Proposal for a Council Decision providing macro-financial assistance to Bosnia and Herzegovina (SEC(2009)1459}
Date: 2009-10-29
Institutions: European Commission
Subjects: Bosnia and Herzegovina, EU aid, economic situation, economic stabilisation, financial aid, macroeconomics

EN 

EN 

   EN 

 
 
COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 29.10.2009 
COM(2009) 596 final 

2009/0166 (CNS) 

Proposal for a 

COUNCIL DECISION 

providing macro-financial assistance to Bosnia and Herzegovina 

(SEC(2009)1459} 

EN 

   EN 

 
 
 
  
 
EXPLANATORY MEMORANDUM 

CONTEXT OF THE PROPOSAL 

11 

Grounds for and objectives of the proposal 

The Commission proposes to provide macro-financial assistance (MFA) to Bosnia and 
Herzegovina in the form of a loan with a view to supporting Bosnia and Herzegovina's 
economic  stabilisation  and  financing  its  external  balance-of-payments  and  budgetary 
needs  identified  by  the  IMF.  The  proposed  assistance  will  support  the  authorities' 
programme  of  necessary  fiscal  adjustments  and  structural  reforms  with  a  view  to 
ensuring sustainable fiscal and external accounts. It will contribute to helping Bosnia 
and Herzegovina to address the consequences of the global financial crisis. 

The  proposed  Community  macro-financial  assistance  will  complement  support  from 
the IMF foreseen under the stand-by agreement which was adopted by the IMF board 
on 8 July 2009, as well as World Bank support due to take the form of budget support 
policy  loans.  Community  MFA  will  be  exceptional  and  limited  in  time,  and  will  be 
conditional,  in  particular  on  progress  in  the  implementation  of  the  current  IMF 
programme and on the successful fulfilment of economic policy conditions that will be 
attached to this assistance. 

In view of the financing needs identified for 2010, it is important that the Community 
macro-financial  assistance  to  Bosnia  and  Herzegovina  is  disbursed  before  the  end  of 
2010. 

120 

General context  

In  2008,  real  GDP  growth  fell  to  5.4%  from  6.8%  recorded  in  2007.  The  global 
economic and financial crisis started to reveal its impact on Bosnia and Herzegovina in 
the  last  quarter  2008.  Economic  activity  in  the  construction,  metal  and  automobile 
industries, but also in the services sector slowed down and companies started to lay off 
workers. Trade dynamics slowed drastically and the financial stability was threatened 
in  October  2008  when  some  12%  of  deposits  were  withdrawn  in  only  one  month. 
While the situation in the domestic financial markets stabilised quickly, the slowdown 
of economic activity continued in 2009, as domestic demand contracted. Nonetheless, 
available  short-term  indicators  such  as  industrial  production  suggest  a  rather  mixed 
situation:  While  in  the  Federation  of  Bosnia  and  Herzegovina  (which  accounts  for 
roughly  two  thirds  of  the  country's  economy)  industrial  production  fell  by  10.4% 
annually  in  the  first  half  of  2009,  it  grew  by  17.1%  in  Republika  Srpska  (which 
accounts  for  roughly  the  remaining  third  of  the  economy).  However,  the  increase  in 
Republika  Srpska  is  almost  entirely  due  to  the  re-opening  of  an  oil  refinery  in 
December 2008. The annual country-wide change of the consumer price index turned 
negative in May 2009 and fell to -1.8% in June, down from its peak of nearly 10% in 
July 2008. The 12-month moving average inflation rate fell to 3.8% in June, compared 
to  7.4%  in  2008.  The  outlook  for  the  current  year  and  beyond  remains  difficult.  The 
macroeconomic scenario depicted in the IMF programme for 2009 is characterised by 
zero  credit  growth,  low  FDI  and  fiscal  retrenchment,  leading  to  a  sharp  drop  in 
domestic  demand,  equally  distributed  between  investment  and  consumption.  GDP  is 
expected to contract by 3% in 2009 and only slightly pick up by 0.5% in 2010.  

EN 

2 

   EN 

 
The current account deficit widened to 14.7% of GDP in 2008, up from 12.7% in 2007, 
mainly  driven  by  developments  of  global  prices  and  internal  demand  during  the  first 
half  of  2008  which  resulted  in  a  rising  trade  deficit.  It  was  more  or  less  equally 
financed  by  foreign  direct  investments  and  drawings  of  new  loans  from  abroad. 
However,  trade  dynamics  slowed  towards  the  end  of  2008  on  the  back  of  reduced 
demand,  with  imports  shrinking  faster  than  exports.  The  monthly  trade  deficit 
improved for the first time in more than two years in November 2008. In the first half 
of 2009, the drop in imports (25.3%) exceeded the one in exports (23.4%), resulting in 
an  improvement  of  the  trade  deficit  by  26.7%.  Consequently,  the  current  account 
deficit more than halved year-on-year in the first quarter, falling to only around 10% of 
GDP.  This  drop  was  mainly  due  to  developments  in  trade,  but  also  a  slightly  rising 
current transfer balance contributed to it, as officially recorded remittances were 6.4% 
higher year-on-year. Official  foreign exchange reserves  declined by 16.8% until June 
2009  since  their  peak  in  September  2008.  However,  they  still  stand  at  23%  of  GDP, 
covering more than five months of imports. 

