1999/325/EC: Council Decision of 10 May 1999 providing macro-financial assistance to Bosnia and Herzegovina
Date: 1999-05-10
Institutions: Council of the European Union
Subjects: Bosnia and Herzegovina, EU aid, financial aid

13. 5. 1999

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Official Journal of the European Communities

L 123/57

COUNCIL DECISION

of 10 May 1999

providing macro-financial assistance to Bosnia and Herzegovina

(1999/325/EC)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Article 308 thereof,

Having regard to the proposal of the Commission (1),

Having regard to the opinion of the European Parlia-
ment (2),

(1) Whereas the Commission consulted the Monetary
Committee before submitting its proposal;

common

(2) Whereas Bosnia and Herzegovina is undertaking
fundamental institutional and political reforms to
establish
policies;
is making
whereas Bosnia
substantial efforts to promote economic reform and
establish an open market economy, which is essen-
tial order to create jobs, improve living conditions
for the people and allow the return of refugees and
displaced persons;

institutions
and Herzegovina

and

(3) Whereas within the Regional Approach defined by
the Council, it is desirable to support efforts made
to ensure a stable political and economic environ-
ment in Bosnia and Herzegovina, with a view to
evolving towards the development of a relationship
of full cooperation with the Community;

(4) Whereas

financial assistance of an exceptional
nature from the Community should be instru-
mental
in supporting the implementation of
common institutions and policies in Bosnia and
Herzegovina consistent with the Dayton peace
agreement, while strengthening mutual confidence
and bringing Bosnia and Herzegovina closer to the
Community;

(5) Whereas Bosnia and Herzegovina has agreed with
the International Monetary Fund (IMF) on a
comprehensive set of economic and institutional
policy reform measures to be supported by a 12-
month upper credit tranche Stand-By Arrangement
(SBA); whereas
the SBA will be followed or
replaced by an Enhanced Structural Adjustment
Facility (ESAF);

(1) OJ C 396, 19.12.1998, p. 16.
(2) Opinion delivered on 12 March 1999 (not yet published in

the Official Journal).

(6) Whereas Bosnia and Herzegovina has agreed with
the World Bank on a set of structural adjustment
measures to be backed by two highly concessional
structural adjustment loans and credits in the areas
of public finance reform, and enterprise and
banking privatisation;

(7) Whereas the authorities of Bosnia and Herzegovina
have requested financial assistance from the inter-
national financial institutions, the Community, and
other bilateral donors; whereas, over and above the
estimated financing which could be provided by
the IMF and the World Bank, an important
residual financing gap remains to be covered in the
coming months in order to strengthen the coun-
try’s reserve position and support the policy objec-
tives attached to the authorities’ reform effort;

(8) Whereas an the fourth Donors’ Pledging Confer-
ence on Bosnia and Herzegovina on 7 and 8 May
1998, the international community welcomed the
agreements reached with the Bretton Woods insti-
tutions
strongly the
economic reform and reconstruction programmes
of Bosnia and Herzegovina in the form of firm
financial pledges;

and decided to support

(9) Whereas the authorities of Bosnia and Herzegovina
have committed themselves to discharge fully all
outstanding financial obligations of all public enti-
ties of Bosnia and Herzegovina towards the Euro-
pean Community and the European Investment
Bank, and to accept the responsibility by way of
guarantee of those obligations that are not yet due;

(10) Whereas

the present

exceptional Community
macro-financial assistance to Bosnia and Herzego-
vina aims to help ease the country’s external finan-
cial
of
supporting
payments and strengthening the reserve position;

constraints,

balance

the

(11) Whereas Bosnia and Herzegovina being a low-
income country eligible for highly concessional
loans and facilities from the World Bank and the
IMF,
requires
assistance
substantial elements of concessionality;

this macro-financial

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Official Journal of the European Communities

13. 5. 1999

(12) Whereas the strengthening of Bosnia and Herzego-
vina’s common institutions and the reform of its
economic system are two of the priorities identified
by the Peace Implementation Conference held in
Madrid in December 1998;

(13) Whereas the statement by the European Union on
Bosnia and Herzegovina of 8 June 1998 recognises
that the future of the country lies with Europe;

(14) Whereas the inclusion of a grant component in
this assistance is without prejudice to the powers of
the budgetary authority;

(15) Whereas this assistance should be managed by the

Commission;

(16) Whereas the Treaty does not provide, for the adop-
tion of this Decision, powers other than those of
Article 308,

HAS DECIDED AS FOLLOWS:

Article 1

1.
The Community shall make available to Bosnia and
Herzegovina an exceptional macro-financial assistance in
the form of a long-term loan and a straight grant with a
view to ensuring a sustainable balance-of-payments situa-
tion and strengthening the country’s reserve position.

