COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 05.06.1996 
COM(96) 243 final 
REPORT FROM THE COMMISSION 
TO THE BUDGETARY AUTHORITY 
ON GUARANTEES COVERED BY THE GENERAL BUDGET 
SITUATION AT 31 DECEMBER 1995 

This report describes the situation as regards budget guarantees at 31 December 1995. 
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 nine reports to the budgetary authority. 
The report is in three parts: 
1. Events since the last report, the risk situation and the activation of budget 
guarantees. 
2. Description of operations entered in the budget. 
3. Assessment of the economic and financial situation of non-Community countries 
benefiting from the most important operations. 
A 
Contents 
PART ONE: EVENTS SINCE THE REPORT AT 30 JUNE 1995, THE RISK 
SITUATION AND ACTIVATION OF BUDGET GUARANTEES ........ 1 
I. EVENTS SINCE THE REPORT AT 30 JUNE 1995 1 
LA. Macrofinancial assistance to Ukraine 1 
I.B. European Investment Bank loans to the Mediterranean countries guaranteed by 
the general budget 1 
n. RISK SITUATION 1 
n.A. Total risk 2 
II.B. Risk in respect of the Member States 2 
U.C. Risk in respect of non-member countries 3 
IE. ACTIVATION OF BUDGET GUARANTEES 4 
III.A. EIB loans to non-member countries 4 
III.B. BORROWING/LENDING OPERATIONS OR LOAN GUARANTEES 
FOR NON-MEMBER COUNTRIES 4 
PART TWO: OPERATIONS ALREADY ENTERED IN THE BUDGET 6 
I. BORROWINGS TO BE ON-LENT WITHIN THE COMMUNITY 6 
LA. Community borrowing operations to provide balance-of-payments support 6 
LB. Euratom borrowing operations 6 
LC. Borrowing operations for the promotion of investment in the Community 6 
II. LOANS RAISED FOR ON-LENDING TO NON-COMMUNITY 
COUNTRIES 7 
II.A. Euratom borrowings for certain non-Community countries 7 
II.B. Programme of borrowings contracted by the Community to provide 
macrofinancial assistance to the countries of Central and Eastern Europe 8 
ILC. Borrowings contracted by the Community to grant macrofinancial assistance to 
the new independent States of the former Soviet Union 11 
II.D. Borrowings contracted by the Community to grant macrofinancial assistance to 
the Baltic States 13 
ILE. Borrowings contracted by the Community to grant macrofinancial assistance to 
the Mediterranean countries 14 
III. COMMUNITY GUARANTEE TO NON-COMMUNITY COUNTRIES ... 15 
III.A. European Investment Bank loans to Mediterranean countries guaranteed by the 
general budget 15 
III.B. Loans granted by the European Investment Bank in countries of Central and^ 
Eastern Europe 16 
IILC. Loans granted by the European Investment Bank in non-member countries .... 17 
III.D. Loans granted by the European Investment Bank in South Africa 17 
PART THREE: CHANGES IN POTENTIAL RISKS 18 
I. TYPES OF OPERATION 18 
LA. Operations with macroeconomic objectives 18 
I.B. Operations with microeconomic objectives . 18 
IL GENERAL ECONOMIC SITUATION OF THE NON-MEMBER 
COUNTRIES 19 
W A 
STATISTICAL ANNEX 
TABLES OF STATISTICS 
EXPLANATORY NOTES 
ANNEX: DEFINITION OF FIGURES USED IN THE REPORT 
iir ^ 
PART ONE: EVENTS SINCE THE REPORT AT 30 JUNE 1995, THE RISK SITUATION 
AND ACTIVATION OF BUDGET GUARANTEES 
I. EVENTS SINCE THE REPORT AT 30 JUNE 1995 
I.A. Macrofinancial assistance to Ukraine 
As part of an overall aid programme for Ukraine, the Council Decision of 23 October 1995 
empowered the Commission, on behalf of the Community, to borrow ECU 200 million for a 
maximum period often years. The proceeds of this operation are to be on-lent to Ukraine in two 
tranches. 
At 31 December 1995 the first tranche had not yet been paid. 
I.B. European Investment Bank loans to the Mediterranean countries guaranteed by 
the general budget 
Council Decisions of 30 October 1995 on the conclusion of protocols on financial and technical 
cooperation between the Community and the Republics of Malta and Cyprus. 
Under these protocols, the EIB may commit ECU 30 million and ECU 50 million respectively 
for a three-year period in the form of loans from its own resources. 
II. 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 31 December 1995, giving the minimum 
level of risk to the Community assuming that there are no early repayments (see Table 
2 on page 2 of the statistical annex); 
on a more forward-looking basis, by'reference to all the operations decided-by the 
Council or proposed by the Commission in order to estimate the impact on future 
budgets, giving the maximum risk borne by the Community assuming that the 
Commission's proposals are accepted (see Table 3 on page 3 of the statistical annex). 
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 tables in the annex (pages 1 to 3), 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 
macrofinancial assistance and loans for projects guaranteed by the borrowers in the case of NCI 
and EIB operations, for example. 
lc A 
The following analysis distinguishes between total risk, the risk in respect of Member States and 
the risk in respect of non-member countries. 
H.A. Total risk 
II. A. 1. Amount outstanding at 31 December 1995 (see Table 1 on page 1 of the statistical annex) 
The total risk at 31 December 1995 came to ECU 13 114 million, the same as at 30 June 1995. 
II.A.2. Maximum annual risk borne by the community budget: operations disbursed at 31 
December 1995 (see Table 2 on page 2 of the statistical annex) 
The total risk, which comes to ECU 3 149 million in 1996, will develop as follows: 
Year 
Annual risk 
(ECU million) 
% change 1997 
3049 
-3% 1998 
3238 
+6% 1999* 
994 
-69% 2000 
3481 
+250% 2001 
776 
-78% 2002 
600 
-23% 2003 
360 
^0% 
* No capital repayments for the balance-of-payments loans to the Member States; capital 
repayments on loans to Hungary, the Czech and Slovak Republics and Bulgaria end in 
1998. 
II. A. 3. Maximum theoretical annual risk borne by the community budget (see Table 3 on page 3 
of the statistical annex) 
This risk comes to ECU 3 500 million in 1996 and will increase regularly until 2000 (except in 
1999 when it will total ECU 2 508 million) as follows: 
Years 
Annual risk 
(ECU million) 
% change 1997 
3858 
+ 10% 1998 
4425 
+ 15% 1999 
2508 
-43% 2000 
5267 
+ 110% 2001 
2716 
-48% 2002 
4617 
+70% 2003 
4783 
+4% 
II.B. Risk in respect of the Member States 
II.B.l. Amount outstanding at 31 December 1995 (see Table 1 on page 1 of the statistical annex) 
The capital outstanding in respect of operations in the Member States was ECU 7 263 million 
at 31 December 1995, a fall of 3.7% compared with 30 June 1995. 
This fall is mainly due to the reduction in outstanding Euratom loans and NCI loans. 
The amount outstanding from the other operations has remained stable. 
A 
ILB.2. Maximum annual risk borne by the Community budget: operations disbursed at 31 
December 1995 (see Table 2 on page 2 of the statistical annex) 
The risk for 1996 comes to ECU 2 068 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 up to 2000 when it will reach 
ECU 2 821 million. 
II.B. 3. Maximum theoretical annual risk borne by the Community budget (see Table 3 on page 3 
of the statistical annex) 
The trend is much the same as in Table 2 up to 2000 when the risk will amount to 
ECU 3 215 million. It will fall to ECU 2 370 million in 2002 and ECU 2 196 million in 2003. 
n.C. Risk in respect of non-member countries 
//. C.l. Amount outstanding at 31 December 1995 (see Table 1 on page 1 of the statistical annex) 
The capital outstanding at 31 December 1995 was ECU 5 851 million, an increase of 5.% 
compared with 30 June 1995-. 
II.C.2. Maximum annual .risk borne by the Community budget: operations disbursed at 31 
December 1995 (see Table 2 on page 2'of the statistical annex) 
The risk for 1996 comes to ECU 1 081 million. 
The risk will increase in 1997 to ECU 1 586 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. 
ECU 143 million from the Republics of the former Soviet Union. 
Years 
Annual risk 
(ECU million) 1997 
1586 1998 
1178 1999 
695 2000 
660 2001 
670 2002 
570 2003 
334 
A 
//. C.3. Maximum theoretical annual risk borne by the Community budget (see Table 3 on page 3 
of the statistical annex)) 
The risk will rise from ECU 1 263 million in 1996 to ECU 2 057 million in 1997. 
Years 
Annual risk 
(ECU million) 1997 
2057 1998 
1942 1999 
1817 2000 
2053 2001 
2269 2002 
2247 2003 
2587 
m. ACTIVATION OF BUDGET GUARANTEES 
III.A. EIB loans to non-member countries 
On 5 July 1995, the EIB called on the budget guarantee in respect of loans of around 
ECU 8.6 million to the Republics of former Yugoslavia (the Former Yugoslav Republic of 
Macedonia - FYROM - and Serbia). The payment was made to the EIB on 11 October 1995. 
On 18 October 1995, the EIB again called on the budget guarantee in respect of loans of around 
ECU 5.2 million to the Republics of former Yugoslavia (FYROM, Serbia and Bosnia-
Hercegovina). The payment was made to the EIB on 26 January 1996. 
At 31 December 1995 the total amount of debts settled by the Community and not yet repaid by 
the defaulting debtors came to ECU 68.2 million. These debts were owed by all the Republics 
of former Yugoslavia with the exception of Slovenia and Croatia, which have no payments 
overdue. 
Of the ECU 68.2 million due but not paid, ECU 28.6 million was entered in the budget in 
respect of the amount owed from before 1994 and a total of ECU 39.6 million was called in from 
the Guarantee Fund on 11 January 1995 (ECU 5.3 million), on 30 January 1995 
(ECU 14.3 million), on 24 May 1995 (ECU 6.08 million), on 11 October 1995 
(ECU 8.6 million) and on 26 January 1996 (ECU 5.2 million). 
in.B. BORROWING/LENDING OPERATIONS OR LOAN GUARANTEES 
FOR NON-MEMBER COUNTRIES 
III.B. 1. Payments from cash resources 
The Commission draws on its cash resources under Article 12 of Council Regulation No-4552/89 
of 29 May 1989 implementing Decision 88/376/EEC, Euratom on the system of the 
Communities* own resources to avoid delays in servicing its borrowing operations when a debtor 
is la,te in paying. 
III.B.2. Activation of the Guarantee Fund 
In the event of late payment by a recipient of a loan granted or guaranteed by the Community, 
the Guarantee Fund is called on to cover the default within three months of the date on which 
is payment is due. 
Penalty interest for the time between the date on which cash resources are made available and 
the date of activation of the Fund is drawn from the Fund and repaid to the cash resources. 
A 
In the last six months the Fund has been called on to honour guarantees for the following 
debtors: ' / 
Country Date I Amount (principal 
+" interest) 
Tajikistan 20.07.95 1713 431.10 
Georgia 20.07.95 2 182 277.63 
Georgia 17.10.95 1471300.30 
Kazakhstan 17.10.95 835 614.83 
Georgia 21.11.95 70 931 856.06 
Armenia 21.11.95 37 996 507.14 
Tajikistan 21.11.95 55 692 660.94 
Turkmenistan 21.11.95 45 850 146.11 
Total J ~ 216 673 794.11 
III.B.3. Late repayments 
During the period covered by this report the following country repaid debts on which it had 
defaulted and for which the Guarantee Fund had already been activated. The amounts recovered 
are repaid to the Fund under Article 2 of Council Regulation (EC) No 2728/94 of 31 October 
1994 establishing a Guarantee Fund for external action. 
Country Repayment date Amount (principal 
+ interest) 
Kazakhstan 15.11.95 835 614.83 
III.B.4. Situation as regards unpaid debts at 31 December 1995 
The following amounts had not been paid at 31 December 1995: 
Country Amount (principal 
+ interest) 
Tajikistan 63 181 389.89 
Georgia 81306 915.94 
Armenia 37 996 507.14 
Turkmenistan 45 850 146.11 
"Total 228 334 959.08 
A 
PART TWO: OPERATIONS ALREADY ENTERED IN THE BUDGET 
The budgetary authority authorized 29 headings with token entries in the 1995 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 
LA. 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 31 December 1995 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 31 December 1995 the amount outstanding was ECU 1 000 million in loans to Greece and 
ECU 4 045 million in loans to Italy (Table 1 on page 1 of the statistical annex). 
I.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. 
At 31 December 1995 the total outstanding was ECU 720 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 on 21 March 1994 (see Part II - Loans raised for 
non-Community countries). 
I.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 men raised by ECU 1 billion by the Decision of 15 March 1982. The ceiling was further 
A-
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 31 December 1995 the total outstanding was ECU 1 113 million, 29.11% less than on 31 
December 1994. 
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. 
Every year the EIB provides the Commission with a list of debtors who, according to its 
information, risk defaulting in the coming year. So far, no names have appeared on this list. 
II. LOANS RAISED FOR ON-LENDING TO NON-COMMUNITY COUNTRIES 
II.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 
A 
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. 
II.B. Programme of borrowings contracted by the Community to provide 
macrofinancial assistance to the countries of Central and Eastern Europe 
II.B.l. Hungary 
n.B.l(a) Hungary I 
In 1990 the Community granted 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 has not been 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. 
Hungary repaid the first tranche of ECU 350 million in full on 20 April 1995. 
n.B.l(b) Hungary II 
As me 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, the Council 
decided to grant additional macrofinancial assistance to Hungary in the form of a loan of 
ECU 180 million under a general G-24 programme of financial assistance. 
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 paid on 15 January 1993. It will be repaid in 
January 1997 and interest, which is at a fixed rate, is payable annually. 
At 31 December 1995 the amount outstanding on borrowings for Hungary came to 
ECU 440 million. 
ILB.2. Czech Republic and Slovak Republic 
As part of G-24's overall financial assistance, 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. 
A 
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 31 December 1995 the amount outstanding on borrowings for the two republics came 
to ECU 375 million. 
Slovak Republic 
As part of the new financial assistance to the Slovak Republic, the Commission, on 
behalf of the Community, was empowered by a Council decision of 22 December 1994 
to borrow, in two tranches, ECU 130 million for a period of seven years. The proceeds 
of this operation were to be on-lent on the same terms to Slovakia. 
This assistance has not been implemented because of the delay in structural reforms in 
these countries. Furthermore, there has been a distinct improvement in the Slovak 
Republic's balance of payments and currency reserves since October 1995. The 
Commission has therefore submitted to the Council a proposal to cancel the medium-term 
loan authorized by Decision 94/939/EC of 22 October 1994. 
II.B J. Bulgaria 
II.B.3(a) Bulgaria I 
As part of G-24's overall financial assistance, 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. 
II.B.3(b) Bulgaria II 
As part of G-24's new aid for 1992 and 1993, the Commission, on behalf of the Community, 
was empowered to borrow ECU 110 million in two tranches for a maximum period of seven 
years. The proceeds of this operation were to be on-lent to Bulgaria. Because of delays in the 
process of economic reform in Bulgaria, implementation of this operation was deferred until 
December 1994 when the first tranche of ECU 70 million was finally paid. It will be repaid in 
A 
one instalment on 7 December 2001 and the interest, which is at variable rates, is payable half-
yearly. 
At 31 December 1995 the amount outstanding on borrowings for Bulgaria came to 
ECU 360 million. 
II.B.4. Romania 
II.B.4(a) Romania I 
As part of G-24's overall financial assistance, 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. 
II.B.4(b) Romania II 
As part of G-24's new aid, 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. 
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. 
II.B.4(c) Romania HI 
As part of G-24's new 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. 
The first tranche of ECU 55 million for a term of seven years was paid on 20 November 1995. 
It will be repaid in one instalment on 20 November 2002, and interest, which is at variable rates, 
is payable half-yearly. 
The second tranche had not yet been paid at 31 December 1995. 
10 A 
At 31 December 1995 the amount outstanding on borrowings for Romania came to 
ECU 510 million. 
n.C. Borrowings contracted by the Community to grant macrofinancial assistance to 
the new independent States of the former Soviet Union . 
II.C.l Medium-term loan of ECU 1 250 million 
In December 1991 the Council decided to grant a credit facility of up to ECU 1 250 million for 
the Soviet Union and 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. 
After the Soviet Union broke up, the loan was divided between the various new independent 
States at the beginning of 1992. 
U.C. 1(a) 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; 
n.C.1(b) 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: 
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. 
On 14 September 1994 a contract for ECU 59 million was signed with Uzbekistan. 
On 12 October 1994 a contract for ECU 68 million was signed with Azerbaijan. 
11 A 
n.C. 1(c) Utilization of the ECU 1 250 million loan 
Loans 
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 
31.12.1995 
38 
20 
68 
100.5 
70 
10 
40 
25 
0 
23.7 
27 
72.9 
349 
55 
45 
129.8 
59 
1132.9 Actual utilization at 
31.12.1995 
37.9 
19.6 
50.3 
100.5 
69.4 
9.8 
34.1 
24.9 
22.7 
27.0 
70.0 
299.7 
54.5 
44.9 
129.8 
58.8 
1053.9 
At 31 December 1995 the amount of loans actually being used came to ECU 1053.9 million. 
n.C. 1(d) 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 38 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)). 
Azerbaijan and Uzbekistan: 
interest on 28 March and 28 September 
capital on 28 September 1997. 
At 31 December 1995 Georgia, Armenia, Turkmenistan and Tajikistan had defaulted on principal 
and interest totalling ECU 228.33 million (see Part One, Section III - Activation of budget 
guarantees). 
12 A 
ILC.2 Macrofinancial 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 often years. The proceeds of this 
operation were to be on-lent on the same terms to Moldova. 
The first tranche of ECU 25 million was paid to Moldova in December 1994. The loan is to be 
repaid in five equal annual instalments from the sixth year onwards. The full loan will have been 
paid by 7 December 2004. The interest, which is at variable rates, is payable half-yearly. 
The second tranche of ECU 20 million for a term of 10 years was paid on 8 August 1995. The 
loan is to be repaid in five equal annual instalments from the sixth year onwards. The full loan 
will have been paid by 8 August 2005. The interest, which is at variable rates, is payable half-
yearly. 
At 31 December 1995 the amount outstanding on borrowings for Moldova came to 
ECU 45 million. 
IL C.3 Macrofinancial assistance for Ukraine 
As part of the overall aid programme for Ukraine, the Commission, on behalf of the Community, 
was empowered by the Council Decision of 22 December 1994 to borrow ECU 85 million for 
a maximum period often years. The proceeds of this operation are to be on-lent to Ukraine in 
one tranche. 