In  early  2009,  the  repercussions  of  the  economic  slowdown  were  increasingly  felt  in 
public  budgets.  In  an  attempt  to  mitigate  this  effect,  the  National  Fiscal  Council 
unblocked  some  €  90  million  in  the  first  quarter  of  2009  from  succession  funds  of 
former Yugoslavia's assets which are part of the central bank's reserves. Nonetheless, 
this proved to be insufficient as public finances increasingly came under stress on the 
back of falling revenues and high spending commitments. Faced with the deteriorating 
economic  environment  and  the  legacy  of  poor  fiscal  policies,  the  authorities  of  all 
government levels, represented by the National Fiscal Council, therefore concluded in 
early  May  2009  negotiations  with  the  International  Monetary  Fund  on  a  Stand-By 
Arrangement that comprised commitments to a number of structural reforms and fiscal 
adjustment measures. After prior action agreed with the IMF (mainly the adoption of a 
three-year  budget  framework  by  the  National  Fiscal  Council  and  the  rebalancing  of 
budgets at all state levels resulting in an expected consolidated budget deficit of 4.7% 
of  GDP  instead  of  7.8%  without  adjustment)  had  been  taken,  the  Fund's  Board 
approved on 8 July 2009 the  EUR 1.15  billion loan for a three-year period.  The first 
instalment of around EUR 203 million was disbursed immediately afterwards. 

130 

140 

Existing provisions in the area of the proposal 

None  

Consistency with other policies and objectives of the Union 

The  proposal  aims  at  supporting  Bosnia  and  Herzegovina's  economic  stabilisation 
programme at the current economic juncture. It is both complementary to: 

•  the  European  Economic  Recovery  Programme  agreed  by  the  Council  to 
foster  and  coordinate  EU  and  Member  States'  crisis  response  policies 
within the EU; and  

•  the  Stabilisation  and  Association  Process  with  candidate  and  potential 
candidate  countries,  aimed  at  supporting  possible  future  member  states  in 
the  course  of  the  pre-accession  process;  in  particular,  the  economic 

EN 

3 

   EN 

 
 
Copenhagen  accession  criteria,  notably  the  establishment  of  a  functioning 
market economy, requires the relevant countries to have established macro-
economic stability. 

CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

Consultation of interested parties 

219 

229 

230 

Commission  services  have  been  in  contact  with  the  Bosnian  authorities,  the 
International Monetary Fund and the World Bank during the preparation of the present 
Commission  proposal  to  discuss  assistance  needs.  Before  submitting  its  proposal  the 
Commission  consulted  the  Economic  and  Financial  Committee,  which  raised  no 
objections. Following the adoption of the Council Decision, the Commission services 
will  negotiate  with  the  authorities  of  Bosnia  and  Herzegovina  a  Memorandum  of 
Understanding  and  a  Loan  Agreement  to  lay  down  in  detail  the  implementation 
modalities of the assistance.  

Collection and use of expertise 

An  Operational  Assessment  assessing  the  quality  and  reliability  of  Bosnia  and 
Herzegovina's  public  financial  circuits  and  administrative  controls  will  be  prepared 
with the support of external consultants appointed by the Commission. 

Impact assessment  

immediate 

Macro-financial  assistance  will  have  an 
impact  on  Bosnia  and 
Herzegovina's balance of payments and will in this way contribute to the alleviation of 
financial  constraints  on  the  implementation  of  the  authorities'  economic  programme 
and to financing the budget deficit. Macro-financial assistance will further support the 
general  objectives  of  the  stabilisation  programme  agreed  with  the  IMF,  which  in 
particular aims at improving the country's fiscal sustainability in the short- to medium-
term. 

Project  finance  and/or  technical  assistance  would  not  be  suitable  to  address  these 
macroeconomic  objectives.  When  delivered  as  balance-of-payments  and  budget 
support,  as  proposed  in  the  case  of  Bosnia  and  Herzegovina,  the  disbursements 
contribute  to  the  building  up  of  reserves  in  the  Central  Bank  as  foreseen  under  the 
macro-economic  stabilisation  programme  and  can  also  be  channelled  to  finance  the 
budget deficit. 

EC assistance will also support the authorities' efforts to implement short- and medium-
term  policies  identified  in  the  European  Partnership  of  the  EU  with  Bosnia  and 
Herzegovina.  

LEGAL ELEMENTS OF THE PROPOSAL 

305 

Summary of the proposed action  

The  Community  shall  make  available  to  Bosnia  and  Herzegovina  macro-financial 
assistance in the form of a loan. To this end, the Commission shall be empowered to 
borrow up to EUR 100 million on the capital markets or from financial institutions.  

