Commission report to the Budgetary Authority on guarantees covered by the general budget - Situation at 30 June 1997
Date: 1997-09-25
Institutions: European Commission
Subjects: Community loan, budgetary reserve (EU), credit guarantee, general budget (EU), third country

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 25.09.1997 
COM(97) 464  final 

COMMISSION REPORT TO THE BUDGETARY AUTHORITY 

ON GUARANTEES COVERED BY THE GENERAL BUDGET -

SITUATION AT 30 JUNE 1997 

This report describes the situation as regards budget guarantees at 30 June 1997. 

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 twelve 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. 

3-

CONTENTS 

II. EVENTS  SINCE THE REPORT AT 31 DECEMBER  1996 

LA  Operations  with macroeconomic  objectives 
LB  Operations  with microeconomic  objectives 

PART ONE: EVENTS SINCE THE REPORT AT 31 DECEMBER  1996, THE RISK  SITUATION 
4 
AND ACTIVATION  OF BUDGET GUARANTEES 
4 
I. INTRODUCTION: TYPES OF OPERATION 
4 
4 
4 
11.A  Community guarantee  to the European Investment  Bank against losses under loans for  projects 
outside  the Community  (Central and Eastern Europe countries, Mediterranean  countries,  Latin 
American  and Asian  countries and South Africa) 
IL. B Former  Yugoslav Republic  of Macedonia  (FYROM) 
LLC Bulgaria 
LL.D Georgia, Armenia,  Tajikistan 

III. RISK SITUATION 

LIL.A Amount  outstanding  at 30 June  1997 (Table 1) 
ILLS Maximum  annual risk borne by the Community budget: operations disbursed at 30 June  1997 
(see Table 2) 
III. C Maximum  theoretical  annual risk borne by the Community budget  (see Table 3) 

IV. ACTIVATION OF BUDGET GUARANTEES 

LV.A Payments from  cash resources. 
IV.B Activation  of the Guarantee Fund 
IV.CLate  repayments 
IV.D Situation  as regards unpaid debts at 30 June  1997 

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

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

LA  Tables  1 to 3 
L.B Loan  operations  covered by a budget guarantee 
L.C Expected  signature and disbursement of ELB loans 
I. D Payment  of the budget guarantee 

13 
14 

16 
16 
16 
19 
22 

24 

25 
25 
27 
32 
33 

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 (I) 
IL B Bases for  the calculation  of the provisioning  of the Guarantee Fund (2) 
IL C Basis for  the provisioning  of the Fund in the event of a part guarantee 
IL D Provisioning  of the Guarantee Fund (3) 
II.E Margin  remaining  in the guarantee  reserve  (4) 
II.FResidual  lending capacity  (5) 

III. TABLES: COUNTRY-RISK  INDICATORS 

4 
5 
5 
5 
6 
6 

7 
8 
12 
12 
12 
12 
13 

34 
34 
34 
35 
35 
36 
36 
37 

PART ONE: EVENTS SINCE THE REPORT AT 31 DECEMBER  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. 

I.A 

Operations with  macroeconomic  objectives 

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

This  category  includes  the  loan  of  ECU  1  250 million  to  finance  imports  of  agricultural 
products and foodstuffs  into the former  Soviet Union, since the risk involved in this operation 
depends  to  a  large  extent  on  macroeconomic  and  political  developments  in  the  recipient 
countries. 

LB 

Operations with microeconomic  objectives 

These are loans to finance  projects which are usually  repaid  over the long term from funds 
which  these  projects  are  expected  to  generate;  as  a  rule,  they  are  granted  to  companies, 
financial  institutions or non-member countries and, in addition to the Community guarantee, 
are covered by the usual guarantees demanded by banks. 

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

II. 

EVENTS SINCE THE REPORT AT 31 DECEMBER  1996 

The main events in the first half of 1997 were as follows: 

II.A 

Community  guarantee  to  the  European  Investment  Bank  against  losses 
under  loans  for  projects  outside  the  Community  (Central  and  Eastern 
Europe  countries,  Mediterranean  countries,  Latin  American  and  Asian 
countries and South  Africa) 

On 14 April  1997 the Council granted a global Community guarantee to the EEB on loans for 
investment  projects  carried  out  in  the  Central  and  Eastern  European  countries,  in  the 
Mediterranean  countries,  in the Latin  American  and  Asian  countries  and  in the  Republic  of 
South Africa. 

This guarantee  is restricted  to  70% of the aggregate  amount  of the credits opened,  plus all 
related  sums. The overall  ceiling of the  credits  opened  is equivalent  to  ECU  7 105 million, 
broken down as follows: 

5-

-  Central and Eastern European countries: ECU 3 520 million 

-  Mediterranean countries: ECU 2 310 million 

-  Latin American and Asian countries: ECU 900 million 

-  Republic of South Africa:  ECU 375 million, 

and  covers  a  period  of  three  years  beginning  on  31  January  1997 for  Central  and  Eastern 
European, Mediterranean and Latin American and Asian countries and on  1  July 1997 for the 
Republic of South Africa.  If,  on expiry of this period, the loans granted  by the EIB have not 
attained  the overall amounts referred  to above, the period  will be automatically  extended by 
six months. 

The European  Investment Bank is invited to aim to cover the commercial risk on 25%) of 
its lending from  non-sovereign guarantees. 

H.B 

Former Yugoslav  Republic of Macedonia  (FYROM) 

As part  of  an  overall  aid  programme  for  the  former  Yugoslav  Republic  of Macedonia,  on 
22 May  1997 the Commission presented  a proposal for a Council Decision providing macro-
financial  assistance of ECU 40 million to FYROM with a maximum maturity of fifteen years. 
The loan was authorised by the Council Decision of 22 July 1997. 

H.C 

Bulgaria 

As  part  of  an  overall  aid  programme  for  Bulgaria,  on  22 May  1997  the  Commission 
presented a proposal for a Council Decision providing macro-financial  assistance of ECU 250 
million to  Bulgaria with  a maximum maturity  of ten years.  The  loan  was  authorised  by the 
Council Decision of 22 July 1997. 

II.D 

Georgia, Armenia,  Tajikistan 

Georgia,  Armenia  and  Tajikistan  were  severely hit by the  economic  collapse resulting from 
the breaking up of the command economy and the disintegration of the Soviet Union. 

Owing  to  the  exceptionally  harsh  conditions  presently  faced  by  Armenia,  Georgia  and 
Tajikistan,  the Commission considered that exceptional assistance was required to support the 
implementation of the stabilisation and structural reform programmes agreed with the IMF. 

On 3 February  1997 the Commission therefore  presented  a proposal  for  a Council Decision 
providing  exceptional financial assistance  of ECU  170 million in the  form  of a loan with  a 
maximum maturity of fifteen years and of ECU 50 million in the form of grants to  Armenia, 
Georgia  and,  if  appropriate,  Tajikistan.  On  7  February  1997  the  Council  (Economic  and 
financial  affairs)  took the decision, in principle, to change this figure to ECU 95 million. 

- 6-

III. 

RISK  SITUATION 

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

- 

- 

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

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

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

-  by reference  only to  actual  disbursements  at  30 June  1997, giving the minimum  level  of 
risk  to the Community assuming that there are no early repayments (see Table 2 below); 

-  on a more forward-looking  basis, by reference to all the operations decided by the Council 
or proposed by the Commission in order to estimate the impact on future  budgets, giving 
the maximum risk borne by the Community assuming that the Commission's proposals are 
accepted (see Table 3 below). 

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

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

III.A  Amount  outstanding at 30 June  1997 (Table 1) 

The total risk at 30 June 1997 came to ECU 11 720 million as against ECU  11 876 million at 
31 December  1996, a fall of ECU  156 million.3 

The  following  table  shows  the  operations  which  have  had  an  effect  on  the  amount 
outstanding since the last report. 

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 30 June 1997. 

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

Amount outstanding at 31  December 1996 

Loan repayments 

Euratom 

NCI 

Former Soviet Union 

EIB 

Exchange rate differences between ecu and other currencies 

Loans disbursed 

EIB 

Amount outstanding at 30 June 1997 

11  876 

-476 

-416 

-34.1 

-112.48 

-59.62 

+942.2 

11 720 

The capital outstanding in respect of operations in the Member States was ECU 4 648 million 
at 30 June  1997, a fall of 16.46% compared with 31 December 1996. 

This fall is mainly due to the repayment of ECU 873 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 30 June  1997 was ECU 7 072 million, 
an increase of 12.04% compared with 31 December 1996. 

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

disbursed at 30 June  19974 (see Table 2) 

The total risk, which  comes to ECU 3 096 million in  1997, will  steadily  increase to around 
ECU 3 635 million in 2000, 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.  This 
figure  changes in line with the capital repayments (every two years) on balance-of-payment 
loans to Greece and Italy. The maximum risk is highest in the even years up to 2000 when 
it will reach ECU 2 739 million. 

-  The risk for 1997 in respect of non-member countries comes to ECU  1  667 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; 

At  30  June  1997,  after  taking  account  of  repayments  in  the  first  half  of  the  year,  the  residual 
risk for  1997 in Table 2 is ECU 2 057 million. 

-  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. 
-  ECU 205 million from  EIB loans. 

The amount of capital repayments on borrowing and lending operations will then fall in 1998 
and  1999. The risk in respect of non-member countries will thus drop to ECU  1  345 million 
in 1998 and to ECU 895 million in 1999. 

III.C  Maximum  theoretical  annual  risk  borne  by  the  Community  budget5  (see 

Table 3) 

This risk comes to ECU 3  196 million in 1997 and will increase regularly until 2000 (except 
in 1999 when it will total ECU  1  726 million). 

-  The trend  in the maximum risk in respect  of the Member  States is much the  same as in 

Table 2 up to 2000 when the risk will amount to ECU 2 739 million. 

-  The risk in respect  of non-member countries will rise from ECU  1  768 million in  1997 to 
ECU  1  445 million in 1999. The risk will increase from 2000 until 2004 when it will reach 
ECU 3 185 million. 

At 30 June  1997, after  taking account of repayments in the first half  of the year, the residual 
risk for  1997 in Table 3 is ECU 2 342 million. 

- 9-

TABLE 1 

CAPITAL OUTSTANDING  IN RESPECT  OF OPERATIONS  DISBURSED 

(ECU  million) 

Operation 

Authorised 
ceiling 

Capital 
outstanding 
31.12.96 

Capital 
outstanding 
30.06.97 

Remainder  to 
be disbursed 
30.06.97 

MEMBER  STATES 
A. Balance of  payments 
1.  Greece 
2.  Italy 
B. Others 
3.  Euratom 
4.  NIC and NCI  earthquake 
5.EIB  Mediterranean 

Spain,  Greece, Portugal. 

