COMMISSION REPORT TO THE BUDGETARY AUTHORITY ON GUARANTEES COVERED BY THE GENERAL BUDGET SITUATION AT 30 JUNE 1996
Date: 1996-12-12
Institutions: European Commission
Subjects: Community loan, EU financial instrument, budgetary reserve (EU), credit guarantee, general budget (EU)

COMMISSION OF THE EUROPEAN COMMUNITIES 

•ir 

* 

Brussels,  12.12.1996 
COM(96)631  final 

COMMISSION REPORT TO THE BUDGETARY AUTHORITY 

ON GUARANTEES COVERED BY THE GENERAL BUDGET 

SITUATION AT 30 JUNE 1996 

REPORT ON GUARANTEES  COVERED BY THE GENERAL  BUDGET 
SITUATION AT 30 JUNE  1996 

This report describes the situation as regards budget guarantees at 30 June 1996. 

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. 

This  report  is  presented  in  accordance  with  Article  134(g)  of  the  Financial  Regulation 
applicable to the general budget of the European Communities. 

The Commission has already presented ten reports to the budgetary authority. 

The report is in two parts: 

1.  Events since the last report, the risk situation and the activation of budget guarantees. 

2.  Evaluation  of  potential  risks.  Economic  and  financial  situation  of  non-Community 

countries benefiting from the most important operations. 

3 
Contents 

PART  ONE:  EVENTS  SINCE  THE  REPORT  AT  31  DECEMBER  1995,  THE 
RISK SITUATION AND ACTIVATION  OF BUDGET  GUARANTEES 

I. INTRODUCTION:  TYPES  OF OPERATION 

LA.  OPERATIONS WITH MACROECONOMIC OBJECTIVES 

LB.  OPERATIONS  WITH MICROECONOMIC OBJECTIVES 

n.  EVENTS SINCE THE REPORT AT 31 DECEMBER  1995 

II. A.  FURTHER MACROFINANCIAL ASSISTANCE FOR MOLDOVA 

II.B.  MACROFINANCIAL ASSISTANCE FOR THE SLOVAK REPUBLIC 

ffl.  RISK SITUATION 

III. A.  AMOUNT OUTSTANDING  AT 30  JUNE  1996 
III.B.  MAXIMUM  ANNUAL RISK BORNE  BY  THE COMMUNITY BUDGET:  OPERATIONS DISBURSED AT 30  JUNE 
1996 
III.C.  MAXIMUM THEORETICAL ANNUAL RISK BORNE BY  THE COMMUNITY BUDGET 
IV. ACTIVATION  OF BUDGET  GUARANTEES 

' 

IV. A.  EIB  LOANS TO NON-MEMBER COUNTRIES 

I V.B.  BORROWING/LENDING  OPERATIONS OR LOAN GUARANTEES FOR NON-MEMBER  COUNTRIES 

V. ANALYSIS OF THE COMMUNITY'S THEORETICAL LENDING /IND GUARANTEE 
CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES 

VI.  RELATIVE  SOLIDITY  OF THE GUARANTEE  FUND 

4 

4 

4 

4 

....4 

5 

5 

.6 

6 
7 
11 

11 

11 

13 

14 

PART  TWO:  EVALUATION  OF  POTENTIAL  RISKS:  GENERAL  ECONOMIC 
SITUATION  OF  THE  NON-MEMBER  COUNTRIES  BENEFITING  FROM  THE 
MOST IMPORTANT LOAN  OPERATIONS 

I. INTRODUCTION 

II. C E N T R AL A ND EAST E U R O P E AN COUNTRIES 

III. N E W LY INDEPENDENT STATES 

IV. M E D I T E R R A N E AN COUNTRIES 

ANNEXE 

I. EXPLANATORY  NOTES  ON THE SITUATION  OF RISKS COVERED  BY  THE 
COMMUNITY  BUDGET 

LA.  TABLES  1 TO 3 
LB.  LOAN OPERATIONS COVERED BY A BUDGET GUARANTEE 
I.C.  PAYMENT OF THE BUDGET GUARANTEE 

16 

17 

19 

22 

25 

25 
26 
40 

II.  METHODOLOGICAL NOTE ON THE ANALYSIS OF THE COMMUNITY'S  ESTIMATED 
LENDING CAPACITY IN RESPECT OF NON-MEMBER COUNTREES OVER THE PERIOD 1996-
99 UNDER THE GUARANTEE FUND MECHANISM 

42 

II. A.  RESERVE FOR LOAN GUARANTEES TO NON-MEMBER COUNTRIES (1) 

II.B.  BASES FOR THE CALCULATION OF THE PROVISIONING OF THE GUARANTEE FUND  (2) 

U.C.  BASIS FOR THE PROVISIONING  OF THE FUND IN THE EVENT OF A PART GUARANTEE 

ILD.  PROVISIONING OF THE GUARANTEE FUND (3) 

ILE.  MARGIN REMAINING IN THE GUARANTEE RESERVE (4) 

II.F.  RESIDUAL LENDING CAPACITY (5) 

III.  TABLES: COUNTRY-RISK  INDICATORS 

42 

42 

43 

43 

44 

44 

45 

EVENTS  SINCE THE REPORT AT 31 DECEMBER  1995, THE RISK SITUATION  AND 
ACTIVATION OF BUDGET  GUARANTEES 

PART ONE: 

I.  INTRODUCTION:  TYPES  OF  OPERATION 

The risks covered  by the Community budget  derive from a variety  of lending  and  guarantee  operations 
which  can  be  divided  into  two  categories:  loans  with  macroeconomic  objectives  and  loans  with 
microeconomic objectives. 

LA.  Operations with  macroeconomic  objectives 

The  first  of  these  are  the  balance  of  payments  loans  for  Member  States  or  non-member  countries, 
normally carrying strict economic conditions and undertakings. 

This  category  includes  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 this operation depends to a large extent 
on macroeconomic and political developments in the recipient countries. 

LB.  Operations with  microeconomic  objectives 

These are loans to finance 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  companies, financial institutions  or non-
member  countries  and,  in  addition  to  the  Community  guarantee,  are  covered  by  the  usual  guarantees 
demanded by banks. 

This  covers  Euratom  and  NCI  loans  in  Member  States  and  the  Euratom  and  EIB  loans  outside  the 
Community  (Mediterranean,  Central  and  Eastern  Europe,  certain  non-member  countries -  developing 
countries of Asia and Latin America and South Africa). 

n.  EVENTS  SINCE THE REPORT AT 31 DECEMBER  1995 

The main events in the first half of 1996 were as follows: 

II.A.  Further macrofinancial  assistance for Moldova1 

Moldova  made  considerable  progress  in financial stabilization  and  reform  in  1994  and  largely  met  the 
performance criteria laid down in the first IMF programme. In June 1994 the Council therefore  decided to 
grant Moldova macrofinancial  assistance up to a maximum of ECU 45 million in support  of the country's 
stabilization and reform programme (see point U.C.2). The Moldovan authorities' new programme, which 
is backed by a new IMF stand-by agreement,  covers the period March  1995-March 1996 and is intended 
to  consolidate  the  progress  made  in  stabilization  and  boost  the  structural  reforms.  This  programme 
requires additional financing of around USD 50 million from the international community. 

The  Council  has  therefore  decided  to  grant  Moldova  further  assistance  up  to  a  maximum  of 
ECU  15 million in the form of a loan to support its balance of payments (Decision 96/242/EQ. 

Council Decision 96/242/EC of 25 March 1996 providing further macrofinancial assistance for Moldova. 

The  Commission,  on  behalf  of  the  Community,  has  been  empowered  to  borrow  this  amount  for  a 
maximum period often years. The proceeds of this operation will be on-lent to Moldova in one tranche. 

The loan had not yet been disbursed at 30 June 1996. 

II.B.  Macrofinancial  assistance for the Slovak Republic2 

As part of the financial assistance for the Slovak Republic, the Commission, on behalf of the Community, 
was  empowered  by  Council  Decision  94/93 9/EC  of  22 December  1994  to  borrow,  in  two  tranches, 
ECU  130 million for a maximum period of seven years. The proceeds of this operation were to be on-lent 
on the same terms to Slovakia. 

Because  of  the  improvement  in  the  macroeconomic  situation  and,  in  particular,  the  Slovak  Republic's 
balance  of  payments  and  currency  reserves  and  its  access  to  international  private  capital  markets,  the 
Slovak authorities stated in April  1995 that they would no longer be calling on the aid granted by the IMF 
under the stand-by agreement to support the country's balance of payments. 

With the IMF stand-by arrangement  expiring and the Slovak authorities not  being prepared  to  agree  on 
the  economic  policy  measures  to  be  attached  to  the  implementation  of  the  EU  loan  facility,  the 
Commission therefore  submitted to the Council a proposal cancelling the Decision of 22 December  1994 
in line with the conclusions to be drawn for  the Community.  This decision was repealed  by the  Council 
Decision of 25 July 1996 

m. 

R I SK  SITUATION 

There are two possible methods for evaluating the risks borne by the Community budget: 

- 

- 

the  method,  often  used  by  bankers,  of  the  total  amount  of  capital  outstanding  for  the  operations 
concerned on a given date; 

the more budgetary approach of calculating the maximum amount which the Community could have to 
pay out in each financial year. 

The second approach itself has been applied in two different ways: 

-  by reference  only to  actual  disbursements  at  30 June  1996, giving the  minimum  level  of risk to  the 

Community assuming that there are no early repayments (see Table 2 below); 

-  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 below). 

The latter  exercise  gives  some idea  about  the future  level  of risks connected  with  the  proposals  made. 
However,  a number of assumptions have to be made about dates of disbursement and terms of repayment 
(details are given in the annex) as well as interest3 and exchange rates.4 

The results are  shown in Tables  1 to  3 which assess the risk relating to  countries inside the  Community 
and countries outside the Community. 

2 

3 

Council Decision of 25 July  1996 repealing Decision 94/939/EC  of 22 December  1994 providing macrofinancial  assistance  for  the  Slovak 
Republic. 

An average interest rate of 10% is assumed. 

The exchange rate used for loans in currencies other than ecus are those of 30 June 1996. 

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 EDB operations, for 
example. 

The following analysis distinguishes between total risk, the risk in respect of Member States and the risk in 
respect of non-member countries. 

III.A.  Amount outstanding at 30 June  1996 

(see Table 1) 

The  total  risk  at  30  June  1996  came  to  ECU  11 705 million  as  against  ECU  13 114 million  at  31 
December  1995, a fall of ECU 1  409 million.5 

Amount outstanding at 31  December 1995 

Loan repayments 

Greece 
Italy 
Euratom 
NCI 
Hungary 
Former Soviet Union 
EIB 

Exchange rate differences between ecu and other currencies 

Loans disbursed 

Former Soviet Union 
EIB 

Amount outstanding at 30 June 1996 

13114 

500 
500 
32 
179 
260 
204 
121 

20 

1 
406 

11  7 05 

The capital outstanding in respect of operations in the Member  States was ECU 5 985 million at 30 June 
1996, a fall of 17.6% compared with 31 December 1995. 

This fall  is mainly  due to  the  repayment  of ECU 1  000 million  in balance-of-payments  loans  to  Greece 
(ECU 500 million) and Italy (ECU 500 million). 

The amount outstanding from other operations in the Member States has remained stable. 

The  capital  outstanding from non-member  countries  at  30  June  1996 was  ECU 5 720 million,  a  fall  of 
2.2% compared with 31 December  1995. 

III.B.  Maximum  annual  risk  borne  by  the  Community  budget:  operations  disbursed  at 

30 June  1996 

(see Table 2) 

The  total  risk,  which  comes  to  ECU 3 149 million  in  1996,  will  steadily  increase  to  around 
ECU 3 500 million  in  2000,  although  the  situation  in  1999  is  special  in  that  there  will  be  no  capital 

^ 

In the case of loans in currencies other than the ecu, part of the change over the past six months is due to exchange rate differences. 

repayments  for  the balance-of-payments  loans to  the Member  States  and  in that  capital  repayments  on 
loans to Hungary, the Czech and Slovak Republics and the ECU 290 million loan to Bulgaria end in 1998. 

The risk for  1996 in respect of the Member States comes to ECU 2 068 million. 

This figure 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 2 793 million. 

The risk for  1996 in respect of non-member countries comes to ECU 1 081 million. The risk will increase 
in 1997 to ECU  1617 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. 

ni.C.  Maximum  theoretical  annual  risk borne by the Community  budget 

(see Table 3) 

This risk comes to ECU 3 490 million in 1996 and will increase regularly until 2000 (except in 1999 when 
it will total ECU 2 255 million). 

The trend in the maximum risk in respect of the Member States is much the same as in Table 2 up to 2000 
when  the  risk  will  amount  to  ECU 3 188 million.  It  will  fall  to  ECU 2 370  million  in  2002  and 
ECU 2 197 million in 2003. 

The  risk  in  respect  of  non-member  countries  will  rise  from  ECU  1  253 million  in  1996  to 
ECU 1  930 million in  1997. Compared with Table 2, the risk will increase from 1999, the date scheduled 
for the first repayments of the loans proposed for Turkey, Croatia and FYROM. 

-X  ~ 

TABLE 1 

CAPITAL  OUTSTANDING  IN RESPECT  OF OPERATIONS  DISBURSED 

(ECU million) 

Operation 

Authorized 
ceiling 

Capital 
outstanding 
31.12.95 

Capital 
outstanding 
30.06.96 

Remainder  to 
be  disbursed 
30.06.96 

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 

2200 
8000 

14000 

4000 
6830 

1500 

26330 

1050 
250 
125 
400 
580 
600 
160 
220 
60 
285 
55 
1250 

6362 
1700 
3000 
750 
300 

1000 
4045 

720 
1113 

385 

7263 

440 
250 
125 
360 
510 
500 
160 
135 
45 
85 
30 
347 

1782 
837 
96 
149 

500 
3512 

695 
932 

346 

1200 
4000 

0 
0 

0 

5985 

5200 

180 
250 
125 
360 
510 
500 
160 
135 
45 
85 
30 
143 

1981 
884 
141 
191 

260 
0 
0 
40 
70 
100 
0 
85 
15 
200 
25 
0 

3112 
733 
2865 
548 
300 

THIRD  COUNTRIES  -  TOTAL 

17147 

5851 

5720 

8353 

GRAND  TOTAL 

43477 

13114 

11705 

13553 

1)  No disbursement  is planned. 
2) The third and fourth tranches  had still not been paid at 30.6.1996.  So far, the  Italian 
Government  has not requested  payment. 

