Commission report to the budgetary authority on guarantees covered by the general budget - Situation at 31 December 1996
Date: 1997-06-05
Institutions: European Commission
Subjects: Community loan, European Investment Bank, budgetary power, general budget (EU)

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels,  05.06.1997 
COM(97) 273  final 

COMMISSION REPORT TO THE BUDGETARY AUTHORITY 

ON GUARANTEES COVERED BY THE GENERAL BUDGET -

SITUATION AT 31 DECEMBER 1996 

i1  «•) 

1/ 

. 

'"'Vi1' 

1  " ' 11" 

<£ 

REPORT ON GUARANTEES  COVERED BY THE GENERAL BUDGET 
SITUATION AT 31 DECEMBER  1996 

This report describes the situation as regards budget guarantees at 31 December 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 eleven reports to the budgetary authority. 

The report is in two parts with an annex: 

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. 

^ 

CONTENTS 

PART  ONE:  EVENTS  SINCE  THE  REPORT  AT  30  JUNE  1996,  THE  RISK 
SITUATION AND ACTIVATION  OF BUDGET  GUARANTEES 

I. INTRODUCTION:  TYPES  OF OPERATION.. 
I. A  OPERATIONS WITH MACROECONOMIC OBJECTIVES , 
LB  OPERATIONS WITH MICROECONOMIC OBJECTIVES  .. 

II. EVENTS SINCE THE REPORT AT 30 JUNE 1996 
IL A  BULGARIA II 
II.B UKRAINE II 

II. C  MOLDOVA II 

II.D LOANS GRANTED BY THE EUROPEAN INVESTMENT BANK IN THE OTHER NON-MEMBER  COUNTRIES 
(DEVELOPING COUNTRIES OF ASIA AND LATIN AMERICA)  WITH WHICH THE COMMUNITY HAS CONCLUDED 
COOPERATION AGREEMENTS 

III. RISK SITUATION 
III.A  AMOUNT OUTSTANDING AT 31 DECEMBER  1996  (TABLE 1) 
III.B MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET:  OPERATIONS DISBURSED AT 31 
DECEMBER  1996  (SEE TABLE 2) 
III. C  MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE COMMUNITY BUDGET (SEE TABLE  3) 

IV. ACTIVATION  OF BUDGET GUARANTEES 
IV-.AEIB LOANS TO NON-MEMBER COUNTRIES 
IV. B  BORROWING/LENDING OPERATIONS OR LOAN GUARANTEES FOR NON-MEMBER COUNTRIES 

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

VI. RELATIVE SOLIDITY  OF THE GUARANTEE FUND 

2 

2 

2 

2 
3 

4 
5 

9 
9 
9 

10 

11 

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

L INTRODUCTION 

II. CENTRAL AND  EAST EUROPEAN  COUNTRIES 

III. NEWLY INDEPENDENT  STATES 

IV. MEDITERRANEAN  COUNTRIES 

ANNEX 

I. EXPLANATORY  NOTES  ON THE SITUATION  OF RISKS COVERED  BY  THE 
COMMUNITY  BUDGET 
I. A  TABLES  1 TO 3 

LB LOAN OPERATIONS COVERED BY A BUDGET GUARANTEE 
I.C EXPECTED SIGNATURE AND DISBURSEMENT OF EIB  LOANS 
I.D PAYMENT OF THE BUDGET GUARANTEE 

13 

13 

16 

19 

22 
22 

24 
29 
30 

<J-L 

II. METHODOLOGICAL NOTE ON THE ANALYSIS OF THE COMMUNITY'S ESTIMATED 
LENDING CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES OVER THE PERIOD 
31 
1997-99 UNDER THE GUARANTEE FUND MECHANISM 
31 
II.A  RESERVE FOR LOAN GUARANTEES TO NON-MEMBER COUNTRIES (1) 
31 
II.B  BASES FOR THE CALCULATION OF THE PROVISIONING OF THE GUARANTEE FUND (2) 
II.C BASIS FOR THE PROVISIONING OF THE FUND IN THE EVENT OF A PART GUARANTEE 
32 
II.D PROVISIONING OF THE GUARANTEE FUND (3) 
ILE  MARGIN REMAINING IN THE GUARANTEE RESERVE (4) 
II.F RESIDUAL LENDING CAPACITY (5) 

32 
33 
33 

III. TABLES: COUNTRY-RISK INDICATORS 

34 

PART ONE: EVENTS SINCE THE REPORT AT 30 JUNE  1996, THE RISK 
SITUATION AND ACTIVATION  OF BUDGET  GUARANTEES 

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  EEB  loans 
outside  the  Community  (Mediterranean,  Central  and  Eastern  Europe,  certain  non-member 
countries - developing countries of Asia and Latin America and South Africa). 

IL  EVENTS  SINCE THE REPORT AT 30 JUNE 1996 

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

II.A  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.  The  second 
tranche of ECU 40 million was  paid  in August  1996. It will be repaid  in one  instalment  on 
29 August 2003 and the interest, which is at variable rates, is payable half-yearly. 

-2 

ILB  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 
maximum period often  years. The proceeds of this operation are to be on-lent to Ukraine in 
two tranches. 

Half of the first tranche, i.e. ECU 50 million of the ECU  100 million provided,  was paid  on 
29 August  1996. The loan is to be repaid in five equal annual instalments from the sixth year 
onwards. The full  loan will have been repaid by 29 August 2006. The  other  half of the first 
tranche, i.e. ECU 50 million of the ECU  100 million provided, was paid on 30 October 1996. 
The loan is to be repaid in five equal annual instalments from the sixth year onwards. The full 
loan  will have been  repaid  by  30 October 2006.  The  interest,  which  is  at  variable  rates,  is 
payable half-yearly. 

II.C  Moldova  H 

As part of an overall aid programme for  Moldova,  the Council Decision of 25 March  1996 
empowered the Commission,  on behalf of the Community, to borrow ECU  15 million for  a 
maximum period often years. The proceeds of this operation are to be on-lent to Moldova. 

The loan was paid in one tranche on 30 December  1996. The loan is to be repaid in five equal 
annual  instalments  from  the  sixth  year  onwards.  The  full  loan  will  have  been  repaid  by 
30 October 2006. The interest, which is at variable rates, is payable half-yearly. 

ILD  Loans  granted  by  the  European  Investment  Bank  in  the  other  non~member 
countries  (developing  countries  of  Asia  and  Latin  America)  with  which  the 
Community  has concluded  cooperation  agreements 

On  12 December  1996 the Council granted the EIB a 100% Community guarantee for  loans 
to projects of mutual interest in certain non-member countries {developing<pcountries of Asia 
and Latin America) with which the Community has concluded cooperation agreements. This 
guarantee is restricted to an overall loan ceiling of ECU 275 million to be granted in  1996.  If, 
on 31 December  1996, the loans granted by the EIB have not attained  the overall amount of 
ECU 275 million,  the  period  during  which  this  Decision  remains  applicable  will  be 
automatically extended by six months. 

ffl.  RISK  SITUATION 

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

- 

- 

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

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

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

-  by reference only to actual disbursements at 31 December  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 a!l 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 interest1  and 
exchange rates.2 

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

The overall figures quoted cover risks of different  types; loans to one country in the case of 
macrofinancial  assistance  and loans for  projects  guaranteed  by the borrowers  in the  case of 
NCI and ED3 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 31 December  1996 (Table 1) 

total  risk  at  31  December  1996  came 

The 
ECU  11 705 million at 30 June 1996, an increase of ECU  171 million.3 

to • ECU  11 876 million  as  against 

1 

2 

3 

An average interest rate of 10% is assumed. 

The exchange rate used for loans in currencies other than ecus are those of 31 December 1996. 

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. 

4-

Table  1 shows the operations which have had an effect  on the amount  outstanding  since the 
last report. 

Amount outstanding at 30 June  1996 

Loan  repayments 

Euratom 

NCI 

EIB 

Exchange  rate  differences  between  ecu  and  other 
currencies 

Loans  disbursed 

NCI 

Bulgaria 

Moldova 

Ukraine 

EIB 

Amount outstanding at 31 December  1996 

in Mio ECU 

11.705 

123 

187,5 

81 

-48,5 

0,01 

40 

15 

100 

456 

11.876 

The capital outstanding in respect of operations in the Member States was ECU 5 564 million 
at 31 December  1996, a fall of 7.03% compared with 30 June 1996. 

This fall is mainly due to the repayment of ECU 310,5 million in Euratom and NCI loans 

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

The  capital  outstanding  from  non-member  countries  at  31  December  1996  was 
ECU 6 312 million, an increase of 10.35% compared with 30 June 1996. 

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

disbursed  at 31 December  1996 (see Table 2) 

The total  risk,  which  comes to  ECU 3 095 million in  1997, will  steadily  increase  to  around 
ECU 3 546 million in 2t)00, although the situation in  1999 is special in that  there will be no 
capital 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  1997 in respect of the Member States comes to ECU  1  429 million. 

5-

This  figure  changes 
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 2 757 million. 

the  capital  repayments  (every 

in  line  with 

The risk for  1997 in respect  of non-member  countries  comes to  ECU  1 666 million  as  the 
following capital 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. 

The risk will then drop to ECU 1  275 million in 1998 and to ECU 806 million in 1999. 

ÎII.C  Maximum  theoretical  annual  risk  borne  by  the  Community  budget  (see 

Table 3) 

This risk comes to ECU 3 381 million in  1997 and will increase regularly until 2000  (except 
in 1999 when it will total ECU 2 072 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 ECJJ 3 154 million. It will fall to ECU 2 366 
million in 2003 and ECU 2 188 million in 2004. 

The risk in respect  of non-member  countries will rise from ECU 1 781 million  in  1997  to 
ECU  1  396 million in  1999. The risk will increase from 2000 until  2004  when  it will  reach 
ECU 3 370 million. 

CAPITAL  OUTSTANDING  IN RESPECT  OF OPERATIONS  DISBURSED 

TABLE 1 

Operation 

MEMBER STATES 
A.  Balance  of  payments 
1.  Greece 
2.  Italy 
B.  Others 
3.  Euratom 
4.  NCI and NCI earthquakes 
5.  EIB Mediterranean, 
Spain,  Greece,  Port. 

M E M B ER  S T A T ES  -  T O T AL 

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 
1 1. 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 

(ECU  million) 

Authorized 
ceiling 

Capital 
outstanding 
30.06.96 

Capital 
outstanding 
31.12.96 

Remainder to 
be  disbursed 
31.12.96 

2200 
8000 

14000 

4000 
6830 

1500 

26330 

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

6362 
1700 
3000 
1025 
300 

500 
3512 

695,2 
931,8 

345,9 

5985 

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

1981 
884 
141 
191 

5 00 
3479 

572,48 
748 

265 

1200 
4 0 00 

0 
0 

0 

5564 

5200 

180 
250 
125 
400 
510 
500 
160 
135 
60 
185 
30 
144 

2092 
971 
335 
204 
32 

260 
0 
0 
0 
70 
100 
0 
85 
0 
100 
25 
0 

2497 
6 02 
2645 
443 
69 

T H I RD  C O U N T R I ES  -  T O T AL 

17422 

5720 

6312 

6896 

G R A ND  T O T AL 

43752 

11705 

11876 

12096 

1)  No disbursement  is planned. 
2) The third and fourth tranches  had still not been paid at 31.12.96.  So far, the  Italian 
Government  has  not  requested  payment. 