14000 

4000 
6830 

1500 

500 
3479 

572 
748 

265 

500 
3455 

120 
327 

246 

MEMBER  STATES  - TOTAL 

26330 

5564 

4648 

THIRD  COUNTRIES 
A.Financial  assistance 
1.  Hungary 
2.  Czech  Republic 
3. Slovak  Republic 
4.  Bulgaria 
5.  Romania 
6. Algeria 
7.  Israel 
8.  Baltic  States 
9.  Moldova 
10.  Ukraine 
11.  Belarus 
12.  Former  Soviet  Union 
B. Other 
13.  EIB  Mediterranean 
14.  EIB Central and Eastern  Europe 
15.  EIB Asia,  Latin America 
16.  EIB South Africa 

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

8672 
8220 
1925 
675 

THIRD  COUNTRIES  - TOTAL 

24527 

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

2092 
1306 
204 
32 

6312 

0 
0 

0 
0 

0 

0 

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

2197 
3135 
411 
125 

180 
250 
125 
400 
510 
500 
160 
135 
60 
185 
30 
110 

2541 
1531 
301 
56 

7072 

6247 

GRAND  TOTAL 

50857 

11876 

11720 

6247 

ANNEX  TO TABLE 1 

SITUATION  IN RESPECT  OF  EIB OPERATIONS  (30.06.97) 

Operations 

Credit line 
authorised 

Loans  made 
available  minus 

cancellations 

Amounts 
disbursed 

Amounts 
outstanding 
at 30.06.97 

1465 

1603 

1500 

6362 
1700 
3000 
750 
275 
300 

Mediterranean  Member  States 
Third countries,  old mandates 
Mediterranean  Protocols 
Central and  Eastern Europe I 
Central and Eastern  Europe II 
Asia,  Latin America I 
Asia,  Latin America  II 
South Africa 
Third countries,  new mandates(*): 
Mediterranean 
Central and  Eastern  Europe 
Asia,  Latin America 
South Africa 
Total 
(*) Council Decision of 14 April 1997 
NB:  As the loans are disbursed in national currencies, the loan ceiling may be exceeded when the amounts 
disbursed up to the date ot the report are converted into ecus. 

5720 
1628 
3000 
647 
50 
176 

3703 
1128 
487 
258 
51 
56 

2310 
3520 
900 
375 
20992 

12761 

7285 

75 

246 

2541 
1044 
486 
250 
51 
56 

4674 

10 

TABLE 2 

MAXIMUM  ANNUAL  RISK  BORNE  BY  THE  COMMUNITY  BUDGET 
Estimate  in  ECU  million  based  on all operations  disbursed  at  30.06.97) 

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 
983 

91 
49 

46 

453 
532 

58 

Capital  -  subtotal 

1042 

1669 

2472 

12 
40 

38 

2562 

15 
40 

41 

96 

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 
209 

10 
16 

18 

156 

156 

3 
12 

14 

1 
10 

11 

Interest  -  subtotal 

386 

300 

185 

177 

71 

21 

92 

7 

7 

15 

23 

23 

22 

22 

2 

6 

7 

2 

3 

5 

500 
3455 

571 
749 

263 

5538 

95 
731 

55 
114 

84 

1080 

17 

15 

32 

2 

2 

4 

MEMBER  STATES  -  TOTAL 

1429 

1969 

281 

2739 

107 

30 

27 

36 

6617 

NON-MEMBER  COUNTRIES 

CAPITAL 
A.  Financial  assistance 

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

80 
127 
63 
140 

160 
250 
144 

140 
50 
15 

100 
123 
62 
150 
185 

190 

80 

110 
5 

201 
145 
32 

172 
85 
21 

195 
120 
26 

Capital  -  subtotal 

1169 

898 

530 

572 

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.  EIB  C+E  Eur.  I  +  II 
20.  EIB Asia  Latin  America 
21.  EIB  South  Africa 

Interest  -  subtotal 

NON-MEMBER  COUNTRIES  -
TOTAL 

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

140 
84 
11 
5 

498 

10 
13 
6 
26 
51 

25 
0 
14 
6 
19 
3 

159 
95 
13 
8 

446 

11 
33 

25 

14 
6 
19 
3 

146 
89 
12 
8 

365 

11 
13 

25 

14 
6 
19 
3 

133 
81 
11 
8 

324 

70 

150 

9 

17 
6 

202 
149 
33 
36 

672 

11 
6 

25 

3 
5 
19 
3 

119 
72 
10 
8 

281 

55 

100 

25 
12 
37 
6 

199 
145 
34 
20 

632 

4 
6 

10 

3 
5 
17 
2 

105 
62 
9 
3 

226 

40 

12 
37 
6 

200 
137 
40 

12 
37 
6 

184 
135 
12 

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

1495 
964 
212 
56 

472 

386 

5333 

4 

3 
13 
2 

92 
53 
8 

2 
9 
1 

78 
44 
8 

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

972 
579 
83 
42 

176 

143 

2458 

1667 

1345 

895 

896 

953 

858 

647 

529 

7791 

GRAND  TOTAL 

3096 

3314 

1176 

3635 

1060 

888 

674 

565 

14409 

(Eastern  Europe ) 
(Other  non-member  countries) 

880 
787 

946 
399 

483 
413 

485 
411 

369 
585 

378 
480 

307 
340 

247 
282 

4095 
3696 

-11 -

TABLE 3 
MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE COMMUNITY BUDGET 
(Estimation 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 and NCI 
4. EIB Spain, Greece, Portugal 

985 
58 

500 
983 

140 
46 

Capital - subtotal 

1042 

1669 

2472 

52 
38 

2562 

55 
41 

96 

INTEREST 
A. Balance of payments 

1  Greece 
2. Italy 

B. Structural loans 

3. Euratom and NCI 
4. EIB, Spain, Greece, Portugal 

Interest - subtotal 

48 
211 

105 
23 

386 

48 
209 

25 
18 

156 

156 

15 
14 

11 
11 

300 

185 

178 

71 
21 

92 

7 
7 

15 

23 

23 

22 

22 

2 
6 

7 

2 
3 

5 

500 
3455 

1320 
263 

5537 

95 
731 

169 
84 

1080 

17 
15 

32 

2 
2 

4 

MEMBER STATES - TOTAL 

1428 

1969 

281 

2739 

107 

30 

27 

36 

6617 

100 
123 
62 
150 
185 

80 
127 
63 
140 

160 
250 

144 

190 

80 

THIRD COUNTRIES 

CAPITAL 
A. Financial assistance 

5. Hungary 
6. Czech Republic 
7. Slovak Republic 
8. Bulgaria 
9. Roumania 
10. Israel 
11. Algeria 
12. FYROM 
13. Ex-URSS 
14. Baltic States 
15. Moldova 
16. Ukraine 
17. Belarus 
18. Euratom C+E Europe 
B. Guarantees 
19. EIB Mediterranean 
20. EIB C+E Europe 
21.  EIB Asia, Latin America 
22. EIB South Africa 

140 
50 
15 

172 
85 
21 

195 
120 
26 

Capital - subtotal 

1169 

898 

531 

INTEREST 
A. Financial assistance 

5. Hungary 
6. Czech Republic 
7. Slovak Republic 
8. Bulgaria 
9. Romania 
10. Israel 
11. Algeria 
12. FYROM 
13. Ex-URSS 
14. Baltic States 
15. Moldova 
16. Ukraine 
17. Belarus 
18. Euratom C+E Europe 
B. Guarantees 
19  EIB Mediterranean 
20. BEI C+E Europe 
21.  EIB Asia, Latain America 
22. EIB South Africa 

Interest - subtotal 

18 
25 
13 
40 
55 
16 
55 

5 
18 
6 
24 
3 
1 

173 
124 
18 
6 

599 

10 
12 
6 
39 
58 

35 
3 

22 
6 
29 
3 
6 

252 
218 
35 
16 

749 

36 
40 

35 
4 

22 
6 
29 
3 
17 

325 
318 
54 
26 

70 

150 

9 
17 
6 

309 
290 
59 
45 

55 

100 

25 
12 
37 
6 
1 

389 
385 
79 
40 

65 

12 
57 
6 
7 

493 
499 
111 
38 

50 
70 

100 

85 
12 
57 
6 
16 

547 
568 
105 
58 

180 
250 
125 
475 
580 
160 
600 

144 
220 
50 
168 
24 
24 

2494 
2207 
458 
184 

955 

1129 

1288 

1674 

8343 

36 
13 

35 
4 

11 
6 
29 
3 
54 

497 
529 
106 
61 

29 
13 

20 
4 

11 
5 
27 
2 
72 

545 
576 
124 
75 

29 
7 

10 
4 

9 
3 
23 
2 
88 

566 
591 
134 
86 

13 
7 

10 
4 

9 
2 
17 
1 
101 

541 
579 
135 
92 

28 
37 
19 
257 
212 
16 
235 
27 
5 
124 
40 
205 
20 
373 

3318 
3371 
686 
405 

110 
5 

249 
210 
42 
3 

699 

36 
21 

35 
4 

22 
6 
29 
3 
34 

419 
436 
80 
43 

914 

1167 

1383 

1502 

1553 

1511 

9377 

THIRD COUNTRIES - TOTAL 

1768 

1647 

1445 

1866 

2338 

2631 

2841 

3185 

17720 

GRAND TOTAL 

3196 

3616 

1726 

4605 

2444 

2661 

2868 

3220 

24337 

(Eastern Europe) 
(other non-member countries) 

935 
833 

1113 
534 

780 
665 

991 
875 

1072 
1266 

1255 
1376 

1399 
1442 

1593 
1592 

9137 
8583 

-  12-

IV. 

ACTIVATION  OF BUDGET  GUARANTEES 

IV.A 

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. 

LV.B  Activation  of the Guarantee Fund 

In the event of late payment by a recipient of a loan granted or guaranteed by the Community, 
the Guarantee Fund is called on to cover the default within three months of the date on which 
is payment is due. 

Penalty interest for the time between the date on which cash resources are made available and 
the date of activation of the Fund is drawn from the Fund and repaid to the cash resources. 

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

Country 

Georgia (loan of ECU 40 million) 

Former Yugoslavia 

Date 

15.04.97 

23.05.97 

Amount (principal + interest) 

34 894 595.09 

6 292 486.81 

IV.C  Late  repayments 

During  the  period  covered  by  this  report,  the  following  non-member  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. 

The  former  Yugoslav  Republic  of Macedonia  (FYROM)  repaid  ECU  7.6  million  of  its 
arrears for which the Fund had already contributed ECU  1.4 million. 

Country 

Repayment date 

Amount (principal + interest) 

Armenia 

Georgia 

FYROM 

Total 

13.2.97 

18.4.97 

29.5.97 

* 

3 680 702.65 

4 689 948.53 

1446 515.51 

9 817 166.69 

-  13-

IV.D 

Situation  as regards unpaid  debts at 30 June  1997 

The following  amounts had not been paid at 30 June  1997: 

Country 

Tajikistan 

Georgia 

Armenia 

Former Yugoslavia 

Total 

Amount  (principal + interest) 

63 181 389.89 

122 817 507.50 

53920 610.55 

87 831143.77 

327 750 651.71 

V. 

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

In  practice,  the  Guarantee  Fund  and  reserve  facility  limits  the  Community's  lending  and 
guarantee  capacity  to  non-member  countries  since  the  appropriations  available  for 
provisioning the Fund whenever a new lending decision is adopted  (or any annual tranche in 
the case of guarantees for multiannual  operations)  are limited  by the amount  entered  for  the 
guarantee reserve in the financial perspective.6 

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

Table 4 contains an estimate of the  Community's lending capacity  in respect  of non-member 
countries  over  the  period  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 307 million is expected to be used from the guarantee reserve 
in 19,97, leaving ECU 22 million available at the end of the year. 

