COMMISSION OF THE EUROPEAN COMVIDNITIES 
COM(95) 17 final 
Brussels, 27.03.1995 
REPORT FROM THE COMMISSION 
ON GUARANTEES 
COVERED BY THE GENERAL BUDGET 
SITUATION AT 30 JUNE 1994 
J4; 
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REPORT ON GUARANTEES COVERED BY THE GENERAL BUDGET 
SITUATION AT 30 JUNE 1994 
This report describes the situation as regards budget guarantees at 30 June 1994. 
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. 
The Commission has already presented six reports to the budgetary authority. 
The report is in three parts: 
1. Description of operations entered in the budget and events since the last report. 
2. Situation at 30 June 1994 as regards risks for the budget in future years and 
guarantees already activated. 
3. Assessment of the economic and financial situation of non-Community countries 
benefiting from the most important operations. 
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PART ONE: OPERATIONS ALREADY ENTEREDJN THE BUDGET 
The budgetary authority has authorized 22 headings with token entries in the 1994 budget 
to cover any payment of guarantees. These headings can be divided into three categories: 
borrowing and lending within the Community, borrowing and lending outside the 
Community and guarantees given to financial institutions. 
I. BORROWINGS TO BE ON-LENT WITHIN THE COMMUNITY 
A. COMMUNITY BORROWING OPERATIONS TO PROVIDE 
BALANCE-OF-PAYMENTS SUPPORT 
The Community is authorized to borrow on the capital markets or from financial 
institutions and make the sums raised available to Member States experiencing 
temporary balance-of-payments difficulties. 
The outstanding amount of loans granted to Member States for this purpose may 
not exceed ECU 14 billion in principal. 
At 30 June 1994 there was one operation in respect of Greece under the decision 
of 4 March 1991 and one operation in respect of Italy under the decision of 
18 January 1993. 
At 30 June 1994 the amount outstanding was ECU 1 000 million in loans to 
Greece and ECU 4 004.9 million in loans to Italy (Table 1). 
B. EURATOM BORROWING OPERATIONS 
In 1977 the Commission was empowered to borrow funds to be used to help 
finance nuclear power stations. 
Loans are made to electricity producers and carry the usual guarantee demanded 
by banks. Recipients are often State-owned companies or companies enjoying a 
State guarantee. 
The maximum amount of borrowings authorized is ECU 4 billion, of which 
ECU 500 million was authorized by the 1977 decision, ECU 500 million in 1980, 
ECU 1 billion in 1982, ECU 1 billion in 1985 and ECU 1 billion in 1990. The 
amount borrowed comes to around ™ECU*2 900 million, leaving 
ECU 1 100 million which may still be raised. 
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At 30 June 1994 the total outstanding was ECU 861.6 million. 
On 9 December 1992 the Commission proposed that the balance of borrowings 
not used in the Member States could be used to finance the improvement of the 
degree of efficiency and safety of nuclear power stations in the countries of Central 
and Eastern Europe and in the CIS. 
The Council adopted a decision to this effect in the first half of 1994 (see Part II -
Loans raised for non-Community countries). 
C. BORROWING OPERATIONS FOR THE PROMOTION OF 
INVESTMENT IN THE COMMUNITY 
The Commission was empowered by a Council Decision of 16 October 1978 to 
borrow funds to be used to promote investment in the Community (New 
Community Instrument). 
The authorized borrowing ceiling was fixed at ECU 1 billion by the Decision of 
16 October 1978 and was then raised by ECU 1 billion by the Decision of 
15 March 1982. The ceiling was further raised by ECU 3 billion by the Decision 
of 19 April 1983- and by ECU 750 million by the Decision of 9 March 1987. 
The proceeds of the operations are paid out in the form of loans granted by the 
EIB, acting for the Commission, to finance investment projects which contribute 
to greater convergence and growing integration and are consistent with the 
priority Community objectives in the energy, industry and infrastructure sectors, 
taking account of such factors as the regional impact of the projects and the need 
to combat unemployment. Support for small businesses was also made a priority 
objective by the Decision of 26 April 1982. 
A Decision of 20 January 1981 also empowered the Community to contract loans 
in order to provide exceptional aid of ECU 1 billion to the regions of Italy affected 
by the earthquake of November 1980. A similar decision involving 
ECU 80 million was adopted on 14 December 1981 for the regions affected by the 
earthquakes in Greece in February/March 1981. 
The maximum amount of borrowings authorized thus comes to 
ECU 6 830 million. 
At 30 June 1994 the total outstanding was ECU 1 880.2 million, 31.16% less than 
on 30 June 1993. 
The risk is spread over a large number of borrowers. -In addition, most of the 
loans are global loans to financial institutions which guarantee repayment of the 
funds. 
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Every year the EIB provides the Commission with a list of debtors who, according 
to its information, risk defaulting in the coming year. JSo far, no names have been 
recorded on this list. 
H. LOANS RAISED FOR ON-LENDING TO NON-COMMUNITY 
COUNTRIES 
A. EURATOM BORROWINGS FOR CERTAIN NON-COMMUNITY 
COUNTRIES 
On 21 March 1994 the Council decided to amend Decision 77/270/Euratom to 
authorize the Commission to contract Euratom borrowings in order to contribute 
to the financing required for improving the degree of safety and efficiency of 
nuclear power stations in certain non-member countries. 
This Decision will allow a considerable proportion of Euratom's available 
borrowing capacity (some ECU 1 100 million) to be used to finance projects. For 
these projects to be eligible they must relate to: 
- nuclear power stations or installations in the nuclear fuel cycle which are in 
service, or under construction; 
- or to the dismantling of installations which cannot be brought up to standard for 
technical or economic reasons. 
The following non-member countries qualify: 
Republic of Bulgaria 
Republic of Hungary 
Republic of Lithuania 
Romania 
Republic of Slovenia 
Czech Republic 
Slovak Republic 
Russian Federation 
Republic of Armenia 
Ukraine 
The idea of international financial aid for the closure of the Chernobyl nuclear 
power plant was entered in the conclusions of both the Corfu European Council of 
24 and 25 June 1994 and the G7 summit at Naples on 7 and 8 July 1994. 
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B. PROGRAMME OF BORROWINGS CONTRACTED BY THE 
'COMMUNITY TO PROVIDE MEDIUM-TERM FINANCIAL 
ASSISTANCE TO THE COUNTRIES OF CENTRAL AND EASTERN 
EUROPE 
1. HUNGARY 
(a) Hungary I 
'•"* The Community is granting Hungary a medium-term loan of up to 
ECU 870 million in principal for a maximum of five years. The loan is 
intended to facilitate the adjustment of the Hungarian economy in a way 
which will enable it to derive all the benefits of a market-based economy. 
It is being made available in tranches. 
The first tranche of ECU 350 million was paid on 20 April 1990. A second 
tranche of ECU 260 million was paid on 14 February 1991. The third 
tranche, which is not to exceed ECU 260 million, was planned for 1992 but 
was not paid out as Hungary's balance of payments has been more 
favourable than expected. The tranches will be repaid in one instalment 
after five years and interest, which is at variable rates, is payable half-
yearly. 
At 30 June 1994 the amount outstanding on borrowings under this 
operation came to ECU 610 million. 
(b) Hungary II 
As the break-up of the Council for Mutual Economic Assistance 
(Comecon) and the Gulf crisis threatened to compromise the initial 
encouraging results of the reforms undertaken, it was decided to launch a 
supplementary borrowing and lending operation for ECU 180 million under 
an overall ECU 360 million G-24 aid programme. 
The first tranche of ECU 100 million was paid on 14 August 1991. It will, 
be repaid in one instalment after seven years, and interest, which is at 
variable rates, is payable half-yearly. - The second tranche of 
ECU 80 million was due paid on 15 January 1993. It will be repaid in 
January 1997 and interest, which is at a fixed rate, is payable annually. 
At 30 June 1994 the amount oustanding on borrowings under this 
operation came to ECU 180 million. 
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2. CZECH REPUBLIC AND SLOVAK REPUBLIC 
As part of G-24's total aid of around ECU 750 million, the Commission, on 
behalf of the Community, was empowered to borrow, in two tranches, < 
ECU 375 million for a period of seven years. The proceeds of this operation 
were to be on-lent on the same terms to the Czech and Slovak Federal 
Republic. 
The first tranche of ECU 185 million was paid on 14 August 1991. It will be 
repaid in one instalment after seven years, and interest, which is at variable 
rates, is payable half-yearly. 
The second tranche of ECU 190 million was paid on 2 March 1992 and will be 
repaid in one instalment after six years. 
Following the division of Czechoslovakia into the Czech Republic and the 
Slovak Republic on 1 January 1993, the Commission proposed that the loan be 
divided between the two Republics. 
Under the Council decision of 24 January 1994, two thirds of the loan -
ECU 250 million - will be for the Czech Republic and one third -
ECU 125 million - for the Slovak Republic. 
At 30 June 1994 the amount outstanding on borrowings for the two republics 
came to ECU 375 million. 
3. BULGARIA 
(a) Bulgaria I 
As part of G-24's total aid of ECU 580 million, the Commission, on behalf 
of the Community, was empowered to borrow, in two tranches, 
ECU 290 million for a period of seven years. The proceeds of this 
operation were to be on-lent on the same terms to Bulgaria. 
The first tranche of ECU 150 million was paid to Bulgaria on 
14 August 1991. It will be repaid in one instalment after seven years, and 
interest, which is at variable rates, is payable half-yearly. 
The second tranche of ECU 140 million was paid on 2 March 1992 and 
will be repaid in one instalment after five years. Interest, which is at 
-variable rates, is payable half-yearly. 
At 30 June 1994 the amount outstanding on borrowings for Bulgaria came 
to ECU 290 million. 
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(b) Bulgarian 
As part of G-24's total aid of ECU 220 million in 1992 and 1993, the 
Commission, on-behalf of the Community, was empowered to borrow 
ECU 110 million in two tranches of ECU 70 million and ECU 40 million 
for a maximum period of seven years. The proceeds of this operation were 
to be on-lent to Bulgaria. 
Since the conditions for Community assistance had not been met by 
30 June 1994, neither of the two tranches have yet been paid out. 
4. ROMANIA 
(a) Romania I 
As part of G-24's total aid of ECU 750 million, the Commission, on behalf 
of the Community, was empowered to borrow ECU 375 million in two 
tranches for a maximum period of seven years. The proceeds of this 
operation were to be on-lent on the same terms to Romania. 
The first tranche of ECU 190 million for a term of seven years was paid on 
22 January 1992. It will be repaid in one instalment on 1 February 1999, 
and interest, which is at variable rates, is payable half-yearly. 
The second tranche of ECU 185 million for a term of six years was paid in 
April 1992 and will be repaid in one instalment on 18 March 1998. 
Interest, which is at variable rates, is payable half-yearly. 
At 30 June 1994 the amount outstanding on borrowings for Romania came 
to ECU 455 million. 
(b) Romanian 
As part of G-24's new aid of ECU 160 million, the Commission, on behalf 
of the Community, was empowered to borrow ECU 80 million for a 
maximum period of seven years. The proceeds of this operation were to be 
on-lent on the same terms to Romania. 
In view of its size, the loan was paid out in a single tranche on 
26 February 1993. It will be repaid in one instalment on 26 February 2000, 
and interest is payable half-yearly. 
(c) Romania III 
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As part of G-24's overall macrofinancial aid, the Commission, on behalf of 
the Community, was empowered by the Council Decision of 20 June 1994 
to borrow ECU 125 million in two tranches of ECU 90 million and 
ECU 35 million for a maximum period of seven years. The proceeds of 
this operation are to be on-lent on the same terms to Romania. 
No tranche had been paid at 30 June 1994. 
C. BORROWINGS CONTRACTED BY THE COMMUNITY TO GRANT 
FINANCIAL ASSISTANCE TO THE REPUBLICS OF THE FORMER 
SOVIET UNION 
- Medium-term loan of ECU 1 250 million 
The Commission has proposed a medium-term loan of up to ECU 1 250 million 
for the Soviet Union and/or its Republics in order to finance imports of 
agricultural products, foodstuffs and medicines from the Community and Eastern 
Europe for a maximum period of three years. 
Parliament delivered a favourable opinion and the Council adopted its formal 
decision on 16 December 1991. 
At the beginning of 1992 the loan was divided between the various Republics of 
the former Soviet Union. 
1. Loan contracts signed on the basis of the original breakdown 
Most of the loan contracts were signed in the course of 1992: 
-with Armenia (ECU 38 million), Kyrgyzstan (ECU 32 million), 
Turkmenistan (ECU 45 million) and Moldova (ECU 27 million) on 
10 July 1992; the amount for Kyrgyzstan has since been reduced to 
ECU 23.7 million at the request of the Kyrgyzstan authorities; 
- with Ukraine (ECU 130 million) on 13 July 1992; 
- with Belarus (ECU 102 million), Tajikistan (ECU 55 million) and Georgia 
(ECU 70 million) on 24 July 1992; 
- with Russia (ECU 150 million) on 9 September 1992; 
- with Russia (ECU 349 million) on 9 December 1992; 
- with Kazakhstan (ECU 25 million) on 15 December 1992; 
2. Loan contracts signed on the basis of the amended breakdown 
Some loan contracts were also signed in 1993 after the initial breakdown of 
the total amount of the loan had been changed: 
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- on 5 May 1993 two further contracts were signed with Armenia 
(ECU 20 million) and Georgia (ECU 10 million).— The amount represented 
by these two loans had originally been allocated to Kazakhstan; 
- on 6 December 1993 a further loan contract of ECU 40 million was signed 
with Georgia. This loan was financed by reducing Uzbekistan's allocation. 
3. Loan contracts not vet signed 
At 30 June 1994 three new loan contracts were in preparation but had still not 
been signed. The loans are for: 
- Kazakhstan (ECU 30 million); the loan will be financed by reducing 
Uzbekistan's allocation; 
- Azerbaijan (ECU 68 million) and Uzbekistan (ECU 59 million); the two 
countries did not satisfy the conditions for eligibility for this lending 
operation until late 1993 (Uzbekistan) and early 1994 (Azerbaijan). 
4. Utilization of the ECU 1 250 million loan 
Republic 
Armenia a 
Armenia b 
Azerbaijan 
Belarus 
Georgia a 
Georgia b 
Georgia c 
Kazakhstan a 
Kazakhstan b 
Kyrgyzstan 
Moldova 
Russia a 
Russia b 
Tajikistan 
Turkmenistan 
Ukraine 
Uzbekistan 
Total Initial breakdown 
(1992) 
38 
68 
102 
70 
55 
32 
27 
150 
349 
55 
45 
130 
129 
1250 Breakdown at 
30.6.1994 
38 
20 
* 68 
100.5 
70 
10 
40 
25 
30 
23.7 
27 
150 
349 
55 
45 
130 
* 59 
1240.2 Actual utilization at 
30.6.1994 
37.7 
19.4 
100.5 
69.4 
9.8 
32.0 
23.8 
22.7 
26.9 
63.9 
298.8 
54.5 
44.9 
129.8 
934.4 
^Contracts not signed at 30.6.1994. 
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At 30 June 1994 the amount of loans actually being used came to 
ECU 934.4 million. 
5. Capital repayment and interest payment dates 
The capital repayment and interest payment dates for this operation vary 
depending on the date on which the loan contract was signed and the amount 
of the loan: 
- Armenia (ECU 3 8 million), Belarus, . Georgia (ECU 70 million), 
Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Ukraine, Russia 
(ECU 150 million): 
- interest on 20 April and 20 October 
- capital on 20 August 1995 (half on 20 August 1994 and half on 
20 August 1995 for Belarus, Ukraine and Russia) 
- Armenia (ECU 20 million), Kazakhstan, Russia (ECU 349 million), 
Georgia (ECU 10 million and ECU 40 million): 
- interest on 15 January and 15 July 
- capital on 15 January 1996 (half on 15 January 1995 and half on 
15 January 1996 for Russia and 15 January 1997 for Georgia 
(ECU 40 million)). 
At 30 June 1994 Georgia, Kyrgyzstan and Tajikistan had defaulted on interest 
of ECU 7.42 million (see Part IV - Activation of guarantees). 
- Financial assistance for Moldova 
As part of the Community's contribution to the international aid scheme for 
Moldova, the Commission, on behalf of the Community, was empowered by a 
decision of 13 June 1994 to borrow ECU 45 million in two tranches for a 
maximum period of ten years. The proceeds of this operation are to be on-lent 
on the same terms to Moldova. 
This aid will be granted under Moldova's economic reform programme backed by 
the IMF. A confirmation agreement with the IMF was reached on 
17 December 1993. 
No tranche had yet been paid at 30 June 1994. 
