Commission report to the budgetary authority on guarantees covered by the general budget - Situation at 31 December 1997
COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 27. 04. 1998 COM(1998) 252 final COMMISSION REPORT TO THE BUDGETARY AUTHORITY ON GUARANTEES COVERED BY THE GENERAL BUDGET - SITUATION AT 31 DECEMBER 1997 - 2- This report describes the situation as regards budget guarantees at the date of the report. It is in response to the statement made by the Commission, when the vote was taken on supplementary and amending budget No 1/91, that it would report to the budgetary authority twice a year on budget guarantees and the corresponding risks. This report is presented in accordance with Article 134 of the Financial Regulation applicable to the general budget of the European Communities. The Commission has already presented thirteen reports to the budgetary authority. The report is in two parts with an annex: 1) Events since the last report, the risk situation and the activation of budget guarantees. 2) Evaluation of potential risks. Economic and financial situation of non-Community countries benefiting from the most important operations. 3- CONTENTS PART ONE: EVENTS SINCE THE REPORT AT 30 JUNE 1997, THE RISK SITUATION AND ACTIVATION OF BUDGET GUARANTEES I. INTRODUCTION: TYPES OF OPERATION LA OPERATIONS WITH MACROECONOMIC OBJECTIVES LB OPERATIONS WITH MICROECONOMIC OBJECTIVES II. EVENTS SINCE THE REPORT AT 30 JUNE 1997 II. A GEORGIA, ARMENIA, TAJIKISTAN II. B UKRAINE ILC LOANS GRANTED BY THE EUROPEAN INVESTMENT BANK FOR INVESTMENT PROJECTS IN THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA III. RISK SITUATION III. A AMOUNT OUTSTANDING AT 31 DECEMBER 1997 (TABLE 1) III. B MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET: OPERATIONS DISBURSED AT 31 DECEMBER 1997 (SEE TABLE 2) III. C MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE COMMUNITY BUDGET (SEE TABLE 3) IV. ACTIVATION OF BUDGET GUARANTEES IV. A PAYMENTS FROM CASH RESOURCES IV. B ACTIVATION OF THE GUARANTEE FUND IV. C LATE REPAYMENTS IV. D SITUATION AS REGARDS UNPAID DEBTS AT 31 DECEMBER 1997 V. ANALYSIS OF THE COMMUNITY'S THEORETICAL LENDING AND GUARANTEE CAPACITY IN RESPECT OF NON-MEMBER COUNTRDZS VI. RELATIVE SOLIDITY OF THE GUARANTEE FUND PART TWO: EVALUATION OF POTENTIAL RISKS: ECONOMIC AND FINANCIAL SITUATION OF THE NON-MEMBER COUNTRIES BENEFITING FROM THE MOST IMPORTANT LOAN OPERATIONS I. INTRODUCTION II. CENTRAL AND EAST EUROPEAN COUNTRIES III. NEWLY INDEPENDENT STATES IV. MEDITERRANEAN COUNTRIES 5 5 5 5 5 5 6 6 6 7 8 8 13 13 13 13 14 14 15 17 17 17 22 25 - 4- ANNEX I. EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED BY THE COMMUNITY BUDGET LA TABLES 1 TO 3 I. A. J Authorised ceiling (Table 1) Î. A. 2 Capital outstanding ( Table I) I. A. 3 Annual risk (Tables 2 and 3) LB LOAN OPERATIONS COVERED BY A BUDGET GUARANTEE I. C EXPECTED SIGNATURE AND DISBURSEMENT OF EIB LOANS I. D PAYMENT OF THE BUDGET GUARANTEE I. D. I Borrowing/lending operations I. D. 2 Guarantees given to third parties 28 28 28 28 29 30 35 35 35 36 II. METHODOLOGICAL NOTE ON THE ANALYSIS OF THE COMMUNITY'S ESTIMATED LENDING CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES OVER THE PERIOD 1997-99 UNDER THE GUARANTEE FUND MECHANISM (TABLE 4) II. A RESERVE FOR LOAN GUARANTEES TO NON-MEMBER COUNTRIES II. B BASES FOR THE CALCULATION OF THE PROVISIONING OF THE GUARANTEE FUND II. C BASIS FOR THE PROVISIONING OF THE FUND IN THE EVENT OF A PART GUARANTEE II. D PROVISIONING OF THE GUARANTEE FUND ILE MARGIN REMAINING IN THE GUARANTEE RESERVE II. F RESIDUAL LENDING CAPACITY n i. TABLES: COUNTRY-RISK INDICATORS 37 37 37 38 38 39 39 40 5- PART ONE: EVENTS SINCE THE REPORT AT 30 JUNE 1997, THE RISK SITUATION AND ACTIVATION OF BUDGET GUARANTEES I. INTRODUCTION: TYPES OF OPERATION The risks covered by the Community budget derive from a variety of lending and guarantee operations which can be divided into two categories: loans with macroeconomic objectives and loans with microeconomic objectives. LA Operations with macroeconomic objectives The first of these are the balance of payments loans for Member States or non-member countries, normally carrying strict economic conditions and undertakings. This category includes the loan of ECU 1 250 million to finance imports of agricultural products and foodstuffs into the former Soviet Union, since the risk involved in this operation depends to a large extent on macroeconomic and political developments in the recipient countries. I. B Operations with microeconomic objectives These are loans to finance projects which are usually repaid over the long term from fonds which these projects are expected to generate; as a rule, they are granted to companies, financial institutions or non-member countries and, in addition to the Community guarantee, are covered by the usual guarantees demanded by banks. This covers Euratom and NCI loans in Member States and the Euratom and EEB Joans outside the Community (Mediterranean, Central and Eastern Europe, certain non-member countries - developing countries of Asia and Latin America and South Africa). II. EVENTS SINCE THE REPORT AT 30 JUNE 1997 The main events in the second half of 1997 were as follows: II. A Georgia, Armenia, Tajikistan Georgia, Armenia and Tajikistan were severely hit by the economic collapse resulting from the breaking up of the command economy and the disintegration of the Soviet Union. Owing to the exceptionally harsh conditions presently faced by Armenia, Georgia and Tajikistan, the Commission considered that exceptional assistance was required to support the implementation of the stabilisation and structural reform programmes agreed with the IMF. On 3 February 1997 the Commission therefore presented a proposal for a Council Decision providing exceptional financial assistance of ECU 170 million in the form of a loan with a maximum maturity of fifteen years and of ECU 50 million in the form of grants to Armenia, Georgia and, if appropriate, Tajikistan. On 17 November 1997 the Council decided to grant exceptional financial assistance of ECU 170 million in the form of long-term loans and of ECU 95 million in the form of grants to Armenia and Georgia. II. B Ukraine As part of an overall aid programme for Ukraine, on 12 November 1997 the Commission presented a proposal for a Council Decision providing additional macro-financial assistance of ECU 150 million to Ukraine in the form of a loan with a maximum maturity often years. The Council had not adopted any formal decision at the time this report was drawn up. II. C Loans granted by the European Investment Bank for investment projects in the former Yugoslav Republic of Macedonia On 13 January 1998 the Commission presented a proposal for a Council Decision granting a Community guarantee in respect of loans for investment projects in the former Yugoslav Republic of Macedonia. This guarantee is limited to a maximum of ECU 150 million in the period up to 31 December 2000. The Council had not adopted any formal decision at the time this report was drawn up. III. RISK SITUATION There are two possible methods for evaluating the risks borne by the Community budget: - - the method, often used by bankers, of the total amount of capital outstanding for the operations concerned on a given date; the more budgetary approach of calculating the maximum amount which the Community could have to pay out in each financial year. The second approach itself has been applied in two different ways: - by reference only to actual disbursements at 31 December 1997, giving the minimum level of risk to the Community assuming that there are no early repayments (see Table 2 below); - on a more forward-looking basis, by reference to all the operations decided by the Council or proposed by the Commission in order to estimate the impact on future budgets, giving the maximum risk borne by the Community assuming that the Commission's proposals are accepted (see Table 3 below). The latter exercise gives some idea about the future level of risks connected with the proposals made. However, a number of assumptions have to be made about dates of -7 disbursement and terms of repayment (details are given in the annex) as well as interest1 and exchange rates. 