REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of macro-financial assistance to third countries in 2013
Date: 2014-06-24
Institutions: European Commission
Subjects: Bosnia and Herzegovina, Georgia, Jordan, Kyrgyzstan, Tunisia, Ukraine, balance of payments, balance of payments assistance, economic reform, economic situation, macroeconomics, structural adjustment













EUR-Lex - 52014DC0372 - EN











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52014DC0372

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the implementation of macro-financial assistance to third countries in 2013 /* COM/2014/0372 final */









TABLE
OF CONTENTS
1.      Introduction..................................................................................................... 3
2.      Background........................................................................................................ 3
2.1.       Developments
over the last few years.................................................................... 3
2.2.       MFA
Framework Regulation.................................................................................. 5
2.3
       Overcoming
the stalemate in the approval of new MFA operations....................... 6
3.      Macro-financial
assistance operations in 2013........................ 6
3.1.       Overview............................................................................................................... 6
3.2.       Individual
operations in the beneficiary countries in 2013.................................... 7
3.2.1.        Bosnia
and Herzegovina................................................................................ 7
3.2.2.        Georgia.......................................................................................................... 7
3.2.3.        Jordan............................................................................................................ 8
3.2.4.        The
Kyrgyz Republic....................................................................................... 8
3.2.5.     
Tunisia........................................................................................................... 9
        3.2.6.       Ukraine………………………………………………………………………9
4.      Ensuring
a proper use of MFA funds: operational assessments and Ex-post evaluations............................................................................................................. 10
4.1.       Operational
assessments....................................................................................... 10
4.2.       Ex-post
evaluations.............................................................................................. 11
5.      Requests
for assistance and future Commission proposals; Budgetary situation.................................................................................................................... 11
REPORT FROM THE
COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL
The
implementation of macro-financial assistance to third countries in 2013

1.         Introduction

Macro-financial
assistance, or MFA, as part of the EU’s external assistance framework, is an
instrument designed to address exceptional external financing needs of countries
that are geographically, economically and politically close to the EU. Its
objective is to strengthen macroeconomic and financial stability in candidate
and potential candidate countries, and in countries in the European
neighbourhood, while encouraging the implementation of appropriate structural
reforms. It complements and is conditional on the existence of an adjustment
and reform programme agreed with the International Monetary Fund (IMF). Macro-financial
assistance is a balance of payments support instrument. It takes the form of
either loans, for which the Commission borrows the necessary funds in capital
markets and lends them to the beneficiary country, or, in specific circumstances,
grants financed by the EU budget.
The year 2013
was characterised by the unblocking of pending legislative files on MFA . This
came after more than two years of disagreement between the European Parliament
and the Council on the procedure to be used for the adoption of the Memorandum
of Understanding (MoU), which lays down the economic policy measures to be
undertaken by the country benefiting from the MFA. This enabled the adoption by
the co-legislators of three MFA legislative decisions. Those for Georgia and the Kyrgyz Republic had been proposed by the Commission in 2011 and that for Jordan in 2013. The Commission’s 2013 proposal for Tunisia is expected to be approved in
2014.
In
light of political developments in early 2014 and the acute vulnerability of Ukraine’s economy and its balance of payments situation, the Commission prepared a new MFA operation
for Ukraine, for up to EUR 1 billion in loans. On 14 April 2014, the Council adopted
the decision on this in an accelerated procedure under Article 213 of the Treaty
on the Functioning of the European Union (TFEU).
This report is
prepared in accordance with the various Council and joint European Parliament and
Council decisions regarding MFA operations. It follows the reports presented in
previous years. It is accompanied by a Commission Staff Working document
providing more detailed information on, and analysis of, the macroeconomic
context and implementation of individual MFA operations.

