Opinion of the European Central Bank of 26 February 2024 on the competences of Hrvatska narodna banka related to Croatia’s membership of the International Monetary Fund (CON/2024/6)
Date: 2024-02-26
Institutions: European Central Bank
Subjects: financial stability, legal basis

EN 

                                       ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 26 February 2024  

on the competences of Hrvatska narodna banka related to Croatia’s membership  

of the International Monetary Fund 

(CON/2024/6) 

Introduction and legal basis 

On 19 January 2024, the European Central Bank (ECB) received a request from the Croatian Minister 

for  Finance  for  an  opinion  on  a  draft  decision  on  the  manner  of  conducting  operations  and  settling 

liabilities  arising  from  the  membership  of  the  Republic  of  Croatia  in  the  International  Monetary  Fund 

(hereinafter the ‘draft decision’). 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning of the European Union and the third indent of Article 2(1) of Council Decision 98/415/EC1, 

as the draft decision relates to Hrvatska narodna banka (HNB). 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 decision 

1.1  The purpose of the draft decision is to amend the legal framework governing the relations between 

Croatia  and  the  International  Monetary  Fund  (IMF),  which  constitutes  the  Law  on  accepting 

membership of the Republic of Croatia of the International Monetary Fund and other international 
financial organisations on the basis of succession2 (hereinafter the ‘Law’) and the Decision on the 

manner  of  conducting  operations  and  settling  liabilities  arising  from  the  membership  of  the 

Republic  of  Croatia  of  the  International  Monetary  Fund  and  other  international  financial 
organisations3. The latter would be repealed in its entirety by the draft decision, which would be 

adopted by the Croatian government pursuant to its powers under Article 6 of the Law and Article 

31(2) of the Law on the Government of the Republic of Croatia4. 

1.2  The draft decision regulates the manner of conducting operations and settling obligations arising 

from Croatia’s membership of the IMF, shifting certain responsibilities from the Ministry of Finance 

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Council  Decision  98/415/EC  of  29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 
Zakon o prihvaćanju članstva Republike hrvatske u međunarodnom monetarnom fondu i drugim međunarodnim 
financijskim institucijama na temelju sukcesije (“Narodne novine”, br. 89/92). 
Odluka o načinu vođenja poslova i izmirivanju obveza koje proizlaze iz članstva Republike Hrvatske u 
međunarodnom monetarnom fondu i drugim međunarodnim financijskim institucijama (“Narodne novine”, br. 83/93 i 
94/93). 
Zakon o Vladi Republike Hrvatske (“Narodne novine” br. 150/11, 119/14, 93/16, 116/18 i 80/22). 

 
 
 
 
 
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to HNB. As noted in the explanatory memorandum to the draft decision, the draft decision aims to 

optimise the distribution of roles between the Ministry of Finance and HNB. As it is expected that 

Croatia  will  become  a  creditor  member  state  of  the  IMF,  this  optimisation  will  be  achieved  by 

redefining the roles of the two institutions, authorising the Governor and Deputy Governor of HNB 

to  represent  Croatia  at  the  IMF  and  ensuring  compliance  with  the  prohibition  on  monetary 

financing.  Furthermore,  the  draft  decision  obliges  Croatia  to  reimburse  certain  losses  or 

transaction costs to HNB from the State budget. The purpose of the draft decision is to establish 

a new legal framework, given that Croatia adopted the euro on 1 January 2023, and it is anticipated 
that Croatia’s role as a member state of the IMF will include additional obligations and activities5. 

1.3  The draft decision: (1) authorises the Governor and Deputy Governor of HNB to represent Croatia 

in the Board of Governors of the IMF in the capacity of Governor and Alternate Governor of the 

IMF respectively, while in the event that both are temporarily prevented from representing Croatia 

in the Board of Governors, the Governor of HNB may authorise another person to do so in the 
capacity  of  Governor  or  Alternate  Governor  of  the  IMF6;  (2)  transfers  the  financial  obligations 

related  to  Croatia’s  quota,  which  includes  past  and  future  payments  to  the  IMF  and  other 
obligations based on the quota, from the Ministry of Finance to HNB7; (3) provides that participation 

in  the  implementation  of  the  IMF’s  Financial  Transactions  Plan  and  in  special  drawing  rights 
(SDRs) trading will now be carried out by HNB from its own resources on behalf of  Croatia8; (4) 

regulates  the  powers  and  obligations  related  to  the  allocation  of  SDRs  and  stipulates  that  the 