2 The results are shown in Tables 1 to 3 which assess the risk relating to countries inside the Community and countries outside the Community. The overall figures quoted cover risks of different types; loans to one country in the case of macrofmancial assistance and loans for projects guaranteed by the borrowers in the case of NCI and EEB operations, for example. The following analysis distinguishes between total risk, the risk in respect of Member States and the risk in respect of non-member countries. III. A Amount outstanding at 31 December 1997 (Table 1) total risk at 31 December 1997 came to ECU 12171 million as against The ECU 11 941 million at 30 June 1997, an increase of 2%. 3 The following table shows the operations which have had an effect on the amount outstanding since the last report. Amount outstanding at 30 June 1997 Loan repayments Euratom NCI Financial assistance Former Soviet Union EIB Exchange rate differences between ecu and other currencies Loans disbursed Financial assistance EIB Amount outstanding at 31 December 1997 11 941. 00 -1. 30 -110. 70 -825. 00 -115. 33 -150. 00 + 6. 33 +195. 00 +1231. 00 12 171. 00 1 An average interest rate of 10% is assumed for EIB loans. The average interest rate assumed for borrowing and lending operations is 4. 4%. 2 The exchange rate used for loans in currencies other than the ecu are those of 31 December 1997. 3 In the case of loans in currencies other than the ecu, part of the change over the past six months is due to exchange rate differences. 8- The capital outstanding in respect of operations ECU 4 497 million at 31 December 1997, a fall of 3. 2% compared with 30 June 1997. the Member States was in This fall is mainly due to the repayment of ECU 112 million in Euratom and NCI loans The amount outstanding from other operations in the Member States has remained stable. The capital outstanding from non-member countries at 31 December 1997 was ECU 7 674 million, an increase of 5. 2% compared with 30 June 1997. III. B Maximum annual risk borne by the Community budget: operations disbursed at 31 December 1997 (see Table 2) The total annual risk, which comes to ECU 3 289 million in 1998, will increase to around ECU 3 682 million in 2000, although the situation in 1999 is special in that there will be no capital repayments for the balance-of-payments loans to the Member States and in that capital repayments on loans to Hungary, the Czech and Slovak Republics and the ECU 290 million loan to Bulgaria end in 1998. - The risk for 1998 in respect of the Member States comes to ECU 1 967 million. This figure changes in line with the capital repayments on balance-of-payment loans to Greece and Italy. The risk will reach ECU 2 734 million in 2000 when Italy's last repayment is due. - The risk for 1998 in respect of non-member countries comes to ECU 1 323 million as the following capital payments fall due: - ECU 100 million from Hungary; - ECU 123 million from the Czech Republic; - ECU 62 million from the Slovak Republic; - ECU 150 million from Bulgaria; - ECU 185 million from Romania; - ECU 288 million from EIB loans. From 1999 the amount of capital repayments on borrowing and lending operations will fall. The risk in respect of non-member countries will then average ECU 880 million over the period 1999-2005. III. C Maximum theoretical annual risk borne by the Community budget (see Table 3) This risk comes to ECU 3 400 million in 1998 and will increase to ECU 4 266 million in 2000, before stabilising at an average of ECU 2 550 million between 2001 and 2005. The risk in 1999 will total ECU 1 544 million. -9 The trend in the maximum risk in respect of the Member States is much the same as in Table 2 up to 2000 when the risk will amount to ECU 2 734 million. The risk in respect of non-member countries will rise from ECU 1 433 million in 1998 to ECU 1 263 million in 1999. The risk will increase by an average of 20% a year from 2000 until 2005. 10 IABLEJ. CAPITAL OUTSTANDING IN RESPECT OF OPERATIONS DISBURSED (ECU million) Operation ceiling outstanding outstanding be disbursed Authorised Capital Capital Remainder to 30. 06. 97 31. 12. 97 31. 12. 97 MEMBER STATES A. Balance of payments 1. Greece 2. Italy B. Others 3. Euratom 4. NIC and NCI earthquake 5. EIB Mediterranean Spain, Greece, Portugal. 14000 4000 6830 1500 500 3455 120 327 246 500 3448 118 219 212 MEMBER STATES - TOTAL 26330 4648 4497 THIRD COUNTRIES A. Financial assistance 1. Hungary 2. Czech Republic 3. Slovak Republic 4. Bulgaria 5. Romania 6. Algeria 7. Israel (*) 8. FYROM 9. Baltic States 10. Moldova 11. Ukraine 12. Belarus 13. Georgia, Armenia 14. Former Soviet Union (**) B. Other 15. EIB Mediterranean 16. EIB Central and Eastern Europ 17. EIB Asia, Latin America 18. EIB South Africa 180 250 125 650 580 600 160 40 220 60 285 55 170 1250 8672 8220 1925 675 THIRD COUNTRIES - TOTAL 24117 180 250 125 400 510 500 160 0 135 60 185 30 0 331 2541 1531 301 56 7294 100 123 62 260 580 250 0 25 130 60 285 30 0 216 3150 1919 385 100 0 0 0 0 0 0 0 0 0 250 0 100 0 15 85 0 0 25 170 0 2513 4052 653 199 7674 8062 GRAND TOTAL 50447 11941 12171 8062 (*) Loan repaid in full at 31. 12. 1997. (**) The ECU 216 million outstanding corresponds to the principal due but not paid at 31. 12. 1997 ANNEX TQ TABLE 1 SITUATION IN RESPECT OF EIB OPERATIONS (31. 12. 97) Operations authorised available minus disbursed outstanding Credit line Loans made Amounts Amounts Mediterranean Member States Third countries, old mandates Mediterranean Protocols Central and Eastern Europe I Central and Eastern Europe II Asia, Latin America I Asia, Latin America II South Africa Third countries, new mandates!*): Mediterranean Central and Eastern Europe Asia, Latin America South Africa Total (*) Council Decision of 14 Apnl 1997 1500 6362 1700 3000 750 275 300 2310 3520 900 375 20992 cancellations at 31. 12. 97 1465 1590 212 5736 1628 3000 657 153 300 934 1466 215 0 15553 4251 1255 762 324 78 100 114 30 0 0 3036 1128 761 307 78 100 114 30 0 0 8503 5765 NB: As the loans are disbursed in national currencies, the loan ceiling may be exceeded when the amounts disbursed up to the date ot the report are converted into ecus. IABJ£2 MAXIMUM ANNUAL RISK BORNE BY THE COMMUNITY BUDGET (Estimate in ECU million based on all operations disbursed at 31. 12. 