2002/883/EC: Council Decision of 5 November 2002 providing further macro-financial assistance to Bosnia and Herzegovina
Date: 2002-11-05
Institutions: Council of the European Union
Subjects: Bosnia and Herzegovina, Community loan, EU aid, donation, economic stabilisation, financial aid, macroeconomics

L 308/28

EN

Official Journal of the European Communities

9.11.2002

COUNCIL DECISION

of 5 November 2002

providing further macro-financial assistance to Bosnia and Herzegovina

(2002/883/EC)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Commu-
nity, and in particular Article 308 thereof,

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

Having regard to the opinion of the European Parliament (2),

Having regard to the opinion of the Economic and Financial
Committee (3),

Whereas:

(1)

(2)

The Bosnia and Herzegovina authorities re-established
links with international organisations and, in particular,
made progress towards normalising that country's finan-
including the
cial relations with multilateral creditors,
European Investment Bank, and with official bilateral
creditors.

Since October 2000, Bosnia and Herzegovina has
achieved substantial progress in economic stabilisation
and reform and has made important steps towards a
well-functioning market economy.

(3) Within the Stabilisation and Association process, which
is the framework for the European Union's (EU) relations
with the region,
it is desirable to support efforts to
sustain political and economic stabilisation in Bosnia
and Herzegovina, with a view to evolving towards the
development of a full cooperation relationship with the
Community.

(4)

(5)

(6)

Financial assistance from the Community should be
instrumental in bringing Bosnia and Herzegovina closer
to the Community.

The Community already provided in 1999 macro-finan-
cial assistance of EUR 60 million to Bosnia and Herze-
govina. The International Monetary Fund (IMF) approved
on […] a 15-month ‘Stand-by Arrangement’ for Bosnia
and Herzegovina of about USD 89 million to support
the authorities' economic programme in 2002 to 2003.

The World Bank Group has
committed broadly
USD 900 m in support of 42 IDA credits/Trust Funds,
and has disbursed broadly USD 670 m since 1996. In
addition broadly USD 45 m of IFC loans have been

(1) Proposal of 27 August 2002 (not yet published in the Official

Journal).

(2) Opinion delivered on 10 October 2002 (not yet published in the

Official Journal).

(3) Opinion delivered on 17 October 2002 (not yet published in the

Official Journal).

committed with USD 37 m disbursed, as of February
2002. A second Public Finance Structural Adjustment
Credit (PFSAC II) is being implemented. An Enterprise
and Bank Privatisation Adjustment Credit (EBPAC) has
just been completed and a labour market reform and
social protection operation was completed last year. An
operation aimed at improving and enabling the business
environment was also recently agreed.

The Members of the Paris Club agreed, in October 1998,
on debt relief
in favour of Bosnia and Herzegovina,
already alleviating the balance of payments situation.

authorities of Bosnia

The
and Herzegovina have
requested financial assistance from the international
financial institutions, the Community, and other bilateral
donors.

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 to support
the policy objectives attached to the authorities' reform
efforts.

Community macro-financial assistance to Bosnia and
Herzegovina is an appropriate measure to help ease that
country's external financial constraints, supporting the
balance of payments and securing the reserve position.

Financial assistance from the Community in the form of
a combination of a long-term loan and a straight grant
is an appropriate measure to support the sustainability
of Bosnia and Herzegovina's external financial position,
given its limited borrowing capacity. This Community
financial assistance should be effective and properly
implemented.

The inclusion of a grant component in this assistance is
without prejudice to the powers of
the Community
budgetary authority.

This assistance should be managed by the Commission,
and Financial
in consultation with the Economic
Committee.

(7)

(8)

(9)

(10)

(11)

(12)

(13)

(14)

The Treaty does not provide, for the adoption of this
Decision, powers other than those of Article 308,

9.11.2002

EN

Official Journal of the European Communities

L 308/29

HAS DECIDED AS FOLLOWS:

Article 4

Article 1

1.
The Community shall make available to Bosnia and
Herzegovina further 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 situation and securing the
country's reserve position.

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

The grant component of this assistance shall amount to a

3.
maximum of EUR 40 million.

4.
This Community financial assistance shall be managed by
the Commission in close consultation with the Economic and
Financial Committee and in a manner consistent with the
agreements reached between the IMF and Bosnia and Herzego-
vina.

Article 2

1.
The Commission is empowered to agree with the authori-
ties of Bosnia and Herzegovina, after consultation with the
the economic policy
Economic and Financial Committee,
conditions attached to this assistance. These conditions shall be
consistent with the agreements referred to in Article 1(4).

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

Article 3

1.
The loan and grant components of this assistance shall be
made available to Bosnia and Herzegovina in at least two instal-
ments. Subject to Article 2, the first instalment is to be released
on the basis of a satisfactory implementation of the adjustment
and reform programme of Bosnia and Herzegovina under the
present stand-by arrangement with the IMF.

2.
Subject to Article 2, the second and any further instal-
ments shall be released on the basis of a satisfactory track
record on Bosnia and Herzegovina's adjustment and reform
programme, and not before one quarter after the release of the
previous instalment.

The funds shall be paid to the Central Bank of Bosnia and

3.
Herzegovina.

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
in any exchange or interest rate risks, or in any
maturities,
other commercial risk.

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

3.
At the request of Bosnia and Herzegovina, and where
circumstances permit an improvement in the loan's interest
rate, the Commission may refinance all or part of its initial
borrowings or restructure the corresponding financial condi-
tions. Refinancing 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
increasing the amount,
of
expressed at the current exchange rate, of capital outstanding
at the date of the refinancing or restructuring.

the borrowing concerned or

All

related costs

4.
the Community in
concluding and carrying out the operation under this Decision
shall be borne by Bosnia and Herzegovina, if appropriate.

incurred by

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

Article 5

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

Article 6

This Decision shall take effect on the day of its publication in
the Official Journal of the European Communities.

It shall apply until two years after that date.

Done at Brussels, 5 November 2002.

For the Council

The President

T. PEDERSEN