ANNEX TO  TABLE 1 

SITUATION  IN RESPECT  OF  EIB OPERATIONS  (30.6.96) 

Operations 

Credit line 
authorized 

Loans  made 
available,  minus 
cancellations 

Initial 
disbursement 

Amt outstnd. 
at  30.06.96 

EIB  Mediterranean 

Spain,  Greece,  Port. 
Third countries  EIB Med. 
Central  & Eastern  Europe I 
Central  & Eastern  Europe II 
Asia,  Latin America 
South Africa 

1500 
6362 
1700 
3000 
750 
300 

1465 
5128 
1647 
1999 
647 
101 

1572 
2984 
914 
141 
191 

346 
1981 
884 
141 
191 

Note: The fact that the initial disbursement sometimes exceeds the authorized ceiling is due to 
differences  in the  ecu rate between the date on which the contracts were signed and 30.6.1996. 

- 

< ?-

TABLE 2 
MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 
(Estimate in ECU million based on all operators disbursed at 30.6.1996) 

1996 

1997 

1998 

1999 

2000 

2001 

2002 

2003 

TOTAL 

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. 

Spain,  Greece,  Port. 

500 
500 

153 
306 

73 

500 
997 

93 
91 

56 

453 
541 

70 

2514 

13 
41 

45 

16 
41 

50 

Capital  -  subtotal 

1533 

1064 

1738 

107 

2613 

INTEREST 
A.  Balance  of  payments 

1.  Greece 
2.  Italy 

B.  Structural  loans 

3.  Euratom 
4.  NCI  and  NCI  EQ 
5.  EIB  Med.  Old.  Prot. 

Spain,  Greece,  Port. 

95 
255 

57 
95 

33 

48 
213 

43 
69 

26 

48 
213 

10 
21 

20 

158 

158 

3 
12 

15 

1 
10 

11 

Interest  -  subtotal 

535 

398 

311 

189 

180 

-  1000 
4012 

728 
1092 

359 

7190 

190 
998 

113 
216 

123 

1640 

23 

23 

21 

21 

2 

5 

7 

2 

3 

5 

71 

21 

92 

7 

7 

14 

MEMBER  STATES  -  TOTAL 

2068 

1462 

2049 

296 

2793 

106 

30 

27 

8830 

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.  E l B C + E E u r.  I +  II 
20.  EIB  Asia  Latin  America 

260 

204 

134 
30 

80 
127 
63 
140 

160 
250 
143 

141 
46 
15 

Capital  -  subtotal 

628 

1165 

INTEREST 
A.  Financial  assistance 

6.  Hungary 
7.  Czech  Republic 
8.  Slovak  Republic 
9.  Bulgaria 
10.  Romania 
11.  Israel 
12.  Algeria 
13.  Ex  USSR 
14.  Baltic  States 
15.  Moldova 
16.  Ukraine 
17  Belarus 
B.  Guarantees 
18.  EIB  Mediterranean 
19.  E l B C + E E u r.  I +  II 
20.  EIB  Asia  Latin  America 

Interest  -  subtotal 

26 
25 
13 
36 
51 
16 
50 
14 
14 
5 
9 
3 

123 
63 
6 

453 

18 
25 
13 
36 
51 
16 
50 
7 
14 
5 
9 
3 

130 
67 
9 

452 

100 
123 
62 
150 
185 

161 
67 
19 

867 

10 
12 
6 
22 
51 

25 

14 
5 
9 
3 

120 
64 
9 

348 

70 

150 

9 

17 
6 

156 
97 
22 

528 

7 
6 

25 

3 
4 
9 
3 

85 
46 
7 

55 

100 

25 
9 
17 
6 

151 
96 
23 

483 

6 

10 

3 
3 
7 
2 

73 
39 
6 

440 
250 
125 
360 
510 
160 
500 
347 
135 
32 
51 
18 

1233 
611 
128 

4901 

54 
62 
32 
115 
210 
32 
210 
21 
73 
32 
63 
22 

797 
424 
57 

9 
17 
6 

151 
90 
8 

281 

2 
5 
2 

63 
33 
5 

190 

80 

110 
5 

166 
96 
22 

479 

7 
14 

25 

14 
5 
9 
3 

96 
53 
7 

172 
88 
20 

470 

7 
33 

25 

14 
5 
9 
3 

108 
59 
8 

269 

231 

193 

149 

110 

2203 

NON-MEMB.  CNTRIES  -  TOTAL 

1081 

1617 

1215 

738 

710 

720 

631 

390 

7103 

GRAND  TOTAL 

3149 

3079 

3264 

1034 

3503 

827 

661 

417 

15934 

(Eastern  Europe  ) 
(Other  non-member  countries  ) 

751 
330 

846 
771 

882 
333 

406 
332 

394 
316 

275 
445 

268 
364 

164 
226 

3986 
3117 

-  io 

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) 

1996 

1997 

1998 

1999 

2000 

2001 

2002 

2003 

TOTAL 

MEMBER  STATES 

CAPITAL 
A. Balance of  payments 

1. Greece 
2. Italy 

B. Structural  loans 
3. Euratom + NCI 
4. EIB Sp, Gr. Port 

500 
500 

459 
73 

500 
997 

184 
56 

994 
70 

2514 

54 
45 

57 
50 

Capital - subtotal 

1532 

1064 

1738 

107 

2613 

2000 

2000 

23 

21 

1000 
8012 

1819 
359 

2023 

2021 

11190 

71 
21 

92 

INTEREST 
A. Balance of payments 

1. Greece 
2. Italy 

B. Structural  loans 
3. Euratom + NCI 
4. EIB Sp. Gr. Port 

Interest - subtotal 

95 
425 

152 
33 

705 

48 
553 

111 
26 

738 

48 
638 

30 
20 

553 

553 

340 

340 

170 

15 
15 

11 
11 

7 
7 

2 
5 

2 
3 

190 
3571 

330 
122 

736 

583 

575 

354 

347 

175 

4213 

MEMBER  STATES  -  TOTAL 

2237 

1802 

2474 

690 

3188 

446 

2370 

2197 

15402 

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.  l a n d» 
20. EIB Asia Latin America 
21.  EIB South Africa 

100 
123 
62 
150 
185 

260 

204 

80 
127 
63 
140 

160 
250 
143 

134 
30 

141 
46 
15 

161 
67 
1.9 

Capital - subtotal 

628 

1165 

867 

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. ElBC+EEur. I + II 
20. EIB Asia Latin America 
21.  EIB South Africa 

Interest - subtotal 

57 
25 
20 
40 
55 
16 
55 
14 
18 
5 
19 
5 
1 

168 
112 
15 
1 

625 

44 
25 
26 
44 
58 
16 
60 
7 
22 
6 
29 
8 
6 

213 
170 
28 
4 

765 

36 
12 
20 
30 
58 

35 

22 
6 
29 
8 
17 

274 
249 
47 
9 

851 

190 

80 

55 

70 

260 

80 
70 

700 
250 
125 
440 
580 
160 
600 
347 
220 
38 
111 
28 
24 

2054 
1527 
352 
55 

150 

100 

100 

9 

17 
6 
1 

318 
288 
64 
10 

25 
12 
37 
11 
7 

392 
363 
85 
17 

85 
12 
57 
11 
16 

431 
377 
96 
21 

934 

1103 

1616 

7611 

26 

13 
15 
13 

35 

11 
6 
29 
8 
72 

411 
362 
90 
25 

26 

13 
8 
13 

20 

11 
5 
27 
7 
88 

409 
337 
88 
26 

26 

8 
7 

10 

11 
3 
23 
6 
94 

383 
301 
45 
24 

267 
62 
118 
175 
263 
32 
285 
21 
139 
43 
211 
55 
366 

2597 
2227 
467 
127 

110 
5 

260 
213 
44 
5 

717 

26 

13 
15 
21 

35 

22 
6 
29 
8 
54 

394 
368 
85 
22 

216 
143 
29 
2 

580 

26 

14 
15 
40 

35 

22 
6 
29 
8 
34 

345 
328 
69 
16 

985 

1097 

1114 

1077 

941 

7454 

NON-MEMB. CNTRIES  - TOTAL 

1253 

1930 

1718 

1565 

1814 

2048 

2180 

2557 

15065 

GRAND  TOTAL 

3490 

3731 

4192 

2255 

5002 

2494 

4550 

4753 

30468 

(Eastern  Europe) 
(Other non-member  countries) 

864 
389 

1043 
887 

1173 
545 

853 
712 

969 
845 

944 
1103 

1043 
1137 

1447 
1110 

8336 
6729 

11 

IV.  ACTIVATION  OF BUDGET  GUARANTEES 

IV.A.  EIB loans to non-member  countries 

On 7 March  1996 the EIB called on the budget guarantee in respect  of loans of around  ECU 6.4 million 
to the Republics of former  Yugoslavia (the Former Yugoslav Republic of Macedonia - FYROM, Bosnia-
Herzegovina and Serbia). The payment was made to the EIB on 11 June 1996. 

On  2  July  1996  the  EIB  again  called  on  the  budget  guarantee  in  respect  of  loans  of  around 
ECU 8.9 million to the Republics of former Yugoslavia (FYROM and Serbia). The payment was made to 
the EIB on 4 October 1996. 

At 30 June 1996 the total amount of debts settled by the Community and not yet repaid by the  defaulting 
debtors  came to  ECU 72.4 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 72.4 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 45.9 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),  on  26  January  1996  (ECU 5.2 million)  and  on 
11 June 1996 (ECU 6.4 million). 

The  Former  Yugoslav  Republic  of  Macedonia  (FYROM)  has  repaid  some  of 
(ECU 2.1 million). 

its  arrears 

IV.B.  Borrowing/lending  operations  or loan guarantees for non-member  countries 

I V.B.J. Payments from  cash resources 

The  Commission  draws  on  its  cash  resources  under  Article 12  of  Council  Regulation  No  1552/89  of 
29 May 1989  implementing  Decision  88/376/EEC,  Euratom  on  the  system  of  the  Communities'  own 
resources to avoid delays and resulting costs in servicing its borrowing operations when a debtor is late in 
paying. 

IV. B. 2.  A ctivation  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. 

12 

In the last six months the Fund has been called on to honour guarantees for the following debtors: 

Country 

Georgia (loan of ECU 10 million) 

Georgia  (loan of ECU 40 million) 

Armenia (loan of ECU 20 million) 

Total 

IVB.3.  Late  repayments 

Date 

15.4.1996 

15.4.1996 

15.4.1996 

Amount (principal + interest) 

10 106 572.43 

1  050 469.67 

19 604 806.06 

30 761848.16 

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, Euratom)  No  2728/94  of 31  October 
1994 establishing a Guarantee Fund for  external action. 

Country 

Turkmenistan 
ECU 45 million) 

Repayment date 

Amount (principal + interest) 

(loan 

of 

7.5.1996 

15 279 824.71 

IV.B. 4.  Situation as regards  unpaid debts at 30 June 1996 

The following  amounts had not been paid at 30 June  1996: 

Country 

Tajikistan 

Georgia 

Armenia 
Turkmenistan6 

Total 

Amount (principal + interest) 

63 181  389.89 

92 463 958.04 

57 601313.20 

30 570 321.40 

243 816 982.53 

6 

Two capital repayments totalling ECU 22.8 million have been made since 30 June 1996 

13 

V.  ANALYSIS  OF  THE  COMMUNITY'S  THEORETICAL  LENDING  ^ND  GUARANTEE 

CAPACITY IN RESPECT OF NON-MEMBER  COUNTRIES 

In practice, the Guarantee Fund and reserve facility limits the Community's lending and guarantee capacity 
to  non-member  countries  since the  appropriations  available  for  provisioning  the  Fund  whenever  a  new 
lending decision is adopted  (or any annual tranche in the case of guarantees  for  multiannual  operations) 
are limited by the amount entered for the guarantee reserve in the financial perspective.7 

At any given time, lending  capacity  corresponds to the margin remaining in the guarantee  reserve.  This 
margin is equal to the difference  between the reserve and the estimated  amount needed to  provision the 
Guarantee Fund for operations which have already been adopted and which are in preparation. 

Table 4  contains  an  estimate  of the  Community's  lending  capacity  in respect  of  non-member  countries 
over the period  1996-99 compatible with the Guarantee Fund mechanism. The method of calculation and 
references to legal texts are set out in greater detail in the Annex. 

On the basis of the  decisions  adopted  by the  Council8  and  decisions proposed  and  in preparation9  (see 
Table 4),  ECU 306 million  is  expected  to  be  used  from  the  guarantee  reserve  in  1996,  leaving 
ECU 20 million available at the end of the year. 

The Guarantee Fund could then amount to around ECU 620 million at the end of the year assuming: 

-  no further  defaults requiring activation of the Fund; 

-  no late repayment of arrears by defaulting countries. 

If account  is taken  of the  effect  on the  guarantee  reserve  of the  provisioning  of the  Fund  in respect  of 
loans already decided  and loans proposed  and in preparation for  the period  1997-99, the annual capacity 
available for loans varies: 

-  from  ECU  1.8 billion to ECU 2 billion for loans with a 100% guarantee under the Community budget; 

-  from  ECU 2.4 billion to ECU 2.7 billion for loans with a 75% guarantee (EIB loans to  Mediterranean 

countries). 

7 

ECU 300 million at 1992 prices. 

Under transfer 5/96 the budgetary authority authorized the transfer of ECU 191.8 million from the guarantee reserve to the Guarantee Fund. 

The loans proposed and being prepared by the Commission for 1996 will have an impact of ECU 114 million on the guarantee reserve. 

14 

VI.  RELATIVE  SOLIDITY  OF THE  GUARANTEE  FUND 

The ratio between  the  estimated  amount  in the Fund  at  the  end  of  1996 and  the  maximum  annual risk 
(defined  as the total amount falling due) shown for  1997 in Table 3 comes to 32%. 