ANNEX  TO TABLE 1 

SITUATION  IN RESPECT  OF  EIB OPERATIONS  (31.12.96) 

Operations 

Credit  line 
authorized 

Loans  made 
available,  minus 
cancellations 

Initial 
disbursement 

A m o u nt 

o u t s t a n d i ng 
at  31.12.1996 

EIB  Mediterranean, 

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

1500 
6362 
1700 
3000 
1025 
300 

1465 
5660 
1628 
2980 
647 
101 

1543 
3143 
1026 
335 
204 
32 

265 
2092 
971 
335 
204 
32 

NB:  The fact that the  initial disbursement  sometimes  exceeds the authorized  ceiling is due to  differences 
in the ecu rate between the date on which the contracts were signed and 31.12.96. 

- 7-

TABLE 2 
MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 
Estimate in ECU million based on all opérations disbursed at 31.12.1996 

(E 

1997 

1998 

1999 

2000 

2001 

2002 

2003 

2004 

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. 

Sp. Gr. Port 

500 
989 

92 
50 

44 

453 
532 

58 

Capital - subtotal 

1042 

1675 

2490 

12 
40 

37 

2579 

16 
40 

39 

95 

INTEREST 
A. Balance of payments 

1. Greece 
2. Italy 

B. Structural loans 

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

Sp. Gr. Port 

48 
211 

42 
63 

23 

48 
211 

10 
16 

18 

157 

157 

3 
12 

14 

1 
10 

11 

Interest - subtotal 

386 

301 

186 

178 

71 

20 

92 

7 

7 

14 

22 

22 

21 

21 

2 

5 
/ 

2 

3 

5 

500 
3479 

572 
748 

257 

5557 

95 
735 

55 
113 

83 

1082 

16 

15 

30 

2 

2 

3 

MEMBER STATES - TOTAL 

1429 

1976 

280 

2757 

106 

30 

27 

34 

6638 

NON-MEMBER COUNTRIES 

CAPITAL 
A. Financial assistance 

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

100 
123 
62 
150 
185 

80 
127 
63 
140 

160 
250 
144 

190 

80 

140 
50 
15 

162 
78 
19 

175 
104 
20 

110 
5 

175 
119 
22 

Capital - subtotal 

1169 

879 

489 

511 

18 
25 
13 
40 
51 
16 
50 
5 
14 
6 
19 
3 

140 
84 
11 
5 

493 

10 
13 
6 
26 
51 

25 
0 
14 
6 
19 
3 

130 
81 
9 
5 

392 

11 
33 

25 

14 
6 
19 
3 

118 
76 
9 
5 

312 

11 
13 

25 

14 
6 
19 
3 

106 
69 
8 
5 

273 

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

Interest - subtotal 

NON-MEMBER  COUNTRIES -
TOTAL 

GRAND TOTAL 

(Eastern Europe ) 
(Other non-member countries) 

70 

150 

9 
17 
6 
167 
123 
23 
32 

565 

11 
6 

25 

3 
5 
19 
3 

94 
61 
7 
5 

55 

100 

25 
12 
37-
6 

162 
120 
24 

40 

12 
37 
6 

163 
114 
8 

12 
37 
6 

146 
114 
9 

541 

380 

324 

4 
6 

10 

3 
5 
17 
2 

82 
53 
7 

4 

3 
13 
2 

71 
45 
6 

2 
9 
1 

59 
37 
5 

180 
250 
125 
400 
510 
160 
500 
144 
135 
50 
128 
24 

1289 
821 
141 
32 

4889 

28 
38 
19 
107 
159 
16 
160 
5 
59 
40 
132 
20 

800 
506 
62 
24 

233 

188 

144 

115 

2174 

1662 

1271 

801 

784 

798 

729 

524 

439 

7062 

3090 

3247 

1082 

3541 

904 

758 

551 

473 

13700 

880 
782 

926 
345 

454 
347 

448 
336 

332 
466 

344 
385 

277 
248 

219 
220 

3879 
3183 

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) 

1997 

1998 

1999 

2000 

2001 

2002 

2003 

2004 

TOTAL 

MEMBER  STATES 

CAPITAL 
A. Balance of  payments 

1.  Greece 
2. Italy 

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

Capital - subtotal 

INTEREST 
A. Balance of  payments 

1.  Greece 
2. Italy 

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

Interest -  subtotal 

500 
989 

141 
44 

985 
58 

1042 

1675 

2490 

52 
37 

2579 

55 
39 

95 

71 
20 

92 

2000 

2000 

22 

22 

21 

15 

2021 

2015 

48 
383 

105 
23 

559 

48 
553 

25 
18 

553 

553 

340 

340 

340 

170 

15 
14 

11 
11 

7 
7 

2 
5 

2 
3 

2 
2 

644 

582 

575 

354 

347 

345 

174 

3577 

500 
7479 

1305 
257 

9541 

95 
3230 

169 
83 

MEMBER  STATES -  TOTAL 

1601 

2318 

676 

3154 

446 

369 

2366 

2188 

13118 

NON-MEMBER  COUNTRIES 

CAPITAL 
A. Financial  assistance 

5.  Hungary 
6. Czech  Republic 
7. Slovak  Republic 
8.  Bulgaria 
9.  Romania 
10. Israel 
11.  Algeria 
12. Ex USSR 
13. Baltic  States 
14.  Moldova 
15.  Ukraine 
16. Belarus 
17. Euratom, C+E Eur. 
B.  Guarantees 
18. EIB  Mediterranean 
19. ElBC+EEur.  I + II 
20. EIB Asia Latin America 
21.  EIB South Africa 

100 
123 
62 
150 
185 

80 
127 
63 
140 

160 
250 
144 

140 
50 
15 

162 
78 
19 

Capital - subtotal 

1169 

879 

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 

31 
25 
13 
40 
55 
16 
55 
5 
18 
6 
24 
3 
1 

173 
124 
18 
6 

612 

36 
12 
6 
26 
58 

35 

22 
6 
29 
3 
6 

240 
209 
34 
11 

733 

190 

80 

110 
5 

231 
187 
34 
1 

648 

26 

0 
11 
21 

35 

22 
6 
29 
3 
34 

436 
429 
93 
31 

175 
104 
20 
0 

489 

26 

0 
11 
40 

35 

22 
6 
29 
3 
17 

328 
310 
61 
20 

907 

55 

100 

25 
12 
37 
6 
1 

385 
365 
79 
17 

40 
0 

12 
57 
6 
7 

500 
482 
95 
28 

260 

70 

100 

85 
12 
57 
6 
16 

558 
551 
119 
39 

440 
250 
125 
400 
580 
160 
600 
144 
220 
50 
168 
24 
24 

2446 
2085 
435 
125 

1082 

1227 

1873 

8276 

26 

0 
4 
13 

20 

11 
5 
27 
2 
72 

574 
571 
138 
45 

26 

4 
7 

10 

9 
3 
23 
2 
88 

594 
589 
145 
49 

26 

0 
7 

10 

9 
2 
17 
1 
101 

559 
575 
141 
49 

223 
37 
19 
107 
212 
16 
235 
5 
124 
40 
205 
20 
373 

3429 
3330 
752 
251 

70 

150 

9 
17 
6 
0 

295 
268 
54 
40 

909 

26 

0 
11 
13 

35 

11 
6 
29 
3 
54 

525 
523 
122 
40 

1175 

1397 

1507 

1550 

1497 

9377 

NON-MEMBER  COUNTRIES 

-  TOTAL 

1781 

1612 

1396 

1823 

2306 

2589 

2777 

3370 

17653 

GRAND  TOTAL 

3381 

3930 

2072 

4977 

2751 

2958 

5142 

5559 

30770 

(Eastern Europe ) 
(Other  non-member  countries) 

948 
833 

1111 
501 

757 
639 

962 
861 

1045 
1261 

1231 
1358 

1356 
1421 

1795 
1575 

9204 
8449 

IV.  ACTIVATION  OF BUDGET GUARANTEES 

IV.A  EIB loans to non-member  countries 

On 23 October  1996 the EIB called  on the budget  guarantee  in respect  of loans  of  around 
ECU 5.7 million to  the Republics  of former  Yugoslavia  (the Former  Yugoslav  Republic  of 
Macedonia,  Bosnia-Herzegovina  arid  Serbia).  The  payment  was  made  to  the  EIB  on 
28 January 1997. 

Of the ECU  84.4  million  due  but  not  paid,  ECU  24 million  was  entered  in  the  budget  in 
respect of the amount owed from before  1994 and a total of ECU 60.4 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),  on  11  June 1996  (ECU  6.4 million),  on 
4 October  1996 (ECU 8.9 million) and on 28 January  1997 (ECU 5.7 million). 

The  Former  Yugoslav  Republic  of  Macedonia  (FYROM)  has  repaid  some  of  its  arrears 
(ECU 4.7 million). 

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

IV B. I  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 ct i vat ion 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. 

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

Country 

Date 

Amount (principal + interest) 

Georgia (loan of ECU 40 million) 

15.10.1996 

855.862,78 

-  1 0-

IV. B. 3  Late  repayments 

During the period  covered  by this report,  the following  countries  repaid  debts  on  which 
they  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 

Repayment date 

Amount (principal + interest) 

Turkmenistan (loan of ECU 

4 5 m i l , i°n) 

G e o r9 'a 

Total 

13.8.1996 

9.10.1996 

13.12.1996 

10.10.1996 

11.386.081,43 

11.467.876,61 

7.716.363,36 

710.997,54 

31.281.318,94 

IV.B. 4  Situation as regards unpaid debts at 31 December 1996 

The following  amounts had not been paid at 31 December  1996: 

Country 

Tajikistan 

Georgia 

Armenia 

Total* 

' 

Amount (principal + interest) 

63.181.389,89 

92.608.823,28 

57.601.313,20 

213.391.525,37 

V.  ANALYSIS  OF  THE  COMMUNITY'S  THEORETICAL  LENDING  AND 
IN  RESPECT  OF  NON-MEMBER 

CAPACITY 

GUARANTEE 
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.5 

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 

Two  repayments  totalling  ECU  8.4  million  have  been  made  since  31  December  1996: 
ECU 3.7 million by Armenia and ECU 4.7 million by Georgia. 

ECU 300 million at  1992 prices. 

-11 

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  1997-99  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  Council  and  decisions  proposed  and  in 
preparation (see Table 4), ECU 286 million is expected to be used from the guarantee reserve 
in 1997, leaving ECU 43 million available at the end of the year. 

The Guarantee  Fund  could then amount  to  around  ECU 843 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 213 million  to  ECU 286 million  for  loans  with  a  100%  guarantee 
under the Community budget; 

from  ECU 304 million to  ECU 409 million for  loans with  a 70% guarantee  (new 
EIB loans). 

VI.  RELATIVE  SOLIDITY  OF THE GUARANTEE FUND 

The  ratio  between  the  amount  in the Fund  at  the  end  of  1996  (ECU 557 million)  and  the 
maximum annual risk for loans to non-member countries (defined  as the total amount  falling 
due) shown for  1997 in Table 3 (ECU  1  781 million) comes to 31%. 

The  Fund  should  then  correspond  to  8.5%  of  the  total  amount  of  guaranteed  loans 
outstanding outside the Community. 

-12-

TABLE 4 

THE COMMUNITY'S THEORETICAL ESTIMATED LENDING & GUARANTEE CAPACITY 
IN RESPECT OF NON-MEMBER COUNTRIES 
OVER THE PERIOD 1997-99 
under the Guarantee Fund mechanism* 

ECU million 

1997 

1998 

1999 

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

329 

338 

345 

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 

-  Euratom loans (e) 

-  Macrofinancial assistance (f) 

Provisioning of the Gurantee Fund (3) 

644  779,25 
728 
210 
87,5 
1804,8 

787,5 
172 
125 
1728,5 

693 
752,5 
210 
105 
1760,5 

0 

200 

350 

165 

25 

0 

286 

302 

313 

Margin remaining in the guarantee reserve (4) 

43 

36 

32 

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

Maximum if used in full for 100% guarantee (e.g. BP loans) 
Maximum if used in full for EIB loans (70% guarantee) 

286 
409 

243 
347 

213 
304 

(*) 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 106 million a year for loans with a 100% guarantee and by ECU 152 million for loans with a 70% guarantee. 