D. BORROWINGS CONTRACTED BY THE COMMUNITY TO GRANT 
FINANCIAL ASSISTANCE TO THE BALTIC STATES 
'As part of the G-24's total aid of ECU 440 million for these three countries, the 
Commission, on behalf of the Community, was empowered to borrow 
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ECU 220 million for a period of seven years. The proceeds of this operation are 
' to be on-lent on similar terms in two tranches: 
- ECU 40 million for Estonia; 
- ECU 80 million for Latvia; 
- ECU 100 million for Lithuania. 
The first tranches of the loan for Estonia (ECU 20 million) and for Latvia 
(ECU 40 million) were paid on 31 March 1993. The loans are to be repaid in one 
instalment on 31 March 2000 and interest, which is at variable rates, is payable half 
-yearly every 31 March and 30 September. 
The first tranche for Lithuania was paid on 27 July 1993; it is to be repaid in one 
instalment on 27 July 2000 and interest, which is at a fixed rate, is payable annually 
every 27 July. 
At 30 June 1994 the amount outstanding on the borrowings for the Baltic States 
came to ECU 110 million. 
E. BORROWINGS CONTRACTED BY THE COMMUNITY TO GRANT 
FINANCIAL ASSISTANCE TO THE MEDITERRANEAN COUNTRIES 
1. ISRAEL 
As part of the financial assistance agreed for Israel and the population of the 
occupied territories, the Commission was empowered to borrow, on behalf of 
the Community, ECU 160 million in one tranche for a period of seven years. 
The proceeds were to be paid out to Israel on the same terms and are 
accompanied by an interest subsidy of ECU 27.5 million paid from the 
Community budget. 
This operation started on 2 March 1992. The borrowing is to be repaid in full 
on 15 December 1997. 
At 30 June 1994 the amount outstanding on the borrowings for Israel came to 
ECU 160 million. 
2. ALGERIA 
The Commission,-on behalf of the Community, was empowered to borrow 
ECU 400 million for a maximum period of seven years in two tranches of 
ECU 250 million and ECU 150 million. The proceeds of this operation were to 
be on-lent on the same terms to Algeria. 
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A bridging loan was granted on 23 December 1991 to cover the first tranche 
and was repaid from the net proceeds of the borrowing contracted on 
14 January 1992 for a period of six years. 
The loan is to be repaid in one instalment on 15 December 1997 and interest is 
payable annually every 15 December. 
At 30 June 1994 the amount outstanding on the loans raised for Algeria came 
to ECU 250 million.1 
IH. COMMUNITY GUARANTEE TO NON-COMMUNITY COUNTRIES 
A. EUROPEAN INVESTMENT BANK LOANS TO MEDITERRANEAN 
COUNTRIES GUARANTEED BY THE GENERAL BUDGET 
Under the terms of the Council Decision of 8 March 1977, the Community 
guarantees loans to be granted by the European Investment Bank as part of the 
Community's financial commitments towards the Mediterranean countries. 
This decision was the basis for the contract of guarantee signed by the European 
Economic Community and the European Investment Bank on 30 October 1978 in 
Brussels and 10 November 1978 in Luxembourg introducing a global guarantee 
of 75% on all credit lines made available for loans in the following countries: 
Portugal (Financial Protocol, pre-accession aid), Greece, Spain (financial 
cooperation), Malta, Tunisia, Algeria, Morocco, Turkey, Cyprus, Egypt, Jordan, 
Syria, Israel, Yugoslavia and Lebanon. 
In addition, by way of exception, a 100% guarantee covers loans allocated for 
emergency aid to Portugal in accordance with the Council Decision of 
7 October 1975. 
A new extension of the contract of guarantee is established for each new Financial 
Protocol. 
The loans authorized at 30 June 1994 total ECU 7 782 million, of which 
ECU 1 500 million is for Spain, Greece and Portugal and ECU 6 282 million for 
the non-member Mediterranean countries. At 30 June 1994 the total of 
outstanding loans came to ECU 2 161 million (taking account of the 75% limit), of 
which ECU 527 million was accounted for by Spain, Greece and Portugal and 
ECU 1 634 million by the non-member Mediterranean countries. 
The second tranche was paid on 17 August 1994. The loan is to be repaid in full on 
17 August 2001 and interest is payable annually every 17 August. 
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There is also provision for EIB loans outside these protocols under Council 
Regulation (EEC) No 1763/92 of 29 June 1992 concerning financial cooperation 
in respect of all Mediterranean non-member countries. 
EIB loans under this operation must not exceed ECU 1 800 million. Overall, a 
75% guarantee is provided. 
At 30 June 1994 ECU 422 million had been made available; of this total, 
ECU 5.2 million had been paid; this figure corresponds to the amount currently 
outstanding. 
On 19 July 1993 the Council decided to conclude a new protocol with the 
Republic of Slovenia in order to finance projects to contribute to the country's 
economic development through loans totalling ECU 150 million from the EIB's 
own resources for a period of up to five years with a 75% budget guarantee. 
On 24 January 1994 the Council decided to conclude the fourth protocol with 
Syria in order to finance projects to contribute to the country's economic 
development through loans totalling ECU 115 million from the EIB's own 
resources for a period of up to three years with a 75% budget guarantee. 
At 30 June 1994, the breakdown of authorizations by country (non-member 
countries only) was as follows: 
Algeria 
Cyprus 
Egypt 
Israel 
Jordan 
Lebanon 
Malta 
Morocco 
Slovenia 
Syria2 
Tunisia 
Turkey 
Yugoslavia3 
Protocols - Total Loans authorized 
640 
92 
802 
215 
198 
222 
55 
517 
150 
323 
418 
90 
760 
4.482 
Horizontal financial cooperation 1.800 
Mediterranean - Total 6.282 
Including ECU 115 million under the fourth protocol authorized in January 1994. 
The second protocol with Yugoslavia was suspended when ECU 100 million of credits could still be 
granted. 
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The loans are generally for 15 years with 3 to 4-year periods of grace on capital 
repayments. 
B. LOANS GRANTED BY THE EUROPEAN INVESTMENT BANK IN 
COUNTRIES OF CENTRAL AND EASTERN EUROPE 
In response to a call made by the Council on 9 October 1989, the Board of 
Governors of the European Investment Bank decided on 29 November 1989 to 
authorize the Bank to provide loans from its own resources to finance investment 
projects in Hungary and Poland for a total amount not exceeding ECU 1 billion. 
These loans are granted to finance investment projects which satisfy the Bank's 
usual requirements for loans from its own resources. The contract of guarantee 
covering 100% of the lending operations was signed on 24 April 1990 in Brussels 
and 14 May 1990 in Luxembourg. 
On 14 May 1991 the budgetary authority extended this 100% guarantee to loans 
made in Czechoslovakia, Bulgaria and Romania up to a maximum of 
ECU 700 million. 
The extension of the contract of guarantee was signed on 31 July 1991. 
On 23 October 1992 the Commission presented a proposal for a Council Decision 
extending this 100% Community guarantee to losses incurred by the EIB as a 
result of loans granted to Estonia, Latvia and Lithuania; this was approved by the 
budgetary authority in its decision of 15 March 1993. 
The overall ceiling on loans which the EIB may grant in these countries was set at 
ECU 200 million for a period of three years. 
On 18 December 1992 the Commission also proposed the extension of this 100% 
guarantee to losses incurred by the EIB as a result of loans granted in Albania. 
On 13 December 1993 the budgetary authority renewed the 100% Community 
guarantee for a period of three years for loans granted by the EIB in the countries 
of Central and Eastern Europe (including the Baltic States and Albania) up to a 
maximum of ECU 3 billion.4 
The loans are generally long-term: 15 years on average with 3 to 4-year periods of 
grace on capital repayments. 
.At 30 June 1994, ECU 1 660 million had been made available in the Central and 
Eastern European countries but only ECU 393 million had been disbursed. 
C. LOANS GRANTED BY THE EUROPEAN INVESTMENT BANK IN NON 
-MEMBER COUNTRIES 
At its meeting of 19 May 1992 the Council (Economic and Financial Affairs) 
adopted the guidelines proposed by the Commission for the extension of EIB 
activities outside the Community and asked it-to. grant Joans in accordance with its 
statutes and its usual criteria to projects of mutual interest in certain non-member 
The contract of guarantee was signed on 22 July 1994 in Brussels and on 12 August 1994 in 
Luxembourg. 
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countries (the developing countries of Asia and Latin America) with which the 
Community has concluded cooperation agreements. 
An overall limit of ECU 250 million per year has been set for a 3-year period; this 
ceiling will be reviewed at the end of the period. 
These loans benefit from 100% Community budget guarantees. The Commission 
presented a proposal for a decision to this effect on 3 June 1992. The formal 
Council Decision followed on 15 February 1993. The contract of guarantee 
between the Community and the EIB was signed on 4 November 1993 in Brussels 
and on 17 November 1993 in Luxembourg. 
At 30 June 1994 credit lines of ECU 139 million had been signed but no 
disbursements had taken place. 
D. COMMUNITY CREDIT GUARANTEE FOR EXPORTS OF 
AGRICULTURAL PRODUCTS AND FOODSTUFFS FROM THE 
COMMUNITY TO THE FORMER SOVIET UNION 
The Community has decided to guarantee loans granted to the former Soviet 
Union by a pool of banks to finance imports of agricultural products and 
foodstuffs originating in the Community and the countries of Central and Eastern 
Europe. 
The Community guarantee covers 98%, up to a maximum of ECU 500 million, of 
any losses in principal (around ECU 408 million) and interest (around 
ECU 92 million). 
As the credit line has not been used in full and as the time limit for use has not 
been extended, the amount guaranteed comes to only ECU 375.5 million in 
principal and ECU 80.3 million in interest. 
The Community will receive a surety commission of 0.67% of the amount 
guaranteed in consideration for this guarantee. Half of this commission was paid 
on 26 December 1991 under the terms of the contract. The balance corresponding 
to the Community guarantee was paid on 28 January 1993. 
On 26 November 1991 the terms of the loan and the arrangements for the 
utilization of the funds were laid down in an exchange of letters between the 
Commission and the Soviet authorities. On the same day the Community and the 
banks signed a contract of guarantee. 
Following the disappearance of the Soviet Union, it has been decided that the 
funds will be used by the Russian Republic. 
The loan is for three and a half years from the date of signature. 
Interest is payable half-yearly and the principal will be repaid in three instalments, 
20, 31 and 42 months after the agreement has been signed. 
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Interest payments up to 30 June 1994: 
Payment due > Actual date of payment 
1st 9.9.1992 25.9.1992 
2nd 9.3.1993 2.4.1993 
3rd 9.9.1993 18.11.1993 
4th 9.3.1994 24.3.1994 
Capital repayments up to 30 June 1994: 
Payment due Actual date of payment 
1st 26.7.1993 18.11.1993 
2nd 26.6.19945 
All the default interest has been paid on late payments up to 9 March 1994. 
The capital repayment due on 26 June 1994 was made on 14 July 1994 together with the 
corresponding interest. 
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PART TWO: 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 30 June 1994, giving the minimum level of 
risk to the Community assuming that there are no early repayments; 
- on a more forward-looking basis, by reference to all the operations proposed by the 
Commission in order to estimate the impact on future budgets, giving the maximum 
riskrborne by the Community assuming that the Commission's proposals are accepted. 
For the latter exercise a number of assumptions have to be made about dates of 
disbursement, terms of repayment, interest and exchange rates; details are given in the 
annex. However, this method does give some idea about the future level of risks 
connected with the proposals made. 
The results are shown in the attached tables, 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 financial assistance and loans for projects guaranteed by the borrowers in the case of 
NCI and EIB 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. 
I. TOTAL RISK 
A. AMOUNT OUTSTANDING AT 30 JUNE 1994 (Table 1) 
The total risk at 30 June 1994 came to ECU 13 798 million, 4.0% less than at 
31 December 1993. 
B. MAXmUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET: 
OPERATIONS DISBURSED AT 30 JUNE 1994 (Table 2) 
The total risk, which came to ECU 2 780 million in 1994, will develop as follows: 
- 1995 
- 1996 
- 1997 
- 1998 
- 1999 
- 2000 2 856 million (+ 3%) 
3 056 million (+ 7%) 
2 797 million (- 8.5%) 
3 055 million (+ 9%) 
794 million (- 74%) 
3 241 million (+408%) 
-19 
* No capital repayments for the balance-of-payments loans to the Member 
States; capital repayments on loans to Hungary;~the Czech and Slovak 
Republic and Bulgaria end in 1998. 
C. MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE 
COMMUNITY BUDGET (Table 3) 
This risk comes to ECU 3 035 million in 1994 and will increase regularly as 
follows until 2000 (except in 1999 when it will total ECU 2 588 million): 
1995 
1996 
1997 
1998 
1999 
2000 3 628 million (+ 19.5%) 
4 026 million (+11%) 
4 221 million (+ 5%) 
4 602 million (+ 9%) 
2 588 million (- 44%) 
7 116 million (+275%) 
H. RISK IN RESPECT OF THE MEMBER STATES 
A. AMOUNT OUTSTANDING AT 30 JUNE 1994 (Table 1) 
The amount of capital outstanding in respect of operations in the Member States 
came to ECU 8 274 million at 30 June 1994, a fall of 7.9% compared with 
31 December 1993. 
This fall is mainly due to the reduction in outstanding loans to Greece, Euratom 
and the NCI. 
The amount outstanding from the other operations has fallen or remained stable. 
B. MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET: 
OPERATIONS DISBURSED AT 30 JUNE 1994 (Table 2) 
The risk for 1994 comes to ECU 1 900 million. 
The total maximum annual risk to the Community budget in relation to 
disbursements (Table 2) changes in line with the capital repayments (every two 
years) on balance-of-payment loans to Greece and Italy. The maximum risk is 
highest in the even years leading up to 2000 when it will reach ECU 2 784 million. 
C. MAXIMUM THEEORETICAL ANNUAL RISK BORNE BY THE 
COMMUNITY BUDGET (Table 3) 
The trend is much the same as in Table 2 up to 2000 when the risk will amount to 
ECU 5 168 million and 2001 when it will amount to ECU 2 201 million. 
-20-
IH. RISK IN RESPECT OF NON-MEMBER COUNTRIES 
*£ AMOUNT OUTSTANDING AT 30 JUNE 1994 (Table 1) 
The amount of capital outstanding at 30 June 1994 came to ECU 5 524 million, an, 
increase of 5% compared with 31 December 1993. 
B. MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET: 
OPERATIONS DISBURSED AT 30 JUNE 1994 (Table 2) 
The risk for 1994 comes to ECU 880 million and will increase to 
ECU 1 654 million in 1995, mainly because two repayments of principal then fall « 
due: 
- ECU 350 million from Hungary; 
- ECU 553 million from the Republics of the former Soviet Union. 
The risk will drop in 1996 to ECU 976 million and increase again in 1997 to 
ECU 1 327 million as the following payments fall due: 
- ECU 80 million from Hungary; 
- ECU 127 million from the Czech Republic; 
- ECU 63 million from the Slovak Republic; 
- ECU 140 million from Bulgaria; 
- ECU 250 million from Algeria; 
- ECU 160 million from Israel. 
At ECU 1 010 million, the risk will be smaller but still at a high level in 1998, but 
should fall to ECU 502 million in 1999 and ECU 457 million in 2000. 
C MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE 
COMMUNITY BUDGET (Table 3) 
The risk will rise from ECU 964 million in 1994 to ECU 2 084 million in 1995; in 
particular, the Republics of the former Soviet. Union are to repay principal of 
ECU 687 million that year. 
The risk will drop to ECU 1 520 million in 1996, rise again to ECU 2 328 million 
in 1997, ECU 2 128 million in 1998, ECU 1901 million in 1999, 
ECU 1 948 million in 2000 and ECU 2 322 million in 2001. 
-21 
IV. ACTIVATION OF BUDGET GUARANTEES 
1. 'EIB loans to non-member countries 
In the first half of 1994, the EIB again called on the budget guarantee in respect of 
loans of around ECU 6.0 million to the Republics of former Yugoslavia 
(Bosnia-Hercegovina, Macedonia and Serbia). The payment was made to the EIB 
on 28 May 1994. 
On 21 June 1994, the EIB again called on the budget guarantee in respect of loans 
of around ECU 8.6 million to the Republics of former Yugoslavia (Macedonia and 
Serbia). The payment was made to the EIB in late September 1994. 
At 30 June the total amount of debts settled by the Community and not yet repaid 
by the defaulting debtors came to ECU 34.6 million. These debts were owed by 
all the Republics of former Yugoslavia with the exception of Slovenia and Croatia. 
2. The Commission also made payments from 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: 
(a) loans granted by a consortium of banks guaranteed by the Community 
(ECU 500 million) 
- payment of interest due from Russia on 9 March 1994 and principal and 
interest due on 26 June 1994 in respect of a loan granted by a consortium 
of banks and guaranteed by the Community; 
(b) loans granted by the Community to the Republics of the former Soviet Union 
(ECU 1 250 million) 
- payment of interest: 
due from four Republics of the former Soviet Union (Russia, Armenia, 
Georgia and Kazakhstan) on 15 January 1994 in respect of the borrowing 
and lending operation of ECU 1 250 million for these Republics, 
due from nine Republics of the former Soviet Union on 20 April 1994 in 
respect of the same operation. 