97) 1998 1999 2000 2001 2002 2003 2004 2005 TOTAL MEMBER STATES CAPITAL A. Balance of payments 1. Greece 2. Italy B. Structural loans 3. Euratom 4. NCI and NCI EQ 5. EIB Med. Old. Prot. Sp. Gr, Port Capital - subtotal INTEREST A. Balance of payments 1. Greece 2. Italy B. Structural loans 3. Euratom 4. NCI and NCI EQ 5. EIB Med. Old. Prot. Sp. Gr, Port 500 981 91 50 45 1667 48 209 10 16 18 2467 12 40 38 2557 15 40 40 96 155 155 3 13 14 1 10 11 71 21 92 7 7 Interest - subtotal 300 184 177 15 500 3448 118 219 211 4496 48 519 13 51 62 693 8 8 1 1 23 23 22 22 2 6 7 2 3 5 17 15 32 2 2 4 MEMBER STATES - TOTAL 1967 280 2734 107 30 27 36 8 5189 NON-MEMBER COUNTRIES CAPITAL A. Financial assistance 6. Hungary 7. Czech Republic 8. Slovak Republic 9. Bulgaria 10. Romania 11. Algeria 12. FYROM 13. Baltic States 14. Moldova 15. Ukraine 16. Belarus B. Guarantees 17. EIB Mediterranean 18. ElBC+EEur. 19. EIB Asia Latin America 20. EIB South Africa 100 123 62 150 185 190 80 5 5 174 92 22 200 134 27 95 5 215 172 34 70 150 9 17 6 233 183 40 34 55 100 25 12 37 6 243 182 43 19 40 12 57 6 250 175 50 70 12 57 6 236 172 22 7 57 6 226 164 23 100 123 62 260 580 250 0 130 57 225 30 1777 1274 260 53 Capital - subtotal 912 556 601 742 721 590 575 483 5180 INTEREST A. Financial assistance 6. Hungary 7. Czech Republic 8. Slovak Republic 9. Bulgaria 10. Romania 11. Algeria 12. FYROM 13. Baltic States 14. Moldova 15. Ukraine 16. Belarus B. Guarantees 17. EIB Mediterranean 18. ElBC+EEur. 19. EIB Asia Latin America 20. EIB South Africa 2 3 1 8 22 16 1 7 3 13 2 185 115 18 15 5 14 16 1 7 3 13 2 178 109 15 15 5 8 16 1 6 3 13 2 164 101 15 15 5 6 16 1 1 3 13 2 149 90 14 15 2 6 5 1 1 2 12 1 135 79 12 9 2 3 1 2 11 1 119 68 11 7 3 1 1 8 1 104 57 10 7 2 3 1 27 62 67 9 21 18 88 13 1124 666 104 88 1 1 5 1 90 47 9 7 Interest - subtotal 410 378 347 315 265 225 192 160 2292 NON-MEMBER COUNTRIES - TOTAL 1323 933 948 1056 986 815 767 643 7472 GRAND TOTAL 3289 1213 3682 1163 1016 842 803 652 12661 (Eastern Europe) (Other non-member countries) 892 430 482 451 490 459 405 651 419 566 377 438 388 380 288 356 3741 3731 12 TABLE 3 MAXIMUM THEORETICAL ANNUAL RISK BORNE BY THE COMMUNITY BUDGET (Estimation in ECU million based on all operations disbursed, adopted and proposed by the Commission) 1998 1999 2000 2001 2002 2003 2004 2005 TOTAL MEMBER STATES CAPITAL A. Balance of payments 1. Greece 2. Italy B. Structural loans 3. Euratom and NCI 4. EIB Spain, Greece, Portugal Capital - subtotal INTEREST A. Balance of payments 1. Greece 2. Italy B. Structural loans 3. Euratom and NCI 4. EIB. Spain, Greece, Portugal 500 981 141 45 1667 48 209 26 18 2467 52 38 2557 55 40 96 155 155 15 14 11 11 Interest - subtotal 300 184 177 71 21 92 7 7 15 23 23 22 22 2 6 7 2 3 5 17 15 32 2 2 4 500 3448 337 211 4496 48 519 65 62 693 8 8 1 1 MEMBER STATES - TOTAL 1967 280 2734 107 30 27 36 8 5189 THIRD COUNTRIES CAPITAL A. Financial assistance 5. Hungary 6. Czech Republic 7. Slovak Republic 8. Bulgaria 9. Roumania 10. Algeria 11. FYROM 12. Baltic States 13. Moldova 14. Ukraine 15. Belarus 16. Georgia 17. Armenia 18. Euratom C+E Europe B. Guarantees 19. EIB Mediterranean 20. EIB C+E Europe 21. EIB Asia, Latin America 22. EIB South Africa 100 123 62 150 185 190 80 5 5 95 5 174 92 22 200 134 27 215 172 34 Capital - subtotal 913 556 601 INTEREST A. Financial assistance 5. Hungary 6. Czech Republic 7. Slovak Republic 8. Bulgaria 9. Romania 10. Algeria 11. FYROM 12. Baltic States 13. Moldova 14. Ukraine 15. Belarus 16. Georgia 17. Armenia 18. Euratom C+E Europe B. Guarantees 19. EIB Mediterranean 20. EIB C+E Europe 21. EIB Asia. Latin America 22. EIB South Africa Interest - subtotal 2 3 1 13 22 21 2 11 3 16 3 5 3 1 205 166 26 18 520 15 14 21 2 11 3 19 3 5 3 5 272 267 43 25 15 8 21 2 10 3 19 3 5 3 14 341 385 68 35 55 100 25 12 37 6 352 360 74 31 12 37 6 1 436 470 107 23 70 12 72 11 5 509 596 110 35 31 100 17 7 87 11 14 537 631 127 42 100 123 62 251 580 350 0 147 57 250 40 0 0 20 2706 2722 554 171 1052 1092 1420 1604 8133 12 6 14 2 5 2 18 2 5 3 49 469 587 123 47 12 3 9 2 5 2 17 2 5 3 69 476 593 135 48 12 3 9 2 5 1 14 2 5 3 86 457 569 136 47 11 4 2 5 1 11 2 5 3 98 362 519 128 42 2 3 1 105 62 120 16 57 18 133 20 39 21 352 3001 3599 758 306 70 150 9 17 6 283 267 53 40 895 15 6 21 2 5 3 19 3 5 3 30 419 513 99 44 707 931 1186 1343 1380 1350 1192 8613 THIRD COUNTRIES - TOTAL 1433 1263 1532 2081 2395 2472 2771 2796 16746 GRAND TOTAL 3400 1544 4266 2188 2426 2500 2807 2805 21935 (Eastern Europe) (other non-member countries) 965 468 673 590 816 716 970 1111 1183 1212 1236 1236 1466 1305 1452 1344 8764 7982 13 IV. ACTIVATION OF BUDGET GUARANTEES IV. A Payments from cash resources The Commission draws on its cash resources under Article 12 of Council Regulation No 1552/89 of 29 May 1989 implementing Decision 88/376/EEC, Euratom on the system of the Communities' own resources to avoid delays and resulting costs in servicing its borrowing operations when a debtor is late in paying. IV. B Activation of the Guarantee Fund In the event of late payment by a recipient of a loan granted or guaranteed by the Community, the Guarantee Fund is called on to cover the default within three months of the date on which is payment is due. Penalty interest for the time between the date on which cash resources are made available and the date of activation of the Fund is drawn from the Fund and repaid to the cash resources. In the last six months the Fund has been called on to honour guarantees for the following debtor: "' ', ,L ', " T ," • '— ' •— ,", M! • — — I. -. — I. • ! I ! I ! ! • • • ,. • • •„. ,I I IL. ,U • L I. J. 1. 1. 1 •. !. _ _. I I. 1 U I I. I L II — — P — • — ^— •• • , l| — ^- Non-member country Former Yugoslavia Date 16. 10. 97 Amount (principal + interest) 6134 806. 85 IV. C Late repayments During the period covered by this report, the following non-member countries repaid debts on which they had defaulted and for which the Guarantee Fund had already been activated. The amounts recovered are repaid to the Fund under Article 2 of Council Regulation (EC, Euratom) No 2728/94 of 31 October 1994 establishing a Guarantee Fund for external action. The former Yugoslav Republic of Macedonia (FYROM) has repaid all its arrears of ECU 19. 7 million. Non-member country Repayment date Amount (principal + interest + Armenia FYROM FYROM Total 28. 11. 97 3. 11. 97 23. 12. 97 default interest) 8 000 000. 00 16 509 236. 82 3195 400. 83 27 704 637. 65 - 1 4- IV. D Situation as regards unpaid debts at 31 December 1997 The following amounts had not been paid at 31 December 1997: Non-member country Amount (principal + interest + default interest) Tajikistan Georgia Armenia Former Yugoslavia Total 72130 543. 72 127 912 418. 30 48 510 587. 09 67 207 757. 63 315 761306. 74 V. ANALYSIS OF THE COMMUNITY'S THEORETICAL LENDING AND IN RESPECT OF NON-MEMBER GUARANTEE CAPACITY. COUNTRIES In practice, the Guarantee Fund and reserve facility limits the Community's lending and guarantee capacity to non-member countries since the appropriations available for provisioning the Fund whenever a new lending decision is adopted (or any annual tranche in the case of guarantees for multiannual operations) are limited by the amount entered for the guarantee reserve in the financial perspective. 4 At any given time, lending capacity corresponds to the margin remaining in the guarantee reserve. This margin is equal to the difference between the reserve and the estimated amount needed to provision the Guarantee Fund for operations which have already been adopted and which are in preparation. Table 4 contains an estimate of the Community's lending capacity in respect of non- member countries over the period 1997-99 compatible with the Guarantee Fund mechanism. The method of calculation and references to legal texts are set out in greater detail in the Annex. On the basis of the decisions adopted by the Council and decisions proposed and in preparation (see Table 4), ECU 259 million is expected to be used from the guarantee reserve in 1998, leaving ECU 79 million available at the end of the year. Outstanding lending and loan guarantee operations for non-member countries plus unpaid interest due totalled ECU 7 961 million at 31 December 1997. The ratio between the Fund's resources and outstanding capital liabilities within the meaning of the Regulation establishing the Fund was 10. 