Description of the loans for which the Fund will be provisioned in the period 1997-99: 

-  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). 
31.1.97- 31.1.2000:  ECU 2 310 million for the renewal of the EIB mandate, covered by 
overall 70% guarantee. 
b. Central and Eastern Europe 

- loans proposed or in preparation: 31.1.97-31.1.2000: ECU 3 520 million for the renewal of the EIB mandate, 

covered by overall 70% guarantee. 

c. Asia and Latin America: 

- loans decided: 1993-1996: ECU 750 million 
- loans proposed or in preparation: 31.1.97-31.1.2000: ECU 900 million for renewal of the EIB mandate, 

covered by overall 70% guarantee. 

d. South Africa: 

- loans decided: mid-1995 to mid-1997:  ECU 300 million 
- loans proposed or in preparation: 1.7.97-1.7.2000: ECU 375 million for the renewal of the EIB mandate, 

covered by overall 70% guarantee 

e. - Euratom 

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

f. - Financial  assistance 

- loans decided: 1997: ECU 25 million loan to Belarus cancelled;  ECU 130 million loan to Slovakia cancelled. 
- loans proposed or in preparation: 1997: ECU 170 million in loans to the Republics of Georgia, Armenia and 
Tajikistan, ECU 150 million in loans to Ukraine. 

13 

PART TWO 
EVALUATION  OF POTENTIAL RISKS: ECONOMIC AND  FINANCIAL 
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 borne by the  general  budget.  However,  these  data  should  be weighted  in  accordance 
with aspects relating to the quality of the risk,' which depend on the type of operation and the 
standing of the borrower.  Recent  events which may influence  the portfolio  country risk are 
analysed below. 

The country risk  evaluation presented  in this chapter provides a set of extensive  country 
risk indicators  for  all relevant  countries  in Central  and  Eastern  Europe,  the NIS  as well 
as  in  the  Mediterranean  area,  in  the  form  of  a  full-page  table  per  country.  As  a 
complement  to  this,  a  further  textual  analysis  is  provided  for  those  countries  where 
significant  new information  influencing  the risk evaluation has become available  since the 
previous report covering the first  six months of  1996. 

It  may be noted  that  the  evaluation in this section  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. 

II.  CENTRAL AND EAST EUROPEAN  COUNTRIES 

BULGARIA 

Since  the  last  report,  Bulgaria's  situation  has  worsened  significantly  and  GDP  is 
estimated  to  have fallen  by  some  10%  in  1996.  Year-end  inflation  was  over  300  %  and 
the leva is experiencing  a rapid  and accelerating  depreciation  (70 leva/$ at  start  of  1996, 
to  250  by  November,  500  at  end-December,  1000  as  of  30  January).  In  these 
circumstances,  there  is  a  clear  risk  of  hyperinflation  in  the  early  months  of  1997.  The 
budget  deficit  has expanded  very fast  and has been financed  in recent  months  directly by 
the  central  bank.  At  the  end  of December,  internal  debt  reached  BGL  1.053  trillion,  up 
from  BGL  345  billion  at  the  end  of  1995.  Although  privatisation  has  made  some 
progress,  structural  reforms  remain slow and the banking system continues to  pose  many 
problems.  Several banks are currently subject to bankruptcy  proceedings. 

During  the  Autumn,  the  World  Bank  and  the  International  Monetary  Fund  suspended 
their  financial  assistance  to  Bulgaria.  In  November  1996,  the  International  Monetary 
Fund  proposed  the  introduction  of  a  currency  board  as  a  mechanism  to  restore 
macroeconomic  stability  and  confidence  among  economic  agents.  Technical  discussions 
with the Bulgarian authorities started  in December but negotiations have been delayed by 
the resignation  of the Prime Minister.  Political  forces,  from  both  the  opposition  and  the 
ruling party seem, however,  to have accepted  the idea of a currency board. 

14 

The crisis has led to a sharp decline in international reserves - from  US$  1.3  billion at the 
end  of  1995 to  US$  518 million at the end of  1996. Service on foreign  debt  continues  to 
be  very  substantial  -  US$  300  million  in  the  first  quarter  of  1997  alone.  In  these 
conditions,  external  viability  crucially  depends  on  concluding  rapidly  an  agreement  with 
the IMF and other international creditors. 

ESTONIA 

Estonia's risk assessment continues to be among the best in the region although there are 
signs  of possible  turbulence  ahead.  In  1996, for  the  second  consecutive  year,  real  GDP 
growth  was  positive,  although  it  appears  to  have  been  lower  than  in  1995  (3%). 
Construction  and trade  (wholesale and retail) recorded  very positive performances  while 
agricultural  and industrial  output were lower than in  1995. Trade is now  more  important 
than  manufacturing.  Nearly  20%  of  total  exports  are  goods  processed  after  being 
imported  and another  13% are reported to be transit trade. 

Estonia  introduced  a  Currency  Board  system  in  1992  which  provides  for  a  strict  link 
between money growth  and the level of foreign  exchange reserves. The exchange  rate is 
pegged  to  the  DM  at  a fixed rate.  The  system  has  been  very  successful  to  stabilise  the 
macroeconomic  situation:  the  general  government  deficit  for  1996 is  estimated  at  1.5% 
of  GDP  (with  revenues  higher  than  planned)  and  inflation  has  continued  to  slow  down 
(23%o vs. 29%o in  1995). Estonian exports have increased  by roughly  5% in volume in the 
first  three  quarters  of  1996, compared  to the corresponding  period  of the previous  year, 
and by  15% in value. 

However,  the  gradual  appreciation  of  the  currency  has  led  to  a  surge  of  imports  and  a 
widening  of  the  trade  deficit  to  nearly  30%  in  the  first  three  quarters  of  1996.  Also, 
whereas in the  past the net capital inflow  was more than  sufficient  to  finance  the  current 
account deficit,  the situation in the third quarter  of  1996 was just  about in balance.  Other 
signs  of uncertainties  are the high relative  level of  direct  investments  outflows  (superior 
to  inflows  in  second  quarter  of  1996), the political  situation  (calls for  the  resignation  of 
the  Prime  Minister)  and  the  implications  of  Lithuania's  wish  to  abandon  its  currency 
board regime. 

LATVIA 

Latvia's  creditworthiness  seems to  have improved  considerably.  The Latvian  economy is 
recovering  from  the  banking  crisis  in  1995:  economic  growth  is  picking  up  and  in  the 
first  nine months  of  1996 it reached  2.3%. Foreign  reserves  and banking  assets  are back 
up  to  pre-crisis  levels.  Furthermore,  inflation  and  interest  rates  have  come  down  quite 
rapidly, the currency is stable, and the budget deficit  for  1996 remained below target.  For 
these  reasons,  and  because  of  the  country's  relatively  low  external  indebtedness 
(debt/GDP  is below  10%), the  international  credit  ratings  agencies  have awarded  Latvia 
an  investment  grade  rating  in  January  1997.  However,  the  imbalances  on  the  external 
side  have  increased,  with  the  trade  and  current  account  deficits  rising  to  16%  and  7% 
respectively.  Foreign direct investment continues to be only modest. 

15 

LITHUANIA 

The  Lithuanian  economy  is still  recovering  from  the  banking  crisis  of  December  1995. 
During  1996, macroeconomic  performance  remained  satisfactory  in spite of the  financial 
troubles.  Growth  accelerated  driven  by  rising  exports  and  by  an  upturn  in  domestic 
demand later in the year. The currency board  system was maintained  thanks to  continued 
monetary  and  fiscal  discipline.-  Inflation  fell  further.  The  budget  deficit  remained 
moderate although it deteriorated  slightly. The balance of payments situation would  seem 
to have remained  stable. 

The  banking  sector  continues  to  be  weak  but  supervision  was  strengthened  and  the 
government  made  some  progress  in  sorting  out  the  legacies  of  the  1995  crisis. 
Restructuring  on  the  real  side  of  the  economy  will  make  important  progress  if  the 
authorities  go  ahead  with  the  announced  privatisation  of  large  telecommunications  and 
transport  enterprises.  This  could  also  spark  investors'  interest  and  lead  to  a  surge  in 
foreign  direct  investment  which  continues  to  be  disappointingly  low.  Finally,  last 
September,  Lithuania was the first former  Soviet republic to receive a credit  rating when 
Moody's rated  it just below investment grade. 

ROMANIA 

Following  the  formation  of  a new  Government  in late  1996, Romania's  risk  assessment 
seems  to  have  improved  slightly.  The  new  authorities  aim  at  a  rapid  integration  of 
Romania in the EU  and in NATO  and are committed  to  accelerating  the pace of  reform. 
On the basis  of renewed  negotiations  with the  IMF  and  the World  Bank,  the  Romanian 
authorities  have  announced  a  comprehensive  economic  stabilisation  and  structural 
adjustment  programme. 

The  economic  situation  worsened  significantly  however  in  the  last  months  of  1996,  in 
particular  because  of  a  spending  spree  by  the  former  Government  in the  run-up  to  the 
elections  and  largely  financed  by money  creation.  Inflation  soared  to  57% at  the  end  of 
the year. The  State budget deficit  rose to 6% of GDP, and taking into  account the  deficit 
of state-owned  companies and hidden subsidies to agriculture, to a higher level still. Very 
little  progress  has  been  achieved  on  structural  reforms.  The  1996  current  account  is 
estimated  to  show  a US$ 2 billion deficit.  Foreign debt has risen further  by 30%» in  1996 
(to  US$  6.9  billion  or  25.8% of  GDP)  after  rising  18% in  1995. Debt  service  for  1997 
remains high at around US$  1  billion. 

The new Government  has already taken some steps towards adjustment  and  liberalisation 
of the economy.  Monetary  policy has been tightened.  Fuel prices were  raised  by 90% at 
the beginning of January; and, since the beginning of January  1997, the official  rate of the 
leu  has been  devalued  by 41% against the dollar.  These measures  are  necessary  steps in 
order to end prices distortions and bring internal prices in line with international prices. 

The  Government  has now  agreed  in principle with  the  IMF  a  programme  of  adjustment 
and  long-awaited  structural  reforms  which  entails  very  strong  upfront  measures  (e.g. 
closure  of  10  of  the  large  loss-making  enterprises  in barely  5 weeks,  laying  off  5%  of 
civil  servants  in the same period)  . If properly  implemented  these  measures  are  expected 
to  enhance  confidence  and  put  Romania  back  on  the  path  of  a  rapid  and  successful 

16 

transition  towards  a fully  fledged  market  economy.  However,  the  difficult  period  which 
lies  ahead  could  undermine  support  for  the  Government  both  among  the  general  public 
and  within  the  ruling  coalition.  Furthermore,  special  interest  groups  retain  a  strong 
influence which could negatively affect  the pace of reforms. 

