Communication from the Commission European Development Fund (EDF) estimate of the contributions needed for expenditure in the 2003 financial year and forecast expenditure for 2004, 2005, 2006 and 2007

EUROPEAN DEVELOPMENT FUND

(EDF)

Estimate of the contributions needed

for expenditure in the 2003 financial year

and forecast expenditure for 2004, 2005, 2006 and 2007

Article 6 of the Internal Agreement on the financing and administration of the seventh and eighth EDFs lays down that the Commission shall:

-send the Council a statement of the payments to be made for the following year 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 that for which the call for contributions is made.

1. Introduction

In accordance with the rules laid down in the Internal Agreements of the 7th and 8th EDFs, each year the Commission draws up a communication to the Council giving an estimate of expenditure for the following year (2003). This estimate is used to determine the amount of calls for the Member States' contributions to the EDF for the year in question (2003). The document also presents the expenditure forecasts for the four following years (2004 to 2007). It starts with a revision of EDF expenditure for the current year (2002).

This estimate covers EDF resources for both the ACP States and the OCTs.

2. edf expenditure for the 2002 financial year (decisions and payments)

2.1. Decisions

In its communication on financial Information on the EDF last July, [1] the Commission estimated the volume of decisions to be carried out in 2002 at EUR2000 million. On 30 September the volume of new decisions stood at EUR729 million. This figure might appear low but it is actually in line with the target figure of EUR2000 million. The procedure for adopting decisions leads to a substantial "stockpiling" in the first half of the year. Most are in the process of adoption by the EDF Committee At the end of September they amounted to EUR1201 million. The total therefore rises to EUR1930 million (final amounts and those pending adoption), which is 96% of the target. Consequently, the Commission considers that the objective of EUR2000 million for 2002 could be reached.

[1] COM(2002) 372 of 9.7.2002.

Note that a significant proportion of the decisions (estimated at EUR700 million for the year) concern measures taken under Decision No 1/2000 of the ACP-EC Council of Ministers. This involved unexpended balances of the 8th EDF, mobilised pending the implementation of the Cotonou Agreement. The estimate presented in July's communication already took account of this.

2.2. Payments

Unlike the decisions estimate, the estimate of EUR2000 million in payments for 2002 given in July's communications is not likely to be met. According to information from the EIB, the last tranche (approximately EUR150 million) that was initially intended to be paid to the EIB towards the end of 2002 for the HIPC instrument (relief of the poorest countries' debt), will not be paid out until sometime in the first half of 2003. The last tranche (EUR180 million) to the World Bank should normally be made, as planned, before the end of the year.

The EIB account does not need replenishing this year because of the slower implementation of the HIPC initiative in a number of countries; only at "completion point" can the EIB disburse major sums.

The pace of payments for other instruments is relatively slow (EUR927 million by 30 September, plus EUR185 million was in the pipeline (pending validation)), but this delay should be reabsorbed by the end of the year.

In conclusion, as a result of the delay in payment of the last tranche of the EIB's HIPC programme, the Commission is forced to revise downwards the level of the payments for 2002. It now estimates some EUR1850 million.

The table on the following page updates decisions and payments by instrument. Note that unlike the communication on financial Information (figures in column 1), the amounts relating to the measures taken under Decision No 1/2000 are now presented separately (column 3, envelopes A and B).

2.3. Stabex

With the expiry of the revised Lomé IV Stabex is at an end. No new decision has been taken since 1 January 2001. Whereas large amounts were still being paid out in 2001, only a few were made in 2002 (EUR1.6 million). The Stabex account cannot be closed, however. Some EUR200 million has to remain available for possible payments to Sudan and Togo, currently suspended. The Commission has transferred the surplus balance to the current expenditure account. In addition, interest accrued and still to be accrued on the Stabex also goes to the current expenditure account until the Stabex account is closed.

The situation of the Stabex account is presented in a separate table.

Estimate of decisions and payments for the financial year 2002

EUR million

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3. forecast cash position at 31-12-2002

3.1. Forecast cash position at 31-12-2002: current expenditure

EUR million

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3.2. Forecast cash position at 31-12-2002: Stabex expenditure

EUR million

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4. edf expenditure for the 2003 financial year (decisions and payments)

The Commission estimates some EUR2300 million for both decisions and payments in 2003.

These estimates are based on the pace of implementation recorded for the various Funds. The figures also take account of the state of dossiers currently being handled by the Commission. Concerning decisions, account was taken of the positive impact of the process of devolution from Brussels to the Delegations. On the other hand, the Commission believes that devolution will not have a decisive effect on the speed of payments in 2003.

Figures are based on the assumption that the 9th EDF could enter into force in early 2003. Obviously, this assumption is a major element in the forecast for decisions and payments. This is particularly true of decisions, since it has been projected that EUR1035 million , 45% of the total, will come from the 9th EDF. Figures must therefore be treated with caution, given the uncertainty still reigning as to the date of ratification of the Cotonou Agreement.

The result of this analysis is presented in the table overleaf.