The loan was paid in one tranche on 28 December 1995. The loan is to be repaid in five equal 
annual instalments from the sixth year onwards. The full loan will have been paid by 28 
December 2005. The interest, which is at variable rates, is payable half-yearly. 
At 31 December 1995 the amount outstanding on borrowings for Ukraine came to 
ECU 85 million. 
//. C. 4 Macrofinancial assistance for Belarus 
As part of the overall aid programme for Belarus, the Commission, on behalf of the Community, 
was empowered by a Council decision of 10 April 1995 to borrow up to ECU 75 million for a 
maximum period often years. The proceeds of this operation were to be on-lent in twojtranches 
The first tranche of ECU 30 million was paid on 28 December 1995 and is to be repaid in five 
equal annual instalments from the sixth year onwards. The full loan will have been paid by 28 
December 2005. The interest, which is at variable rates, is payable half-yearly. 
At 31 December 1995 the amount outstanding on borrowings for Belarus came to 
ECU 30 million. 
II.D. Borrowings contracted by the Community to grant macrofinancial assistance to 
the Baltic States 
As part of the G-24's overall programme of financial assistance for these three countries, the 
Commission, on behalf of the Community, was empowered to borrow ECU 220 million for a 
13 f\ 
period of seven years. The proceeds of this operation were 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 of ECU 50 million 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. 
Half of the second tranche, ie. ECU 25 million of the ECU 50 million planned, was paid to 
Lithuania on 16 August 1995; it is to be repaid in one instalment on 16 August 2002 and 
interest, which is at a variable rate, is payable half-yearly every 16 February and 16 August. 
At 31 December 1995 the amount outstanding on the borrowings for the Baltic States came to 
ECU 135 million. 
ILE. Borrowings contracted by the Community to grant macrofinancial assistance to 
the Mediterranean countries 
ILEA. Israel 
As part of the financial assistance agreed for Israel and the population of the occupied territories, 
the Commission was empowered in June 1991 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 31 December 1995 the amount outstanding on the borrowings for Israel came to 
ECU 160 million. _ 
II.E.2. Algeria 
In September 1991 the Commission, on behalf of the Community, was empowered to borrow 
ECU 400 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 Algeria. 
A bridging loan was granted on 23 December 1991 to cover the first tranche of ECU 250 million 
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. 
14 A: 
Payment of the second tranche of ECU 150 million was deferred because of delays in AJgeria's 
economic reform programme and was not made until August 1994 when the process of structural 
adjustment resumed. The loan is to be repaid in full on 17 August 2001 and interest is payable 
annually every 17 August. 
In December 1994 the Council decided to grant Algeria further macrofinancial assistance. The 
Commission, on behalf of the Community, was empowered to borrow ECU 200 million for a 
maximum period of seven years. The proceeds of this operation are to be on-lent to Algeria in 
two tranches. 
The first tranche of ECU 100 million for a term of seven years was paid on 27 November 1995. 
It is to be repaid in one instalment on 27 November 2002 and interest, which is at a variable rate, 
is payable half-yearly. 
At 31 December 1995 the amount outstanding on the borrowings for Algeria came to 
ECU 500 million. 
III. COMMUNITY GUARANTEE TO NON-COMMUNITY COUNTRIES 
m.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 31 December 1995 total ECU 7 862 million, of which 
ECU 1 500 million is for Spain, Greece and Portugal and ECU 6 362 million for the 
non-member Mediterranean countries. At 31 December 1995 the total of outstanding loans came 
to ECU 2 167 million (taking account of the 75% limit), of which ECU 385 million was 
accounted for by Spain, Greece and Portugal and ECU 1 782 million by the non-member 
Mediterranean countries. 
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. A 75% overall guarantee 
is provided. 
15 A 
At 31 December 1995 ECU 1 239 million had been made available; of this total, ECU 98 million 
had been paid; this figure corresponds to the amount currently outstanding. 
At 31 December 1995, the breakdown of authorizations by country (non-member countries only) 
was as follows: 
ECU Million 
Loans authorized 
Algeria 640 
Cyprus 142 
Egypt 802 
Israel 215 
Jordan 198 
Lebanon 222 
Malta 85 
Morocco 517 
Slovenia 150 
Syria 323 
Tunisia 418 
Turkey 90 
Yugoslavia1 760 
Protocols - Total 4 562 
Horizontal financial cooperation 1 800 
Mediterranean - Total 6 362 
The loans are generally for 15 years with 3 to 4-year periods of grace on capital repayments. 
III.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. 
The second protocol with Yugoslavia was suspended when ECU 100 million of credits could still be 
granted. 
16 ft 
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 EEB in the countries of Central and Eastern Europe 
(including the Baltic States and Albania) up to a maximum of ECU 3 billion. 
The contract of guarantee was signed on 22 July 1994 in Brussels and on 12 August 1994 in 
Luxembourg. 
The loans are generally long-term: 15 years on average with 3 to 4-year periods of grace on 
capital repayments. 
At 31 December 1995, ECU 3 541 million had been made available in the Central and Eastern 
European countries but only ECU 952 million had been disbursed. 
III.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 loans in accordance with its Statute and its usual criteria to projects of 
mutual interest in certain non-member 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 31 December 1995 credit lines of ECU 607 million had been signed but only 
ECU 149 million had been disbursed. 
III.D. Loans granted by the European Investment Bank in South Africa 
At its meeting of 1 June 1995 the Council adopted the guidelines proposed by the Commission 
for the extension of EIB activities to South Africa and asked it to grant loans in accordance with 
its Statute and its usual criteria to projects of mutual interest in that country. 
An overall limit of ECU 300 million has been set for a two-year period which could be extended 
to two and a half years. 
These loans benefit from 100% Community budget guarantees. The Commission presented a 
proposal for a decision to this effect on 5 December 1994. The formal Council Decision followed 
on 1 June 1995. The contract of guarantee between the Community and the EIB was signed on 
4 October 1995 in Brussels and on 16 October 1995 in Luxembourg. 
At 31 December 1995 credit lines of ECU 45 million had been signed but no amounts had been 
disbursed. 
17 f\ 
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. 
I.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. 
Macrofinancial 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. 
I.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, certain non-member countries -
developing countries of Asia and Latin America and South Africa). 
A 
IL GENERAL ECONOMIC SITUATION OF THE NON-MEMBER 
COUNTRIES 
A. ALGERIA 
1. GENERAL ECONOMIC SITUATION 
Despite some progress accomplished in the field of stabilization and structural 
adjustment in both 1994 and 1995, Algeria's general social and economic situation 
remained difficult. The future pace of economic growth, output recovery, expansion in 
domestic and foreign investment, structural reforms and the implementation of 
effective social and labour policies would critically depend upon the on-going 
democratizatization process, associated with a positive outcome of current civil strife. 
In 1994 real GDP increased by a modest 1.1% (which, however, favourably compares 
with a 2% decline in 1993). According to preliminary estimates, in 1995 real GDP 
increased by 5.3%. 
In 1994/95, Algerian economy witnessed new, relevant inflationary pressures (year-on-
year CPI inflation was 34% in April 1995), reflecting the previous implementation of 
price liberalization policies, associated with subsidy reduction and the dinars' sharp 
depreciation (40.17%) decided in April 1994. The inflation rate is projected to decline 
to 10.3% by the end of March 1996. 
The overall budget deficit sharply contracted from 8.7% in 1993 to 2.8% in 1995 and 
it is expected to further decline to 1.3% of GDP in 1996, reflecting higher revenue 
from indirect taxation and custom duties, the enlargement of the tax base, and further 
cuts in public wages and salaries, food subsidies, agricultural price support, Treasury's 
financing of the Industrial Rehabilitation Fund and cash transfer to the poor. 
In 1994/1995, the Algerian authorities implemented tight monetary and fiscal policies, 
in the framework of a policy programme supported by an IMF Stand-by arrangement 
approved in May 1994, followed by a three-year Extended Financing Facility approved 
in May 1995. Economic policies also emphasised wage restraint. Market-based 
instruments for the management of domestic liquidity are being adopted. 
These policies were complemented by a large depreciation of the Algerian dinar, the 
introduction of an exchange rate regime based upon a managed floating mechanism, 
the strengthening of the external reserve position, price liberalization and subsidy 
reduction. Imports have been completely liberalized and State import monopolies are 
being gradually dismantled. 
Progress was also made in structural adjustment, in particular, and banking reform. A 
new Code on Foreign Investment has been approved and a new agency aimed at 
promoting foreign and domestic private investment has been established. 
2. BALANCE OF PAYMENTS 
The adoption of import liberalization policies associated with a free access to foreign 
currency for current account transactions by residents led to a sharp deterioration of 
19 A 
Algeria's current account balance which shifted from a surplus of 1.6% of GDP in 1993 
to a deficit of 6.9% in the 1994/1995 programme year. The current account situation is 
expected to remain precarious with a projected deficit of 5.7% of GDP in 1995/96. 
While imports have been buoyant, thus contributing to alleviate the scarcity of 
industrial spare parts, raw materials and basic and intermediate consumption goods, 
export revenue declined somewhat in both 1994 and during the first quarter of 1995 
reflecting the unsatisfactory performance of hydrocarbon exports (both in terms of 
quantities and prices).The sharp nominal devaluation of the dinar has improved 
Algerian exports' competitiveness and will encourage export diversification towards 
new products and new markets. 
The overall balance of payments situation in 1995 is estimated to have sharply 
deteriorated if compared to the previous year, reflecting a growing trade deficit and 
the" residual" (after Paris and London Club arrangements) servicing of medium-long 
term external debt. 
In this respect, new Paris and London Club reschedulings are envisaged as well as new 
financing by the IMF, other IFIs, the European Union and other bilaterals (Japan in 
particular). In 1995, FDI is expected to remain low. By September 1995, the country's 
foreign currency reserves decreased to US$ 1.9 bn, equivalent to 2 months of imports 
(against US$ 2.6 bn by end of 1994, or 2,9 months of imports). 
3. EXTERNAL DEBT 
The amount of external debt (some US$ 33.8 bn as of end of 1995) still represents a 
heavy burden for Algeria's public finances and balance of payments. Rescheduling 
arrangements with Paris Club official bilateral creditors were reached in 1994 and 
1995. These arrangements are expected to continue in the framework of the IMF 
three-year policy programme. Algerian authorities reached also an arrangement with 
commercial creditor banks (London Club) which implies a rescheduling of debt service 
obligations falling due from March 1, 1994 to December 31, 1997 (US$ 3.2 bn). 
The foreign debt/GDP ratio (which was around 78% at end of 1995) is expected to 
remain relatively stable in the foreseeable future. Debt service/exports ratio (which 
declined dramatically from 82% in 1993 to around 50% in 1995) is projected tojiirther 
slim down to about 40%» in 1996, reflecting the positive impact of London and Paris 
Club debt relief arrangements. 
20 A 
B. BELARUS 
1. GENERAL ECONOMIC SITUATION 
Owing to conservatism and doubts on the nature of future ties with Russia Belarus 
went through a period of high uncertainty after it became independent in 1992. The 
country embarked on reforms after most countries in the region and left the Russian 
ruble zone only in April 1994. A considerable drop of production (-20%) was recorded 
in 1994, and in 1995 real GDP is estimated to have declined by 7%. Price increases, 
owing to central bank unlimited refinancing of the banking system, reached hyper-
inflationary levels in 1993 and 1994. 
Stringent stabilisation policies were implemented as of early 1995, with a tight control 
of monetary expansion. As a result, inflation dropped down from 40% per month in 
January to 3% in August. Market mechanisms for the allocation of central bank credits 
were introduced. The authorities pursued a flexible interest rates policy aimed at 
maintaining positive and attractive real interest rates, so as to mobilise ruble deposits 
within the banking system. The budget deficit, which remained below 2% in 1993 and 
1994, is estimated at 3.2% of GDP for 1995. 
Progress in the area of structural reforms remains the weak point in Belarus, as the 
initial steps have been undertaken only recently. Significant price adjustments took 
place in late 1994 and early 1995 and most prices have now been freed. Most import 
licences and the surrender requirements on exports have now been abolished. External 
trade however remains subject to some limitations. The banking sector is burdened 
with bad loans and remains globally inefficient. Inter-enterprises arrears account for 
more than 50% of GDP. Privatisation is only at the very initial stage, with enterprises 
representing only 6% of the total asset value earmarked for privatization having 
already been privatised. The process of reforms in agriculture has been particularly 
slow and land privatisation has not yet started. 
On 12 September 1995, the IMF board approved the first Stand-By Arrangement with 
Belarus, to support the country's programme of reforms and external financing needs. 
2. BALANCE OF PAYMENTS 
The current account was in deficit in 1993 and 1994 (about -10% of GDP). Initial 
figures for 1995 show a significant growth of exports over the first half of the year. 
The real appreciation of the ruble, combined with a loss of competitiveness due to the 
rise in import tariffs, is however expected to hamper export growth over the short 
term, and a current account deficit of -4% of GDP is still estimated for 1995 and 
expected in 1996. 
Owing to hard currency inflows the capital account was in surplus in the first half of 
1995 but, on account of high amortisation needs on the external debt, it is estimated to 
have again been in deficit in the second half of the year. Hard currency international 
reserves remain tight, representing only about 1.5 months of imports by end-1995. 
21 A 
Despite a law on foreign investment enacted in 1992 which ensures the free 
repatriation of profits, foreign direct investment remains extremely scarce (estimated at 
only 20 mio dollars in 1995). 
The positive real interest rates contributed to stabilise the Belarus ruble in nominal 
terms and led to a significant appreciation in real terms against the dollar and the 
Russian ruble in 1995. Under a two digit inflation rate, the present exchange rate 
would however be difficult to hold without serously damaging the country's 
competitiveness. 
By lifting restrictions on foreign exchange transactions, Belarus progressively moved in 
1995 to current account convertibility. By end-1995, however, the authorities gave 
confusing signals on a reintroduction of limitations on inter-bank hard currency 
transactions. 
3. FOREIGN DEBT 
Belarus has abandoned to Russia its relative share of assets and liabilities of the FSU. 
Thus, the country's only external debts are those contracted after 1 January 1992. The 
total external debt was estimated at US$ 2.1 bn by end-1995 (i.e. 22% of GDP). 
The country's main creditor is Russia, on account of gas arrears which accumulated 
until end-1994 and which are now subject to a US$ 419 mio ceiling under the current 
IMF programme, which was however exceeded by end-1995. They are expected to be 
phased out under a long-term framework currently under discussion between the 
Russian and Belarus authorities. Debt service increased significantly in 1995 owing to 
the repayment of German and EC credits, but remained nevertheless moderate (7.6% 
of exports, without including the settlement of the gas arrears). 
22 A 
C. BULGARIA 
1. GENERAL ECONOMIC SITUATION 
In 1995, the Bulgarian economy consolidated the recovery which had started in 1994. 
Real GDP increased by 2.5% and this positive real trend essentially reflected a 
favourable export performance, despite the steady real appreciation of the lev. In 
September 1995, the unemployment rate further declined to 11.1% (which favourably 
compares with a rate of around 13% as of end of 1994). 
In 1995, inflation fell to an annual rate of 33%, despite the increase of some 
administered prices (energy in particular). 
Implementing a tight monetary policy in 1995 was made more difficult by large capital 
inflows which exerted upward pressures on the lev exchange rate. The Bulgarian 
National Bank (BNB) intervened with a view to preventing a nominal currency 
appreciation. Official interest rates were cut in order to contain interest-sensitive (short 
-term) capital inflows. However, despite efforts to keep monetary aggregates under 
control, the 1995 monetary targets were exceeded. The BNB's room for manoeuvre 
was also limited by the still huge liquidity requirements of the State budget, ailing 
banks and loss-making, state-owned enterprises. 
A moderately restrictive incomes policy helped the government in its effort to subdue 
inflation. As regards fiscal policy, in May 1995, the government adopted a new budget 
law which implied a budget deficit of 5.5% of GDP for 1995. However, preliminary 
indications suggest that the deficit reached 6.7% of GDP last year, a level virtually 
unchanged from 1994 (6.6%). 
As for sectoral adjustment and reform, achievements in 1995 were mixed. On the 
negative side, some restrictions on agricultural land sales to private owners and new 
price controls have been introduced. On the other hand, some administered prices have 
been increased, action has been taken to reform two ailing banks and a list of more 
than 1200 state owned enterprises (SOEs) has been prepared in view of their 
subsequent mass privatization (via issuing vouchers) due to start in March 1996. Some 
further 200 medium-large SOEs have been selected for privatization (via direct sales) 
in 1996. 
Current policies aimed at coping with financial problems of the banking system do not 
seem to have produced tangible results yet. 
As regards official forecasts for 1996, real GDP is projected to expand by 3%, inflation 
to decline to 20-25%, the budget deficit is envisaged to contract somewhat to around 
5-5.5%) and the country's external position (trade and current account, foreign 
exchange reserves etc.) is expected to improve. However both the inflation target and 
the projected trade and current account improvements appear to be rather uncertain 
and probably are unrealistic. 
23 \ 
2. BALANCE OF PAYMENTS 
By September 1995, Bulgaria's trade balance recorded a surplus of US$ 300 mio. The 
country continued to benefit from increased access to EU market, the economic 
recovery in Western Europe, the resumption of trade with eastern European partners 
and the positive effects of the real exchange rate adjustments occurred in 1994. 
By the same date, current account recorded a small surplus of around SU$ 100 mio. In 
1995, FDI gave some signs of expansion (US$ 165 mio against 105 mio in 1994). 
By end-October 1995 gross official reserves amounted to US$ 1.8 bn, equivalent to 
around 3.6 months of imports (which compares to 3 months of imports as of end of 
1994). 
3. FOREIGN DEBT 
The agreement in principle reached in November 1993 with the London Club 
commercial creditors on a debt and debt service reduction programme (DDSR) was 
finalized in July 1994. Overall, it is estimated that the agreement reduced Bulgaria's 
US$ 8.2 bn eligible debt to western commercial banks by around 46%. In April 1994, a 
third Paris Club debt rescheduling arrangement was reached between Bulgaria and its 
official creditors, covering all obligations falling due from the previous rescheduling 
until April 30, 1995. 
By restoring Bulgaria's external viability, these debt agreements should help the 
country attract further FDI and regain access to the international financial markets. At 
end-1995 the external debt/GDP ratio was 83.0% (against 109.3% in 1994) and the 
debt service ratio was reduced to 17.5% (18.4% in 1994). 
24 A 
CENTRAL ASIAN NEWLY INDEPENDENT STATES (NIS) 
1. GENERAL ECONOMIC SITUATION 
In 1995, Kazakhstan's GDP is estimated to have declined by more than 10 %, but the 
recovery in industrial production has continued and exports have rebounded. In early 
October, the budget was nearly balanced. Monetary and credit policies have been 
geared towards the fight against inflation. As a result, monthly inflation fell to around 
2.4 % in September and all IMF program targets under the current Stand-By 
arrangement were met with large margins. Important progress have been made in the 
structural transformation of the economy, in particular in liberalizing external trade. 