2.         Background
2.1.      Developments over the last few years

The global
economic and financial crisis of 2008-09, which profoundly affected the
emerging economies of the European Union’s neighbourhood, resulted in a surge
of requests for EU financial support, including in the form of MFA. Four such
programmes — in favour of Bosnia and Herzegovina, Serbia, Armenia and Georgia — were decided by the EU Council of Ministers at the end of 2009, and the previously
approved MFA operation for Kosovo[1]
was extended by one year in 2009. In 2010, two more programmes, in favour of Ukraine and the Republic of Moldova were decided — this time, following the entry into force of the
Lisbon Treaty — by the EU’s co-legislators, the Council and the Parliament. The
operations for Georgia and Kosovo were finalised in 2010. In 2011, 2012 and
2013, the Commission completed the implementation of MFA programmes for Serbia, Armenia, Moldova and Bosnia and Herzegovina.
The overall
economic situation in 2010 and early 2011 improved significantly and somewhat
eased the pressure on the balance of payments position of MFA-eligible
countries. 
From the second
half of 2011, financing conditions in global capital markets experienced a
significant deterioration, partly reflecting the effects of the euro area’s
sovereign debt crisis. In addition, the Arab Spring and the resulting political
and economic upheavals in the Arab Mediterranean partner countries[2] put
heightened pressure on the budgets and the external financial positions in
these countries. These developments led to an increased demand for MFA in 2012
and 2013, with requests for support from the authorities of Egypt, Jordan and Tunisia. A decision to provide MFA to Jordan was adopted by the co-legislators in December
2013. In the same month, the Commission presented a proposal for a decision to
provide MFA to Tunisia; this is expected to be adopted by the co-legislators in
the first half of 2014. A proposal for a MFA operation to Egypt was prepared by the Commission services, but it was put on hold pending the
conclusion between Egypt and the IMF of a disbursing IMF programme, and in view
of the developments in the second half of 2013.
More
recently, a weakening in economic performance of some Eastern neighbours,
coupled with significant deterioration in the political situation in some, is expected
to lead to new MFA operations. In light of the developments of early
2014 and the further deterioration of Ukraine’s balance of payments, the
Council approved a new MFA operation for Ukraine in April 2014 under the
urgency procedure (Article 213 TFEU). The new
programme consists of a loan of up to EUR 1 billion, foreseen to be
disbursed during 2014.

2.2.      MFA Framework Regulation

As early as
2003, the
European Parliament identified the lengthy decision-making process — decisions
on individual MFA operations were taken on a case-by-case basis by the Council,
after consultation of the Parliament — as one of the main shortcomings
of MFA. Parliament
stressed the need
for a transparent legal basis for the MFA instrument as a whole. Since
the entry into force of the Lisbon Treaty on 1 December 2009, legislative
decisions on individual MFA operations have been taken by the Parliament and
the Council under the ordinary legislative procedure (co-decision), resulting
in an even lengthier decision-making process. However, as has
been highlighted
by the financial and sovereign debt crisis, dealing effectively with
macroeconomic and financial emergency situations requires a crisis response
instrument that can be deployed quickly and efficiently.
Responding to the
need for a streamlining of the MFA instrument, the Commission submitted
on 4 July 2011 a proposal for a Framework Regulation laying down general provisions for
Macro-Financial Assistance to third countries[3]. The main objectives of the proposal were:
(i) to make MFA more effective through a swifter and more efficient
decision-making process; (ii) to align the decision-making process with that of
other financing instruments, mainly related to external relations; (iii) to
formalise,  clarify and simplify the rules governing MFA.
The Commission's
proposal was subject of a lenghty legislative procedure, during which the two
co-legislators notably disagreed over the procedure to be used for the adoption
of the MoU. More importantly, the Council insisted on maintaining the existing
system where each individual MFA operation with a country in crisis requires a
separate legislative decision. The European Parliament, while not sharing the
views of Council at first, later in the process declared its wilingness to
conclude an agreement with Council to this effect. The European Parliament and
the Council intended therefore to adopt the Commission proposal, but without
conferring implementing powers to decide the provision of MFA to a third
country upon the Commission. In the view of the Commission, this meant that the
nature of its proposal  was changed, and that, if adopted, the MFA Framework
Regulation would constitute a serious breach of the interinstitutional balance,
in particular by affecting the Commission’s right of legislative initiative.
Therefore, the Commission decided to withdraw its proposal on 8 May 2013. As a
result, legislative decisions on individual MFA operations are still to be
adopted by the Parliament and the Council under the ordinary legislative
procedure[4].