Estimate of decisions and payments for the financial year 2003

EUR million

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Under the 6th EDF. There should be only a few remaining balances of payments under the national and regional indicative programmes, estimated at EUR50 million.

Under the 7th EDF. Forecast for decisions concern only programmable aid (NIPs and RIPs) for a total of EUR50 million, the funds for other instruments being almost exhausted. At only EUR175 million, payments under the 7th EDF are declining year on year and account for only 7,5% of all payments forecast for 2003 (EUR2325 million). They also concern exclusively expenditure under the indicative programmes.

Under the 8th EDF. After deduction of major amounts in the pipeline (see point 2.1), the funds still available at 22 October 2002 for decisions stood at EUR1918 million, of which EUR841 million for the indicative programmes (NIPs and RIPs) and EUR1077 million for other instruments.

The estimate for decisions takes account of the proposal for a Decision to reallocate EUR254.2 million in unused resources of the 8th EDF.

The amount calculated for the indicative programmes in 2003 takes account of the fact that a relatively high amount is destined for countries in crisis. The estimates for the non-indicative programme instruments come from the EIB (risk capital and interest-rate subsidies) or are based on available balances (emergency aid, aid for refugees) and the reallocation proposal mentioned above (HIPC). The balance for the structural adjustment facility is exhausted. Finally, in the case of the envelope of EUR1 200 million mobilised under Decision No 1/2000 of the ACP-EC Council of Ministers pending the implementation of the Cotonou Agreement, it is supposed that the high-absorbing countries will exhaust the available balance of EUR500 million (envelopes A and B) from the EUR700 million to be committed in 2002. On top of that, there is EUR25 million under the Decision (reallocation of EUR254.2 million) for regional cooperation and integration.

Payments under the 8th EDF are estimated at EUR1850 million, including EUR1076 million in programmable aid. The amount for the structural adjustment facility (EUR200 million) is what remains in hand. For the HIPC (debt relief, EUR209 million), it is supposed that all the decisions taken hitherto will be honoured in 2003. Payments from envelopes A and B are likely to remain relatively low (EUR125 million).

As noted earlier, the assumptions concerning the 9th EDF should be taken with a pinch of salt because they depend on the timing of implementation of the Cotonou Agreement. In addition, the new Fund involves new or almost new instruments about which it is obviously more difficult to make reliable forecasts. Implementation of the new Financial Regulation may also affect the level of decisions in the first year of application.

Decisions are estimated at EUR1185 million, including EUR235 million notified by the EIB for the Investment Facility. For envelopes A, the amount is based on an analysis of projects in the pipeline. For envelope B, the amount is based on past trends for Stabex and Sysmin and on envelope B contributions to debt relief.

Payments, keeping in mind the start to implementation of the 9th EDF, should remain relatively low. They are estimated at EUR250 million, including EUR60 million for the Investment Facility.

5. call for contributions 2003 (rounded figures)

To cover current expenditure for the 2003 financial year and maintain a reasonable cash reserve, the call for contributions should be established with EUR2 300 Million.

On the basis of the historical pattern of disbursements for the various instruments, and taking into account the wish expressed by the Member States to limit the available - but nevertheless necessary cash in hand, the Commission proposes the following four tranches to cover current:

-EUR450 million on 20 January 2003

-EUR650 million on 1 April 2003

-EUR700 million on 1 July 2003

-EUR500 million on 1 November 2003

It is stressed that these amounts assume payment in the second quarter of EUR209 million under the HIPC instrument (of which EUR149 million is the last EIB tranche initially scheduled to be spent towards the end of 2002, plus EUR60 million decided by the ACP-EC Council of Ministers in December 2001).

As usual, these tranches may be adjusted up or down in line with real requirements at the time of the quarterly call. Similarly, a faster pace of financial implementation would lead the Commission to invoke the Internal Agreement in order to adjust financial resources to needs.

Forecast cash position at 31/12/2003

Current expenditure

EUR million

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The table of the call for contributions (scale 8th EDF) is in point 7.

6. edf expenditure forecasts 2004 to 2007

Forecasts for 2003 to 2006 are only an approximate estimate of expenditure, based on the rates in previous years. For example, figures may vary considerably if, say, there are new debt relief commitments.

In accordance with the Cotonou Agreement, remaining uncommitted funds of the 7th and 8th EDFs will be transferred to the 9th EDF after the ratification of the Agreement. This will not affect the totals.

Forecast EDF decisions and payments

2004 to 2007

EUR million

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7. contributions to the edf for 2003

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Execution of the EDF

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Decisions: -------- Payments:

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Balances 6th EDF (situation at 22/10/02)

EURO

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(3) This involves decisions in the pipeline, i.e. awaiting the decision of the EDF Committee.

Balances 7th EDF (situation at 22/10/02

EURO

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(3) This involves decisions in the pipeline, i.e. awaiting the decision of the EDF Committee.

Balances 8th EDF (situation at 22/10/02)

EURO

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(1) Before inclusion of the Commission's proposal for reallocation of EUR254.2 million.

(3) This involves decisions in the pipeline, i.e. awaiting the decision of the EDF Committee.