2.
The loan component of this assistance shall amount
to a maximum principal of EUR 20 million with a grace
period of 10 years and a maximum maturity of 15 years.
To this end, the Commission is empowered to borrow, on
the necessary
behalf of
resources that will be placed at the disposal of Bosnia and
Herzegovina in the form of a loan.

the European Community,

The grant component of

3.
assistance shall
amount to a maximum of EUR 40 million of the 1999 to
2000 period.

this

financial

The Community

4.
shall be
managed by the Commission in close consultation with
the Economic and Financial Committee and in a manner
consistent with any agreement reached between the IMF
and Bosnia and Herzegovina.

assistence

The implementation of this assistance is conditional
5.
upon clearance in full by Bosnia and Herzegovina of
outstanding due financial obligations of all public entities
towards the Community and the European Investment
Bank and upon the acceptance by Bosnia and Herzego-
vina of responsibility by way of guarantee of those obliga-
tions that are not yet due.

Article 2

1.
The Commission is empowered to agree with the
authorities of Bosnia and Herzegovina, after consultation
the
with the Economic and Financial Committee,

economic and institutional policy conditions attached to
the Community macro-financial assistance. These condi-
tions shall be consistent with the agreement referred to in
Article 1(4).

The Commission shall verify at regular intervals, in
2.
collaboration with
Financial
the Economic
Committee and in coordination with the IMF, that the
economic and institutional policy in Bosnia and Herzego-
vina is in accordance with the objectives of this macro-
financial assistance and that
its conditions are being
fulfilled.

and

Article 3

The loan and grand components of this assistance
1.
shall be made available to Bosnia and Herzegovina in at
least two successive tranches. Subject to the provisions of
Article 2, the first tranche shall be released on the basis of
a successful completion of the first review of the 12-
month SBA between the IMF and Bosnia and Herzego-
vina, subject to the provisions of Article 1(5).

2.
Subject to the provisions of Article 2, the second
tranche shall be released on the basis of a satisfactory
track record in the implementation of the SBA with the
IMF and not before three months after the release of the
first tranche.

The funds shall be paid to the Central Bank of

3.
Bosnia and Herzegovina.

Article 4

The borrowing and lending operations referred to in
1.
Article 1(2) shall be carried out using the same value date
and must not involve the Community in the transforma-
tion of maturities, in any exchange or interest rate risks,
or in any other commercial risk.

2.
The Commission shall take the necessary steps, if
Bosnia and Herzegovina so requests, to ensur that an early
repayment clause is included in the loan terms and
conditions and that it may be exercised.

At

the request of Bosnia and Herzegovina, and
3.
where circumstances permit an improvement
in the
interest rate on the loan, the Commission may refinance
all or part of its initial borrowings or restructure the
corresponding
or
restructuring operations shall be carried out in accordance
with the conditions set out in paragraph 1 and shall not
have the effect of extending the average maturity of the
borrowing concerned or increasing the amount, expressed
at the current exchange rate, of capital outstanding at the
date of the refinancing or restructuring.

conditions. Refinancing

financial

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Official Journal of the European Communities

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All related costs incurred by the Community in concluding and carrying out the

4.
operation under this Decision shall be borne by Bosnia and Herzegovina.

The Economic and Financial Committee shall be kept informed of developments in

5.
the operations referred to in paragraph 2 and 3 at least once a year.

At least once a year the Commission shall address to the European Parliament and to the
Council a report, which will include an evaluation of the implementation of this Decision.

Article 5

Done at Brussels, 10 May 1999.

For the Council

The President

H. EICHEL