Following the
withdrawal by the Commission of its proposal, the Council, in accordance with
Article 263 TFEU, brought an action for annulment against the Commission to the
Court of Justice[5]. The
case is still pending before the Court.
Recent
experiences, and in particular the need to swiftly launch a new MFA operation
in Ukraine, have again underlined the need to ensure that MFA, as an emergency
instrument, can be mobilised rapidly in reaction to crisis situations. The
Commission will therefore continue to reflect on ways to improve the
effectiveness and efficiency of the decision-making process.

2.3       Overcoming
the stalemate in the approval of new MFA operations

With the entry
into force of the new ‘Comitology Regulation’[6] on 1
March 2011, the European Parliament and the Council disagreed over certain
procedural issues related to the Commission’s proposals for providing MFA to Georgia and to the Kyrgyz Republic. While there was an overall agreement on the substance of the
proposals, the two institutions had different views on the comitology procedure
to follow for the adoption of the MoU. The Parliament insisted on using the advisory
procedure (non-binding opinion by Member States), whereas the Council claimed
that the examination procedure (binding opinion by Member States) had to be
used. A compromise solution was finally found in the context of the
negotiations on the MFA Framework Regulation and the conciliation procedure for
the decision on MFA to Georgia. The co-legislators thus agreed on applying a
threshold of EUR 90 million to future operations: the examination procedure
would apply for the adoption of the MoU for individual MFA operations above EUR
90 million, and the advisory procedure for MFA operations equal to or below
this amount. This compromise (which was also reflected in the Joint Declaration
mentioned in footnote 4), enabled the adoption of the MFA decisions for Georgia and the Kyrgyz Republic in August and October 2013, respectively.

3.         Macro-financial assistance operations in 2013
3.1.      Overview

The MFA to Bosnia and Herzegovina, approved in 2009 for a total of EUR 100 million in loans, was
completed in 2013. The first and second tranches, each of EUR 50 million,
were disbursed in February and September 2013.
As indicated
already, unblocking the MFA instrument in 2013 enabled the adoption of two MFA decisions
(Georgia, Kyrgyz Republic) that had been held up for two years, and the
adoption of two new MFA decisions (Jordan, Tunisia):
-       
In
August 2013, the co-legislators adopted the Commission’s 2011 proposal to
extend MFA to Georgia for a total of EUR 23 million in loans and EUR 23
million in grants. Disbursement under this MFA operation will become possible once
  Georgia agrees on a new disbursing programme with the IMF.
-       
The
Commission’s 2011 proposal to extend an exceptional MFA to the Kyrgyz Republic for EUR 15 million in loans and EUR 15 million in grants was
adopted in October 2013. The Commission and the Kyrgyz authorities are currently
discussing the MFA-related documents. Disbursements of both the first and
second tranches are planned in 2014.
-       
In
April 2013, the Commission proposed a new legislative decision extending EUR 180
million in loans to Jordan; it was adopted in December 2013. The MoU and the Loan
Facility Agreement were signed by the Jordanian authorities and the EU on 18
March 2014. Disbursements of both the first and second tranches are planned in
2014.
-       
In
December 2013, the Commission presented a new legislative proposal to provide MFA
to Tunisia for up to EUR 250 million in loans. The decision was adopted by
the co-legislators in May 2014. The
assistance, the size of which was finally increased to EUR 300 million in
the course of the legislative procedure, is planned to be implemented in 2014-15.
As regards Ukraine, two
decisions to provide MFA for a total of EUR 610 million were adopted in
2002 and 2010. However, implementation could not start in 2013 owing to a
protracted negotiation process. The MoU and Loan Agreement were signed in
February and March 2013 and ratified one year later. Disbursement of these MFA
funds is subject to an agreement between the Ukrainian authorities and the IMF
on a disbursing IMF programme and is planned to take place in 2014-15.

