Proposal for a Council Decision on the position to be adopted by the Community within the ACP-EC Council of Ministers on granting exceptional aid to the highly indebted ACP countries
Date: 1999-11-30
Institutions: European Commission
Subjects: ACP countries, ACP-EU Council of Ministers, EU financing, debt reduction, development aid

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 30.11.1999
COM(1999) 646 final

Proposal for a

COUNCIL DECISION

on the position to be adopted by the Community within the ACP-EC Council of
Ministers on granting exceptional aid to the highly indebted ACP countries

(presented by the Commission)

EXPLANATORY MEMORANDUM

At the G7 Summit in Cologne in June, it was proposed that the initiative for heavily indebted
poor countries agreed in 1996 be expanded to provide faster, deeper and broader external debt
relief.  The  proposals  were  ratified  at  the  World  Bank  and  IMF  annual  meetings  in
Washington in September, and an ambitious set of political decisions was taken that  closely
linked poverty alleviation strategies, structural adjustment programmes and the debt reduction
initiative.

On 26 October, the Commission adopted a communication addressing the issues raised by the
enhancement of the HIPC initiative (COM(1999)518).

The  ECOFIN  Council  of  8  November  proposed that  the  Commission  start  negotiating  with
the  ACP  countries  on the  basis  of  a  Community  contribution  of  the  order  of  magnitude  of
EUR 1 billion. The  money was to cover, on the  one  hand, the  Community’s  contribution  as
(estimated  at
creditor  of 
EUR 320-380 million), and on the other hand a contribution to the HIPC Trust Fund managed
by  the  World  Bank,  which  would  be  both  sufficient  and  commensurate  with  a  fair  burden
sharing between donors.

first  ACP  countries 

to  qualify 

initiative 

the 

the 

for 

The  ACP  countries  gave  their  views  in  a  meeting  in  Accra  on  13  November  between  the
ministerial Development Finance Co-operation Committee and the Commission. In particular,
their  agreement  to the  proposed  approach  was  conditional  on  an  immediate  increase  in  the
Structural Adjustment Facility of at least EUR 250 million.

The  Community  contributions  for  the  non-ACP  countries  would  be  financed,  up  to  a
maximum of EUR 54 million over 3 years, on the relevant budget lines. These contributions
would  be  subject  to  separate  decisions  according  to  the  regular  procedures  within  the
framework governing Community development assistance  to the  Asian  and  Latin  American
countries.

Against this  background the Commission  proposes to the Council  to  define  the  Community
position  within  the  Joint  ACP-EU  Council  in  view  of  the  adoption  by  the  latter  of  the
following draft decisions:

a)

b)

extraordinary assistance in favour of heavily indebted ACP countries;

an increase of the structural adjustment facility.

These proposals would need to be adopted, concomitantly, at the Joint ACP-EU Council at its
meeting on December 8th.

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Proposal for a

COUNCIL DECISION

on the position to be adopted by the Community within the ACP-EC Council of
Ministers on granting exceptional aid to the highly indebted ACP countries

THE COUNCIL OF THE EUROPEAN UNION,

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular
Articles 310 and 300 thereof,

Having regard to the proposal from the Commission1,

Whereas:

(1)

(2)

Article 30 of the Fourth ACP-EC Convention, as amended by the agreement signed in
Mauritius  on  4  November  1995,  establishes  a  Council  of  Ministers  with  powers  to
make decisions in accordance with the Convention;

The  Community's  position  within  the  ACP-EC  Council  of  Ministers  should  be
established with a view to the adoption by the latter of a decision on the Community's
participation in the debt relief initiative for the highly indebted poor countries,

HAS ADOPTED THIS DECISION:

Article 1

The  position  adopted  by  the  Community  within  the  ACP-EC  Council  of  Ministers  on  the
Community's participation in the debt relief  initiative  for the  highly  indebted poor  countries
(HIPC) shall be based on the attached draft Council of Ministers Decision.

Minor amendments to the draft Decision may be agreed without the need for a further Council
decision.

Article 2

The Commission shall report regularly to the Council and Parliament on the implementation
of the attached ACP-EC Council of Ministers Decision.

Article 3

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OJ C ...

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The  Economic  and  Financial  Committee  shall  be  informed  of  the  implementation  of  this
Decision.

This Decision is addressed to the Member States.