The Guarantee Fund  could  then  amount to  around  ECU 864 million  at the  end  of the year 
assuming: 

-  no further  defaults requiring activation of the Fund; 

-  no late repayment of arrears by defaulting countries. 

ECU 300 million at  1992 prices. 

-14 

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  146 million  to  ECU 243 million  for  loans  with  a  100%  guarantee  under  the 

Community budget; 

-  from  ECU 209 million  ta  ECU 347 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 538 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  768 million) comes to 30%. 

The  Fund  should  then  correspond  to  7.4%»  of  the  total  amount  of  guaranteed  loans 
outstanding outside the Community. 

-15 

TABLE 4 

THE COMMUNITY'S THEORETICAL  ESTIMATED  LENDING & GUARANTEE  CAPACITY 
IN RESPECT OF NON-MEMBER  COUNTRIES 
OVER THE PERIOD  1997-1999 
under the Guarantee  Fund  mechanismf) 

ECU  million 

19971998 

1999] 

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

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,  Latin America  (c) 
•  South Africa  (d) 
-  EIB loans  - Total 

693 
850,5 
60 
125 
1728,5 

744,25 
763 
210 
87,5 
1804,75 

623 
710,5 
322 
105 
1760,5 

•  EURATOM  loans  (e) 

0 

200 

350 

-  Macro-financial  assistance  (f) 

305 

25 

0 

Provisioning  of the Guarantee Fund (3) 

307 

302 

313 

Margin  remaining  in the guarantee reserve (4) 

22 

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) 

146 
209 

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  1997-1999: 

-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 

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:  1994-1999:  ECU  1100 million 

f. - Financial  assistance 

-  loans decided:  1997:  ECU  25 million  loan to  Belarus cancelled;  ECU  130 million  loan to  Slovakia 

cancelled. 
ECU 250  million  loan to  Bulgaria;  ECU 40 million  loan to the  Former Yugoslav  Republic  of  Macedonia 
(FYROM). 

-  loans proposed or in preparation:  1997:  ECU  170 million in loans to the  Republics  of Georgia,  Armenia 

and Tajikistan. 

16 

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  country  risk 
indicators  for  all  countries  that  have  been  recipients  of  macro-financial  assistance  in 
Central  and  Eastern  Europe,  the  NIS  and  the Mediterranean  area,  in the  form  of  a  full-
page  table  per  country.  To  complement  this,  textual  analysis  is  provided  for  those 
countries  where  significant  new  information  influencing  the  risk  evaluation  has  become 
available  since  the  previous  report  covering  the  last  six  months  of  1996.  Brief  textual 
analysis is also  provided  for  the  countries which  have  still  to  repay  loans  outstanding  in 
the  context  of  the  ECU  1250  million  commercial  credits  made  available  to  the  then 
Soviet  Union in 1991. 

The  evaluation  in  this  section  does  not  deal  with  other  regions  than  those  mentioned, 
mainly  because  Community  exposure  elsewhere  (notably  through  guarantees  of  EIB 
lending) represents only a small 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 improved.  Inflation  has been brought  under 
control.  The national  currency,  the  lev,  recovered  some  of the  value  it  lost  in  1996  and 
early  1997,  before  the  exchange  rate  was  fixed  at  1000  leva  per  deutschemark  under  a 
currency board  arrangement which took  effect  on  1 July. The budget  deficit  should  meet 
in  1997 the target of 6.2% of GDP agreed with the IMF and has been mainly financed  so 
far through  sales of government  paper to the commercial banks. 

There has been some acceleration of structural reform.  Prices of all but a handful  of basic 
foodstuffs  have been  liberalized.  Some large  state  enterprises  have been  sold  to  foreign 
investors.  Although  many  banks  are  still  the  subject  of  bankruptcy  proceedings,  the 
health of those which continue to operate has improved. 

The  approval  by  the  IMF  of  a  stand-by  arrangement  in  April  and  the  adoption  of  the 
currency  board  arrangement  helped  to  restore  some  economic  confidence  and  stability. 
This was  reflected  in the  strong  recovery  in the  level  of the  central  bank's  international 

17 

reserves,  which  by  mid-year  had  recovered  most  of  the  losses  incurred  in  1996. 
Nevertheless,  service on foreign  debt continues to be substantial,  at close to US$1 billion 
per  year.  A  manageable  external  situation  remains  dependent  on  a  sustained  reform 
effort,  which  will  ensure  continued  support  from  the  IMF  and  other  international 
institutions, and encourage larger flows of foreign  direct  investment. 

CZECH  REPUBLIC 

The  overall  picture  in  the  Czech  Republic  has  deteriorated  since  the  last  report: 
economic growth  has slowed,  the budget  and trade deficits  are both large,  and  there  has 
been  some  political  instability.  This  deterioration  was  reflected  in  nervousness  on  the 
foreign  exchange markets about the Czech crown; throughout  late April and May,  strong 
downward  pressure  on  the  Czech  crown  developed,  and  on  27  May  forced  the  Czech 
National Bank to abandon its currency peg and allow the Czech crown to float. 

GDP  statistics  for  the  first  quarter  of  1997  show  a  slowdown  in  economic  growth: 
preliminary  estimates  indicate  that  year-on-year  growth  was  only  1.5%,  compared  to 
4.4%> in  1996.  The  government  is  also  facing  a  problem  of  a  growing  budget  deficit, 
which in  1996 was kept to  a low level only by sharp  spending cuts at the end of the year. 
However,  it  is  the  external  position  which* continues  to  be  of  the  greatest  concern: 
because  of  a combination  of  declining  exports  and  increasing  imports,  the  trade  deficit, 
which had reached  11% of GDP in  1996, rose further  in the first quarter of  1997. 

In  April  1997,  the  government  introduced  a  package  of  measures  aimed  at  boosting 
growth  and  tackling  the  growing  budget  and  trade  deficits.  Most  notably  the  measures 
included  budget  cuts,  limits  on  public  sector  wage  growth,  and  the  introduction  of  an 
import  deposit  scheme.  However,  foreign  exchange  traders  remained  concerned  at  the 
large  current  account  deficit,  and  nervousness  was  aggravated  by the  domestic  political 
uncertainty  that  followed  the  announcing  of  the  package.  Several  weeks  of  sustained 
attack  on the currency  forced  the Czech National Bank  to  abandon  its policy  of  pegging 
the Czech  crown to  a basket  of the  US$ and  the DM,  but  not  before  an estimated  $3bn 
(approximately  one  quarter)  of  foreign  exchange  reserves  had  been  used  to  defend  the 
currency.  The Czech crown  will now be subject  to  a managed  float.  The  abandoning  of 
the  pegged  exchange  rate  allowed  the  currency  to  depreciate  by  some  20%> against  the 
dollar  and  over  7% against  the DM  compared  with  its levels at  the  end  of  1996.  In  the 
weeks  after  the  abandonment  of  the  previous  currency  regime  the  currency  looked 
relatively  stable,  but  interest  rates  remained  high.  At  the  beginning  of  June,  the  Czech 
National Bank successfully  negotiated  a loan to replenish its foreign  exchange reserves. 

In May,  the  government  announced  a further  package  of  economic  measures,  including 
further  cuts  in  the  state  budget  for  1997.  The  government  also  narrowly  won  a 
confidence  vote in the Parliament  on  11 June.  However,  it  seems that  both  the  political 
and the economic situation will remain fragile  in the short term. 

ESTONIA 

Estonia's  risk  assessment  continues to be among the best  in the  region,  but  new  sources 
of  uncertainty  associated  with  the  rapid  growth  of  the  economy  have  appeared.  The 
economy is expanding  strongly  (real GDP growth  reached  7.3% on a year-on-year  basis 

in the  fourth  quarter  of  1996),  and  inflation  has  fallen  dramatically  in recent  months  (a 
yearly  inflation  of  10.8% was  registered  in  May,  compared  to  26.7%  in  April  1996). 
Foreign  debt  remains  small  as  a  proportion  of  GDP.  In  April,  the  country  received  a 
BBB-  sovereign  risk  rating  from  Thomson  BankWatch,  recently  upgraded  to  BBB+. 
This  is the  highest  rating  given  by the  agency  to  a country  of the  former  Soviet  Union. 
Estonia has requested  a rating from Moody's, which is expected to be released  at the end 
of the year. 

However, there are signs that the economy is close to overheating: in  1996,  consumption 
increased  as  a  percentage  of  GDP,  while  investment  declined;  the  trade  and  current 
account  deficits  reached  24.5%  and  10.2%  of  GDP,  respectively;  foreign  investment 
declined,  and  banks'  borrowings  abroad  grew  very  fast,  fuelling  a  strong  expansion  of 
domestic credit. These developments are a source of new macroeconomic risks. 

LITHUANIA 

During  the  first  half  of  1997,  growth  accelerated  further  while  both  inflation  and 
unemployment  continued  to  fall.  Budget  developments  appear  relatively  satisfactory,  as 
new fiscal  measures  seem to  have  reversed  the  downward  trend  in public  revenues.  The 
balance-of-payments  situation  remains  satisfactory,  even  though  imports  are  rising 
rapidly as the recovery picks up. The prudent  strategy for  abandoning  the currency  board 
seems  to  have  calmed  investors'  initial  fears  about  the  policy  intentions  of  the  new 
coalition  government. 

The  banking  sector  continues  its  slow  recovery  as  the  authorities  strengthen  regulation 
and take  a tougher  stance against  the weakest  banks.  Preparations  for  the  privatization 
of state banks and large telecommunications  and transport  enterprises  continue.  In June, 
the  improving  macroeconomic  situation  and  the  acceleration  in  structural  reforms  led 
Standard  & Poor's to award Lithuania an investment grade rating. 

ROMANIA 

Romania's  country  risk,  while  remaining  one  of  eastern  Europe'  highest,  improved 
during  the  first  half  of  1997,  as  a result  of  a  radical  change  in  course  of  the  country's 
economic  policy.  Prices  were  liberalized,  which  caused  monthly  inflation  to  jump  to 
30.5%) in March. Monthly  inflation  rates decreased  sharply  afterwards.  At the same time, 
the  authorities  allowed  a sharp  nominal  depreciation  of the  currency,  aimed  at  reversing 
the  deterioration  in the  external  accounts  that  took  place  in  1996.  Measures  to  restore 
public finances  and  limit  inflationary  pressures  should  lead  to  slower  growth  of  GDP  in 
1997, estimated  at  3-4%,  after  4.1%  in  1996. Already  in the first quarter,  the balance  of 
payments  improved  significantly,  with  the  surplus  on  the  capital  account  more  than 
compensating  for  the  (shrinking)  deficit  on  the  current  account.  Foreign  direct 
investment  has  picked  up,  and  residents  have  repatriated  large  amounts  of  hard 
currencies, indications of restored  confidence. 

Important  advances  in  structural  reforms  have  been  made  in  1997.  Between  February 
and  May,  800  firms  were  privatized.  Reform  of  agriculture  has  begun,  with  effective 
privatization  of  a  few  large  loss-making  pig  and  poultry  farms.  A  law  on  foreign 
ownership  of  land  has been  passed,  and  amendments  to  the  law  on  foreign  investments 

19-

have  been  introduced,  which  set  clear  rules  for  portfolio 
investment  and  profit 
repatriation.  Trade policy has been liberalized,  notably by a significant  cut in  agricultural 
tariffs. 