3.2.      Individual operations in the beneficiary countries
in 2013
3.2.1.   Bosnia and Herzegovina

Back
in 2009, the Council approved an MFA operation for Bosnia and
  Herzegovina
for a sum of up to EUR 100 million in the form of loans. The MoU and Loan
Agreement were signed in November 2010, but the Loan Agreement was only
ratified in August 2011, partly because of the lengthy government formation
after the October 2010 general elections. No MFA funds were disbursed during
2012 as a result of the authorities’ failure to meet the conditionality agreed
in the MoU. Following the agreement of a new Stand-By-Arrangement with the IMF
and the authorities’ steps towards improving public finance sustainability, the
Commission extended the MFA availability period by one additional year, until 7
November 2013. The first and second tranches, each of EUR 50 million, were
both disbursed in 2013.
After
entering negative territory in 2012 (GDP growth was -0.9 %), economic
growth gained some momentum during 2013 and is set to reach 1.5%, partly in
response to the recovery of the country’s main trading partners. The 24-month Stand-By
Arrangement with the IMF for about EUR 400 million remains on track
despite some political tensions in late 2013, which deterred the timely
disbursement of the sixth tranche. In January 2014, the Stand-By Arrangement was
extended until June 2015 and increased by an additional EUR 300 million to
address elevated financing needs in late 2014.

3.2.2.   Georgia

At a
donors conference in the aftermath of Georgia’s August
2008 military conflict with Russia, the EU pledged a comprehensive package of
up to EUR 500 million to support Georgia’s economic recovery. This
included two potential MFA programmes, amounting to EUR 46 million each.
The first one was successfully completed in 2009-10. The adoption of the
legislative decision for the second MFA programme (to be provided equally in
loans and grants) was delayed for two years on account of disagreements
between the European Parliament and the Council over the procedure to be used
for the
adoption of the MoU. The decision was finally adopted in
August 2013. However, the disbursement of MFA funds is conditional on a
disbursing IMF programme, and no disbursements have been carried out under the
IMF programme that expired in April 2014, as the Georgian authorities were treating
it as precautionary. However, the Georgian authorities and the IMF are
currently negotiating a successor arrangement possibly entailing the use of IMF
resources, which could open the way for the implementation of this MFA
operation.
In 2013, Georgia’s GDP growth slowed to 3.2 %, compared with 6.2 % in 2012. External
vulnerabilities also remained of concern, as evidenced by a decreasing but
still high current account deficit-to-GDP ratio, high gross external debt and
declining foreign direct investment. In the last quarter of 2013, Georgia started to show signs of economic recovery, which continued into January and
February 2014, with GDP growth and inflation picking up, driven by external and
domestic demand.

3.2.3.   Jordan

During
the last three years, Jordan has been severely affected by external regional
economic shocks. The economic and social implications of the Syrian conflict
resulting from the mounting inflow of refugees, repeated disruptions to the
flow of natural gas from Egypt, a weak global economic climate and high global
energy prices have all taken a heavy toll on external receipts and GDP growth,
which slowed to 3.3 % in 2013. Against this background, in August 2012, Jordan entered a 36-month Stand-By Arrangement with the IMF
for a sum of USD 2 billion (800% of quota). According to the last review,
the programme remains broadly on track, with half of its total amount disbursed
by the end of 2013.
Following a December
2012 official request for MFA in December 2012, the Commission presented on 29
April 2013 a proposal for a decision to provide Jordan with MFA of up to EUR 180
million in loans. The decision was adopted by the Parliament and the Council on
11 December 2013. The MoU and Loan Facility Agreement were signed on 18 March
2014. Jordan’s MFA operation
is
meant to complement the funds provided by the IMF under the Stand-By-Arrangement
and is
envisaged to be released in two instalments during 2014. The
assistance aims at supporting reform efforts in the area of public finance
management and tax reform; social safety net and labour markets; investment
framework and trade; and the energy sector.