In 1994, Tajikistan's GDP contracted by 12 % and it is tentatively estimated to have 
declined again in 1995, though at a lower rate than in 1994. The budget deficit (13.8 % 
of GDP in 1994) should be lower in 1995-96. In 1995, the positive effects of the tight 
budgetary control were jeopardized by the excessive banking credit, which led to a 
very sharp acceleration of monthly inflation (70 % in August) and to a continued 
depreciation of the Tajik ruble. In 1995, simultaneously with the introduction of the 
Tajik ruble, interest rates were deregulated, restrictions on bank deposits eliminated, 
bread prices adjusted and foreign trade liberalized. 
During 1994, Turkmenistan, which was forced to curtail its gas exports to 
neighbouring countries because of recurrent non-payments, suffered a 15% contraction 
in GDP. In 1995, non-payment of gas exports reached critical levels, industrial output 
fell by 20% (year-on-year) and cotton and grain harvests failed to meet their targets. In 
1994, Turkmenistan had an inflation rate of over 2,000%, reflecting a strong expansion 
of money and credit. Inflation is estimated to have accelerated to around 2.500% in 
1995. In 1995, the authorities made strenuous efforts to keep the budget deficit from 
rising but not enough to alleviate the inflation problems. With regard to the reform 
process, progress has been very slow. 
Uzbekistan's real GDP is estimated to have declined by about 2 % in 1995 and is 
expected to decline again moderately in 1996. In 1995, the authorities tightened 
significantly financial policies, and as a result, year-on-year inflation declined from 
1.280 % in 1994 to about 250 % in September 1995, and seems to have declined 
further in the final months of the year. In the first half of 1995, the budget deficit was 
very low (1 % of GDP), but rose to about 4 % of GDP in late 1995 because of 
significant increases in public wages and social benefits. This, however, still represents 
an important improvement with respect to the 1994 deficit (7 % of GDP). The 1996 
budget deficit is likely to be limited (4 % of GDP). Despite a large increase in net 
foreign assets, reserve money and broad money were approximately in line with the 
programmed levels, reflecting tight domestic credit policies. In the area of structural 
reform, a fast liberalization of prices and a major liberalization of the foreign exchange 
system were implemented, while delays were experienced in banking sector reform and 
in the privatization of medium-and large-scale enterprises. 
25 A 
2. THE BALANCE OF PAYMENTS 
The current account of Kazakhstan is estimated to have recorded a deficit of about 
US$ 600 mio (3 % of GDP) in 1995. Reflecting a large capital account surplus, gross 
official reserves increased from US$ 1.2 bn at end-1994 to about 1.7 bn in September 
1995. Net official reserves represented 2.7 months of imports in September 1995. 
Despite a nominal depreciation of 16 % in 1995, the real exchange rate of the tenge 
vis-à-vis the dollar appreciated by some 20 %, reflecting the higher rate of inflation. 
Kazakhstan is benefiting from a World Bank Structural Adjustment Loan and from an 
IMF Stand-By arrangement. A recent comprehensive medium-term economic and 
financial program could be supported in early 1996 by an arrangement under the IMF's 
Extended Facility. 
Despite an improvement in the terms of trade and a sharp decline in import volume, the 
current account deficit of Tajikistan remained very high in 1994 (15 % of GDP). 
Together with a slight deficit of the capital account, this left an overall balance of 
payments deficit of 16% of GDP and gross official reserves were practically depleted. 
In 1995, the current account experienced an impressive correction, reflecting the 
improvement in the terms of trade and a sharp contraction in import volumes. 
Nevertheless, the external financing needs remain very high since. The current account 
deficit is expected to reach 9 % of GDP in 1996 because of a deteriorated trade 
balance and large interest payments falling due. The resulting financing gap is expected 
to be partly covered by a substantial debt service relief and by IMF and World Bank 
disbursements. In early 1996, the IMF board could approve a first credit tranche under 
a new Stand-By arrangement which would require complementary financing from the 
official donors. 
In recent years, the inadequate financial policies and the nonpayment for gas deliveries 
put strong pressure on Turkmenistan's current account. As a result, the Turkmen 
authorities restricted severely the access to foreign exchange to compress imports. In 
spite of these measures, the current account on a cash basis weakened further from a 
deficit of 8 % of GDP in 1993 to a deficit of 14 % of GDP in 1994. In 1995, gas 
exports have shown an extremely weak performance. Nevertheless, gross official 
reserves have continued to grow and stand at a very high level (1.2 bn of US$ or 10 
months of imports at end-1995). The manat has dropped by 2,500 % in nominal terms 
in the two years since its introduction in November 1993. The official exchange rate 
has been kept significantly overvalued with respect to the parallel market rate in order 
to keep import costs low. There is not an IMF agreement in place but on-going 
discussions between the authorities and the IMF could lead to an IMF-supported 
stabilization programme. 
In 1995, Uzbekistan's trade balance is estimated to have been balanced and the current 
account deficit was low (about 2.5 % of GDP). New loan agreements, foreign direct 
investments and significant unexpected inflows allowed a substantial increase in gross 
official reserves (of about US$ 500 mio) to US$ 1.8 bn (6 months of imports). In 
1996, the current account could deteriorate owing to growing infrastructure 
investments. The resulting financing gap would be largely filled by purchases from the 
26 A 
IMF and from the World Bank. In 1995, the exchange rate for the sum depreciated 
significantly in nominal terms, but appreciated in real terms against the US dollar, 
3. FOREIGN DEBT 
At end-September 1995, Kazakhstan's stock of external debt was estimated at US$ 3.3 
bn (around 19 % of GDP), of which US$ 1.4 bn was owed to Russia, and the external 
debt service ratio was estimated to represent about 10 % of exports. In 1995, 
difficulties continued to be experienced with respect to the timely servicing of this debt. 
However, a recent redefinition of responsibilities among the institutions in charge of 
debt management should prevent this from recurring. The total amount of arrears has 
been reduced to US$ 6 mio at end-October 1995. 
At end 1995, the external debt of Tajikistan (US$ 800 mio) exceeded the country's 
GDP, most of it contracted on non-concessional terms with relatively short maturities. 
Most of it was due to FSU countries. The external payments situation is likely to be 
very difficult in 1996, when large principal repayments fall due and when grace periods 
expire on deferred payments. 
In 1994, Turkmenistan's total external debt rose sharply to 18 % of GDP, mainly 
reflecting loans aiming at financing the current account deficit, and debt service 
represented 23 % of exports. The short-term maturity of most loans is a source of 
particular concern. 
In 1995, Uzbekistan's external debt stock represented slightly more than 15 % of GDP 
(about US$ 1.3 bn) and debt service slightly more than 15 % of exports. Under the 
current IMF programmes (SBA and STF), the authorities have committed themselves 
to observe cumulative quarterly ceilings on the amount of new loans contracted or 
guaranteed. 
27 A 
D. THE CZECH REPUBLIC 
1. GENERAL ECONOMIC SITUATION 
The recovery of the Czech economy that started in 1994 strengthened markedly in 
1995, with year-on-year real GDP growth accelerating to 5.2%. This stronger growth 
is being led by domestic demand, and in particular by investment. Industrial output 
posted a 12.9% year-on-year increase in November 1995. The unemployment rate, at 
2.9% in December 1995, remains very low. Real GDP growth is projected to reach 5-
6% in 1996. 
Despite the strength of the recovery, CPI inflation declined from 10.2% at end-1994 to 
7.9% in November 1995. The Czech National Bank (CNB), however, expects the 
year's average inflation rate to be about 9.5%, which means that the official target of 
bringing average inflation below 9% in 1995 is unlikely to be attained. Furthermore, 
the boom in domestic demand, the destabilising effects of the capital inflow surge on 
the money supply and the tightness of the labour market (which has contributed to an 
acceleration of real wage growth to around 7.5% in 1995) will make it difficult for the 
authorities to meet that target in the coming two years. 
Money supply grew by 20.2% in 1995, compared to an original official target of 14-
17%. This rapid growth of liquidity reflects the impact of the strong foreign capital 
inflows, which the CNB has only been able to sterilize partially through open market 
operations, the increase in the banks' minimum reserve requirements and the transfer of 
deposits of the National Property Fund from commercial banks to the central bank. 
Regarding fiscal policy, preliminary figures show that the state budget ended 1995 with 
a surplus of Kc 8.6 bn (about US$ 331 mn). In December 1995, the Parliament 
approved a balanced budget for 1996. 
As far as structural reform is concerned, the second wave of large-scale voucher 
privatization was concluded in November 1994. The privatization of the remaining 
enterprises controlled by the state has gathered momentum in 1995 with the sale of a 
27% stake in the country's telephone monopoly SPT, worth US$ 1.32 bn, to a Dutch-
Swiss telecommunications consortium, the decision to sell a 49% stake in Czech 
Refineries, and the announcement by the government of a plan to privatize additional 
stakes in 53 big state enterprises. — 
2. THE BALANCE OF PAYMENTS 
The current account surplus (2.2% of GDP in 1993) disappeared in 1994 and is 
expected to turn into a 3.5% of GDP (about US$ 1.5 bn) deficit in 1995. This 
deterioration in the current account reflects the acceleration of domestic demand, the 
real appreciation of the Czech crown and trade restrictions introduced by Slovakia. 
Between January and September 1995, the trade and current account balances reached 
deficits of, respectively, US$ 2.7 bn and US$ 1 bn. 
The current account deficit, however, is being amply financed by a huge inflow of 
foreign capital. The capital account showed a US$ 6 bn surplus in January-September 
1995. This figure includes almost US$ 2 bn in net FDI, US$ 0.7 bn in portfolio 
28 A 
investment, US$ 2.1 bn in other long-term capital and US$ 1.2 bn in short-term capital. 
The record amount of FDI largely reflects the SPT operation. The high inflow of short-
term capital, for its part, mostly reflects arbitrage operations to take advantage of the 
combination of a relatively high differential between domestic and foreign interest rates 
and the strength of the Czech crown. 
The Czech Republic's access to the international capital markets has been reinforced by 
successive upgradings of its ratings. In August 1995, the London agency IBCA 
assigned to the Czech Republic an A" rating; in September 1995, Moody's upgraded 
the country's rating from Baa2 to Baal; and, in November 1995, Standard & Poor's 
upgraded its rating from BBB+ to A. The Czech Republic has, therefore, become one 
of the few non-developed countries that can boast a "A" level rating. The official 
integration of the Czech Republic into the OECD as of 21 December 1995 should 
contribute to a further improvement of the foreign perception of the country. 
The surge in capital inflows 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$ 12.9 bn (or about 8 months of imports) in November 1995, up from US$ 6.2 bn 
at end-1994. In order to offset or restrict part of the capital inflows, the authorities 
have repaid ahead of schedule all the remaining IMF debts (worth US$ 1.1 bn) and 
imposed in late June 1995 limits on the total amount of short-term foreign credits 
Czech banks may take. Also, a new Foreign Exchange Law entered into force on 1 
October 1995 making the Czech crown fully convertible for current account 
transactions (including the immediate termination of the Czech-Slovak clearing system) 
and providing for a gradual introduction of full capital account convertibility. Finally, 
the CNB is considering possible options to increase the flexibility of their exchange 
rate policy, including the widening of the fluctuation band around the D-mark/US$ peg 
and the revaluation of the central rate. No decision regarding exchange rate policy 
however is expected to be taken before the June 1996 general elections. 
3. FOREIGN DEBT 
Mostly reflecting strong foreign borrowing by Czech enterprises and banks, foreign 
debt has risen substantially since 1993, with the pace of increase accelerating in 1995. 
Nonetheless, 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$ 15 bn in June 1995, 
but this still implied a relatively moderate debt/GDP ratio of 31%. The debt service-
over-exports ratio, at below 15%, remains low. While projections for 1995 and 1996 
point towards a continued increase in the debt and debt service indicators, these ratios 
are expected to remain at reasonable levels. 
29 A 
E. ESTONIA 
1. GENERAL ECONOMIC SITUATION 
After a sharp decline in 1992 and early 1993, the Estonian economy emerged from 
recession by the end of 1993. GDP grew by 4% in 1994 and probably at a similar rate 
in 1995. Unemployment, at about 5.4% of the labour force, remains moderate. 
Macro-economic stabilisation was to a large extent achieved after the introduction in 
June 1992 of a currency board arrangement under which the growth of the monetary 
base is limited by the amount of hard currencies and gold detained by the central bank. 
A new currency, the Estonian kroon, was introduced at the same time. This proved 
successful in stabilising the economy: inflation continued to decline in 1995, reaching 
29% at year-end compared to 47% at end-1994. Under the currency board 
arrangement, central bank lending to the state is prohibited, which contributes to 
budgetary discipline. In 1995 the financial balance was in surplus (0.8% of GDP). 
Increased government deposits in the banking sector resulted in a slightly lower fiscal 
balance surplus (0.3% of GDP). The 1996 budget envisages an almost balanced 
budget. 
Estonia has already implemented the bulk of structural reforms leading to a market 
economy. Prices and foreign trade have been liberalised. The small scale privatisation 
covering some 1000 small enterprises is now virtually completed. Out of the 500 
medium and large scale enterprises, about 100 remain in the state's hands. Land 
privatisation, which was slow to initiate, is being accelerated. Financial sector reform 
appears as the most sensitive area. The Bank of Estonia has increased its supervision 
capacities and reduced its share of assets in the Savings Bank to 25% of the capital. 
The state also reduced below 10% its minority shareholding in commercial banks. 
Capital adequacy requirements are being gradually increased. 
Estonia maintains liberal foreign investment laws. The Free Trade Agreement with the 
European Union entered into force on 1 January 1995. 
2. THE BALANCE OF PAYMENTS 
External trade continued to grow at a high pace, particularly imports (including^ large 
share of investment-related goods) which increased in 1995 by 33% over 1994. 
Estonia's external trade with the European Union increased markedly after 
independence. However, it is characterised by a large deficit on the Estonian side. In 
1994, the bilateral trade deficit amounted to US$ 1.3 bn, and increased even faster in 
1995, when it amounted to US$ 1.2 bn over the first seven months1. The overall trade 
deficit considerably increased to an estimated US$ 620 mio, or 17% of GDP in 1995. 
The current account also deteriorated sharply, reaching a deficit of about 10% of GDP 
(excluding official transfers). 
Data between 1994 and 1995 arc not strictly comparable. 1995 trade with the EU includes 
Sweden and Finland, tAvo very significant commercial partners of Estonia. 
30 A 
Under the currency board arrangement, the Estonian kroon is pegged to the DM at a 
fixed 8 to 1 rate. This has led, given the remaining two digit inflation, to a relative loss 
of external competitiveness which will have to be assessed against future developments 
in the external trade. 
In March 1995, the IMF approved a new fifteen-month Stand-By arrangement in the 
amount of SDR 14 mio (US$ 21 mio), but the authorities do not intend to make 
purchases under it unless the balance of payments weakens unexpectedly. For the third 
consecutive year, the capital account was in surplus, mainly owing to high inflows of 
foreign direct investment of about US$ 200 mio (approximately 5.9% of GDP). 
Official foreign exchange reserves continued to grow and, at US dollars 580 mio at 
end-1995, covered approximately 3 months of imports. 
3. FOREIGN DEBT 
Estonia has no legacy of foreign debts from the FSU. In 1995, the stock of external 
debts increased from US$ 271 mio to an estimated US$ 353 mio level (or 9.9% of 
GDP). Debt service remained low with a ratio to exports of goods and non-factor 
services of about 1%. 
A substantial part of Estonia's foreign debt is owed to international financial 
institutions. The IMF has awarded Estonia a US$ 35 mio STF and disbursed US$ 59 
mio under the successive Stand-By programmes since 1992. 
31 A 
F. HUNGARY 
1. GENERAL ECONOMIC SITUATION 
Despite the stabilization measures adopted by the Hungarian government in March 
1995, real GDP is estimated to have expanded by about 2% in 1995, only slightly 
below the 2.9%» rate recorded in 1994. Although economic growth decelerated in the 
second half of 1995, GDP is projected to remain within the 2-3% range in 1996. After 
reaching a peak of 11.8% in early 1993, the unemployment rate has declined to 10.4% 
at end-1995. 
Largely reflecting the faster devaluation of the forint, the introduction of an 8% import 
surcharge and the increase in indirect taxes as part of the government's March 1995 
"austerity package", inflation worsened significantly in 1995. CPI inflation has risen 
from 21.2% in December 1994 to 28.5% in December 1995. Wages, however, grew at 
a relatively moderate pace (19%) in 1995 and, as a result, real wages fell by about 
10%. For 1996, the authorities aim at bringing inflation back to around 20%, an 
ambitious target. 
Thanks to higher than expected income from privatization (see below) and from 
corporate and custom taxes, the central government deficit finished the year 
significantly below the targets contained in the March 1995 supplementary budget. 
However, the fiscal performance of social security funds seems to have been worse 
than programmed and the general government deficit excluding privatization revenues 
remains high (6% of GDP). 
Disagreements within the government coalition that took office in July 1994 initially 
resulted in a deadlock in the privatization process. Privatization, however, accelerated 
in the second half of 1995, and particularly at the end of the year. The sale of important 
parts of the electricity, gas supply, banking and telecommunication and chemical 
sectors, mostly involving foreign investors, has resulted in privatization revenues of 
about US$ 3.3 bn, largely exceeding the initial government target. 
2. THE BALANCE OF PAYMENTS 
After reaching US$ 3.9 bn (9.5% of GDP) in 1994 and further widening in earjy 1995, 
the current account deficit responded favourably to the March 1995 package. The 
current account is estimated to have finished 1995 with a deficit of about US$ 2.3-2.5 
bn (about 6% of GDP) and to have been in balance in the final months of the year. 
The capital account also strengthened markedly in 1995. The National Bank of 
Hungary (NBH) continued to place a substantial amount of international bonds in the 
first half of 1995 (US$ 1.8 bn), resident enterprises and banks borrowed abroad 
heavily, and FDI is estimated to have increased from US$ 1.2 bn in 1994 to a record of 
more than US$ 3 bn in 1995. In the fourth quarter of 1995, a significant part of the 
capital inflows has consisted of short-term arbitrage operations through which 
investors seek to take advantage of the combination of a high differential between 
domestic and foreign interest rates and a relatively moderate rate of pre-announced 
monthly devaluation of the forint within the crawling-peg system. 
32 A 
The surge in capital inflows has not only allowed Hungary to finance its still high 
current account deficit but has also resulted in a sharp increase in foreign exchange 
reserves. Official reserves have risen from US$ 6.8 bn at end-1993 to almost US$ 12 
bn at end-1995, representing about 12 months of imports. 