EN 

4 

   EN 

 
 
 
The assistance will be made available in two instalments. The maximum average loan 
maturity shall not exceed 15 years. The assistance will be managed by the Commission 
which  shall  agree  with  the  authorities  the  specific  economic  policy  and  financial 
conditions attached to the payment of the loan instalments. Specific provisions on the 
prevention  of  fraud  and  other  irregularities,  consistent  with  the  Financial  Regulation, 
will be duly taken into account.  

The assistance will be fully consistent with the macroeconomic targets set in the IMF 
programme  and  Bosnia  and  Herzegovina's  economic  policy  documents,  such  as  the 
"Global Framework of Fiscal Balance and Policies in Bosnia and Herzegovina". It will 
also  be  consistent  with  longer-term  policy  objectives  contemplated  in  the  EU-Bosnia 
and Herzegovina European Partnership adopted in February 2008. As regards specific 
economic  policy  conditions  attached  to  the  disbursement  of  the  loan  instalments,  the 
Commission  intends  to  focus  on  a  limited  number  of  areas,  including  in  particular 
public  finance  management.  Also,  the  Commission  may  consider  targeting  specific 
policies of particular importance, such as priorities identified in the context of the EU-
Bosnia and Herzegovina European Partnership and the 2009 Progress Report scheduled 
for  adoption  in  October  2009,  or  measures  deemed  appropriate  following  the  above 
mentioned Operational Assessment. 

310 

Legal basis 

Article 308 of the Treaty. 

329 

Subsidiarity principle 

The proposal falls under the exclusive competence of the Community. The subsidiarity 
principle therefore does not apply. 

Proportionality principle 

The proposal complies with the proportionality principle for the following reasons: 

The  amount  of  the  assistance  –  up  to  EUR  100  million  –  corresponds  to  77%  of  the 
residual financing needs of Bosnia and Herzegovina for the year 2010 in the context of 
the  IMF  programme,  over  and  above  macro-economic  support  provided  by  the  IMF 
and the World Bank. The remaining part (EUR 30 million) will be covered by London 
Club debt deferment. This high burden sharing by the Community takes account of the 
current exceptional juncture, as the unfolding of the economic crisis is having a severe 
effect on Bosnia and Herzegovina's economy.  

Choice of instruments 

Proposed instruments: other. 

In the absence of a framework regulation for the macro-financial assistance instrument, 
ad hoc Council decisions under Article 308 of the Treaty are the only available legal 
instrument for this assistance. 

331 

341 

342 

BUDGETARY IMPLICATION 

EN 

5 

   EN 

 
 
 
401 

In  line  with  the  Guarantee  Fund  Regulation1  the  provisioning  of  a  EUR  100  million 
loan disbursed in 2010 would intervene in 2012 and amount to a maximum of EUR 9 
million.  

ADDITIONAL INFORMATION 

Review/revision/sunset clause 

The proposal sets a limited availability period. 

533 

E-11287 

1 

Article 5 of Council Regulation (EC, Euratom) No 480/2009 of 25 May 2009 establishing a Guarantee 
Fund for external action (codified version). The provisioning is appropriated from "the provisioning of 
the Guarantee Fund" (budget line 01 04 01 14). 

EN 

6 

   EN 

 
 
 
                                                 
2009/0166 (CNS) 

Proposal for a 

COUNCIL DECISION 

providing macro-financial assistance to Bosnia and Herzegovina 

THE COUNCIL OF THE EUROPEAN UNION, 

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

Having regard to the proposal from the Commission2, 

Having regard to the opinion of the European Parliament3, 

After consulting the Economic and Financial Committee, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

Relations  between  Bosnia  and  Herzegovina  and  the  European  Union  are  developing 
within  the  framework  of  the  Stabilisation  and  Association  Process  and  the  European 
Partnership; Bosnia and Herzegovina and the Commission signed on 16 June 2008 a 
Stabilisation  and  Association  Agreement  and  the  Interim  Agreement  on  Trade  and 
Trade related Matters. 

The  Bosnian  economy  has  been  increasingly  hit  by  the  international  economic  and 
financial  crisis  since  the  fourth  quarter  of  2008,  with  declining  output  and  trade  and 
falling fiscal revenues.  

Bosnia  and  Herzegovina's  economic  stabilisation  and  recovery  is  supported  by 
financial  assistance  of  the  International  Monetary  Fund  (IMF).  In  May  2009,  the 
Bosnian authorities agreed with the IMF on a new disbursing programme of EUR 1.15 
billion over a three-year period which was approved by the IMF board in July 2009.  

Bosnia  and  Herzegovina  has  requested  additional  Community  macro-financial 
assistance in view of the worsening economic situation and outlook.  

Given that, following the assumptions of the IMF, a residual financing gap remains in 
the  balance  of  payments  in  2010,  macro-financial  assistance  is  considered  an 
appropriate  response  to  Bosnia  and  Herzegovina's  request  under  the  current 
exceptional  circumstances  to  support  economic  stabilisation  in  conjunction  with  the 

2 
3 

OJ C , , p. . 
OJ C , , p. . 