83%. Since this is higher than the target amount of 10%, the surplus had to be "paid back to a special heading in the 4 ECU 300 million at 1992 prices. -15 statement of revenue in the general budget of the Communities", as provided for in the Regulation. The surplus came to ECU 66 million at the end of the 1997 financial year. The Guarantee Fund could amount to around ECU 1 100 million at the end of 1998 assuming: - a transfer of ECU 259 million from the reserve in 1998; - no further defaults requiring activation of the Fund; - no late repayment of arrears by defaulting countries; - revenue of around ECU 40 million on investments from the Fund's assets. If account is taken of the effect on the guarantee reserve of the provisioning of the Fund in respect of loans already decided and loans proposed and in preparation for the period 1998-99, the annual capacity available for loans varies: - from ECU 516 million to ECU 568 million for loans with a 100% guarantee under the Community budget; - from ECU 688 million to ECU 757 million for loans with a 70% guarantee (in accordance with the contract of guarantee signed between the Community and the EIB on 25 and 29 July 1997). VI. RELATIVE SOLIDITY OF THE GUARANTEE FUND The ratio between the amount in the Fund at 31 December 1997 (ECU 862 million) and the maximum annual risk for loans to non-member countries (defined as the total amount falling due) shown for 1998 in Table 3 (ECU 1 433 million) comes to 60%. -16 TABLE 4 THE COMMUNITTS THEORETICAL ESTIMATED LENDING & GUARANTEE CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES OVER THE PERIOD 1997-1999 under the Guarantee Fund mechanism(*) ECU million Outturn 31. 12. 1997 Forecast Forecast 1998 1999 Reserve for loan guarantees to non-member countries 329 338 346 Bases for the calculation of the provisioning of the Guarantee Fund - EIB loans - Mediterranean (a) - Countries of Central and Eastern Europe (b) - Asia, Latin America (c) - South Africa (d) - EIB loans • Total - Euratom loans - Macrofinancial assistance 553 850,5 60 125 1588,5 931,6 665,7 190,55 17,5 1805,35 693,25 710,5 322 105 1830,75 0 305 0 50 0 125 Provisioning of the Guarantee Fund 286 259 274 Margin remaining in the guarantee reserve 43 79 72 Residual lending capacity (balance of payments loans, EIB loans and Euratom loans) - Maximum if used in full for 100% guarantee (e. g. BP loans) - Maximum if used in full for EIB loans (70% guarantee) 286 409 568 811 516 737 (*) The provisioning rate for 1998 and 1999 is 14%, the Fund having reached its target amount at the end of 1997. (see Council recommendations of 2 December 1996 and 27 January 1997) Description of the loans for which the Fund will be provisioned in the period 1997-1999: • EIB a. Mediterranean: - loans decided: 1994-96: ECU 115 million under the Fourth Financial Protocol with Syria (overall 75% guarantee). 31. 1. 1997-31. 1. 2000: ECU 2 310 million for the renewal of the EIB mandate, covered by overall 70% guarantee - loans proposed or in preparation: 1998-2002: ECU 750 million for financial cooperation with Turkey. 1998-2001: ECU 230 million for financial cooperation with Croatia. 1998-2000: ECU 150 million for financial cooperation with the Former Yugoslav Republic of Macedonia (FYROM). b. Central and Eastern Europe: - loans decided: 31. 1. 1997-31. 1. 2000: ECU 3 520 million for the renewal of the EIB mandate, covered by overall 70% guarantee. c. Asia and Latin America: - loans decided: 1993-1996: ECU 750 million. Loans of ECU 54. 6 million cancelled. 1996: ECU 275 million (100% guarantee). ECU 122 million still to be signed when the decision of 14. 4. 1997 was adopted is now covered by the overall 70% guarantee. 31. 1. 1997-31. 1. 2000: ECU 900 million for renewal of the EIB mandate, covered by overall 70% guarantee. d. South Africa: - loans decided: 1. 7. 1997-1. 7. 2000: ECU 375 million for the renewal of the EIB mandate, covered by overall 70% guarantee. - Euratom No loans proposed. Macrofinancial assistance - loans decided: 1997: loans of ECU 25 million to Belarus released and carried forward to 1999; loans of ECU 130 million to Slovakia cancelled. 1998: loans of ECU 100 million to Algeria released in 1998 and carried forward to 1999; - loans proposed or in preparation: 1998: ECU 150 million in loans to Ukraine. 17 PART TWO EVALUATION OF POTENTIAL RISKS: ECONOMIC AND FINANCIAL SITUATION OF THE NON-MEMBER COUNTRIES BENEFITING FROM THE MOST IMPORTANT LOAN OPERATIONS I. INTRODUCTION The figures given in the previous parts provide information on the quantitative aspects of the risks borne by the general budget. However, these data should be weighted in accordance with aspects relating to the quality of the risk, which depend on the type of operation and the standing of the borrower. Recent events which may influence the portfolio country risk are analysed below. The country risk evaluation presented in this chapter provides a set of country risk indicators for all countries that have been recipients of macro-financial assistance in Central and Eastern Europe, the NIS and the Mediterranean area, in the form of a full- page table per country. To complement this, textual analysis is provided for those countries where significant new information influencing the risk evaluation has become available since the previous report covering the first six months of 1997. Brief textual analysis is also provided for the countries which have still to repay loans outstanding in the context of the ECU 1250 million commercial credits made available to the then Soviet Union in 1991. The evaluation in this section does not deal with other regions than those mentioned, mainly because Community exposure elsewhere (notably through guarantees of EIB lending) represents only a small fraction of total exposure (less than 3 %) and is also well diversified among countries. Israel will no longer be included in the next report, as the country repaid in December 1997 the ECU 160 million loan granted by the Community in 1991. II. CENTRAL AND EAST EUROPEAN COUNTRIES BULGARIA Bulgaria's prospects continue to improve. The stand-by arrangement reached in Spring 1997 with the International Monetary Fund remains on track. Foreign reserves are more than adequate to cover the central bank's liabilities under the currency board arrangement introduced on 1 July. The 1997 budget deficit was around 4% of GDP, some 2 percentage points smaller than the target agreed with the IMF. This is in part due to lower than expected interest rates, which reflect both successes in macroeconomic stabilisation and depressed demand for credit. Structural reform has speeded up. Prices of all but a handful of basic foodstuffs have been liberalised. Widespread privatisation of large enterprises is under way, and the 18 pace should accelerate in 1998. One bank has been privatised, and others may be sold soon. Foreign direct investment inflows in the first half of 1997 were substantially greater than in the full years 1995 and 1996 combined. Notwithstanding the progress which Bulgaria has made, its external finances are likely to remain somewhat fragile for some years to come: service on foreign debt continues to be substantial, at close to US$1 billion per year. Important to note in this context is the ECU 140 million repayment made in December 1997 by Bulgaria to the Community, out of the ECU 400 million disbursed so far, in the framework of the Community macro-financial assistance to this country, as well as the July 1997 Council Decision to provide to Bulgaria new macro-financial assistance for a maximum amount of up to ECU 250 million. A sustained reform effort will ensure continued support from the IMF and other international institutions, and attract larger flows of foreign direct investment. CZECH REPUBLIC Since the last report, the situation in the Czech Republic has remained unsettled. In the second half of 1997, growth slowed further to only 0. 