The Fund  should then correspond  to  7.5%» of the total  amount  of guaranteed  loans outstanding  outside 
the Community. 

The ratio between the amount in the Fund at the end of 1996 and the amount due in  1997 from countries 
which have defaulted in the past is 11:1. 

-IS-

TABLE 4 

THE  COMMUNITY'S  THEORETICAL  ESTIMATED  LENDING &  GUARANTEE  CAPACITY 

IN RESPECT  OF NON-MEMBER  COUNTRIES  OVER  THE  PERIOD  1996-99 
under the Guarantee Fund mechanism* 

EÔU million 

1996 

1997 

7353 

7333 

Reserve for loan guarantees to  non-member countries(l) 

326 

329 

337 

346 

Bases for the  calculation  of the  provisioning  of 
the  Guarantee  Fund  (2) 

-  EIB loans 
-  Mediterranean  (a) 
-  countries of Central and  Eastern  Europe (b) 
-  Asia and  Latin America  (c) 
-  South Africa (d) 
-  EIB loans - total 

201 
1114 
521 
120 
1956 

281,75 

195,5 

150 

55 
336,75 

195,5 

150 

-  Euratom loans (e) 

0 

200 

200 

150 

-  Macrofinancial assistance 

165 

-130 

Provisioning  of the  Guarantee  Fund (3) 

306 

60 

57 

44 

Margin remaining  in the guarantee  reserve (4) 

20 

269 

280 

303 

Residual lending  capacity  (balance  of  payments  loans, 
EIB loans and Euratom  loans  (5) 

-  Minimum if used in full for  100% guarantee (e.g. BP loans) 
- Maximum if used in full for  EIB loans (75% guarantee) 

134 
179 

1794 
2393 

1865 
2486 

2017 
2689 

(*) Assuming that the target amount  is reached after  1999. For example, if the Fund reaches its target amount at 
1 January  1999 and the rate of provisioning is cut to 10% after the review provided for in Article 4 of the  Regulation 
establishing the Fund, the Union's lending capacity  in respect of non-member countries would be increased by 
ECU  1 143 million a year for loans with a 100% guarantee and by ECU 1 524 million for loans with a 75% guarantee. 

Description of the loans for which the  Fund will be provisioned in the period 1996-99: 

•  EIB 
a. Mediterranean: 

- loans decided: 1994-96: ECU  115 million under the Fourth Financial Protocol with Syria. 

1995-98: ECU 80 million under the Fourth Financial Protocol with Malta and Cyprus 

- loans proposed or in preparation: 1996-2000: ECU 750 million for financial cooperation with Turkey 

and ECU 230 million for financial cooperation with Croatia.  1997-2000: ECU  150 million for financial cooperation with 
the Former Yugoslav  Republic of Macedonia  (FYROM). 
b. Central and eastern Europe: 

- loans decided: 1994-96: ECU 3 000 million 

c. Asia and Latin America 

- loans decided: 1993-96: ECU 750 million 
- loans proposed or in preparation: 1996: ECU 410 million 

d. South Africa 

- loans decided: mid-1995 to mid-1997: ECU 300 million 

e. - Euratom 

- loans decided: 1994-99: ECU  1 100 million 

f.  - Financial  assistance 

- loans decided: 1996: ECU  15 million loan to Moldova; ECU 20 million loan to Belarus cancelled; ECU  130 million 

loan to Slovakia  cancelled 

- loans proposed or in preparation: 1996: ECU  170 million in loans to the Republics of Georgia, Armenia 

and Tajikistan 

16 

Part Two 
Evaluation of potential risks: General Economic Situation of the non-
Member Countries benefiting from the most important loan 
operations 

I.  INTRODUCTION 
The figures given in the previous parts provide information  on the quantitative aspects of the risks bome 
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. Recent events 
which may influence the portfolio  country risk are analysed below. 

The country  risk  evaluation  presented  in this chapter  is slightly different  from  previous  reports.  The 
present  report  is focusing  more  clearly  on  recent  developments  of  direct  relevance  for  the  country 
risk  evaluation  in the  respective  countries.  Less  space  is accordingly  attributed  to  the  more  general 
description  of  economic  developments  in the  countries  concerned,  which  allows  to  shorten  the  text 
considerably. With that  same goal in mind, some countries - where the overall risk level is considered 
low  and  recent  developments  not  significant  -  are treated  only  summarily  whereas  countries  where 
the  financial  exposure  for  the  EU  is  great  and/or  a  noteworthy  change  (deterioration  or 
improvement) in the risk evaluation has taken place, are analysed more thoroughly. 

As an important  complement  to the textual  analysis, extensive country  risk  indicators for  all relevant 
countries in Central  and  Eastern  Europe,  the NIS  and in the Mediterranean  area  are provided  in the 
form  of a full-page  table per country. 

It  may  be  noted  that  the  evaluation  does  not  cover  EU  exposure  in  other  regions  than  those 
mentioned,  mainly  because  this  exposure  (notably  through  guarantees  of  EIB  lending)  represents 
only a fraction  of total exposure (less than 3%) and is also well diversified  among countries. 

Generally,  developments  since  the  latest  report  indicate  that  overall  EU  exposure  in  the  regions 
concerned  (CEEC,  NIS, Med.)  has fallen  marginally.  Increases  in CEEC  and  the  Mediterranean  are 
more than offset  by the decrease for NIS. 

The  development  of  risk  associated  with  the  three  regions  differs  though.  In  Central  and  Eastern 
Europe risk levels are generally lower but with some important  exceptions. The present  uncertainties 
regarding  future  developments  in  Bulgaria  seem  particularly  preoccupying  but  developments  in 
Romania and  Slovakia may also, although to a lesser extent, need close monitoring. 

In the NIS, the Far Eastern  nations  continue to  present  generally  considerable  risk, with  Uzbekistan 
as  an  exception.  The  situation  is equally  fragile  in the  Caucasian  region  whereas  Belarus,  Moldova 
and Ukraine fare  marginally  better. 

In the Mediterranean  area, finally,  Algeria presents the most sensitive picture at this juncture. 

17 

H. CENTRAL AND EAST EUROPEAN COUNTRIES 

BULGARIA 

Bulgaria  is  in  the  middle  of  a  serious  economic  and  financial  crisis.  Progress  in  structural  reform 
remains  slow,  in  particular  with  respect  to  the  closure  of  large  loss-making  state  enterprises  and 
restructuring  of the severely hit banking  sector. IMF has postponed  and the World Bank has  delayed 
further  any additional financial  assistance. GDP declined by 2.6 % in the first  quarter  of  1996, before 
the crisis came to  a head.  The currency  continues to depreciate against the  dollar  by  mid-September 
it  had  reached  230  leva/USD,  compared  with  about  80  in  mid-April.  Simultaneously,  inflation  has 
accelerated  sharply.  The  key  interest  rate  has been  raised  from  108 %  to  300  %  in  September  in a 
short-term  effort  to  support  the  leva.  However,  confidence  in  the  currency,  and  in  the  banks, 
continues  to  be  extremely  low.  The  current  account  has improved  only very  slowly  and  was  still in 
deficit  in  1995. The  servicing  of  Bulgaria's  external  debt  is  substantial  during  the  rest  of  1996  and 
continues  to  be  high  in  the  coming  years.  Returning  the  Bulgarian  economy  to  a  path  of  macro-
economic  stabilisation  and  recovery  hinges  crucially  on  rapid  success  in  implementing  a  revised 
economic  programme  in  agreement  with  the  IMF,  without  which  Bulgaria  would  find  itself 
effectively  cut  off  from  official  credits.  Presidential  elections  in  October  1996  and  parliamentary 
elections  by the  end  of  1998  provide  a  rather  short  intermediate  time  span  in  which  to  implement 
strict economic policies. 

CZECH  REPUBLIC 

Czech  country  risk has grown  but  remains very moderate  relative to  other  transition  countries.  Real 
growth  is high and  driven  by buoyant  domestic investment.  Unemployment  is very  low  and  inflation 
below  10%. However,  the fiscal  accounts have slipped  into the red  for  the first  time in years  and  the 
current  account  deficit  remains  sizeable. Financing the external disequilibrium will cause the  net-debt 
ratio  to  rise  from  its  very  low  level  but  the  Czech  Republic  would  have  no  problem  raising  the 
necessary  finance  on  the  international  markets.  Some  macroeconomic  adjustment  may  still  be 
preferable  but will be more difficult  to  deliver after  the government  lost  its Parliamentary  majority  in 
the recent general  elections 

ESTONIA 

Estonia's  risk  assessment  has improved  steadily  over  the  last  few  years.  The  economy  is  recovering 
markedly  as  a consequence  of  sound  policies  pursued  by the  authorities  and  early  liberalization  and 
reform  of  the  economy.  Following  the  stabilization  of  GDP  in  1994,  it  expanded  by  3.2%  in  1995 
and  is  expected  to  grow  a further  4%  in  1996.  Inflation  has  come  down  to  29%  in  1995  from  the 
hyperinflation  experienced  in  1992 (1000%). The exchange rate of the Estonian Kroon  is fixed  to the 
D-Mark  (8EEK=1DM)  through  a currency  board  system  that  links money  growth  to  the  balance  of 
payments.  Despite  a substantial  current  account  deficit  during the  past  years  (8% in  1995  excluding 
official  transfers)  the  overall  balance  was  always  positive  thanks  to  capital  inflows,  including  in 
particular  strong  foreign  direct  investment  (in  the  order  of  US$  200  million).  Despite  the  real 
appreciation  over  the  past  years,  the  exchange  rate  is still  competitive,  given  the  highly  competitive 
starting  point.  Therefore  capital  inflows  can  be  expected  to  continue  for  a  number  of  years,  but 
would  eventually  stop,  having in the context  of the currency board  system  a contractionary  effect  on 
the economy.] Debt  and  debt  service ratios remain relatively low. 

HUNGARY, 

18 

The  overall  risk  assessment  for  Hungary  has.continued  to  improve,  positive  developments  in  the 
balance of payments and foreign  debt indicators, a reduction in the budget  deficit,  the acceleration  of 
he privatization process,  and  a relatively  stable political  context.  In March  1996, the IMF  approved 
i  "precautionary"  stand-by  credit  for  Hungary  and  the  economic  programme  remains  on-track. 
Hungary's  debt  ratios  however  remain  dangerously  high,  and  further  reductions  in  the  current 
account  and  budget  deficits  are  still  needed.  The  forint  was  made  fully  convertible  for  current 
account  purposes  in  January  1996.  Hungary's  international  credit  ratings  remain  stable  at  a  sub-
investment grade level. 

LATVIA 

Latvia's  economy  had just  emerged  from  recession,  showing  positive  GDP  growth  of  2%  in  1994, 
when  a major  banking  crisis emerged  in  Spring  1995, which  contributed  to  a contraction  of GDP  (-
1.6%)  and  a  widening  of  the  consolidated  budget  deficit  to  3.3%  of  GDP  (4.8%  for  the  central 
government). As a consequence of the crisis, the SB A of April  1995 went  off-track.  Since May  1996 
a  new  SBA  is  in  place  and  the  economy  seems  to  recover,  with  trade  and  industrial  production 
expanding.  As  a  consequence  of  the  crisis,  international  reserves  declined  in  the  course  of  1995, 
reducing  the  level,  in months  of  imports,  from  4.5  to  3.2,  which  still  seems  fairly  comfortable.  The 
external debt and debt  service ratios have remained relatively low. 

LITHUANIA 

In late  1995, Lithuania's  economy  was  hit  by a banking  crisis.  Economic  growth  that  started  to  be 
positive in  1994 and  accelerated  in  1995 has slowed  down in  1996 with unemployment  rising  above 
8%. But  the Lithuanian  authorities reacted  to the financial  crisis by a mix of monetary  relaxation  and 
fiscal tightening thereby  stabilizing financial  conditions and preserving the currency board  system that 
pegs the  national  currency,  the Litas, to  the  US  dollar.  In  addition,  a plan  has  been  developed  with 
the support  of IMF and World Bank to address the bad debt problem of the banking  sector. 
In the  first  quarter  of  1996,  the  balance  of  payments  went  into  deficit  for  the  first  time  since  early 
1994. This is due to  a sharp  decrease in capital inflows  and  a worsening trade  deficit  which  could  be 
the result  of the  significant  real  appreciation  of the Litas  since April  1994.  So far,  Lithuania  has  not 
been  very  successful  in  attracting  direct  foreign  investment,  especially  if  compared  to  the  smaller 
Estonia,  the other Baltic  country  with  a currency  board  arrangement,  which obtains more than  triple 
the amount  of DFI each year.  Steps are taken to create a more favourable  and  stable environment  for 
DFI.  The  foreign  debt  and  debt  service  ratios  remain  relatively  low,  but  debt  in terms  of  exports  is 
rising steadily. 

ROMANIA 

Romania  country  risk  has  increased  as  the  forthcoming  general  elections  are  influencing  policy 
decisions.  This  may jeopardise  the  initially  positive  results  achieved  under  the  reform  programme 
implemented  with  IMF  support  since  1994.  Macroeconomic  disequilibria  are  developing  and  timid 
microeconomic reforms  have been halted  and,  at times, reversed.  This was the case of the  unification 
of the foreign  exchange  regime:  a free  interbank  foreign  exchange  market  was  de facto  abolished  in 
March  1996  and  state-run  enterprises  had  their  foreign  earnings  confiscated.  As  a  consequence, 
Romania  went  off-track  on  its  IMF  stand-by  and  the  disbursement  of the  second  tranche  of the  EU 
balance-of-payments  loan  is  delayed.  Foreign  liabilities  do  not  yet  raise  any  immediate  concern  but 
they  present  a  very  short-term  structure  and  the  debt-ratio  has  climbed  up  steeply.  Access  to  the 

private international  capital market may become difficult  if the reform  effort  is not  resumed  after  the 
elections. 