EN 

7 

   EN 

 
 
                                                 
current IMF programme. The present financial assistance is also expected to contribute 
to alleviate budgetary financing needs. 

(6) 

(7) 

(8) 

(9) 

In order to ensure efficient protection of the Community's financial interests linked to 
the present financial assistance, it is necessary to provide for appropriate measures by 
Bosnia  and  Herzegovina  related  to  the  prevention  of,  and  the  fight  against,  fraud, 
corruption and any other irregularities linked to this assistance, as well as for controls 
by the Commission and audits by the Court of Auditors. 

The release of the Community financial assistance is without prejudice to the powers 
of the budgetary authority. 

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

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

HAS DECIDED AS FOLLOWS:  

1. 

2. 

3. 

4. 

1. 

Article 1 

The  Community  shall  make  available  to  Bosnia  and  Herzegovina  macro-financial 
assistance in the form of a loan facility with a maximum principal amount of EUR 
100 million and a maximum average maturity of 15 years with a view to supporting 
Bosnia  and  Herzegovina's  economic  stabilisation  and  alleviating  its  balance  of 
payments and budgetary needs as identified in the current IMF programme.  

To  this  end,  the  Commission  is  empowered  to  borrow  on  behalf  of  the  European 
Community the necessary resources.  

The  release  of  the  Community  financial  assistance  shall  be  managed  by  the 
Commission in a manner consistent with the agreements or understandings reached 
between the IMF and Bosnia and Herzegovina.  

The  Community  financial  assistance  shall  be  made  available  for  two  years  starting 
from  the  first  day  after  the  entry  into  force  of  the  Memorandum  of  Understanding 
referred  to  in  Article  2(1).  However,  if  circumstances  so  require,  the  Commission, 
after consultation of the Economic and Financial Committee, may decide to extend 
the availability period by a maximum of one year. 

Article 2 

The  Commission  is  empowered  to  agree  with  the  authorities  of  Bosnia  and 
Herzegovina, after consulting the Economic and Financial Committee, the economic 
policy  conditions  attached  to  the  Community  macro-financial  assistance,  to  be  laid 
down  in  a  Memorandum  of  Understanding.  The  conditions shall be consistent with 
the  agreements  or  understandings  reached  between  the  IMF  and  Bosnia  and 
Herzegovina.  The  detailed  financial  terms  of  the  assistance  shall  be  laid  down  in  a 

EN 

8 

   EN 

 
2. 

3. 

1. 

2. 

3. 

1. 

2. 

3. 

Loan Agreement to be agreed between the Commission and the authorities of Bosnia 
and Herzegovina.  

During the implementation of the Community financial assistance, the Commission 
shall  monitor  the  soundness  of  Bosnia  and  Herzegovina's  financial  arrangements, 
administrative  procedures,  and  the  internal  and  external  control  mechanisms  which 
are relevant to such assistance. 

The  Commission  shall  verify  at  regular  intervals  that  Bosnia  and  Herzegovina's 
economic policies are in accordance with the objectives of the Community assistance 
and  that  the  agreed  economic  policy  conditions  are  being  satisfactorily  fulfilled.  In 
doing  so,  the  Commission  shall  coordinate  closely  with  the  International  Monetary 
Fund  and  the  World  Bank,  and,  when  required,  with  the  Economic  and  Financial 
Committee. 

Article 3 

The Community financial assistance shall be made available by the Commission to 
Bosnia  and  Herzegovina  in  two  loan  instalments,  subject  to  the  conditions  of 
paragraph 2. The size of the loan instalments will be laid down in the Memorandum 
of Understanding.  

The Commission shall decide on the release of the instalments subject to satisfactory 
implementation  of  the  economic  policy  conditions  agreed  in  the  Memorandum  of 
Understanding.  The  disbursement  of  the  second  instalment  shall  not  take  place 
earlier than three months after the release of the first instalment. 

The Community funds shall be paid to the Central Bank of Bosnia and Herzegovina. 
Subject  to  provisions  to  be  spelled  out  in  the  Memorandum  of  Understanding, 
including  a  confirmation  of  residual  budgetary  financing  needs,  their  counter-value 
in local currency may be transferred to the Treasuries of Bosnia and Herzegovina and 
its entities as the final beneficiaries.  

Article 4 

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

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 matched by a corresponding clause in the terms and conditions of the 
borrowing operations.  

At  the  request  of  Bosnia  and  Herzegovina,  and  where  circumstances  permit  an 
improvement  of  the  interest  rate  of  the  loan,  the  Commission  may  refinance  all  or 
part  of  its  initial  borrowings  or  restructure  the  corresponding  financial  conditions. 
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 

EN 

9 

   EN 

 
average  maturity  of  the  borrowing  concerned  or  increasing  the  amount  of  capital 
outstanding at the date of the refinancing or restructuring. 