After more than a year of difficult discussions, the Hungarian authorities reached in 
December 1995 a preliminary agreement with the IMF on the terms of a 18-month 
Stand-By arrangement. This arrangement, however, will be of a "precautionary 
nature", that is, the authorities do not intend to make in principle any purchases under 
it. In fact, Hungary decided in November 1995 to repay ahead of schedule about US$ 
600 mio of IMF debt maturing before end-1998. 
As a result of the new foreign exchange law and accompanying regulations that came 
into effect on 1 January 1996, the Hungarian currency has become fully convertible for 
current account transactions. In March 1995, the forint was devalued by 8.3% and a 
crawling peg system was introduced whereby the currency is devalued each month at a 
pre-announced rate. The monthly rate of devaluation was reduced from 1.9% to 1.3% 
in the second half of 1995 and again to 1.2% in January 1996. The exchange rate of the 
forint is defined against a basket of currencies comprising the ECU (70%) and the US 
dollar (30%). 
3. FOREIGN DEBT 
With the current account deficit considerably exceeding the net inflow of FDI, both 
gross and net foreign debt rose rapidly between end-1992 and the third quarter of 
1995, and from already high levels. Gross convertible foreign debt increased from US$ 
21.5 at end-1992 to US$ 31.7 bn (74.1% of GDP) in November 1995. Net foreign 
debt, for its part, increased from US$ 13.1 bn to US$ 20.4 bn over the same period. 
Debt service (including early repayments) has also risen since 1992 and is estimated to 
have represented about 50% of annual exports in 1995. 
On the positive side, the maturity structure of the debt has substantially improved since 
1992 and is at present very favourable (medium- and long-term debt accounts for 
about 90% of total debt). Also, the reduction in the current account deficit and the 
sharp increase in privatization-related FDI should have resulted in a substantiaLdecline 
in net foreign debt in the second half of 1995. The NBH has announced that it will use 
its high reserves to repay some US$ 3 bn in foreign debts (including US$ 1 bn of early 
repayments) in the first four months of 1996, which should ensure a decline in total 
gross debt during that period. 
33 A 
G. ISRAEL 
1. GENERAL ECONOMIC SITUATION 
According to the first estimates, Israel's economy grew by 6.9 % in 1995, the highest 
growth rate in 23 years. The acceleration in growth has been fuelled by investment. 
The peace process also enhanced economic growth, triggering a partial lifting of the 
Arab boycott against conducting business with Israel. Unemployment fell to an 
estimated 6.3 % from 7.8 % in 1994. Nevertheless, Israel's economy faces some 
serious problems, especially on the trade front. 
The inflation in 1995 is expected to have reached about 8.0 %, the lowest level in a 
generation and at the bottom end of the government's initial 8-11 % target. However, 
the Bank of Israel considers that economic conditions still require a very prudent 
monetary policy because of strong domestic demand, declining unemployment and the 
large current account deficit. 
Business complained the strong shekel has hurt the exports and widened the current 
account deficit. However, in the last weeks of the year, the shekel started weakening 
after talks on budget cuts, likely to be announced in January, which would prompt the 
central bank to ease up on interest rates. 
The government budget deficit increased from 2 % of GDP in 1994 to 3.5 % in 1995, 
reflecting lower than expected state revenues mainly as a consequence of tax reform 
and greater than anticipated transfers to the Palestinian Authority. Revenue from 
privatisation totalled US$ 600 mio in 1995 against a target of US$ 1.5 bn. There is a 
plan for tradable vouchers to be used to subsidise privatisation investments and 
increase public support for the privatisation process. This scheme would aim at 
achieving an equitable distribution of the benefits across the general population, which 
should contribute to overcome the interference of influential lobbies and the reluctance 
of some political groups. Moreover, it should contribute to the development of the 
Israeli capital market. 
2. THE BALANCE OF PAYMENTS 
The estimated deficit in the balance of goods and services, excluding defence imports, 
jumped to US$ 10.2 bn in 1995 from US$ 7.9 bn in 1994. The current account deficit 
also worsened sharply. While Israel is still expecting US$ 1 bn in US civilian aid, 
delayed by the budget crisis in Washington, the Central Bureau of Statistics estimated 
that without this aid, the current account deficit would total US$ 5.2 bn, or about 6 % 
of GDP. This represent a sharp rise from US$ 2.5 bn (3 % of GDP) in 1994. 
Foreign investment in Israel soared to US$ 1.5 bn in the first nine months of 1995, 
almost double the figure for the whole year 1994. Foreign direct investment totalled 
US$ 826 mio, financial investment by foreigners US$ 358 mio and foreigners 
investment in Israeli shares traded abroad US$ 329 mio, compared respectively with 
US$ 241, 146, and 242 mio in the same period in 1994. 
34 A 
Official foreign exchange reserves increased substantially over the last year and reached 
a satisfying level of US$ 8.2 bn (equivalent to 2.6 months of imports) at the end of 
1995. 
The Bank of Israel maintains a "crawling peg" exchange rate regime, with an annual 
rate of crawl (currently set at 6%) and a fluctuation band of 7 percentage points on 
either side of the central rate. 
3. FOREIGN DEBT 
Israel's net foreign debt grew to US$ 18.5 bn at end-1995 from US$ 16.5 bn at end-
1994. However, as a percentage of GDP, net external liabilities continued to decline, 
reaching 22 % in 1995 compared to 28.6 % at the beginning of the decade. 
In November 1995, the US Administration approved Israel's request to use the whole 
1996 financial guarantees, totalling US$ 2 bn, to fund the national budget deficit. 
Previously, a clause had restricted budget financing to US$ 900 mio, the remaining 
being used for infrastructure projects, such as water, roads, schools and hospitals. 
In November 1995, Moody's awarded the country's debt an A3 rating and in 
December, Standard and Poor's upgraded Israel's debt to A- from BBB+. Both 
Moody's and S&P said that these improved ratings reflect an increased political 
domestic consensus behind fiscal restraint solid enough to ensure that the government 
debt's burden, estimated at 114 % GDP this year, will continue to trend downwards. 
Israel's increasingly secure geopolitical position, improving long-term growth 
prospects, and high per capita GDP (estimated at US$ 15,000 this year, a level similar 
to that of a number of European countries) also support the upgrade. 
In December 1995, Israel issued for the first time international debt without a US 
government guarantee. The deal, which was finally oversubscribed 3.5 times, is widely 
seen as indicative of Israel's determination to establish a sovereign presence in the 
international capital markets ahead of the ending of the US-sponsored guarantee 
programme in 1998. Other issues without the use of US loan guarantees are planned 
for the first half of 1996. 
35 A 
H. LATVIA 
1. GENERAL ECONOMIC SITUATION 
After a sharp output drop in 1992 and 1993, Latvia's overall economic situation had 
strengthened in 1994 with a 2% growth of GDP. In April 1995, the IMF confirmed its 
support for the authorities' policies by approving a second Stand-By arrangement for a 
13-month period. 
In 1995, the budget deficit had initially been programmed to remain at 2% of GDP as 
in 1994, to be financed mainly by issuing treasury bills. However, Latvia's budget 
situation deteriorated in early 1995 and the budget deficit rose to 92 mio lats (US$ 184 
mio) in 1995, or 4% of GDP. Additionally, a major crisis in the banking sector blew up 
in April 1995, with the main Latvian commercial bank, Banka Baltija (which alone 
accounted for 20% of the country's deposits), being declared insolvent. By mid-1995, 
eight other banks had been declared insolvent. 
As a result of the financial crisis, broad money dropped by 10% over the second 
quarter, which is expected to have had a contractionary effect on the economy (there is 
a lack of comprehensive figures to assess the real impact of the crisis). However, the 
high percentage of savings held in cash in foreign currencies dampened its 
contractionary effect. Unemployment remained stable, standing at about 6.3% by end-
1995. The present estimate is that Latvia went through a zero growth over 1995. The 
Bank of Latvia maintained its conservative monetary policy stance, and inflation thus 
continued to slow down, falling from 26% in 1994 to about 23% in 1995. 
The authorities have adopted a package of measures to address immediate and long 
term needs of the financial sector, by enhancing prudential regulations and setting up a 
deposit insurance scheme. Other structural reforms continued in 1995. The 
Privatisation Agency is now fully operational and 230 additional firms were privatised 
in 1995. The sale of shares of the Universal Bank, one of the three main public banks, 
started in the third quarter of the year. 
The Free Trade Agreement signed with the European Union came into force on 1 
January 1995. 
2. THE BALANCE OF PAYMENTS 
Imports and exports increased by about 200 mios dollars in 1995, while the shift in the 
country's trade to the West continued. After a sharp deterioration in 1994, the current 
account stabilized at about 4% of GDP. This deficit reflects a trade balance deficit of 
about 8%> of GDP partly offset by a surplus in services, mainly in the transport sector. 
The authorities have successfully pursued a policy of stable exchange rate with an 
informal peg to the SDR. Despite speculative attacks, which led to a loss of foreign 
exchange in the amount of 90 mio US dollars in Spring, the exchange rate of the lats 
remained in 1995 broadly at its previous level with a two-digit inflation rate. This 
translated into a real appreciation in the exchange rate. The overall competitiveness of 
the economy however seems to remain at an acceptable level. 
36 A 
In order to cover its current account deficit, Latvia is dependent upon private capital 
inflows, which remained substantial in 1995 in spite of the financial crisis. Thus, the 
damage of the crisis could be limited and Latvia's reserves position remained relatively 
strong, with approximately US$ 600 mio net reserves at year-end, which covers almost 
5 months of imports. 
3. FOREIGN DEBT 
Latvia has no legacy of foreign debts from the FSU, and the country's external debt is 
thus recent. In 1994, the external debt stock increased from US$ 360 mio to about 
US$ 540 mio, or 12% of GDP. The debt service ratio (debt service on exports), with a 
2.6% level, remains very low. 
About half of Latvia's foreign debt is owed to the international financial institutions. 
Latvia owes the IMF 163 mio dollars (95 mio under the 1992 and 1993 Stand-By 
arrangements, and 68 mio under the 1993-1994 Systemic Transformation Facility). In 
August 1995, the authorities borrowed the equivalent of US$ 45 mio on the Japanese 
market, to finance the increasing needs of the budget. 
37 A 
I. LITHUANIA 
1. GENERAL ECONOMIC SITUATION 
After four years of recession, Lithuania's economy began to show signs of 
recovery in 1994, with a 2% GDP increase. Growth for 1995, despite a drop in 
GDP in the first quarter of the year, is estimated at roughly 3%. Unemployment, 
however, is reported to have significantly risen in 1995. It reached about 7% of the 
labour force at the end of the year, against 4% at end-1994. 
Inflation, which had peaked in 1992 at hyper-inflationary levels, slowed down in 1993 
and early 1994. On April 1, 1994, a currency board arrangement was introduced under 
which the growth of the monetary base is kept in line with the increase in the market 
value of gold and hard currencies detained by the Bank of Lithuania. The reduction in 
inflation after the introduction of the currency board has been striking: price increases 
fell substantially in 1994, finishing the year at a rate of 45%. Inflationary pressures 
however remained in 1995, fuelled by the low foreign exchange rate of the litas, 
increases of public prices and capital inflows. As a result inflation, with an estimated 
35% (year-end), was in 1995 above the authorities' initial 25% target. The fiscal deficit 
target for 1995 (3.4% of GDP) was broadly met. 
Structural reforms have been further implemented. The only items with prices 
remaining under government control relate to cases of monopolistic situations. 
Housing and small-scale privatisation are now virtually completed but, owing to delays 
in the establishment of the Privatisation Agency, large scale privatisation will only 
effectively start in 1996. The financial sector reform is the most sensitive area. After 
the enactment of the Central Bank and Commercial Bank laws in early 1995 and the 
subsequent tightening of prudential regulations, the banking sector went through 
drastic adjustments in 1995 when 14 small banks out of 28 (however representing only 
1.6% of the total banking sector assets) were declared insolvent and will probably in 
most cases be liquidated. In December two private banks, Litimpeks and Innovative 
Bank, were also declared insolvent. The authorities are now preparing, with IMF and 
World Bank support, a new set of measures to consolidate the sector. 
On 1 January 1995, the Free Trade Agreement with the European Union entered into 
force. Lithuania maintains liberal foreign trade and investment laws. 
2. THE BALANCE OF PAYMENTS 
The share of the west in the country's external trade continues to increase. About 50% 
of Lithuania's exports were directed to western markets in 1994. In the first half of 
1995 exports are reported to have increased by 19.7%, against a stable level of 
imports. This contributed to stabilise the current account deficit near the level of 1994 
(US$ 278 mio, or about 4% of GDP, excluding official transfers). 
Under the currency board arrangement the litas is pegged to the US dollar at a rate of 
4 to 1. Growing confidence in the currency board, fuelled by the low exchange rate of 
the litas, translated into growing private capital inflows until end-November. 
Additionally, significant medium- and long-term borrowings allowed in 1995 for a 
38 A 
significant capital account surplus, in the amount of about US$ 300 mio. In December 
however, the declared insolvency of two banks (Litimpeks and Innovative Banks) lead 
to significant foreign exchange reserves losses, in the amount of US$ 45 mio. At year-
end, official reserves were estimated at about US$ 800 mio, or 3.5 months of imports. 
In October 1994, the IMF approved an SDR 134.55 mio three-year Extended Facility, 
of which SDR 51.75 mio (US$ 75 mio) have already been purchased. This should 
contribute to consolidate the reserves and help finance key energy and investment 
related imports. 
3. FOREIGN DEBT 
Lithuania has no legacy from sovereign debts from the FSU. In 1995, the stock of 
external debts increased by more than 300 mio US$, reaching a level of US$ 860 mio. 
Despite this sharp increase, this level of debt remains moderate relatively to GDP 
(14%). The country's debt service over exports ratio also remains low (about 2%). In 
December 1995, Lithuania borrowed on the private capital market for the first time, in 
the ajnount of US$ 60 mio. 
A 
J. MOLDOVA 
1. GENERAL ECONOMIC SITUATION 
After a 31% decline in 1994, due to severe weather conditions and to the continuing 
disruptions to output and trade associated with the collapse of central planning, 
Moldova's GDP is estimated to have grown slightly - around 1% - in 1995. This 
improvement is partly due to a recovery in the important agricultural sector with the 
return of normal climatic conditions, but also to a reduction in the rate of decline of 
industrial production, estimated to have dropped by "only" 10%. The official 
unemployment rate remains rather low (2%) by end-1995, but a lot of workers are on 
unpaid leave and the actual unemployment figure may exceed 10%. 
After six months of low inflation - with monthly rates below 0.75%, compared to 
annual inflation of about 800% in 1993 and 120% in 1994 -, inflationary pressures re-
emerged in the autumn 1995, owing to strong capital inflows. With an average monthly 
rate of 3.5% between September and December, inflation reached 24% for the whole 
year. In the fourth quarter, the central bank tightened the monetary policy, which was 
reflected in upward pressure on interest rates. 
The fiscal deficit is expected to have declined from 8% in 1994 to an estimated 4% in 
1995, not far from the 3.5% official target. Only a severe control of expenditures made 
this reduction possible. Revenue collection remained indeed insufficient and 
privatisation receipts were far below expectations, because of a lack of domestic 
capital. 
Concerning structural reforms, important measures were initiated in 1995. The 
privatisation process slowed in early 1995, but gathered momentum after the adoption 
by Parliament, in March, of the new 1995/96 Privatisation Programme. The 
government estimates the private sector's share of the economy to have risen to about 
2/3 by November 1995 (end of the voucher programme). Important progress was 
recorded in enterprise restructuring with the liquidation of a series of state enterprises 
in difficulty and the revision of the bankruptcy legislation. 
2. THE BALANCE OF PAYMENTS ~~ 
The balance of payments remained under severe pressure in the first half of 1995, 
primarily because of the continued impact of the terms-of-trade shock caused by the 
increase in imported energy prices to world market levels. In the second half of the 
year, however, a better-than-expected export performance coupled with an important 
reduction in imports, principally energy, led to a quasi-equilibrium in the trade balance. 
Consequently, the current account deficit is projected to have sharply declined from a 
revised 13% of GDP in 1994 to 3.5% in 1995. 
Medium- and long-term loans still represented the main part of capital inflows in 1995. 
Direct investment remained low. Gross reserves of the central bank had reached some 
US$ 265 mio by end-1995, or the equivalent of 4.8 months of imports, compared to 3 
months at end-1994 and 1.4 months at end-93. 
40 A 
3. FOREIGN DEBT 
Moldova agreed to the zero option with the Russian Federation and so has no 
responsibility for the external debt of the FSU. Foreign debt of the country is estimated 
to have reached some US$ 650 mio by end 1995 (or around 42 % of GDP), and is 
owed mainly to Russia, the IMF and the World Bank. Debt service as a percentage of 
exports is projected to have increased from 2% in 1994 to some 13 % in 1995. 
A 
K. ROMANIA 
1. GENERAL ECONOMIC SITUATION 
The marked improvement in Romania's economic growth and performance that had 
started in 1994 continued well into 1995, driven mainly by exports, the resumption in 
domestic consumption and investment. Real GDP growth accelerated to some 5% (as 
compared to 3.9% in 1994), owing to a better performance of the agricultural sector 
and an impressive recovery in industrial output (+ 14% during the first eleven months 
of 1995). 
Also investment recovered fast, expanding during the first nine months of 1995 by 
6.3% over the same period of the previous year. Particularly encouraging appears the 
increase in the private investment (+ 9.3% during the same period). Inflation slowed 
down from an annual rate of 62% in 1994 to 24.3% by October 1995. In 1995 the 
budget deficit was 2.8% of GDP. The unemployment rate progressively slowed down 
from around 11% at end of 1994 to around 9% in October 1995. 
The tight monetary, fiscal and income policies implemented in 1994 were somewhat 
relaxed during the second and third quarter of 1995, reflecting positive achievements 
with regard to inflation and probably also in view of the parliamentary elections in 
1996. 
In 1996, real GDP is expected to increase by 4% and investment by 8.8%; 
unemployment is projected to soar to 11.2%; the budget deficit/GDP ratio will further 
decrease to 2.2-2.4%; and annual inflation is forecasted to decline to 20%. 
Structural reforms are progressing with mixed results. The parliamentary approval of 
the long-overdue bankruptcy law in March 1995 should now enable the government to 
speed up closure and liquidation of inefficient enterprises. In 1995, the authorities 
started the implementation of a mass privatization programme by issuing privatization 
vouchers. On the basis of current legislation, some 3900 state-owned enterprises are to 
be sold off. Share dealing will be eased by the establishment of the Stock Exchange on 
November 20, 1995. Draft legislation dealing with the privatization of banks is 
currently before parliament. 