Done at Brussels,

For the Council
The President

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ANNEX

Proposal for a

DECISION OF THE ACP-EC COUNCIL OF MINISTERS

on exceptional aid for highly-indebted ACP countries

THE ACP-EC COUNCIL OF MINISTERS,

Having  regard  to the  fourth  ACP-EC  Convention,  as  amended  by  the  Agreement  signed  in
Mauritius on 4 November 1995, and in particular Article 282(5) thereof,

Whereas:

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

The  ACP  countries  have  consistently  and  repeatedly  pressed  for  more  ambitious
initiatives to reduce their external debt;

At the G7 summit in Cologne in June 1999 ministers approved an enhanced initiative
to provide faster, deeper and broader debt relief; whereas as a result of the proposed
improvements the total cost of the  initiative  is  set to  double,  bringing  it to a total  of
over USD 27.4 billion;

On  26  October  1999  the  Commission  adopted  communication  COM(1999)518  on
Community participation in the debt relief initiative for highly indebted poor countries
(HIPCs), hereinafter referred to as the "Communication";

Although  significant  sums  have  been  pledged  to  finance  the  HIPC  initiative,  further
resources still need to be mobilised to cover the full amount of the multilateral share of
the enhanced initiative;

Unallocated  programmable  resources  from  the  eighth  EDF  and  its  predecessors  are
available for this purpose;

At the annual World Bank/IMF meetings in Washington in September 1999 the donor
community  took  an  ambitious  set  of  political  decisions  closely  linking  poverty
alleviation  strategies,  structural  adjustment  programmes  and  the  debt  reduction
initiative;

A significant Community contribution to the HIPC Trust Fund managed by the World
Bank would play a crucial part in ensuring the overall success of this initiative;

In this context separate decisions  will  be  adopted  in  accordance with  the appropriate
procedures to deal with the external indebtedness of HIPCs other than members of the
ACP  group,  and  budget  resources  should  be  used  for  this  purpose  as  part  of  the
Community's development aid policy for the countries of Asia and Latin America;

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(9)

The  conclusions  of  the  meeting  held  in  Accra  on  13  November  1999  between  the
Commission and  the  ACP Development Finance  Cooperation  Ministerial  Committee
have been taken into account;

(10) A decision of the  ACP-EC Council  of  Ministers  is  required  in  order to  mobilise  the

above-mentioned programmable resources,

HAS DECIDED AS FOLLOWS:

Article 1

Unallocated programmable resources from the eighth EDF and earlier Funds  may be used in
the form of grants for the following purposes:

i)

ii)

meeting the outstanding debt and debt servicing obligations to the Community of the
first ACP countries which qualify under the HIPC initiative (EUR 320 million);

contributing  to the  overall  financing  of  the  HIPC  initiative  by  providing  up  to  EUR
626 million for the HIPC Trust Fund managed by the World Bank.

Article 2

The aid referred to in Article 1(i) will be used for ACP countries currently expected to qualify
(i.e. reach their decision point) before 2001. For countries which qualify at a later date it will
if necessary be supplemented from further available EDF resources on the basis of a  further
ACP-EC Council decision.

In line with other major multilateral creditors the Community will also use these resources to
alleviate  the  debt  servicing  burden  in  the  interim  period  of  the  HIPC  initiative,  on  the
understanding  that  this  contribution  will  be  deducted  from  the  relief  it  is  to  provide
subsequently at completion point.

Article 3

The  aid  referred  to  in  Article  1(ii)  will  be  mobilised  in  accordance  with  a  schedule  and
arrangements to be  laid down by the Commission taking  into account  both the needs of the
countries concerned and actual disbursements made by other donors.

Without prejudice to the use of resources from the Community budget for the benefit of non-
ACP  countries,  the  contribution  referred  to  in  Article  1(ii)  will  be  assigned  solely  to  ACP
countries, with particular reference to the needs of the African Development Bank.

Article 4

The resources referred to in Article 1(i) and (ii) will be mobilised in accordance with the rules
and procedures for the implementation of financial cooperation under the Lomé Convention.

Special arrangements will be made to use the new budgetary margin of manoeuvre generated
by the Community's contribution for the development of social  sectors in the ACP countries
and for poverty alleviation.

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The Commission is requested to take the measures  necessary to give effect to this Decision,
which shall enter into force on the day it is adopted.

Article 5

Done at

For the ACP-EC Council of Ministers
The President

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