Although  debt  ratios  worsened  in  1996  and  are  set  to  deteriorate  further  in  1997,  the 
central  bank  was  able  to  increase  its  foreign  exchange  reserves  from  $850  million  in 
March  to  $1.49  billion  in  May.  Romania's  new  economic  programme  is  strongly 
supported  by the IMF, which approved  on 22 April a  13-month, $430 million new stand 
by  arrangement;  by  the  World  Bank,  which  approved  on  3  June  $550  million  of  new 
credits  and  the  release  of  the  $80  million  second  tranche  of  the  FESAL  loan  frozen  in 
1996;  and  by  the  EC,  which  will  reactivate  its  macro-financial  assistance,  of  which  the 
balance amounts to ECU 70 million. At the end of June, despite the severe contraction  of 
the purchasing power  of wages, the government  continued  to enjoy  considerable  popular 
support. 

SLOVAKIA 

Slovakia's  country  risk  remains  moderate,  but  external  balances  are  deteriorating  and 
foreign  debt  is increasing  rapidly.  The  fast  economic  growth  -  some  7%> -  registered  in 
1995 and  1996 has led to an overheating of the economy. Inflation  has started to  edge up 
after  three  years  of  uninterrupted  decline.  In  response,  monetary  policy  was  gradually 
tightened  and became very restrictive in May and June 1997. 

Following  the  sharp  deterioration  of the  current  account  in  1996  -  a  deficit  of  10%  of 
GDP was registered,  compared  to a small surplus in  1995 - and the rapid  increase  of the 
external  debt to finance  it, the external  situation in the first months  of  1997  deteriorated 
further.  Up till the middle of May, the rising trade deficit  could be financed  without  much 
difficulty,  and  foreign  reserves  remained  approximately  stable  compared  to  the  end  of 
1996.  However,  as  a  result  of  pressure  on  the  currency  in  the  second  half  of  May, 
reserves dropped by 20%. So far, the National Bank of Slovakia has managed to  stabilize 
the  exchange  rate  close  to  its  central  rate.  However,  this  could  only  be  achieved  at  the 
cost  of  a  sharp  monetary  contraction,  a loss  in  foreign  reserves,  and  very  high  interest 
rates. Clearly, such a situation cannot be maintained for a prolonged  period. 

III. 

NEWLY  INDEPENDENT  STATES 

ARMENIA 

GDP  growth  similar  to  the  5.8%»  registered  in  1996  is  expected  for  1997.  Annual 
inflation,  which was 5.7 %> in December  1996, is set to rise to  9.5  % this year. Weak  tax 
collection  continues to  undermine  the  fiscal  position.  Armenia's  current  account  deficit, 
which  was  around  27  %  of  GDP  (16  %  including  official  transfers)  in  1996,  partly 
because  of  the  blockade  imposed  on  the  country  in  connection  with  the  Nagorno 
Karabakh  issue,  is  expected  to  decline  to  19.5  %  in  1997.  Over  the  medium  term, 
however,  external  sustainability  could  become  a  crucial  issue.  The  external  debt  was 
estimated  at  about  30  %  of  GDP  at  end-1996.  Net  international  reserves  are  still  low 
(about  US$  50 million).  Progress  with  structural  reform  is limited:  much  remains  to  be 
done  in  large  enterprise  restructuring  and  in  the  banking  sector.  In  June,  the  IMF 

20 

approved  the second year (US$ 47 million) of an ESAF arrangement.  Meanwhile,  recent 
armaments  purchases  and  the  nomination  of  a  new  Prime  Minister  have  raised  political 
tensions,  and  peace  is more  fragile  than  six months  ago.  In  view  of  both  economic  and 
political uncertainties, Armenia remains in the category of high-risk debtors. 

AZERBAIJAN 

Economic  recovery,  which  appears  to  have  begun  in  1996,  should  accelerate  in  1997, 
with a projected  5% growth  in GDP.  The annual average  inflation  rate should  decline  to 
some  9  %  by  the  end  of  1997,  and  the  budget  deficit  to  2  %  of  GDP.  The  current 
account  deficit,  which is expected  to  decrease to  16 % of GDP in  1997, will  continue  to 
be financed by growing  foreign  direct  investment  deriving  from  oil  contracts  (US$  345 
million  in  1996)  and  by  official  assistance.  The  level  of  foreign  exchange  reserves  is 
expected  to  increase to  3 months'  imports in  1997. The  external  debt  was  quite  low,  at 
about  16 %  of GDP,  at  end-1996,  and  the  debt  service  comfortable,  at  9 %  of  exports. 
Azerbaijan  has generally adhered very closely to the IMF ESAF programme  performance 
criteria,  and  structural  reforms  have  accelerated  and  are  broadly  on  track.  However, 
since  May,  the  arrears  in  pension  payments,  as  well  as  the  pace  of  privatization  and 
reform  of  the  banking  sector,  have  been  causing  concern.  These  factors,  together  with 
the  unresolved  conflict  with  Armenia  over  Nagorno  Karabakh,  imply  that  the  country 
risk remains high. 

BELARUS 

Current  economic  and  political  developments  in  Belarus  remain  a  matter  of  grave 
concern.  The  moderate  progress  made  towards  stabilization  in  the  past  is  in jeopardy. 
Since  the  second  half  of  1996,  state  interference  in  the  economy  has  intensified.  The 
positive economic growth officially  recorded in  1996 and in the first half of  1997 appears 
to  be  mostly  the  result  of  state  orders,  which  were  financed  by  cheap  credit  from  the 
banking  system  and  have  led  to  a  major  surge  of  stocks.  After  a  period  of  relative 
stability,  inflation  has  accelerated  significantly  since  the  last  quarter  of  1996.  Consumer 
prices  increased  at  an  annual  average  of  65%  during  the first five months  of  1997.  The 
external  sector  remains  particularly  fragile.  Furthermore,  there  is  a  serious  lack  of 
progress  with  structural  reforms,  especially  privatization.  The  overall  risk  is  high  and 
increasing. 

GEORGIA 

GDP  growth  of  9%,  close  to  the  10.5% registered  in  1996,  is  expected  for  1997.  The 
budget deficit,  which fell to 4.5 % in 1996, is expected  to  decrease further  in  1997, while 
annual inflation,  which fell dramatically to  14 % in  1996, should decrease further  to  11 % 
in  1997. The current  account  deficit  (excluding  official  transfers)  was  equivalent  to  10.5 
%  of GDP  in  1996, but  is expected  to  narrow  in  1997. Foreign  direct  investment  is still 
low.  Foreign  exchange  reserves  (2.6  months'  imports  in  1996)  are  expected  to  remain 
stable.  Since its independence,  Georgia  has accumulated  a foreign  debt  which  amounted 
to  some  30  %  of  GDP  at  end-1996,  but  has  reached  agreements  with  most  of  its 
creditors,  in  particular  an understanding  leading  to  clearance  of  its  arrears  towards  the 
Community.  In  March  1997,  the  IMF  Board  approved  a  second  annual  ESAF 
arrangement  (US$ 76 million). However,  in May, it expressed  concern  about  the pace  of 

-21 

privatization,  enforcement  of  tax  collection,  corruption  and  the  repayment  of  debt  to 
Turkmenistan.  Political  difficulties  continue: the Abkhazian problem is further  than  ever 
from  being resolved. The country risk remains high. 

MOLDOVA 

Following  three  years  of  substantial  progress  in  macroeconomic  stabilization,  serious 
problems have appeared  in Moldova since the middle of  1996: a widening budget  deficit, 
wage  and  pension  arrears,  lack  of  substantial  progress  in  structural  reform,  all  this  in a 
context  of  almost  continuous  output  decline.  These  negative  phenomena  persisted  and 
even  intensified  in  the  first  half  of  1997.  In  particular,  increasing  reliance  on  external 
financing  has contributed  to a steady increase in the country's external debt, which by the 
end  of May  1997  reached  51%  of GDP.  More  than  one-third  of the  debt  is  short-term, 
i.e. with maturities below 5 years. 

The  overall  risk  deteriorated  in the first half  of  1997,  as  it  seems  that  the  political  will 
which made for  significant  progress  in the reform  effort  in the  past  few  years  has begun 
to  weaken.  Indeed,  there  are  signs  which  suggest  that  the  process  of  economic 
transformation  may be slowing down. 

TAJIKISTAN 

Following  the end  of the civil war in December  1996 and the signing, in June  1997,  of a 
peace agreement  between  conflicting  parties,  economic  output  is expected  to  expand  by 
5  %  in  1997,  after  the  sharp  decline  -  16.7%  -  registered  in  1996,  Annual  average 
inflation,  which fell dramatically to 65 % in  1996, as a result  of tight  credit  and  monetary 
policies,  is  expected  to  decrease  only  slightly  to  50 %  in  1997,  because  of  policy  shifts 
following  the  inclusion  of  new  parties  in  a  coalition  government  and  wage  arrears  that 
are due to  be paid.  The trade  balance,  which  was  in  surplus  (US$  75  million  or  7 %  of 
GDP)  in  1996,  is  expected  to  deteriorate  slightly  in  1997.  Foreign  exchange  reserves, 
which  were  very  low  in December  1996,  are  expected  to  increase  in  1997,  mainly  as a 
result  of expected  disbursements  of external  assistance.  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. Rescheduling  of debt-service  payments 
falling  due in  1997 has begun.  The liberalization  of the foreign  exchange market,  foreign 
trade and prices is well advanced.  The transformation  into joint  ventures  of all remaining 
medium-sized  and large enterprises  is expected  by end-year,  while the agricultural  sector 
and  banking  system have begun to be reformed.  The  conclusion  of an IMF  agreement  is 
expected  in the coming months. The risk assessment  remains cautiously optimistic. 

UKRAINE 

Financial  stabilization  made  further  progress  in Ukraine  in the first half  of  1997,  mainly 
because  of  a decline  in the  financing  needs  of the  budget  deficit,  which  led  to  a  further 
reduction  in  broad  money  growth  and  in  the  inflation  rate.  The  exchange  rate  has 
remained  stable,  and  the  central  bank  announced  a  10% trading  band  for  the  hryvnia  in 
April  1997.  Both  the  current  account  deficit  and  the  foreign  debt  remain  at  manageable 
levels.  The  authorities  have  announced  the  current  account  convertibility  of the  hryvnia, 
with  effect  from  September  1997.  However,  structural  reform  has  practically  stagnated 

22 

in recent  months.  The  1997 budget  and  the  accompanying  package  of laws,  including  a 
comprehensive  tax  reform  and  further  deregulation  of  the  economy,  have  not  yet  been 
adopted,  and it is becoming increasingly clear that they will be approved  only in a revised 
and diluted form.  Real economic performance  continues to be disappointing.  GDP fell by 
8%o in the first quarter of  1997, compared to the same period  of last year. 

The recently signed Friendship Treaty with Russia settles a series of potentially  explosive 
issues relating  to  the  Black  Sea fleet.  However,  since  economic  stabilization  in  Ukraine 
remains  fragile  because  of  a  significant  slow-down  in  the  reform  process,  the  overall 
assessment  is that  Ukraine represents a moderate risk. 

