Opinion of the European Central Bank of 9 September 2008 at the request of the Austrian Federal Ministry of Finance on a draft Federal law providing for an Austrian contribution to the HIPC-Trust Fund for Liberia’s debt relief (CON/2008/41)
Date: 2008-09-09
Institutions: European Central Bank
Subjects: Austria, International Monetary Fund, Liberia, central bank, loan, national law, payment

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 9 September 2008 

at the request of the Austrian Federal Ministry of Finance  

on a draft Federal law providing for an Austrian contribution to the HIPC-Trust Fund for 

Liberia’s debt relief  

(CON/2008/41) 

Introduction and legal basis 

On 28 July 2008, the European Central Bank (ECB) received a request from the Austrian Ministry of 

Finance for an opinion on a draft Federal law providing for an Austrian contribution to the HIPC-Trust 

Fund for Liberia’s debt relief (hereinafter the ‘draft law’). 

The ECB’s competence to deliver an opinion is based on Article 105(4) of the Treaty establishing the 

European  Community  and  the  third  indent  of  Article  2(1)  of  Council  Decision  98/415/EC  of 

29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft 
legislative provisions1, as the draft law contains provisions concerning a national central bank (NCB). 

In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central 

Bank, the Governing Council has adopted this opinion.  

1. 

Purpose of the draft law  

1.1  Pursuant to Article 1 of the draft law, the Oesterreichische Nationalbank (OeNB) is authorised2 in 

the process of debt clearance for Liberia to transfer 4.8 million Special Drawing Rights (SDRs) 

as an Austrian contribution to the trust funds of the International Monetary Fund (IMF) initiative 

for Heavily Indebted Poor Countries (HIPC). 

1.2  The  explanatory  memorandum  accompanying  the  draft  law  states  that  the  IMF  has  lifted  the 

suspension of Liberia’s membership, which had been imposed due to arrears of payments. As a 

precondition for lifting  the  suspension,  and  since  the  IMF  was  not in  a position  to  advance  the 

loan  directly,  IMF  member  countries  agreed  to  provide  a  temporary  IMF  loan  to  Liberia  to 

enable  it  to  pay  off  its  old  IMF  loans  and  thereby  resume  full  IMF  membership.  By 

11 March 2008,  102  IMF  member  countries  had  promised  contributions  totalling  547.2  million 

SDRs.  It  is  understood  that,  from  a  procedural  point  of  view,  the  next  step  will  be  actually  to 

grant Liberia the debt relief provided that it satisfies certain conditions.  

1  
2  

OJ L 189, 3.7.1998, p. 42. 
In  the  context  of  this  opinion,  the  question  of  the  legal  quality  of  the  term  ‘authorise’  (i.e.  whether  the  OeNB  has 
discretion in deciding whether and/or how many SDRs it would transfer or whether it could also decide not to transfer 
any SDRs) is not considered any further. 

 
 
 
 
                                                 
1.3  The ECB understands from the explanatory memorandum to the draft law that the OeNB, after the 

proportionate  transfer  of  the  relevant  Special  Contingent  Account  –  1  (SCA-1)  funds  and  the 

proportionate  transfer  of  outstanding  charges,  is  authorised  to  retransfer  these  to  the  Liberia 

Administered  Account  established  for  Liberian  debt  clearance  or  the  Poverty  Reduction  and 

Growth  Facility  (PRGF)-HIPC  trust  fund.  The  SCA-1  is  a  sub-account  of  the  General  Resources 

Account,  which  is  remunerated  by  creditors  and  recipient  countries  in  the  context  of  the  Burden 

Sharing Mechanism. The SCA-1 resources are repayable funds which can be repaid to the member 

countries  following  a  resolution  of  the  IMF  (as  has  happened  in  this  case),  or  following 

cancellation of all arrears due to the IMF. This is intended to ensure that in the event of a debtor 

country becoming unable to pay, the IMF is in a position to settle the claims of donor countries. 

The outstanding deferred charges were borne proportionally by creditor and debtor countries in the 

course of a burden sharing mechanism. After repayment of the debts and accrued charges, they are 

repaid automatically to the countries participating in this process. 