All costs incurred by the Community which are related to the borrowing and lending 
operations under this Decision shall be borne by Bosnia and Herzegovina. 

The Economic and Financial Committee shall be kept informed of developments in 
the operations referred to in paragraphs 2 and 3. 

4. 

5. 

Article 5 

The Community financial assistance shall be implemented in accordance with the provisions 
of  Council  Regulation  (EC,  Euratom)  No  1605/2002  of  25  June  2002  on  the  Financial 
Regulation  applicable  to  the  general  budget  of  the  European  Communities4  and  its 
implementing  rules5.  In  particular,  the  Memorandum  of  Understanding  and  the  Loan 
Agreement  to  be  agreed  with  the  authorities  of  Bosnia  and  Herzegovina  shall  provide  for 
appropriate  measures  by  Bosnia  and  Herzegovina  in  relation  to  the  prevention  of,  and  the 
fight against, fraud, corruption and other irregularities affecting the assistance. They shall also 
provide for controls by the Commission, including the European Anti-Fraud Office (OLAF), 
with the right to perform on-the-spot checks and inspections, and for audits by the Court of 
Auditors, where appropriate, to be carried out on the spot. 

Article 6 

By 31 August of each year the Commission shall submit to the European Parliament and to 
the  Council  a  report,  including  an  evaluation  of  the  implementation  of  this  Decision  in  the 
preceding year. The report shall indicate the connection between the policy conditions as laid 
down in a Memorandum of Understanding pursuant to Article 2(1), Bosnia and Herzegovina's 
on-going  economic  and  fiscal  performance,  and  the  Commission's  decision  to  release  the 
instalment of the assistance. 

Article 7 

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

Done at Brussels, […] 

For the Council 
The President 
[…] 

4 

5 

OJ L 248, 16.9.2002 p. 1. Regulation as amended by Regulation (EC Euratom) 1995/2006 (OJL 390, 30 
December 2006, p. 1). 
Commission Regulation (EC, Euratom) No 2342/2002 OJ L 357 31.12.2002, p.1 

EN 

10 

   EN 

 
 
 
 
                                                 
LEGISLATIVE FINANCIAL STATEMENT 

1. 

NAME OF THE PROPOSAL: 

Macro-financial assistance to Bosnia and Herzegovina 

2. 

ABM / ABB FRAMEWORK 

Policy Area(s) concerned and associated Activity/Activities: 

Title 01 – Economic and Financial Affairs, 03 – International economic and financial 
affairs 

3. 

BUDGET LINES 

3.1. 

Budget  lines  (operational  lines  and  related  technical  and  administrative 
assistance lines (ex- B.A lines)) including headings: 

01 04 01 14 Provisioning of the Guarantee Fund  

3.2. 

Duration of the action and of the financial impact: 

Start 2010, tentatively all disbursements should take place over the year 2010 in two 
tranches (second and fourth quarter). However, delays cannot be excluded that would 
prolong the operation.  

3.3. 

Budgetary characteristics: 

Budget line 

Type of 
expenditure 

New 

EFTA 
contribution 

Contributions 
from applicant 
countries 

Heading in 
financial 
perspective 

01.04.01.14  Comp 

Diff 

NO 

NO 

NO 

No 4 

Assistance in the form of loan 

01 04 01 14 – Provisioning of the Guarantee Fund 

The Guarantee Fund for external actions has to be provisioned according to the Fund 
Regulation  as  amended.  In  line  with  this  Regulation,  loans  are  not  any  more 
provisioned  for  the  entire  amount  at  the  time  of  the  decision  but  based  on  the 
outstanding amount at the end of a year. The provisioning amount is calculated at the 
beginning of the year "n" as the difference between the target amount and the Fund's 
net assets at the end of the year "n-1". This provisioning amount is introduced in the 
year  "n"  to  the  "n+1"  preliminary  budget  and  effectively  paid  in  one  transaction  at 
the  beginning  of  the  year  "n+1"  from  "the  provisioning  of  the  Guarantee  Fund" 
(budget line 01 04 01 14). 

EN 

11 

   EN 

 
 
 
 
 
 
 
 
As  a  result,  9%  (maximum  of  EUR  9  million)  of  the  effectively  disbursed  amount 
will be considered in the target amount at the end of the year "n-1" for the calculation 
of the provisioning of the Fund.  

01  04  01  04  –  EC  guarantee  for  Community  loans  raised  for  macro-financial 
assistance to third countries.  

The  budget  entry  ("p.m.")  reflecting  the  budget  guarantee  for  the  loan  (EUR  100 
million) will be activated only in the case of an effective call on the guarantee. It is 
called. 
expected 

guarantee  will 

normally 

budget 

that 

not 

the 

be 

EN 

12 

   EN 

 
4. 

SUMMARY OF RESOURCES 

4.1. 

Financial Resources 

4.1.1. 

Summary of commitment appropriations (CA) and payment appropriations (PA) 

EUR million (to 3 decimal places) 

Expenditure type 

Section 
no. 