2. THE BALANCE OF PAYMENTS 
The upturn in economic activity witnessed in 1995 led to a sharp rise in imports and 
this, combined with a slightly lower export growth, resulted in the deterioration of the 
current account. By September 1995, the current account deficit reached nearly US$ 1 
bn, against a deficit of US$ 430 mio recorded in 1994. 
The authorities are expressing a growing concern as regards the deterioration of the 
external position and are considering new and more effective export promotion plans. 
In this respect, some improvement in trade balance is expected to come from exports 
of agricultural products, which were liberalized in the second half of 1994. Instruments 
for export support being considered would include interest rate subsidies and tax 
breaks. The Romanian Trade Centre for export promotion is due to start its operations 
42 A 
at the beginning of 1996. The Association agreement with the EU, facilitating 
Romania's access to EU market, came into force on 1 February 1995. 
As for the capital account, FDI and portfolio investment slowed down to US$ 306 mio 
in the first ten months on 1995 (against US$ 341 mio in 1994). By mid-1995, the 
cumulative FDI amounted to a total of US$ 1.4 bn. Official loan disbursements remain 
the principal source of external finance. In this respect, in December 1995, the IMF 
approved the extension of the current Stand-By arrangement through April 1997 and 
decided to augment the amount available under it by SDR 188.5 mio (to SDR 320.5 
mio, or about US$ 475 mio). The World Bank's FESAL (US$ 280 mio) could be made 
available soon. 
After an absence of some 15 years, Romania returned to the international capital 
markets in 1995 with two syndicated loans to the Romanian Central Bank, amounting 
to US$ 150 mio and US$ 110 mio respectively. The central bank has been authorized 
to borrow up to US$ 1 bn in 1996 and, as creditworthiness improves, banks and 
companies may also gain access to the international capital market. 
By October 1995, total foreign exchange reserves of the banking system amounted to 
US$ 2.5 bn, equivalent to 2 months of imports. Slightly more than US$ 695 mio were 
held with the Central Bank. This was equivalent to 0.6 months of imports. 
Presently, Romania has a floating exchange rate regime and an interbank foreign 
exchange market which has been developed since 1994. In 1995, the leu was put under 
pressure, reflecting the deterioration of the country's external balance. This eventually 
led to a further 10% depreciation in the reference exchange rate reported by the 
National Bank. The difference between the reference rate and exchange rate offered by 
the private exchange bureaus increased by up to 20% by November 1995, from its 
normal deviation level of 3-5%, which shows a renewed segmentation in the exchange 
market. 
3. EXTERNAL DEBT 
By October 1995, total foreign ( medium- and long-term) debt was stabilized at the 
level of US$ 4.8 bn, or 18.7% of GDP (18.9% in 1994). The external debt service ratio 
increased to 13% (8.9% in 1994) and is expected to further rise to close to 22% in 
1996. Despite this rapid increase, debt and debt service ratios remain relatively 
manageable. 
43 A 
L. RUSSIA 
1. GENERAL ECONOMIC SITUATION 
After several years of sharp recession, output continued to decline in 1995, although at 
a less sharp pace (-4% of GDP). Industrial production decreased by only 3% over the 
previous year, against a drop of 24% in 1994. The unemployment rate increased to 
8.2% at year-end, compared with 7% by end-1994. 
Price increases, which had peaked at hyper-inflationary levels in 1992-1993, had 
remained high in 1994 and until early 1995, with a 18% monthly increase in January. 
1995 was a turning point for macro-economic stabilisation. In March, the Duma passed 
the 1995 budget with a target deficit of 5.5% of GDP (compared with 11% in 1994). 
In April, the IMF board approved a twelve-month Stand-By arrangement with Russia, 
initially aiming at a reduction in monthly inflation to 1% by year-end, principally by 
means of tight monetary policies. The monetary base grew monthly by 7% in the first 
half of 1995 and by 6% over the second half of the year. The budget deficit, at about 
4% of GDP, remained within the 5.5% target. Revenue performance, despite growing 
tax arrears, improved, whereas expenditure was cut by about 17% in 1994. Inflation, 
however, declined only slowly down to a 3.2% monthly level in December, down from 
its high level of the beginning of the year but still well over the initial target. In 
December, the Parliament approved the 1996 budget which envisages a 3.85% deficit. 
Foreign trade, which had been subject to administrative distortions until early 1995, 
was liberalised. Import exemptions were restricted to a few cases. After the completion 
of the voucher mass privatisation scheme which, by end-1994, had transferred the 
ownership of 112,000 enterprises to private hands, privatisation advanced in 1995 at a 
slower pace than in the previous years. 
2. THE BALANCE OF PAYMENTS 
After a significant depreciation against the dollar over the first quarter, the rouble 
stabilised in June well below the level of 5000 roubles per dollar and appreciated in real 
terms over the remaining of the year. This strong performance of the rouble, a result of 
the tight monetary policies implemented in the context of the Stand-By arrangement, 
was encouraged by the high level of interest rates on the treasury bills market and was 
accompanied by significant hard currency inflows (including the sale of dollars held in 
cash by residents). In July, in order to cut inflationary expectations, the authorities 
established an exchange rate corridor between 4,300 r/US$ and 4,900 r/US$ which 
performed successfully until year-end. In November, a new exchange rate band for the 
first half of 1996 was announced with a range of 4550 r/US$ to 5150 r/US$. 
Owing to increasing export earnings, which showed a 23% growth in dollars over the 
first three quarters of the year, the trade balance recorded a significant surplus in 1995, 
estimated US$17.4 bn, compared with US$ 14 bn in 1994. This suggests an initially 
undervalued level of the rouble which was only partially compensated by this year's 
appreciation (+ 72% on a year-end basis) in real terms. The current account, at about 
US$ 6 bn (or 1.5% of GDP), remained in surplus despite a negative balance of 
services. 
44 A 
The capital account, burdened with significant amortization payments (about US$ 12 
bn) was in deficit in spite of important purchases from the IMF (US$ 5.4 mio). The 
deferral of private debt payments and a rescheduling in the Paris Club provided 
exceptional relief in the amount of US$ 24 bn. The foreign exchange reserve position 
substantially improved. By the end of the year, net international reserves amounted to 
about US$ 8 bn, or 1.2 months of imports, against only US$ 2.3 bn a year before. 
3. FOREIGN DEBT 
According to the agreements reached with the New Independent States, Russia is the 
successor state for the external assets and liabilities of the former Soviet Union. The 
level of the Russian debt, which includes the capitalisation of accumulated arrears, 
represents, in a context of recession, an increasing burden for the country. By end-
1995, foreign debt, at an estimated US $ 130 bn, represented about 33% of GDP. 
Most of this debt is owed to official bilaterals (about US$ 80 bn), a substantial part to 
commercial banks (about US$ 33 bn), and a smaller but rapidly growing part to the 
international financial institutions. The bulk of Russian debt represents the debt 
inherited from the FSU (about US dollars 115 bn). 
Russia's inability to service its debts has triggered several Paris Club rounds since 
1992. On 3 June 1995, Russia reached an agreement with its Paris Club creditors on a 
new rescheduling for debt maturities falling due in 1995. Subsequently, the total debt 
service in 1995 amounted to about US$ 17.6 bn (including US$ 5 bn interest 
payments), or 22% of estimated exports. Paris Club creditors also agreed to start 
discussions on a wider rescheduling of the Russian debt as soon as an agreement can 
be reached, in early 1996, on a three-year extended fund facility (EFF). This should 
allow to bring debt service down to sustainable levels in the coming years. An 
agreement in principle was also reached in November with London Club creditors on a 
wide scale restructuring of the private debt. The reconciliation of the exact terms of 
this agreement with some 600 banks is now taking place with the objective of a final 
agreement by the end of June 1996. 
45 A 
M. THE SLOVAK REPUBLIC 
1. GENERAL ECONOMIC SITUATION 
After growing by 4.8% in 1994, the Slovak economy continued to strengthen in 1995. 
GDP growth accelerated to 7.4% in January-September (year-on-year) and industrial 
production rose by 10.1% in November (year-on-year). Domestic demand has replaced 
net exports as the force driving economic expansion. The unemployment rate is on a 
downward trend, having declined from 15.2% in January 1995 to 12.8% last 
November. 
Despite this strong growth performance, inflation has continued to decelerate, reaching 
7.2%) at end-1995, compared to 11.7% at end-1994. Slovakia has thus become one of 
the few transition countries that can boast a single-digit inflation rate. Real wage 
growth accelerated to about 5% in 1995 but this, it seems, is being offset to an 
important extent by productivity gains. 
The reduction in inflation has continued to be supported by restrictive macroeconomic 
policies. Reflecting larger than anticipated revenues from the VAT and income tax, the 
state budget deficit finished 1995 with a deficit of Sk 8.3 bn, well below the Sk 21 bn 
deficit that had been programmed. Monetary policy was kept tight in 1995, with broad 
money expanding by 7.9% in the first 9 months of the year, only slightly above 
inflation. For 1996, the monetary programme of the National Bank of Slovakia (NBS) 
targets broad money growth of 13.2%, consistent with a reduction of inflation to 6-
7.5% and real GDP growth of 5.8%. 
The new government formed in December 1994 decided in June 1995 to cancel the 
voucher privatization scheme. Instead of shares in state enterprises, the 3.5 mio Slovak 
citizens that bought vouchers in 1994 have been given 5-year interest-bearing bonds 
issued by the National Property Fund. Privatization through standard methods (often in 
the form of direct sales to managers and employees) has gathered momentum since 
mid-1995 but is being criticized for lack of transparency. 
2. THE BALANCE OF PAYMENTS 
The balance of payments has experienced a clear improvement since the second quarter 
of 1994. The current account swung from a deficit of US$ 0.6 bn (5.4% of GDP) in 
1993 to surpluses of US$ 0.7 bn (6% of GDP) in 1994 and of US$ 0.4 bn in the first 7 
months of 1995. The evolution of the trade balance at the end of the year, however, 
suggests that the current account surplus may have began to shrink reflecting strong 
domestic demand. 
The capital account has also improved, although net FDI inflows remain low. About 
US$ 300 mio of official macro-financial assistance (IMF, World Bank's Economic 
Recovery Loan and Japan Exim Bank) have been disbursed since mid-1994. In 
addition, the NBS issued in July 1994 a US$ 250 mio bond in the Samurai market, and 
certain companies and banks have been able to borrow abroad at relatively long 
maturities. Finally, the tight management of inter-bank liquidity by the NBS, in 
combination with the perceived stability of the Slovak crown (and, in the first half of 
46 A 
1995, the expectation of a revaluation against the Czech crown), has led to some 
short-term capital inflows. Slovakia's access to the international capital markets has 
been reinforced by the upgrading by Standard & Poor's of its rating from BB~ to BB+ 
in April 1995, and by the assignment by Moody's of an investment grade rating (Baa3) 
in May 1995. 
These favourable trends in both the current and the capital account have been 
translated into a substantial increase in reserves. Official foreign exchange reserves 
(excluding those obtained from gold swaps) have risen from US$ 416 mio at end-1993 
to US$ 2.8 bn in October 1995, or about 3.5 months of imports. Following a 10% 
devaluation in July 1993, the exchange rate of the crown has been stable against a 
basket of Western currencies. In July 1994, the number of currencies in the basket was 
reduced from five to two (the Deutsche mark and the US dollar). In January 1996, the 
fluctuation band around the central rate was increased from +- 1.5% to +- 3%. 
Despite the strengthening of the balance of payments, the Slovak authorities intend to 
maintain until end-1996 the import surcharge introduced in March 1994. As of 
October 1995, the Slovak crown was made fully convertible for current account 
purposes and the bilateral clearing system with the Czech Republic was terminated. 
The authorities also plan to liberalize some capital flows. 
The mid-term review of the IMF stand-by arrangement, initially scheduled for February 
1995, has not been completed. In any case, the authorities announced in April 1995 
that, in view of the improvement in the balance of payments and reserve position, they 
did not intend to make any further purchases under this IMF facility. 
3. FOREIGN DEBT 
Slovakia inherited from the Czechoslovak federation a relatively low external debt. 
Although debt and debt service ratios have deteriorated since the country's 
independence, they remain at reasonable levels. The foreign debt/GDP ratio has 
increased from 25.7% at end-1992 to 33.7% in July 1995. Debt service as a percentage 
of exports has risen from 3.3% in 1992 to an estimated 9.5% in 1995. 
47 
A 
N. TRANSCAUCASIAN REPUBLICS 
1. GENERAL ECONOMIC SITUATION 
After a sharp decline in 1990-93 (75%), Armenia's GDP recovered in 1994 (+5.4%). 
This positive growth trend is expected to have continued in 1995 with a 5% estimated 
increase, due partly to better results in industrial output which grew by 10% in 1994 
and by 13% in the first half of 1995. 
A tightening of monetary policy succeeded in halting hyperinflation in the second half 
of 1994. In 1995, inflation is projected to reach about 30%, down from 1900% in 
1994, owing to a further tightening of monetary policy and an increase in the supply of 
agricultural goods. Over the last two years, Armenia has moved from a highly 
expansionary fiscal policy characterized by extremely large deficits financed by central 
bank credit to a policy featuring much smaller deficits financed primarily by external 
sources. The fiscal deficit after grants is estimated to have declined to some 10% of 
GDP in 1995, from 16% in 1994 and about 50% in 1993. Substantial progress has 
been made in the area of structural reform, namely in price liberalisation, enterprise 
restructuring and small-scale privatisation. 
In Azerbaijan, the GDP decline - some 20% per year between 1992 and 1994 -
continued at a lower rate - 15% - in the first half of 1995 but statistics do not take into 
consideration the activity of an emerging informal sector, particularly in trade and 
services. Monetary stability was set as the primary goal of financial policies in 1995 
and average monthly inflation fell to 1.5% in the period April-October 1995, compared 
to a yearly rate of about 1700% in 1994. This was made possible by the fiscal 
consolidation started in 1995: the compression in expenditures brought the fiscal deficit 
to an estimated 8% of GDP, down from 11% in 1994, the main part of this deficit 
being financed by external funds linked to the signature of the oil contract with western 
companies. Regarding structural reforms, progress has been made with respect to price 
and trade liberalisation, but much remains to be done in enterprise restructuring and 
privatisation. 
After the sharp decline of Georgia's output between 1990 and 1994 - 70% -, the 
economy continued in 1995 to face severe bottlenecks, especially arising from-energy 
shortages. There were however signs of recovery in 1995, mainly due to an increase in 
agriculture output despite a lack of basic inputs and weak property rights. Official 
unemployment remained rather low (some 4%) in 1995, but a recent informal poll 
indicated a rate above 11%. Tight financial policies have succeeded in halting 
hyperinflation (average rate of 2.5%) in the first eight months of 1995, compared to 
66% in the first nine months of 1994) and in stabilizing the exchange rate of the 
coupon, replaced by the lari in October 95. The fiscal deficit after grants was reduced 
to an estimated 7% in 1995, mainly through sharp cuts in expenditures and the 
monétisation of external food assistance. Revenue performance, however, remains very 
weak. Several structural reforms have been introduced (price liberalisation, elimination 
of state order system, privatisation process). Substantial further efforts are however 
still needed, namely in privatisation, land reform and in the development of an 
appropriate legal framework for a market-based economy. 
48 
A 
2. THE BALANCE OF PAYMENTS 
Reflecting an increase in imports associated with official transfers, Armenia's current 
account before transfers further deteriorated in dollar terms in the first half of 1995. As 
a percentage of GDP, however, the deficit decreased from 35% in 1994 to about 25% 
in the same period. Owing to purchases under IMF programmes and World Bank 
credits, official reserves increased in 1995 to reach about US$ 100 mio (or 2 months of 
imports) in November. During the first half of 1995, the exchange rate of the dram 
remained stable against the dollar, while the real effective exchange rate increased by 
about 4%>, reflecting a depreciation against FSU currencies more than offset by an 
appreciation against non-FSU currencies. 
Much of the recent deterioration in Azerbaijan's current account is due to a sharp 
decline in the terms of trade (increased import prices from CIS countries to world 
levels and increased transportation costs, owing to the war situation in neighbouring 
Chechnya). As a percentage of GDP, the trade and the current balances deteriorated 
from 7% and 8.5% in 1994 to, respectively, 12.5% and 16.9% in 1995. Important 
inflows in the capital account were registered in 1995, reflecting the use of the EU loan 
for import of food and medicine, but also the effects of the signature between the 
government and a consortium of international oil companies of an oil production 
sharing contract. These inflows, together with IMF disbursements, led to a 
strengthening of international reserves which reached some US$ 140 mio - 2 months of 
imports - by end-June 1995 and were projected to further increase before end-1995. As 
a result of the tightening of credit policies in early 1995 and the associated increase in 
interest rates to positive real levels, the exchange rate of the manat against the US 
dollar remained broadly stable in 1995, following a devaluation of more than 90% in 
1994. 
Partly reflecting a steep decline in gas consumption, Georgia's trade deficit is estimated 
to have declined by 28% in the first half of 1995. The current account balance, before 
transfers, has recorded a pattern similar to the trade balance, with a projected 1995 
deficit of US$ 410 mio (some 16% of GDP), down from US$ 450 mio (35% of GDP) 
in 1994. Official transfers have been a significant source of financing for the current 
account deficits registered in recent years. The capital account, dominated by official 
transactions, has moved into deficit since 1994, due to important amounts of 
amortisation falling due. The resulting deficit in the overall balance of payments was 
largely financed through the accumulation of arrears, which reflected the near 
exhaustion of official reserves. These reserves, however, increased sharply in 1995 to 
reach US$ 165 mio or about 3 months of imports by end-November. This increase was 
partly due to programmed drawings on IMF credits, but also to the successful 
introduction of the new currency, the lari. Exchange rate developments in 1995 have 
been strongly influenced by the interventions of the central bank, which have served to 
sterilise the impact of credit expansion to central government. This led to a rather 
stable official exchange rate of the currency and to a substantial appreciation in the real 
effective exchange rate. 
49 
A 
3. FOREIGN DEBT 
The three countries agreed to the zero option with the Russian Federation and so 
entered the independence with modest external obligations. Since then, the situation 
sharply deteriorated, as Armenia and Georgia are in arrears on their debt servicing, 
while Azerbaijan has already negotiated a debt rescheduling. 
Armenia's external debt increased rapidly at US$ 310 mio by end-June 95 (some 25% 
of GDP) and is estimated to have reached about US$ 350 mio by end-95, while total 
scheduled debt service could reach more than 20% of exports of goods and non-factor 
services. 