These payments were eventually made by the debtors concerned, except in the 
case of three Republics: Tajikistan, Kyrgyzstan and Georgia, which had still not 
settled their debts on 30 June 1994. 
At 30 June 1994 the situation as regards unpaid debts was as follows: 
Republics of former Yugoslavia: ECU 43.2 million (including 
ECU 28.6 million from before 1994) 
Tajikistan: ECU 4.2 million (including ECU 2 million 
from before 1994) 
-Kyrgyzstan: ECU 0.79 million6 
Georgia: ECU 2.6 million 
The interest due on 20 April 1994 was paid on 21 July 1994. 
-22-
PART THREE: CHANGES IN POTENTIAL RISKS 
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. 
I. TYPES OF OPERATION 
The risks to which the above figures relate derive from a variety of operations which can 
be divided into two categories:* operations with macroeconomic objectives and those with 
microeconomic objectives. 
A. OPERATIONS WITH MACROECONOMIC OBJECTIVES 
The first of these are the balance of payments loans for Member States, normally 
carrying strict economic conditions and undertakings. 
Financial assistance operations are similar in nature but are intended for non-
member countries. 
Finally, this category includes the credit guarantee of ECU 500 million and 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 these two 
operations depends to a large extent on macroeconomic and political 
developments in the recipient countries. 
B. OPERATIONS WITH MICROECONOMIC OBJECTIVES 
These are loans to finance specific projects which are usually repaid over the long 
term from funds which these projects are expected to generate; as a rule, they are 
granted to State companies or financial institutions and, in addition to the 
Community guarantee, are covered by the usual guarantees demanded by banks. 
They are the Euratom and NCI loans in Member States and the Euratom and EIB 
loans outside the Community (Mediterranean and Central and Eastern Europe and 
certain non-member countries - developing countries of Asia and Latin America). 
-23-
A. ALGERIA 
l. GENERAL ECONOMIC SITUATION 
Following the rapid worsening of the internal and external economic situation of 
Algeria towards the end of 1993, caused by security problems and declining 
hydrocarbon export prices, the authorities reached a new agreement with the IMF in 
April 1994 on an economic reform programme. The programme's main objective is 
to give a new impetus to economic growth while reducing inflation and the fiscal 
deficit. It comprises a substantial liberalisation of prices, imports and the foreign 
exchange regime, combined with stringent monetary and fiscal policies. 
Substantial price increases and liberalisation measures were implemented in April. At 
the same time, the Algerian Dinar was devalued from 25 to 36 Dinar per US$. The 
resulting increase in inflation is expected to slow down gradually. Average inflation 
for 1994 is expected to remain below 40%. The administrative foreign exchange 
allocation system has been replaced by a more liberal system whereby banks are 
allowed to make their own allocation decisions. The resulting increase in imports 
fuelled industrial and construction activities. GDP growth is forecasted to reach 3% 
in 1994, following a 1.8% decline in 1993. The overall deficit of the government 
should decline from an unsustainable 9.2% of GDP in 1993 to no more than 5.7% of 
GDP in 1994. The recent increase in hydrocarbon export prices is likely to ease the 
external financial constraints on the economic and financial recovery programme. 
2. THE BALANCE OF PAYMENTS 
Export revenues, generated almost exclusively by hydrocarbon products, diminished 
by 10% in 1993 and are projected to remain low in 1994 as world hydrocarbon 
prices took a dip end 1993 and early 1994. The strict administrative imports regime, 
established end 1992, has been abandoned in May 1994 and replaced by a more 
liberal regime. As a result, imports are expected to increase by 20% in 1994, thereby 
giving a boost to economic growth. The current account will be in deficit, to be 
financed partly by the rescheduling of external debt service due. In view of the 
economic and security situation, there were no foreign direct investments in 1993. 
The projected increase in the current account deficit will be financed by external debt 
rescheduling arrangements with the Paris Club and commercial creditors as well as 
new money from, amongst others, the IMF, the World Bank and the Community. In 
August 1994, the remaining second tranche (ECU 150 million) of the 1992 
Community balance of payments loan was disbursed. A proposal for a further 
balance of payments loan of up to ECU 200 million in support of the economic 
reform programme is being considered. 
Algeria's foreign reserves position worsened somewhat in 1993 and is expected to 
remain at around US$ 1.5 billion or 6 weeks of imports throughout most of 1994. 
-24-
3. FOREIGNDEBT 
End 1993, Algeria's foreign debt stock amounted to US$ 24.6 billion, requiring US$ 
2.1 billion in interest payments and US$ 7.1 billion in repayments of principal. 
Nearly three quarters of this debt stock consisted of publicly guaranteed private 
sector credits^ About 13% are bilateral credits, mostly non-concessional. 
The downward trend in export revenues, due to decreasing oil prices, undermined 
Algeria's debt service capacity. By early 1994, the debt service-to-exports ratio had 
climbed to close to 100% and, for the first time, accumulated arrears exceeded US$ 
0.5 billion by March 1994. This created an unsustainable situation. Following the 
agreement with the IMF on an economic reform programme, the Algerian authorities 
obtained, in June, an agreement from Paris Club creditors on a rescheduling of 
bilateral debt. Àt the same time, the authorities announced their intention to 
negotiate a debt rescheduling agreement with commercial creditors on similar terms 
as those of the Paris Club. 
As a result of these reschedulings, external debt service due during the programme 
period with the IMF (May 1994-May 1995) should be reduced by some US$ 4.9 
billion or more than 50% compared to scheduled debt service. Algeria should be able 
to reach external viability again by the end of 1997. Further external financial 
support, notably from the IMF and through debt reschedulings, will be required over 
the next three years. 
The 1992 Community balance of payments loan (ECU 250 million) is excluded from 
the rescheduling agreements and debt service on this loan should continue as 
foreseen. 
-25 
B. BULGARIA 
l. GENERAL ECONOMIC SITUATION 
Stabilization and reform in Bulgaria, which had slowed down in 1993, have been 
making only slow progress since the start of 1994. This was made in the context of 
the economic programme put in place with the financial support of the IMF under a 
new stand-by arrangement approved in March 1994. The programme's objectives 
include restoring domestic and external balances through a tightening of fiscal, 
incomes and monetary policies, and accelerating the structural transformation 
process, mainly financial sector reform and privatization. 
The implementation of government stabilization policies in the first half of 1994 has 
been broadly in line with programme targets despite an unprecedented sharp 
depreciation of the national currency in the first months of the year. The exchange 
rate crisis fuelled by political uncertainties, delays in mobilizing international financial 
support and, most importantly, policy slippages during 1993 (the 1993 fiscal deficit is 
estimated to have reached over 13% of GDP, against 7% a year earlier) culminated 
in March 1994, when the lev exchange rate dropped from 37 to 65 Leva per US$ (it 
stabilized later at round 55 Leva per US$). On the side of structural reform, 
privatization has been accelerated somewhat, a modern bankruptcy law has been 
adopted by Parliament and a clean-up of a large proportion of non-performing bank 
loans has been virtually completed. 
2. BALANCE OF PAYMENTS 
Bulgaria's external financial situation remains weak, although there have been 
improvements since the start of 1994. Exports in convertible currencies, which had 
grown in 1992, remained stable in 1993 while imports increased somewhat. Clearly, 
Bulgaria's export performance was adversely affected by the UN sanctions against 
Serbia and Montenegro and by a substantial real appreciation of the exchange rate 
(until the last months of the year). The effects of the UN sanctions and the 
deteriorating competitiveness were compounded by lack of official external financing 
following the failure of Bulgaria to secure an arrangement with the IMF. The country 
remained also cut off from private financing as it did virtually no servicing of the 
commercial debt inherited from the previous regime. Foreign direct investment 
remained very low despite a particularly liberal foreign investment law. 
During the first half of 1994, the trade account has improved substantially as exports 
increased by an estimated 13% while the value of imports has fallen by one-fifth. The 
sharp decline from late 1993 to Spring 1994 in the exchange rate of the lev is likely 
to'explain at least in part the improved trade balance. 
-26-
3. FOREIGN DEBT 
Bulgaria's external debt at the end of 1993 was estimated at some US$ 13 billion. It 
included over US$ 9 billion owed to some 300 commercial banks, out of which 
about half was made up of interest arrears and arrears on short-term deposits and 
letters of credit. In November 1993, almost four years after Bulgaria declared its 
debt moratorium and following two years of negotiations with the Bank Advisory 
Committee, an agreement in principle was reached on the parameters of a 
comprehensive debt and debt service reduction deal (DDSR). The deal expected to 
improve substantially the country's financial situation in the medium-term was finally 
closed in end-July 1994. 
Under the DDSR operation, a total of US$ 8.3 billion was tendered for the various 
elements of the debt restructuring package, i.e. debt buy-backs (at about 25% of face 
value) and long-term securities (discount bonds at 50% of face value, interest 
reduction bonds and "past due interest bonds"). Overall, it is estimated that the 
operation will result in a reduction of Bulgaria's commercial debt by some 46-48%. 
The upfront cost of the deal, which is made up of debt buy-backs, interest down-
payments and collateral prepayments on long-term bonds is over US$ 700 million, 
which corresponds to the Central Bank's present international reserves. The IMF and 
the World Bank made available specific financing to support the DDSR operation. 
Prior to the closure of the London Club debt restructuring, Bulgaria also negotiated 
a new official debt rescheduling with the Paris Club. The terms of the 1994 Paris 
Club arrangement are comparable to those obtained in December 1992. 
-27-
C. THE CZECH REPUBLIC 
1. GENERAL ECONOMIC SITUATION 
The recession bottomed out in 1993, with real GDP remaining practically unchanged 
(-0.3%). After increasing from 2.6% at end-1992 to 3.5% at end-1993, the 
unemployment rate edged down to 3.2% in July-1994. Led by the recovery of the 
construction and services sectors, the economy is expected to grow by about 2-3% 
in 1994 and by 3-5% next year. 
Following a 8.5% price-jump in January 1993 associated with the introduction of the 
VAT, inflation came down rapidly, ending 1993 at a year-on-year rate of 18.2%. 
Inflation remained subdued in the first half of 1994, with the year-on-year rate falling 
below 10% for the first time since mid-1992. However, the rapid expansion of the 
money-supply (M2), which grew by 8.8%:between December 1992 and July 1993, 
risks reigniting inflationary pressures in the second half of the year. 
The rapid growth of M2 reflects the impact of the strong foreign capital inflows, 
which the Czech National Bank (CNB) has only been able to sterilize partially 
through open market operations and the increase (effective on 4 August) of the 
minimum reserve requirements on banks' demand deposits. Regarding fiscal policy, 
the state budget ended the first half of 1994 with a surplus of Ck 9.7 bn (about US$ 
336 mio) and the government is preparing a balanced budget for 1995. 
As far as structural reform is concerned, the second wave of large-scale privatization 
is underway. As was the case in the first wave, almost one third of the assets will be 
sold through the voucher method. The second wave should be completed by end-
1994, by which time 80-90% of the productive capacity of the economy will be in 
private hands. 
2. THE BALANCE OF PAYMENTS 
The Czech current account posted in 1993 a surplus of US$ 580 mio (1.8 % of 
GDP), a good result given the acceleration of domestic demand and imports and the 
weakness of the country's main export markets. The surplus, however, is expected to 
start shrinking in the second half of 1994 and disappear or turn into a moderate 
deficit in 1995, reflecting a continued strengthening of domestic demand and the real 
appreciation of the currency. 
The net inflow of FDI slowed down considerably in 1993 (to US$ 517 mio from 
US$ 983 mio in 1992) and the first half of 1994 (US$ 275 mio), but the Czech 
Republic-has been experiencing a surge in other-capitaUnflows since the third quarter 
of 1993. Thus, portfolio investment (mostly equity investment in the Prague Stock 
Exchange and foreign acquisition of Czech issues of international bonds) reached 
US$ 1062 mio last year and US$ 530 mio in the first half of 1994. The Czech 
-28-
Republic's access to the international capital markets has been reinforced by 
successive upgradings of the country's rating. In June, Moody's upgraded again the 
Czech Republic's rating (from Baa3 to Baa2), and in July S&P's upgraded its rating 
fromBBB"toBBB+. 
The combination of a healthy current account and a strong capital inflow has put 
upward pressure on the nominal exchange rate and has resulted in a rapid growth of 
official foreign exchange reserves, which stood at US$ 5.6 bn at end August-1994 
compared to US$ 0.7 bn at end-1992. In order to stem the upward pressure on the 
exchange rate the CNB intends to make the crown fully convertible for current 
account transactions and liberalize capital controls in a phased manner. It has also 
decided not to withdraw the remaining tranches of the stand-by credit approved by 
the IMF in March 1993, and to repay ahead of schedule US$ 471 mio owed to the 
IMF which were originally scheduled for repayment during 1996-99. 
3. «FOREIGN DEBT 
Despite a significant growth of convertible debt in 1993 and the first half of 1994, 
mostly associated with strong foreign borrowing by Czech companies and 
municipalities, the Czech Republic continues to enjoy a low foreign debt burden. 
Total convertible debt increased from US$ 6.9 bn at end-1992 to US$ 8.7 bn at end 
March-1994, but this still implied a relatively low debt/GDP ratio of 27.7%. At US$ 
1.4 bn in 1993, total debt service also remains moderate, having even decreased as a 
percentage of exports (from 9.1% in 1992 to 8.4%). While projections for 1994 and 
1995 point towards an increase in the debt and debt service indicators, they are 
expected to remain at reasonable levels. 
29-
D. ESTONIA 
1. GENERAL ECONOMIC SITUATION 
Following sharp output contractions in 1991 (-12%) and 1992 (-19%) and a further 
decline in the first half of 1993, the economic situation in Estonia improved 
considerably in the second half of 1993 reducing the rate of negative growth to 
merely 3%. The economic rebound, which is expected to produce a positive growth 
rate of 4-5% in 1994, reflects the successful implementation of macroeconomic 
stabilization and structural reforms in Estonia backed by two subsequent IMF stand­
by programmes (since mid-1992), the country's reorientation towards Western 
markets and support from the international community. Despite the reduction in 
economic activity over the past years, the official unemployment rate has barely risen 
in the course of 1993 and 1994 and is now at 2%. 
Since 1992, the Estonian authorities have been successful in cutting inflation, despite 
a temporary resurgence of inflation last winter after strong price increases of Russian 
imports. Apart from the virtual completion of price liberalization by the end of 1992, 
this achievement is due to the implementation of strict monetary and incomes 
policies. The central bank is also prohibited from extending credits to the 
Government, which ran a small budget surplus in 1993, following a somewhat larger 
surplus in 1992. But the government's net lending operations amounted to some 
1.5% of GDP in 1993, which had to be financed almost completely by foreign 
sources. 
Estonia has made continuing progress on structural reform. In 1993 and 1994, 
Estonia advanced further in the area of privatization, especially for small enterprises 
of which over 80% have now been sold to private owners. The Estonian 
Privatization Office was created in 1993 to better coordinate policies towards the 
enterprise sector, and in 1994 a separate department was established in the Ministry 
of Economy with responsibility for restructuring state firms before privatization. In 
some cases the bankruptcy law was applied. Banking supervision was improved. 
Following the banking crisis of early 1993, the banking system was restructured. The 
number of commercial banks was reduced to 21, mostly through mergers. The 
central bank policy of phased increases in minimum capital requirements keeps the 
pressure on banks to consolidate. Estonia maintained liberal foreign trade and 
investment laws. 
2. THE BALANCE OF PAYMENTS 
In 1992, Estonia's current account unexpectedly showed a surplus of US$ 83, largely 
due'to^a*dynamic expansion of exports of goods"to-4ndustrialized countries which 
limited the overall trade deficit to some US$ 63 mio. But in the course of 1993, 
imports from Western countries picked up sharply, whereas exports to this area 
slowed down considerably due to increasing domestic demand pressures, diminished 
-30-
opportunities for re-exports of FSU goods and a diversion of exports towards the 
FSU; -This -resulted in a trade deficit with the non-FSU area-(US$ 107) ten times 
larger than in 1992. One major reason for the redirection of exports to the West was 
the sharp real appreciation of the ruble in the course of the second half of 1993, 
shifting Estonia's trade balance with the FSU from a deficit of US$ 51 mio to a 
surplus of US$ 15 mio. Estonia's overall tra&e deficit widened to US$ 142 mio and 
the current account surplus shrank to US$ 8.5 mio despite an increased surplus in the 
services account. It is likely that the strengthening of domestic demand and the 
gradual reduction of the international competitiveness have led to a further 
deterioration of the current account in 1994. 
