Proposal for a Council Decision providing supplementary macro financial assistance to Moldova
Date: 1999-10-22
Institutions: European Commission
Subjects: Community loan, International Monetary Fund, Moldova, economic reform, financial aid

C 376 E/38

EN

Official Journal of the European Communities

28.12.1999

Proposal for a Council Decision providing supplementary macro financial assistance to Moldova

(1999/C 376 E/05)

COM(1999) 516 final (cid:151) 1999/0213(CNS)

(Submitted by the Commission on 22 October 1999)

THE COUNCIL OF THE EUROPEAN UNION,

HAS DECIDED AS FOLLOWS:

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

Article 1

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

(1) Whereas the Commission consulted the Economic and

Financial Committee before submitting its proposal;

(2) Whereas Moldova is undertaking fundamental political and
economic reforms and is making substantial efforts to
establish a market economy;

1.
The Community shall make available to Moldova a
long-term loan facility of a maximum amount of EUR 15
five years and a maximum
million with a grace period of
maturity of ten years, with a view to ensuring a sustainable
balance of payments situation, strengthening the country’s
reserves position 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 Moldova in the form of
a loan.

(3) Whereas Moldova, on the one hand, and the European
Communities and their Member States on the other hand,
have signed a Partnership and Cooperation Agreement,
which entered into force 1 July 1998;

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 Moldova.

(4) Whereas the authorities of Moldova have agreed with the
IMF on a macro-economic programme supported by a
three-year Extended Fund Facility, approved in May 1996
and have
intention to subsequently
continue this programme in the context of a new Fund
Facility;

expressed their

Article 2

1.
The Commission is empowered to agree with the
Moldovan authorities, after consulting the Economic and
Financial Committee, the economic policy conditions attached
to the loan. These conditions shall be consistent with the
agreement referred to in Article 1(3).

(5) Whereas the Moldovan authorities have requested financial
assistance from the International Financial Institutions, the
Community and other bilateral donors; whereas over and
above the extended financing by the IMF and the World
Bank a substantial residual financing gap remains to be
covered in the
to strengthen the
country’s reserve position and support the policy objectives
attached to the authorities’ reform efforts;

coming months

(6) Whereas Moldova has been particularly affected by the
Russian financial crisis and is presently facing particularly
difficult economic and social circumstances;

(7) Whereas financial assistance from the Community in the
form of a long term loan with a substantial grace period is
an appropriate measure to help the beneficiary country at
this critical juncture;

(8) Whereas

this assistance

should be managed by the

Commission;

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

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

Article 3

1.
Subject to the provisions of Article 2, the loan shall be
made available to Moldova in a single tranche on the basis of a
satisfactory track record on the implementation of an upper
credit tranche arrangement agreed with the IMF.

2.

The funds shall be paid to the National Bank of Moldova.

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 any other
commercial risk.

28.12.1999

EN

Official Journal of the European Communities

C 376 E/39

The Commission shall

2.
Moldova so requests,
clause is included in the loan terms and conditions.

if
to ensure that an early repayment

take the necessary steps,

All

related costs

in
4.
concluding and carrying out the operation shall be borne by
Moldova.

the Community

incurred by

At

3.
the request of Moldova, and when circumstances
permit an improvement in the interest rate of 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.

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

Article 5

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

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) Former Yugoslav Republic of Macedonia
(cid:151) Bosnia

EIB/Old protocols (2)
(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)
(cid:151) Former Yugoslav Republic of Macedonia (7)
(cid:151) Tajikistan (7)
(cid:151) Moldova III (7)

872,9
218,1
143,5
351,4
38,5
42,0

(cid:150) 30

20
20

105
35

100
200
50
75
15

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
42,7
32,2
30,1

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
7,0
10,5
2,1

(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.