SLOVAKIA 

Slovakia  country  risk  remains relatively  moderate  but the  country  is increasingly  relying 
on  foreign  savings.  Macroeconomic  performance  was  largely  positive  during  1996  with 
high  real  growth  (up  7%),  low  inflation  (5.9%)  and  falling  unemployment.  However, 
rising household  and government  consumption led to  a sharp  deterioration  in the  current 
account  balancé (swinging  from  a surplus  position  of 3.6%» of  GDP  in  1995  to  a  deficit 
of 7.8%>) which may put the sustainability  of the current  policy stance into  question.  The 
National Bank  sharply raised interest rates in December but  may come under pressure  to 
relax its policy in the run-up to the  1998 parliamentary elections. Capital inflows  have  so 
far  been  more  than  sufficient  to  finance  the  current  account  deterioration  and  debt 
service remains low. 

m.  NEWLY INDEPENDENT  STATES 

ARMENIA 

Armenia  remains  in  the  category  of  high-risk  creditors.  The  economic  recovery  has 
continued  for  a  third  consecutive  year  in  1996  with  GDP  growth  expected  to  have 
reached  some  6%>.  However,  the  slow  pace  of  structural  reforms  -  even  if  the 
privatization  process  started  early  after  independence  -  has  made  Armenia  largely 
dependent  on  external  assistance.  The  external  debt  is  estimated  at  about  US$  600 
million  (some  35%> of  GDP)  by  end  1996.  The  country  has  been  facing  difficulties  in 
meeting  its  external  financial  obligations  towards  the  Community  but  an  understanding 
leading  to  the  eventual  full  clearance  of the  existing  arrears  has now  been  reached  with 
the  Armenian  authorities.  The  approval  by the IMF Board  in February  1996  of a 3-year 
economic  programme  may  contribute  to  accelerate  the  pace  of  reforms  and  to  improve 
the general economic situation in the medium-term. On the political  side, no progress  has 
been made concerning the Nagorno Karabakh issue. 

AZERBAIJAN 

Azerbaijan's  risk  assessment  has  improved  somewhat  in  1996.  Economic  recovery 
appears to  have  started  and  GDP  is estimated  to  have grown  by about  1% during  1996, 
following  a  sharp  decline  of  some  40%  in  1994-1995.  The  inflation  rate  also  sharply 
improved,  having  declined  from  400%  in  1995  to  some  20%)  in  1996,  while  the  fiscal 
deficit  is expected  to  have  declined  to  less than  3% of GDP.  The  external  debt  is  rather 
low  at about  US$  560 million (some  16 % of GDP) by end  1996. Concerning  structural 
reform,  Azerbaijan  is lagging  well  behind  most  other  NIS. A new  economic  programme 
has,  however,  been adopted,  covering  the  1996-99  period  and  designed  to  be  supported 
by IMF credits. This programme,  approved by the IMF Board  in December  1996, aims at 
preparing  the  country  for  the  prospective  oil  boom  and  is  addressing  the  key  stmctural 
reform  issues.  Azerbaijan's  medium-term  perspectives  are  potentially  favourable,  owing 

17 

mainly to its huge oil reserves. In the short run however, the combination  of a still  fragile 
economic situation,  slow structural  reforms  and the unresolved  conflict  with Armenia  on 
Nagorno Karabakh implies that the country risk remains high. 

BELARUS 

The  political  developments  in.  Belarus  during  1996  have  been  preoccupying.  In 
connection  with  the  referendum  in  November  doubts  were  raised  as  regards  the 
Belarussian  authorities'  commitment  to  democratic  principles.  The  prospect  of  a  future 
political  and/or  economic union between  Belarus  and  Russia  adds  further  uncertainty  to 
the  picture.  With  regard  to  macro-economic  developments,  Belarus  achieved  real  GDP 
growth  of 2.6 % in  1996, but  several macro-economic  developments still raise concerns. 
Despite  a  sharp  currency  depreciation  from  April  1996,  the  Belarussian  currency 
remained  overvalued at the end of the year and the trade deficit had grown to US$  1.7 bn 
or  14.1 % of GDP. In absence of restructuring,  20 % of enterprises were still working  at 
a  loss, unemployment  remained  high and hidden,  while interentreprise  arrears  amounted 
to  above  100 %  of GDP.  Towards  the  end  of  1996, inflation  accelerated  (8 %  monthly) 
as a result of lax monetary policy in the form of directed  credits from  the National  Bank. 
The  interruption  in  the  structural  reform  process  as  well  as  the  uncertainties  regarding 
the political commitment to pursue economic reform were other  sources of concern. The 
Belarussian economy remains unreformed  in many areas and the state continues to play a 
major  role in production  and distribution.  The structure of the economy remains de  facto 
highly  monopolistic  and  prices  are  to  a  high  degree  controlled.  Overall  risk  therefore 
remains high. 

GEORGIA 

The risk assessment  for  Georgia  has remained  rather  stable throughout  1996.  Following 
the first  signs of recovery  registered  in  1995, GDP growth of some  10% is expected  for 
1996.  The  situation  in  public  finances  has  worsened  considerably,  however,  due  to  a 
collapse  in revenues,  which  are  far  below  programme  targets.  Georgia  has  accumulated 
foreign  debt,  estimated  at  some  US$  1.3  billion  by  end  1996  (27%  of  GDP),  the  main 
part  of  which  represents  import  related  payments  arrears.  Rescheduling  arrangements 
have  been  reached  with  most  creditors.  Georgia  is  also  in  arrears  of  payments  towards 
the  Community  but  an  understanding  has  now  been  reached  with  the  Georgian 
authorities  leading  to  the  eventual  full  clearance  of  these  arrears.  The  approval  by  the 
IMF  Board  in  February  1996  of  a  3-year  economic  programme  may  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 remains unresolved. 

MOLDOVA 

Moldova's  economic  and  structural  reform  performance  fell  short  of  expectations  in 
1996. GDP declined further  by some 3 to 5%. Fiscal performance  was poor  as a result of 
weak  tax  collection,  although  corrective  measures  were  implemented  in  1996  to  tackle 
this  problem.  Moldova's  foreign  debt  was  expected  to  reach  some  US$  700  million  by 
end-1996 (some  32% of GDP)  and  is mainly owed  to  international  financial  institutions. 
Important  structural  reforms  still  remain  to  be  undertaken  in  key  sectors  such  as 
privatization  of  agriculture  and  restructuring  of  enterprise  and  energy  sectors.  TJie 

18 

approval  by  the  IMF  Board  in  May  1996  of  a  3-year  economic  programme,  should 
contribute  to  accelerate  the  pace  of  reforms  and  to  improve  the  general  economic 
situation  in  the  medium-term.  The  newly-elected  President  and  the  new  government 
seem committed  to reforms  and may also give new impetus to the negotiations  aiming at 
solving the issue of the autonomy of the proclaimed  Dniestr Republic, part  of Moldova's 
territory. 

TAJIKISTAN 

After  an  escalation  of  the  military  confrontation  with  the  Islamic  opposition  until 
November  1996, the  authorities  and  the opposition  agreed  on a ceasefire  which  appears 
to  be holding.  The  macro-economic  developments  since  early  1996  have  been  positive, 
with  rapid  reduction  of  monthly  inflation  (2.5  %  in  November  1996),  budgetary 
performance  broadly  in  line  with  the  IMF  programme  and  satisfactory  credit  and 
monetary  policies. However,  GDP  has continued  to fall  (10%). The liberalization  of  the 
forex  market,  foreign  trade  and  prices  is  well  advanced.  The  pace  of  the  enterprises 
privatization and of the land reform,  slow until now, is expected to accelerate in  1997. At 
end  1996,  the  country  had  a  foreign  trade  surplus  of  US$  111  million,  but  foreign 
exchange reserves were still weak.  The level of these reserves is expected  to  increase up 
to  a  level  of  2  months  of  imports  in  1997.  At  the  end  of  1996,  the  external  debt  of 
Tajikistan  was  equivalent  to  the  country's  GDP.  Major  creditors,  however,  agreed  to 
reschedule  the  debt  falling  due  in  1996,  while  rescheduling  of  debt  service  payments 
falling  due  in  1997  had  begun.  The  country  is  in  arrears  of  payments  towards  the 
Community  but  an  understanding  has  now  been  reached  with  the  Tajik  authorities 
leading  to  the  eventual  full  clearance  of  these  arrears  in  the  context  of  a  Stand-By 
arrangement with the IMF expected to be agreed in the coming months. 

UKRAINE 

In the second  half of  1996, Ukraine's  transition to  a market  economy,  which  essentially 
had  started  in  late  1994  after  the  election  of  President  Kuchma,  seems  to  have  gained 
new  momentum.  The  continuation  of  a  relatively  tight  monetary  policy  was  a 
determining  factor  in  further  reducing  inflation,  stabilizing  the  exchange  rate  and 
ensuring  the  successful  introduction  of  the  new  national  currency  in  September.  The 
Central Bank Governor  responsible for this policy was recently reconfirmed  for  a second 
term. The budget  deficit  was  also brought  down to  some 3%, in line with targets  agreed 
with  the  IMF,  however  at  the  cost  of accumulating  significant  arrears  on  public  wages, 
salaries  and  pensions,  in  the  order  of  some  3.5%  of  GDP.  The  economic  situation  has 
remained  very  difficult,  with  GDP  declining  by another  10% in  1996.  On  the  structural 
side,  there  was  substantial  progress  in  the  area  of  privatization,  demonopolization  and 
banking supervision. 

With  a  view  to  continuing  and  reinforcing  stabilization  and  reform,  thereby  laying  the 
foundations  for  growth  to  resume,  the  Ukrainian  government  adopted  in  November  a 
comprehensive  medium-term  reform  programme.  During the last few  months however  it 
became  clear  that  it  would  take  considerable  time  to  have  this  package  approved  by 
Parliament,  thereby  also  delaying  the  expected  economic  recovery.  Once  the  reform 
package has been  approved,  Ukraine can expect  financial  assistance  of  US$  1.9 bn  from 
the  IMF  (Extend  Financing  Facility)  and  the  World  Bank  to  help  meet  its  external 

-  19 

financing  needs  in  1997. In  addition,  official  bilateral  donors,  including  the  Community, 
are expected  to provide complementary financial  assistance. Ukraine also plans to  launch 
its  first  Eurobond  issue  once  the  Extended  Financing  Facility  is  in  place  and  a  credit 
rating has been obtained, both expected for  Spring  1997. 

Ukraine's  debt  ratios  have  declined  somewhat  during  the  last  two  years  and  therefore 
remain fairly moderate. With the resumption of payments to Russia and Turkmenistan  on 
previously rescheduled  gas arrears, the debt service ratio is expected  to rise somewhat  in 
1997. 

UZBEKISTAN 

With the relative military stabilization in Afghanistan,  prospects  for  Uzbek  authorities  to 
benefit  from  political  stability  in Central  Asia are better.  With regard  to  macroeconomic 
indicators,  Uzbek  real  GDP  is  expected  to  have  grown  slightly  (1.6  %)  in  1996. 
However,  annual inflation was picking up at 65 % towards the end  of the year,  owing  to 
massive  budgetary  support  to  the  agricultural  sector  in  October  and  the  budget  deficit 
was higher than  expected.  In  1996, as a result  of a big rise in imports,  a fall  in the  price 
of  cotton  and  bad  harvests,  the  current  account  showed  a  deficit  which  resulted  in  a 
decrease of the foreign  exchange reserves to the, still however comfortable,  level of US$ 
1.8  billion  (5 months  of  imports).  With  the  Som  under  increasing  pressure  and  the 
Government  reluctant  to  use  its  hard  currency  reserves,  Uzbekistan  was  hit  by  hard 
currency  shortage  on the forex  market,  while draconian  foreign  exchange  controls  were 
introduced,  prompting the international  donors to  suspend  their macro-financial  support. 
Foreign direct investment is however reported  to have been high in  1996. With regard  to 
structural  reform,  the  restructuring  of  enterprises  was  progressing,  whereas  some 
reversals  were  observed  in the  liberalization  process  of  the  foreign  trade  and  exchange 
market. 