The capital account surplus observed in 1992 (US$ 120 mio) expanded further in 
1993 to US$ 148 mio despite the fact that in 1992 the capital account had benefited 
exceptionally from the restitution of gold of US$ 140 mio. The main reason for the 
improvement in 1993 was the sharp increase of foreign direct investment from US$ 
58 mio in 1992 to US$ 144 mio which was supported by Estonia's liberal trade, 
foreign exchange and investment laws and the stability of its currency (pegged to the 
D-Mark under a currency board system since June 1992). It permitted the Bank of 
Estonia to accumulate reserves in the order of US$ 200 mio in 1992 and some US$ 
157 mio in 1993, to a level equivalent to 4.8 months of goods imports. 
Conditions for ongoing capital inflows have remained good in 1994; in August 
Estonia accepted the obligations of the IMF Article VIII, i.e. basically to refrain from 
imposing restrictions on the making of payments and transfers for current 
international transactions. 
3. FOREIGN DEBT 
In the course of 1993, Estonia's external debt increased from US$ 38 mio to US$ 
140 mio (some 7% of GDP). US$ 46 million hereof is due to purchases from the 
Fund. Debt service stabilized at around $20 mio in 1992 and 1993, with the ratio to 
exports of goods and non-factor services declining from 3.2% to 1.8%. 
-31-
E. HUNGARY 
1. GENERAL ECONOMIC SITUATION 
In spite of a 4% growth in industrial production, real GDP declined by 2.3% in 1993, 
reflecting a sharp fall in both agricultural output and exports. After a peak in March 
1993, the unemployment rate has steadily declined to 11% in August 1994. In 1994 
GDP is expected to grow by 1-2% but, with the strengthening of domestic demand 
being constrained by a weak balance of payments situation, GDP could again 
stagnate in 1995. 
Little progress was made on the inflation front in 1993, with average CPI inflation 
reaching 22.5%, close to the 1992 level (23%). Increases in indirect taxes and a 
faster devaluation of the forint will prevent a reduction of end-1994 inflation below 
20%. 
The new socialist-liberal government announced in August the adoption of a 
supplementary budget for 1994 designed to keep the consolidated deficit at Ft 330 
bn (or about 7%) of GDP, down from the Ft 390 bn deficit that was being forecasted 
on recent trends. In recent talks with the new government, the IMF has insisted on 
the need to reduce the budget deficit to about 3% of GDP next year if IMF financing 
is to resume, but the government's budget guidelines for 1995 point towards a 7-8% 
deficit. 
Regarding the structural reforms, a new bank consolidation scheme was launched in 
December 1993, involving a two-step recapitalization of the major Hungarian banks 
through the transfer of state bonds. The new government, however, will probably 
scale down the scheme and give priority to bank privatization. After a slowdown in 
1993, the privatization process almost came to a standstill in the first half of 1994. 
The new govenment plans to revitalize and revise the privatization strategy. 
2. THE BALANCE OF PAYMENTS 
Hungary's current account suffered a sharp deterioration in 1993, reaching a deficit 
of US$ 3.5 bn (almost 10% of GDP). Having amounted to almost US$ 2 bn in the 
first half of 1994, the current account deficit is projected to again exceed US 3bn this 
year. The weakness of the current account and speculation against the forint led the 
authorities to devalue the currency by 8% on 5 August, thus deviating from their 
policy of small, regular devaluations aimed at stabilizing the real exchange rate. 
Despite the very high current account deficit, official foreign exchange reserves 
expanded rapidly in 1993, reaching US$7 bn at the end.o£the year, up from US$ 4.4 
bn at end-1992. This was made possible by a continuing strong net inflow of FDI 
(which reached a record of US$ 2.3 bn) and by the placement by the National Bank 
of Hungary (NBH) of US$ 4.5 bn in international bonds in 1993. 
-32-
Although a further US$ 1.5 bn in international bonds were raised by the NBH in the 
t first half of 1994- lower inflows of FDI and substantial early repayments of external 
'" debt have resulted in a decrease in official foreign exchange reserves from a peak of 
US$ 7.5 bn in January 1994 to US $6.6 bn at end-August 1994. 
Hungary has a 15 month, SDR 340 mio stand-by loan agreement with the IMF 
ending in December 1994. However, reflecting both the comfortable level of official 
foreign exchange reserves and non-compliance with some of the programme target 
the government has only withdrawn the first tranche of the stand-by credit. The IMF 
is currently discussing with the Hungarian authorities on the main elements of an 
economic programme to be supported by the resumption of IMF lending. 
3. FOREIGN DEBT 
The result of the international borrowing programme of the NBH has been a rapid 
growth of gross foreign debt. Gross convertible foreign debt increased from US$ 
21.5 bn at end-1992 to US$ 24.6 bn at end-1993 and US$ 26.6 bn at end-June 1994. 
Reflecting the gap between the current account deficit and net inflows of FDI, net 
foreign debt has shown a similar increase (from US$ 13.1 bn at end-1992 to US$ 
18.1 bn at end-June 1994). The structure of external debt, however, has continued to 
improve, with the proportion of medium- and long-term debt increasing from 89.8% 
at end-1992 to 92.4% at end-June 1994. 
Total debt service amounted to US$ 4.3 bn in 1993, practically the same level as in 
1992. However, with exports estimated to have fallen by 20% last year, debt service 
increased in percent of merchandise exports from 43.9% to 53.1%. The early 
repayments made by the NBS have significantly reduced the concentration of 
repayments expected for 1995 and 1996. Repayments in 1995 and 1996, which 
would have otherwise reached US$ 3.4 bn and US$ 3.9 bn respectively, are now 
projected to amount to US$ 3.bn and US$ 3.1 bn. 
-33-
F. ISRAEL 
1. GENERAL ECONOMIC SITUATION 
GDP increased by 3.5% only in 1993, the lowest growth rate since 1989. The 
closure of the Occupied Territories in the second quarter slowed down economic 
activity, but an increase was registered towards the end of the year, following the 
peace agreement with the Palestinians. While growth in the early 90s was driven 
mainly by immigrant inflows, privatisation and deregulation is now creating a basis 
for more sustainable long-term growth. 
The government budget deficit was reduced to 3.6% of GDP, following an 
acceleration of privatisation and a reduction in the housing programme and other 
subsidies for immigrants, including unemployment benefits. Budget revenue from 
v privatisation .was only US$ 250 million in 1992, which is very small given the 
importance of state enterprises in the economy. The acceleration of privatisation, 
announced in August 1993, boosted privatisation revenue to nearly US$ 1 billion by 
end 1993. For 1994, privatisation revenues are expected to reach US$ 1.5 billion or 
more than 2% of GDP. 
Unemployment continued to fall, from 11.2% end 1992 to 9% end 1993, as the wave 
of immigration from Eastern Europe and the ex-Soviet Union of the early 1990s 
came to an end. Recent immigrants were gradually integrated into the economy. The 
closure of the Occupied Territories in the second quarter facilitated this process as 
immigrants replaced Palestinian workers. 
Inflation accelerated sharply to 16% p.a. in the first quarter of 1993. Monetary policy 
has been tightened, with an increase in the Central Bank refinancing rate driving up 
short-term interest rates. By July, inflationary pressures had decreased sufficiently 
and monetary policy was eased again. At the end of 1993, inflation had slowed down 
to 11.3% p.a. which is still somewhat above the initial target of 10%. 
2. THE BALANCE OF PAYMENTS 
Foreign trade was further liberalised in 1993 with the cancellation of a 2% import 
duty surcharge, a 2% export subsidy and travel taxes, all of which constituted trade 
restrictions under the GATT rules. The effective unification of the exchange rate 
took place in July, for the first time in Israel's history. In September, Israel accepted 
the obligations concerning the convertibility of the shekel for current account 
transactions under article VIII of the IMF Articles of Agreement. The Central Bank 
of Israel maintains a "crawling peg" exchange rate system with a target depreciation 
^rate^announced by the Central Bank,- in line nvith«expected -inflation, and a 2% 
variation allowed around the targeted exchange rate. The announced rate of 
depreciation was reduced in July from 8% to 6%, in line with the expected slow­
down in the inflation rate. 
34-
Following the end of the Gulf War, external trade started to pick up again in 1992 
*-and this trend continued in 1993. The increase in exports, estimated at 12% in dollar 
"terms, was a strong driving force for growth in 1993. Industrial exports increased by 
18%, of which three quarters went to non-OECD countries. But imports increased 
equally fast. The current account moved from a small US$ 0.1 billion surplus in 1992 
to a US$ 1.2 billion deficit in 1993. Private capital inflows increased as monetary 
policy was tightened and interest rates increased. Long-term capital inflows grew 
strongly from a net outflow in 1992 to a US$ 2.2 billion inflow in 1993. 
Official foreign exchange reserves reached the satisfactory level of US$ 6.4 billion at 
end-1993, or the equivalent of 2.4 months of imports. 
3. FOREIGN DEBT 
The US$ 10 billion credit guarantees obtained from the US government in 1992 have 
-enabled the authorities to draw on medium and long-term credit lines for investment 
projects. Total external debt increased to US$ 36.1 billion, of which nearly three 
quarters was public sector debt. The debt service to exports ratio improved slightly 
as export growth was strong in 1993. 
-35-
G. LATVIA 
1. GENERAL ECONOMIC SITUATION 
Following severe output contractions in 1991 (-8.3%) and 1992 (-33.8%), the 
Latvian economy bottomed out in the course of 1993 in which output contracted by 
some 12% for the year as a whole. For 1994, a GDP growth in the order of 4-5% is 
expected. After rising from 2.3% to 5.8% in the course of 1993, the official 
unemployment rate increased further to 6.4% in August 1994. At the same time, real 
wages rose by 12% from the first quarter 1993 to the first quarter 1994. 
Until Summer 1993, the Latvian authorities succeeded in bringing down inflation 
significantly; at the end of 1993, the level of consumer prices was 35% higher than 
one year earlier (compared to 960% in 1992). Apart from the virtual completion of 
price liberalization by the end of 1992, this was due to the tight stance of monetary 
policy (since the monetary reform of July 1992), as well as of fiscal and incomes 
policies. In late 1993 and early 1994, however, inflation rates picked up. The VAT 
rise of 1 November contributed to this development. But the major cause is likely to 
have been the intervention of the Bank of Latvia in the foreign exchange market in 
order to contain the appreciation of the national currency (lats) in response to the 
substantial capital inflow. 
In 1993, the Latvian budget was in surplus (at 1% of GDP; or, if net lending of the 
Government is taken into account, at 0.6% of GDP). This was not only due to tight 
budget control, but also to higher profit and value added tax revenues and lower 
unemployment benefits than previously estimated. Despite substantial increases of 
pensions and public sector wages on 1 November 1993, the budget was in balance in 
the first quarter of 1994 (-1% of GDP if net lending is taken into account). For 1994 
a deficit of 1.7% of GDP is envisaged (4% of GDP, counting net lending). 
Latvia also advanced further in a number of areas of structural reform. In particular, 
significant progress was made towards restructuring and privatizing the former 
commercial branches of the Bank of Latvia and towards rehabilitating and eventually 
privatizing the State Savings Bank. Banking supervision was also strengthened. In 
addition, progress was made in land restitution and privatization of small-scale 
enterprises. In February 1994, several privatization laws were adopted and 
subsequently the Privatization Agency and the State Property Fund were established 
to supervise, respectively, privatization and those enterprises remaining under state 
control. This is likely to speed up large-scale privatization. 
2. THE BALANCE OF PAYMENTS 
Latvia's current account position in 1992 and especially 1993 were considerably 
better than expected under the first IMF programme. The surplus increased from 
US$ 21 mio in 1992 to US$ 193 mio in 1993, compared to estimated deficits in the 
-36-
order of US$ 90 mio and US$ 240 mio, respectively. To some extent, there may still 
be a problem of under-reporting of imports from the former-Soviet republics, but the 
situation also reflects a better than expected performance in the services account and 
dynamic exports. The reorientation of trade towards Western markets was halted in 
1993, with exports to the CIS and Baltics increasing by 8% in volume terms, while 
expanding 9% to the rest of the world. This reflects on the one hand the very strong 
real appreciation of the Latvian currency compared to the dollar since July 1992. On 
the other hand, it is the consequence of a real depreciation of the lat against the 
rouble since mid-1993 which almost completely reversed the Latvian loss in 
competitiveness vis-à-vis Russia that had occurred since September 1992. It appears 
that possibilities for re-export of FSU products (in particular energy) to the West 
have diminished with these developments. The strengthening of domestic demand 
and diminished international competitiveness should lead to a deterioration of the 
current account in 1994. 
As a consequence of the strong capital inflow in 1993, the Bank of Latvia 
accumulated a large amount of reserves (some US$ 356 mio), increasing its gross 
level to some US$ 518 mio or an equivalent of 5.9 in months of total imports (from 
1.8 at the end of 1992). 
Since July 1994, Latvia assumes Article Vm status at the IMF; i.e. in particular that 
it undertakes to refrain from imposing restrictions on the making of payments and 
transfers for current international transactions. 
FOREIGN DEBT 
Latvia's external debt increased from US$ 65 mio to some US$ 300 mio (about 10% 
of GDP). Compared to 1992, the debt service fell by one third to US$ 10 mio in 
1993, with the ratio to merchandise exports declining from 2% to 1%. 
-37-
H. LITHUANIA 
l. GENERAL ECONOMIC SITUATION 
In Lithuania, output contraction seems to have halted at the end of 1993, and the 
overall GDP decline is estimated at 16% for the whole year, following declines of 
13% in 1991 and 38% in 1992. The officiai unemployment rate rose only moderately 
in the course of 1993 and reached a mere 1.6% at the end of 1993, above which it 
did not rise in the first eight months of 1994. However, hidden unemployment is 
estimated at some 7%. 
The Lithuanian authorities have reduced inflation in 1993, even though less rapidly 
than the other two Baltic States. The increase in consumer prices which reached 
1163% at the end of 1992 fell to 189% at end-1993. Strict incomes and fiscal 
policies throughout the year, combined with a monetary policy that was tightened in 
Spring 1993, contributed to the strong deceleration of inflation during the Summer. 
Towards the end of the year, monetary expansion picked up sharply and contributed 
to a rise of inflation as the central bank intervened in the foreign exchange to prevent 
a strong appreciation of the litas resulting from capital inflows. Since 1 April 1994, 
Lithuania has a currency board which ties monetary expansion to the balance of 
payments. 
The Lithuanian authorities managed to keep public expenditures under tight control 
in 1993 and strengthened revenues through trade reforms and an increase in the 
general sales tax, such that the budget was for the third year in a row in surplus (1% 
of GDP). However, if government lending is taken into account, there was a fiscal 
deficit of 4.6% of GDP, financed through foreign assistance. For 1994, a deficit 
target of about 1% of GDP has been set, (4.9% accounting for net lending). 
Regarding structural reform, Lithuania also continued to progress in a number of 
areas as foreseen under the IMF stand-by arrangement of October 1993. 
Privatization advanced further; so far, 90% of small firms have been privatized and 
nearly 90% of privatizations of residential property by occupants has been 
completed. There were also additional price liberalization measures, including the 
abolition of profit margins. Progress in banking reform was relatively slow in 1993. 
But following the adoption of the currency board, both the central bank and the 
commercial bank laws are now being discussed in Parliament. 
2. THE BALANCE OF PAYMENTS 
The current account shifted from a surplus of US$ 62 mio in 1992 (originally a 
^deficit/of US$ 160 mio had been expected) into an estimated deficit of US$ 192 mio 
in 1993 (6.2% of GDP). A major factor contributing to this recent deterioration was 
Russia's move to world market levels for its energy exports to Lithuania in Fall 1992. 
The trade balance swung from a US$ 65 mio surplus to a deficit of US$ 267 mio. 
-38-
The reorientation of trade continued in 1993 and 1994. It is expected that the current 
account-will deteriorate further in 1994 to reach a deficit in~the. order of US$ 330 
mio (some 5% of GDP). 
The deterioration of the current account in 1993 was accompanied by a substantial 
improvement in the capital account from a surplus of US$ 90 mio in 1992 to US$ 
313 mio in 1993. Foreign direct investment increased from US$ 10 mio to US$ 23 
mio, but remained low in comparison with that of the other two Baltic States. The 
inflow of official transfers and medium- and long-term loans more than doubled to 
reach in total some US$ 245 mio in 1993. This capital inflow permitted the central 
bank to accumulate US$ 304 mio in reserves, bringing the stock up to US$ 410 mio. 
In terms of months of imports, this signifies a negligible decrease from 2.6 in 1992 to 
2.4 in 1993, reflecting the rise in imports. 
Since July 1994, Lithuania assumes Article VIE status at the IMF; i.e. in particular 
that it undertakes to refrain from imposing restrictions on the making of payments 
and transfers for current international transactions. 
3. FOREIGNDEBT 
In 1993, Lithuania's external debt stock increased from US$ 99 mio to US$ 345 mio 
(some 11% of GDP) and the debt service increased from a mere US$ 2 mio in 1992 
to US$ 15 mio (0.7% exports of goods and services). 