8% year-on-year. After poor output data for the first six months of the year, the Czech Republic suffered severe flooding over the summer, which dented hopes of a recovery of output in the third quarter. However, although many large industrial firms were forced to stop production for a few weeks, output in the third quarter, though not buoyant, was higher than for the same period of 1996. This slight improvement in the trend of industrial output continued into the final quarter, when some signs of a recovery appeared, led by manufacturing. Data on the construction sector, on the other hand, are not so encouraging: the sector is suffering badly from government investment expenditure cuts made in fiscal austerity packages earlier in the year. On the external side, the continued poor growth combined with the devaluation of the currency in May, resulted in a marked improvement in the evolution of the trade balance in the second half of the year. Despite the improvement of the trade balance and the current account, the currency remained unsteady. The main source of continuing currency turbulence has been the political instability, which culminated with the resignation of the Czech government at the end of November. The political uncertainty is due to continue until the country has fresh elections which are likely to be in mid- 1998 at the earliest. In December 1997, the Czech Republic repaid some ECU 127 million to the Community, out of the ECU 250 million granted by the Community in the context of its macro-financial assistance to this country. ESTONIA Despite recent financial turbulence, Estonia's risk assessment continues to be among the best in the region. The economy is expanding very rapidly (real GDP growth reached 11. 7% on a year-on-year basis in the first half of 1997), exports are growing strongly (during the first ten months of 1997, they were 38% higher, in dollar terms, than in the corresponding period of 1996) and the country recorded a budget surplus in 1997. 19 Foreign debt remains small as a proportion of GDP. In September, the country's good economic performance was acknowledged by two favourable sovereign risk ratings. Moody's gave Estonia a Baal, investment grade, long-term foreign currency rating, and ICBA gave a BBB, investment grade, long-term foreign currency rating. Moody's rating is the highest rating given to a country of the former Soviet Union and the same as that of the Czech Republic. The multiplication of overheating signs, in particular the growth of the current account deficit and the very fast pace of expansion of bank lending, led the authorities to take a number of restrictive measures in the last quarter of 1997. Fiscal policy was tightened, notably by depositing abroad a large share of extra fiscal revenues (500 million kroons in 1997) and by increasing the planned surplus for 1998. Also, the capital adequacy ratio was raised from 8% to 10% on 1 October and reserve requirements for banks were tightened. While these measures will slow down growth in 1998, they will address some of Estonia's macroeconomic imbalances. As a result of the difficult situation on the international financial markets and the authorities' measures to cool down the economy, Estonia experienced serious liquidity difficulties in the last quarter of 1997. This led to a significant increase in interbank interest rates and to massive selling on the stock market, which fell by more than 50% between end-August and end-November. These financial difficulties have dented banks' profit outlook, but have not prevented Estonian banks from continuing to tap the international financial markets. In November 1997, the authorities agreed with the IMF a new memorandum of economic policy but announced that they did not intend to make any purchase under the stand-by arrangement backing the memorandum. FYROM Since its independence in 1991, the former Yugoslav Republic of Macedonia has made substantial progress in economic stabilisation and liberalisation and has undertaken a number of structural measures to reform its economy. These efforts have reduced inflation to low single-digit rates, stabilised the exchange rate (except for a devaluation in July 1997), halted the output decline, and earned the former Yugoslav Republic of Macedonia a reputation for stability and willingness to reform. However, despite a resumption of GDP growth in 1996 of some 1 % and an increase of about 2 % in 1997, the output level is only 60 % of that prevailing in 1991, unemployment is very high, and the FYROM remains one of the poorest countries in Europe. In 1997, the country continued its transition to a market economy in the framework of an IMF ESAF arrangement approved in April 1997. Following a programme adjustment in July (accompanying the 14% devaluation), the programme was implemented satisfactorily and is now on track. One important element of the programme has been the clearance of the country's arrears vis-à-vis the Community and the EIB, which took place on 10 September. In support of the IMF programme, the Council decided on a Community loan of up to 40 MECU, of which the first tranche (25 MECU) was disbursed on 30 September. The release of the second tranche is expected for early 1998. 20 The good track record of economic stabilisation and reform and the clearance of the last outstanding external arrears certainly are positive factors in the risk evaluation of the former Yugoslav Republic of Macedonia. In 1995 and 1996, the FYROM reached rescheduling agreements with the Paris and London Clubs respectively, and the last bilateral Paris Club agreements are being finalised. The country's debt increased to 38% of GDP in 1997, while the debt service fell to 8. 7% of exports of goods and services, which is not overly high. However, the FYROM continues to have a relatively high risk. This is particularly due to the unstable political situation in the region, as well as to internal political difficulties related to the minority issue. Moreover, important progress in restructuring enterprises and strengthening the banking sector remains to be made. LATVIA The economic situation in Latvia remains favourable. In 1997, growth accelerated, reaching 4. 6% in the first six months of the year. Moreover, inflation continued to fall, interest rates fell substantially throughout the year, and the fiscal position continued to improve - the budget outturn for 1997 showed a surplus. The imbalances on the external side continue to grow, but for the moment there is little threat to the stability of the currency. LITHUANIA During 1997, the Lithuanian economy continued to perform positively. GDP grew by 2. 5%o during the first half, driven by investment and consumption. Unemployment and inflation have stopped falling but remain relatively low, respectively at 5. 9% and 9% year-on-year in October. Fiscal revenues have been higher than projected, and the budget deficit remained within the targeted 1. 9% of GDP. The trade balance has been deteriorating significantly as buoyant domestic demand has caused imports to grow faster than exports. As a result, the trade deficit for the first nine months of 1997 nearly equalled the deficit for the whole of 1996. Nevertheless, this increasing external imbalance was easily financed. Borrowing rates on the international capital market have continued to improve, and portfolio and foreign direct investment flows have been rising strongly. Official reserves increased during the first half of the year and provide more than two months of import coverage. The foreign debt grew rapidly in the first nine months of the year but remains low as a percentage of GDP. New regulations on external borrowing introduced a ceiling of 20% of GDP on total foreign debt. The banking sector continues its recovery from the 1995 crisis. The authorities have strengthened regulation and taken a tougher stance against the weakest banks. This caused the bankruptcy of one of the banks to which the proceeds of Community macro- financial assistance were on-lent by the Lithuanian authorities at their own risk. In order to further the restructuring of the financial sector, the government is finalising plans for the privatisation of two of the three state-owned banks. 