3.2.4.   The Kyrgyz Republic

On 20 December
2011, the Commission presented a
proposal to provide to the Kyrgyz Republic MFA of up to EUR 30 million (EUR 15
million each in loans and grants). This exceptional MFA operation was
outside the normal geographical scope of macro-financial assistance. It was
justified by the strength of the pro-democratic political and economic reform
momentum in the country and by its position in a region of economic and
political importance for the EU. In parallel, a three-year programme running
from June 2011 until June 2014 was agreed with the IMF, supported by an
Extended Credit Facility of USD 102.3
million. The MFA decision was finally adopted on 22 October 2013,
after a delay of two years caused by the disagreement
between the co-legislators over the procedure to be used for the
adoption of the MoU (see Section 2.3). Should the ongoing discussions on MFA
documents be successful, both tranches could be disbursed in
2014.
After a decline
in GDP of 0.9 % in 2012 due to a 40 % contraction in gold production,
the economy rebounded in 2013. GDP growth is estimated to have reached 7.8 %
in 2013, driven not only by a recovery in gold production (notwithstanding a 25 %
decline in the gold price in 2013) but also a strong performance in the
non-gold sector. Inflation remained under control in 2013, at an estimated 7.0 %.
The Kyrgyz government managed to slightly
out-perform fiscal targets for 2013, with a fiscal deficit of 5.2 % of
GDP, thanks to stronger than expected growth and sizeable imports, which led to
a better performance in VAT and income tax receipts. The current account deficit
is also expected to narrow to 10.4 % in 2013. External public debt
slightly decreased to an estimated 44.6 % of GDP by end-2013. The level of
gross reserves declined to 3.3 months of imports, from 3.7 one year before, as
a result of increased imports. The Kyrgyz Republic is broadly on track
with the ongoing IMF programme.

3.2.5.
Tunisia

In
mid-April 2013, Tunisia reached an agreement with the IMF on a 24-month
Stand-By Arrangement for USD 1.75 billion; the IMF Board gave its approval
in June 2013. In this context, in August 2013, the Tunisian government
requested MFA from the EU for an amount of EUR 500 million. In response,
on 5 December, the Commission submitted a proposal to grant MFA to Tunisia for up to EUR 250 million, in the form of a loan to be disbursed in three
tranches during 2014 and the first half of 2015. In the course of discussions
in the Parliament and Council, the amount of the assistance was increased to EUR 300
million. The decision on this MFA operation was adopted by the co-legislators in
May 2014.
The continuing
political crisis, combined with a bad cereal harvest and weak external demand,
had a negative impact on GDP growth in 2013, which is expected to be limited to
2.6 %. The latest estimates of the fiscal situation and the current
account pointed towards deficits of 8.8 % and 8.2 % of GDP, respectively,
which is significantly higher than original IMF projections. Reserves were estimated
to represent barely three months of imports at year-end 2013. Despite positive
political events in early 2014 (approval of a new constitution and appointment
of a caretaker government), the risks to the macroeconomic outlook remain high.
In a climate of sluggish global growth, Tunisia is facing significant external
and budgetary financing constraints. It is also vulnerable to increasing
domestic security threats and moderate risks to regional stability. The interim
Government should pursue the necessary structural reforms aimed at enhancing
inclusive growth and addressing external and fiscal imbalances, supported by
the ongoing IMF programme.
3.2.6. Ukraine
In
July 2010, against the backdrop of a persistent external financing gap and in
order to support the economic reform process in the country, the EU adopted a
decision providing up to EUR 500 million in macro-financial assistance to Ukraine. In combination with the EUR 110 million still available under the 2002 MFA
decision, this implied a total package of up to EUR 610 million in loans,
to be disbursed in three tranches. The MoU and the Loan Agreement were signed
in March 2013 and ratified by the Ukrainian Parliament in March 2014. 
Ukraine is
suffering from serious macroeconomic imbalances and the ongoing political
turmoil is creating many uncertainties. After stagnating in 2012-13, GDP is
expected to have declined by 10 % in the first quarter of 2014. Inflation entered negative territory, at -0.2% in 2013. The
fiscal deficit increased to 6.5-7.5 % of GDP in 2013. While the
overall public debt level looked manageable by international standards (41 %
of GDP in 2013), Ukraine faced a peak of debt repayments in 2013. It had to
deal with the major challenge of rolling over its debt at sustainable interest
rates, until in December the authorities received USD 3 billion in
financial support from Russia. The current account continued to deteriorate, on
account of decreased exports, to an estimated deficit of 10 % of GDP. By
end-February 2014, official reserves had declined to only two months of next
year’s imports: this arose from the large current account deficit, pressure on
the hryvnia and significant debt repayments in the last quarter of 2013. In the
first months of 2014, the economic situation deteriorated further as a result
of the acute political crisis. GDP growth is estimated to have decreased by some
3-4 % year-on-year in January and February 2014.      
In
light of the political developments of early 2014 and the acute vulnerability
of the Ukrainian economy and its balance of payments, the Commission prepared a
new MFA operation for Ukraine, for up to EUR 1 billion in loans. The
decision on this assistance was adopted in an accelerated procedure under
Article 213 TFEU on 14 April 2014. Its
disbursement is conditional on an IMF arrangement and on the implementation of
policy conditions agreed in a MoU that was negotiated with the
Ukrainian authorities in April and is foreseen to be signed
and ratified by the Ukrainian parliament in May. The IMF Board approved a
24-month Stand-By Arrangement for Ukraine in April 2014 of up to USD 17
billion,
essentially allowing to start disbursing both the 2002/2010 and the 2014 MFA operations.

