and included in the forecasts.

2. Decisions in the pipeline amount to EUR3 300 million. This does not include the outstanding EUR150 million to be allocated to the increase in the structural adjustment facility, on which no decision has yet been taken. In its dealings with third countries, however, the Commission is also dependent on a number of external factors which cannot, by their nature, be foreseen (political instability, armed conflict, natural disasters). These factors can upset a forecast at any time.

3. The estimated payments of EUR2 553 million should see the two billion euro threshold crossed again in 2001. This will largely be due to the anticipated high level of HIPC payments (EUR375 million). However, the figure does not include the expected disbursement of EUR250 million under Stabex on which the data is as yet unavailable. Stabex will in fact come to end when the revised Lomé IV expires as it is not due to be renewed in its present form in the next partnership agreement.

4. To cover these payments, taking account of obligations under the Convention, the financial requirements for 2001 to be discussed with the Member States in November 2000 should be close to EUR3 050 million for current expenditure. Meanwhile calls in relation to Stabex will be closed in July 2000, as provided for in the Financial Regulation.

The above forecast of financial requirements is based on the following:

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The forecast current expenditure figure for 2000 includes the increase in the structural adjustment facility agreed under the HIPC initiative. The expiry of the revised Lomé IV and the entry into force of the successor convention are currently under discussion, notably concerning the finalisation of interim measures for the transition between agreements. The source of the necessary financing to cover the original 2000 and 2001 expenditure as well as that arising from the new initiatives will depend on decisions taken in that context.

ANNEXES

Annex 1: Contributions to the EDF for 2000

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CONTRIBUTIONS TO THE EDF FOR 2000

STABEX

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Annex 2: Sectoral breakdown at 31.12.1999

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Annex 3: Summary statements of management accounts at 31.12.1999.

EDF CONSOLIDATED ACCOUNTS AT 31.12.1999

ANNUAL FIGURES (EUR '000)

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EDF CONSOLIDATED ACCOUNTS AT 31.12.1999 Class of aid (EUR'000)

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