2 1- ROMANIA Romania's country risk, while still one of Eastern Europe's highest, continued to improve during the second half of 1997. A year after the Romanian authorities launched their radical and ambitious economic programme, much progress has been achieved in transforming the economy and accelerating the transition towards a functioning market economy. The implementation of the authorities' programme has continued to affect negatively the level of economic activity. GDP fell by about 6% in 1997. The macroeconomic framework continues to be fragile. After a period, during the summer, when inflation and interest rates fell to their lowest levels since the beginning of the year, inflation jumped in October to 6. 5% on a monthly basis. Also, there have been delays in restructuring the large public sector enterprises and uncertainty with regard to the legal framework for foreign investment and privatisation. However, there has been significant progress in key areas. Fiscal policy has been very tight, with the government strictly controlling expenditures. For example, by the end of November, the public sector work-force had shrunk by 10%. The external accounts clearly improved during 1997. Relatively high capital inflows more than offset the current account deficit, allowing the National Bank of Romania to build up its reserves, from $700 million in February to $2. 6 billion in November, equivalent to more than three months' imports. The current account deficit for 1997 amounted to $2 billion, a fall of almost 25% over 1996. Foreign investment, and in particular foreign direct investment (FDI), increased sharply in 1997, reflecting growing investor confidence. According to the Romanian Development Agency, FDI in the first nine months of 1997 totalled $1. 3 billion, which is about two thirds of the cumulative amount received between 1989 and 1996. Romania has passed successfully the first IMF review under the SBA. Already, three tranches of the SBA have been disbursed. Romania is also on track with the World Bank on the various loans approved in June. The EC also disbursed in the second half of 1997 the remaining ECU 70 million, out of the ECU 125 million macro-financial assistance decided by the Council in 1994. Finally, the government reshuffle announced at the beginning of December 1997, and the nomination of reform-minded independent personalities at key economic ministries, is a positive sign of the authorities' strong determination to continue and accelerate economic restructuring. SLOVAKIA Slovakia's country risk remains moderate, but external balances are. still registering big deficits and foreign debt is increasing rapidly. Following the sharp deterioration of the current account in 1996, the external situation stabilised somewhat in 1997, but deficits remained high. After eight months, the current account deficit was reduced to about 814%) of GDP, compared to 10% in 1996. Nevertheless, external debt continued to rise rapidly to finance the external deficit. The fast economic growth registered in 1995 and 1996 barely slowed down in the first half of 1997, which led to an overheating of the economy. Preliminary figures for the first two quarters of 1997 now show that economic activity was expanding by 6%, 22 compared to slightly below 7% in 1995 and 1996. Inflation has started to edge up after three years of uninterrupted decline. Because fiscal policy became more expansionary, monetary policy had to be tightened gradually to preserve the attained level of macroeconomic stability. Especially after the attack on the currency in May and June 1997, monetary policy became very restrictive, with high interest rates and very limited liquidity. Without a significant reduction of the government budget deficit, no significant improvement of the current account balance can be expected, while pressures to depreciate the currency might intensify. In December 1997, Slovakia repaid some ECU 63 million to the Community, out of the ECU 125 million granted by the Community in the context of its macro-financial assistance to this country. III. NEWLY INDEPENDENT STATES ARMENIA The Armenian economy continued to recover for a fourth consecutive year in 1997, but, it seems, at a slower pace than expected (3 % rise in GDP instead of the 6 % initially targeted). Although the average inflation rate fell further in 1997 to about 14 %, this is significantly above the Government's target of 9. 5%. Moreover, partly because of the blockade imposed on the country, the current account deficit (excluding official transfers) widened in 1997 (to around US$ 450 million or about 28 % of GDP), while the foreign debt increased to around 50 % of GDP at year-end. The level of foreign direct investment is still very low (around US$ 25 million for 1997). Important progress has been made in price and trade liberalisation and with privatisation. However, much remains to be done in large enterprise restructuring, and in the banking sector, which is still fragile (high levels of non-performing loans and inadequate capitalisation). In June, the IMF approved the second annual credit (US$ 47 million) of an ES AF arrangement. In the political sphere, the recent resignation of the Armenian President has cast doubts on the prospects for a peaceful settlement of the Nagorno-Karabakh conflict. Moreover, the expected settlement of Armenia's outstanding debt arrears towards the Community has not yet taken place. For all these reasons, Armenia remains in the category of high-risk debtors. BELARUS The assessment of the economy of Belarus has not changed significantly since the last report. Current economic and political developments are a matter of grave concern. The lack of elementary political and economic freedom represents a major constraint on the development of a market economy. Censorship and data manipulation prevent a proper evaluation of the real state of the economy. Real GDP is reported to have increased by 2. 6% in 1996, and by more than 10%) in the first half of 1997. Officially recorded growth of industrial production is particularly buoyant: above 18% in the first half of 1997 with respect to the 23 corresponding period of the previous year. However, this rise in output is unsustainable. It has been based exclusively on a policy of credit expansion and repayment of gas arrears to Gazprom through barter trade. Macroeconomic stability is in jeopardy. Monetary expansion has had an impact on inflation, which despite far-reaching price controls, was reported at 75% in October 1997 (year-on-year basis). improve corporate governance, accelerate Implementation of structural reforms has been very slow. Very little has been done to liberalise domestic prices and trade, promote competition through the entry of foreign companies, the privatisation of state enterprises and housing, and begin the privatisation of land. Belarus remains highly dependent on imported energy. Its export structure has remained almost unaltered since the Soviet times. The official external debt, however, remains low, at US$900 million or 6. 9 per cent of GDP. The overall risk remains high. Its reduction would require a major effort to tackle the fundamental disequilibria on the basis of a comprehensive blueprint encompassing macroeconomic, microeconomic, structural and institutional reforms. GEORGIA The growth of around 12 % achieved in 1997 continued the positive evolution registered in the Georgian economy since 1995. The tight monetary and credit policies resulted in a reduction in the state budget deficit to around 3. 