UZBEKISTAN 

GDP growth  similar to the  1.6%  registered  in  1996 is expected  for  1997. So far  in  1997, 
the  authorities  have been  implementing  a stricter  fiscal  policy,  so  that  the  budget  deficit 
has been kept  within the target  of 3 % of GDP. However,  inflation  remains  high  (5-6  % 
monthly),  real  interest  rates  are  negative,  while  official  exchange  rates  for  the  som  are 
less and  less  realistic.  In  1996, the  current  account  balance  showed  a deficit  of  US$  1.0 
billion  (8  %  of  GDP),  while the  gross  foreign  exchange  reserves  were  still  high  at  US$ 
1.9 billion (4.8 months'  imports). The deficit  is expected  to stabilize or even to  decline in 
1997.  Uzbekistan  will  continue to finance  its deficit  mainly through  borrowing,  although 
an upturn in foreign  investment  is expected.  The country's  external  debt, which was US$ 
2.3  bn  or  17 %  of  GDP  at  the  end  of  1996,  is  projected  to  remain  moderate  in  1997. 
With  regard  to  structural  reform,  draconian  foreign  exchange  controls  and  import 
restrictions  have  been  reintroduced.  The  restructuring  of  the  agricultural  sector  and  of 
large  enterprises  is  proceeding  slowly,  while  the  banking  sector  is  in  a  poor  condition. 
The  IMF  stand-by  arrangement  remains  suspended.  The  risk  assessment  is  still 
unfavourable. 

IV. 

MEDITERRANEAN  COUNTRIES 

ALGERIA 

Although  macro-economic  indicators  have  continued  to  improve,  Algeria's  country  risk 
remains high owing to doubts about medium-term economic prospects and the  continued 
difficult  security  situation. 

The  macro-economic  performance  achieved  under  the  IMF-supported  programme  has 
recently  improved  further.  Economic growth is projected  to  accelerate from  4% in  1996 
to 4.5%o in  1997. Inflation  declined  from  15.1%o in December  1996 (12 months) to  6.9%) 
in  April  1997.  The  current  account  and  fiscal  balances  remained  in  surplus  during  the 
first quarter  of  1997 and  are currently projected  at 0.3%) and  1.3%  of GDP,  respectively, 
for  the  year  as  a  whole.  Gross  foreign  exchange  reserves,  which  doubled  to  US$  4.2 
billion in  1996 (4.5 months'  imports),  increased  further  to  US$  5.3  billion  at  end-March 
1997.  They  are  currently  projected  to  reach  US$  5.5  billion  by  the  end  of  the  year. 
Algeria's  outstanding  external  debt  declined  slightly  to  74.2%  of  GDP  at  end-1996, 
while the  outstanding  domestic  debt  was  halved  during  the  period  1993-96  to  22.2% of 
GDP. 

-23 

Despite  these  achievements,  the  economy  remains  poorly  diversified  and  particularly 
vulnerable  to  the  vagaries  of  world  energy  prices  and  weather  conditions.  Because  of 
limited  foreign  direct  investment  and  lack  of  access  to  international  capital  markets,  a 
sound  balance  of payments  continues  to  rely on  sizeable  concessional  external  financing 
from  the Bretton  Woods  institutions, the Paris  and London  clubs,  and  other  multilateral 
and bilateral  creditors.  In addition,  the  political  situation  and  security  problems  continue 
to  hinder  economic  progress,  in  particular  structural  reforms  and  the  development  of  a 
dynamic  private  economy.  Growing  unemployment  (estimated  at  28.3%>  in  1996)  and 
mounting social difficulties  could also jeopardize the reform  momentum. 

24 

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 

25 
25 
27 
32 
33 

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) 
LL.B Bases for  the calculation  of the provisioning  of the Guarantee Fund (2) 
IL C Basis for  the provisioning  of the Fund in the event of apart  guarantee 
II.D Provisioning  of the Guarantee Fund (3) 
ILE Margin  remaining  in the guarantee  reserve  (4) 
II.FResidual  lending capacity  (5) 

III. TABLES: COUNTRY-RISK  INDICATORS 

34 
34 
34 
35 
35 
36 
36 
37 

25 

I. 

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

I.A 

Tables  1 to 3 

The purpose  of Tables  1 to  3 is to  show the outstanding  amount  of guarantees  and  annual 
repayments of capital and interest  in respect  of borrowing and lending  operations for  which 
the risk is covered by the Community budget.  The figures show the maximum possible risk 
for the Community in respect of these operations and must not be read as meaning that these 
amounts will actually be drawn from the budget. In the case of Table 3, in particular, it is not 
certain that all the operations described will actually be disbursed. 

I.A.J 

A uthorised ceiling (Table 1) 

This  is  the  aggregate  of  the  maximum  amounts  of  capital  authorised  (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 authorised ceiling 

Factors reducing the risk: 

- 

- 

limitation  of  the  guarantee  given  to  the  EIB  to 75%>  of  the  loans  signed  in  the 
Mediterranean countries; 

limitation of the guarantee given to the EIB to 70% of the loans signed as part  of lending 
operations with  certain non-member  countries authorised  by the  Council  Decision  of  14 
April  1997  and  a  sharing  or  risk  between  the  Community  and  the  EIB  as  the  budget 
guarantee covers only political risks in some cases; 

-  operations  already repaid,  since the amounts concerned,  except  in the  case  of balance  of 
payments  support  (Member  States),  are the maximum  amount  of loans granted  and  not 
outstanding amounts authorised; 

- 

the amounts authorised are not necessarily taken up in full. 

I.A. 2 

Capital outstanding ( Table I) 

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. 

- 2 6-

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; 

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  authorised  plus,  where  applicable,  the  amounts  in  respect  of 
operations proposed  by the Commission and not yet decided. 

27 

I.B 

Loan operations covered  by a budget guarantee 

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  0 3 77 
20  12.79 
15.03.82 
05.12.85 
23.04.90 

16.10.78 
2001.81 
14.12.81 
1503.82 
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) 

Amount 
decided 

Amount 
outstanding 
at  1.1.97 

Operations  in  six-month 
period 

Amounts 
disbursed 

Amounts 
repaid 

Amount 
outstanding  at 
30.06.97 

500,00 

3.478,57 

500,00 

3.454,50 

572,48 

476,00 

119,60 

748,11 

416,00 

327,30 

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 

5.299,16 

0,00 

892,00 

4.401,40  (5) 

(1 ) Exceptional  aid for the reconstruction  of  areas hit by the earthquake  in Italy  in  1 980. 
(2)  Exceptional  aid for the reconstruction  of  areas hit by the earthquake  in Greece  in  1981. 
(3)  Long-term  loans  for which  the  schedule  of  repayments  depend  on the dates of  disbursement. 

(4)  By Decision  94/1 79/Euratom  of  21 March  1 994 the Council  decided to  extend  Euratom  loans to  the financing  of  projects  in certain  non-member  countries. 

At  31 December  1 996 no loans  had yet been granted  in non-member  countries. 

(5)  Discrepancy  caused  by change  in the  rates of the other  currencies  against  the ecu. 

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 
1.01.97 

Operations  in six-month period 

Amounts 
disbursed 

Amounts 
reapid 

Amount 
outstanding at 
30.06.97 

ECU  million 

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

SLOVAKIA 

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

90/83/EEC 
90/681/EEC 

22.02.90 
21.12.90 

91/310/EEC 

24.06.91 

91/106/EEC 

25.0291 

91/106/EEC 

25.0291 

91/311/EEC 

24.06.91 

92/511/EEC 

19.10.92 

91/384/EEC 

22.07.91 

ROMANIA II 
ROMANIA III 

92/551/EEC 
94/369/EC 

27.11 92 
20.06.94 

1st 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) 

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 
40,00 

190,00 
185,00 
80,00 

55,00 
0,00 

20,00 
0,00 

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 

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) 

E x p i ry  date 

L o an  s i t u a t i on 

-  c l o s ed  (a) 
-  p a r t ly  d i s b u r s ed  (b) 
-  d i s b u r s ed  in  f u ll  (c) 
-  n ot  y et  d i s b u r s ed  (d) 

A m o u nt 
d e c i d ed 

A m o u nt 
o u t s t a n d i ng  at 

1.01.97 

O p e r a t i o ns  in  s i x - m o n th  p e r i od 

A m o u n ts 
d i s b u r s ed 

A m o u n ts 
repaid 

A m o u nt 
o u t s t a n d i ng  at 
30.06.97 

ECU  million 

LATVIA 

1 st  t r a n c he 
2 nd  t r a n c he 

LITHUANIA 

1st  t r a n c he 

2 nd  tranche 
MOLDOVA  I 

1 st  t r a n c he 

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

1st  t r a n c he 

2 nd  tranche 

ALGERIA  I 

1st  t r a n c he 
2 nd  t r a n c he 
ALGERIA  II 

1 st  t r a n c he 
2nd  t r a n c he 

94/346/EC 

13.06.94 

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

25.03.96 
2 2 1 2 . 94 
2 3 . 1 0 95 

95/132/EC 

1 0 0 4 . 95 

91/510/EEC 

23.09.91 

94/938/EC 

2 2 . 1 2 94 

ISRAEL 
REPS.OF  FORMER  USSR 

91/408/EEC 
91/658/EEC 

22.07.91 
16.12.91 

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 

(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 
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 

i 
OJ 
O 

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 
109,60 

34,10 

TOTAL 

5.035,00 

2.678,50 

0,00 

34,10 

2.644,60 

GEOGRAPHICAL AREA 

Decision 

Date of 
decision 

Rate of 
guarantee 

Loan  term 
(years) 

Date of 
guarantee 
contract 

Amount 
decided 

TABLE  6 

LOAN GUARANTEES TO EIB 

Loans  signed 

Amount  outstanding 

at 1.01.97 

during 
six-month 
period 

at 1.01.97 

at 30.06.97 

MED. financial  protocols(l) 

8.03.77 

75% (2) 

MED. horizontal coop. 

R/1762/92/CEE 

29.06.92 

75% (2) 

TOTAL MED. 

C and E Europe 1 

90/62/CEE(4) 

12.02.90 

91/252/CEE(5) 

14.05.91 

C and E Europe II 

93/696/CE(6) 

1312.93 

Asia, Latin America 1 

93/115/CEE 

15.02.93 

Asia, Latin America II 

96/723/CE 

12.1296 

South Africa 

95/207/CE 

01.06.95 

100% 

100% 

100% 

100% 

100% 

100% 

New mandates 

97/256/CE(7) 

14.04.97 

70% 

TOTAL 

15 

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 

25.07.97/29.07.97 

6062 

1800 

7862 

1000 

700 

3000 

750 

275 

300 

7105 

20992 

5325 

1800 

7125 
(3) 

928 

700 

2980 

647 

101 

60 

0 

60 
(3) 

0 

20 

0 

50 

75 

2057 

301 

2357 

615 

356 

335 

204 

32 

2321 

466 

2787 

664 

380 

486 

250 

51 

56 

12481 

205 

3898 

4674 

I 

(1) Including  ECU  1 500 million for Spain, Greece and Portugal. 