Azerbaijan had accumulated by end-1994 a US$ 230 mio external deb and could reach 
US$ 277 mio (about 15% of GDP) in 1995. In 1995, the country was unable to repay 
debts arriving to maturity but creditors - Russia, Turkmenistan and Turkey - accepted 
to reschedule them. The whole debt of the country is now of short or medium-term 
maturity and is to be repaid between 1996 and 1999. 
By the end of 1994, Georgia had accumulated a foreign debt of almost US$ 1 bn (80% 
of GDP). The bulk of this debt, mainly contracted to finance imports, has now 
accumulated in arrears. In the first half of 1995, debt service falling due was estimated 
at about US$ 119 mio (over 50% of exports of goods and non-factor services). Faced 
with this very heavy debt burden, the Georgian authorities have approached creditors 
to request financial support designed to help bringing the country's external obligations 
in line with its very limited debt-servicing capacity. 
50 
A 
O. UKRAINE 
1. GENERAL ECONOMIC SITUATION 
Following sharp output contractions between 1990 and 1994, GDP decline slowed 
down markedly in 1995 (average change of -13%, compared to -23% in 1994). 
Industrial production is estimated to have fallen by some 20% last year, following a 
36% reduction in 1994. The official unemployment figure of 0.4% still does not reflect 
the protracted fall in output; the International Labour Organization estimates that 
hidden unemployment has reached as much as 20%. 
In the first half of 1995, the Ukrainian authorities continued to implement their 
stabilization policies, first in the context of the IMF Systemic Transformation Facility 
of October 1994 and then under the IMF stand-by arrangement (SB A) of April 1995. 
Relatively strict monetary and credit policy led to a rapid deceleration of inflation to a 
monthly rate of 5% in mid-1995. However, loosening of policies in the summer months 
prevented a further reduction of inflation in the second half of 1995 to the target rate 
of 1-2%. On average, inflation fell from 401% by 1994 to 180% in 1995. 
The budget deficit on a cash basis was more than cut by half, from 8.6% of GDP in 
1994 to 4.1% in 1995. The target deficit rate of 3.3% of GDP was, however, not 
achieved, mainly because of the Government's decision to extend budget guarantees for 
Ukrainian gas imports from Russia beyond the agreed deadline of September 1995; this 
was an important reason for the IMF's decision in December to postpone the 
completion of the third quarter review under the SB A until the programme is back on 
track. But the overrun of public expenditures was also due to large wage increases 
granted to government workers and subsidies to the coal mine sector. 
Between fall 1994 and spring 1995, there were considerable reform achievements, in 
particular the liberalization of prices and the foreign exchange market, as well as a 
sharp reduction of government procurement in the agricultural sector. However, 
subsequently the reform dynamics slowed down markedly; in some areas there were 
even reversals of earlier achievements. Progress was particularly unsatisfactory with 
regard to privatization, but foreign trade policy was also not sufficiently liberalized so 
that it continued to impede exports, especially of agricultural products. — 
2. THE BALANCE OF PAYMENTS 
In 1995, Ukraine's balance of payments situation remained tight. The current account 
deficit stabilized at US$ 1.4 bn (some 4.5% of GDP). The merchandise trade deficit 
also remained roughly unchanged at US$ 2.1 bn. However, the earlier contraction of 
trade volumes (in the order of 15% in 1994) was halted. Overall exports expanded 
moderately (3%), although with respect to the West the expansion was dynamic 
(15%>). Imports from Western countries also increased strongly (some 10%), but 
overall imports nevertheless contracted somewhat given a strong decline in energy 
imports. 
In the context of the IMF-supported programme, the Ukrainian authorities agreed not 
to accumulate any more external arrears towards Russia and Turkmenistan. This 
51 
A 
assurance was also the basis for Russia's agreement in March 1995 to reschedule 
Ukrainian arrears on gas supplies. However, in the course of 1995, and in particular 
with the beginning of the heating season, external arrears were accumulated (mostly 
with Russia). This has played an important role for the suspension of the stand-by 
arrangement. At the end of 1995, the external arrears stood at US$ 236 mio. 
In 1995, external financing was somewhat lower than expected mainly owing to the 
difficulties in the implementation of the IMF programme. Nevertheless, gross foreign 
reserves were accumulated to a level corresponding to 1 month of imports. 
3. FOREIGN DEBT 
In 1995, Ukraine's external debt stock increased from US$ 7.1 bn in 1993 to US$ 
8.1 bn. In percent of GDP, this represents a decline from 29% to 24%. The ratio 
of external debt service to exports of goods and services fell from 12% to 10%. 
The Ukrainian authorities are presently discussing the possibility of Russia 
rescheduling some of the recently accumulated Ukrainian debt on gas deliveries. 
52 
A 
Statistical annex 
TABLES OF STATISTICS 1 
EXPLANATORY NOTES 18 
ANNEX: DEFINITION OF FIGURES USED IN THE REPORT 24 
o 
TABLE 1 
CAPITAL OUTSTANDING IN RESPECT OF OPERATIONS DISBURSED 
(ECU million) 
Operation 
MEMBER STATES 
A. Balance of payments 
1. Greece 
2. Italy 
B. Others 
3. Euratom 
4. NCI and NCI earthquakes 
5. 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. Ukraine 
11.Belarus 
12. Former Soviet Union 
B. Other 
13. EIB Mediterranean 
14. EIB Central & E. Europe I 
15. EIB Central & E. Europe II 
16. EIB Asia, Latin America 
17. EIB South Africa 
THIRD COUNTRIES - TOTAL 
GRAND TOTAL Authorized 
ceiling 
14000 
2200 
8000 
4000 
6830 
1500 
26330 
1050 
250 
255 
400 
580 
600 
160 
220 
45 
285 
75 
1250 
6362 
1700 
3000 
750 
300 
17282 
43612 Capital 
outstanding 
30.06.95 
1000 
4071 
741 
1289 
439 
7540 
440 
250 
125 
360 
455 
400 
160 
110 
25 
702 
1756 
658 
24 
107 
5572 
13111 Capital 
outstanding 
31.12.95 
1000 
4045 
720 
1113 
385 
7263 
440 
250 
125 
360 
510 
500 
160 
135 
45 
85 
30 
347 
1782 
837 
96 
149 
5851 
13114 Remainder to 
be disbursed 
31.12.95 
1200 
4000 
0 
0 
0 
5200 
260 
0 
130 
.- 40 
70 
100 
0 
85 
0 
200 
45 
18 
3647 
844 
2905 
601 
300 
9245 
14445 
1) No disbursement is planned. 
2) The third and fourth tranches had still not been paid at 31.12.95. So far, the Italian 
Government has not requested payment. 
ANNEX TO TABLE 1 
SITUATION IN RESPECT OF EIB OPERATIONS (31.12.95) 
Operations 
EIB Mediterranean, 
Spain, Greece, Port. 
Third countries EIB Med. 
Central & Eastern Europe I 
Central & Eastern Europe II 
Asia, Latin America 
South Africa Credit line 
authorized 
1500 
6362 
1700 
3000 
750 
300 Loans made 
available, minus 
cancellations 
1465 
4972 
• 1647 
1894 
607 
45 Initial 
disbursement 
1576 
2715 
856 
96 
149 Amount 
outstanding 
at 31.12.1995 
385 
1782 
837 
96 
149 
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 31.12.95. 
a 
TABLE 2 
MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 
(Estimate in ECU million based on all operations disbursed at 31.12.1995 
MEMBER STATES 
CAPITAL 
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 
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 
15. Moldova 
16. Ukraine 
17. Belarus , 
B. Guarantees 
18. EIB Mediterranean 
19. ElBC+EEur. I + II 
20. EIB Asia Latin America 
Capital - subtotal 
INTEREST 
A. Financial assistance 
6. Hungary 
7. Czech Republic 
8. Slovak Republic 
9. Bulgaria 
10. Romania 
11. Israel 
12. Alqena 
13. Ex USSR 
14. Baltic States 
15. Moldova 
16. Ukraine 
17. Belarus 
B. Guarantees 
18. EIB Mediterranean 
19. ElBC+EEur. I + II 
20 EIB Asia Latin America 
Interest - subtotal 
NON-MEMBER COUNTRIES -
TOTAL 
GRAND TOTAL 
(Eastern Europe ) 
(Other non-member countries) 1996 
500 
500 
153 
306 
73 
1533 
95 
255 
57 
95 
33 
535 
2068 
260 
204 
134 
30 
628 
26 
25 
13 
36 
51 
16 
50 
14 
14 
5 
9 
3 
123 
63 
6 
453 
1081 
3149 
751 
330 1997 
444 
547 
72 
1063 
48 
215 
42 
69 
27 
400 
1463 
80 
127 
63 
140 
160 
250 
143 
141 
44 
12 
1161 
18 
25 
13 
36 
51 
16 
50 
7 
14 
5 
9 
3 
114 
61 
6 
426 
1586 
3049 
837 
749 1998 
500 
1006 
94 
91 
57 
1747 
46 
215 
10 
20 
20 
313 
2060 
100 
123 
62 
150 
185 
157 
63 
16 
856 
10 
12 
6 
22 
51 
25 
14 
5 
9 
3 
103 
57 
6 
322 
1178 
3238 
871 
307 1999 
16 
42 
50 
109 
160 
3 
12 
15 
190 
299 
190 
162 
83 
16 
451 
7 
33 
25 
14 
5 
9 
3 
92 
53 
6 
244 
695 
994 
394 
300 2000 
2539 
13 
42 
45 
2639 
160 
1 
10 
11 
182 
2821 
80 
110 
5 
153 
87 
18 
452 
7 
14 
25 
14 
5 
9 
3 
81 
47 
5 
208 
660 
3481 
378 
281 2001 
71 
21 
92 
7 
7 
14 
106 
70 
150 
9 
17 
6 
142 
87 
18 
499 
7 
6 
25 
3 
4 
9 
3 
70 
41 
5 
171 
670 
776 
261 
409 2002 
23 
23 
2 
5 
7 
30 
55 
100 
25 
9 
17 
6 
134 
87 
19 
451 
6 
10 
V 3 
7 
2 
50 
35 
4 
119 
570 
600 
254 
316 2003 
21 
21 
2 
3 
5 
26 
9 
17 
6 
133 
80 
6 
252 
2 
5 
2 
40 
29 
4 
82 
334 
360 
151 
184 TOTAL 
1000 
4045 
720 
1100 
362 
7226 
190 
1005 
113 
216 
123 
1647 
8873 
440 
250 
125 
360 
510 
160 
500 
347 
135 
32 
51 
18 
1155 
560 
105 
4749 
54 
62 
32 
115 
210 
32 
210 
21 
73 
32 
63 
1 
672 
385 
41 
2004 
6753 
15626 
3876 
2876 
2- s 
TABLE 3 
MAXIMUM THEORETICAL ANNUAL RISK BORNE 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 
I.Greece 
2. Italy 
B. Structural loans 
3. Euratom + NCI 
4. EIB Sp.Gr.Port 
Capital - subtotal 
INTEREST 
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. Ukraine 
16.Belarus 
17. Euratom, C+E Eur. 
B. Guarantees 
18. EIB Mediterranean 
19. ElBC+EEur. I + II 
20. EIB Asia Latin America 
21. EIB South Africa 
Capital - subtotal 
INTEREST 
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. Ukraine 
16.Belarus 
17. Euratom, C+E Eur. 
B. Guarantees 
18. EIB Mediterranean 
19. EIB C+E Eur. I + II 
20. EIB Asia Latin America 
21. EIB South Africa 
Interest - subtotal 
NON-MEMBER COUNTRIES - TOTAL 
GRAND TOTAL 
(Eastern Europe ) 
(Other non-member countries) 1996 
500 
500 
459 
73 
1532 
95 
425 
152 
33 
705 
2237 
260 
204 
134 
30 
628 
57 
25 
20 
40 
55 
16 
55 
14 
18 
5 
19 
5 
10 
168 
112 
15 
2 
635 
1263 
3500 
873 
390 1997 
991 
72 
1063 
48 
553 
111 
27 
738 
1801 
80 
127 
63 
140 
160 
250 
161 
141 
44 
12 
1178 
44 
25 
26 
44 
58 
16 
60 
7 
22 
6 
29 
8 
30 
262 
219 
33 
9 
897 
2075 
3876 
1132 
943 1998 
500 
1006 
185 
57 
1748 
48 
638 
30 
20 
735 
2483 
100 
123 
62 
150 
185 
157 
63 
16 
856 
36 
12 
20 
30 
58 
35 
22 
6 
29 
8 
50 
374 
337 
52 
18 
1086 
1942 
4425 
1290 
652 1999 
58 
50 
108 
553 
15 
15 
583 
691 
190 
236 
164 
30 
3 
623 
26 
14 
15 
40 
35 
22 
6 
29 
8 
70 
447 
402 
62 
20 
1194 
1817 
2508 
984 
833 2000 
2539 
55 
45 
2639 
553 
11 
11 
575 
3215 
80 
110 
5 
327 
269 
48 
11 
850 
26 
13 
15 
21 
35 
22 
6 
29 
8 
88 
456 
395 
61 
29 
1203 
2053 
5267 
1086 
967 2001 
71 
21 
92 
340 
7 
7 
354 
447 
70 
150 
9 
17 
6 
13 
420 
371 
65 
19 
1140 
26 
13 
15 
13 
35 
11 
6 
29 
8 
94 
436 
361 
56 
28 
1129 
2269 
2716 
1060 
1209 2002 
2000 
23 
2023 
340 
2 
5 
347 
2370 
55 
100 
25 
12 
37 
11 
27 
459 
399 
69 
25 
1219 
26 
13 
8 
13 
20 
11 
5 
27 
7 
91 
408 
324 
50 
26 
1028 
2247 
4617 
1090 
1157 2003 
2000 
21 
2021 
170 
2 
3 
175 
2196 
260 
80 
70 
100 
85 
12 
57 
11 
40 
473 
393 
69 
25 
1675 
26 
~8 
7 
10 
11 
3 
23 
6 
87 
376 
287 
45 
23 
912 
2587 
4783 
1466 
1121 TOTAL 
1000 
8045 
1820 
362 
11227 
190 
3571 
329 
123 
4212 
15439 
700 
250 
125 
440 
580 
160 
600 
365 
220 
38 
111 
28 
80 
2347 
1733 
309 
83 
8169 
267 
62 
118 
175 
263 
32 
285 
21 
139 
43 
211 
55 
520 
2927 
2437 
374 
155 
8083 
16252 
31691 
8980 
7272 
3 
• _ Country risk indicators 
Country: Algeria 
Real GDP growth rate (in %) 
Hydrocarbon production ( % change) 
Inflation ra (Dec/Dec) 
Exchange (end of period) 
Nominal el (change Q4/Q4) (- - depreciation) 
Real effect (change Q4/Q4) (- = depreciation) 
General government balance (as % of GDP) 
Balance of payments 
Exports of G&S (in bn 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 G&S 
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 G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in mio USD) 
Debt relief agreements and rescheduling (bin US$) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of per.) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (1) 
(number of countries) 
The Institutional Investor 
Position in the ranking (1) 
(number of countries) 
Credit rating (2) 1993 
-2,0 
-0.6 
16.1 
24,0 
-7.9 
12,8 
-6.7 
11,0 
1.6 
0,0 
1.5 
1,9 
25,7 
25,0 
0,7 
9,1 
7,2 
1,9 
51,8 
206,8 
82,2 
No 
No 
No 
Not rated 
Not rated 
Mar Sep 
68 79 
(169) (170) 
Mar Sep 
62 69 
(127) (133) 
28.2 27.1 1994 
1.1 
-2,5 
34,9 
42,9 
-78.6 
-40,4 
-4,4 
9,5 
-6,9 
0,0 
2,6 
2,9 
29,6 
28,9 
0,7 
4.6 (3) 
3,2 
1,4 
67.7 
252,0 
48.7 (3) 
No 
4,5 
SBA 
(5. 94 - 5. 95) 
On-track 
Not rated 
Not rated 
Mar Sep 
92 96 
(167) (167) 
Mar Sep 
75 78 
(135) (135) 
26.3 24.6 1995 
Latest data 
or estimates (E) 
5,3 
1.5 
22.2 (E) 
52.2 
-21,7 
-34,5 
-2,8 
10,5 
-5,7 
100,0 
1.9 (Nov.) 
2.0 (Nov.) 
33.8 (E) 
n.a. 
n.a. 
3.8 (3) 
2.2 (3) 
1.6 (3) 
78.5 (E) 
264.4 (E) 
49,1 
No 
4,8 
SBA 
(5. 94 - 5. 95) 
EFF 
(5. 95 - 5. 98) 
On-track 
Not rated 
Not rated 
Mar Sep 
102 107 
(187) (181) 
Mar Sep 
89 91 
(135) (135) 
23.5 22.8 
(1) The higher the ranking number, the lower the creditworthiness of the country. 
(2) 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. 
(3) After rescheduling. 
A 5 
" " " Country risk indicators 
Country: Belarus 
Real GDP growth rate Cm %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
inflation rate (Dec/Dec) 
Exchange rate ( Rbs per USD) (average) 
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. 
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 mio USD 
in months of imports 
External debt 
External debt 
(in convertible currencies, in mio 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/merchandise exports (%) 
Debt service/merchandise exports (%) 
Arrears (on both interest and principal, in bn USD) 
Debt rescheduling agreement 
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) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (1) 
(number of countries) 
The Institutional Investor 
Position in the ranking (1) 
(number of countries) 
Credit rating (2) 1993 
-11,6 
-10,0 
1,5 
1990 
932 
n.a. 
n.a. 
-6,3 
2941 
-6,7 
18 
75,0 
0,3 
964,0 
n.a. 
n.a. 
14,7 
n.a. 
n.a. 
25,0 
33,0 
0,5 
n.a. 
STF 
(08.93 - 8.94) 
Off track 
See footnote 
(3) 
Not rated 
Not rated 
Mar Sep 
148 139 
(169) (170) 
Mar Sep 
100 
(127) (133) 1994 
-20.0 
-35,0 
2,0 
2220 
2202 
n.a. 
n.a. 
-1,7 
3138 
-11,4 
10 
108,0 
0,3 
1500,0 
n.a. 
n.a. 
197,0 
n.a. 
n.a. 
20,0 
48,0 
5,7 
493 
with Russia 
on gas arrears 
STF 
(01.95) 
See footnote 
(3) 
Not rated 
Not rated 
Mar Sep 
145 138 
(167)(167) 
Mar Sep 
109 109 
(135) (135) 
15.5 15.7 1995 
Latest data 
or estimates (E) 
-7.0(E) 
-10.0(E) 
n.a. 
290(E) 
11500 
n.a. 
n.a. 
-3,2 
3135(E) 
-4.1 (E) 
20(E) 
426.0 (E) 
1,5 
2085.0 (E) 
n.a. 
n.a. 