IV.  MEDITERRANEAN  COUNTRIES 

ALGERIA 

Although  economic indicators have recently improved,  Algeria country  risk  remains high 
over  the  medium-term.  The  macro-economic  improvement  achieved  under  the  IMF-
supported  programme  implemented  since  1994 has  recently  been  strengthened  owing  in 
part  to  good  performances  in  agriculture  and  the  hydrocarbon  sector.  Output  growth, 
estimated  at  about  4  percent,  continues  to  recover  in  1996-97;  inflation  decelerated  to 
below  20  percent  and  the  up-swing  in  oil  prices  contributed  to  a  budget  surplus  and 
external  current  account  surplus  of  2.7  percent  of  GDP  and  0.3  percent  of  GDP, 
respectively.  Foreign  exchange  reserves  increased  to  US$  4.2  billion  at  end-1996, 
representing  more  than  4  months  of  imports.  According  to  the  IMF,  these  trends  are 
expected  to  continue  in  1997.  Despite  these  achievements,  the  political  situation  and 
security  problems  continue  to  hinder  the  medium-term  prospects,  including  the  pace  of 
structural  reforms  and  the  development  of  a  dynamic  private  economy.  The  most 
sensitive  areas  for  important  structural  reforms  (such  as  agriculture,  public  enterprise 
restructuring,  privatization  of large  public enterprises,  deregulation,  and  property  rights) 
still  have  to  be  tackled.  In  addition,  difficult  social  conditions,  including  persisting  high 

20 

unemployment  (estimated  at  28  percent)  and  housing  shortages,  could  undermine  the 
reform  momentum.  Finally,  Algeria  external  and  domestic  financial  balances  will  remain 
vulnerable  to  the  future  vagaries  of  the  oil  prices.  In  particular,  the  overall  external 
position  will  remain  fragile  over  the  medium-term  with  no  access  to  the  international 
capital  markets, 
from 
international financial  institutions and reschedulings from the London and Paris Clubs. 

investment,  and  continued  support 

limited  foreign  direct 

21 

ANNEX 

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 EXPECTED SIGNATURE AND DISBURSEMENT OF EIB  LOANS 
I.D  PAYMENT OF THE BUDGET GUARANTEE 

; 

22 
22 
24 
29 
30 

II. METHODOLOGICAL NOTE ON THE ANALYSIS OF THE COMMUNITY'S ESTIMATED 
LENDING CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES OVER THE PERIOD 
1997-99 UNDER THE GUARANTEE FUND MECHANISM 
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) 
II.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) 

32 
33 
33 

31 
31 
31 
32 

: 

III. TABLES: COUNTRY-RISK INDICATORS 

34 

22 

I. 

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. 

LA. I 

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  (Member  States)  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 which 
have not yet been disbursed  nor the proportion  of disbursed  loans which have already been 
repaid. It may be described as the amount of loans which exist on a given date. 

I.A. 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; 

23 

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. 

-24 

LB  Loan operations covered by a budget guarantee 

TABLE  5a 

Borrowing and lending operations:  Member States 

Changes  in amounts  outstanding  during  six-month  period 

COUNTRY 

Decision 

Date 
of  decision 

Loan 
term 
(years) 

Loan  situation 

• closed  (a) 
• partially  disbursed (b) 
• disbursed  in full  (c) 
• not yet disbursed  (d) 

GREECE 

91/136/EEC 

04.03.91 

ITALY 

93/67/EEC 

18.01.93 

EURATOM 

NCI 

TOTAL 

(3) 

(3) 

77/270-271/Euratom 
80/29/Euratom 
82/170/Euratom 
85/537/Euratom 
90/212/Euratom 

78/870/EEC 
81/19/EEC(1) 
81/1013/EEC(2) 
82/169/EEC 
83/200/EEC 
87/182/EEC 

29.03.77 
20.12.79 
15.03.82 
05.12.85 
23.04.90 

16.10.78 
20.01.81 
14.12.81 
15.03.82 
19.04.83 
09.03.87 

(c) 
(d) 
(d) 

(c) 
(c) 
(d) 
(d) 

(c) 
(c) 
(c) 
(b)(4) 
(d)(4) 

(c) 
(c) 
(c) 
(c) 
(c) 
(c) 

ECU million 

Amount 
decided 

Amount 
outstanding 
at  1.7.96 

Operations  in six-month 
period 

Amounts 
disbursed 

Amounts 
repaid 

Amount 
outstanding  at 
31.12.96 

500,00 

3.525,90 

500,00 

3.478,57 

589,50 

24,80 

572,48 

'•n 

1 

935,60 

0,01 

187,50 

748,11 

2.200,00 
1.000,00 
600,00 
600,00 

8.000,00 
2.000,00 
2.000,00 
2.000,00 
2.000,00 

4.000,00 
500,00 
500,00 
1.000,00 
1.000,00 
1.000,00 

6.830,00 
1.000,00 
1.000,00 
80,00 
1.000,00 
3.000,00 
750,00 

21.030,00 

5.551,00 

0,01 

212,30 

5.299,16  (5) 

(1)  Exceptional  aid for the reconstruction  of  areas  hit by the earthquake  in  Italy  in  1 9 8 0. 

(2)  Exceptional  aid for t he reconstruction  of  areas  hit by the earthquake  in  Greece  in  1 9 8 1. 

(3)  Long-term  loans  for  w h i ch  the schedule  of  repayments  depend  on the dates  of  disbursement. 

(4)  By Decision  9 4 / 1 7 9 / E u r a t om  of  21  M a r ch  1 9 94 the Council  decided  to  extend  Euratom  loans  to  the financing  of  projects  in  certain  non-member  c o u n t r i e s. 

At  31  December  1 9 96  no loans  had y et been  granted  in  non-member  countries. 

(5)  Discrepancy  caused  by  change  in the rates  of  the other  currencies  against  the  e c u. 

TABLE 5b (1) 

Financial assistance to non-member countries 

Changes in amounts  outstanding  during  six-month  period, broken down by  countries  and tranche 

COUNTRY 

Decision 

Date of 
decision 

Loan 
term 
(years) 

Expiry date 

Loan situation 

closed (a) 
> partly disbursed (b) 
• disbursed in full (c) 
• not yet disbursed (d) 

Amount 
decided 

Amount 
outstanding 
at 1.7.96 

Operations in six-month period 

Amounts 
disbursed 

Amounts 
reapid 

Amount 
outstanding 
at 31.12.1996 

ECU million 

HUNGARY I 
1st tranche 
2nd tranche 
3ème tranche 
HUNGARY II 
1st tranche 
2nd tranche 
CZECH REPUBLIC 
1 st tranche 
2nd tranche 

SLOVAKIA 

1st tranche 
2nd tranche 
BULGARIA I 
1st tranche 
2nd tranche 
BULGARIA II 
1st tranche 
2nd tranche 
ROMANIA I 
1st tranche 
2nd tranche 

90/83/EEC 
90/681/EEC 

22.0290 
21.12.90 

91/310/EEC 

24.06.91 

91/106/EEC 

25.02.91 

91/106/EEC 

2502.91 

91/311/EEC 

24.06.91 

92/511/EEC 

19.1092 

91/384/EEC 

22.07.91 

.  ROMANIA II 
ROMANIA III 

92/551/EEC 
94/369/EC 

27.11  92 
20.06.94 

1 st tranche 
2nd tranche 

BALTIC STATES 
ESTONIA 

1st tranche 
2nd tranche 

92/542/EEC 

23.11.92 

20.04.95 
14.02.96 

18.03.98 
15.12.97 

18.03.98 
15.12.97 

18.03.98 
15.12.97 

18.03.98 
15.12.97 

07.12.2001 
29.08.2003 

01.02.99 
18.03.98 
26.02.2000 

20.11.2002 

31.03.2000 

(a) 
(a) 
(d) 

(c) 
(c) 

(c) 
(c) 

(c) 
(c) 

(c) 
(c) 

(c) 
(c) 
(c) 
(d) 
(c) 
(d) 

(c) 

870,00 
350,00 
260,00 
260,00 
180,00 
100,00 
80,00 
250,00 
123,30 
126,60 
125,00 
61.60 
63,30 
290,00 
150,00 
140,00 
110,00 
70,00 
40,00 
375,00 
190.00 
185,00 
80,00 
125,00 
55,00 
70,00 
220,00 
40,00 
20,00 
20.00 

0,00 

100,00 
80,00 

123,30 
126,60 

61,60 
63,30 

150,00 
140,00 

70,00 
0,00 

190,00 
185,00 
80,00 

55,00 
0,00 

20,00 
0,00 

40,00 

I 

0,00 

100,00 
80,00 

185,00 
190,00 

150,00 
140,00 

70,00 
40,00 

190,00 
185,00 
80,00 
0,00 
55,00 
0,00 

20,00 
0,00 

TABLE  5b (2) 
Financial assistance to non-member countries 

Changes in  amounts  outstanding  during  six-month  period, broken down  by  countries  and tranche 

COUNTRY 

Decision 

Date of 
decision 

Loan 
term 
(years) 

Expiry  date 

Loan situation 

- closed (a) 
- partly disbursed (b) 
- disbursed in full (c) 
- not yet disbursed (d) 

Amount 
decided 

Amount 
outstanding 
at 1.7.96 

Operations in six-month  period 

Amounts 
disbursed 

Amounts 
repaid 

Amount 
outstanding 
at 31.12.1996 

ECU  million 

LATVIA 

1 st tranche 
2nd tranche 

LITHUANIA 

1st tranche 

2nd tranche 
MOLDOVA I 

1 st tranche 

2nd tranEC 
MOLDOVA II 
UKRAINE I 
UKRAINE II 
1/2 tranche 
1/2 tranche 
2nd tranche 
BELARUS 

1st tranche 

2nd tranche 

ALGERIA I 
1st tranche 
2nd tranche 
ALGERIA II 
1st tranche 
2nd tranche 
ISRAEL 
REPS.OF FORMER USSR 

TOTAL 

7 

7 
7 

10 
10 
10 
10 

10 
10 

31.03.2000 

27.07.2000 
16.08.2002 

07.12.2004 
08.08.2005 
30.10.2006 
28.12.2005 

29.08.2006 
30.10.2006 

10 

28.12.2005 

5 
7 

7 

5 
3 

15.12.97 
17.08.2001 

27.11.202 

15.12.97 
28.09.97 

94/346/EC 

13.06.94 

96/242/EC 
94/940/EC 
95/442/EC 

25.03.96 
22.12.94 
23.10.95 

95/132/EC 

10.04.95 

91/510/EEC 

23.09.91 

94/933/EC 

22.12.94 

91/408/EEC 
91/658/EEC 

22.07.91 
16.12.91 

(c) 
(d) 

(c) 
(b) 

(c) 
(c) 
(c) 
(c) 

(c) 
(c) 
(d) 

(c) 
(d) 

(c) 
(c) 

(c) 
(d) 
(c) 

80,00 
40,00 
40,00 
100,00 
50,00 
50,00 
45,00 
25,00 
20,00 
15,00 
85,00 
200,00 

55,00 
30,00 
25,00 
400,00 
250,00 
150,00 
200,00 
100,00 
100,00 
160,00 
1.250,00 

40,00 
0,00 

50,00 
25,00 

25,00 
20,00 
0,00 
85,00 

0,00 
0,00 
0,00 

30,00 
0,00 

250,00 
150,00 

100,00 
0,00 
160,00 
143,70 

15,00 

50,00 
50,00 

40,00 
0,00 

50,00 
25,00 

25,00 
20,00 
15,00 
85,00 

50,00 
50,00 
0,00 

30,00 
0,00 

250,00 
150,00 

100,00 
0,00 
160,00 
143,70 

5.035,00 

2.523,50 

155,00 

0,00 

2.678,70 

GEOGRAPHICAL AREA 

Decision 

LOAN GUARANTEES TO EIB 

Date of 
decision 

Rate of 
guarantee 

Loan 
term 
(years) 

Date of 
guarantee 
contract 

Amount 
decided 

Loans  signed 

Amount  outstanding 

at 1.7.96 

during six-
month  period 

at 1.7.96 

at 31.12.96 

MED. financial protocols (1) 

8.03.77 

75% (2) 

MED. horizontal  cooperation 

R/1762/92/EEC 

29.06.92 

75% (2) 

TOTAL MED. 