19 

SLOVAKIA 

Slovakia's  risk  assessment  has  deteriorated  reflecting  the  rapid  worsening  of  the  current  account 
since  early  1996  but  remains  relatively  favourable.  Against  the  background  of  prudent  fiscal, 
monetary  and  exchange  rate  policies,  most  macroeconomic  indicators  continue  to  show  a  positive 
evolution.  Real  GDP  grew  by  7%  in  the  first  half  of  1996;  unemployment  is  going  down;  annual 
inflation  has stabilized  at below  6%,  the lowest rate among transition countries; official  reserves  and 
debt indicators remain at comfortable  levels; and the budget  deficit  has been contained  at  around  2% 
of  GDP.  On the  negative  side,  the  current  account  is projected  to  move from  a  surplus  of  3.6%  of 
GDP in 1995 to  a deficit  of more than 4% of GDP in  1996. Furthermore, the outlook  continues to be 
marred  by  political  tensions  (including  the  persisting  conflict  between  the  Prime  Minister  and  the 
President  of the Republic,  and the issue of the Hungarian minority)  and by sluggish,  or  insufficiently 
transparent,  structural  reforms. 
The worsening of the current  account reflects the boom in domestic demand, weak  economic  activity 
in the EU,  some  accumulated  appreciation  of the  real  exchange  rate  and  the  reduction  of  duties  on 
car  imports.  The  current  account  deficit  is being  amply  financed  by  strong  capital  inflows  and,  as a 
result,  official  reserves remain at a comfortable  level (representing  more than 4 months  of imports in 
mid-September  1996).  Slovakia reached  Article VIII  status at the IMF in October  1995.  The  import 
surcharge was reduced  from  10% to  7.5% in July  1996  and the government  intends to  fully  remove 
it  by  end-1996.  The  IMF  stand-by  arrangement  expired  in  early  1996.  The  mid-term  review  of  the 
stand-by  programme  was  never  completed,  reflecting  the  failure  of  the  government  to  implement 
commitments  in the  areas  of privatization  and banking  sector  reform.  Slovakia's international  ratings 
have remained  stable since Moody's assigned to the country an investment grade mark in May  1995. 

III.  NEWLY  INDEPENDENT  STATES 

ARMENIA 

Armenia  remains  in  the  high-risk  category  of  creditors.  The  economic  recovery,  which  started  in 
1994 from  a very low level, has continued  in  1996 and inflation  is under  control.  However,  the  slow 
pace of structural  reforms  - even though  the  privatization  process  started  early  after  independence  -
has  made  Armenia  largely  dependent  on  external  assistance.  The  external  debt  of  the  country  had 
reached  25% of GDP  in end  1995  and this ratio has increased  in  1996 with  drawings  on  credit  lines 
from  the IMF  and  the WB. Moreover,  the country  has been in arrears towards  the EU  since  August 
1995  and  does  not  envisage  a  short-term  solution  to  this  problem  on  its  own.  The  approval  by  the 
IMF  Board  in  February  1996  of  a  3-year  ESAF-supported  economic  programme  should  however 
contribute  to  accelerate  the  pace  of  reforms  and  to  improve  the  general  economic  situation  in  the 
medium-term.  On  the  political  side,  the  unsolved  conflict  with  neighbouring  Azerbaijan  on  the 
Nasorno Karabakh issue is a negative  factor. 

4GV 

AZERBAIJAN 

Risk assessment for  Azerbaijan  is the highest among the three Caucasian  countries.  GDP  is estimated 
to have declined  further  in the first months of  1996, following  a sharp decline of about  40% in  1994-
1995.  Growth  is however  expected  to  resume  during the  second  part  of the  year.  Inflation  is under 
control  and  the  fiscal  deficit  has  also  largely  improved  in the  recent  months.  Concerning  structural 
reforms,  Azerbaijan  is  lagging  well  behind  most  other  CIS  countries.  A  series  of  areas  have  been 

20 

identified  where  the  authorities  are  committed  to  achieve  important  progress  in the  short  run.  The 
second  review  under  the  IMF  12-month  stand-by  arrangement  approved  in  November  1995  took 
place in May  1996: performance  criteria  were  met  and  the  drawing  of the  third  tranche  authorised. 
The external debt of the country  is estimated  at  some US$  500 million (about  15%» of GDP),  mainly 
to  Russia  and  Turkmenistan.  Azerbaijan's  medium-term  perspectives  are  potentially  favourable, 
owing mainly to its huge oil reserves. In the short run, however,  the combination  of a globally weak 
economic  situation,  slow structural  reforms  and the conflict  with neighbouring  Armenia  on  Nagorno 
Karabakh weighs markedly on the negative risk assessment. 

BELARUS 

A referendum  to  be held  in Belarus  in November  1996 is expected  to  settle the  opposition  between 
the  Belarussian  Parliament  and  the  Presidency  and  decisively  influence  the  pace  of  the  structural 
reform  process  in  the  country.  Since  last  year,  as  a  result  of  inappropriate  policies,  the  economic 
situation  in  Belarus  has  been  deteriorating  and  several  macroeconomic  indicators  performed  worse 
than  expected.  So  far,  the  authorities'  main  response  has  been  to  have  recourse  to  command 
economy  measures  by  increasing  state  intervention  and  controls,  imposing  trade  and  exchange 
market  restrictions,  increasing  subsidization  of the  economy,  and  virtually  slowing,  halting  or  even 
reversing  structural  and  institutional  reforms.  The  IMF,  World  Bank  and  European  Union 
disbursements  have been  suspended.  The  trade  deficit  level was  sharply  rising  (US$  750  million)  in 
the first half of  1996 because  of an unrealistic  exchange rate  level, while the  capital  account  surplus 
was considerably reduced  (US$  100 million). As a result, foreign  exchange reserves  stood  at the very 
low level  of 3 weeks  of imports  in April  1996. However,  the continuing nominal  depreciation  of the 
Belarussian currency (30 % from  April  1996) is expected to restore some competitiveness.  The  stock 
of  official  debt  increased  to  US$  1.5  billion  (15  %  of  GDP)  at  end-1995  and  decreased  to  US$  1 
billion after  claims cancellation by Russia in April  1996. 

GEORGIA 

Georgia's  risk  assessment  has  remained  rather  stable  in  recent  months,  at  an  uncomfortable  level. 
After  a  very  sharp  decline  of  the  economy  from  1990  to  1994,  signs  of  recovery  appeared  in  the 
course  of  1995  and  economic  growth  is  expected  for  1996.  Inflation  is  also  under  control  and  the 
exchange  rate  of the  new  currency  has  remained  stable  in  1996.  This  fragile  progress  is,  however, 
threatened  by  the  dramatic  situation  in  public finances, caused  by  a  collapse  in  revenues.  Since  its 
independence,  mainly to  finance  imports,  Georgia  has accumulated  a huge foreign  debt,  estimated  at 
some  US$  1.2  billion  by  end  1995  (44.7%  of  GDP),  the  main  part  of  which  represents  payments 
arrears.  Being  unable 
rescheduling 
understandings  with  some  of  its  creditors  (mainly  Turkmenistan).  The  country  has  also  been  in 
arrears on payments towards the EU since April  1994 and cannot  envisage a solution  to these  arrears 
on its own. The approval by the IMF Board  in February  1996 of a 3-year ESAF-supported  economic 
programme  should  however  contribute to  accelerate the pace of reforms  and  to  improve  the  general 
economic  situation  in  the  medium-term.  On  the  political  side,  the  Abkhazia  problem  is  also  a 
negative  factor. 

its  debt  repayments,  Georgia  has  reached 

to  honour 

MOLDOVA 

Having  been  considered  for  long  as  a  relative  success  story,  Moldova's  economic  and  structural 
reforms  performances  have  fallen  short  of  expectations  recently.  If  inflation  remains  under  control 
(9% for the first 8 months  of  1996), a modest  growth  in GDP of some 3% is expected  for  this year. 
The  fiscal  performance  has  been  badly  influenced  by  the  weakness  of  tax  collection,  but  several 

21 

corrective measures have been implemented  in  1996 to tackle this problem. Moldova's foreign  debt is 
expected  to  reach  some  US$  700 million by end-1996 (some  32% of GDP)  and  is mainly  due to  the 
EFI's.  Important  structural  reforms  are  still  expected  in  key  sectors  such  as  privatization  of 
agriculture  and  restructuring  of  enterprise  and  energy  sectors.  The  approval  by  the  IMF  Board  in 
May  1996 of a 3-year  EFF-supported  economic programme,  combined with a World Bank  "Country 
assistance  strategy"  (CAS)  programme,  adopted  in April  1996,  should  contribute  to  accelerate  the 
pace  of  reforms  and  to  improve  the  general  economic  situation  in  the  medium-term.  Politically, 
although the issue of the  proclaimed  Dniestr Republic  - part  of Moldova's  territory  - is complex,  it 
does not considerably  influence the overall risk assessment.. 

TAJIKISTAN 

The  security  situation  in  Tajikistan  seems  to  have  deteriorated  and  the  recent  developments  in 
Afghanistan  could  affect  the  Tajik  Government's  relations  with  the  Tajik  opposition  based  abroad. 
The  1996  macro-economic  developments  have  been  positive  so  far  with  fast  reduction  of  monthly 
inflation  (4  %  in  September),  satisfactory  budgetary  revenues  and  credit  and  monetary  policies  still 
on-track,  and  slightly  positive  trade  balance.  However,  GDP  has  continued  to  fall  (around  10%»). 
Moreover,  the  cotton  harvest  and  budgetary  expenditures  (in  particular  defence  and  capital 
expenditures)  are  sources  of  concern.  Enterprises  privatization  has been  slow,  but  land  reform  has 
been proceeding  faster.  At  end  1995, the external debt  of Tajikistan  (US$  800 million) exceeded  the 
country's  GDP  (150%),  while  foreign  exchange  reserves  covered  less  than  1  week  of  imports. 
Several  creditors  have  agreed  to  reschedule  the  debt  falling  due  in  1996,  while  others  are  still 
negotiating. An additional rescheduling  of debt  service payments will be necessary  to fill the  residual 
* financing gap  projected  for  1997.  The  conclusion  of  a  Stand-By  Arrangement  in  early  1997  will 
depend  on the progress in the current IMF programme. 

TURKMENISTAN 

The  political  situation  in  Turkmenistan  r.i; hough  complex-  seems  stable.  The  country's  economic 
development  remains  heavily  influenced  by  the  inability  of  its  largest  customers  tô  pay  and  by 
Russia's  and  Iran's  unwillingness  with  respect  to  the  transportation  of  gas.  Output  is  expected  to 
increase  strongly  in  1996  owing  to  extra  gas  shipments  but  the  overall  economic  situation  remains 
weak. Monthly inflation,  which fell from  about  30 % in late  1995 to 3.5  %>  in July  1996, was picking 
up  at  a level  of  10 %>  in August  owing to  excessive  credit to  the economy.  The budget  situation  has 
not  improved  as a result  of recurrent  non-payments for  gas deliveries. The large trade  surplus  of the 
balance of payments partly corresponds to credits to its customers. The still very high level of  foreign 
exchange  reserves  (9  months  of  imports)  can  be  used  to  meet  the  substantial  external  obligations 
falling  due.  Turkmenistan's  government  has  been  reluctant  to  move  rapidly  on  structural  reform, 
although recent  declarations seem to indicate a change of attitude. 

UKRAINE 

Ukraine's  risk  is  slowly  diminishing,  but  it  remains  high.  Economic  conditions  are  improving 
gradually.  Inflation  has declined  further  in the course of  1996, but  GDP continues to contract  even if 
at a lower  rate (estirnated  decline of 8% in  1996). Since the adoption  of the new  SB A in May of this 
year,  financial  policies  have  been  relatively  tight.  This  is  especially  true  for  monetary  policy. 
However,  there are strong  pressures  on the budget  (important  wage  arrears,  demands for  support  of 
coal  mines,  etc.),  and  a  loosening  of  fiscal  policies  remains  a major  risk.  On  2  September  1996  the 
new  national  currency,  hryvnia,  was  introduced.  Given  the  announcement  of  a number  of  restrictive 
measures  in  the  context  of  the  currency'reform,  the  NBU  had  to  intervene  heavily  in  the  foreign 

22 

exchange  market  to  keep  the  exchange  rate  stable,  thereby  loosing  substantial  reserves  (the  level is 
below  1 month  of  imports).  The  political  risk  remains  high.  On the  one  hand,  there  is  an  ongoing 
struggle  between  pro-reform  forces  in  the  government,  also  backed  by  the  President,  and 
conservative  anti-reform  forces,  including  the  majority  of  the  Ukrainian  Parliament.  On  the  other 
hand,  there  are  unsolved  issues  with  Russia  regarding  for  instance  the  Black. Sea  Fleet  and  trade 
issues. 

For  next  year,  the  external  financial  situation  remains  tight.  Although  the  export  performance  is 
strong  and  the  services  balances  positive  the  current  account  deficit  is  expected  to  remain  at  over 
US$  1 bn and to  decline  somewhat  in %  of  GDP.  Capital inflows,  investment  and  long-term  credits 
are  expected  to  leave  a financing  gap  of almost  US$ 2 bn that  cannot  fully  be  covered  by  IMF  and 
World Bank financing  (of some US$  1.5 bn). No dramatic changesjn debt and debt-service ratios are 
expected. 