239.0 (E) 
178.0(E) 
61.0(E) 
22.0 (E) 
66.0(E) 
7.6 (E) 
460 
with Russia 
on gas arrears 
SBA 
(07.95 - 06.95) 
Off track 
— (4) 
Not rated ~ 
Not rated 
Mar Sep 
135 134 
(187)(181) 
Mar Sep 
112 112 
(135) (135) 
15.2 15.5 
(1) The higher the ranking number, the lower the creditworthiness of the country. 
(2) 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. 
(3) IMF 1993 STF programme went off track in early 1994. However, IMF staff considered favourably the government 
programme adopted in Autumn 1994, which was supported with the second STF tranche by end-January 1995. 
(4) The first quarterly review of the programme, scheduled for December 1995, could not be completed. 
t> B 
Country-risk indicators 
Country: Bulgaria 
1993 1994 1995 
Latest data or 
estimates (E) 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) -2,4 
-8,5 
16,3 1,4 
4,0 
12,9 2.5 (E) 
2,8 (E) 
11.1 
Inflation rate 
Exchange rate (Leva per USD) 
Nominal effective exchange rate 
Real effective exchange rate (end of period) 
(end of period) 
(change, Q4/Q4) (- = depreciation) 
(change, Q4/Q4) (- = depreciation) 63,8 
32,7 
-33,5 
59,2 121,9 
66,0 
-101,8 
n.a. 33,0 
69,8 
-5.7 
n.a. 
General government balance (as % of GDP) -15,7 -6,6 -6,7 (E) 
Balance of payments 
Exports of G&S (in bn USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official reserves, including gold (end of period) 
in bn USD 
in months of imports of G&S 3,7 
-12,8 
40 
1,0 
2,0 4,2 
-0,2 
105 
1.3 
3,0 4,8 
2,2 
165 
1,8 
3,6 (E) 
(E) 
(E) 
(Oct) 
(Oct) 
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 G&S (%) 
Debt service/exports of G&S (%) 
Arrears (on both interest and principal, in bn USD) 
Debt relief agreements and rescheduling 12,5 
7,3 
5,2 
1,6 
1,1 
0,5 
120,5 
266,5 
33,7 
n.a. 
London Club 
(roll-overs, and 
DDSR agreed 
in principle) 10,4 
8,9 
1,5 
1,0 
0,5 
0,5 
109,3 
202,2 
18,4 
n.a. 
London Club 
DDSR (July) 
Paris Club 
resched. (Apr) 10,7 
9,2 
1,5 
1,1 
0,5 
0,6 
83,0 
159,6 
17,5 
0,0 
No (E) 
(E) 
(E) 
(E) 
(E) 
(E) 
(E) 
(E) 
(E) 
IMF arrangements 
Type/no 
(Date / - ) 
On track/off track 
( - / Date) SBA+STF 
(3/94-3/95) 
SBA suspend. 
in Sep 94 
Indicators of market's perceived creditworthiness 
Moody's long-term foreign currency rating (end of period) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (1 ) 
(number of countries) 
The Institutional investor 
Position in the ranking (1 ) 
(number of countries) 
Credit rating (2) Not rated 
Not rated 
Mar Sep 
122 125 
(169) (170) 
Mar Sep 
91 89 
(127) (133) 
18.9 19.5 Not rated 
Not rated 
Mar Sep 
88 98 
(167) (167) 
Mar Sep 
91 95 
(135) (135) 
19.8 20.8 Not rated 
Not rated 
Mar Sep 
90 90 
(187) (181) 
Mar Sep 
93 94 
(135) (135) 
21.9 22.2 
(1 ) The higher the ranking number, the lower the creditworthiness of the country. 
(2) 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. 
Country-risk indicators 
Country: Czech Republic 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (CK's 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 G&S (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 G&S 
External debt (end of period) 
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 G&S (%) 
Debt service/exports of G&S (%) 
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) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (1 ) 
(number of countries) 
The Institutional Investor 
Position in the ranking (1) 
(number of countries) 
Credit rating (2) 1993 
-0,9 
-5,4 
3,5 
18,2 
29,9 
4.2 
19,3 
0,5 
16728 
0,5 
542 
3.9 
2,8 
8,5 
6,5 
2,0 
1,4 
0,9 
0,5 
27,0 
50,8 
8,4 
No 
No 
SBA 
(3/93-3/94) 
On-track 
Baa3 
BBB 
Mar Sep 
48 43 
(169) (170) 
Mar Sep 
42 40 
(127) (133) 
44.6 46.6 1994 
2.6 
2,3 
2.8 
10,2 
28,2 
0,0 
6,8 
0,1 
18837 
0,0 
749 
6,2 
4,2 
10,7 
7,8 
2,9 
2,5 
n.a. 
n.a. 
29,6 
54,7 
13,0 
No 
No 
SBA 
(3/93-3/94) 
On-track 
All debts to IMF 
paid ahead of 
schedule. 
Baa2 (Jun) 
BBB+ (Jul) 
Mar Sep 
40 39 
(167) (167) 
Mar Sep 
40 39 
(135) (135) 
49.7 52.8 1995 
Latest data 
or estimates (E) 
5,2 
12,9 (Nov) 
2,9 
7,9 
26,3 (Oct) 
n.a. 
n.a. 
0,5 (E) 
22195 (E) 
-3,5 (E) 
1965 (Jan-Sep) 
12,9 (Nov) 
8,0 (Nov) 
15,0 (Jun) 
9,6 (Jun) 
5,4 (Jun) 
3,1 (Jun) 
n.a. 
n.a. 
31,0 (Jun) 
67,6 (Jun) 
14,0 (E) 
No 
No 
— 
Baal (Sep) 
A (Nov) 
Mar Sep 
35 41 
(187) (181) 
Mar Sep 
33 30 
(135) (135) 
55.8 58.4 
(1 ) The higher the ranking number, the lower the creditworthiness of the country. 
(2) 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. 
"7 B 
• - - Country-risk indicators 
Country: Estonia 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate (end of period) 
Exchange rate (Krons 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) 
Financial balance (1) 
Fiscal balance (1) 
Balance of payments 
Merchandise exports (in mio USD) 
Current account balance (in % of GDP) (excl. official transfers) 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period) 
in mio USD 
in months of goods imports 
External debt 
External debt 
(in convertible currencies, in mio 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/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) 
S&P long-term foreign currency 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) 1993 
-3,5 
-27,0 
1.7 
35,7 
13,2 
n.a. 
n.a. 
1,4 
-0,7 
801 
-5,7 
160,0 
388 
4,0 
135,5 
n.a. 
n.a. 
13,5 
n.a. 
n.a. 
8,6 
17,0 
1,7 
No 
No 
SBA/STF 
(10/93-3/95 
On track 
Not rated 
Not rated 
Mar Sep 
126 122 
(169) (170) 
Mar Sep 
81 84 
(127) (133) 
21.4 20.9 1994 
4,0 
10,0 
4,0 
41,6 
13,0 
n.a. 
n.a. 
0,9 
0,0 
1323 
-9,0 
212,0 
447 
3,2 
271 
n.a. 
n.a. 
2,1 
0 
2,1 
7,7 
17,1 
1,5 
No 
No 
SBA/STF 
(10/93-3/95) 
On track 
Not rated 
Not rated 
Mar Sep 
105 102 
(167) (167) 
Mar Sep 
88 86 
(135) (135) 
20.7 23.6 1995 
Latest data 
or estimates (E) 
4.0 (E) 
n.a. 
5,4 
28,0 
11,5 
25,0 
0,8 (E) 
0,3 (E) 
1913 (E) 
-10,6 (E) 
190,0 (E) 
584 (E) 
2,8 (E) 
353 (E) 
n.a. 
n.a. 
23 (E) 
0 (E) 
23 (E) 
9,9 (E) 
13,5 (E) 
1,2 (E) 
No 
No 
SBA— 
(4/95-4/96) 
On-track 
Not rated 
Not rated 
Mar Sep 
66 76 
(187) (181) 
Mar Sep 
79 79 
(135) (135) 
25.4 26.3 
(1) Financial balance does not take into account government net lending, whereas fiscal balance does. 
(2) The higher the ranking number, 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. 
ft 
Country-risk indicators 
Country: Hungary 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (forints per USD) (end of period) 
Nominal effective exchange rate (change, Q4/Q4) (- = depreciation) 
Real effective exchange rate (change, Q4/Q4) (- = depreciation) 
Consolidated state budget balance (as % of GDP) (GFS definition) 
Balance of payments 
Exports of G+S (in mio USD) 
Current account balance (in % of GDP) 
Net inflow of foreign direct investment (in mio USD) 
Official 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 (1 ) 
interest 
External debt/GDP (%) 
External debt/Exports of G+S (%) 
Debt service/Exports of G+S (%) 
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) 
S&P long-term foreign currency 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) 1993 
-0,8 
4,0 
12,1 
21,1 
100,7 
-3,1 
10,2 
-7,5 
10371 
-9,6 
2328 
6,7 
7,1 
24,6 
22,6 
2,0 
4,9 
3,3 
1,6 
68,0 
237,2 
47,4 
No 
No 
SBA 
(9/93-12/94) 
On track 
Ba1 
BB+ 
Mar Sep 
47 46 
(169) (170) 
Mar Sep 
43 43 
(127) (133) 
44.3 44.8 1994 
2,9 
9,0 
10,9 
21,2 
111,0 
-14,3 
0,0 
-6,1 
10219 
-9,5 
1100 
7,0 
7,4 
28,5 
26,1 
2,4 
6,2 
4,3 
1,9 
69,5 
278,9 
60,8 
No 
No 
SBA 
First review 
uncomple­
ted 
Ba1 
BB+ 
Mar Sep 
44 46 
(167) (167) 
Mar Sep 
43 44 
(135) (135) 
46.1 46.2 1995 
Latest data -
or estimates (E) 
2,0 (E) 
6,0 
10,4 
28,5 
134,6 (Oct) 
-25,4 (Q3) 
-6,4 (Q3) 
-3,0 (E) 
16759 (E) 
-6,0 (E) 
3300 (E) 
11,9 
12,0 
31,7 (Nov) 
28,5 (Nov) 
3,2 (Nov) 
8,4 (E) 
n.a. 
n.a. 
74,1 (E) 
189,2 (E) 
50,0 (E) 
No 
No 
-1 
Ba1 
BB+ 
Mar Sep 
50 44 
(187) (181) 
Mar Sep 
45 48 
(135) (135) 
46.4 45.0 
(1) Including early repayments. 
(2) The higher the ranking number, 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. 
O. 
Country risk indicators 
Country: Israël 
Real GDP growth rate (in %) 
Industrial production ( % change) (at constant 1990 prices) 
Unemployment rate (average) 
Consumer Price Index (Dec/Dec) 
Exchange rate (shekel per USD) (end of period) 
Nominal effective exchange rate (vs the US$) (change, Q4/Q4) (- - deprec.) 
Real effective exchange rate (vs the US$) (change, Q4/Q4) (- = deprec.) 
Central government overall deficit (as % of GDP) 
Balance of payments 
Merchandise trade (in bn USD) 
Current account balance (in % 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 USS 
in months of imports of G&S 
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 (%) 
External debt/exports (%) 
Debt service/exports of goods and services (%) 
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) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (1) 
(number of countries) 
The Institutional Investor 
Position in the ranking (1) 
(number of countries) 
Credit rating (2) 1993 
3.5 
6,5 
10,0 
11.3 
2,986 
-6,1 
1.8 
-2,5 
14,9 
-1,8 
0 
6,382 
2,4 
36,1 
n.a. 
n.a. 
4,1 
1,9 
2,2 
55,8 
242,3 
14,0 
No 
No 
No 
Not rated 
BBB+ 
Mar Sep 
29 29 
(169) (170) 
Mar Sep 
46 46 
(127) (133) 
39.6 40.5 1994 
6,5 
7,2 
7.8 
14.5 
3,018 
-«,1 
2,4 
-2,0 
16,5 
-3,0 
406 
6,689 
2,5 
40,0 
n.a. 
n.a. 
4,6 
2,2 
2,4 
54,2 
226,7 
14,9 
No 
No 
No 
Not rated 
BBB+ 
Mar Sep 
30 33 
(167) (167) 
Mar Sep 
46 43 
(135) (135) 
43.4 46.5 1995 
Latest data 
or estimates (E) 
6.9 (E) 
n.a. 
6.3 (E) 
8.0 (E) 
3,140 
-4.0 (E) 
0.9 (E) 
-3.5 (E) 
17.8(E) 
-6.2 (E) 
1.350(E) 
8.158(E) 
2.6 (E) 
46.8 (E) 
n.a. 
n.a. 
n.a. 
n.a. 
n.a. 
58.9 (E) 
262.9 (E) 
13.0(E) 
No 
No 
No 
A3 
A-
Mar Sep 
31 31 
(187) (181) 
Mar Sep 
43 42 
(135) (135) 
47.9 49.2 
(1) The higher the ranking number, the lower the creditworthiness of the country. 
(2) 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. 
Excludes short-term debt. 
IO B 
Country-risk indicators 
Country: Latvia 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (end of period) 
Inflation rate 
Exchange rate (Lats 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) 
Financial balance (1) 
Fiscal balance (1) 
Balance of payments 
Exports (in mio USD) 
Current account balance, excl. official transfers (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 G&S 
External debt 
External debt 
(in convertible currencies, in mio 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/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) 
S&P long-term foreign currency 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) 1993 
-12,0 
-32,6 
5,8 
34,8 
0,595 
n.a. 
n.a. 
1,0 
0,6 
998 
4,6 
51 
510 
5,6 
225 
225 
0 
20 
n.a. 
n.a. 
10,0 
24,0 
2,0 
No 
No 
SBA/STF 
(12/93-3/95 
On track 
Not rated 
Not rated 
Mar Sep 
133 132 
(169) (170) 
Mar Sep 
89 87 
(127) (133) 
19.5 20.0 1994 
2,0 
-2,2 
7,0 
26,0 
0,548 
n.a. 
n.a. 
-1,7 
-4,1 
951 
-4,6 
155 
620 
5,5 
359 
359 
0 
27 
20 
7 
10,0 
38,0 
3,0 
No 
No 
SBA/STF 
(12/93-3/95) 
On track 
Not rated 
Not rated 
Mar Sep 
104 125 
(167) (167) 
Mar Sep 
94 92 
(135) (135) 
19.6 21.3 1995 
Latest data 
or estimates (E) 
0,0 (E) 
n.a. 
6,3 
23,0 
0,512 
0,0 
20,0 
-3,8 (E) 
-4,4 (E) 
1204 (E) 
-4,0 (E) 
153 (E) 
600 (E) 
4,8 (E) 
540 (E) 
540 (E) 
0 (E) 
31 (E) 
16 (E) 
15 (E) 
12,0 (E) 
45,0 (E) 
2,6 (E) 
No 
No 
SBA— 
(4/95-4/96) 
Off-track 
Not rated 
Not rated 
Mar Sep 
106 116 
(187) (181) 
Mar Sep 
91 89 
(135) (135) 
22.6 23.4 
(1 ) Financial balance does not take into account government net lending, whereas fiscal balance does. 
(2) The higher the ranking number, 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. 
I V 
Country-risk indicators 
Country: Lithuania 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate (end of period) 
Exchange rate (Litas per USD) (end of period; for 1994, fixed as of 1.4.94 
Nominal effective exchange rate (change, Q4/Q4) (- = depreciation) 
Real effective exchange rate (change, Q4/Q4) (- = depreciation) 
General government balance (as % of GDP) 
Financial balance (1) 
Fiscal balance (1) 
Balance of payments 
Exports (in mio USD) 
Current account balance (in % of GDP), without official transfers 
Net inflow of foreign direct investment (in mio USD) 
Official FX reserves (end of period, gross foreign assets) 
in mio USD 
in months of imports of G&S 
External debt 
External debt 
(in convertible currencies, in mio 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 G&S (%) 
Debt service/exports of G&S (%) 
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) 
S&P long-term foreign currency 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) 1993 
-16,2 
-47,0 
1,6 
188,6 
3,9 
n.a. 
n.a. 
0,9 
-4,6 
1877 
-8,3 
23 
410 
2,4 
345,3 
n.a. 
n.a. 
15,0 
n.a. 
n.a. 
11,2 
16,3 
0,7 
No 
No 
SBA/STF 
(10/93-3/94) 
On track 
Not rated 
Not rated 
Mar Sep 
134 130 
(169) (170) 
Mar Sep 
91 93 
(127) (133) 
18.9 19.0 1994 
1,5 
1.0 
4,0 
45 
4,0 
n.a. 
n.a. 
-1,5 
-4,2 
1930 
-4,3 
60 
588 
2,7 
530 
n.a. 
n.a. 
25,4 
n.a. 
n.a. 
9,7 
25,0 
1,0 
No 
No 
STF (10/93-3/94) 
EFF (10/94-11/97 
On track 
Not rated 
Not rated 
Mar Sep 
110 121 
(167) (167) 
Mar Sep 
97 96 
(135) (135) 
18.4 20.0 1995 
Latest data. 
or estimates (E) 
3,0 (E) 
15,0 (E) 
6,1 
35 
4,0 
0,0 
30,0 
-1.5 (E) 
-3,4 (E) 
2250 (E) 
-3,4 (E) 
55 (E) 
800 
3,5 
860 (E) 
n.a. 
n.a. 
43,0 (E) 
38 (E) 
5 (E) 
11,0 (E) 
35,0 (E) 
2,0 (E) 
No 
No 
-EFF 
(10/94-10/97) 
On track 
Not rated 
Not rated 
Mar Sep 
108 118 
(187) (181) 
Mar Sep 
95 90 
(135) (135) 
21.7 22.9 
(1 ) Financial balance does not take into account government net lending, whereas fiscal balance does. 
(2) The higher the ranking number, 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. 
iz. 6 
«• " - Country-risk indicators 
Country: Moldova 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end of period) 
Inflation rate (end of period) 
Exchange rate (leu 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 
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 mio USD 
in months of imports of merchandises 
External debt 
External debt 
(in convertible currencies, in mio 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/ 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) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (1 ) 
(number of countries) 
The Institutional Investor 
Position in the ranking (1 ) 
(number of countries) 
Credit rating (2) 1993 
-8,7 
-7,2 
n.a. 
837 
3,64 
n.a. 
n.a. 
-6,8 
451 
-9,3 
14,0 
76,6 
1,4 
168,0 
n.a. 
n.a. 
5,0 
n.a. 
n.a. 
23,0 
37,3 
1,1 
No 
No 
SBA 
(3/93-3/94) 
On-track 
Not rated 
Not rated 
Mar Sep 
159 160 
(169) (170) 
Not rated 1994 
-31,2 
-30,0 
1,0 
116 
4,27 
n.a. 
n.a. 
-8,1 
617 
-12,9 
23,0 
178,8 
3,0 • 
343,0 
n.a. 
n.a. 