Central & Eastern  Europe 

90/62/EEC(4) 

12.02.90 

91/252/EEC(5) 

14.05.91 

Central & Eastern Europe II 

93/696/EC(6) 

13.1293 

Asia, Latin America I 

93/115/EEC 

15.02.93 

Asia, Latin America II 

96/723/EC 

12.12.96 

SOUTH AFRICA 

95/207/EC 

01 06.95 

100% 

100% 

100% 

100% 

100% 

100% 

TOTAL 

15 

15 

15 

15 

15 

15 

15 

15 

30.10.78/10.11.78 

09.11.92/18.11.92 

24.04.90/14.05.90 

19.01.93/04.02.93 

22.07.94/12.08.94 

04.11.93/17.11.93 

18.03.97/-  . 

04.10.95/16.10.95 

6062 

1800 

7862 

1000 

700 

3000 

750 

275 

300 

13887 

5196 

1397 

6593 
(3) 

947 

700 

1999 

647 

101 

10987 

129 

404 

533 
(3) 

-20 

981 

2065 

261 

2327 

559 

325 

141 

191 

1494 

3543 

2057 

301 

2357 

615 

356 

335 

204 

32 

3898 

(1) including ECU 1 500 million for Spain, Greece and Portugal. 
(2) General guarantee of 75% for all credits  made available under lending operations  under a guarantee contract signed between the Community and the EIB on 30.10.78 and 10.11.78. 

By way of exception, a 100%  guarantee applies to the emergency aid granted to Portugal in accordance with the Council Decision of 7 October 1975. 

(3) the Community has guaranteed ECU  5 379.4 million, of which ECU 141.5 million is covered by a 100% guarantee for Portugal. 
(4) Non-member  countries:  Poland, Hungary. 
(5) Non-member countries: Czech Republic and Slovak  Republic, Bulgaria, Romania. 
(6) Nori-member countries:  Poland, Hungary,  Czech Republic and Slovak Republic,  Bulgaria, Romania, Baltic  States and Albania.  -

29-

I.C  Expected  signature and disbursement  of EIB loans 

The EIB has supplied the figures used for calculation of the assumptions made for drawing up 
Table 3 (EB3 loans to non-member countries from its own resources). 

Expected signatures 

Mediterranean countries 

At 31 December  1996 a total of ECU 250 million was still to be signed in 1977 under current 
and former mandates (ECU 477 million, less ECU 227 million for the remainder from the  first 
and second protocols with Yugoslavia which will no longer be signed). 

It is assumed that all the ECU 225 million under the third and fourth protocols with Syria will 
be signed in 1998; however, this assumption is very uncertain. 

Central and Eastern Europe 

At 31 December  1996 a total  of ECU 20 million was  still awaiting  signature  under  current 
and former mandates. 

Asia and Latin America 

At 31 December  1996 a total  of ECU 20 million was still awaiting  signature under the first 
mandate. As the Council decided to grant ECU 275 million on  12 December  1996, the total 
still to be signed in 1997 comes to ECU 295 million. 

South Africa 

At 31 December  1996 a total of ECU  199 million was still to be signed in  1997 under the  first 
mandate. 

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 31 December  1996 ECU 6 256.3 million still had to be disbursed  against  loans  signed  at 
that date. The total breaks down as follows:6 

Mediterranean 

Central and Eastern Europe 

Asia and Latin America 

South Africa 

ECU 2 497.3 million 

ECU 3 247  million 

ECU  443  million 

ECU 

69  million 

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. 

30 

I.D  Payment  of the budget  guarantee 

I.D.I 

Borrowing/lending  operations 

In this type of operation, the Community borrows on the financial market  and  on-lends the 
proceeds (at the same rate and for the same term) to Member States (balance of payments), 
non-member countries (medium-term financial assistance) or firms (NCI, Euratom). 

The loan repayments are scheduled to match the repayments of the borrowings due from the 
Community.  If the recipient  of the loan is late in making a repayment, the Commission must 
draw on its resources to repay the borrowing on the due date. 

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. 

I.D. 2  Guarantees given  to third parties 

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 
tliree 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. 

31 -

If there are insufficient  resources in the Fund, the procedure used for activating the guarantee 
is the same as for borrowing/lending operations. 

n.  METHODOLOGICAL  NOTE  ON  THE  ANALYSIS  OF  THE 
COMMUNITY'S  ESTIMATED  LENDING  CAPACITY  IN  RESPECT  OF 
NON-MEMBER  COUNTRIES  OVER THE PERIOD  1997-99  UNDER  THE 
GUARANTEE FUND MECHANISM 

n.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 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 

resources. 

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  Council  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 

\ 

- 3 2-

tranches  calculated  on the basis  of the  annual  amounts indicated  in the financial statement 
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  second  half  of  1996  the  budgetary  authority  therefore  adopted  transfers  42/96  and 
52/96 to provision the Guarantee Fund in respect of the lending operations with non-member 
countries  (loans  to  Moldova  and  EIB  loans  to  Asian  and  Latin  American  developing 
countries with which the Community has concluded cooperation agreements). 

II.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. 

II.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".  As  the  amounts  drawn  under  the  activation  of  the  guarantee  have  not  been 
restored, the rate of provisioning applied to the new operations is 15%). 

33 

A 14% provisioning rate is applied to the EIB loans granted before defaults were covered by 
the Fund  if the financial statements  provide  for  the  signature  of part  of  the  loans  in  1997. 
(Pursuant to Articles 2 and 4 of the 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.) 

n.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). 

II.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. 

34 

in.  TABLES: COUNTRY-RISK INDICATORS 

-35 

Country-risk  indicators 

Country:  Bulgaria 

footnotes 

1994 

1995 

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

(end of1 period) 
(end of period) 
(end of period) 

1.8 
7,8 
12,8 
121,9 
66,0 

2,5 
8,6 
11.6 
32,8 
70,7 

(12) 

1996 
(10) 

-10,0 
-1,1 
12,5 
311,0 
496,0 

General government  balance (as % of GDP) 

-5,8 

-5,7 

-11,0 

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) 
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 (%) 
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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating 

'  5,3 
-2,0 
105 

1,3 
3,0 

10,3 

0,9 
0,5 
0,5 
118,9 
219,8 
18,4 
17,6 
(4) 

6,8 
4,6 
8,9 

7,0 
-0,4 
90 

1,5 
2,8 

9,4 

0,8 
0,2 
0,6 
80,9 
155,1 
11,4 
(9) 
(9) 

7,3 
5,7 
7,7 

(09/96) 

4,4 
-0,1 
61 

0,5 
(11) 

9,9 

(09/96) 

1,1 
0,5 
0,6 
280,0 
221,0 
(11) 
(9) 
(9) 

(09/96) 

8,1 
6,5 
14,6 

(09/96) 

(5)+(6) 
(3/94-3/95) 
(7) 
(09/94) 

-

-

(8) 
(8) 
03/94  09/94 
88  98 
(167)  (167) 
03/94  09/94 
91  95 
(135)  (135) 
19.8  20.8 

(8) 
(8) 
03/95  09/95 
90  90 
(187)  (181) 
03/95  09/95 
93  94 
(135)  (135) 
21.9  222 

(8) 
(8) 
03/96  09/96 
99  92 
(178) (178) 
03/96  09/96 
92  93 
(135) (135) 
23 1  23.5 

(D 

(2) 

(2) 

(3) 

(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)  London Club DDSR  (July) Paris club resched. (Apr) 
(5)  SBA 
(6)  STF 
(7)  SBA suspended 
(8)  Not rated 
(9)  No 
(10)  Preliminary 
(11)  Not available 
(12)  Latest data or estimates (E) (in sheet * is being used) 

- 3 6-

Country-risk  indicators 

-  Country: Czech Republic 

footnotes 

1994 

1995 

Real GDP growth rate (in %) 
Industrial production ( % change) 
Unemployment (% of labour force) 
Inflation rate 
Exchange rate (CK's per USD) 

(end of period) 
(Dec/Dec) 
(end of period) 

2,6 
2.1 
3,3 
10,2 
28,2 

4,8 
9,2 
3,0 
7,9 
26,3 

General government  balance (as % of GDP) 

-0,3 

-0,8 

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

(1) 

14295 
-0,1 
762 

6,2 
4,2 

10,7 

2,5 
2,0 
0,5 
29,7 
56,6 
12,6 
(4) 

5,2 
3,4 
2,5 

17054 
-3,0 
2547 

14,0 
7,9 

16,5 

2,6 
1,5 
1,1 
35,8 
56,5  ' 
15,2 
(4) 
(4) 

5,8 
2,6 
2,5 

1996 
(7) 

4,8 
7,9 
3,0 
9,0 
27,0 

-0,6 

29920 
-6,5 
875 

12,4 
5,3 

16,1 

3,8 
3,0 
0,8 
30,6 
53,8 
12,7 
(4) 
(4) 

7,3 
3,6 
1,9 

IMF arrangements 

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

(5) 
(3/93-3/94) 
(6) 

-

-

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 
(number of countries) 
The Institutional  Investor 
Position in the ranking 
(number of countries) 
Credit rating 

Baa2 (06/94) 
BBB+ (07/94) 
03/94  09/94 
40  39 
(167) (167) 
03/94  09/94 
40  39 
(135) (135) 
49.7  52.8 

Baal  (09/95) 
A 
03/95  09/95 
35  41 
(187) (181) 
03/95  09/95 
33  30 
(135) (135) 
55.8  58.4 

Baal 
A 
03/96  09/96 
36  35 
(178) (178) 
03/95  09/95 
30  29 
(135) (135) 
60.1  62.0 

(2) 

(2) 

(3) 

(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)  No 
(5)  SBA 
(6)  On-track. All debts to IMF paid ahead of schedule. 
(7)  Projections (unless otherwise stated) 

- 3 7. 

Country-risk  indicators 

Country:  Estonia 

footnotes 

1994 

1995 

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

(end of period) 
(end of period) 
(end of period) 

General government  balance (as %  of  GDP) 

Financial  balance 
Fiscal  balance 

Balance  of  payments 

-0,1 
3,5 
4,5 
41,6 
13,0 

(1) 
(1) 

2,9 
1,3 

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 

1329 
-12,3 
212 

447 
3,2 

3,2 
1,4 
4,1 
28,8 
11,5 

-0,4 
-0,8 

1861 
-8,2 
202 

583 
2,7 

1996 
(10) 

3,1 
-0.7 
4,3 
23,1 
12,4 

(11) 
-1,5 

1980 
(11) 
42 

605 
2,3 

(12) 

(09/96) 

(09/96) 
(09/96) 

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

(2) 

IMF  arrangements 

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

170,3 

246,8 

294 

(10/96) 

8,1 
3,0 
5,1 
7,5 
12,8 
0,6 
(5) 
(5) 

0,4 
15,7 
2,0 

12,8 
3,5 
9,3 
7,1 
13,3 
0,7 
(5) 
(5) 

0.5 
16,5 
2,2 

•  * 

(10/96) 

21,4 
10,5 
10,9 
(11) 
14.3 
(11) 
(5) 
(5) 

0,5 
13,8 
2,1 

(6) 
(10/93-3/95) 
(7) 

(9) 
(4/95-6796) 
(7) 

(9) 
(4/95-6/96)  (13) 
(7) 

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 
(number of countries) 
The Institutional  Investor 
Position in the  ranking 
(number of countries) 
Credit  rating 

(8) 
(8) 
03/94  09/94 
105  102 
(167) (167) 
03/94  09/94 
88  86 
(135) (135) 
20.7  23.6 

(8) 
(8) 
03/95  09/95 
66  76 
(187)  (181) 
03/95  09/95 
79  79 
(135) (135) 
254  26.3 

(8) 
(8) 
03/96  09/96 
73  71 
(178)  (178) 
03/96  09/96 
76  71 
(135)  (135) 
28 9  31.1 

(3) 

(3) 

(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 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. 

