Proposal for a Council Decision providing further macro- financial assistance to Bulgaria
Date: 1999-07-28
Institutions: European Commission
Subjects: Bulgaria, Community loan, International Monetary Fund, economic development, financial aid

C 307 E/46

EN

Official Journal of the European Communities

26.10.1999

Proposal for a Council Decision providing further macro-financial assistance to Bulgaria

(1999/C 307 E/11)

COM(1999) 403 final (cid:151) 1999/0165(CNS)

(Submitted by the Commission on 29 July 1999)

THE COUNCIL OF THE EUROPEAN UNION,

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

(8) Whereas a Community long-term loan to Bulgaria is an
appropriate measure to help ease the country’s external
financial constraints, supporting the balance of payments
and strengthening the reserve position;

Having regard to the proposal of the Commission,

(9) Whereas the Community loan should be managed by the

Commission;

Having regard to the opinion of the European Parliament,

(1) Whereas the Commission has consulted the Economic and
Financial Committee before submitting its proposal;

(10) Whereas the Treaty does not provide, for the adoption of
this Decision, powers other than those of Article 308,

(2) Whereas Bulgaria is undertaking fundamental economic
reforms and is making substantial efforts to establish a
well-functioning market economy;

HAS DECIDED AS FOLLOWS:

(3) Whereas Bulgaria and the European Union have signed on
relationship of

establishing a

a Europe Agreement
association;

(4) Whereas

the European Council

its meeting in
Luxembourg in December 1997 decided to launch an
accession process comprising Bulgaria along with the
other Central and East European applicant countries and
Cyprus;

at

(5) Whereas Bulgaria has reached an agreement with the
International Monetary Fund (IMF)
in September 1998
on an arrangement under the Extended Fund Facility
(EFF)
the authorities’ adjustment and
reform programme;

in support of

(6) Whereas

the World Bank has adopted a three-year
Country Assistance Strategy for Bulgaria in April 1998,
which envisages substantial adjustment and investment
financing in support of Bulgaria’s
in
priority areas;

reform efforts

(7) Whereas

the authorities of Bulgaria have requested
financial assistance from the international financial insti-
tutions,
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
during the programme period in order to strengthen the
the policy
country’s
reserve position and support
objectives
reform
programme;

government’s

attached

the

to

Article 1

1.
The Community shall make available to Bulgaria a
long-term loan facility of a maximum principal amount of
100 million euro with a maximum maturity of
ten years,
with a view to ensuring a sustainable balance of payments
situation and comforting the implementation of the necessary
structural reforms.

2.
To this end, the Commission is empowered to borrow, on
behalf of the European Community, the necessary resources
that will be placed at the disposal of Bulgaria in the form of
a loan.

3.
This loan will 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 Bulgaria.

Article 2

1.
The Commission is empowered to agree with the auth-
orities of Bulgaria, after consultation with the Economic and
Financial Committee, the economic policy conditions attached
to the loan. These conditions shall be consistent with the
agreements referred to in Article 1(3).

2.
The Commission shall verify at regular intervals, in colla-
boration with the Economic and Financial Committee and in
co-ordination with the IMF,
the economic policy in
Bulgaria is in accordance with the objectives of this loan and
that its conditions are being fulfilled.

that

26.10.1999

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Official Journal of the European Communities

C 307 E/47

Article 3

The loan shall be made available to Bulgaria in two
1.
tranches. Subject
tranche is to be
released on the basis of a satisfactory track record of Bulgaria’s
macroeconomic programme in the context of the present EFF
arrangement agreed with the IMF.

to Article 2,

the first

2.
Subject to Article 2, the second tranche shall be released
on the basis of a satisfactory continuation of Bulgaria’s
adjustment and reform programme and not before one
quarter after the release of the first instalment.

3.

The funds shall be paid to the Bulgarian National Bank.

Article 4

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

included in the loan terms and conditions and that it may be
exercised.

At

3.
the request of Bulgaria, and where circumstances
permit an improvement in the interest rate on the loans, the
Commission may refinance all or part of its initial borrowings
or restructure the corresponding financial conditions. Refi-
nancing 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.

All

related costs

4.
concluding and carrying out
Decision shall be borne by Bulgaria.

incurred by

the Community

the operation under

in
this

5.
The Economic and Financial Committee shall be kept
informed of developments in the operations referred to in
paragraphs 2 and 3 at least once a year.

Article 5

2.
so requests,

The Commission shall take the necessary steps, if Bulgaria
to ensure that an early repayment clause is

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.

C 307 E/48

EN

Official Journal of the European Communities

26.10.1999

BUDGETARY RESOURCES NECESSARY FOR THE PROVISIONING OF THE GUARANTEE FUND IN 1999
AND MARGIN UNDER THE RESERVE FOR LOANS AND LOAN GUARANTEES IN FAVOUR OF THIRD
COUNTRIES

ANNEX

(EUR million)

Operations

Basis of the
calculation (1)

Provisioning of the
Fund (2)

Reserve Margin

Operations decided

EIB/New mandates (4)

(cid:151) CEEC

(cid:151) ALA

(cid:151) South Africa

(cid:151) MED

(cid:151) FYROM

(cid:151) Bosnia

EIB/Old protocols (4)

(cid:151) Syria

Macro-financial assistance

(cid:151) Albania III

(cid:151) Bosnia I

Operations proposed

(cid:151) EIB/Turkey (5)

(cid:151) EIB/Croatia (6)

Macro-financial assistance

(cid:151) Bulgaria IV (7)

(cid:151) Romania IV (7)

872,9

218,1

143,5

351,4

38,5

42,0

(cid:150) 30

20

20

105

35

100

200

122,2

30,5

20,1

49,2

5,4

5,9

(cid:150) 4,2

2,8

2,8

14,7

4,9

14,0

28,0

346,0 (3)

223,8

193,3

173,2

124,0

118,6

112,7

116,9

114,1

111,3

96,6

91,7

77,7

49,7

(1) The provisioning basis is calculated by applying the relevant guarantee cover rate, namely 70 % (EIB loans new mandates), 75 % (EIB

loans old protocols) or 100 % (macro-financial assistance loan).

(2) In accordance with the provisioning rules in Council Regulation (EC, Euratom) No 2728/94 of 31 October 1994, the Fund having

reached its target amount on 31 December 1997, the provisioning rate has been reduced to 14 %.

(3) Amount of the Reserve for loans and loan guarantees in favour of third countries for 1999 under the financial perspective.
(4) Annual amounts of loans scheduled to be signed in 1999 and correction of amounts already provisioned in the Fund to take account

of actual signings at the end of 1998: Transfer 5/99 to the Guarantee Fund.

(5) Proposal for a Council Regulation on a special financial cooperation measure for Turkey (COM(95) 389/3).
(6) EC/Croatia cooperation agreement (SEC(95) 180/final).
(7) Commission proposal.