5 % of GDP (on a commitment basis) and end-of-period annual inflation rate declined to 8 % in 1997. The low level of budget revenue is, however, unsatisfactory. The level of foreign direct investment is still low (US$ 70 million expected for 1997). in line with IMF and World Bank The implementation of structural reforms expectations is encouraging. Very positive developments have occurred in privatisation and in bank restructuring. The energy sector, however, despite improvements, in particular with regard to the adoption of a sound legal and regulatory framework, remains a source of concern because of insufficient collection rates. The government is proceeding with the adoption of a market-oriented legal framework, and is now giving priority to the development of the enforcement capacity of the legal system. In October 1997, the IMF Board formally approved the completion of the second mid-term review under the ESAF. Georgia is expected to clear shortly all its outstanding debt arrears towards the Community. This would allow the normalisation of the country's financial cooperation with the EU. Political difficulties persist: the Abkhazian and South Ossetian problems are still unresolved. As a result, the country risk remains high. MOLDOVA Moldova has made considerable progress towards macroeconomic stabilisation, but achievements in carrying out robust and rigorous macroeconomic policy need to be consolidated. The sustainability of macroeconomic stabilisation cannot be taken for granted, as the financial situation remains fragile. Inflation has been substantially reduced, and trend inflation is now estimated at about 10%. The exchange rate of the leu has shown a remarkable stability since May 1995. However, a widening budget deficit - 2 4- has put pressure on monetary policy and on the current account; tax collection remains inefficient; and wage, and especially pension, arrears are very large. There is also a lack of substantial progress in the process of agricultural reform, privatisation and restructuring. All this in a context of continuous output decline. On the whole, data for the second half of 1997 confirm the previous assessment of a deterioration in the country's risk. In particular, increasing reliance on external financing has contributed to a steady increase of the external debt, now well above 50% of GDP. This level is not particularly high. However, the debt has been increasing at a very rapid pace, almost doubling every year since 1993, and about one third is short term. This component could prove highly sensitive to the conditions prevailing in the international financial markets for emerging economies. Minimising its potential volatility will require improvements in Moldova's fundamentals, especially in the fiscal stance and in the balance of payments. Equally important will be to make significant efforts to revive the agricultural sector through privatisation, farm restructuring and the creation of a land market. TAJIKISTAN Output expanded by 4 %> in 1997, after the sharp decline (20. 1 %) registered in 1996. Annual average inflation, which, as a result of tight credit and monetary policies, fell dramatically to 40 % in 1996, increased substantially in 1997 (80 % for the first seven months), because of directed credits from the National Bank and a large budget deficit (13 % of GDP in the first half of the year). However, the authorities implemented tighter monetary and fiscal policies for the remainder of 1997. The current account deficit improved slightly to 5 % of GDP in 1997, while the foreign exchange reserves increased to two weeks' imports. The external debt of Tajikistan amounts to 100% of GDP, but major creditors have agreed to reschedule the debt falling due in 1996 and 1997. Despite some minimum servicing of outstanding debts toward the Community, the country maintains important arrears. The Government attempted to apply direct control on the foreign exchange and foreign trade markets, but, since July, foreign exchange auctions have been restarted and the exchange rate is once again largely market determined. Export taxes have been eliminated, while plans are being developed to adopt a low uniform import tariff and to unify excise taxes. Privatisation in the enterprise and agricultural sectors is proceeding well and reform of the banking system has begun. In December 1997, a post-conflict facility was approved by the IMF Board. Despite recent adverse security developments, the political situation continues to improve. The risk remains very high in absolute terms, but a positive trend has been recorded in recent months. UKRAINE Although the pace of economic decline is decelerating in Ukraine, with real GDP expected to fall by 3. 4% in 1997 compared to a contraction of 10% in 1996, macro- economic stabilisation has slowed down considerably in recent months, as the country is entering a long pre-electoral campaign. Parliamentary elections are scheduled for March 1998 and presidential elections for mid-1999. Spending has rapidly increased, and the -25 cumulative budget deficit rose to 7. 3% of GDP in the first nine months of 1997 compared to an overall 4. 6%) in 1996. The increased outlays led to the overshooting of the budget deficit targets of the stand-by arrangement with the IMF, but after revision the programme was put back on track in late November. The EC disbursed in the second half of 1997 the remaining ECU 100 million, out of the ECU 200 million macro- financial assistance decided by the Council in 1995. In November, the central bank was forced to raise key interest rates and to intervene heavily in both the foreign exchange and Treasury bill markets after the national currency, the hryvnia, repeatedly fell out of the announced exchange rate band vis-à-vis the dollar. The external balances are deteriorating: the merchandise trade and services deficit rose to US$ 1. 23 billion in the first half of 1997 compared to US$ 1. 1 billion for the whole of 1996. Structural adjustment, and in particular privatisation, has almost stagnated in recent months. The overall risk assessment is unfavourable. IV. MEDITERRANEAN COUNTRIES ALGERIA While macro-economic stabilisation continued to be strong in 1997, Algeria's country risk remains high owing to the escalation of political violence and the vulnerable medium-term economic prospects. A key prerequisite for a more favourable outlook is the early establishment of a lasting civil peace. Despite the legislative and local elections in June and October 1997, respectively, and the announcement by the outlawed Front Islamique du Salut (FIS) of an end to its armed opposition, the security situation has deteriorated further in recent months. Progress in implementing the stabilisation and structural reform programme supported by the IMF three-year arrangement continued during 1997. All IMF performance criteria for end-June and end-September were met. Owing to the impact of a severe drought on agricultural production, real GDP growth was revised downward to around 2. 3%) in 1997. While industrial production continued to decline in 1997, the hydrocarbon sector expanded by more than 8%. As a result of a tight monetary policy, the 12-month rate of increase in consumer prices fell from 15% in December 1996 to 3% in October 1997. Inflation was around 6% for the year as a whole. In September 1997, Algeria decided to establish the convertibility of the dinar for current account transactions and accepted the obligations of Article VIII of the IMF's Articles of Agreement. The external current account and fiscal balances registered large surpluses, equivalent to about 6. 7% and 2. 3% of GDP, respectively. Gross foreign exchange reserves, which already doubled to US$ 4. 2 billion in 1996, increased further in 1997 to reach about US$ 7. 5 billion at end-year, covering about 9 months' imports. Algeria's outstanding external debt declined from 73. 