(2) General gurantee 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% gurantee 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) Non-member  countries:  Poland, Hungary,  Czech Republic  and Slovak  Republic,  Bulgaria, Romania,  Baltic  States and Albania. 
(7) Non-member  countries:  Central and  Eastern  Europe, Mediterranean, Asia and Latin America, South Africa. 

32 

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 (EIB loans to non-member countries from its own resources). 

Expected signatures 

Mediterranean countries 

At 30 June  1997 a total of ECU 190 million was still to be signed in  1997 under current and 
former mandates (ECU 642 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. 

Asia and Latin America 

At  30  June  1997  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  comes  to  ECU 225 million.  The  total  still  to  be  signed  in  1997  therefore 
comes to ECU 245 million. 

South Africa 

At  30 June  1997 a total  of ECU 124 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 30 June  1997 ECU 5 868 million still had to be disbursed against loans signed at that date. 
The total breaks down as follows:7 

Mediterranean 

Central and Eastern Europe 

Asia and Latin America 

South Africa 

ECU 2 197  million 

ECU 3135  million 

ECU  411  million 

ECU  125  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. 

- 3 3-

I.D 

Payment of the budget  guarantee 

ID.  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 authorised 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. 

/. 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 
three months of receiving the EIB's request.  The EIB  administers the loan with  all the care 
required  by banking practice and is obliged to demand the payments due after  the guarantee 
has been activated. 

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 authorise the Bank to withdraw  the corresponding  amounts from the Guarantee Fund 
within three months. 

34 

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

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) 

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 (70%, 75% or 100%): 

- 

- 

to the loan guarantees authorised 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) authorised 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 

-35 

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 first half of  1997 the budgetary authority therefore adopted transfer  9/97 so that,  as at 
the start  of every financial year, the amounts paid  into the Funds could  be adjusted  and  the 
annual tranche provided for in the financial statements for EIB loans to non-member countries 
(Central  and  Eastern  Europe,  Mediterranean  countries,  Asia  and  Latin  America  and  South 
Africa) could be paid. 

II.C 

Basis for the provisioning of the Fund in the event of a part guarantee 

For EBB 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 authorised. 

The guarantee on the EIB loans authorised by the Council on 14 April  1997 is limited to 70%» 
of  the  total  amount  of  credits  opened.  The  basis  for  provisioning  is  70%  of  the  annual 
forecast of signatures. 

II.D 

Provisioning of the Guarantee Fund (3) 

The amounts paid into, the Fund are obtained by applying the appropriate rate of provisioning 
(15%o 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 

- 3 6-

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%. 

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.) 

ILE  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. 

37 

III. 

TABLES: COUNTRY-RISK  INDICATORS 

38 

Country-risk  indicators 

Country:  Bulgaria 

footnotes 

1994 

1995 

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

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

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

2,1 
8,6 
11,6 
32,8 
70,7 

1996 
prelim. 

-10,9 
-8,3 
12,5 
310,8 
487,4 

General  government  balance  (as  % of  GDP) 

-5,8 

-5,7 

-11,0 

Balance  of  payments 

Exports of goods  and services  (bn  USD) 
Current  account  balance  (%  of GDP) 
Net inflow of foreign direct  investment  (m  USD) 
Official  reserves,  including  gold (end of period) 

bnUSD 
months'  imports  of goods and  services 

External  debt 

Convertible  currency  external  debt 

(bn  USD, end of period.) 

Convertible  debt  service  (bn  USD) 

principal 
interest 

External debt/GDP  (%) 
External debt/exports  of goods and services  (%) 
Debt  service/exports  of goods and services  (%) 
Arrears  (on both interest  and principal.bn  USD) 
Debt  relief agreements  and  rescheduling 

Indicators  of  EU  exposure 

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

IMF  arrangements 

Type 
(Date) 
On track 

Indicators  of  market's  perception  of  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 

Footnotes 
(1)  (2)  (3)  See explanatory  notes 
(4) 
(5) 

London Club  DDSR  (July)  Paris Club  rescheduling  (April) 
SBA  suspended  in 09/94 and  09/96 

5,3 
-2,1 
105 

1.3 
3,0 

11.4 

0,9 
0,5 
0,5 
119 
220 
28 
17,6 
(4) 

6,8 
4,6 
8,9 

SBA/STF 
(3/94-3/95) 
no (5) 

7,0 
-0,5 
90 

1.5 
2,8 

10,2 

0.9 
0,3 
0,6 
79 
151 
14 
none 
none 

7,3 
5,7 
7,7 

-

6,1 
-0.0 
.115 

0,8 
1.6 

9,7 

1,0 
0,4 
0,6 
99 
159 
17 
none 
none 

8,1 
6,5 
10,3 

(09/96) 
est. 

(09/96) 

SBA 
(7/96-2/98) 
no (5) 

none 
none 
03/94  09/94 
88  98 
(167)  (167) 
03/94  09/94 
91  95 
(135)  (135) 
19.8  20.8 

none 
none 
03/95  09/95 
90  90 
(187)  (181) 
03/95  09/95 
93  94 
(135)  (135) 
21.9  22.2 

none 
none 
03/96  09/96 
99  92 
(178)  (178) 
03/96  09/96 
92  93 
(135)  (135) 
23.1  23.5 

(1) 

(2) 

(2) 

(3) 

-39 

Country-risk  indicators 

Country:  Czech  Republic 

footnotes 

1994 

1995 

1996 

4,4 
6,8 
3,5 
8,6 
27,1 

0,0 

29,7 
-8,6 
1388 

12,4 
4,4 

20,4 

3,8 
3,0 
0,8 
39,2 
68,8 
12,8 
none 
none 

7,3 
2,8 
1,9 

-

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

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

2,6 
2,1 
3,2 
9,7 
28,8 

4,8 
8,7 
2,9 
7,9 
26,6 

General  government  balance  (as  % of  GDP) 

1,0 

0,6 

18,9 
-0,1 
749 

6,2 
3,9 

10,7 

2,5 
2,1 
0,4 
27,9 
56,6 
13,2 
none 
none 

5,2 
3,4 
2,5 

SBA 
(3/93-3/94) 
yes  (4) 

28,2 
-2,9 
2526 

14,0 
5,6 

16,5 

2,6 
2,0 
0,6 
35,1 
58,6 
9,2 
none 
none 

5,8 
2,6 
2,5 

-

Balance  of  payments 

Exports of  goods  and services  (bn  USD) 
Current  account  balance  (%  of  GDP) 
Net  inflow  of  foreign  direct  investment  (m  USD) 
Official  foreign  exchange  reserves  (end of  period) 

b n U SD 
months'  imports  of  goods and  services 

External  debt 

Convertible  currency  external  debt 

(bn  USD, end of  period.) 

Convertible  debt  service  (bn  USD) 

principal 
interest 

External  debt/GDP  (%) 
External  debt/exports  of  goods  and services  (%) 
Debt  service/exports  of  goods  and services  (%) 
Arrears  (on  both  interest  and  principal, m  USD) 
Debt  relief  agreements  and  rescheduling 

Indicators  of  EU  exposure 

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

(D 

IMF  arrangements 

Type 
(Date) 
On  track 

Indicators  of  market's  perception  of  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 

Footnotes 
(1) (2) (3)  See explanatory notes 
(4) 

All debts to IMF paid ahead of schedule. 

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 

(2) 

(2) 

(3) 

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

- 4 0-

Country-risk  indicators 

Country:  Estonia 

footnotes 

1994 

1995 

1996 

est. 

4,0 
1.1 
4.3 
14,8 
12,4 

-1,5 
-1,6 

est. 
est. 

2074 
-12,0 
70 

640 
2,4 

est. 
est. 

est. 
est. 
est. 

est. 

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

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

General government  balance (as % of  GDP) 

Financial  balance 
Fiscal  balance 

Balance of  payments 

-1,8 
3,5 
4,5 
41.7 
12,6 

(4) 
(4) 

2,9 
1,3 

Exports of goods (m USD) 
Current account balance (% of GDP), excl. official transfers 
Net inflow of foreign direct investment  (m USD) 
Official foreign exchange reserves  (end of period) 

m  USD 
months' imports of goods 

1312 
-11,7 
214 

447 
3,2 

4,3 
1,4 
4,1 
28,9 
11,5 

-0,4 
-0,8 

1838 
-7,4 
204 

583 
2,7 

External  debt 

Convertible currency external debt  (incl. to IMF) 

170,3 

246,8 

296,5 

(m USD, end of period) 

Convertible debt service (m USD) 

principal 
interest + charges to IMF 

External debt/GDP  (%) 
External debt/exports of goods  (%) 
Debt service/exports of goods  (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and  rescheduling 

Indicators  of  EU  exposure 

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

IMF  arrangements 

Type 
(Date) 
On track 

Indicators  of  market's  perception  of  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) 

(1) 

(2) 

(2) 

(3) 

8,1 
3,0 
5,1 
7,2 
12,8 
0,8 
none 
none 

0,4 
15,7 
2,0 

21,0 
6,0 
15,0 
7,8 
15,3 
1,1 
none 
none 

0,5 
16,5 
2,2 

51,2 
27,5 
23,7 
6,4 
13,5 
2,5 
none 
none 

0,6 
15,6 
2,2 

SBA/STF 
(10/93-3/95) 
yes 

SBA 
(4/95-6/96) 
yes 

SBA 
(7/96-8/97) 
yes 

none 
none 
03/94  09/94 
105  102 
(167)  (167) 
03/94  09/94 
88  86 
(135)  (135) 
20.7  23.6 

none 
none 
03/95  09/95 
66  76 
(187)  (181) 
03/95  09/95 
79  79 
(135)  (135) 
25.4  26.3 

none (6) 
none (6) 
03/96  09/96 
73  71 
(178)  (178) 
03/96  09/96 
76  71 
(135)  (135) 
28.9  31.1 

Footnotes 
(1) (2) (3)  See explanatory  notes 
(4) 
(5) 

Financial balance does not take into account government net lending, whereas fiscal balance does. 
Kroon figures have been converted using the yearly average exchange rate of the dollar. 
In 1996, Estonia  repaid in advance some foreign loans. 
Estonia has asked for a rating 

(6) 

-41 

Country-risk  indicators 

Country:  Hungary 

footnotes 

1994 

1995 

1996 

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

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

2,9 
9,0 
10,4 
21,2 
111,0 

1.5 
6,0 
10,4 
28,5 
139,5 

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

Consolidated  state  budget  balance  (as  % of  GDP) 

-6,3 

-6,8 

-3.3 

Balance  of  payments 

Exports  of goods and services  (bn  USD) 
Current  account  balance  (%  of GDP) 
Net inflow  of foreign direct  investment  (m  USD) 
Official  reserves  (end of  period) 

bnUSD 
months'  imports  of goods 

External  debt 

Convertible  currency  external debt 

(bn  USD, end of period) 

Convertible  debt service  (bn  USD) 

principal,  including  early  repayments 
interest 

External debt/GDP  (%) 
External debt/exports  of goods and services  (%) 
Debt service/exports  of goods and services  (%) 
Arrears  (on both  interest  and principal, m  USD) 
Debt  relief  agreements  and  rescheduling 

Indicators  of  EU  exposure 

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

IMF  arrangements 

Type 
(Date) 
On  track 

Indicators  of  market's  perception  of  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 

Footnotes 
(1)  (2)  (3)  See explanatory  notes 
(4) 

First  review  uncompleted. 

est. 