4.         Ensuring a proper use of MFA funds: operational
assessments and ex post evaluations
4.1.      Operational assessments

In line with the
requirements of the EU Financial Regulation, the Commission, with the help of
external consultants, carries out operational assessments to obtain reasonable
assurances on the functioning of administrative procedures and financial
circuits in recipient countries.
Operational
assessments focus on Public Finance Management (PFM) systems, in particular on
the procedures and the organisation of the ministry of finance and the central
bank and, more specifically, on the management of those accounts receiving EU
funds. In addition, special attention is given to how external audit
institutions function, their independence, their work programmes and the
effectiveness of their controls. Public procurement procedures at the central
level are also examined. In 2013, the Commission conducted operational
assessments in Jordan, Egypt and Tunisia.

4.2.      Ex
post
evaluations

In line with the
EU Financial Regulation, the Commission conducts ex post
evaluations of MFA programmes to assess the impact of MFA. The main objectives
of ex post
evaluations are: (i) to analyse the economic impact of MFA on the economy of
the recipient country and in particular on the sustainability of its external
position; and (ii) to assess the added value of the EU intervention. Three ex post
evaluations of MFA operations with Serbia, Moldova and Armenia were completed in 2013[7].
-       
The
ex post
evaluation on the Serbian MFA programme concluded that the assistance,
alongside the IMF package, had helped to prevent the Serbian economy from
slipping into a major economic crisis. Nevertheless, Serbia’s fiscal and
external financial situation remained fragile and subject to numerous risks and
challenges.
-       
For
  Moldova, the evaluation concluded that the MFA operation had a positive net
impact on the Moldovan economy. It enabled a more gradual fiscal consolidation
than would otherwise have been possible in the post-crisis period, thereby supporting
economic growth over the period 2010 to 2012. Some structural reforms were
promoted by linking disbursement of tranches to specific conditions agreed with
the Moldovan authorities and coordinated with other donors.
-       
For
  Armenia, the
evaluation found evidence of the reinforcing effect of MFA in the areas of tax
and customs policy reforms. However, it was inconclusive as regards other
reform areas, such as pension reform: as domestic ownership was already high,
this reform would most likely have been undertaken in the absence of any MFA
operation.