12,3 
n.a. 
n.a. 
26,0 
55,6 
2,0 
No 
No 
SBA 
(12/93-3/95) 
On-track 
Not rated 
Not rated 
Mar Sep 
148 155 
(167) (167) 
Not rated 1995 
Latest data 
or estimates (E) 
1,0 (E) 
-10,0 (E) 
2,0 (E) 
24 
4,50 
n.a. 
n.a. 
-4,0 (E) 
653 (E) 
-3,5 (E) 
19,7 (E) 
265 
4,8 
652,0 (E) 
n.a. 
n.a. 
84,9 (E) 
n.a. 
n.a. 
42,0 (E) 
99,8 (E) 
13,0 (E) 
No 
No 
__ SBA 
(3/95-3/96) 
On-track 
Not rated 
Not rated 
Mar Sep 
157 141 
(187) (181) 
Not rated 
(1 ) The higher the ranking number, the lower the creditworthiness of the country. 
(2) 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. 
•V5 6 
Country-risk Indicators 
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 rate (change, Q4/Q4) (- = depreciation) 
Real effective exchange rate (change, Q4/Q4) (- = depreciation) 
General government balance (as % of GDP) 
Balance of payments 
Exports of G&S (in bn 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 G&S 
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 G&S (%) 
Debt service/exports of G&S (%) 
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) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (1 ) 
(number of countries) 
The Institutional Investor 
Position in the ranking (1 ) 
(number of countries) 
Credit rating (2) 1993 
1,3 
7,7 
10,2 
295,5 
1276 
-56,9 
39,7 
-0,1 
4,9 
-4,8 
48 
52 
0,1 
4,4 
3,4 
1,0 
330 
147 
183 
21,4 
81,0 
6,4 
No 
No 
No 
Not rated 
Not rated 
Mar Sep 
66 75 
(169) (170) 
Mar Sep 
73 75 
(127) (133) 
24.2 24.4 1994 
3,9 
9,9 
11,0 
61,7 
1767 
-29,4 
n.a. 
-1,0 
6,1 
-1,8 
416 
591 
1,1 
5,5 
4,5 
1,0 
586 
393 
193 
18,9 
81,0 
8,9 
No 
No 
SBA/STF 
(5/94-12/95) 
On track 
Not rated 
Not rated 
Mar Sep 
74 77 
(167) (167) 
Mar Sep 
76 74 
(135) (135) 
25.4 26,2 1995 
Latest data 
or estimates (E) 
5,0 (E) 
14,0 (E) 
9,0 (E) 
24,3 (E) 
2547 (Oct) 
n.a. 
n.a. 
-2,8 (E) 
7,4 (E) 
-4,7 (E) 
306 (E) 
695 
0,6 
6,0 (E) 
4,8 (E) 
1,2 (E) 
653 
428 
225 
18,7 (E) 
80,0 (E) 
13,0 (E) 
No 
No 
SBA extended 
through 1997 
and augmented 
On Track 
Not rated 
Not rated 
Mar Sep 
68 64 
(187) (181) 
Mar Sep 
73 71 
(135) (135) 
28.1 29.7 
(1 ) The higher the ranking number, the lower the creditworthiness of the country. 
(2) 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. 
14 S 
Country risk indicators 
, Country: Russia 
Real GDP growth rate On %) 
Industrial production ( % change) 
Unemployment rat© (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate ( Rbs per L (end of period) 
Nominal exchange rate (change, Q4/Q4) (• = depreciation) 
Real exchange rate (1) (change, Dec/Dec.) (- = depreciation) 
General government balance (as % of GDP) 
Balance of payments 
Exports of G&S (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) (net figures) 
in mio USD 
in months of imports of G&S 
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 G&S (%) 
Debt service/exports of G&S (%) (before rescheduling) 
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) 
S&P long-term foreign currency 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) 1993 
-12.0 
-16,4 
5.1 
840 
1247 
-62,5 
-66,9 
-7,7 
58 
1,6 
0,7 
6,4 
1.3 
104,0 
n.a. 
n.a. 
19.4(4) 
14.7 
4,7 
31,0 
' 178,0 
34,0 
(6) 
Paris Club 
(resched.) 
STF 
(07.93 - 07.94) 
Off track 
Not rated 
Not rated 
Mar Sep 
141 137 
(169) (170) 
Mar Sep 
87 92 
(127) (133) 
20.2 19.0 1994 
-15.3 
-21.0 
7.1 
315 
3571 
n.a. 
-2.2 
-11,5 
66 
-0,4 
-0,2 
2,3 
0,4 
119,0 
n.a. 
n.a. 
19.6 (5) 
15,3 
4,3 
40,0 
180,0 
31,0 
(6) 
Paris Club 
(resched.) 
STF 
(07.93 - 07.94) 
Off track 
Not rated 
Not rated 
Mar Sep 
138 136 
(167)(167) 
Mar Sep 
98 100 
(135) (135) 
18.1 18.4 1995 
Latest data 
or estimates (E) 
-4.2 (E) 
-3.0 (E) 
8.2 
231 
4640 
-30 
72,0 
-3.9 (E) 
81(E) 
1.6(E) 
n.a. 
8.1 (E) 
1.2(E) 
130.0(E) 
n.a, 
n.a. 
17.6(5) 
12,3 
5,3 
33.0 (E) 
160.0(E) 
22.0 (E) 
(6) 
Paris Club 
(resched.) 
SBA 
(04.95 - 04.96) 
On track 
Not rated 
Not rated 
Mar Sep 
141 142 
(187) (181) 
Mar Sep 
97 98 
(135) (135) 
19.5 19.4 
(1) Real exchange rale: (USD/rouble rate x US price level) / (Russian price level). 
(2) The higher the ranking number, 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. 
(4) Before rescheduling. 
(5) After rescheduling. 
(6) Since 1992, Russia has not been servicing private debts contracted by the FSU. 
AS S 
Country-risk indicators 
Country: Slovak Republic 
Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (SK's 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 G&S (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 G&S 
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 G&S (%) 
Debt service/exports of G&S (%) 
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) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (1 ) 
(number of countries) 
The Institutional Investor 
Position in the ranking (1 ) 
(number of countries) 
Credit rating (2) 1993 
-4,1 
-8,6 
14,4 
25,1 
33,2 
n.a. 
-1,8 
-7,6 
7568 
-5,4 
134 
416 
0,6 
3,4 
2,7 
0,7 
674 
490 
184 
30,8 
44,5 
8,9 
No 
No 
STF 
(7/93 - 7/94) 
On-track 
Not rated 
Not rated 
Mar Sep 
56 63 
(169) (170) 
Mar - Sep 
57 57 
(127) (133) 
31 30.6 1994 
4,8 
7,0 
14,6 
11,7 
31,3 
n.a. 
2,4 
-2,7 
8983 
6,0 
184 
1691 
2,3 
3,9 
3,2 
0,7 
791 
n.a. 
n.a. 
31,1 
43,4 
8,8 
No 
No 
STF 
(7/93 -7/94) 
SBA 
(7/94-3/96) 
Baa3 (May) 
BB- (Feb) 
Mar Sep 
64 66 
(167) (167) 
Mar Sep 
59 59 
(135) (135) 
31.6 33.1 1995 
Latest data 
or estimates (E) 
7,4 (Jan-Sep) 
10,1 (Nov) 
12,8 (Nov) 
7,2 
29,5 (Sep) 
n.a. 
n.a. 
-2,5 (E) 
11000 (E) 
6,0 (E) 
150 (E) 
2799 (Oct) 
3,4 (Oct) 
4,9 (Jul) 
n.a. 
n.a. 
1045 (E) 
n.a. 
n.a. 
33,7 (Jul) 
44,5 (Jul) 
9,5 
No 
No 
SBA 
(7/94-3/96) (3) 
Baa3 (May) 
BB+ (Apr) 
Mar Sep 
53 51 
(187) (181) 
Mar Sep 
61 59 
(135) (135) 
33.2 35.7 
(1 ) The higher the ranking number, the lower the creditworthiness of the country. 
(2) 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. 
(3) The mid-term review of the programme, which had been scheduled for February 1995, was not completed. 
1 ^ 6 
Country risk indicators 
Country: Ukraine 
Real GDP growth (% change) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate (Dec/Dec) 
Exchange rate (Krb per USD) (end of period) 
- auction / interbank 
-cash 
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 G&S (in bn USD) 
Current account balance (excl. transfers) (in % of GDP) 
Net inflow of foreign direct investment (in bn USD) 
Gross official FX reserves (end of period) in mio USD 
in months of imports of G&S 
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 paid (in mio USD) 
principal 
interest 
External debt/GDP (%) 
External debt/exports of G&S (%) 
Debt service/exports of G&S (%) 
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) 
S&P long-term foreign currency rating (end of period) 
Euromoney 
Position in the ranking (1) 
(number of countries) 
The Institutional Investor 
Position in th« ranking (1) 
(number of countries) 
Credit rating (2) 1993 
-17.1 
-8,5 
0,3 
10155 
12610 
25000 
n.a. 
n.a. 
-10,1 
14,4 
-5,9 
0,2 
193 
0.2 
4,1 
n.a. 
n.a. 
202 
n.a. 
n.a. 
12,1 
28,5 
1.3 
548 
-
Not rated 
Not rated 
Mar Sep 
142 146 
(169) (170) 
Mar Sep 
95 96 
(127) (133) 
18.2 18.2 1994 
23,0 
-35,6 
0.3 
401 
108196 
128000 
n.a. 
2% 
-8,6 
14,8 
-6,0 
0,09 
646 
0,5 
7,1 
n.a. 
n.a. 
1794 
n.a. 
n.a. 
29,2 
48,0 
12,4 
2722 
rescheduling of 
debt owed to 
Russia/Turkm. 
STF 
26 Oct 94 
On track 
Not rated 
Not rated 
Mar Sep 
149 147 
(167) (167) 
Mar Sep 
111 113 
(135) (135) 
15.1 14.5 1995 
Latest data 
or estimates (E) 
-13.0(E) 
-20.0 (E) 
0.4(E) 
180 
179400 
186000 
n.a. 
60% 
-4,1 
15.1 (E) 
-4.5 (E) 
0.12(E) 
1100 
1 
8,1 
n.a. 
n.a. 
1531 
986 
545 
24.1 (E) 
53.6 (E) 
10.2(E) 
236 
rescheduling of 
debt owed to 
Russia/Turkm. 
SBA 
Dec. 1995 
Off track 
Not rated 
Not rated 
Mar Sep 
145 138 
(187) (181) 
Mar Sep 
109 111 
(135) (135) 
15.5 15.7 
(1) The higher the ranking number, the lower the creditworthiness of the country. 
(2) 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. 
j-uiiflfrf' 17 5 
EXPLANATORY NOTES 
The purpose of the tables 1 to 3 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 
LA. Types of operation 
The risk covered by the Community budget results from two types of operation: 
borrowing/lending operations; 
guarantees given to third parties. 
I.A.I Borrowing/lending operations 
In this 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 is late in making a repayment, the 
Commission must draw on its resources to repay the borrowing on the due date. 
I.A.2 Guarantees given to third parties 
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 EIB 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 receiving 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. 
LB. Mobilization of funds for guarantee payments 
The funds needed to pay the budget guarantee in the event of late payment by the 
recipient of a loan granted or guaranteed by the Community are raised as follows: 
I.B.I. Borrowing/lending operations 
(a) The amount required may be taken provisionally from cash resources in 
accordance with Article 12 of the Financial Regulation. This method is used so 
that the Community can immediately repay the borrowing on the date scheduled 
in the event of late payment by the recipient of the loan. 
(b) If the delay extends to three months after the due date, the Commission draws 
on the Guarantee Fund to cover the default. The funds obtained are used to 
replenish the Commission's cash resources. 
18 B 
(c) 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 in the Guarantee Fund and must be authorized in 
advance by the budgetary authority. 
(d) 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 recovered funds 
available. 
I.B. 2. Community guarantees for loans from the EIB's own resources 
Since the entry in force of the Regulation establishing a Guarantee Fund for external 
action, the provisions of the Agreement between the Community and the EIB on 
management of the Fund state that, after the EIB calls in the guarantee in the event of 
a default, the Commission must authorize the Bank to withdraw the corresponding 
amounts from the Guarantee Fund within three months. 
If there are insufficient resources in the Fund, the procedure used for activating the 
guarantee is the same as for borrowing/lending operations. 
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 31 December 1995. 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. 
n.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 has been disbursed in two tranches of 
ECU 5Q0 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 
tranches amounting to ECU 2 000 million each and - with the exception of the 
first tranche - is conditional on the attainment of agreed targets on Italy's public 
debt and deficit. 
The first two tranches were released in 1993. The Council Decision states that 
the third and fourth tranches could be released as of 1 February 1994 and 
1 February 1995 respectively. The Italian Government has not applied for the 
payment of these two tranches which it is no longer planned to implement. 
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 have been disbursed. 
II.B. Non-member countries 
1I.B.1 Financial assistance 
19 B 
n.B.l(a) Hungary I 
The amounts of the first two tranches are final and certain. The third tranche of the 
macrofinancial assistance decided in 1990 will no longer be disbursed since Hungary's 
balance of payments is more favourable than expected. The first tranche was repaid by 
Hungary in full on 20 April 1995. 
II.B. 1(b) Hungary II 
ECU 180 million has been granted and paid out in full. 
II.B. 1(c) 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. 
ECU 130 million has been granted to the Slovak Republic in two tranches for a 
maximum term of seven years (bullet). The Commission has presented to the Council 
a proposal for a decision cancelling this loan to the Slovak Republic. 
II.BJ(d) Bulearia I . 
ECU 290 million has been granted in two tranchés 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. 
II.B. 1(e) Bulgaria II 
The financial assistance of ECU 110 million over a maximum period of seven years 
decided in 1992 is being granted in two tranches. The first tranche of ECU 70 million 
was paid on 7 December 1994. For the -second tranche, it is assumed that 
ECU 40 million could be paid in the second half of 1996. 
II.B. 1(f) ' Romania I 
An estimated ECU 375'million in two tranches for a maximum term of seven years 
(bullet). The first tranché 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. 
II.B. 1(g) Romania II -
The new operation involving ECU 80 million for a maximum term of seven years was 
disbursed in 1993. 
II.B. 1(h) Romania III 
This is a seven-year loan of ECU 125 million to be disbursed in two tranches. The first 
tranche of ECU 55 million was disbursed in November 1995. For the second tranche, 
it is assumed that ECU 75 million will be paid out in the second half of 1996. 
II.B.l(i) Moldova 
This is a ten-year loan of ECU 45 million to be disbursed in two tranches. The first 
tranche of ECU 25 million was disbursed on 7 December 1994. The second tranche of 
ECU 20 million was paid to Moldova in August 1995. 
20 S 
H.B.l(j) Ukraine I 
ECU 85 million is to be lent in one tranche for a maximum term of ten years. The loan 
was paid out to Ukraine on 28 December 1995. 
II.B.l(k) Ukraine n 
ECU 200 million is to be lent in two tranches for a maximum term of ten years. It is 
assumed that the first tranche of ECU 100 million will be paid out in the second half of 
1996 and the second tranche of ECU 100 million in the second half of 1997. 
II.B. 1(1) Belarus 
ECU 75 million is to be lent in two tranches for a maximum term of ten years. The first 
tranche of ECU 30 million was paid to Belarus in December 1995. For the second 
tranche, it is assumed that ECU 25 million could be paid in the first half of 1996. 
ILB.l(m) Baltic States 
The first tranche (ECU 110 million) of a seven-year loan of ECU 220 million was paid 
in 1993. The second tranches for Estonia and Latvia could be paid in 1996. 
Half of the second tranche for Lithuania - i.e. ECU 25 million of the ECU 50 million 
planned - was paid in August 1995. 
It is assumed that the second tranches of ECU 20 million for Estonia and 
ECU 40 million for Latvia will be paid out in the second half of 1996. The second 
payment of ECU 25 million for the second tranche to Lithuania is expected to be 
disbursed in the first half of 1996. 
II.B.l(n) Algeria I 
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 of ECU 400 million was paid on 17 August 1994. . 
'ILB.l(o) Algeria II:- ' 
ECU 200 million has been granted in two tranches for a maximum term of seven years 
(bullet). The first tranche of ECU 100 million was paid out to Algeria in November 
1995. It is assumed that the second tranche of ECU 100 million will be disbursed in the 
second half of 1996. 
II.B.l(p) Israel: 
A loan of ECU 160 million has been paid in full and is repayable in 1997. 
ILB.2 Guarantees 
//.5.2(a) 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). 
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. 
21 6 
It is estimated that the average term will be fifteen years with a three-year period of 
grace. 
II.B.2(b) Food aid for the former Soviet Union 
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 
tranche 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 tranches two years and 
three years after the start of the period in which the funds may be drawn. 
Depending on the type of contract, loans are repaid on 15 January, 20 August or 
28 September. 
The balance of ECU 13.93 million still to be used at 31 December 1995 was for 
Azerbaijan. 
//.B.2(c) Euratom, countries of Central and Eastern Europe 
Of the ECU 1 100 million involved, it is assumed that ECU 200 million will be 
disbursed in 1996, ECU 200 million in each of the three following years and 
ECU 150 million in 2000 and 2001. 
It is assumed that the loans will be for an average term of twenty years with a five-year 
period of grace. 
22 
•B 
ANNEX 
DEFINITION OF FIGURES USED IN THE REPORT 
I. 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: 
LA Member States 
Balance of payments • 14 0002 
NCI 6 830 
Euratom 4 0003 
EIB; Spain, Greece, Portugal 1 500 
Member States - total 26 330 
2 
3 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. 
23 E> 
I.B. Non-member countries 
Hungary I 870 
Hungary II 180 
Czech Republic 250 
Slovak Republic I 125 
Slovak Republic II 130 
Bulgaria I 290 
Bulgarian 110 
Romania I 375 
Romania II 80 
Romania III 125 
Israel 160 
Algeria I 400 
Algeria II 200 
former Soviet Union 1 250 
Baltic States 220 
Moldova 45 
Ukraine 85 
Belarus 75 
EIB, old protocols 3 032 
EIB, Eastern and Central Europe I 1 700 
EIB, Eastern and Central Europe II 3 000 
EIB, new protocols 1 530 
EIB, horizontal financial cooperation 1 800 
Other non-member countries 750 
South Africa 300 
Non-member countries - total 16 674 
Grand total 43 004 
H. 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. _ 
HI. 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; 
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. 
2^ 13 

ISSN 0254-1475 
COM(96) 243 final 
DOCUMENTS 
EN 01 
Catalogue number : CB-CO-96-252-EN-C 
ISBN 92-78-04574-8 
Office for Official Publications of the European Communities 
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