-39-
I. OTHER NEWLY INDEPENDENT STATES 
1. GENERAL ECONOMIC SITUATION 
The situation in the other Newly Independent States (NIS) varies considerably. All 
the former republics have suffered in 1992-1993 from the weakening of old 
structures which have not yet been replaced by market-oriented institutions and the 
collapse of inter-republican trade links. The decline in trade among the former 
republics (probably 20-30% a year since 1992) has had serious knock-on effects on 
output/Loose financial policies in many NIS compounded the adverse effects of the 
external shocks. Inflation remains very high throughout the area, and several states 
are clearly in hyperinflation. 
Far-reaching economic reform has begun in most NIS, and some of them have 
already-made, considerable strides in the transition to market-based system while 
implementing more strict financial policies. Several NIS have received or were about 
to receive financial support from the IMF: Kyrgyzstan, Moldova, Kazakhstan, 
Belarus and, in October 1994, Ukraine have concluded financing arrangement with 
the Fund, and more such arrangements (Georgia, Armenia, and, again, Belarus) were 
expected to be concluded in late 1994 or early 1995. Also, progress towards 
comprehensive reforms had been made in Azerbaijan and Uzbekistan. 
2. THE BALANCE OF PAYMENTS 
The balance of payments situation of the area is extremely weak, with probably the 
exception of Turkmenistan. This is particularly the case in the short run. Large trade 
deficits with Russia and Turkmenistan, linked primarily to higher prices for energy 
and raw materials make the current account position of number of the new states 
particularly precarious. The financial credibility of most NIS is further aggravated by 
lack of international reserves. 
In a longer term perspective, the new states present rather variable profiles. Some 
have considerable hard currency earning potential (Kazakhstan, Uzbekistan, 
Azerbaijan) and industrial capacity. Others are clearly close to developing countries 
and will therefore strongly depend on external assistance. Armenia, Georgia and 
Kyrgyzstan have already been made eligible to highly concessional lending. 
3. FOREIGN DEBT 
The NIS have achieved in 1993 substantial progress in clarifying their position vis-à-
vis~the~questionof the foreign debt ofthe former JSo-viet-Union..Tnitially (at the end 
of 1991), the former republics were made jointly and severally responsible for such 
debt. The Memorandum of Understanding setting forth the principle of joint and 
several liability was signed on 28 October 1991. The April 1993 Paris Club 
-40-
agreement with Russia was accompanied by a change in legal arrangements on debt 
servicing within the FSU making in fact Russia the sole actual-manager qf the debt. 
Accordingly, the creditors acknowledged that the so-called "zero-option" agreements 
concluded by Russia with other former republics (by virtue of which Russia takes 
over the full amount of the ex-Soviet debt, in exchange for the full amount of the ex-
Soviet external assets) discharge them of any servicing of such debt. 
A number of NIS (notably Ukraine, Belarus and Kazakhstan) have attracted since 
their independence new credits from the West. However, the bulk of the NIS 
external debt is owed to Russia and Turkmenistan. This debt results from balances of 
the ex-republics' Central Banks with the Central Bank of Russia and arrears or 
energy shipments. In 1993, Russia concluded with all the NIS (with the only 
exception of Turkmenistan) agreements rescheduling its claims over a period ranging 
from 1994-1997 (Azerbaijan, Georgia, Moldova) to 2000-2007 (Belarus). More such 
agreements were expected in 1994 as trade arrears were continuing to build up with 
the two energy-exporting NIS in 1994. 
-41-
J. ROMANIA 
1. GENERAL ECONOMIC SITUATION 
In the course of 1993, the decline in real GDP was reversed. Annual GDP growth 
reached 1% in 1993 and is expected to remain around that low level throughout 
1994 and 1995 due to the slow implementation of reforms in state enterprises. 
Growth will be fuelled mainly by exports. 
The authorities finally agreed on a new programme with the IMF at the end of 1993 
and started to implement a stricter monetary policy. As a result, inflation slowed 
down considerably to 2.6% per month in June 1994 and is likely to be kept at 
double-digit levels in 1994, down from over 300% end 1993. The increase in interest 
rates to positive levels in real terms early 1994 contributed to the stabilisation of the 
~ Leiat.around 1650-1700 Lei/US$ and allowed the unification of official and open 
market exchange rates into a single market-determined rate. Nominal interest rates at 
National Ëank credit, auctions decreased to 92% p.a. by July 1994. 
The government budget was more or less in balance in 1993. In 1994, the deficit is 
expected to remain low around 2.5% of GDP. 
The agreement with the IMF gave a new impulse to state enterprise reform. 
Enterprises with large losses and/or large arrears have been isolated from the 
financial system and financial recovery plans have been implemented. But there is 
little progress in the privatisation of large and medium sized enterprises. A new mass 
privatisation scheme has been announced for the end of 1994. Prudential regulations 
and stricter control of bank portfolio's have been introduced but little progress has 
been made with respect to the privatisation of banks. 
2. THE BALANCE OF PAYMENTS 
The depreciation of the Lei between end-1993 and early-1994 has improved the 
competitiveness of the Romanian economy. Imports are expected to stabilise at close 
to the 1993 level as domestic demand remains weak. Exports will grow reflecting 
increased competitiveness and easier access to markets with the approval of the 
(Interim) Europe Agreement with the European Union and the granting of Most-
Favoured-Nation status in the United States import regime. 
The trade balance and current account continued to improve in the first half of 1994. 
The current account deficit for that period amounted to US$ 166 million only, 
compared to a US$ 1.6 billion deficit for the whole of 1993. The capital account 
«registered a*surplus of more than US$ 700 {million-(incl^IMF financing facilities) 
during the first half of 1994, compared to a US$ 1.2 billion surplus for the whole of 
1993. The new agreement with the IMF, approved by the Executive Board in May 
1994, is likely to trigger a new stream of official aid inflows into Romania. Access to 
42-
private financial markets is still limited. Direct foreign investment inflows remain very 
- low as large-scale privatisations have not really started yet. 
As a result of these favourable balance of payments developments, foreign currency 
reserves at the National Bank soared from a very low-US$40 million at end-1993 to 
over US$ 800 million by mid-1994. Most of this increase is due to a shift from 
foreign currency deposits to Lei deposits in the commercial banking system, 
triggered by the strong increase in real interest rates. 
3. FOREIGN DEBT 
Total external debt increased rapidly from virtually zero in 1989 to US$ 4.4 billion or 
16% of GDP end 1993 and debt service accounted in 1993 for 6.2% of current 
receipts. As foreign investment inflows are unlikely to increase rapidly, official 
medium and long term loans will remain the principal source of finance for the 
current-account, deficit and, consequently, the growth of the debt stock is projected 
to continue. The external debt service ratio is projected to increase slowly in the next 
few years. 
-43-
K. RUSSIA 
l. GENERAL ECONOMIC SITUATION 
Russia's economic performance, particularly disappointing in 1992 and 1993, 
remained weak in the beginning of 1994. The fall in output in the first half of the year 
is reported to -17% (it was -19% in 1992 and -12% in 1993). Industrial production 
has been contracting even faster (-26% in the first half of 1994) and investment has 
probably fallen to less than half of its 1989 level. Living standards have declined 
markedly. Also, progress with putting in place the legislative and institutional 
framework for a market economy and structural reform has been slow in many 
respects. In particular, enterprise restructuring has not been implemented at the same 
pace as privatization of state assets. Indeed, a large share of small enterprises has 
been privatized and a mass privatization programme was developed; by mid-1994, 
*closeto two-thirds of enterprises had been privatized. 
In May 1993, agreement was reached between the government and the Central Bank 
to reduce credit emission, increase interest rates and limit the budget deficit. The 
measures implemented since then brought down money supply growth, which helped 
to reduce monthly inflation gradually to less than 10% since March 1994 (and even 
less than 5% in August). These advances in stabilization allowed the IMF to agree in 
April to the disbursement of the second US$ 1.5 billion instalment under its Systemic 
Transformation Facility (the first instalment had been paid in July 1993), and to start 
discussions on a stand-by programme. Yet, financial conditions remain fragile, as the 
extreme exchange rate volatility in October 1994 demonstrated; budgetary conditions 
in particular are a cause for concern. 
2. THE BALANCE OF PAYMENTS 
Russia's external situation has remained weak since 1992, reflecting the impact of the 
systemic changes, the disruptions of traditional trade and payments arrangements and 
domestic macro-economic policies. However, during this period Russia's gross 
foreign exchange reserves increased to close to US$ 5 billion or about 1 months of 
imports by October 1994 (they were virtually nil at the end of 1991). 
In the period 1992-first half of 1994, official balance of payments support from the 
West (bilateral trade credits and grants and credit from the International Financial 
Institutions) approached US$ 30 billion. However, owing to a weaker export 
performance, a bunching of debt servicing obligations and large recorded or 
unrecorded capital flight (estimated to some US$ 10 billion, in 1992, probably 
somewhat less in 1993-1994), this did not prevent either a sharp reduction of imports 
or a dramatic increase in debt arrears. 
-44-
3. FOREIGN DEBT 
At the end of 1993, total foreign debt of the former Sbvief Union approached US$ 
84 billion, upjrom US$ 79 billion a year earlier and US$ 67 billion two years earlier. 
Out of this amount, more than US$ 70 billion are medium- and long-term liabilities 
(against US$ 54 billion at the end of 1991). Some 65% of medium- and long-term 
debt is owed to official creditors (up from 45% at the end of 1991). The Russian 
debt still remains relatively modest in view of the size of the economy, about one-
quarter of GDP. In 1993, total scheduled debt servicing (US$20 billion) represented 
almost 30% of total exports and over 40% of exports outside the FSU. 
In December 1991-January 1992, the official and private creditors of the former 
Soviet Union agreed with the former republics on a deferral of some US$ 7.1 billion 
(principal repayment obligations on credits extended to the USSR before 1991). The 
deferral proved, however, insufficient since Russia, the only former Soviet republic 
to have made any debt servicing in 1992 (the payments were supposed to be made by 
"all'therNIS made jointly and severally responsible for the debt), was unable to meet 
the still substantial obligations. Russia's debt payments in 1992 amounted to only 
US$ 1.6 billion. As a result, arrears increased dramatically; at the end of 1992, they 
approached US$ 12 billion. 
In early April 1993, a generous debt rescheduling agreement was reached with the 
Paris Club that reduced the official debt servicing in 1993 by some US$ 15 billion. 
The agreement was this time concluded with Russia alone, making it the sole actual 
manager of the ex-Soviet debt: the agreement was well beyond the deferrals agreed 
previously; it provided for a medium-term deferral of part of moratorium interest. In 
early June 1994, Russia negotiated a new Paris Club deal. The terms of this new 
rescheduling covering maturities falling due in 1994 are broadly comparable to those 
of the 1993 deal. 
Also, in July 1993, Russia reached an agreement in principle with the commercial 
banks on a long-term rescheduling of the ex-Soviet commercial debt (US$ 24-26 
billion is owed to some 600 banks). In parallel with progress in the negotiations with 
the commercial creditors, the price of the Russian debt on the secondary market that 
had been below 20% at the beginning of 1993, rose gradually (by early December) to 
some 55%. However, subsequent delays in the final agreement due to unsettled legal 
issues (only cleared in September 1994) and Russia's failure to make the payment of 
part of interest arrears due in 1993 (US$ 450 million) led to a new fall of the price in 
early 1994 to 35%. 
45-
L. THE SLOVAK REPUBLIC 
l. GENERAL ECONOMIC SITUATION 
Slovak GDP declined by 4.1% in 1993, implying the fourth consecutive year of 
recession. Real activity, however, has been strengthening since the start of 1994. 
Thus, real GDP grew by 4.4% year-on-year in the first half of 1994 and 
unemployment seem to have stabilized at around 14.5%. After accelerating in 1993 
(to 25.1% in December) as result of increases in indirect taxes and the devaluation of 
the Slovak crown, inflation has been on a downward trend since the beginning of 
1994, with year-on year CPI inflation declining to 13.5% in July. 
The reduction of inflation is being supported by tight macroeconomic policies. Net 
domestic assets fell by 9% in the first half of the year and broad money remained 
practically unchanged in nominal terms. Regarding fiscal policy, the general 
government deficit is estimated to have been roughly in balance at end-June. This 
compares with a general government deficit of 7.5% of GDP in 1993 and is 
consistent with the government's targets of reducing the deficit to 4% of GDP in 
1994 and to 3% of GDP in 1995. These targets are part of the economic programme 
for 1994/95 agreed with the IMF and supported by a 20-month, SDR 115.8 mio 
stand-by arrangement, a second purchase (of SDR 64.34 mio) from the Systemic 
Transformation Facility (STF), and complementary macro-financial assistance from 
the EU/G-24 in the amount of up to US$ 243 mio. 
In the area of structural reform, the privatiztion process was given a new impulse in 
1994 with the launching of a second wave of voucher privatization and new 
measures in the area of banking sector reform. However, the new government 
emerging from the September 1994 general elections, has yet to clarify its future 
strategy regarding structural reform. 
2. THE BALANCE OF PAYMENTS 
Slovakia suffered from a weak balance of payments in 1993. The current account 
recorded a deficit of 3.9% of GDP, inflows of foreign direct investment continued to 
be of little significance (US$ 100 mio.) and speculation about a devaluation resulted 
in a considerable outflow of short-term capital. This was reflected in a very 
vulnerable foreign exchange reserve position throughout the year, with official 
reserves never exceeding 1 month of imports. 
The programme for 1994/95, however, projects a gradual strengthening of the 
balance of payments. The current account deficit is expected to decline to 2.5% of 
?GDP thisyear and remain at a similar level in 1995jvdisbursements of official loans 
are expected to reach about US$ 450 mio in both 1994 and 1995, and the support of 
the international community for the governments's economic programme should 
facilitate the placement by the National Bank of Slovakia (NBS) of some US$ 500 
-46-
mio in international bonds in 1994/95. Reflecting these factors, official foreign 
exchange reserves are targeted to increase to about US$,1.4 bn (or 2.4 months of 
imports) by end-1995. 
Recent trends in the current account, the capital account and foreign exchange 
reserves are consistent with these projections. The balance of the clearing account 
with the Czech Republic, for example, has moved from a large deficit at-the 
beginning of the year to a considerable surplus. Also, in late July the NBS 
successfully placed a US$ 250 mio bond in the Samurai market. This was facilitated 
by the assignment by the Japan Bond Research Institute in July of an investment rate 
rating (BBB). Together with the disbursement of the first tranche of the IMF stand­
by and the second purchase from the STF, and a regained confidence in the Slovak 
currency, all this has resulted in an increase in official foreign exchange reserves from 
US$ 372 mio at end-February to US$ 1 bn (or 1.8 months of imports) in mid-
August. The total reserves of the banking system have risen over the same period 
from US$ 1.39 bn to US$ 2.27 bn. 
Within the IMF programme, the government is committed to lifting by end-1994 the 
10% temporary surcharge on consumer imports introduced last March and to make 
progress towards achieving full current account convertibility so as to reach "Article 
VIII status" at the IMF by 1 January, 1996. 
3. FOREIGN DEBT 
Slovakia inherited from the Czechoslovak federation a very low external debt. While 
external debt and debt service ratios are expected to deteriorate in the coming years, 
they will remain at relatively low levels. The convertible currency debt to GDP ratio 
is projected to increase from 30.5% at end-1993 to about 40% at end-1995 and 
stabilize at*43-45% after 1997. Convertible debt service as a percentage of exports of 
goods and services, for its part, is expected to increase from 8.9% in 1993 to 11% in 
1995 and remain approximately at that level thereafter. 
II-F-3 Country Risk Indicators 
Last update 
o25/10/94 Country: Algeria 
° 
Real GOP growth rate (in t) 
Industrial production ( t change) 
Unemployment rate (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (dinars per USD) (end of period) 
Nominal effective exchange rate (change Q4/Q4) (- • depreciation) 
Real effective exchange rate (change Q4/Q4) (- - depreciation) 
\ General government balance (as I of GDP) 
Balance of payments 
Exports of GtS (in bn USD) 
Current account balance (in t of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in bn USD 
in months of imports of GtS 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
medium and long-term (> I year) 
short-term (-< 1 year) 
Convertible debt service (in bn USD) 
principal 
interest 
External debt/GDP (t) 
External debt/exports of GtS (t) 
Debt service/exports of GtS (t) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
IMF arrangements 
Type/no 
(Date / - ) 
On ctrack/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of per.) 
StP long-term foreign currency rating (end of period) 
EIU country risk service (1) 
Score (end of period) 
Rating (end of period) 
Euroaoney 
Position in the ranking (2) 
(number of countries) 
The Institutional Investor 
Position in the ranking (2). 