5.         Requests for assistance and future Commission
proposals — Budgetary situation

The programme
of MFA operations for 2014 is as follows:
(i) four
decisions already approved for MFA operations in the Kyrgyz Republic, Jordan, Georgia and Ukraine;
(ii) one
MFA decision for Tunisia, proposed by the Commission in 2013, for which implementation
is planned to start in 2014;
(iii)
one new MFA decision for Ukraine, adopted by the Council in April 2014 and which
is expected to be implemented in 2014; and
(iv)
up to two new programmes, based on requests received to date from European
Neighbourhood Policy countries (currently Armenia and Egypt).
As
mentioned above, the two tranches under the MFA operation for the Kyrgyz Republic (EUR 15 million in loans, EUR 15 million in grants) are scheduled
to be disbursed in 2014. This is also the case for Jordan’s MFA operation (EUR 180
million in loans).
Under
the MFA programme for Ukraine approved in 2002/2010 (EUR 610 million in
loans), subject to compliance with policy conditions in the MoU, disbursement
of these funds is now planned in 2014-15. Ukraine’s new MFA operation for EUR 1
billion, approved in April 2014, is expected to
be fully implemented in 2014.
Under
the new legislative decision for Tunisia’s MFA operation of EUR 300
million (also in loans), approved in May 2014, disbursements
are scheduled in three tranches in 2014-15.
Full
implementation of all the above operations is subject to compliance with policy
conditions set out in the corresponding MoU.
Should
the ongoing discussions between the IMF and Georgia result in a new IMF
programme, and subject to the Georgian authorities and the EU agreeing on a
MoU, implementation of the MFA decision for Georgia (EUR 23 million in loans,
EUR 23 million in grants) could start in 2014. 
A new
request for MFA support for Armenia was received by the Commission in February
2014. It is intended to follow up on the MFA programme completed in 2012 and
would aim at helping the country cover the residual external financing gap that
is forecast over 2014-15, complementing the resources made available by the IMF
under a new financing arrangement (Extended Fund Facility of USD 125
million), which was approved on 7 March 2014.
In
November 2012, Egypt renewed its MFA request for a total of EUR 500
million. On this basis, the Commission had considered submitting a proposal,
possibly consisting of a loan of EUR 450 million coupled
with a grant of EUR 50 million. An operational assessment,
which analysed the financial circuits and controls of Egypt’s Public Finance Management system, was also undertaken in June 2013. However, this
proposal has been put on hold pending the conclusion between Egypt and the IMF of a disbursing IMF programme, and in view of the political developments in
the second half of 2013.
The
Commission may bring forward a proposal for a new MFA operation with Moldova, given the deterioration of its economic situation and recent talks with the IMF on
a new programme.
The table below
provides an overview of commitments and payments of MFA grants for 2012, 2013
and 2014 (indicative). The forecast for 2014 is of a very preliminary nature
and includes only those MFA operations for which a decision has been proposed
by the Commission or already been approved by the co-legislators.
With regard to
loans, the total amount of outstanding MFA loans was EUR 582 million at year-end
2013. This sum is covered by the Guarantee Fund for external actions[8],
which is maintained at 9 % of the outstanding amount. The Guarantee Fund
covers not only MFA loans, but also Euratom loans and EIB loans to third
countries; it is supported by the EU budget. MFA loan disbursements are
estimated to reach about EUR 1.8 billion in 2014, which would
correspond to a provisioning of the Guarantee Fund of about EUR 160 million.
These figures do not, however, include possible new MFA operations for which the
Commission has not yet presented a proposal.
[1] This designation is
without prejudice to positions on status, and in line with UN Security Council
Resolution 1244 and the International Court of Justice Opinion on the Kosovo
Declaration of Independence.
[2] For background
information on economic developments in the southern neighbours, see also ‘The
EU’s neighbouring economies: managing policies in a challenging global
environment’, Occasional Papers no. 160, August 2013, DG ECFIN, European
Commission. (http://ec.europa.eu/economy_finance/publications/occasional_paper/2013/index_en.htm).
[3] COM(2011) 396 final, 4.7.2011.
[4] In the context of the
adoption of Decision No 778/2013/EU providing further macro-financial
assistance to Georgia, the European Parliament and the Council adopted a Joint
Declaration reflecting compromises found between the two co-legislators during
the negotiations on the Framework Regulation and the conciliation procedure for
the decision on Georgia (OJ L 218, 14.8.2013, p. 18). The Declaration is a
political agreement without legally binding effects.
[5] Case C-409/13.
[6] Regulation (EC) No
182/2011 of the European Parliament and of the Council of 16 February 2011.
[7] All ex-post
evaluations are available on DG ECFIN website: http://ec.europa.eu/dgs/economy_finance/evaluation/completed/index_en.htm.
[8] For more information,
please see the Report from the Commission to the European Parliament and the
Council on guarantees covered by the general budget.