UZBEKISTAN 

Provided  new  developments  in  Afghanistan  do  not  significantly  influence  the  Central  Asian  region, 
the  Uzbek  authorities,  in  spite  of  slow  institutional  reforms,  are  expected  to  maintain  political  and 
social stability and play a leading and constructive  role in Central Asian politics. Bolstered  by cotton, 
gold  and oil revenues, Uzbek  GDP in recent  years has shrunk much less than in most  CIS  countries, 
and, with significant  foreign  investments and the energy sector  still expanding,  output  is projected  to 
stabilize  in  1996.  Fiscal  and  monetary  tightening  since  mid-1994  brought  about  a  sharp  drop  in 
monthly  inflation  from  100  %  in  1994  to  around  2  %  in  March  1996.  The  budget  deficit,  already 
smaller (4 % of GDP)  in  1995, is expected  to improve further  in  1996. In  1995, the current  account 
showed  a deficit  of 0.5  %  of GDP, while the  country was building up  foreign  exchange  reserves  (6 
months'  imports).  The  current  account  deficit  is  expected  to  widen  slightly  in  1996/1997  and  to 
decline by 2000. The external debt  service/exports ratio is expected to remain comfortable.  While the 
Som  remained  stable  for  most  1995  and  1996,  it  has  been  under  increasing  pressure  from  August 
1996 as a result  of big rise in trade, fall  in the price  of cotton  and bad  harvests.  As the  Government 
has until now refused  to use its sizeable hard  currency reserves, Uzbekistan is hit by shortage  of hard 
currency which could  hamper further  development  of foreign  trade. Economic  and  structural  reforms 
in Uzbekistan,  although  introduced  cautiously,  have, with IMF  and World  Bank  support,  intensified 
lately,  with  progress  in  a wide  range  of  areas: liberalization  of  prices,  domestic  trade,  foreign  trade 
and  currency  regime.  The  creation  of  SMEs  has  accelerated  and  the  country  is  open  to  foreign 
investment. 

IV.  MEDITERRANEAN  COUNTRIES 

ALGERIA 

Algerian  country  risk  remains  high.  The  political  situation  and  the  security  problems  continue  to 
hinder  the  pace  of  structural  reform  and  the  development  of  a  dynamic  private  economy.  The 
macroeconomic  improvement  achieved  under  the  IMF-supported  programme  implemented  since 
1994 has recently  been  strengthened  by an up-swing  in oil prices. However,  unemployment  remains 
above  20%  and  the  most  sensitive  areas  for  crucial  microeconomic  reform  (agriculture  and  public 
enterprise  restructuring)  still have to be tackled.  Given limited  structural  change,  both  the  fiscal  and 
the  external  accounts  remain  vulnerable  to  the future  vagaries  of the  oil  price.  The  overall  external 
position  has  improved  but  remains  fragile  with  no  access  to  the  international  capital  market, 
negligible  FDI  and  a  persisting  deficit  in  the  overall  balance  of  payments.  External  viability  is 

achieved  only  through  the  support  of  the  multilateral  institutions  and  the  debt  rescheduling  agreed 
with the London and Paris Clubs (ending in 1998). 

23 

ISRAEL 

The risk  assessment  for  Israel has deteriorated  somewhat  reflecting  the stalemate in the Middle  East 
peace process,  rising budget  and current  account  deficits  and inflationary  pressures  in the  context  of 
an overheating economy. These negative developments are only compensated  in part by the  approval 
by  the  Netanyahu  government  of  expenditure  cuts  of  Sk  4.9  bn  to  the  1997  budget  deficit,  its 
simultaneous  adoption  of  a  stringent  multi-year  deficit  reduction  plan  and  its  commitment  to 
accelerate privatization  and other  structural reforms. While Israel has a high gross foreign  debt and a 
considerable  political  risk,  the  country-risk  evaluation  benefits  from  the  implicit  guarantee  provided 
by the US's economic and political  support. 

24 

Annexe 

ANNEXE 

I. EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED BY THE 
COMMUNITY BUDGET 

I.A. TABLES 1 TO 3 
I.B.  LOAN OPERATIONS COVERED BY A BUDGET GUARANTEE 
I.C.  PAYMENT OF THE BUDGET GUARANTEE 

25 

25 

26 
40 

n.  METHODOLOGICAL NOTE ON THE ANALYSIS OF THE COMMUNITY'S ESTIMATED 
LENDING CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES OVER THE PERIOD 
1996-99 UNDER THE GUARANTEE FUND MECHANISM 

42 

II. A.  RESERVE FOR LOAN GUARANTEES TO NON-MEMBER COUNTRIES (1) 
II.B.  BASES FOR THE CALCULATION OF THE PROVISIONING OF THE GUARANTEE FUND (2) 
U.C.  BASIS FOR THE PROVISIONING OF THE FUND IN THE EVENT OF A PART GUARANTEE 
II.D. PROVISIONING OF THE GUARANTEE FUND (3) 
II.E. MARGIN REMAINING IN THE GUARANTEE RESERVE (4) 
II.F. RESIDUAL LENDING CAPACITY (5) 

in.  TABLES: COUNTRY-RISK INDICATORS 

42 
42 
43 

43 
44 
44 

45 

25 

L  EXPLANATORY  NOTES  ON  THE  SITUATION  OF RISKS  COVERED  BY 

THE COMMUNITY  BUDGET 

LA.  Tables  1 to 3 

The purpose  of Tables  1 to  3 is to  show the outstanding  amount  of guarantees  and  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, in particular, it is not 
certain that all the operations described will actually be disbursed. 

I.A. 1.  Authorized  ceiling  (Table 1) 

This  is  the  aggregate  of  the  maximum  amounts  of  capital  authorized  (ceilings)  for  each 
operation decided by the Council. 

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 

LA. 2.  Capital outstanding  ( Table 1) 

This  is  the  amount  of  capital  still  to  be  repaid  on  a  given  date  in  respect  of  operations 
disbursed. 

Compared with the previous aggregate, the amount outstanding does not include loans wliich 
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. 

26 

LA. 3.  Annual  risk  (Tables 2 and 3) 

Estimated amount of principal and interest due each financial year. 

This amount is calculated for: 

a)  disbursements  alone (Table 2),  in which case the capital to be repaid  corresponds to  the 

amount outstanding; 

b)  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. 

LB.  Loan operations  covered  by a budget  guarantee 

The  budgetary  authority  authorized  31 headings  with  token  entries  in  the  1996  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. 

LB. 1.  Borrowings  to he on-lent within the Community 

IB. 1.1  Community borrowing operations to provide balance-of-pavments  support 

The Community is authorized to borrow on the capital markets or from financial  institutions 
and  make  the  sums  raised  available  to  Member  States  experiencing  temporary  balance-of-
payments difficulties. 

The outstanding amount of loans granted to Member States for this purpose may not exceed 
ECU  14 billion in principal. 

At  30  June  1996  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. 

I.B.I..2  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. 

27 

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.B.I..3  Borrowing operations for the promotion of investment in the Community 

The Commission was empowered by a Council Decision of 16 October 1978 to borrow funds 
to be used to promote investment in the Community (New Community Instrument). 

The  authorized  borrowing  ceiling  was  fixed  at  ECU 1  billion  by  the  Decision  of 
16 October  1978  and was then  raised  by ECU 1  billion by the Decision  of  15 March 1982. 
The  ceiling  was  further  raised  by  ECU 3 billion  by  the  Decision  of  19 April 1983  and  by 
ECU 750 million by the Decision of 9 March 1987. 

The proceeds of the operations are paid out in the form  of loans granted by the EIB, acting 
for the Commission, to finance investment projects which contribute to greater  convergence 
and  growing  integration  and  are  consistent  with  the  priority  Community  objectives  in  the 
energy,  industry  and  infrastructure  sectors,  taking  account  of  such  factors  as  the  regional 
impact of the projects  and the need to combat unemployment.  Support for  small businesses 
was also made a priority objective by the Decision of 26 April 1982. 

A Decision of 20 January 1981 also empowered the Community to contract  loans in order to 
provide exceptional aid of ECU  1  billion to the regions of Italy affected  by the earthquake of 
involving  ECU 80 million  was  adopted  on 
November  1980.  A  similar  decision 
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. 

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. 

LB. 2.  Loans  raised for  on-lending  to non-Community  countries 

I.B.2..1  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. 

28 

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 relaté to: 

nuclear power  stations or installations in the nuclear fuel  cycle which  are in service  or 
under construction; 

or  to  the  dismantling  of  installations  which  cannot  be  brought  up  to  standard  for 
technical or economic reasons. 

The following non-member countries qualify: 

Republic of Bulgaria 
Republic of Hungary 
Republic of Lithuania 
Romania 
Republic of Slovenia 
Czech Republic 
Slovak Republic 
Russian Federation 
Republic of Armenia 
Ukraine 

The idea of international financial aid for  the closure of the  Chernobyl  nuclear power  plant 
was entered in the conclusions of both the Corfu  European Council of 24 and 25 June 1994 
and the G7 summit at Naples on 7 and 8 July 1994. 

LB.2..2  Programme  of  borrowings  contracted  bv 

the  Community 

to  provide 

macrofinancial  assistance to the countries of Central and Eastern Europe 

• 

Hungary 

Hungary I 

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. The  second 
tranche of ECU 260 million was repaid on 20 April 1996. 

Hungary II 

29 

As the break-up of the Council  for  Mutual  Economic  Assistance  (Comecon)  and  the  Gulf 
crisis threatened to compromise the initial encouraging results of the reforms undertaken, the 
Council decided in June 1991 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. 

•  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. 

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. 

-  Slovak Republic 

As part of the financial assistance for the Slovak Republic, the Commission, on behalf 
of  the  Community,  was  empowered  by  a  Council  decision  94/939/EC  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. 

30 

Because  of the  improvement  in the macroeconomic  situation  and,  in particular,  the 
Slovak  Republic's  balance  of  payments  and  currency  reserves  and  its  access  to 
international private capital markets, the Slovak authorities stated  in April  1995 that 
they would  no  longer  be  calling  on the  aid granted  by the  IMF under  the  stand-by 
agreement to support the country's balance of payments. 

With the  IMF  stand-by  arrangement  expiring  and  the  Slovak  authorities  not  being 
prepared  to  agree  on  the  economic  policy  measures  to  be  attached  to  the 
implementation  of the EU  loan facility,  the  Commission  therefore  submitted  to  the 
Council a proposal cancelling Decision 94/939/EC of 22 December  1994 in line with 
the conclusions to  be drawn  for  the Community.  This decision was repealed  by  the 
Council Decision of 25 July 1996. 

•  Bulgaria 

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. 

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 
one  instalment  on  7 December 2001  and  the  interest,  which  is  at  variable  rates,  is  payable 
half-yearly. 

•  Romania 

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. 

31 

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. 

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. 

Romania in 

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. 

term  of  seven  years  was  paid  on 
The  first  tranche  of  ECU 55 million  for  a 
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 30 June 1996. 

IB.2..3  Borrowings  contracted  by the Community to  grant macrofinancial  assistance  to 

the new independent  States of the former  Soviet Union 

•  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. 

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; 

32 

-  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. 

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. 

Utilization of the ECU  1  250 million loan 

Loans 

Initial breakdown (1992) 

Breakdown at 30.6.1996 

Armenia a 
Armenia b 
Azerbaijan 
Belarus 
Georgia a 
Georgia b 
Geongia c 
Kazakhstan a 
Kazakhstan b 
Kyrgyzstan 
Moldova 
Russia a 
Russia b 
Tajikistan 
Turkmenistan 
Ukraine 
Uzbekistan 

Total 

38 

68 
102 
70 

55 

32 
27 
150 
349 
55 
45 
130 
129 

38 
20 
68 
100,5 
70 
10 
40 
25 
0 
23,7 
27 
72,9 
349 
55 
45 
129,8 
59 

1250 

1132,9 

Actual utilization at 
30.6.1996 
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 30 June  1996 the amount of loans actually being used came to ECU  1053.9 million. 

33 

Schedule for the repayment of capital and the payment of outstanding interest. 

The  schedules for  the repayment  of capital and the payment  of outstanding interest  for  this 
operation vary according to the date on which the loan contract was signed  and the amount 
of the loan: 

- Georgia (ECU 40 million): 

- 
interest on 15 January 1997 
-  capital on 15 January 1997. 

- Azerbaijan and Uzbekistan: 

interest on 28 March and 28 September 

- 
-  capital on 28 September 1997. 

At 30 June  1996 Georgia,  Armenia,  Turkmenistan and Tajikistan  had defaulted  on principal 
and  interest totalling ECU 243.81 million (see Part Two,  Section  IV - Activation  of  budget 
guarantees). 

•  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 often  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. 

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  22JDecember  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. 

Ukraine II 

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 

34 

maximum period often  years. The proceeds of this operation are to be on-lent to Ukraine in 
two tranches. 
At 30 June 1996 the first tranche had not yet been paid. 

•  Macrofinancial  assistance for Belarus 

As  part  of  the  overall  aid  programme  for  Belarus,  the  Commission,  on  behalf  of  the 
Community,  was  empowered  by  the  Council  decision  of  10 April  1995  to  borrow  up  to 
ECU 75 million for  a maximum period  of ten years. The proceeds of this operation were to 
be on-lent in two tranches. 

ECU 55 million of the ECU 75 million loan has been committed. As the country's  economic 
situation is better than initially forecast  by the IMF, the remaining ECU 20 million will not be 
paid. 

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. 

IB.2..4  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 
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  1991 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, i.e. 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. 

I.B.2..5  Borrowings  contracted  bv the Community to  grant macrofinancial  assistance  to 

the Mediterranean  countries 

• 

Israel 

35 

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. Thé proceeds were 
to  be paid  out  to  Israel  on the  same terms  and  are  accompanied  by  an interest  subsidy  of 
ECU 27.5 million paid from the Community budget. 

This  operation  started  on  2 March 1992.  The  borrowing  is  to  be  repaid  in  full  on 
15 December 1997. 

At  30  June  1996  the  amount  outstanding  on  the  borrowings  for  Israel  came  to 
ECU  160 million. 

•  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. 

Payment  of  the  second  tranche  of  ECU  150  million  was  deferred  because  of  delays  in 
Algeria'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. 

LB. 3.  Community  guarantee  to non-Community  countries 

IB.3..1  Breakdown bv geographical  area 

• 

European  Investment  Bank  loans  to  Mediterranean  countries  guaranteed  by  the 
general budget 

36 

Under the terms of the Council Decision of 8 March 1977, the Community guaraiitees loans 
to  be  granted  by  the  European  Investment  Bank  as  part  of  the  Community's financial 
commitments towards the Mediterranean countries. 

This decision was the basis for  the contract of guarantee  signed by the European Economic 
Community  and  the  European  Investment  Bank  on  30 October 1978  in  Brussels  and 
10 November  1978 in Luxembourg introducing a global guarantee of 75%  on all credit lines 
made  available  for  loans  in  the  following  countries:  Portugal  (Financial  Protocol,  pre-
accession  aid),  Greece,  Spain  (financial  cooperation),  Malta,  Tunisia,  Algeria,  Morocco, 
Turkey, Cyprus, Egypt, Jordan, Syria, Israel, Yugoslavia and Lebanon. 