7,6 
-9,5 
1100 

6,8 
7,2 

28,5 

6,2 
4,3 
1,9 
68,4 
267,2 
48,7 
none 
none 

16,5 
4,0 
11,3 

SBA 
(9/93-12/94) 
no (4) 

12.8 
-5,6 
4410 

12,0 
9,5 

31,7 

7,7 
5,3 
2,4 
72,3 
185,9 
43,8 
none 
none 

13,0 
3,1 
6,6 

-

14,2 
-3,2 
1987 

9,7 
6,9 

27,6 

7,4 
5,1 
2,3 
63,6 
144,1 
44,7 
none 
none 

9,6 
2,7 
5,2 

SBA 
(3/96-2/98) 
yes 

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) 

(2) 

(3) 

42 

Country-risk  indicators 

Country:  Latvia 

footnotes 

1994 

1995 

1996 

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

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

2,0 
-2.2 
6.5 
26,3 
0,55 

-1,6 
-6,3 
6.1 
23,1 
0,54 

General  government  balance  (as  % of  GDP) 

-4,4 

-3,4 

est. 

2,8 
1,4 
7,2 
13,0 
0,56 

-1,9 

1443 
-9,0 
171 

652 
2,9 

409 

71,0 
n.a. 
n.a. 
8,2 
28,6 
4,9 
none 
none 

0,7 
12,4 
3,5 

988 
5,5 
155 

545 
4,5 

345 

50,0 
n.a. 
n.a. 
9,2 
34,1 
5,1 
none 
none 

0,7 
13,3 
4,8 

1304 
-0,4 
165 

527 
2,9 

403 

39,0 
n.a. 
n.a. 
9,2 
31,4 
3,0 
none 
none 

0.7 
12,3 
4,0 

SBA/STF 
(12/93-3/95) 
yes 

SBA 
(4/95-4/96) 
no 

SBA 
(5/96-8/97) 
yes 

none 
none 
03/94  09/94 
104  125 
(167)  (167) 
03/94  09/94 
94  92 
(135)  (135) 
19.6  21.3 

none 
none 
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 

Balance  of  payments 

Exports of goods  (m  USD) 
Current  account  balance  (%  of GDP) 
Net  inflow of foreign direct  investment  (m  USD) 
Official foreign exchange  reserves  (end of  period) 

m  USD 
months'  imports  of goods and non-factor  services 

External  debt 

Convertible  currency  external  debt 

(m  USD, end of  period) 

Convertible  debt  service  (m  USD) 

principal 
interest 

External debt/GDP  (%) 
External debt/exports  of goods  (%) 
Debt service/exports  of goods  (%) 
Arrears  (on both  interest  and  principal, m  USD) 
Debt  relief agreements and  rescheduling 

Indicators  of  EU  exposure 

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

IMF  arrangements 

Type 
(Date) 
On  track 

Indicators  of  market's  perception  of  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 

Footnotes 
(1)  (2)  (3)  See explanatory  notes 

(D 

(2) 

(2) 

(3) 

43 

Country-risk  indicators 

Country:  Lithuania 

Real G DP  growth  rate  (%) 
Industrial  production  ( %  change) 
Unemployment 
Inflation  rate 
Exchange  rate  (Litas  per  USD) 

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

General  government  balance  (as  %  of  GDP) 

Financial  balance 

Fiscal  balance 

Balance  of  payments 

Exports  of goods  and  services  (bn  USD) 
Current  account  balance  (%  of GDP),  excl.  official  transfers 
Net  inflow  of foreign  direct  investment  (m  USD) 
Official  foreign  exchange  reserves  (end  of period,  gross  foreign  assets) 

m  USD 
months'  imports  of goods  and  services 

External  debt 

Convertible  currency  external  debt 

(m  USD,  end  of  period) 

Convertible  debt  service  (m  USD) 

principal 
interest 

External  debt/GDP  (%) 
External  debt/exports  of goods  and  services  (%) 
Debt  service/exports  of goods  and  services  (%) 
Arrears  (on  both  interest  and  principal,  m  USD) 
Debt  relief  agreements  and  rescheduling 

Indicators  of  EU  exposure 

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

IMF  arrangements 

Type 

(Date) 

On  track 

Indicators  of  market's  perception  of  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 

footnotes 

1994 

1995 

1996 

1.0 
-6,7 
3,8 
72,2 
4,3 

-1,5 
-4,2 

1,9 
-4,2 
60 

587 
3,1 

448 

19 
n.a 
n  a. 
8,0 
23,2 
1,0 
none 
none 

0,9 
13,3 
3,1 

3,0 
0,8 
7,3 
39,6 
4,0 

-1,8 

-3,3 

2,7 
-3,2 
55 

819 

3,9 

757 

69 
n.a. 
n  a. 
13,9 
34,3 

3,1 
none 
none 

1,4 
13,9 
4,8 

3,6 
-1,5 
6,2 
13,1 
4,0 

-1,9 

-3,6 

3,3 
-2,7 
152 

834 
2,4 

1076 

120 
n  a 
n.a. 
15,6 
32,7 
3,6 
none 
none 

1,4 
10,2 
3,3 

STF  (10/93-3/94) 

EFF 

EFF 

EFF  (10/94-10/97) 

(10/94-10/97) 

(10/94-10/97) 

yes 

yes 

yes 

none 
none 
03/94  09/94 
110  121 
(167)  (167) 
03/94  09/94 
97  96 
(135)  (135) 
18.4  20.0 

none 
none 
03/95  09/95 
108  118 
(187)  (181) 
03/95  09/95 
95  90 
(135)  (135) 
21.7  22.9 

Ba2 
none 
03/96  09/96 
85  59 
(178)  (178) 
03/96  09/96 

89  90 
(135)  (135) 
23.8  25.3 

(4) 

(4) 

(1) 

(2) 

(2) 

(3) 

Footnotes 
(1)  (2)  (3)  See  explanatory  notes 
(4) 

Financial  balance  does  not  take  into  account  government  net  lending, whereas  fiscal  balance  does. 

44 

Country-risk  indicators 

Country: Romania 

footnotes 

1994 

1995 

1996 

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

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

3,9 
3,3 
8,1 
61,7 
1767 

7,1 
9,4 
8,0 
27,8 
2760 

4,1 
9,9 
6,3 
56,9 
4035 

General government  balance (as % of GDP) 

-2,0 

-2,6 

-3,9 

Balance of  payments 

Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 

m USD 
months' imports of goods and services 

External  debt 

Convertible currency external debt, incl. short-term debt 

(bn USD, end of period) 

Convertible debt service (m USD) 

principal 
interest 

External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 

Indicators  of EU exposure 

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

(D 

7,2 
-1,4 
341 

1596 
2,2 

5,5 

589 
313 
276 
18,3 
76,6 
15,4 
none 
none 

8,4 
10,7 
9,7 

9,4 
-4,6 
367 

1523 
1,9 

6,6 

1366 
1073 
293 
18,7 
73,9 
14,5 
none 
none 

10,2 
11,5 
10,1 

9,8 
-5,8 
555 

2099 
2,1 

8,3 

1980 
1524 
456 
23,5 
85,0 
20,2 
none 
none 

10,2 
9,4 
8,0 

est. 
est. 

IMF arrangements 

Type 
(Date) 
On track 

Indicators  of market's  perception of  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 

SBA 
(5/94-12/95) 
yes 

SBA 
(5/94-12/95) 
yes 

SBA 
(4) 
no (5) 

none 
none 
03/94  09/94 
74  77 
(167) (167) 
03/94  09/94 
76  74 
(135) (135) 
25.4  26.2 

none 
none 
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 

(2) 

(2) 

(3) 

Footnotes 
(1) (2) (3)  See explanatory notes 
(4) 
(5) 

The SBA approved in May 1994 was augmented and extended through 1997. 
Suspended in March 1996. New SBA approved by IMF Board on 22 April 1997 

- 4 5-

Country-risk  indicators 

Country: Slovak  Republic 

footnotes 

1994 

1995 

1996 

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

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

4,9 
4,8 
14,8 
11,7 
31,3 

6,8 
8,3 
13,1 
7,2 
29,6 

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

General government  balance (as % of GDP) 

-1,3 

0,1 

-1,3 

Balance of  payments 

Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 

m USD 
months' imports of goods and services 

External debt 

Convertible currency external debt 

(bn USD, end of period) 

Convertible debt service (m USD) 

principal 
interest 

External debt/GDP (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling 

Indicators of EU exposure 

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

(D 

IMF arrangements 

Type 
(Date) 
On track 

8,9 
4,8 
184 

1691 
2,3 

4,2 

766 
497 
269 
30,5 
46,9 
8,6 
none 
none 

2,9 
5,3 
2,3 

11,0 
2,3 
157 

3400 
4,1 

5,7 

1390 
1130 
260 
32,9 
52,0 
12,7 
none 
none 

4,1 
5,2 
2,8 

STF 
(7/93  -7/94) 
yes 

SBA 
(7/94-3/96) 
no (4) 

10,9 
-10,1 
189 

3473 
3,4 

7,7 

1444 
1186 
258 
40,6 
70,6 
13,3 
none 
none 

4,5 
4,5 
3,2 

-

Indicators of market's  perception of 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 

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) 
38.6  41.2 

(2) 

(2) 

(3) 

Footnotes 
(1) (2) (3)  See explanatory notes 
(4) 

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

-46-

Country-risk  indicators 

Country:  Belarus 

footnotes 

1994 

1995 

1996 

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

(end of period) 
(yearly average) 
(average) 

-12,6 
-19,9 
2,1 
1960 
10600 

-10,4 
-11,5 
2,7 
244 
11500 

2,6 
3,3 
3,9 
39,3 
15500 

General government  balance (as % of GDP) 

-1,6 

-2,3 

-1,8 

Balance of payments. 

Exports of goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves (end of period) 

m USD 
months' imports of goods and services 

External debt 

Convertible currency external debt 

(bn USD, end of period) 

Convertible debt service (m USD) 

principal 
interest 

External debt/GDP  (%) 
External debt/exports of goods and services (%) 
Debt service/exports of goods and services (%) 
Arrears (on both interest and principal, m USD) 
Debt rescheduling agreement 

Indicators of EU exposure 

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

(D 

IMF arrangements 

Type 
(Date) 
On track 

2,5 
-12,4 
10 

101,0 
0,3 

1,3 

123,0 
n.a. 
n.a. 
25,9 
47,4 
4,3 
493 
(4) 

0,9 
4,8 
2,3 

4,7 
-4,7 
7 

377,0 
0,7 

1,5 

178,0 
n.a. 
n.a. 
14,7 
32,7 
3,4 
460 
none 

0,5 
2,6 
0,8 

est. 
est. 

est. 

est. 