(number of countries) 
Credit rating (3) 1991 
-2,80 
1,00 
20,20 
22,80 
21,39 
-50,00 
-39,50 
-3,30 
13,00 
2,60 
-90,00 
1,60 
2,00 
26,96 
26,20 
1,00 
9,20 
6,70 
2,50 
63,30 
209,40 
70,50 
(b) 
(b) 
(d) 
(6/91-3/92) 
(e) 
(f) 
(c) 
(c) 
(c) 
(c) 
83 
(130) 
Mar Sep 
47 52 
(111) (113) 
37.9 34.2 1992 
2,20 
-2,50 
21,90 
32,10 
22,78 
1,00 
27,00 
-1,30 
12,15 
1.17 
40,00 
1,50 
2,00 
26,11 
25,00 
1,20 
9,10 
6,80 
2,30 
58,60 
215,60 
75,00 
(b) 
(b) 
(b) 
(c) 
(c) 
(c) 
(c) 
66 
(169) 
Mar Sep 
53 57 
(119) (126) 
33.1 28.9 1993 
-1,80 
(a) 
(a) 
20,50 
24,12 
7,90 
14,20 
-9,20 
10,90 
2,50 
0,00 
1,50 
1,90 
24,58 
(a) 
(a) 
9,10 
7,00 
2,10 
53,40 
225,30 
83,60 
(b) 
(b) 
(b) 
(c) 
(c) 
(c) 
(c) 
Mar Sep 
68 79 
(169) (170) 
Mar Sep 
62 69 
(127) (133) 
28.2 27.1 
(1) Countries are given a rating between A - E and a score between 1 - 100, with E and 100 representing the-highest risk. 
(2) The higher the score in the ranking, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(a) 
(b) 
(c) 
(d) 
(e) 
(f) n.a. 
No 
Note rated 
SBA 
Off-track 
Ql 1992 
II-F-3 Country Risk indicator's 
Last update 
24/10/94 Country: Bulgaria 
1992 1993 (1) , 
Real GDP growth rate (in %) -5,60 -4,20 
Industrial production ( % change) -11,00 -9,00 
Unemployment rate (end of period) 15,30 16,30 
Inflation rate -79,40 63,90 
Exchange rate jLeva per USD) (end of period) 24,50 33,32 
Nominal effective exchange rat (change, Q4/Q4) (- - depreciation) -15,74 (Q3/Q3) -3,10 
Real effective exchange rate (change, Q4/Q4) (- - depreciation) 43,62 59,17 
General government balance (as % of GDP) -7,40 -13,60 
Balance of payments 
Exports of GtS (in bn USD) 4,00 4,00 
Current account balance (in % of GDP) -9,20 -7,90 
Net inflow of foreign direct investment (in mio USD) 42,00 55,00 
Official FX reserves (end of period) 
in bn USD 1,00 0,70 
in months of imports of GtS 2,20 1,50 
External debt 
External debt (2) 12,50 12,80 
(in convertible currencies, in bn USD, end of period) 
medium and long-term (> 1 year) (a) (a) 
short-term («< 1 year) (a) (a) 
Convertible debt service (in bn USD) 2,00 1,70 
principal 1,40 1,10 
interest 0,60 0,60 
External debt/GDP (%) 144,00 124,00 
External debt/exports of GtS (%) 248,00 249,00 
Debt service/exports of GtS (%) 39,00 32,00 
Arrears (on both interest and principal, in bn USD) 6,05 (a) 
Debt relief agreements and rescheduling (g) (h) 
IMF arrangements 
Type/no (d) (b) 
(Date / - ) (03/94-03/95) 
On track/off track (e) ?-
( - / Date) -
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) (c) (c) 
StP long-term foreign currency rating (end of period) (c) (c) 
EIU country risk service (3) 
Score (end of period) 80 80 
Rating (end of period) E E 
Euromoney Sep Mar Sep 
Position in the ranking (4) ^ 91 122 125 
(number of countries) (169) (169) (170) 
The Institutional Investor Mar Sep Mar Sep 
Position in the ranking (4) 81 86 91 89 
(number of countries) (119) (126) (127) (133) 
Credit rating (5) 21.1 19.8 18.9 19.5 
(1) For some data, preliminary estimates. 
(2) Any short-term debt is actually arrears. 
(3) Countries are given a rating between A - E and a score between 1 - 100, with E and 100 representing 
the highest risk. 
(4) The higher the score in the ranking, the lower the creditworthiness of the country. 
(5) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country may 
improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(a) n.a. 
(b) No 
(c) Note rated 
(d) SBA 
(e) Off-track 
(g) Paris Club (resched.); London CI. (roll-overs) 
(h) London CI. (roll-overs, and DDSR agreed in principle) 
II-F-3 Country Risk indicators 
Last update 
24/10/94 Country: Czech Republic 
1992 1993 
Real GDP growth rate (in I) -7,10 -0,30 
Industrial production ( t change) -10,60 -5,40 
Unemployment (t of labour force) (end of period) 3,10 3,50 
Inflation rate (Dec/Dec) 12,70 18,20 
Exchange rate (CK's per USD) (end of period) 28,90 29,90 
Nominal effective exchange rate (change, Q4/Q4) (- - depreciation) 0,98 (Q3/Q3). 3,70 
Real effective exchange rate (change, Q4/Q4) (- - depreciation) 9,43 (Q3/Q3) 15,90 
General government balance (as t of GDP) 0,40 0,00 
Balance of payments 
Exports of GtS (in mio USD) 14800,00 16728,00 
Current account balance (in I of GDP) 0,40 1,80 
Net inflow of foreign direct investment (in mio USD) 983,00 517,00 
Official FX reserves (end of period) 
in bn USD 0,73 3,80 
in months of imports of GtS 1,10 2,70 
External debt (end of period) 
External debt 6,92 9,00 
(in convertible currencies, in bn USD, end of period) 
medium and long-term (> 1 year) 5,12 6,80 
short-term («< 1 year) 1,80 2,20 
Convertible debt service (in bn USD) 1,35 1,41 
principal 0,83 0,90 
interest 0,52 0,51 
External debt/GDP (t) 25,36 28,57 
External debt/exports of GtS (4) 46,78 53,80 
Debt service/exports of GtS (I) 9,12 8,43 
Arrears (on both interest and principal, in mio USD) (b) (b) 
Debt relief agreements and rescheduling (b) (b) 
IMF arrangements 
Type/no (d) (d) 
(Date / - ) (4/92-4/93) (3/93-3/94) 
On track/off track (el) (e2) 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) (1) Bal Baa3 
StP long-term foreign currency rating (end of period) (c) BBB-
EIU country risk service (2) 
Score (end of period) 30 25 
Rating (end of period) B B 
Euromoney Mar - Sep 
Position in the ranking (3) 49 48 43 
(number of countries) (169) (169) (170) 
The Institutional Investor (1) Mar - Sep Mar - Sep 
Position in the ranking (3) 37 39 42 40 
(number of countries) (119) (125) (127) (133) 
Credit rating (4) 47.1 46.1 44.6 46.6 
(1) 
(2) 
(3) 
(4) For 1992, rating or position in the ranking assigned to the former CSFR. 
Countries are given a rating between A - E and a score between 1 - 100, with E and 100 representing 
the highest risk. 
The higher the score in the ranking, the lower the creditworthiness of the country. 
Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(a) n.a. 
(b) No 
(c) Note rated 
(d) SBA 
(el) On-track but expired with dissolution of CSFR 
(e2) On-track 
- 50 
II-F-3 Country Risk indicators 
Last update 
24/10/94 Country: Estonia 
1992 1993 (1) 
Real GDP growth rate (in %) -19,00 -3,00 
Industrial production ( % change) -38,70 -27,00 
Unemployment rate (end of period) 2,00 1,70 
Inflation rate 953,50 35,70 
Exchange rate (Krons per USD) (end of period) 1,71 1,58 
Nominal effective exchange rat (change, Q4/Q4) (- - depreciation) (a) (a) 
Real effective exchange rate (change, Q4/Q4) (- - depreciation) (a) (a) 
General government balance (as % of GDP) 
Financial balance (2) 0,80 0,20 
Fiscal balance (2) 0,50 -1,40 
Balance of payments 
Exports of goods (in mio USD) 457,20 802,10 
Current account balance (in % of GDP) 7,20 0,40 
Net inflow of foreign direct investment (in mio USD) 57,90 144,20 
Official FX reserves (end of period) 
in mio USD 195,20 378,70 
in months of goods imports 4,50 4,80 
External debt 
External debt 38,10 140,00 
(in convertible currencies, in bn USD, end of period) 
medium and long-term (> 1 year) (a) (a) 
short-term (»< 1 year) (a) (a) 
Convertible debt service (in mio USD) 20,80 19,80 
principal (a) (a) 
interest (a) (a) 
External debt/GDP (%) 3,30 7,10 
External debt/exports of GiNFS (%) 5,90 12,70 
Debt service/exports of GtNFS (%) 3,20 1,80 
Arrears (on both interest and principal, in mio USD) (b) (b) 
Debt relief agreements and rescheduling (b) (b) 
IMF arrangements 
Type/no v (dl) (d2) 
(Date / - ) (9/92-9/93 (10/93-3/94) 
On track/off track (e) (e) 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) (c) (c) 
StP long-term foreign currency rating (end of period) (c) (c) 
EIU country risk service (3) 
Score (end of period) " s 80 75 
Rating (end of period) E D 
Euromoney Sep Mar Sep 
Position in the ranking (4) 117 126 122 
(number of countries) (169) (169) (170) 
The Institutional Investor Mar Sep Mar Sep 
Position in the ranking (4) 68 74 81 84 
(number of countries) (119) (126 (127) (133) 
Credit rating (5) 25.7 22. 21.4 20.9 
(1) For some data, preliminary estimates. 
(2) Financial balance does not take into account government net lending, whereas fiscal balance does. 
(3) Countries are given aa rating between A - E and a score between 1 - 100, with E and 100 representing 
the highest risk. 
(4) The higher the score in the ranking, the lower the creditworthiness of the country. 
(5h Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(a) n.a. 
(b) No 
(c) Note rated 
(dl) SBA 
(d2) SBA/STF 
(e) On-track 
II-F-3 Country Risk indicators 
Last update 
24/10/94 Country: Hungary 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (%- of labour force) (end of period) 
Inflation rate 
Exchange rate (forints per USD (end of period) 
Nominal effective exchange rat (change, Q4/Q4) (- - depreciation) 
Real effective exchange rate (change, Q4/Q4) (- - depreciation) 
General government balance (as % of GDP) (GFS definition) 
Balance of payments 
Merchandise exports (in mio USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in bn USD 
in months of imports of merchandises 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
medium and °long-term (> 1 year) 
short-term (-< 1 year) 
Convertible debt service (in bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/ merchandise exports (%) 
Debt service/ merchandise exports (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
StP long-term foreign currency rating (end of period) 
EIU country risk service 0d) 
Score (end of period) 
Rating (end of period) 
Euromoney 
Position in the ranking (2) 
(number of countries) 
The Institutional Investor 
Position in the ranking (2) 
(number of countries) 
Credit rating (3) 1991 
-11,90 
-19,10 
8,00 
32,20 
76,78 
-13,71 
10,49 
-4,32 
9258,00 
0,80 
1474,00 
4,00 
5,30 
22,66 
20,20 
2,18 
4,00 
2,40 
1,60 
72,19 
244,76 
43,21 
(b) 
(b) 
(dl) 
(2/91-2/94) 
(el) 
44 
(130) 
Mar Sep 
41 42 
(111) (113) 
41.1 40.9 1992 
-4,40 
-9,80 
12,30 
21,60 
83,97 
-5,40 
7,90 
-6,90 
10028,00 
0,74 
1471,00 
4,40 
6,10 
21,50 
19,30 
2,29 
4,40 
2,80 
1,60 
60,55 
214,40 
43,88 
(b) 
(b) 
(dl) 
(2/91-2/94) 
(e2) 
(f) 
Bal 
BB+ 
40 
B 
46 
(169) 
Mar Sep 
42 43 
(119) (126) 
41.7 42.3 1993 
-2,30 
4,00 
12,10 
21,10 
100,70 
-3,10 
10,20 
-7,00 
8094,00 
-10,00 
2328,00 
7,70 
8,20 
24,56 
22,80 
1,80 
4,30 
2,60 
1,80 
68,03 
303,43 
53,13 
(b) 
(b) 
(d2) 
(9/93-12/94) 
(el) 
Bal 
BB+ 
50 
C 
Mar Sep 
47 46 
(169) (170) 
Mar Sep 
43 43 
(127) (133) 
44.3 44.8 
(1) 
(2) 
(3) Countries are given a rating between A - E and a score between 1 - 100, with E and 100 representing 
the highest risk. 
The higher the score in the ranking, the lower the creditworthiness of the country. 
Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(a) n.a. 
(b) No 
(c) Note rated 
(dl) EFF 
(d2) SBA 
(el) On-track 
(e2) Off-track 
(f) Summer 
II-F-3 Country Risk indicators 
Last update: 
25/10/94 Country: Israel 
Real GDP growth rat* (in 1) 
Industrial production ( I change) (at constant 1990 prices) 
Unemployment rate (average) 
Number of Immigrants (in thousands) 
Consumer Price Index (Dec/Dec) 
Exchange rate (sheqalim per USD) (end of period) 
Nominal effective exchange rate (change, Q4/Q4) (- -deprec.) 
- Real effective exchange rate (change, Q4/Q4) (- » deprec.) 
Central government overall deficit (as I of GDP) 
Balance of payments 
Exports (in bn USD) 
Current account balance (in X of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Gross official FX reserves (end of period) (in months of total imports) 
in billions US$ 
in months of imports of GtS 
External debt 
External debt (gross external liabilities) 
(in bn USD, end of period) 
medium and long-term (> 1 year) 
short-term (-< 1 year) 
Debt service (in bn USD) 
principal 
interest (gross) 
External debt/GDP (I) 
External debt/exports (I) 
Debt service/exports of goods and services (t) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
IMF arrangements 
Type/no 
(Date / - ) • ' -
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
StP long-term foreign currency rating (end of period) 
EIU country risk service (1) 
Score (end of period) 
Rating (end of period) 
Euromoney 
Position in the ranking (2) 
s (number of countries) 
The Institutional Investor 
Position in the ranking (2) 
(number of countries) 
Credit rating" (3) 1991 
6,20 
6,70 
10,60 
176,00 
18,00 
2,28 
-9,60 
2,90 
-4,30 
12,00 
-0,60 
-161,00 
6,28 
2,80 
33,20 
(a) 
(a) 
7,00 
4,60 
2,40 
56,80 
170,00 
38,00 
(b) 
(b) 
(b) 
(c) 
BBB-
(a) 
(a) 
38 
(130) 
Mar Sep 
51 51 
(111) (113) 
(34.9) (35.2) 1992 
6,60 
8,20 
11,20 
77,00 
9,40 
2,76 
-9,70 
-4,90 
-2,40 
13,30 
0,10 
-340,00 
5,13 
2,20 
33,60 
23,20 
10,40 
6,50 
4,20 
2,30 
52,30 
155,00 
31,00 
(b) 
(b) 
(d) 
(3/92-3/93) 
(e) 
178 
(c) 
BBB-
(a) 
(a) 
32 
(169) 
Mar Sep 
50 52 
(119) (126) 
37.1 35.1 1993 
3,50 
6,50 
10,00 
77,00 
11,30 
2,99 
-6,10 
1,80 
-3,60 
14,90 
-1,80 
(a) 
6,38 
2,40 
36,10 
(a) 
(a) 
6,40 
4,10 
2,30 
55,80 
135,00 
29,00 
(b) 
(b) 
(b) 
(c) 
BBB+ 
(a) 
(a) 
Mar Sep 
29 29 
(169) (170) 
Mar Sep 
46 46 
(127) (133) 
39.6 40.5 
(1) Countries are given a rating between A - E and a score between 1 - 100, with E and 100 representing the highest risk 
(2) The higher the score in the ranking, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(a) n.a. 