Operational expenditure6 

Commitment Appropriations 
(CA) 

8.1. 

Payment 
(PA) 

Appropriations 

a 

b 

2009 

2010 

Total 

0 

0 

0 

0 

Administrative expenditure within reference amount7 

Technical  &  administrative 
assistance (NDA) 

8.2.4. 

c 

0 

0 

TOTAL REFERENCE AMOUNT 

Commitment 
Appropriations 

Payment Appropriations 

a+c 

b+c 

0 

0 

0 

0 

Administrative expenditure not included in reference amount8 

Human 
associated 
(NDA) 

resources 

and 
expenditure 

8.2.5. 

d 

Administrative  costs,  other 
than  human  resources  and 
not 
associated 
included 
reference 
in 
amount (NDA) 

costs, 

8.2.6. 

e 

Total indicative financial cost of intervention 

TOTAL  CA  including  cost 
of Human Resources 

TOTAL  PA  including  cost 
of Human Resources 

a+c
+d+
e 

b+c
+d+
e 

0 

0 

0 

0 

0 

0 

0 

0 

4.1.2.  Compatibility with Financial Programming 

X 

Proposal is compatible with existing financial programming. 

6 
7 
8 

Expenditure that does not fall under Chapter xx 01 of the Title xx concerned. 
Expenditure within article xx 01 04 of Title xx. 
Expenditure within chapter xx 01 other than articles xx 01 04 or xx 01 05. 

EN 

13 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
(cid:133) 

(cid:133) 

Proposal  will  entail  reprogramming  of  the  relevant  heading  in  the  financial 
perspective. 

Proposal  may  require  application  of  the  provisions  of  the  Inter-institutional 
Agreement9 (i.e. flexibility instrument or revision of the financial perspective). 

4.1.3.  Financial impact on Revenue 

X 

Proposal has no financial implications on revenue 

(cid:133) 

Proposal has financial impact – the effect on revenue is as follows: 

4.2. 

Human Resources FTE (including officials, temporary and external staff) – see 
detail under point 8.2.1. 

Annual requirements 

Total  number  of  human 
resources 

2009 

2010  

1/3

1/3  

5. 

CHARACTERISTICS AND OBJECTIVES 

5.1. 

Need to be met in the short or long term 

The  Bosnian  economy  has  been  severely  hit  by  the  global  economic  and  financial 
crisis. Economic growth started to decelerate in the fourth quarter of 2008 and output 
is  expected  to  contract  by  3%  in  2009.  Although  the  current  account  deficit  is 
declining, overall external financing needs remain high due to an increase in short-
term  debt  repayment  obligations.  The  International  Monetary  Fund  identified  an 
external financing gap to be filled by IMF, World Bank and official donors of EUR 
433 million in 2009 and EUR 563 million in 2010. Whereas the programme is under 
current  assumptions  expected  to  be  fully  financed  in  2009  and  2011,  a  residual 
financing gap remains in 2010 after IMF and expected World Bank support, and is 
estimated  by  the  IMF  at  about  EUR  130  million,  partly  to  be  covered  by  the 
European Community (the remaining EUR 30 million will be covered by the London 
Club).  

5.2. 

Value-added  of  Community  involvement  and  coherence  of  the  proposal  with 
other financial instruments and possible synergy 

The  Community  financial  support  reflects  the  country's  strategic  importance  as  a 
potential  candidate  country  for  EU  accession.  Macro-financial  assistance  is  an 
appropriate 
to  complement  existing  Community  assistance  and 
contributes  to  a  fully  financed  IMF-supported  economic  stabilisation  programme. 
Thereby,  important  synergies  can  be  established  with  respect  to  its  impact  on 
economic reform and stabilisation.  

instrument 

9 

See points 19 and 24 of the Interinstitutional agreement. 

EN 

14 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
5.3. 

Objectives, expected results and related indicators of the proposal in the context 
of the ABM framework 

Within  the  Activity  "International  Economic  and  Financial  Affairs"  of  the 
Directorate General for Economic and Financial Affairs, the Objective of "providing 
macro-financial  assistance  to  third  countries  in  resolving  their  balance  of  payment 
crises and restoring external debt sustainability" is related to the general objective "to 
promote prosperity beyond the EU". 

The  related  indicators  are:  "official  reserves  in  months  of  imports  of  goods  and 
services"  (expected  result:  "a  stabilisation  or  an  increase");  and  "external  debt  as  a 
percentage of GDP" (expected result: a level deemed sustainable upon the end of the 
current programme). 

5.4.  Method of Implementation (indicative) 

X 

Centralised Management 

X 

directly by the Commission 

(cid:133) 

indirectly by delegation to: 

(cid:133) 

executive Agencies 

(cid:133) 

bodies set up by the Communities as referred to in art. 185 of the 
Financial Regulation 

(cid:133) 

national public-sector bodies/bodies with public-service mission 

(cid:133) 

Shared or decentralised management 

(cid:133)  with Member states 

(cid:133)  with Third countries 

(cid:133) 

Joint management with international organisations (please specify) 

Relevant comments: 

EN 

15 

   EN 

 
6. 