SDRs allocated by the IMF to Croatia are part of the international reserves of Croatia managed by 
HNB  in  accordance  with  the  Law  on  HNB9;  (5)  establishes  that  the  Ministry  of  Finance  covers 

liabilities under the first and second allocation of SDRs, as well as interest rate expenses on those 

liabilities,  on  the  basis  of succession of membership  of the IMF following the  dissolution  of  the 
former Yugoslavia10; (6) regulates the conclusion and implementation of agreements on voluntary 
trading of SDRs (voluntary trading arrangements)11; and (7) requires the Ministry of Finance and 

HNB to cooperate and coordinate Croatia’s positions towards the IMF and exchange information 
in relation to Croatia’s membership of the IMF12. 

1.4  As noted in the explanatory memorandum to the draft decision, the draft decision also specifies 

the distribution of roles and obligations in respect of Croatia’s participation in the IMF’s voluntary 

financial  initiatives.  This  includes,  for  example,  loans  under  new  arrangements  to  borrow  and 

bilateral borrowing agreements, and loans or donations to trusts managed by the IMF. The latter 
include the Poverty Reduction and Growth Trust and the Resilience and Sustainability Trust13. In 

particular, the draft decision provides that Croatia may participate in the IMF’s voluntary financial 

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See explanatory memorandum to the draft decision, p. 1. 
See Article 2 of the draft decision. 

See Article 3 of the draft decision. 
See Article 4 of the draft decision. 

Zakon o Hrvatskoj narodnoj banci (“Narodne novine” br. 75/08, 54/13 i 47/20). See Article 5 of the draft decision. 
See Article 6 of the draft decision. 
See Article 7 of the draft decision. 

See Article 10 of the draft decision. 
See explanatory memorandum to the draft decision, p. 8. 

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initiatives, including loans and grants to the IMF and to the trusts managed by the IMF. When the 

resources for Croatia’s participation in an IMF voluntary financial initiative in the form of a loan are 

provided by HNB, the decision on participation in such an initiative is to be adopted by HNB with 

the prior consent of the Ministry of Finance. When the resources for Croatia’s participation in an 

IMF voluntary financial initiative are provided from the State budget, the decision on participation 

is to be adopted by the Croatian government. If participation in an IMF voluntary financial initiative 

is  the  subject  of  an  international  agreement,  the  decision  on  participation  is  to  be  adopted  in 
accordance with the  Law regulating the entry into and execution of international agreements14. 

The explanatory memorandum to the draft decision notes that, on account of the prohibition on 

monetary financing, Union national central banks (NCBs), including HNB, are only allowed to grant 

loans to the IMF and its trusts provided the resulting claims have all the characteristics of reserve 
assets.  Donations  or  grants  can  only  be  financed  from  budgetary  funds.  Prior  approval  of  the 

Ministry of Finance is required for a decision on Croatia’s participation in IMF voluntary financial 

initiatives for which funds are provided by HNB. The reasons for this are that these contributions 

can be characterised as development assistance given by Croatia, and that the State undertakes 

to reimburse possible losses in the event of credit and interest risk materialising in respect of these 

loans and to reimburse transaction costs in relation to them. 

1.5  The draft decision provides that  any principal  and interest losses,  as well  as transaction costs, 

arising from Croatia’s participation in the implementation of the IMF’s Financial Transactions Plan 

and in the IMF’s voluntary financial initiatives for which the resources are provided by HNB, are to 
be paid to HNB from the State budget15.  

1.6  Finally, the draft decision authorises the Ministry of Finance to enter into an agreement with HNB, 

which is to be concluded within 30 days of the entry into force of the draft decision and which is to 
detail  the  manner  of  conducting  operations  and  settling  liabilities  to  be  followed16.  The  draft 

decision further provides that HNB must, within 30 days of the entry into force of the draft decision, 

transfer the funds that the Ministry of Finance has paid up to that date for Croatia’s quota in the 

IMF,  at  the  date  of  entry  into  force  of  the  draft  decision  recorded  in  HNB’s  balance  sheet  as 

liabilities towards the Ministry of Finance in relation to membership of the IMF. The funds are to 
be deposited in a special deposit account of the Ministry with HNB17.  

2. 