5,4 
-9,1 
6 

10,0 
0,0 

1,0 

163,2 
n.a. 
n.a. 
8,1 
17,6 
3,0 
n.a. 
none 

0,5 
4,0 
0,7 

STF 
(07/93-06/94) 
no (5) 

SBA 
(12/95-11/96) 
no (6) 

SBA 
(12/95-11/96) 
no (6) 

Indicators  of market's  perception of  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 

none 
none 
03/94  09/94 
145  138 
(167) (167) 
03/94  09/94 
109  109 
(135) (135) 
15.5  15.7 

none 
none 
03/95  09/95 
135  134 
(187) (181) 
03/95  09/95 
112  112 
(135) (135) 
15.2 15.5 

none 
none 
03/96  09/96 
128  142 
(178) (178) 
03/96  09/96 
116  118 
(135) (135) 
14.5 14.6 

(2) 

(2) 

(3) 

Footnotes 
(1) (2) (3)  See explanatory notes 
(4) 
(5) 

With Russia for gas arrears 
IMF 1993 STF programme went off track in early 1994. However, IMF staff regarded favourably the government programme 
adopted in Autumn 1994, which was supported with the second STF tranche by end-January 1995. 
The first quarterly review of the programme, initially scheduled for December 1995, has never been completed. 

(6) 

47 

Country-risk  indicators 

Country:  Moldova 

footnotes 

1994 

1995 

1996 

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

(end of period) 
(yearly  average) 
(end of period) 

-30,9 
-12,0 
20,6 
116 
4,27 

-1.9 
-6,0 
24,5 
24 
4,50 

-8,0 
-5,1 
23,4 
15 
4,59 

General  government  balance  (as  % of  GDP) 

-5,9 

-5,9 

-10,0 

Balance  of  payments 

Exports of goods  (m  USD) 
Current  account  balance  (%  of GDP) 
Net inflow of foreign direct  investment  (m  USD) 
Official  foreign  exchange  reserves  (end of  period) 

m  USD 
months'  imports  of goods 

External  debt 

Convertible  currency  external  debt 

(m  USD, end of period) 

Convertible  debt service  (m  USD) 

principal 
interest 

External debt/GDP  (%) 
External debt/exports  of goods  (%) 
Debt service/exports  of goods  (%) 
Arrears  (on both  interest  and principal, m  USD) 
Debt  relief agreements  and  rescheduling 

Indicators  of  EU  exposure 

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

(1) 

618 
-12,9 
11,6 

179 
2,9 

739 
-8,1 
63,7 

257 
3,2 

506,2 

696,3 

12,3 
n.a. 
n.a. 
30,0 
55,5 
4,0 
none 
none 

0,9 
18,0 
10,0 

91,0 
n.a. 
n.a. 
38,0 
91,1 
11,0 
none 
none 

0,8 
8,7 
7,9 

801 
-18,8 
40,0 

315 
4,1 

818,2 

n.a. 
n.a. 
n.a. 
57,6 
102,1 
n.a. 
none 
none 

1,0 
9,3 
9.5 

IMF  arrangements 

Type 
(Date) 
On  track 

Indicators  of  market's  perception  of  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 

Footnotes 
(1)  (2) 

See explanatory  notes 

SBA 
(12/93-3/95) 
yes 

SBA 
(3/95-3/96) 
yes 

EFF 
(5/96-5/99) 
yes 

none 
none 
03/94  09/94 
148  155 
(167)  (167) 

none 
none 
03/95  09/95 
157  141 
(187)  (181) 

none 
none 
03/96  09/96 
134  125 
(178)  (178) 

(2) 

none 

none 

none 

none 

none 

none 

48 

Country-risk  indicators 

Country:  Ukraine 

footnotes 

1994 

1995 

1996 

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

General  government  balance  (as  % of  GDP) 

-8,2 

-5,0 

-10,0 
-5,1 
1,3 
40 

1,9 
1,9 

-3,2 

20,3 
-3,9 
0,52 

1994 
5,3 

9,2 

1221 
716 
505 
21,2 
45,3 
6,0 
n.a. 
(4) 

3,0 
2,6 
1,2 

14,7 
-6,0 
0,09 

646 
2,3 

7,2 

1794 
n.a. 
n.a. 
29,2 
48,0 
12,1 
2722 

(4) 

1,6 
1.6 
0,8 

16,4 
-5,0 
0,27 

1134 
3,7 

8,1 

1531 
986 
545 
23,3 
53.6 
9,3 
236 
(4) 

1,5 
1.4 
0,7 

STF 
(04/93-04/95) 
yes 

SBA 
(04/95-04/96) 
no  (5) 

SBA 
(05/96-02/97) 
yes 

none 
none 
03/94  09/94 
149  147 
(167)  (167) 
03/94  09/94 
111  113 
(135)  (135) 
15.1  14.5 

none 
none 
03/95  09/95 

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

none 
none 
03/96  09/96 

135 
136 
(178)  (178) 
03/96  09/96 

107 
111 
(135)  (135) 
16.7  16.6 

Balance  of  payments 

Exports  of goods and services  (bn  USD) 
Current  account  balance  (excl. transfers)  (%  of GDP) 
Net  inflow  of foreign direct  investment  (bn  USD) 
Gross  official foreign exchange  reserves 

m  USD 
weeks'  imports  of goods  and  services 

External  debt 

Convertible  currency external  debt 

(bn  USD, end of period) 

Convertible  debt  service  paid  (m  USD) 

principal 
interest 

External  debt/GDP  (%) 
External  debt/exports  of goods  and services  (%) 
Debt service/exports  of goods  and services  (%) 
Arrears  (on  both interest  and principal, m  USD) 
Debt  relief agreements  and  rescheduling 

Indicators  of  EU  exposure 

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

IMF  arrangements 

Type 
(Date) 
On track 

Indicators  of  market's  perception  of  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 

Footnotes 
(1)  (2)  (3)  See explanatory  notes 
(4) 
(5) 

Rescheduling  of debt  owed to  Russia and Turkmenistan. 
Suspended  in  November  1995. 

(D 

(2) 

(2) 

(3) 

-49 

Country-risk  indicators 

Country:  Algeria 

footnotes 

1994 

1995 

1996 

Real GDP growth rate (%) 
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 goods and services (bn USD) 
Current account balance (% of GDP) 
Net inflow of foreign direct investment (m USD) 
Official foreign exchange reserves 

bn USD 
months' imports of goods and services 

External  debt 

Convertible currency external debt 

(bn USD, end of period) 

Convertible debt service (bn USD) 

principal 
interest 

External debt/GDP  (%) 
External debt/exports of goods and services  (%) 
Debt service/exports of goods and services  (%) 
Arrears (on both interest and principal, m USD) 
Debt relief agreements and rescheduling (bn US$) 

Indicators of EU exposure 

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

(1) 

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

-4,4 

8,9 
-4,4 
0,0 

2,6 
2,9 

29,5 

8,9 
7,1 
1,8 
70,0 
307,5 
48,6 
none 
4,5 

9,9 
2,4 
7,8 

3,9 
4,4 
21,9 
52.2 

-1,4 

10,3 
-5,3 
0,0 

2,1 
2,1 

32,5 

9,4 
7,1 
2,3 
78,4 
297,1 
42,5 
none 
4,9 

12,2 
2,8 
8,9 

4,0 
6,3 
15,1 
56,2 

3,0 

13,2 
2,8 
0,3 

4,2 
4,5 

33,5 

7,4 
5,2 
2,2 
73,3 
240,1 
29,2 
none 
3,5 

11,6 
2,7 
6,8 

IMF  arrangements 

Type 
(Date) 
On track 

Indicators of market's  perception of  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 
(1 ) (2) (3)  See explanatory notes 

SBA 
(5/94 - 5/95) 
yes 

SBA/EFF 
(5/94 - 5/95) 
yes 

EFF/CCFF 
(5/95 - 5/98) 
yes 

none 
none 
03/94  09/94 
92  96 
(167) (167) 
03/94  09/94 
75  78 
(135) (135) 
26.3  24.6 

none 
none 
03/95  09/95 
102  107 
(187) (181) 
03/95  09/95 
89  91 
(135) (135) 
23.5  22.8 

none 
none 
03/96  09/96 
109  97 
(178) (178) 
03/96  09/96 
95  95 
(135) (135) 
21.5  22.8 

(2) 

(2) 

(3) 

50 

Country-risk  indicators 

Country:  Israel 

Real GDP  growth  rate  (%) 
Industrial  production  ( %  change) 
Unemployment 
Consumer  Price  Index 
Exchange  rate (shekel  per  USD) 

(yearly average) 
(yearly  average) 
(end of period) 

Central  government  overall  deficit  (as  % of  GDP) 

Balance  of  payments 

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

bn  US$ 
months' imports  of goods 

External  debt 

External debt  (gross external  liabilities) 

(bn  USD, end of period) 

Debt service  (bn  USD) 

principal 
interest  (gross) 

External  debt/GDP  (%) 
External debt/exports  of goods and services  (%) 
Debt service/exports  of goods and services  (%) 
Arrears  (on both  interest  and principal, m  USD) 
Debt  relief agreements  and  rescheduling 

Indicators  of  EU  exposure 

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

IMF  arrangements 

Type 
(Date) 
On  track 

Indicators  of  market's  perception  of  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 

Footnotes 
(1)  (2)  (3)  See explanatory  notes 

footnotes 

1994 

1995 

1996 

6,8 
7,4 
7.8 
14,5 
3,01 

-2,3 

16,0 
-3,2 
0,6 

6,6 
2,4 

41,8 

3,8 
2,2 
1.6 
56,2 
171,0 
15,5 
none 
none 

4,4 
0,8 
1,9 

7,1 
8,4 
6,9 
8,1 
3,12 

-4,2 

17,9 
-5.6 
2,0 

9.1 
2,8 

45,1 

4,2 
2,5 
1.7 
53,8 
165,0 
15,4 
none 
none 

4,4 
0.7 
1,7 

4,4 
5,4 
6,7 
10,6 
3,24 

-3,6 

19,1 
-5,6 
2,4 

10,0 
2.8 

48,0 

4,5 
2,8 
1,7 
51,1 
164,0 
15,4 
none 
none 

3,9 
0.6 
1,6 

none 

none 

none 

none 
BBB+ 
03/94  09/94 
30  33 
(167)  (167) 
03/94  09/94 

46 

43 

(135)  (135) 
43.4  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-
03/96  09/96 
33  32 
(178)  (178) 
03/96  09/96 

41 

40 

(135)  (135) 
50.8  52.2 

(1) 

(2) 

(2) 

(3) 

Explanatorv notes for country-risk  indicators 

- 5 1-

Standard  footnotes 

(1) 
(2) 
(3) 

Includes 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; 100 represents the least chance of default. A 
given country  may improve  its rating and still fall in the ranking if the average global  rating 
for all rated countries improves. 

Abbreviations  and English words  used in tables 

S&P 

Standard and Poor's 

CCFF=  Compensatory  and Contingency  Financing  Facility 

EFF= 
SBA = 
STF= 

Extended Financing  Facility 
Stand-By  Arrangement 
Systemic Transformation  Facility 

est.= 
n.a. = 
prelim.= 

estimates 
not  available 
preliminary 

c^ 

ISSN 0254-1475 

COM(97) 464  final 

DOCUMENTS 

EN 

01  06  09  10 

Catalogue number  : CB-CO-97-479-EN-C 

ISBN 92-78-24930-0 

Office  for Official  Publications of the European Communities 

L-2985 Luxembourg