In addition, by way of exception, a 100% guarantee covers loans allocated for emergency aid 
to Portugal in accordance with the Council Decision of 7 October 1975. 

A new extension of the contract of guarantee is established for each new Financial Protocol. 

The loans authorized  at 30 June  1996 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 30 June  1996 the total of outstanding loans came to ECU 2 066 million (taking 
account  of the  75% limit),  of which  ECU 346 million was  accounted  for  by  Spain,  Greece 
and Portugal and ECU  1  720 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. 

At 30 June 1996 ECU  1  396.5 million had been made available; of this total, ECU 261 million 
had been paid; this figure corresponds to the amount currently outstanding. 

At 30.06.96, the breakdown  of authorizations by country (non-member  countries only) was 
as follows: 

37 

ECU million 

Loans authorized 

Algeria 
Cyprus 
Egypt 
Israel 
Jordan 
Lebanon 
Malta 
Morocco 
Slovenia 
Syria 
Tunisia 
Turkey 
Yugoslavia10 

Protocols - Total 
Horizontal financial cooperation 

Mediterranean - Total 

640 
142 
802 
215 
198 
222 
85 
517 
150 
323 
418 
90 

™ 

4 562 
j  8 0Q 

6 362 

The  loans  are  generally  for  15 years  with  3 to  4-year  periods  of  grace  on  capital 
repayments. 

• 

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 RnarH 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. 

10 

The second protocol with Yugoslavia was suspended when ECU 100 million of credits could still be granted. 

38 

On  18 December  1992 the Commission also proposed  the extension of this  100% guarantee 
to losses incurred by the EIB as a result of loans granted in Albania. 

On  13 December  1993 the budgetary authority renewed the  100%» Community guarantee for 
a period of three years for  loans granted by the EIB in the countries of Central and Eastern 
Europe (including the Baltic States and Albania) up to a maximum of ECU 3 billion. 

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  30  June  1996,  ECU 3 646 million  had  been  made  available  in the  Central  and  Eastern 
European countries but only ECU  1  055 million had been disbursed. 

• 

Loans granted by the European Investment Bank in other 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 30 June  1996 credit lines of ECU 647 million had been signed but  only ECU  191 million 
had been disbursed. 

• 

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 EEB 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. 

39 

At 30 June  1996 credit lines of ECU  101 million had been signed but no amounts had been 
disbursed. 

LB.3..2  Expected  signature and disbursement  of EIB loans 

The ED3 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). 

Expected signatures 

Mediterranean countries 

At 30 June 1996 a total of ECU  1  007.5 million was still awaiting signature under current and 
former mandates (ECU  1  234.5 million, less ECU 227 million for the remainder from the  first 
longer  be  signed).  Some 
and  second  protocols  with  Yugoslavia  which  will  no 
ECU 460 million  of  this  amount  could  be  signed  in  the  second  half  of  1996  and  some 
ECU 320 million in 1997. 

It is assumed that half of the ECU 225 million under the third and fourth protocols with Syria 
will be signed in 1996 and half in 1997; however, this assumption is very uncertain. 

Central and Eastern Europe 

At 30 June 1996 a total of ECU 1  054 million was still awaiting signature under current and 
former  mandates,  less ECU 52.8 million for the remainder from the first terms  of  reference 
which  will  no  longer  be  signed,  leaving  ECU 1  001.2 million  actually  to  be  signed  in  the 
second half of 1996. 

Asia and Latin America 

At  30 June 1996  a  total  of  ECU 98 million  was  still  awaiting  signature  under  the  first 
mandates.  Some  ECU 45 million  could  be  signed  in  the  second  half  of  1996  and  the 
remainder in 1997. 

South Africa 

At  30 June 1996  a  total  of  ECU  199 million  was  still  awaiting  signature  under  the  first 
mandates.  Some  ECU  120 million  could  be  signed  in  the  second  half  of  1996  and  the 
remainder in 1997. 

Disbursement  forecasts 

As regards disbursement of the loans still awaiting signature, it is assumed that nothing will be 
paid in the year of signature,  10% in the second year, 25% a year between the third  and fifth 
years and  15% in the sixth year. 

At  30 June  1996 ECU 5 252.4 million  still had  to  be  disbursed  against  loans  signed  at  that 
date. The total breaks down as follows:11 

40 

Mediterranean 

ECU 2104.5 million 

Central and Eastern Europe 

ECU 2 596.7 million 

Asia and Latin America 

ECU  450.2 million 

South Africa 

ECU  101.0 million 

I.C.  Payment of the budget  guarantee 

/. C. 1.  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. 

The funds needed to pay the budget guarantee in the event of late payment by the recipient of 
a loan granted by the Community are raised as follows: 

(a)  The amount required may be taken provisionally from cash resources in accordance 
with Article  12 of Council  Regulation  No  1552/89  of  29 May 1989  implementing 
Decision 88/376/EEC, Euratom on the system of the Communities* own resources. 
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. 

(c)  The  transfer  procedure  can  be  used  to  provide  the  budget  heading  with  the 
appropriations  needed  to  cover  the  default;  any margin  available  in the  guarantee 
reserve  is  drawn  on  first.  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. 

11 

Based on a working assumption that 25% of the loan will be disbursed every year for four years and that the average term 
will be fifteen years with a three-year period of grace. 

I. C. 2.  Guarantees given  to third parties 

41 

The  loan  guarantee  is  in  respect  of  loans  granted  by  a financial institution  such  as  the 
European  Investment  Bank  (EIB). When the recipient  of a guaranteed  loan fails  to  make a 
payment  on the  due  date,  the  EIB  asks  the  Community  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 EEB'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. 

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. 

42 

H.  METHODOLOGICAL  NOTE ON THE ANALYSIS  OF THE  COMMUNITY'S 
ESTIMATED  LENDING  CAPACITY  IN  RESPECT  OF  NON-MEMBER 
COUNTRIES  OVER  THE  PERIOD  1996-99  UNDER  THE  GUARANTEE 
FUND MECHANISM 

H.A.  Reserve for loan guarantees  to non-member countries (1) 

As  agreed  at  the  Edinburgh  European  Council,  the  Interinstitutional  Agreement  of 
29 October  1993  on  budgetary  discipline  and  improvement  of  the  budgetary  procedure 
provided  for  the  entry  of  a  reserve  for  loan  guarantees  to  non-member  countries  as  a 
provision  in the  general  budget  of the  European  Communities.  This  reserve  is intended  to 
cover  the  requirements  of the  Guarantee  Fund  and,  where  necessary,  activated  guarantees 
exceeding the  amount  available in the Fund,  so that these  amounts  may be  charged  to  the 
budget. 

The  amount  of  the  guarantee  reserve  is  the  same  as  in  the  financial  perspective,  viz. 
ECU 300 million  at  1992 prices.  The  amount  in  the  reserve  comes  to  ECU 326 million  in 
1996 and ECU 329 million in 1997. 

The conditions for the entry, use and financing of the guarantee reserve are laid down in the 
following decisions: 

.  Council Decision 94/729/EC of 31 October  1994 on budgetary discipline 

.  Council Regulation (ECSC, EC, Euratom) No 2730/94 of 31 October 1994 

amending the Financial Regulation of 21 December  1977 applicable to the general 
budget of the European Communities 

Council Decision 94/728/EC of 31 October  1994 on the system of the Communities' own 
resource 

II.B.  Bases for the calculation  of the provisioning of the Guarantee  Fund (2) 

The bases for the provisioning of the Fund are calculated by applying the appropriate rate of 
guarantee (75% or  100%): 

- 

- 

to the loan guarantees authorized by the Council and to the loan guarantees proposed 
or being prepared by the Commission on the basis of the estimates of loan signatures 
contained in the financial statements (EIB and Euratom loans); 
to  the  loans  (for financial assistance)  authorized  by  the  Council  and  to  the  loans 
proposed or being prepared by the Commission. 

The  annex  to  Counci/  Regulation  (EC,  Euratom)  No  2728/94  of  31  October  1994 
establishing  a  Guarantee  Fund  for  external  actions,  which  relates  to  the  arrangements  for 
payments into the Guarantee Fund, states that, in the case of borrowing/lending operations or 
guarantees to financial bodies under a framework facility  spread over a number of years and 
with a microeconomic and structural purpose, payments into the Fund will be made in annual 
tranches  calculated  on  the  basis  of the  annual  amounts  indicated  in the financial statement 

43 

attached to the Commission proposal,  adapted where appropriate in the light of the Council 
decision. 

For  other  Community  borrowing/lending  operations,  such  as  loans  for  the  balance  of 
payments of third  countries, whether made in one or more than one tranche, payments into 
the Fund are calculated  on the basis of the total amount for the operation decided  on by the 
Council. 

The annex to the Regulation establishing the Guarantee Fund  states that,  as from the second 
year (in the case of operations spread  over a number of years), the amounts to be paid  into 
the Fund will be corrected  by the difference  recorded  on 31 December  of the previous year 
between  the  estimates  that  were  taken  as a basis for  the  previous  payment  and  the  actual 
figure  for the loans signed during that year. Any difference  relating to the previous year will 
give rise to a payment in the following year. 

The  annex states that,  when it  starts a payment  procedure,  the Commission  will  check  the 
situation with regard to the performance of the operations which were the subject of previous 
payments and, where the commitment deadlines originally laid down have not been met, will 
propose that this will be taken into account in calculating the first payment to be made at the 
start of the following financial year for operations already under way. 

In the first half of  1996 the budgetary authority therefore  adopted transfer  5/96 to adjust  the 
amounts  paid  to  the  Fund  and  make  the  payments  corresponding  to  the  annual  tranche 
provided for in the financial statements, as it does at the start of every financial year. 

H.C.  Basis for the provisioning of the Fund in the event of a part guarantee 

For EIB loans covered by an aggregate 75% guarantee, the Fund is provisioned  on the basis 
of  100% of the  annual  forecast  of  signatures up  to  a level  of  75%» of the  total  amount  of 
operations authorized. 

H.D.  Provisioning  of the Guarantee Fund (3) 

The amounts paid into the Fund are obtained by applying the appropriate rate of provisioning 
(15% or  14%) to the calculation base set out above. 

The  15% provisioning rate is applied to loans granted  after  guarantees under the Fund  have 
been  activated  and  until  the  amount  involved  in  the  default  has  been  repaid  to  the  Fund. 
Article  5  of  the  Regulation  establishing  the  Guarantee  Fund  states,  "If,  as  a  result  of  the 
activation  of  guarantees  following  default,  resources  in the  Fund  stand  below  75% of  the 
target  amount,  the  rate  of provisioning  on new operations  shall be raised  to  15% until  the 
target amount has once more been reached or, if the default  occurs before  the target  amount 
is  reached,  until  the  amount  drawn  under  the  activation  of  the  guarantee  has  been  fully 
restored". 

A 14%) provisioning rate is applied to other loans, i.e. the ECU  115 million loan to  Syria, the 
ECU 750 million  in  loans  to  Asia  and  Latin  America,  the  ECU 3 000 million  in  loans  to 
Central  and  Eastern  Europe  and  the  Euratom  loans.  Pursuant  to  Articles  2  and  4  of  the 

44 

Regulation  establishing  the  Guarantee  Fund,  the  Fund  is  endowed  by  payments  from  the 
general budget  equivalent  to  14% of the capital value  of the  operations  until  it  reaches  the 
target amount. 

H.E.  Margin  remaining  in the guarantee  reserve (4) 

The  margin  remaining  in the  guarantee reserve  is equivalent  to  the  difference  between  the 
reserve (1) and the heading for the provisioning of the Guarantee Fund (3). 

H.F.  Residual  lending  capacity  (5) 

The residual lending capacity is the loan equivalent of the margin left in the reserve, allowing 
for the guarantee rates in force. 

45 

IH.  TABLES: COUNTRY-RISK INDICATORS 

-  k€  ~ 

Country-risk  indicators 

Country:  Bulgaria 

Real GDP growth raie (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate 
Exchange rate (Leva per USD) 

(end of period) 
(end of period) 

1993 

1994 

1995 

Preliminary 

-1,5 
-11,8 
16,4 
63,8 
32,7 

1,8 
7,8, 
12,8 
121,9 
66,0 

2,5 
8,6 
11,6 
32,8 
70,7 

General government  balance (as % of GDP) 

-10,8 

-5,8 

-5,7 

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 

External debt 

External debt 
(in convertible currencies, in bn USD, end of period) 
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 

Indicators  of  EU exposures 

EU exposure/total EU exposure (%)  (1) 
EU exposure/external debt  (%) 
EU exposure/exports of G & S (%) 

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) 

5,0 
-12,8 
40 

1,0 
2,0 

5,3 
-2,0 
105 

1,3 
3,0 

7,0 
-0,4 
82 

1,5 
2,8 

12,5 

10,3 

9,4 

1,6 
1,1 
0,5 
120,5 
266,5 
33,0 
n.a. 
London Club 
(roll-overs, and 
DDSR agreed 
in principle) 

0,9 
0,5 
0,5 
130,2 
194,3 
18,4 
17,6 
London Club 
DDSR  (July) 
Paris Club 
resched. (Apr) 

0,8 
0,2 
0,6 
76,3 
134,3 
11,4 
0,0 
No 

5,6 
2,8 
7,1 

-

7,3 
5,7 
7,7 

-

6,8 
4,6 
8,9 

SBA+STF 
(3/94-3/95) 
SBA suspend. 
in Sep 94 

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)  Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(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. 