(5)  No 
(6)  SBA/STF 
(7)  On-track 
(8)  Not rated 
(9)  SBA 
(10)  Preliminary 
(11)  Not  available 
(12)  Latest data or estimates  (E) (in sheet * is being  used) 
(13)  The SBA (7/96-7/97)  is also on track. 

-38-

Country-risk  indicators 

Country: Hungary 

« 

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

(end"of period) 
(Dec/Dec) 
(end of period) 

footnotes 

1994 

1995 

1996 

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

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

1,0 
2,3 
10,5 
19,8 
164,0 

(10) 

(09/96) 
(11/96) 

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

-6,3 

-6,8 

-3,3  ' 

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  bnUSD 
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 
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 (%) 
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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating 

10219 
-9,5 
1100 

6,8 
7,2 

28,5 

6,2 
4,2 
2,0 
68,9 
278,9 
60,8 
(5) 
(5) 

16,5 
4,0 
11,3 

(6) 
(7) 

14667 
-5,6 
4410 

12,0 
9,5 

31,7 

7,7 
5,3 
2,4 
70,8 
189,2 
52,5 
(5) 
(5) 

13,0 
3,1 
6,6 

12788 
-3,2 
1730 

13,8 
10,1 

(11/96) (8) 

(11/96) 

(11/96) 
(11/96) 

26,4 

(11/96) 

(8) 
(8) 

7,4 
5,1 
2,3 
59,1 
206,2 
43,6 
(5) 
(5) 

9,6 
2,9 
5,9 

-

(6) 
(3/96-2/98) 
(9) 

Ba1 
BB+ 
03/94  09/94 
44  46 
(167)  (167) 
03/94  09/94 
43  44 
(135) (135) 
46.1  46.2 

Ba1 
BB+ 
03/95  09/95 
50  44 
(187) (181) 
03/95  09/95 
45  48 
(135) (135) 
46 4  45.0 

Baa3 
BBB-
03/96  09/96 
44  44 
(178) (178) 
03/96  09/96 
50  50 
(135) (135) 
43.6  44.7 

(1) 

(2) 

(3) 

(3) 

(4) 

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. 

(5)  No 
(6)  SBA 
(7)  First review uncompleted 
(8)  Exports of goods only for 1996 
(9)  On-track 
(10)  Latest data or estimates (E) (in sheet * is being used) 

39-

Country-risk  indicators 

Country:  Latvia 

footnotes 

1994 

1995 

1996 

(12) 

Real GDP growth rate (in %) 
Industrial production  ( %  change) 
Unemployment 
Inflation rate 
Exchange rate (Lats per USD) 

(end  of-period) 
(end of  period) 
(end of  period) 

General government  balance  (as % of  GDP) 

Financial balance 

Fiscal balance 

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 

(D 
(D 

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 

2,0 
-2,2 
6,5 
26 
0,55 

-1,7 
-4,0 

997 
-3,5 
155 

545 
4,5 

359 

50,0 
(5) 
(5) 
10,0 
36,0 
5,0 
(6) 
(6) 

Indicators  of  EU  exposures 

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

(2) 

0,7 
13,3 
4,8 

-1,6 
-6,3 
6,1 
23,1 
0,54 

2,5 
1,0 
7,2 
13,1 
0,55 

-2,7  • 

-3,3 

-1.2 

-1,8 

1306 
-4,4 
165 

527 
3,2 

423 

39,0 
(5) 
(5) 
9,0 
32,4 
3,0 
(6) 
(6) 

0,7 
12,3 
4,0 

1430 
-6,8 
200 

649 
3,5 

500 

71,0 
(5) 
(5) 
9,0 
35,0 
5,0 
(6) 
(6) 

0,7 
10,4 
3,6 

IMF  arrangements 

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

(7) 
(12/93-3/95) 
(8) 

(10) 
(4/95-4/96) 

(11) 

(10) 
(5/96) 
(8) 

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 
(number of countries) 
The Institutional  Investor 
Position in the  ranking 
(number of  countries) 
Credit  rating 

(9) 
(9) 
03/94  09/94 
104  125 
(167)  (167) 
03/94  09/94 
94  92 
(135)  (135) 
19.6  21.3 

(9) 
(9) 
03/95  09/95 
106  116 
(187)  (181) 
03/95  09/95 
91  89 
(135)  (135) 
22.6  23.4 

Baa3  (01/97) 
BBB  (01/97) 
03/96  09/96 
89  75 
(178)  (178) 
03/96  09/96 
86  88 
(135)  (135) 
24.7  25.7 

(3) 

(3) 

(4) 

(1)  Financial balance does  not take into account government  net lending, whereas fiscal balance does. 
(2)  Only EIB and 8 0P  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. 

(5)  Not available 
(6)  No 
(7)  SBA/STF 
(8)  On-track 
(9)  Not rated 
(10)  SBA 
(11)  Off-track 
(12)  Latest data or estimates  (E)  (in sheet  * is being  used) 

- 4 0. 

Country-risk  indicators 

Country:  Lithuania 

• 

footnotes 

1994 

1995 

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

(end of period) 
(end of  period) 
(end of  period) 

General government  balance (as % of  GDP) 

Financial  balance 

Fiscal  balance 

Balance  of  payments 

Exports (in mio  USD) 
Current account balance (in % of GDP), without official transfers 
Net inflow of foreign  direct investment  (in mio  USD) 
Official  FX reserves  (end of period, gross foreign assets) 

in  mio  USD 
in months of imports  of G&S 

External  debt 

External debt 
(in convertible  currencies,  in mio  USD, end of  period) 
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  (%) 
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 
(number of countries) 
The Institutional  Investor 
Position in the  ranking 
(number of countries) 
Credit  rating 

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

(1) 
(D 

-1,5 
-4,2 

1930 
-4,2 
60 

587 
3,1 

448 

19 
(5) 
(5) 
8,0 
~3,2 
1,0 
(6) 
(6) 

0,9 
13,3 
3,1 

(2) 

(3) 

(3) 

(4) 

(09/96) 
(09/96) 
(11/96) 

(09/96) 

1996 
(11) 

3,6 
2,4 
6,4 
13,1 
4,0 

-1,9 
-3,4 

3361 
-2,7 
101 

838 
2,9 

1070 

120 
(5) 
(5) 
10,4 
42,7 
4,8 
(6) 
(6) 

1,4 
10,5 
3,3 

3,1 
0,8 
6.1 
35,5 
4,0 

-1,8 

-3,3 

2210 
-3,2 
55 

819 
3,9 

757 

69 
(5) 
(5) 
9,7 
34,3 
3,1 
(6) 
(6) 

1,4 
13,9 
4,8 

(7) (10/93-3/94) 

(10)  (10/94-11/97) 

(10) 
(10/94-10/97) 

(8) 

(8) 

(10) 
(10/94-10/97) 
(8) 

(9) 
(9) 
03/94  09/94 
110  121 
(167)  (167) 
03/94  09/94 
97  96 
(135)  (135) 
18.4  20.0 

(9) 
(9) 
03/95  09/95 
108  118 
(187)  (181) 
03/95  09/95 
95  90 
(135)  (135) 
21.7  22.9 

Ba2 
(9) 
03/96  09/96 
85  59 
(178)  (178) 
03/96  09/96 
89  90 
(135) (135) 
23.8  25.3 

(1) 
(2) 
(3) 
(4) 

(5) 
(6) 
(7) 
(8) 
(9) 
(10) 
(11) 

Financial balance does  not take into account government net lending, whereas fiscal balance does. 
Only EIB and BOP loans  (outstanding disbursements)  to CEEC, NIS and MED 
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. 
Not  available 
No 
STF 
On-track 
Not  rated 
EFF 
Projections  (unless otherwise  stated) 

-41 -

Country-risk  indicators 

Country:  Romania 

footnotes 

1994 

1995 

1996 

(11) 

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

(end of period) 
('Dec/Dec; 
(end of period) 

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

6.9 
5,2 
8,9 
27,8 
2760 

4,4 
4,9 
6,1 
56,9 
4100 

General government balance (as % of GDP) 

-1,0 

-2,8 

-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 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 (%) 
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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating 

6,1 
-1,4 
341 

1596 
2,2 

5,5 

589 
313 
276 
18,3 
90,1 
9,6 
(4) 
(4) 

8,4 
10,7 
9,7 

7,5 
-3,6 
417 

1110 
1,4 

6,6 

1038 
462 
576 
18,7 
88,0 
13,8 
(4) 
(4) 

10,2 
11,5 
10,1 

(5) 
(5/94-12/95) 
(6) 

(8) 

(9) 

6,4 
-3,4 
608 

1700 
2,3 

6,9 

1200 
477 
723 
22,0 
97,0 
13,7 
(4) 
(4) 

10,2 
11,0 
12,5 

(10) 

(7) 
(7) 
03/94  09/94 
74  77 
(167)  (167) 
03/94  09/94 
76  74 
(135)  (135) 
25.4  262 

(7) 
(7) 
03/95  09/95 
68  64 
(187)  (181) 
03/95  09/95 
73  71 
(135)  (135) 
28.1  29.7 

Ba3 
BB-
03/96  09/96 
67  61 
(178) (178) 
03/96  09/96 
68  72 
(135) (135) 
30.9  31.0 

(1) 

(2) 

(2) 

(3) 

(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)  No 
(5)  SBA/STF 
(6)  On-track 
(7)  Not rated 
(8)  SBA extended through  1997 and augmented 
(9)  On-track; Off track in 1996 
(10)  SBA cancelled  New programme to be approved by IMF Board 
(11)  Latest data or estimates (E) (in sheet * is being used) 

42-

Country-risk  indicators 

Country: Slovak  Republic 

footnotes 

1994 

1995 

1996 

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

(end of period) 
(Dec/Dec) 
(end of period) 

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) 

-0,4 

0,7 

(9) 

(09/96) 
(11/96) 

(09/96) 
(10/96) 
(09/96) 

7,0 
2,6 
12,8 
5,4 
31,9 

-1,4 

7980 
-7,7 
189 

3473 
3,4 

6,3 

(09/96) 

(09/96) 

(09/96) 
(09/96) 
(09/96) 

820 
(4) 
(4) 
33,4 
58,8 
7,7 
(5) 
(5) 

4,5 
5,6 
4,4 

-

8983 
6,0 
184 

1691 
2,3 

3,9 

791 
(4) 
(4) 
31,1 
43,4 
8,8 
(5) 
(5) 

2,9 
5,3 
2,3 

10921 
3,6 
157 

3400 
4,1 

5,8 

1045 
(4) 
(4) 
39,9 
53,1 
9,5 
(5) 
(5) 

4,1 
5,2 
2,8 

(7) 
(7/94-3/96) (8) 

(6) 
(7/93  -7/94) 
(7) 
(7/94-3/96) 

Baa3 (05/94) 
BB- (02/94) 
03/94  09/94 
64  66 
(167) (167) 
03/94  09/94 
59  59 
(135) (135) 
31.6  33.1 

Baa3 
BB+ 
03/95  09/95 
53  51 
(187) (181) 
03/95  09/95 
61  59 
(135) (135) 
33.2  35.7 

Baa3 
BBB-
03/96  09/96 
48  49 
(178) (178) 
03/96  09/96 
57  53 
(135) (135) 
386  41.2 

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  (%) 
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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating 

(1) 

(2) 

(2) 

(3) 

(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)  Not available 
(5)  No 
(6)  STF 
(7)  SBA 
(8)  The mid-term review of the programme, which had been scheduled for February 1995, was not completed 
(9)  Latest data or estimates (E) (in sheet * is being used) 

f 

•43 

Country-risk  indicators 

Country:  Belarus 

footnotes 

1994 

1995 

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

(end of period) 
(Dec/Dec) 
(average) 

General government  balance (as % of  GDP) 

Balance of  payments.  . 