MONITORING AND EVALUATION 

6.1.  Monitoring system 

The monitoring of the action by the Commission services will take place on the basis 
of  macroeconomic  and  structural  policy  measures  to  be  agreed  with  the  Bosnian 
authorities in a Memorandum of Understanding. The authorities will be required to 
report  on  those  measures  to  the  Commission  services  on  a  regular  basis.  The 
Delegation of the European Commission in Sarajevo will also provide reporting on 
issues  relevant  for  the  monitoring  of  the  assistance.  The  Commission  services  will 
remain in close contact with the IMF and the World Bank. 

6.2. 

Evaluation 

6.2.1.  Ex-ante evaluation 

An  ex–ante  evaluation  was  carried  out  by  Commission  services  (Unit  D1  of  the 
Directorate-General for Economic and Financial Affairs). 

6.2.2.  Measures taken  following  an  intermediate/ex-post evaluation (lessons learned from 

similar experiences in the past) 

An  ex-post  evaluation  on  a  previous  macro-financial  assistance  operation  in  favour 
of  Bosnia  and  Herzegovina  was  carried  out  in  2007.  Ex-post  evaluations  were  also 
carried out for other countries of the Western Balkans (Albania, the former Yugoslav 
Republic of Macedonia and Serbia) and for two new independent states of the former 
Soviet  Union  (Armenia,  Tajikistan).  The  results  of  those  evaluations  provide  some 
useful lessons for the current operation in favour of Bosnia and Herzegovina.  

6.2.3.  Terms and frequency of future evaluation 

An  independent  ex-post  evaluation  of  the  assistance  to  Bosnia  and  Herzegovina  is 
planned  to  be  carried  out  under  the  multi-annual  evaluation  programme  of  the 
Directorate-General for Economic and Financial Affairs. 

7. 

ANTI-FRAUD MEASURES  

Commission  services  have  put  in  place  an  on-going  programme  of  Operational 
Assessments  of  the  financial  circuits  and  administrative  procedures  in  all  third 
countries benefiting from the Community macro-financial assistance in order to fulfil 
requirements  of  the  Financial  Regulation  applicable  to  the  General  Budget  of  the 
European Communities. 

In  Bosnia  and  Herzegovina,  the  Commission  services  assessed  in  2004,  with  the 
support  of  duly  mandated  external  experts,  the  reliability  of  financial  circuits  and 
administrative procedures that are relevant for this type of assistance, concluding that 
the  framework  for  sound  financial  management  of  the  Ministries  of  Finance  was 
broadly  effective  and  that  the  one  of  the  Central  Bank  was  effective.  At  the  same 
time, it identified a number of areas for improvement, notably in the field of budget 
controls and internal audits. A new Operational Assessment will be commissioned to 

EN 

16 

   EN 

 
external  consultants  by  the  European  Commission.  Its  results  will  be  used  to  guide 
the  definition  of  the  specific  policy  measures  to  be  attached  to  the  release  of  the 
assistance with a view of strengthening efficiency, transparency and accountability of 
public finance management systems in Bosnia and Herzegovina. 

The  proposed legal  basis for macro-financial  assistance  to Bosnia and Herzegovina 
includes  a  provision  on  fraud  prevention  measures.  These  measures  will  be 
elaborated further in a Memorandum of Understanding and the loan agreement. It is 
envisaged  that  a  number  of  specific  policy  conditions  will  be  attached  to  the 
assistance  mainly  in  the  field  of  public  finance  management,  with  a  view  of 
strengthening  efficiency,  transparency  and  accountability  of  the  assistance.  The 
macro-financial  assistance  will  be  liable  to  verification,  control  and  auditing 
procedures  under  the  responsibility  of  the  Commission,  including  the  European 
Antifraud Office (OLAF), and by the European Court of Auditors. 

EN 

17 

   EN 

 
8. 

DETAILS OF RESOURCES 

8.1. 

Objectives of the proposal in terms of their financial cost 

Commitment appropriations in EUR million (to 3 decimal places) 

Type of output 

Av. 
cost 

Year 2009 

Year 2010 

Year 2011 

Year 2012 

Year n+4 

Year n+5 and 
later 

TOTAL 

No. 
outputs 

Total 
cost 

No. 
outputs 

Total 
cost 

No. 
outputs 

Total 
cost 

No. 
outputs 

Total 
cost 

No. 
outputs 

Total 
cost 

No. 
outputs 

Total 
cost 

No. 
outputs 

Total 
cost 

of 

(Headings 
Objectives, 
and 
actions 
outputs should be 
provided) 

OPERATIONAL 
OBJECTIVE No.1  

Action  1  Balance 
of 
payments/ 
budget support to 
Bosnia 
and 
Herzegovina 

- Output 1  Guarantee Fund 

0 

 0 

.0 

provisioning 

- Output 2 

Action  2  Update 
of  Operational 
Assessment. 