Monetary financing prohibition 

2.1  When carrying out its tasks under the draft decision HNB must comply with Article 123(1) of the 

Treaty, which prohibits overdraft facilities or any other type of credit facility with the NCBs in favour 

of  central  governments.  This  prohibition  is  subject  to  certain  exemptions  contained  in  Council 

14  

15  
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Zakon o sklapanju i izvršavanju međunarodnih ugovora (“Narodne novine”, br. 28/96). See Article 8 of the draft 
decision. 
See Article 9 of the draft decision. 

See Articles 11 and 12 of the draft decision. 
See Article 12(2) of the draft decision. 

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Regulation (EC) No 3603/9318. In particular, Article 7 of Regulation (EC) No 3603/93 provides that 

the financing by NCBs of obligations falling upon the public sector vis-à-vis the IMF is not regarded 

as  a  credit  facility  within  the  meaning  of  Article  123  of  the  Treaty.  The  fourteenth  recital  of 

Regulation  (EC)  No 3603/93  clarifies  the  rationale  behind  this  exemption,  stating  that  it  is 

appropriate to authorise the financing by the NCBs of obligations falling upon the public sector vis-

à-vis the IMF because such financing ‘results in foreign claims which have all the characteristics 

of reserve assets’. Therefore, the exemption in Article 7 of Regulation (EC) No 3603/93 must be 
interpreted in line with this rationale19.  

2.2  Against  this  backdrop,  the  ECB  welcomes  that  HNB’s  financing  obligations  under  the  draft 

decision,  read  in  line  with  the  explanatory  memorandum,  including  as  concerns  Croatia’s 

participation in the IMF’s voluntary financial initiatives, are compatible with the limitations imposed 

by  the  monetary  financing  prohibition  as  specified  in  Regulation  (EC)  No  3603/93.  Concretely, 

under the draft decision, HNB may provide loans to the IMF and any IMF-administered trusts that 

result in foreign claims having all the characteristics of reserve assets, and any donations or grants 

to the IMF or any IMF-administered trusts may only be financed out of the State’s budgetary funds. 

2.3 

In addition, the ECB considers that the transfer to the Ministry of Finance’s special deposit account 

with HNB of the funds paid by the former for Croatia’s quota at the IMF, as referred to in paragraph 

1.6, falls within the scope of the exemption in Article 7 of Regulation (EC) No 3603/93 and therefore 

does not infringe the monetary financing prohibition20. 

3. 

Central bank independence 

3.1  Under the draft decision HNB is responsible for paying any future increases in Croatia’s IMF quota, 

for carrying out SDR trading in the implementation of the IMF’s Financial Transactions Plan from 

its own resources, and for fulfilling most of Croatia’s financial obligations vis-à-vis the IMF. HNB 

may  also  be  responsible  for  the  provision  of  resources  in  the  form  of  a  loan  for  Croatia’s 

participation  in  an  IMF  voluntary  financial  initiative.  This  is  consistent  with  HNB’s  overall 

responsibility to manage Croatia’s international reserves21, as HNB’s financing results in foreign 

claims that have all the characteristics of reserve assets. The ECB understands that in this context 

and in line with the principle of central bank independence enshrined in Article 130 of the Treaty, 

HNB  should  take  decisions  regarding  the  management  of  HNB’s  IMF-related  international 

reserves in a fully independent manner. 

3.2  From a financial independence perspective, pursuant to which Member States may not put their 

NCBs  in  a  position  where  they  have  insufficient  financial  resources  to  carry  out  their  ESCB  or 

Eurosystem-related tasks,  the ECB welcomes that any principal and interest losses, as well as 

transaction costs, arising from Croatia’s participation in the implementation of the IMF’s Financial 

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21  

Council Regulation (EC) 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 Treaty (OJ L 332, 31.12.1993, p. 1). 
See, for example, Opinions CON/2021/39, CON/2022/46 and CON/2023/23. All ECB opinions are published on 
EUR-Lex. 

See, in the same vein, paragraph 3 of Opinion CON/2017/53. 
See Article 100 of the Law on HNB. 

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Transactions Plan and the IMF’s voluntary financial initiatives for which the resources are provided 

by HNB, are to be paid to HNB from the State budget. However, the ECB notes that currently this 

reimbursement arrangement under the draft decision does not explicitly cover exchange rate risk 

on moneys advanced by HNB. 

This opinion will be published on EUR-Lex.  

Done in Frankfurt am Main, 26 February 2024. 

[signed] 

The President of the ECB 

Christine LAGARDE 

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