Exports of G & S (in mio USD) 
Current account  balance (in % of GDP) 
Net inflow of foreign direct investment  (in mio USD) 
Official FX reserves (end of period) 

» 

in  mio USD 
in months of imports 

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  (%) 
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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit  rating 

(D 

(2) 

(2) 

(3) 

-12.2 
-19,3 
2.1 
1957 
3651 

-2,6 

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 

1251,0 

1513,0 

123,0 
(4) 
(4) 
25,9 
47,4 
4,3 
493,0 
(5) 

0,9 
4,8 
2,3 

178,0 
(4) 
(4) 
14,7 
32,7 
3,4 
460 
(9) 

0,5 
2,6 
0,8 

1996 
(13) 

2,6 
3,2 
3,9 
39 
(4) 

-2,0 

5264 
-14,1 * 
6* 

(4) 
0,7* 

950,0 

163,2 * 
(4) 
(4) 
8,1 
15,4 
3,1 
(4) 
(9) 

0,5 
4,0 
0,7 

(6) 
(01/95) 
7) 

(10) 
(12/95-11/96) 
(11) 
(12) 

(10) 
(12/95-11/96) 
(11) 
(12) 

(8) 
(8) 
03/94  09/94 
145  138 
(167) (167) 
03/94  09/94 
109  109 
(135) (125) 
15.5  15.7 

(8) 
(8) 
03/95  09/95 
135  134 
(187)  (181) 
03/95  09/95 
112  112 
(135)  (135) 
15.2 15.5 

(8) 
(8) 
03/95  09/95 
128  142 
(178) (178) 
03/95  09/95 
116  118 
(135)  (125) 
14.5 14.6 

(1) 
(2) 
(3) 

Only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED 
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. 
Not available 

(4) 
(5)  With Russia on gas arrears 
(6) 
(7) 

STF 
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. 
Not rated 
Arr. on Rus. gas cancel, agreem. 02/96-08/96 

(8) 
(9) 
(10)  SBA 
(11)  Off track 
(12)  The first quarterly review of the programme, initially scheduled for December  1995, has never been completed. 
(13)  Estimates (E) (in sheet * is being used) 

- 4 4-

Country-risk  indicators 

Country: Moldova 

footnotes 

1994 

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

(end of period) 
(end of period) 
(end of period) 

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

1995 

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

(11) 

(11/96) 

1996 
(9) 

-5,0 
-17,7 
2,0 
15 
4,65 

General government  balance (as % of GDP) 

-8,7 

-5,5 

-3,4 

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 (%) 
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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating 

(D 

(2) 

(2) 

(3) 

618 
-12,9 
18,0 

179 
2,9 

741 
-6,8 
72,0 

257 
3,2 

343,0 

675,0 

12,3 
(4) 
(4) 
30,0 
55,5 
4,0 
(5) 
(5) 

0,9 
18,0 
10,0 

91,0 
(4) 
(4) 
38,0 
91,1 
11,0 
(5) 
(5) 

. 

0,8 
8,7 
7,9 

563 
-6,8 
(4) 

292 
3,4 

700,0 

(4) 
(4) 
(4) 
32,0 
124,3 
11,0 
(5) 
(5) 

1.0 
11,1 
13,9 

(09/96) 

(09/96) 

(09/96) 

(6) 
(12/93-3/95) 
(7) 

(6) 
(3/95-3/96) 
(7) 

(10) 
(5/96-5/99) 
(7) 

(8) 
(8) 
03/94  09/94 
148  155 
(167)  (167) 

(8) 
(8) 
03/95  09/95 
157  141 
(187) (181) 

(8) 
(8) 
03/96  09/96 
134  125 
(178) (178) 

(6) 

(8) 

(8) 

(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 m3y 

improve its rating and still fall in the ranking if also the average global rating for all rated countries improves 

(4)  Not available 
(5)  No 
(6)  SBA 
(7)  On-track 
(8)  Not rated 
(9)  Projections (unless otherwise stated) 
(10)  EFF 
(11)  Latest data or estimates  (E) (in sheet * is being used) 

45-

Country-risk  indicators 

Country:  Ukraine 

footnotes 

1994 

1995 

Real GDP growth (% change) 
Industrial production ( % change) 
Unemployment rate 
Inflation rate 
Exchange rate (Krb per USD) (Hrv per US$ for 1996) 

(end of period) 
(Dec/Dec) 

- auction / interbank 
- cash 

(end of period) 
(end of period) 

23,0 
-28,5 
0,3 
401 

108196 
128000 

-11,8 
-11,7 
0,6 
182 

179400 
186000 

1996 
(11) 

. 

-10,0 * 
-5,1 
1.3 
39,7 

1.89 
1,89 

General government balance (as % of GDP) 

-8,2 

-5,0 

-3,2 

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 (%) 
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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating 

d) 

(2) 

(2) 

(3) 

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

7,2 

1794 
(4) 
(4) 
29,2 
48,0 
12,1 
2722 
(5) 

1,6 
1,6 
0,8 

15.1 
-4,4 
0,27 
1134 
3,7 

8,1 

1531 
986,0 
545,0 
23,3 
53.6 
9,3 
236 
(5) 

1.5 
1.4 
0,7 

(6) 
10/94 
(7) 

(9) 
08/95 
(10) 

15,6* 
-3,2* 
0,4* 
1994 
5,3 

9,2 

1221 
716 
505 
21,2 
45,3 
6,0 

(5) 

3,0 
2,6 
1,5 

(9) 
5/96 
(7) 

(8) 
(8) 
03/94  09/94 
149  147 
(167) (167) 
03/94  09/94 
111  113 
(135) (135) 
15.1  14.5 

(8) 
(8) 
03/95  09/95 
145  138 
(187) (181) 
03/95  09/95 
109  111 
(135) (135) 
15.5  15.7 

(8) 
(8) 
03/95  09/95 
136  135 
(178) (178) 
03/95  09/95 
107  111 
(135) (135) 
16.7  16.6 

(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)  Not available 
(5)  Rescheduling of debt owed to Russia/Turkm. 
(6)  STF 
(7)  On-track 
(8)  Not rated 
(9)  SBA 
(10)  Off track; New SBA approved in May 1996. On track. 
(11)  Estimates (E) (in sheet * is being used) 

- 4 6-

Country-risk  indicators 

Country: Algeria 

Real GDP growth rate (in %) 
Hydrocarbon production ( % change) 
Inflation rate 
Exchange rate (dinars per USD) 

("Dec/Dec) 
(end of period) 

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) 
in  bn USD 
Official FX reserves 
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 USS) 

Indicators  of EU exposure 

EU exposure/total EU exposure (%) 
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 
(number of countries) 
The Institutional Investor 
Position in the ranking 
(number of countries) 
Credit rating 

footnotes 

1994 

1995 

1996 

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

-4,4 

8,9 
-1,8 
0,0 
2,6 
2,9 

29,5 

8,9 
7,1 
1,8 
70,3 
307,5 
48,6 
(4) 
4,5 

9,9 
2,4 
7,8 

3,9 
4,4 
21,9 
52.2 

-1,4 

10,3 
-2,2 
0,0 
2,1 
2,1 

32,5 

9,4 
7,1 
2,3 
78,4 
297,1 
42,4 
(4) 
4,9 

12,2 
2,8 
8,9 

4,0 
5,4 
15,1 
56,0 

2,6 

12,6 
0,2 
0,2 
3,7 
3,9 

32,7 

7,6 
5,2 
2,4 
72,4 
230,8 
32,7 
(4) 
3,3 

11,6 
2,7 
7,1 

(D 

(5) 
(5/94 - 5/95) 
(6) 

(5) 
(5/94 - 5/95) 
(6)/(8) 
(5/95 - 5/98) 

(8) 
(5/95 - 5/98) 
(6) 

(7) 
(7) 
03/94  09/94 
92  96 
(167) (167) 
03/94  09/94 
75  78 
(135) (135) 
26.3  24.6 

(7) 
(7) 
03/95  09/95 
102  107 
(187)(181) 
03/95  09/95 
89  91 
(135) (135) 
23.5  22.8 

(7) 
(7) 
03/95  09/95 
109  97 
(178) (178) 
03/95  09/95 
95  95 
(135) (135) 
21.5  22.8 

(2) 

(2) 

(3) 

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

SBA 

(4)  No 
(5) 
(6)  On-track 
Not rated 
(7) 
EFF 
(8) 

-47-

Country-risk  indicators 

Country:  Israel 

footnotes 

1994 

1995 

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

(average) 
(average) 
(end  of  period) 

6,5 
7,2 
7.8 
12,3 
3,018 

7,1 
7,9 
6,3 
10,1 
3,135 

1996 
(7) 

4,3 
2 , 7* 
6,3 
11,5 
3,244 

Central  g o v e r n m e nt  overall  deficit  (as  %  of  GDP) 

-2,4 

-4,2 

-4,3 

Balance  of  payments 

Exports  of goods  (in  bn  USD) 
Current  account  balance  (in  % of  GDP) 
Net  inflow  of foreign  direct  investment  (in bn  USD) 
Gross  official  FX  reserves 

in billions  US$ 
in  months  of imports  of  goods 

External  d e bt 

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  e x p o s u re 

EU  exposure/total  EU  exposure  (%) 
EU exposure/external  debt  (%) 
EU  exposure/exports  of  goods  (%) 

IMF  arrangements 

Type/no 
(Date  /  - ) 
On  track/off  track 
(  -  /  Da'e) 

Indicators  of  market's  perceived  creditworthiness 

Moody's  long-term  foreign  currency  rating  (end  of  period) 
S&P  long-term  f cre gn  currency  rating  (end  of  period) 
Euronnoney 

Position  in the  ranking 
(number  of  countries) 
The  Institutional  investor 
Fosition  in the  ranking 
(number  of  countries) 
Credit  rating 

16,7 
-3,2 
-0,2 
6,792 
3,6 

41 

4,6 
2,2 
2,4 
54,2 
169,4 
14,9 
(4) 
(4) 

4,4 
0,8 
1,9 

19,0 
-4,5 
1.2 
8,119 
3.6 

46 

3.9 
(6) 
(6) 
53,0 
170,0 
15 
(4) 
(4) 

4,4 
0,7 
1,7 

19,9 
-5,6 
(6) 
10,05 
4,2 

(6) 

(6) 
(6) 
(6) 
54 
(6) 
(6) 
(4) 
(4) 

3.9 
(6) 
1,5 

(4) 

(4) 

(4) 

(5) 
BBB+ 
03/94  09/94 
30  33 
(167)  (167) 
03/94  09/94 

46 

43 
(135)  (135) 
4 34  46.5 

A3 
A-
03/95  09/95 
31  31 
(187)(181) 
03/95  09/95 

43 

42 
(135)  (135) 
47.9  49.2 

A3 
A-
03/95  09/95 
33  32 
0 7 8)  (178) 
03/95  09/95 

41 

40 
(135)  (135) 
50.8  52.2 

0) 

(2) 

(2) 

(3) 

Only  EIB  and  BCP  loans  (outstanding  disbursements)  to  CEEC,  NIS  and  MED 
The  higher  the  rarkmg  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 .ilso  the  average  global  rating  for  all  rated  countries  improves 
No 
Not  rated 
Not  availab'e 
Estimates  (E)  •."'•  ïhoet  * s  being  used> 

w 

ISSN 0254-1475 

COM(97) 273  final 

DOCUMENTS 

EN 

01  09 

Catalogue  number  :  CB-CO-97-269-EN-C 

ISBN  92-78-20846-9 

Office  for Official  Publications of the European  Communities 

[.,-2985 Luxembourg