- Output 1  Report 

1 

Sub-total 
Objective 1 

OPERATIONAL 
OBJECTIVE  No.2 
1……… 

0.05 

0.05 

9.0 

9.0 

EN 

18 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Action 
1………………. 

- Output 1 

Sub-total 
Objective 2 

OPERATIONAL 
OBJECTIVE  No.n 
1 

Sub-total 
Objective n 

TOTAL COST 

0.05 

9.0 

EN 

19 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8.2. 

Administrative Expenditure  

8.2.1.  Number and type of human resources 

Types of post 

Staff to be assigned to management of the action using existing and/or 
additional resources (number of posts/FTEs) 

Year 2009  Year n+1  Year n+2  Year n+3  Year n+4  Year n+5 

Officials or 
temporary 
staff10 (XX 01 
01) 

A*/AD 

1/3  1/3 

B*, 
C*/AST 

Staff  financed11  by  art. 
XX 01 02 

Other  staff12  financed by 
art. XX 01 04/05 

TOTAL 

1/3  1/3 

8.2.2.  Description of tasks deriving from the action 

Inter alia prepare/negotiate memoranda of understanding and loan agreement, liaise 
with  the  authorities  and  the  International  Financial  Institutions,  monitor  economic 
and  structural  policies  of  the  beneficiary  country,  conduct  review  missions  and 
prepare  Commission  staff  reports,  prepare  Commission  procedures  related  to  the 
management of the assistance.  

8.2.3. 

Sources of human resources (statutory) 

X 

(cid:133) 

(cid:133) 

(cid:133) 

(cid:133) 

Posts currently allocated to the management of the programme to be replaced 
or extended 

Posts pre-allocated within the APS/PDB exercise for year n 

Posts to be requested in the next APS/PDB procedure 

Posts  to  be  redeployed  using  existing  resources  within  the  managing  service 
(internal redeployment) 

Posts required for year n although not foreseen in the APS/PDB exercise of the 
year in question 

10 
11 
12 

Cost of which is NOT covered by the reference amount 
Cost of which is NOT covered by the reference amount 
Cost of which is included within the reference amount 

EN 

20 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
8.2.4.  Other  Administrative  expenditure  included  in  reference  amount  (XX  01  04/05  – 

Expenditure on administrative management) 

EUR million (to 3 decimal places) 

Budget line 01 03 02 

Macro-economic assistance 

Year 
n 

Year 
n+1 

Year 
n+2 

Year 
n+3 

Year 
n+4 

Year 
n+5  

and 
later 

TOTAL 

Technical 

1 
and 
assistance (including related staff costs) 

administrative 

Executive agencies13 

Other 

technical 

and 

administrative 

assistance 

- intra muros  

- extra muros 

1) Operational assessment  

0.050 

2) Ex-post evaluation  

0.250 

Total  Technical  and  administrative 
assistance 

0.050 

0.250 

8.2.5.  Financial cost of human resources and associated costs not included in the reference 

amount 

Type of human resources 

Year n 

Year n+1  Year n+2  Year n+3  Year n+4  Year n+5 

EUR million (to 3 decimal places) 

13 

Reference should be made to the specific legislative financial statement for the Executive Agency(ies) 
concerned. 

EN 

21 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
and later 

Officials  and  temporary  staff 
(XX 01 01) 

0.030 

0.030 

Staff  financed  by  Art  XX  01 
02  (auxiliary,  END,  contract 
staff, etc.) 

(specify budget line) 

cost 

Total 
of  Human 
Resources  and  associated 
in  reference 
costs 
amount) 

(NOT 

0.030 

0.030 

Calculation– Officials and Temporary agents 

Reference should be made to Point 8.2.1, if applicable 

NOT APPLICABLE 

Calculation– Staff financed under art. XX 01 02 

Reference should be made to Point 8.2.1, if applicable 

NOT APPLICABLE 

8.2.6. Other administrative expenditure not included in reference amount 

EUR million (to 3 decimal places)

Year 
2009 

Year 
n+1 

Year 
n+2 

Year 
n+3 

Year 
n+4 

XX 01 02 11 01 – Missions 

0.020 

0.010 

XX 01 02 11 02 – Meetings & Conferences 

XX 01 02 11 03 – Committees14  

XX 01 02 11 04 – Studies & consultations 

Year 
n+5 

and 
later 

TOTAL 

0.030 

14 

Specify the type of committee and the group to which it belongs. 

EN 

22 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
XX 01 02 11 05 - Information systems 

2 

Total 

Other  Management 

Expenditure (XX 01 02 11) 

3  Other 

expenditure 

administrative 
including reference to budget line) 

nature 

of 

an 
(specify 

expenditure, 
than  human  resources  and 
in 

Total  Administrative 
other 
associated  costs  (NOT 
reference amount) 

included 

0.020 

0.010 

0.030 

Calculation - Other administrative expenditure not included in reference amount 

Three staff missions for one/two persons 

EN 

23 

   EN