(b) No 
(c) 
(d) 
(e) Note rated 
CCFF 
On-track 
II-F-3 Country Risk indicators 
Last update 
24/10/94 Country: Latvia 
1992 1993 (1) 
Real GDP growth rate (in I) -33,80 -12,00 
Industrial production ( t change) -35,10 -32,60 
Unemployment (end of period) 2,30 5,80 
Inflation rate 958,10 34,80 
Exchange rate (Lats per USD) (end of period) 0,84 0,60 
Nominal effective exchange rate (change, Q4/Q4) (- - depreciation) (a) (a) 
Real effective exchange rate (change, Q4/Q4) (- - depreciation) (a) (a) 
General government balance (as I of GDP) 
Financial balance (2) 0,00 1,00 
Fiscal balance (2) -0,80 0,60 
Balance of payments 
Exports (in mio USD) 831,00 998,00 
Current account balance (in I of GDP) 2,00 8,00 
Net inflow of foreign direct investment (in mio USD) 43,00 50,00 
Official FX reserves (end of period) 
in mio USD 156,00 518,00 
in months of imports of GtS 1,80 5,90 
External debt 
External debt 
(in convertible currencies, in mio USD, end of period) 65,00 300,00 
medium and long-term (> 1 year) (a) (a) 
short-term (»< 1 year) (a) (a) 
Convertible debt service (in mio USD) 15,10 10,00 
principal (a) (a) 
interest (a) (a) 
External debt/GDP (») 5,00 10,00 
External debt/merchandise exports (t) 8,00 24,00 
Debt service/merchandise exports (I) 2,00 1,00 
Arrears (on both interest and principal, in mio USD) (b) (b) 
Debt relief agreements and rescheduling (b) (b) 
IMF arrangements 
Type/no (dl) (d2) 
(Date / - ) (9/92-9/93) (12/93-3/95) 
On track/off track (e) (e) 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) . (c) (c) 
StP long-term foreign currency rating (end of period) (c) (c) 
EIU country risk service (3) 
Score (end of period) 80 75 
Rating (end of period) E D 
Euromoney Sep Mar Sep 
Position in the ranking (4) 123 133 132 
(number of countries) (169) (169) (170) 
The Institutional Investor Mar Sep Mar Sep 
Position in the ranking (4) 72 77 89 87 
(number of countries) (119) (126) (127) (133) 
Credit rating (5) 23.9 21.4 19.5 20.0 
(1) For some data, preliminary estimates. 
(2) Financial balance does not take into account government net lending, whereas fiscal balance does. 
(3) Countries are given a rating between A - E and a-score between 1 - 100, with E and 100 representing 
the highest risk. 
(4) The higher the score in the ranking, the lower the creditworthiness of the country. 
(5) Countries are rated on a scale of zero to lO'O, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(a) n.a. 
(b) No 
(c) Note rated 
(dl) SBA 
(d2) SBA/STF 
(e) On-track 
- 54 -
II-F-3 Country Risk indicators 
Last update 
24/10/94 Country: Lithuania 
1992 1993 (1) 
Real GDP growth rate (in I) -37,70 -16,20 
Industrial production ( 1 change) -51,60 -47,00 
Unemployment rate, (end of period) 1,30 1,60 
inflation rate 1161,10 188,60 
Exchange rate -(Litas, per USD) (end of period) 1,80 3,90 
Nominal effective exchange rate (change, Q4/Q4) (- - depreciation) (a) (a) 
Real effective exchange rate (change, Q4/Q4) (- - depreciation) (a) (a) 
General government balance (as t of GDP) 
Financial balance (2) 0,60 0,90 
Fiscal balance (2) 0,70 -4,60 
Balance of payments 
Exports of GtS (in mio USD) 1145,00 1877,00 
Current account balance (in I of GDP) 3,40 -6,20 
Net inflow of foreign direct investment (in_mio USD) 10,00 23,00 
Official FX reserves (end of period) 
in mio USD 106,00 410,00 
in months of imports of GtS 2,60 2,40 
External debt 
External debt 98,80 345,30 
(in convertible currencies, in bn USD, end of period) 
medium and long-term (> 1 year) (a) (a) 
short-term (»< 1 year) (a) (a) 
Convertible debt service (in mio USD) 2,00 15,00 
principal - (a) (a) 
interest (a) (a) 
External debt/GDP (t) 5,40 11,20 
External debt/exports of GtS (I) 7,80 16,30 
Debt service/exports of GtS (%) 0,20 0,70 
Arrears (on both interest and principal, in mio USD) (b) (b) 
Debt relief agreements and rescheduling * (b) (b) 
IMF arrangements 
Type/no (dl) (d2) 
(Date / - ) (10/92-9/93) (10/93-3/94) 
On track/off track (e) (e) 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) (c) (c) 
StP long-term foreign currency rating (end of period) (c) (c) 
EIU country risk service (3) 
Score (end of period) 80 75 
Rating (end of period) E D 
Euromoney Sep Mar Sep 
Position in the ranking (4) 118 134 130 
(number of countries) (169) (169) (170) 
The Institutional Investor Mar Sep Mar Sep 
Position in the ranking (.4) 73 80 91 93 
(number of countries) (119), (126) (127) (133) 
Credit rating (5) 23.7 20.7 18.9 19.0 
(1) For some data, preliminary estimates. 
(2) Financial balance does not take into account government net lending, whereas fiscal balance does. 
(3) Countries are given a rating between A - E and a score between 1 - 100, with E and 100 representing 
the highest risk. 
(4) The higher the score in the ranking, the lower the creditworthiness of the country. 
(5) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(a) n.a. 
(b) No 
(c) Note rated 
dl SBA 
d2 SBA/STF 
(e) On-track 
II-F-3 Country Risk indicators 
Last update 
24/10/94 Country: Romania 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate ( lei per USD) (end of period) 
Nominal effective exchange rat (change, Q4/Q4) (- - depreciation) 
Real effective exchange rate (change, Q4/Q4) (- - depreciation) 
General government balance (as % of GDP) 
Balance of payments 
Exports of GtS (in mio USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in mio USD 
in months of imports of GtS 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
medium and long-term (> 1 year) 
short-term (-< 1 year) 
Convertible debt service (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of GtS (%) 
Debt service/exports of GtS {%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
StP long-term foreign currency rating (end of period) 
EIU country risk service (2) 
Score (end of period) 
Rating (end of period) 
Euromoney 
Position in the ranking (3) 
(number of countries) 
the Institutional Investor 
Position in the ranking (3) 
(number of countries) 
Credit rating (4) 1991 
-12,90 
-19,60 
6,10 
222,80 
185,00 
-72,95 
-17,08 
0,60 
3538,00 
-4,48 
37,00 
198,00 
0,49 
2,10 
1,10 
1,00 
7,60 
59,36 
0,60 
(b) 
(b) 
(c) 
(c) 
89 
' (130) 
Mar Sep 
60 64 
(111) (113) 
27.9 26.7 1992 
-13,60 
-22,10 
8,40 
198,50 
460,00 
-74,63 
-24,03 
-4,80 
4299,00 
-8,80 
73,00 
93,00 
0,20 
3,50 
2,40 
1,10 
176,00 
85,00 
91,00 
18,10 
95,10 
4,10 
(b) 
(b) 
(d) 
(5/92-3/93) 
(e) 
Dec 92 
(c) 
(c) 
60 
D 
72 
(169) 
Mar Sep 
69 68 
(119) (126) 
25.6 24.8 1993 (1) 
1,00 
7,70 
9,90 
295,50 
1276,00 
-56,86 
39,70 
-0,10 
4882,00 
-5,50 
48,00 
52,00 
0,10 
4,70 
3,30 
1,40 
312,00 
147,00 
165,00 
21,40 
129,60 
6,40 
(b) 
(b) 
(b) 
(c) 
(c) 
65 
D 
Mar Sep 
66 75 
(169) (170) 
Mar Sep 
73 75 
(127) (133) 
24.2 24.4 
(1) 
(2) 
(3) 
(4) For some data, preliminary estimates. 
Countries are given a rating between A - E and a score between 1 - 100, with E and 100 representing 
the highest risk. 
The higher the score in the ranking, the lower the creditworthiness of the country. 
Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(a) 
(b) 
(c) 
(d) n.a. 
No 
Note rated 
SBA 
(e) Off-track 
II-F-3 Country Risk indicators 
Last update: 
25/10/94 Country: Russia 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment "rate (end of period - ILO definition) 
Inflation rate (Dec/Dec) 
Exchange ra.te ( Rbs per USD) (end of period) 
Nominal effective exchange rate (change, Q4/Q4) (- - depreciation) 
Real effective exchange rate (change, Q4/Q4) (- « depreciation) 
General government balance (as % of GDP) 
Balance of payments 
Exports of GtS (in bn USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in bn USD) 
Official FX reserves (end of period) (excluding gold) 
in mio USD 
in months of imports of GtS 
External debt 
External debt 
(in convertible currencies, in bn USD, end of period) 
medium and long-term (> 1 year) 
short-term («< 1 year) 
Convertible debt service (in bn USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of GtS (%) 
Debt service/exports of GtS (%) 
Arrears (on both interest and principal, in bn USD) 
Debt relief agreements and rescheduling 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S4P long-term foreign currency rating (end of period) 
EIU country risk service (1) 
Score (end of period) 
Rating (end of period) 
Euromoney 
Position in the ranking (2) 
(number of countries) 
The Institutional Investor 
Position in the ranking (2) 
(number of countries) 
Credit rating (3) 1991 
-12,90 
-8,20 
(a) 
160,00 
169,20 
-63,60 
-25,30 
-16,00 
(a) 
(a) 
-0,10 
0,00 
0,00 
67,00 
54,30 
12,70 
(a) 
(a) 
(a) 
(a) 
131,40 
(a) 
4,80 
(b) 
(b) 
(c) 
(c) 
(a) 
(a) 
(a) 
(130) 
Mar Sep 
(a) 
" (113) 
26.7 1992 
-19,00 
-18,40 
(a) 
2300,00 
414,50 
(Q4/Q1) -55,60 
(Q4/Q1) 90,00 
-18,80 
57,00 
-1,20 
0,70 
2,00 
0,50 
78,70 
65,70 
13,00 
15,60 
10,40 
5,20 
24,00 
137,00 
25,00 
11,80 
(g) 
1st credit 
tranche 
Aug 92 
(c) 
(c) 
95 
E 
129 
(169) 
Mar Sep 
73 
~ (126) 
23.6 1993 
-12,00 
-16,40 
5,10 
840,00 
1247,00 
-62,50 
268,42 
-8,00 
69,00 
1,80 
0,40 
3,30 
0,90 
83,70 
70,60 
13,10 
19,60 
14,70 
4,90 
26,00 
122,00 
29,00 
11,00 
(h) 
(d) 
Jul 93 
(c) 
(c) 
-95 
E 
Mar Sep 
149 137 
(169) (170) 
Mar Sep 
87 92 
(127) (133) 
20.2 19.0 
(1) Countries are given a rating between A - E and a score between 1 - 100, with E and 100 representing the highest risk. 
(2) The higher the score in the ranking, the lower the creditworthiness of the country. 
(3) Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(a) n.a. 
(b) No 
(c) Note rated 
(d) STF 
(g) Paris Club (deferrals); London Club (roll-overs) 
(h) Paris Club (resched.); London Club (roll-overs, and resched. agr. in principle) 
II-F-3 Country Risk indicators 
Last update 
24/10/94 Country: Slovak Republic 
1992 1993 
Real GDP growth rate (in I) -7,00 -4,10 
Industrial production ( I change) -12,80 -8,60 
Unemployment (t of labour force) (end of period) 10,40 14,40 
Inflation rate (Dec/Dec) 9,10 25,10 
Exchange rate (SK's per USD) (end of period) 28,90 33,20 
Nominal effective exchange rate (change, Q4/Q4) (- - depreciation) 0,98 -4,90 
Real effective exchange rate (change, Q4/Q4) (- - depreciation) 6,80 16,70 
General government balance (as 4 of GDP) -13,10 -7,50 
Balance of payments 
Exports of GtS (in mio USD) 8219,00 7568,00 
Current account balance (in X of GDP) 1,70 -3,90 
Net inflow of foreign direct investment (in mio USD) 100,00 134,00 
Official FX reserves (end of period) 
in mio USD 356,00 395,00 
in months of imports of GtS 0,70 0,90 
External debt 
External debt 2,56 3,37 
(in convertible currencies, in- bn USD, end of period) 
medium and long-term (> 1 year) 2,14 
short-term (-< 1 year) 0,42 -
Convertible debt service (in mio USD) 675,00 674,00 
principal 415,00 490,00 
interest 260,00 184,00 
External debt/GDP (I) 25,61 30,50 
External debt/exports of GtS (t) 31,16 44,53 
Debt service/exports of GtS (I) 8,21 8,91 
Arrears (on both interest and principal, in mio USD) (b) (b) 
Debt relief agreements and rescheduling (b) (b) 
IMF arrangements 
Type/no (dl) (d2) 
(Date / - ) (4/92-4/93) (7/93 - ) 
On track/off track (el) (e2) 
( - / Date) 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) (1) Bal (c) 
StP long-term foreign currency rating (end of period) (c) BB-
EIU country risk service (2) 
Score (end of period) (c) (c) 
Rating (end of period) (c) (c) 
Euromoney Mar - Sep 
Position in the ranking (3) 58 56 63 
(number of countries) (169) (169) (170) 
The Institutional Investor (1) Mar - Sep Mar - Sep 
Position in the ranking (3) 37 39 57 57 
(number of countries) (119) (125) (127) (133) 
Credit rating (4) 47.1 46.1 31 30.6 
(1) 
(2) 
(3) 
(4) For 1992, rating or position in the ranking assigned to the former CSFR. 
Countries are given a rating between A - E and a score between 1 - 100, with E and 100 representing 
the highest risk. 
The higher the score in the ranking, the lower the creditworthiness of the country. 
Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
(a) n.a. 
(b) No 
(c) Note rated 
(dl) SBA 
(d2) STF 
(el) On-track but expired with dissolution of CSFR 
(e2) On-track 
-58-
TABLE1 
CAPITAL OUTSTANDING IN RESPECT OF OPERATIONS AUTHORISED 
J Operation 
MEMBER STATES 
A. Balance of payments 
1. Greece I 
2. Greece II 
3. Italy 
B. Other 
4. Euratom 
5.NCIand 
NCI earthquakes 
6. EIB Mediterranean, 
Spain, Greece, Port 
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. Baltic States 
9. Moldova 
10. Former Soviet Union 
B. Other 
11. EIB Mediterranean 
12. EIB Central & Eastern Europe I 
13. EIB Central & Eastern Europe II 
14. EIB Asia, Latin America 
15. Guarantee, CIS 
THIRD COUNTRIES - TOTAL 
GRAND TOTAL Authorized ceiling 
14 000 
175Q 
2 200 
8 000 
4000 
6 830 
1500 
26 330 
6 317 
1050 
250 
125 
400 
580 
400 
160 
220 
45 
1 250 
6 282 
1700 
3 000 
750 
500 
16 712 
43 042 Capital 
outstanding 
31.12.1993 
200 
1000 
3 990 
1018 
2 202 
572 
8 892 
580 
790 
250 
125 
290 
455 
250 
160 
110 
803 
1596 
300 
266 
5 395 
14 377 Capital 
outstanding 
30.6.1994 
1000 
4005 
862 
1 1880 
527 
$274 
790 
250 
125 
290 
455 
250 
160 
110 
934 
1 634 
390 
2 
133 
5 524 
13 798 Remainder to be 
disbursed 
30.6.1994 
0 
1200 
4000 
< 0 
0 
0 
5 200 
260 
0 
0 
110 
125 
150 
0 
110 
45 
316 
3 921 
1310 
2 998 
750 
0 
10 094 
15 294 
1 No disbursement is planned. 
2 The third and fourth tranches had still not been paid at 30 June 1994. So far, the Italian Government has not requested payment 
ANNEX TO TABLE 1 
SITUATION IN RESPECT OF EIB OPERATIONS AT 30 JUNE 1994 
Operations 
EIB Mediterranean 
Spain, Greece, Portugal 
Third countries EIB Med 
Central & Eastern Europe I 
Central & Eastern Europe II 
Asia, Latin America Credit line 
authorized 
1500 
6 282 
1700 
3 000 
750 Loans made 
'available, minus 
cancellations 
1465 
3 792 
1 650 
10 
139 Initial 
disbursement 
1614 
2 361 
390 
2 
0 Amount 1 
outstanding at I 
30.6.1994 
527 
1634 
390 
2 
0 
NB: The fact that the initial disbursement sometimes exceeds the authorized ceiling is due to differences 
in the ecu rate between the date on which the contracts were signed and 30 June 1994. 