- 4y 

Country-risk  indicators 

Country: 

Czech  Republic 

Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment  (% of labour force) (end of period) 
Inflation rate 
Exchange rate (CKs per USD) 

(Dec/Dec) 
(end of period) 

1993 

1994 

-0,9 
-5,3 
3,5 
18,2 
29,9 

2,6 
2,1 
3,2 
10,2 
28,2 

1995 
Latest data 
or estimates (E) 

4,8 
9,2 
2,9 
7,9 
26,3 

(Nov) 

(Oct) 

General government  balance (as % of GDP) 

0,8 

-0,3 

-0,8 

(E) 

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) 
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 

Indicators of EU exposures 

EU exposure/total EU exposure (%)  (1) 
EU exposure/external debt  (%) 
EU exposure/exports of G & S (%) 

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) 

13077 
0,4 
538 

3,9 
2,8 

14295 
-0,1 
762 

6,2 
4,2 

(E) 

17054 
-4,2 
2547 

14,0 
7,9 

16,5 

(E) 

(E) 

2,6 
1,5 
1,1 
35,8 
96,7 
15,2 
No 
No 

5,8 
2,6 
2,5 

-

8,5 

1,4 
0,9 
0,5 
27,3 
65,0 
7,0 
No 
No 

4,6 
3,4 
2,2 

10,7 

2,5 
2,0 
0,5 
29,7 
74,8 
12,6 
No 
No 

5,2 
3,4 
2,5 

SBA 
(3/93-3/94) 
On-track 

SBA 
(3/93-3/94) 
On-track 
All debts to IMF 
paid ahead of 
schedule. 

Baa3 
BBB 
Mar  Sep 
48  43 
(169) (170) 
Mar  Sep 
42  40 
(127) (133) 
44.6 46.6 

Baa2 (Jun) 
BBB+ (Jul) 
Mar  Sep 
40  39 
(167) (167) 
Mar  Sep 
40  39 
(135) (135) 
49.7  52.8 

Baal  (Sep) 
A (Nov) 
Mar  Sep 
35  41 
(187) (181) 
Mar  Sep 
33  30 
(135) (135) 
55.8  58.4 

(1)  Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(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 *-

Country-risk  indicators 

Country: 

Estonia 

Real GDP  growth  rate (in  %) 
Industrial  production  ( %  change) 
Unemployment  rate (end of  period) 
Inflation  rate 
Exchange  rate (Kroons  per  USD) 

(end  of  period) 
(end  of  period) 

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  (incl. to  IMF) 
(in  convertible  currencies,  in  mio  USD,  end  of  period) 
Convertible  debt  service  (in mio  USD) 

principal 
interest  +charges to  IMF 

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 

Indicators  of  EU  exposures 

EU exposure/total  EU exposure  (%)  (2) 
EU exposure/external  debt  (%) 
EU exposure/exports  of G  &  S  (%) 

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  (4) 
(number  of  countries) 
The  Institutional  Investor 

Position  in the  ranking  (4) 
(number  of  countries) 
Credit  rating  (5) 

1993 

1994 

1995 
Latest data 
or estimates  (E) 

-8.4 
-30,0 
3.9 
35.7 
13,2 

(E) 

-0,1 
3,5 
4.5 
41,6 
13.0 

3.2 
.  1.4 
4.1 
28.8 
11.5 

1.6 
-0,7 

2,9 
1,3 

-0.4 
-0,8 

812 
-4,9 
154 

388 
4.9 

1329 
-12.3 
212 

447 
3,2 

1861 
-8.2 
202 

583 
2.7 

140.5 

170,3 

246,8 

16,2 
13,5 
2.7 
8.4 
17,3 
2,0 
No 
No 

8.1 
3,0 
5,1 
7,5 
12,8 
0,6 
No 
No 

0,4 
16,7 
2,9 

0.4 
15,7 
2.0 

12,8 
3,5 
9,3 
7.1 
13,3 
0.7 
No 
No 

0.5 
16,5 
2.2 

SBA/STF 
(10/93-3/95 
On track 

SBA/STF 
(10/93-3/95) 
On track 

SBA 

(4/95-6/96)  (3) 

On  track 

Not  rated 
Not  rated 
Mar  Sep 
126  122 
(169)  (170) 
Mar  Sep 
81  84 
(127)  (133) 
21.4  20.9 

Not  rated 
Not  rated 
Mar  Sep 
105  102 
(167)  (167) 
Mar  Sep 
88  86 
(135)  (135) 
20.7  23.6 

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)  Only  EIB  and  BOP  loans  (outstanding  disbursements)  to CEEC,  NIS and  MED 
(3)  The  SBA  (7/96-7/97)  is also  on  track. 
(4)  The  higher  the  ranking  number,  the  lower  the  creditworthiness  of the  country. 
(5)  Countries  are  rated  on a scale  of zero to  100, with  100 representing  the  least  chance  of default. A  given  country 
may  improve  its  rating  and  still fall  in the  ranking  if also the  average  global  rating for all  rated countries  improves. 

- 4 - 9-

Country-risk  indicators 

Country:  Hungary 

Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment  (% of labour force)  (end of period) 
Inflation rate 
Exchange rate (forints per USD) 

(Dec/Dec) 
(end of period) 

1993 

1994 

1995 
Latest data 

-0,8 
4,0 
12,1 
21,1 
100,7 

2,9 
9,0 
10,9 
21,2 
111,0 

1,5 
6,0 
10,4 
28,5 
139,5 

Consolidated  state budget  balance  (as % of GDP) (GFS  definition) 

-7,6 

-6,3 

-3,8 

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) 
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 

Indicators  of EU exposures 

EU exposure/total EU exposure (%)  (2) 
EU exposure/external debt  (%) 
EU exposure/exports of G & S (%) 

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 (3) 
(number of countries)  • 
The Institutional Investor 

Position in the ranking (3) 
(number of countries) 
Credit rating (4) 

10371 
-9,6 
2328 

6,7 
7,1 

10219 
-9,5 
1100 

6,8 
7,2 

14667 
-5,6 
4410 

12,0 
9,5 

24,6 

28,5 

31,7 

4,9 
3,3 
1,6 
63,8 
237,2 
47,4 
No 
No 

6,2 
4,2 
2,0 
68,9 
278,9 
60,8 
No 
No 

7,7 
5,3 
2,4 
70,8 
189,2 
52,5 
No 
No 

16,9 
4,3 
10,3 

16,5 
4,0 
11,3 

13,0 
3,1 
6,6 

SBA 
(9/93-12/94) 
On track 

SBA 
First review 
uncomple 
ted 

-

Ba1  . 
BB+ 
Mar  Sep 
47  46 
(169) (170) 
Mar  Sep 
43  43 
(127) (133) 
44.3  44.8 

Ba1 
BB+ 
Mar  Sep 
44  46 
(167) (167) 
Mar  Sep 
43  44 
(135) (135) 
46.1  46.2 

Ba1 
BB+ 
Mar  Sep 
50  44 
(187) (181) 
Mar  Sep 
45  48 
(135) (135) 
46.4  45.0 

Including early repayments. 

(1 ) 
(2)  Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(3)  The higher the ranking number, the lower the creditworthiness of the country. 
(4)  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. 

- s o-

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) 
(end  of  period) 

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) 
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 

Indicators  of  EU  exposures 

EU  exposure/total  EU exposure  (%)  (2) 
EU  exposure/external  debt  (%) 
EU exposure/exports  of G  &  S  (%) 

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  (4) 
(number  of  countries) 
The  Institutional  Investor 

Position  in the  ranking  (4) 
(number  of  countries) 
Credit  rating  (5) 

1993 

1994 

1995 
Latest  data 
or estimates  (E) 

-16,0 
-32,6 
5.3 
34,8 
0,60 

1.0 
0,6 

998 
4,8 
51 

510 
4,4 

225 

20,0 
n.a. 
n.a. 
10,0 
22,5 
2,0 
No 
No 

0,7 
20,8 
4,7 

(E) 

2,0 
-2,2 
6.5 
26,0 
0,55 

, 

-1,6 
-6.3 
6.1 
23,0 
0,54 

-1,7 
-4,0 

-2.7 
-3,3 

997 
-3,4 
155 

545 
4,5 

359 

50,0 
n.a. 
n.a. 
10,0 
36,0 
5,0 
No 
No 

0.7 
13,3 
4,8 

1306 
-4,3 
165 

527 
3,2 

423 

39,0 
n.a. 
n.a. 
9,0 
32,4 
3,0 
No 
No 

0.7 
12,3 
4,0 

SBA/STF 
(12/93-3/95) 
On  track 

SBA/STF 
(12/93-3/95) 
On  track 

SBA 
(4/95-4/96) 
Off track  (3) 

Not  rated 
Not  rated 
Mar  Sep 
133  132 
(169)  (170) 
Mar  Sep 
89  87 
(127)  (133) 
19.5  20.0 

Not  rated 
Not  rated 
Mar  Sep 
104  125 
(167)  (167) 
Mar  Sep 
94  92 
(135)  (135) 
19.6  21.3 

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)  Only  EIB and  BOP  loans  (outstanding  disbursements)  to CEEC,  NIS and  MED 
(3)  The new SBA  (5/96 - 8/97)  is on track. 
(4)  The  higher the  ranking  number, the  lower  the  creditworthiness  of the  country. 
(5)  Countries  are  rated on a scale  of zero to  100, with  100 representing  the least  chance of default. A  given  country 
may  improve  its rating  and still fall in the  ranking  if also the  average global rating for all rated countries  improves. 

- s * /-

Country-risk  indicators 

Country: 

Lithuania 

Real GDP  growth  rate (in  %) 
Industrial  production  (  %  change) 
Unemployment  rate  (end  of  period) 
Inflation  rate 
Exchange  rate  (Litas  per  USD) 

(end  of  period) 
(end  of  period) 

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, 
Convertible  debt  service  (in  mio  USD) 

in  mio  USD,  end  of  period) 
•> 

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 

Indicators  of  EU  exposures 

EU  exposure/total  EU  exposure  (%)  (2) 
EU  exposure/external  debt  (%) 
EU  exposure/exports  of  G  &  S  (%) 

IMF  arrangements 

Type/no 
(Date / - ) 
On  track/off  track 
(  - /  Date) 

Indicators  of  market's  perceived  c r e d i t w o r t h i n e ss 

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  (3) 
(number  of  countries) 
The  Institutional  Investor 

Position  in the  ranking  (3) 
(number  of  countries) 
Credit  rating  (4) 

1993 

1994 

1995 
Latest  data 

-24,2 
-29,8 
4,4 
188,7 
3,6 

. 

1,0 
-6,7 
3,8 
45,1 
4,3 

2,8 
0,8 
7,3 
35,7 
4,5 

0,9 

-3,1 

-1,5 
-4,2 

-1,8 
-3,3 

1709 
-8,4 
23 

412 
2,5 

281 

12 
n.a. 
n.a. 
9,8 
16,4 
0,7 
No 
No 

0,9 
20,8 
3,4 

1930 
-4,2 
60 

587 
3,1 

448 

19 
n.a. 
n.a. 
7,5 
23,2 
1,0 
No 
No 

0,9 
13,3 
3,1 

2210 
-3,3 
55 

819 
3,9 

757 

69 
n.a. 
n.a. 
9,8 
34,3 
3,1 
No 
No 

0,9 
9,6 
3,3 

SBA/STF 
(10/93-3/94) 
On  track 

STF  (10/93-3/94) 
EFF  (10/94-11/97 
On  track 

EFF 
10/94-10/97) 
On  track 

Not  rated 
Not  rated 
Mar  Sep 
134  130 
(169)  (170) 
Mar  Sep 
91  93 
(127)  (133) 
18.9  19.0 

Not. rated 
Not  rated 
Mar  Sep 
110  121 
(167)  (167) 
Mar  Sep 
97  96 
(135)  (135) 
18.4  20.0 

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)  Only  EIB and  BOP  loans  (outstanding  disbursements)  to CEEC,  NIS  and  MED 
(3)  The  higher  the  ranking  number,  the  lower  the  creditworthiness  of the  country. 
(4)  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. 

- s - 2-

Country-risk  indicators 

Country:  Romania 

Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate 
Exchange rate ( lei per USD) 

(Dec/Dec) 
(end of period) 

1993 

1994 

1995 
Latest data 
or estimates (E) 

1,5 
8,2 
10,2 
295,5 
1276 

3,9 
7,2  ' 
10,9 
61,7 
1767 

6,9 
5,2 
8,9 
27,8 
2578 

General government  balance  (as % of  GDP) 

-0,1 

-1.0 

-2,5 

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) 
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 

Indicators  of  EU  exposures 

EU exposureAotal  EU exposure (%)  (1 ) 
EU exposure/external debt  (%) 
EU exposure/exports of G & S  (%) 

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) 

4,9 
-4.6 
87 

970 
1,6 

4,3 

323 
146 
177 
16,1 
87,7 
6,6 
No 
No 

8,7 
12,8 
11,2 

No 

6,1 
-1,4 
341 

1596 
2,2 

5,5 

589 
313 
276 
18,3 
90,1 
9,6 
No 
No 

7,5 
-3,6 
417 

1110 
1,4 

6,6 

1038 
462 
576 
18.7 
88,0 
13.8 
No 
No 

(E) 

(E) 
(E) 
(E) 
(E) 
(E) 
(E) 

8,4 
10,7 
9,7 

10,2 
11,5 
10,1 

SBA/STF 
(5/94-12/95) 
On track 

SBA  extended 
through  1997 
and augmented 
On track 
(Off track in1996) 

Not rated 
Not rated 
Mar  Sep 
66  75 
(169) (170) 
Mar  Sep 
73  75 
(127) (133) 
24.2  24.4 

Not rated 
Not rated 
Mar  Sep 
74  77 
(167) (167) 
Mar  Sep 
76  74 
(135) (135) 
25.4  26.2 

Not rated 
Not rated 
Mar Sep 
68  64 
(187)  (181) 
Mar  Sep 
73  71 
(135)  (135) 
28.1  29.7 

(1 )  Only  EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(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. 