1.4  From  the  explanatory  memorandum  the  ECB  also  understands  that,  thereafter,  a  transfer  to  the 

Liberia administered account or the HIPC-Trust Fund takes place on the basis of the proposal made 

by the G-8 countries and accepted by the IMF relevant decision-making bodies, to the effect that all 

member countries which regularly appear in the financial transactions plan should participate in the 

debt clearance. The financial transactions plan is an integral part of IMF lending. The IMF makes 

its loans either directly in the form of SDRs or in foreign currency. In the second case, the quota 

position of the donor countries decreases and their claim against the IMF rises. 

1.5  The  explanatory  memorandum  states  that  Austria  agreed  to  make  a  contribution  of  4.8  million 

SDRs  (EUR  5.025  million)  to  the  financing  package.  It  also  states  that  the  cancellation  of 

Liberia’s  IMF  debts  will  reduce  the  OeNB’s  income  and  that,  as  a  result,  lower  funds  will  be 

transferred to the Ministry of Finance. 

2. 

Specific observations  

2.1  The ECB is of the view that an NCB’s involvement in financing the IMF’s PRGF and PRGF-HIPC 

Trusts reduces what is in principle government expenditure on development aid, and that the NCB 

effects this reduction by performing an immediate transfer of funds in lieu of the government. In 

the present case, the explanatory memorandum states that the participation envisaged by the draft 

law  in  respect  of  Liberia  would  increase  the  level  of  Austria’s  multilateral  official  development 

assistance payments. In view of the involvement of the OeNB in this development assistance, the 

ECB notes that it is necessary to ascertain whether the draft law complies with the prohibition on 
monetary  financing  laid  down  in  Article  101  of  the  Treaty3  and  Council  Regulation  (EC) 

3  

Article 101 of the Treaty prohibits overdraft facilities or any other type of credit facility with the ECB or the NCBs of 
Member  States  in  favour  of  Community  institutions  or  bodies,  central  governments,  regional,  local  or  other  public 
authorities, other bodies governed by public law, or public undertakings of Member States and the purchase directly from 
these public sector entities by the ECB or NCBs of debt instruments. 

2 

 
 
                                                 
No 3603/93  of  13  December  1993  specifying  definitions  for  the  application  of  the  prohibitions 
referred to in Articles 104 and 104b(1) of the Treaty4. 

2.2  The draft law covers a situation which is in substance similar to that covered by the Federal Law on 

the  payment  of  a  contribution  by  Austria  to  the  trust  fund  administered  by  the  International 

Monetary  Fund  for  low  income  developing  countries  affected  by  natural  disasters,  on  which  the 
Ministry  of  Finance  consulted  the  ECB  in  2005.  In its  Opinion5,  the  ECB  took  the  view  that  the 

OeNB’s  financing  of  the  relevant  IMF-administered  initiative  fell  within  the  scope  of  the 

exemption  provided  for  in  Article  7  of  Council  Regulation  (EC)  No  3603/93.  This  exemption 

relates  to  the  financing  by  NCBs  of  obligations  falling  upon  the  public  sector  vis-à-vis  the  IMF, 

which  are  not  to  be  regarded  as  credit  facilities  prohibited  by  Article  101  of  the  Treaty. 

Consequently,  in  this  case  the  ECB  considers  that  the  OeNB’s  financing  of  the  Austrian 

contribution to the HIPC-Trust Fund for Liberia’s debt relief, as provided for in the draft law, falls 

within the scope of the same exemption and should not therefore be regarded as a form of monetary 

financing prohibited by the Treaty. 

This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 9 September 2008. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

4  

5  

OJ  L  332,  31.12.1993,  p.  1.  Recital  9  to  Council  Regulation  (EC)  No  3603/93  provides  that,  notwithstanding  the  role 
assigned  to  the Commission  pursuant  to  Article 169  of  the Treaty,  it is  for  the  ECB,  pursuant  to  Article  109f(9)  (now 
Article 117(9)) and Article 180 (now Article 237) of the Treaty, to ensure that NCBs honour the obligations laid down in 
the Treaty. 
ECB Opinion CON/2005/29 of 11 August 2005 at the request of the Austrian Federal Ministry of Finance concerning a 
draft  Federal  law  on  the  payment  of  a  contribution  by  Austria  to  the  trust  fund  administered  by  the  International 
Monetary Fund for low income developing countries affected by natural disasters. 

3