-59-
TABLE 2 
MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 
(Estimate in ECU million based on all operations 
disbursed at 30 June 1994) 
MEMBER STATES 
CAPITAL 
A. Balance of payments 
1. Greece 
2. Italy 
B. Structural loans 
3. Euratom 
4. NCI and NCI EQ 
5.EIBMed.01d.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. Israel 
12. Algeria 
13. Ex USSR 
14. Baltic States 
B. Guarantees 
15. EIB Med. 
16. EIB C+E Eur. I + II 
17. Aid, Russia 500m 
Capital - subtotal 
INTEREST 
A. Financial assistance 
6. Hungary 
7. Czech Republic 
8. Slovak Republic 
9. Bulgaria 
10. Romania 
11. Israel 
12. Algeria 
13. Ex USSR 
14. Baltic States 
B. Guarantees 
15. EIB Med. 
16. EIB C+E Eur. I + II 
17. Aid, Russia 500m 
Interest - subtotal 
NON-MEMBER 
COUNTRIES-TOTAL 
GRAND TOTAL 
(Eastern Europe) 
(Other non-member countries) 1994 
200 
270 
656 
91 
1217 
110 
253 
81 
188 
50 
683 
1900 
147 
130 
2 
133 
412 
79 
25 
13 
29 
46 
16 
25 
60 
11 
120 
21 
24 
468 
880 
2 780 
590 
290 1995 
47 
487 
84 
618 
95 
253 
63 
131 
42 
584 
1202 
350 
553 
140 
13 
133 
1 188 
79 
25 
.13 
29 
46 
16 
25 
72 
11 
114 
27 
9 
466 
1654 
2 856 
1359 
295 1996 
,v 
500 
500 
153 
317 
78 
1548 
95 
253 
58 
91 
35 
532 
2 080 
260 
202 
139 
24 
625 
44 
25 
13 
29 
46 
16 
25 
. 13 
11 
103 
26 
351 
976 
3 056 
693 
283 1997 
463 
534 
77 
1074 
46 
214 
43 
65 
27 
395 
1469 
80 
127 
63 
140 
160 
250 
32 
144 
30 
1026 
18 
25 
13 
29 
46 
16 
25 
2 
11 
93 
24 
302 
1327 
2 797 
640 
688 1998 
500 
996 
92 
92 
58 
1738 
46 
114 
10 
17 
21 
307 
2 045 
100 
123 
62 
150 
185 
149 
36 
805 
10 
13 
6 
15 
46 
11 
82 
22 
205 
1010 
3 055 
778 
232 1999 
16 
41 
51 
108 
158 
3 
8 
15 
184 
292 
190 
146 
37 
373 
27 
11 
71 
19 
129 
502 
794 
284 
218 2000 
2 509 
13 
41 
46 
2 608 
158 
1 
5 
11 
175 
2 784 
80 
110 
135 
36 
361 
8 
11 
61 
17 
97 
457 
3 241 
261 
196 2001 
1 
21 
22 
2 
7 
9 
31 
122 
35 
158 
51 
14 
66 
223 
255 
50 
174 TOTAL 
1200 
4 005 
1053 
2 170 
505 
8 933 
392 
1503 
259 
506 
209 
2 870 
11803 
790 
250 
125 
290 
455 
160 
250 
934 
110 
1 105 
213 
266 
4 948 
230 
113 
58 
131 
265 
64 
100 
147 
77 
696 
168 
33 
2 082 
7 031 
18334 
4 655 
2 375 | 
-60-
TABLE 3 
MAXIMUM THEORETICAL ANNUALTOSICBORNE BY THE COMMUNITY BUDGET 
(Estimate 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 + NCI 
4. EIB Sp; Gr. Port 
1 Capital - subtotal 
INTEREST 
1 A. Balance of payments 
1. Greece 
2. Italy 
B. Structural loans 
3. Euratom + NCI 
4. EIB Sp. Gr. Port. 
Interest - subtotal 
MEMBER STATES-TOTAL 
NON-MEMBER COUNTRIES 
CAPITAL 
A. Financial assistance 
5. Hungary 
6. Czech Republic 
7. Slovak Republic 
8. Bulgaria 
9. Romania 
10. Israel 
11. Algeria 
12. Ex USSR 
13. Baltic States 
14. Moldova 
15. Euratom, C+E Eur. 
B. Guarantees 
16. EIB Med. 
17. EIB C+E Eur. I+ 11 
18. EIB, Asia, Latin America 
19. Aid, Russia, Guar. 500m 
Capital - subtotal 
INTEREST 
A. Financial assistance 
5. Hungary 
6. Czech Republic 
I. Slovak Republic 
8. Bulgaria 
9. Romania 
10. Israel 
II. Algeria 
12. Ex USSR 
13. Baltic States 
14. Moldova 
15. Euratom, C+E Eur. 
B. Guarantees 
16. EIB Med. 
17. EIB C+E Eur. I+ 11 
18: EIB, Asia, Latin America 
19. Aid, Russia. Guar. 500m 
Interest - subtotal 
NON-MEMBER 
COUNTRIES-TOTAL 
GRAND TOTAL 
(Eastern Europe) 
| (Other non-member countries) 1994 
200 
926 
91 
1217 
110 
425 
270 
50 
855 
2 072 
147 
130 
2 
133 
412 
79 
25 
13 
29 
45 
16 
25 
80 
11 -
8 
148 
46 
3 
24 
552 
964 
3 035 
642 
322 1995 
„• 534 
84 
618 
95 
595 
194 
42 
926 
1544 
350 
687 
140 
13 
133 
1323 
79 
25 
13 
34 
51 
16 
40 
110 
22 
2 
25 
210 
114 
11 
9 
761 
2 084 
3 628 
1667 
417 1996 
500 
500 
470 
78 
1548 
95 
680 
149 
35 
959 
2 506 
260 
227 
139 
24 
650 
44 
25 
13 
40 
58 
16 
40 
42 
22 
4 
45 
293 
203 
25 
870 
1520 
4 026 
1007 
513 1997 
997 
77 
1074 
46 
638 
108 
27 
819 
1893 
80 
127 
63 
140 
160 
250 
189 
191 
71 
5 
1276 
44 
25 
13 
40 
58 
16 
40 
19 
22 
4 
65 
368 
295 
43 
1052 
2 328 
4 221 
1255 
1072 1998 
500 
1000 
184 
58 
1742 
46 
638 
27 
21 
732 
2 474 
100 
123 
62 
150 
185 
263 
139 
14 
1036 
36 
12 
6 
26 
58 
15 
22 
4 
85 
409 
361 
58 
1092 
2 128 
4 602 
1369 
759 1999 
57 
51 
108 
553 
11 
15 
579 
687 
190 
10 
348 
230 
28 
807 
26 
11 
40 
15 
22 
4 
102 
415 
392 
67 
1094 
1901 
2 588 
1027 
874 2000 
4498 
54 
46 
4 598 
553 
6 
11 
570 
5168 
80 
110 
23 
400 
303 
44 
959 
26 
11 
21 
15 
22 
4 
107 
°335 
382 
66 
989 
1948 
7116 
1089 
859 2001 
2000 
1 
21 
2 022 
170 
2 
7 
179 
2201 
260 
55 
65 
" 150 
110 
37 
428 
358 
56 
1520 
26 
11 
12 
15 
11 
4 
103 
213 
347 
60 
802 
2 322 
4 523 
1399 
923 TOTAL 
1200 
7998 
3 223 
505 
12926 
392 
4251 
767' 
209 
5 619 
18 545 
1050 
250 
125 
345 
520 
160 
400 
1250 
220 
70 
2 039 
1141 
147 
266 
7983 
360 
58 
202 
343 
64 
205 
251 
154 
26 
540 
2 391 
2 140 
333 
33 
7100 
15083 
33628 
9 344 
5 738 
61-
EXPLANATORY NOTES 
The purpose of these tables is to show the 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, it is not certain that all the 
operations described will actually be disbursed. No account has been taken of interest on 
late payment or any additional costs such as lawyers' fees. 
I. TYPES OF OPERATION AND PAYMENT OF THE BUDGET 
GUARANTEE 
A. Types of operation 
The risk covered by the Community budget results from two types of operation: 
- borrowing/lending operations; 
- guarantees given to third parties. 
In the first 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). 
The loan repayments are scheduled to match the repayments of the borrowings 
due from the Community. If the recipient of the loan defaults, the Commission 
must draw on its budgetary resources to repay the borrowing on the due date. 
The loan guarantee is in respect of loans granted by a financial institution (EIB or 
commercial banks in the case of the former Soviet Union). When the recipient of a 
guaranteed loan fails to make a payment on the due date, the ELB asks the 
Commission to pay the amounts owed by the defaulter in accordance with the 
contract of guarantee. The guarantee must be paid within three months of the 
EIB's request. The EIB 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. 
B. Mobilization of funds 
The funds needed to pay the budget guarantee can be raised in three ways: 
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 funds available. 
-62-
- The transfer procedure can be used to provide the budget heading with the 
appropriations needed to cover the default. This method is used when there are 
- insufficient appropriations for re-use and must be authorized in advance by the 
budgetary authority. 
- The amount required may be taken provisionally from cash resources in 
-accordance with Article 12 of the Financial Regulation. This method is used, in 
particular, when the Community has so short a deadline for the payment of a 
guarantee that the budgetary authority has no time to approve a transfer. 
This operation is subsequently regularized by means of a transfer or a 
supplementary and/or amending budget. 
H. CALCULATION 
Some of the amounts indicated are the result of estimates made on the basis of the 
following assumptions. 
Generally speaking, the exchange rates for loans in currencies other than the ecu 
are assumed to have been stable since 30 June 1994. However, borrowing and 
lending operations should not involve exchange risks for the Community. Unless 
otherwise stated, the average rate of interest is estimated at 10%. This rate is 
probably a little high for EIB loans, which often attract interest subsidies under the 
protocols. 
A. Member States 
1. Greece: A balance-of-payments loan of ECU 2 200 million has been 
authorized. ECU 1 000 million of this amount will be disbursed in two tranches 
of ECU 500 million to be repaid in 1996 and 1998 respectively. It is assumed 
that the remaining ECU 1 200 million will not be disbursed. 
2. Italy: The Council decision of 18 January 1993 granted a ECU 8 000 million 
balance-of-payments loan to Italy. The loan is to be made available in four 
instalments amounting to ECU 2 000 million each and - with the exception of 
the first instalment - is conditional oh the attainment of agreed targets on Italy's 
public debt and deficit. 
The first two instalments were released in 1993. Concerning the coming 
period, the Council Decision states that the third instalment could be released as 
of 1 February 1994 (but the Italian Government has not yet applied for it). The 
fourth instalment may be released not earlier than 1 February 1995. 
-vlf^he Italian Government decides to apply for the-release of the third and fourth 
instalments and the conditions are deemed to be fulfilled ECU 2 000 million in 
1994 and ECU 2 000 million in 1995 will be disbursed to the Italian Republic. 
-63-
3. EIB. Mediterranean, old protocols: Spain. Greece. Portugal: These are 
Community guarantees for EIB operations in these countries prior to accession. 
The amounts are now final, since all the loans authorized Jiave been disbursed. 
B. Non-member countries 
a. Financial assistance 
1. Hungary I: The amounts of the first two tranches are final and certain. 
The third tranche of the macrofinancial assistance decided in 1990 could be 
disbursed in 1995. 
2. Hungary II: ECU 180 million has been granted and paid out in full. 
3. Czech and Slovak Republics: ECU 375 million has been granted in two 
tranches for a maximum term of seven years (bullet), with a first tranche of 
ECU 185 million and a second tranche of ECU 190 million for a term of six 
years. 
4. Bulgaria I: ECU 290 million has been granted in two tranches for a 
maximum term of seven years (bullet), with a first tranche of 
ECU 150 million for a term of seven years and a second tranche of 
ECU 140 million for a term of five years. 
5. Bulgaria II: The financial assistance of ECU 110 million decided in 1992 
has not been disbursed since Bulgaria has failed to meet the necessary 
conditions., It is assumed that it will be paid in two tranches of 
ECU 55 million in 1994 and 1995. 
6. Romania I: An estimated ECU 375 million in two tranches for a maximum 
term of seven years (bullet). The first tranche of ECU 190 million was 
disbursed in 1992 with a term of seven years and the second was disbursed 
in 1992 with a term of six years. 
7. Romania II: The new operation involving ECU 80 million for a maximum 
term of seven years was disbursed in 1993. 
8. Romania HI: This is a seven-year loan of ECU 125 million to be disbursed 
in two tranches. No tranche has been disbursed at 30 June 1994. It is 
assumed that the first tranche of ECU 65 million will be disbursed in 1994 
and the second tranche of ECU 60 million in 1995. 
9. Moldova: This is a ten-year loan of ECU 45 million to be disbursed in two 
tranches. No tranche had been disbursed at 30 June 1994. It is assumed 
.that.the first tranche of ECU 25 million-wilLbe..disbursed in 1994 and the 
second tranche of ECU 20 million in 1995. 
-64-
10. Baltic States: The first tranche of a loan of ECU 220 million was paid in 
1993. The second should be paid in 1994. The two tranches will be repaid 
in 2000 and 2001 respectively. 
11. Algeria: ECU 400 million has been granted in two tranches of 
ECU 250 million and ECU 150 million. The first was paid in 
December 1991 for a term of six years. 
The second tranche should be paid in the second half of 1994 since Algeria 
now meets the necessary conditions. This tranche may soon be disbursed 
as a result of Algeria's new economic programme, which has been 
approved by the IMF. 
12. Israel: A loan of ECU 160 million has been paid in full and is repayable in 
1997. 
b. Guarantees 
1. EIB 
The EIB 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). 
- Loans not disbursed (Loans not signed and loans signed but not yet 
., disbursed) 
The following table shows the situation as regards loans which have not 
been disbursed. 
Year 1994 1995 1996 TOTAL 
Mediterranean countries7 2 2618 830 830 3 921 
Central and Eastern Europe H9 762.6 965 1 270 2 997.6 
Other non-member countries 250 250 250 750 
In the case of loans not disbursed, we have assumed that an average of 
10% of the loan will be disbursed in the year of signature and 30% in 
each of the three following years. 
In the absence of a financial statement, all loans still to be committed under the financial protocols 
for the Mediterranean countries expiring at the end of 1996 have been spread evenly over the 
period 1994-96; 
This amount breaks down into ECU 1 431 million in loans to be disbursed under contracts signed 
before 30 June 1994 and ECU 830 million in loans to be signed and disbursed in 1994. 
Countries of Central and Eastern Europe: decision of 13 December 1993 concerning a loan of 
ECU 3 000 million. 
65 
It is estimated that the average term will be fifteen years with a three-year 
period of grace. 
2. Food aid for the former Soviet Union 
(a) Guarantee 
This is a guarantee for a bank loan of ECU 500 million, with principal 
and interest fully covered by the budget, for a term of three and a half 
years with three repayments at intervals of eleven months starting from 
the twentieth month. ECU 375 million has been used. 
(b) Borrowing/lending 
An operation involving ECU 1 250 million for a maximum term of three 
years. 
This borrowing will be divided between the various Republics of the 
former Soviet Union. Loans amounting to less than ECU 100 million 
will be repaid in one instalment three years after the start of the period in 
which the funds may be drawn. Borrowings exceeding ECU 100 million 
will be repaid in two instalments two years and three years after the start 
of the period in which the funds may be drawn. 
Depending on the type of contract, there are two periods in which funds 
may be drawn; one starts on 20 August, the other on 15 January. 
The balance still to be used at 30 June 1994 came to ECU 316 million. 
3. Euratom, countries of Central and Eastern Europe 
Of the ECU 1 100 million involved, it is assumed that ECU 150 million will 
be disbursed in 1994, ECU 200 million in each of the four following years 
and ECU 150 million in 1999. 
It is assumed that the loans will be for an average term of twenty years with 
a five-year period of grace. 
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ANNEX 
DEFINITION OF FIGURES USED IN THE REPORT 
A. Authorized ceiling 
This is the aggregate of the maximum amounts of capital authorized (ceilings) for 
each operation decided by the Council (see Table 1). 
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 
authorized ceiling; 
- factors reducing the risk; 
- limitation of the guarantee given to the EIB to 75% of the loans signed in 
the Mediterranean countries; 
- operations already repaid, since the amounts concerned, except in the case of 
balance of payments support, are the maximum amount of loans granted and 
not outstanding amounts authorized; 
- the amounts authorized are not necessarily taken up in full. 
The breakdown of authorizations is as follows: 
Member States 
Balance of payments 14 00010 
NCI 6 830 
Euratom 4 00011 
EIB; Spain, Greece, Portugal 1 500 
Member States - total 26 330 
10 Authorized amount outstanding: once this figure is reached, further loans may be granted as 
previous operations are repaid. 
Including ECU 1 100 million which may be granted to the countries of Eastern Europe and the 
CIS. 
67-
Non-member countries 
Hungary I 870 
Hungary II 180 
Czech Republic 250 
Slovak Republic 125 
Bulgaria I 290 
Bulgarian 110 
Romania I 375 
Romania II 80 
Romania III 125 
Israel 160 
Algeria 400 
former Soviet Union I 408 
former Soviet Union II 1.250 
Baltic States 220 
Moldova 45 
EIB, old protocols 3.032 
EIB, Eastern and Central Europe I 1.700 
EIB, Eastern and Central Europe II 3.000 
EIB, new protocols 1.450 
EIB, horizontal cooperation 1.800 
Other non-member countries 750 
Non-member countries - total 16.620 
Grand total 42.950 
B. o Capital outstanding 
This is the amount of capital still to be repaid on a given date in respect of 
operations disbursed (see Table 1). 
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. 
C. Annual risk 
Estimated amount of principal and interest due each financial year. 
This amount is calculated for: 
- disbursements alone (Table 2), in which case the capital to be repaid 
corresponds to the amount outstanding; 
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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 authorized plus, where applicable, the 
amounts in respect of operations proposed by the Commission and not yet 
decided. 
(A 
ISSN 0254-1475 
COM(95) 17 final 
DOCUMENTS 
EN 01 
Catalog number : CB-CO-95-022-EN-C 
ISBN 92-77-85133-3 
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