-  5 - 3-

Country-risk  indicators 

Country: 

Slovak  Republic 

Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment  (% of labour force) (end of period) 
Inflation rate 
Exchange rate (SK"s per USD) 

(Dec/Dec) 
(end of period) 

1993 

1994 

1995 
Latest data 
or estimates (E) 

-4,1 
-8,6 
14,4 
25,1 
33,2 

4,8 
7,0  • 
14,6 
11,7 
31,3 

7,4 
9,6 
13,1 
7,2 
29,6 

General government  balance (as % of GDP) 

-7,6 

-2,7 

0,4 

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) 
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 

Indicators  of  EU exposures 

EU exposure/total EU exposure (%)  (1) 
EU exposure/external debt  (%) 
EU exposure/exports of G & S (%) 

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) 

7568 
-5,4 
134 

416 
0,6 

3,4 

674 
490 
184 
30,8 
44,5 
8,9 
No 
No 

2,4 
4,5 
2,0 

8983 
6,0 
184 

1691 
2,3 

3,9 

791 
n.a. 
n.a. 
31,1 
43,4 
8,8 
No 
No 

2,9 
5,3 
2,3 

10921 
3,6 
157 

3400 
4,1 

5,8 

1045 
n.a. 
n.a. 
39,9 
53,1 
9,5 
No 
No 

4,1 
5,2 
2,8 

(E) 

(E) 

STF 
(7/93 - 7/94) 
On-track 

STF 
(7/93  - 7/94) 
SBA 
(7/94-3/96) 

SBA 

(7/94-3/96)  (4) 

(May) 
(Apr) 

Not rated 
Not rated 
Mar  Sep 
56  63 
(169) (170) 
Mar-  Sep 
57  57 
(127) (133) 
31  30.6 

Baa3 (May) 
BB- (Feb) 
Mar  Sep 
64  66 
(167) (167) 
Mar  Sep 
59  59 
(135) (135) 
31.6  33.1 

Baa3 
BB+ 
Mar  Sep 
53  51 
(187)  (181) 
Mar  Sep 
61  59 
(135)  (135) 
33.2  35.7 

(1 )  Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(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 cou' *-y 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 

(4)  The mid-term review of the programme, which had been scheduled for February  1995, was not completed. 

- s - *-

country  risk  indicators 

Country: 

Belarus 

1993 

1994 

T995~ 

Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment  rate (end of period) 
Inflation rate 
Exchange rate ( Rbs per USD) 

(Dec/Dec) 
(average) 

-10,6 
-10,9 
1,4 
1994 
269 

-12,2 
-19,3 
2,1 
1957 
3651 

Genera! government  balance (as % of GDP) 

-1,8 

-2,6 

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 

2941 
-8,7 
18 
91,0 
0,3 

2641 
-12,4 
10 
101,0 
0.3 

-10,2 
-11,5 
2,7 
244 
11532 

-1,9 

4621 
-2,5 
7 
377,0 
0,7 

External debt 

External debt 
(in convertible  currencies,  in mio  USD, end of  period) 
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 bn USD) 
Debt rescheduling agreement 

Indicators  of EU  exposure 

EU exposure/total EU exposure (%)  (1) 
EU exposure/external debt  (%) 
EU exposure/exports of G & S  (%) 

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) 

964,0 

1251,0 

1513,0 

14,7 
n.a. 
n.a. 
25,0 
32,8 
0,5 
n.a. 

123,0 
n.a. 
n.a. 
25,9 
47,4 
4,3 
493 
with  Russia 
on gas arrears 

178,0 
n.a. 
n.a. 
14,7 
32,7 
3,4 
460 
ar. on Rus. gas 
cancel, agreem. 
02/96 - 08/96 

1,9 
12,2 
4,0 

0,9 
4,8 
2,3 

0,5 
2,6 
0,8 

STF 
(08.93 - 8.94) 
Off track 
See footnote 
(4) 

Not rated 
Not rated 
Mar  Sep 
148  139 
(169)  (170) 
Mar  Sep 
100 
(127) (133) 

STF 
(01.95) 
See footnote 
(4) 

SBA 
(12.95-11.96) 
Off track 
(5) 

Not rated 
Not rated 
Mar  Sep 
145  138 
(167)  (167) 
Mar  Sep 
109  109 
(135)  (135) 
15.5  15.7 

Not rated 
Not rated 
Mar  Sep 
135  134 
(187)  (181) 
Mar  Sep 
112  112 
(135)  (135) 
15.2 15.5 

(1 ) 
(2) 

(3) 

(4) 
(5) 

Only  EIB, BoP and 1250 loans (outstanding  disbursed) 
The higher the ranking number, the lower the creditworthiness of the country. 
Countries are rated on a scale of zero to 100, with 100 representing the least chance of default. A given country 
may improve its rating and still fall in the ranking if also the average global rating for all rated countries improves. 
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. 
The first quarterly review of the programme, initially scheduled for December  1995, has not been completed so far. 

-  JTS"  -

Country-risk  indicators 

Country:  Moldova 

Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment  (% of labour force)  (end of period) 
Inflation rate 
Exchange rate (leu per USD) 

(end of period) 
(end of period) 

1993 

1994 

1995 
Preliminary 

-1,2 
-7,2 
n.a. 
837 
3,64 

-31,2 
-30,0 
1,0 
116 
4,27 

-3,0 
-10,0 
2,0 
24 
4,50 

General government  balance  (as %  of  GDP) 

-6,8 

-8,7 

-5,5 

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) 
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 

Indicators  of  EU  exposures 

EU exposure/total  EU exposure  (%)  (1) 
EU exposure/external debt  (%) 
EU exposure/merchandise  exports  (%) 

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) 

451 
-9,3 
14,0 

76,6 
1,4 

618 
-12,9 
18,0 

179 
2,9 

741 
-6,8 
72,0 

257 
3,2 

168,0 

343,0 

675,0 

5,0 
n.a. 
n.a. 
23,0 
37,3 
1,1 
No 
No 

12,3 
n.a. 
n.a. 
30,0 
55,5 
4,0 
No 
No 

91,0 
n.a. 
n.a. 
38,0 
91,1 
11,0 
No 
No 

0,5 
17,7 
6,6 

0,9 
18,0 
10,0 

0,8 
•  8,7 
7,9 

SBA 
(3/93-3/94) 
On-track 

SBA 
(12/93-3/95) 
On-track 

SBA 
(3/95-3/96) 
On-track 

Not rated 
Not rated 
Mar  Sep 
159  160 
(169) (170) 

Not rated 
Not rated 
Mar  Sep 
148  155 
(167) (167) 

Not rated 
Not rated 
Mar  Sep 
157  141 
(187)  (181) 

Not rated 

Not rated 

Not rated 

(1 )  Only  EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
(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. 

- 

sç~ 

Country: 

Ukraine 

Real GDP growth (% change) 
Industrial production ( % change) 
Unemployment rate (end of period) 
Inflation rate 
Exchange rate (Krb per USD) 

- auction / interbank 
-cash 

(Dec/Dec) 
(end of period) 

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 

in  mio USD 
in weeks of imports of G&S 

External  debt 

External debt 
(in convertible currencies, in bn USD, end of period) 
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 

Indicators  of EU exposure 

EU exposure/total EU exposure (%)  (1) 
EU exposure/external debt  (%) 
EU exposure/exports of G & S (%) 

IMF  arrangements 

Type/no 
(Date / - ) 
On track/off track 
( - / Date) 

1993 

1994 

1995 
Estimates (E) 

-17,1 
-25,1 
0,3 
10155 

12610 
25000 

-10,1 

14,4 
-5,9 
0,2 
193 
0,8 

4,1 
202 
n.a. 
n.a. 
12,1 
28,5 
1,3 
548 

2,3 
3,5 
1,0 

-

23,0 
-28,5 
0,3 
401 

108196 
128000 

-12,0 
-11,7 
0.4 (E) 
182 

179400 
186000 

-8,2 

-5,0 

14,8 
-6,0 
0,09 
646 
2,3 

15.1 (E) 
-4,4 
0,27 
1100 
3,7 

7,2 
1794 
n.a. 
n.a. 
29,2 
48,0 
12,1 
2722 
rescheduling of 
debt owed to 
Russia/Turkm. 

8,1 
1531 
986 
545 
23,3 
53.6 (E) 
9,3 
236 
rescheduling of 
debt owed to 
Russia/Turkm. 

1,6 
1,6 
0,8 

1,5 
1,4 
0,7 

STF 
26 Oct 94 
On track 

SBA 
Dec. 1995 
Off track * 

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) 

Not rated 
Not rated 
Mar  Sep 
142  146 
(169) (170) 
Mar  Sep 
96 
95 
(127) (133) 
18.2 
18.2 

Not rated 
Not rated 
Mar  Sep 
149  147 
(167) (167) 
Mar  Sep 
111  113 
(135) (135) 
15.1  14.5 

Not rated 
Not rated 
Mar  Sep 
145  138 
(187) (181) 
Mar  Sep 
109  111 
(135) (135) 
*  15.5  15.7 

"7J1  Only EIB, BoP and 1250 loans (outstanding disbursed) 
(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. 

*  :  New SBA approved in May 1996. On track. 

-?Y-

Country risk  Indicators 

Country: 

Algeria 

1993 

1994 

Real GDP growth rate (in %) 
Hydrocarbon  production  ( %  change) 
Inflation rate 
Exchange rate  (end  of  period) 

(Dec/Dec) 

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 

in  bn  USD 
in months of imports of G&S 

External  debt 

External debt 
(in convertible  currencies,  in bn  USD,  end of  period) 
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$) 

Indicators  of  EU  exposure 

EU exposure/total  EU exposure  (%)  (1 ] 
EU exposure/external  debt  (%) 
EU exposure/exports  of G  & S  (%) 

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  (2) 
(number  of countries)  • 
The  Institutional Investor 

Position in the ranking  (2) 
(number  of  countries) 
Credit rating (3) 

1995 

4,3 
3,5 
21,9 
52.2 

-1,4 

10,2 
-5,6 
0,0 
2,1 
2,1 

(4) 
(4) 
(4) 

31,7 

3.8 
2.2 
1.6 
76,4 
310,8 
43,8 
No 
4,8 

12,2 
2,9 
8,9 

-0,2 
-2,5 
38,6 
42,9 

-4,4 

8,9 
-4,34 
0,0 
2,6 
2,9 

29,5 

5,1 
3,4 
1,7 
70,6 
331,5 
48.6  (4) 
No 
4,5 

9,9 
2,4 
7,8 

-2,0 
-0,6 
16,1 
24,0 

-8,7 

11,0 
1,6 
0,0 
1,5 
1,9 

26,4 

8,7 
7,0 
1,7 
62,9 
240,0 
82,2 
No 
No 

7,4 
1,8 
4,2 

No 

SBA 
(5. 94 - 5. 95) 
On-track 

SBA 
(5. 94 - 5.  95) 
EFF 
(5. 95 - 5. 98) 
On-track 

Not  rated 
Not  rated 
Mar  Sep 
68  79 
(169)  (170) 
Mar  Sep 
62  69 
(127)  (133) 
28.2  27.1 

Not  rated 
Not  rated 
Mar  Sep 
92  96 
(167)  (167) 
Mar  Sep 
75  78 
(135)  (135) 
26.3  24.6 

Not  rated 
Not  rated 
Mar  Sep 
102  107 
(187) (181) 
Mar  Sep 
89  91 
(135) (135) 
23.5  22.8 

(1 ) 
(2) 
(3) 

Only  EIB, BoP and  1250 loans (outstanding  disbursed) 
The higher the  ranking  number,  the lower the creditworthiness  of the  country. 
Countries are rated on a scale of zero to  100, with  100 representing the least chance of default. A given  country 
may  improve  its rating and still fall in the ranking if also the average global rating for  all rated countries  improves. 

(4) 

Afjer  rescheduling. 

-  S  &  -

Country  risk  indicators 

Country: 

Israël 

1993 

1994 

1995 
Estimates  (E) 

Real GDP  growth  rate (in  %) 
Industrial production  ( %  change)  (at constant  1990 prices) 
Unemployment  rate  (average) 
Consumer  Price  Index 
Exchange  rate (shekel  per  USD)  (end  of  period) 

(Dec/Dec) 

3,5 
6,5 
10,0 
11,3 
2,986 

6,5 
7,2 
7.8 
14,5 
3,018 

Central  government  overall  deficit  (as  % of  GDP) 

-2,5 

-2,0 

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) 
Gross official  FX reserves 

in billions  US$ 
in months of imports of G&S 

External  debt 

External debt (gross  external  liabilities) 
(in bn  USD,  end  of  period) 
Debt service  (in bn  USD) 

principal 
interest  (gross) 

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 

Indicators  of  EU  exposure 

EU exposure/total  EU exposure  (%)  (1 ) 
EU exposure/external  debt  (%) 
EU exposure/exports  of  G  & S  (%) 

IMF  arrangements 

Type/no 
(Date / - ) 
On track/off  track 
( - /  Date) 

22,1 
-1,8 
-141 
6,382 
2,4 

36,1 

4,1 
1,9 
2,2 
55,8 
163,4 
14,0 
No 
No 

4,7 
0,8 
1,4 

24,2 
-3,0 
-357 
6,689 
2,5 

41 

4,6 
2,2 
2,4 
54,2 
169,4 
14,9 
No 
No 

4,4 
0,8 
1,3 

7,1 
8,4 
6,3 
8,1 
3,140 

-3,2 

25,9 
-4,5 
806 
8,158 
2,6 

44 

3.9(E) 
n.a. 
n.a. 
57 
170,0 
15(E) 
No 
No 

4,4 
0,7 
1,3 

No 

No 

No 

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) 

Not rated 
BBB+ 
Mar  Sep 
29  29 
(169)  (170) 
Mar  Sep 
46  46 
(127)  (133) 
39.6  40.5 

Not  rated 
BBB+ 
Mar  Sep 
30  33 
(167)  (167) 
Mar  Sep 
43 
46 

(135)  (135) 
43.4  46.5 

A3 
A-
Mar  Sep 
31  31 
(187)  (181) 
Mar  Sep 
42 
43 

(135)  (135) 
47.9  49.2 

(1 
(2) 
(3) 

The higher the ranking  number,  the lower the creditworthiness  of the  country. 
Countries  are rated on a scale  of zero to  100, with  100 representing the least chance of default. A given  country 
may  improve  its rating  and still fall in the ranking  if also the average global rating for all rated countries  improves. 

-  s ^_ 

ISSN 0254-1475 

COM(96) 631 final 

DOCUMENTS 

EN 

01 

Catalogue number  :  CB-CO-96-662-EN-C 

ISBN  92-78-13210-1 

Office  for Official  Publications of the European Communities 

L-2985 Luxembourg