2% of GDP in 1996 to below 70%) of GDP at end-1997 and Algeria repaid in December 1997 ECU 250 million out of the ECU 500 million disbursed so far by the Community in the context of its macro-financial assistance to this country. However, despite continued structural reforms in external trade and the financial sector, restructuring of public enterprises, and privatisation, the economy remains poorly 26 diversified and particularly vulnerable to the vagaries of world energy prices and weather conditions. Although the Algerian authorities have announced that they will not seek a new IMF arrangement when the current programme expires in June 1998, Algeria's balance-of-payments viability will remain vulnerable in view of the lack of diversification of the export base, limited foreign direct investment, and absence of access to international capital markets. If the oil prices remain depressed at their present nominal level in the coming years, Algeria's external financial situation could deteriorate significantly. Algeria needs social cohesion and public support to embark on a new critical stage of its reform process aimed at developing a dynamic private economy. However, growing unemployment (estimated at 28. 3 per cent in 1996) and mounting social difficulties, including a housing shortage, have somewhat slowed the reform momentum. 27 ANNEX ANNEX I. EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED BY THE COMMUNITY BUDGET LA TABLES 1 TO 3 I. A. I Authorised ceiling (Table 1) I. A. 2 Capital outstanding ( Table I) I. A. 3 Annual risk (Tables 2 and 3) I. B LOAN OPERATIONS COVERED BY A BUDGET GUARANTEE I. C EXPECTED SIGNATURE AND DISBURSEMENT OF EIB LOANS I. D PAYMENT OF THE BUDGET GUARANTEE I. D. I Borrowing/lending operations I. D. 2 Guarantees given to third parties 28 28 28 28 29 30 35 35 35 36 H. METHODOLOGICAL NOTE ON THE ANALYSIS OF THE COMMUNITY'S ESTIMATED LENDING CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES OVER THE PERIOD 1997-99 UNDER THE GUARANTEE FUND MECHANISM (TABLE 4) II. A RESERVE FOR LOAN GUARANTEES TO NON-MEMBER COUNTRIES II. B BASES FOR THE CALCULATION OF THE PROVISIONING OF THE GUARANTEE FUND II. C BASIS FOR THE PROVISIONING OF THE FUND IN THE EVENT OF A PART GUARANTEE II. D PROVISIONING OF THE GUARANTEE FUND ILE MARGIN REMAINING IN THE GUARANTEE RESERVE II. F RESIDUAL LENDING CAPACITY m. TABLES: COUNTRY-RISK INDICATORS 37 37 37 38 38 39 39 40 28 I. EXPLANATORY NOTES ON THE SITUATION OF RISKS COVERED BY THE COMMUNITY BUDGET LA Tables 1 to 3 The purpose of Tables 1 to 3 is to show the outstanding amount of guarantees and annual repayments of capital and interest in respect of borrowing and lending operations for which the risk is covered by the Community budget. The figures show the maximum possible risk for the Community in respect of these operations and must not be read as meaning that these amounts will actually be drawn from the budget. In the case of Table 3, in particular, it is not certain that all the operations described will actually be disbursed. I. A. I Authorised ceiling (Table 1) This is the aggregate of the maximum amounts of capital authorised (ceilings) for each operation decided by the Council. In order to relate it to the risk which the budget might have to cover, account should be taken of the following factors which could affect it: Factor increasing the risk: the interest on the loans must be added to the authorised ceiling Factors reducing the risk: At> • • limitation of the guarantee given to the ELB to 75% of the loans signed in the Mediterranean countries; limitation of the guarantee given to the ELB to 70% of the loans signed as part of lending operations with certain non-member countries authorised by the Council Decision of 14 April 1997 and a sharing of risk between the Community and the EIB as the budget guarantee covers only political risks in some cases; • operations already repaid, since the amounts concerned, except in the case of balance of payments support (Member States), are the maximum amount of loans granted and not outstanding amounts authorised; • the amounts authorised are not necessarily taken up in full. I. A. 2 Capital outstanding ( Table 1) This is the amount of capital still to be repaid on a given date in respect of operations disbursed. Compared with the previous aggregate, the amount outstanding does not include loans which have not yet been disbursed nor the proportion of disbursed loans which have already been repaid. It may be described as the amount of loans which exist on a given date. -29- I. A. 3 Annual risk (Tables 2 and 3) Estimated amount of principal and interest due each financial year. This amount is calculated for: a) disbursements alone (Table 2), in which case the capital to be repaid corresponds to the amount outstanding; b) disbursements, decisions still awaiting disbursement and Commission proposals still awaiting decisions (Table 3), in which case the capital to be repaid corresponds to the ceiling on loans authorised plus, where applicable, the amounts in respect of operations proposed by the Commission and not yet decided. 30 LB Loan operations covered by a budget guarantee TABLE 5a Borrowing and lending operations: Member States Changes in amounts outstanding during six-month period COUNTRY Decision Date of decision Loan term (years) Loan situation - closed (a) - partially disbursed (b) • disbursed in full (c) - not yet disbursed (d) GREECE 91/136/EEC 04. 03. 91 ITALY 93/67/EEC 18. 01. 93 EURATOM NCI TOTAL 77/270-271/Euratom 80/29/Euratom 82/170/Euratom 85/537/Euratom 90/212/Euratom 78/870/EEC 81/19/EEC(1) 81/1013/EEC(2) 82/169/EEC 83/200/EEC 87/182/EEC 29. 03. 77 20. 12. 79 15. 03. 82 05. 12. 85 23. 04. 90 16. 10. 78 20. 01 81 14. 12. 81 15. 03. 82 19. 04. 83 09. 03. 87 6 - 6 6 (3) (3) (c) (d) (d) (c) (c) (d) (d) (c) (c) (c) (b)(4) (d)(4) (c) (c) (c) (c) (c) (c) ECU million Amount decided Amount outstanding at 1. 7. 97 Operations in six-month period Amounts disbursed Amounts repaid Amount outstanding at 31. 12. 97 500,00 3 454,50 500. 00 3 447,80 119,60 1. 30 118. 40 I 327,30 110. 70 218,60 2 200,00 1 000,00 600,00 600,00 8 000,00 2 000. 00 2 000,00 2 000,00 2 000,00 4 000. 00 500,00 500,00 1 000,00 1 000,00 1 000,00 6 830,00 1 000,00 1 000,00 B0,00 1 000,00 3 000,00 750,00 21 030,00 4 401,40 0,00 112,00 4 284,80 (5) (1 ) Exceptional aid for the reconstruction of areas hit by the earthquake in Italy in 1980. (2) Exceptional aid for the reconstruction of areas hit by the earthquake in Greece in 1981. (3) Long-term loans for which the schedule of repayments depend on the dates of disbursement. (4) By Decision 94/179/Euratom of 21 March 1994 the Council decided to extend Euratom loans to the financing of projects in certain non-member countries. At 31 December 1996 no loans had yet been granted in non-member countries. (5) Discrepancy caused by change in the rates of the other currencies against the ecu. TABLE 5b (1) Financial assistance to non-member countries Changes in amounts outstanding during six-month period, broken down by countries and tranche COUNTRY Decision Date of decision Loan term (years) Expiry date Loan situation - closed (a) - partly disbursed (b) - disbursed in full (c) - not yet disbursed (d) Amount decided Amount outstanding at 1. 07. 97 Operations in six-month period Amounts disbursed Amounts reapid Amount outstanding at 31. 12. 97 ECU million HUNGARY 1st tranche 2nd tranche CZECH REPUBLIC 1st tranche 2nd tranche SLOVAKIA 1st tranche 2nd tranche BULGARIA I 1st tranche 2nd tranche BULGARIA II 1st tranche 2nd tranche ROMANIA I 1st tranche 2nd tranche ROMANIA II ROMANIA III 1st tranche 2nd tranche 91/310/EEC 24. 06. 91 91/106/EEC 25. 02. 91 91/106/EEC 25. 02. 91 91/311/EEC 24. 06. 91 92/511/EEC 19. 10. 92 91/384/EEC 22. 07. 91 92/551/EEC 94/369/EC 27. 11. 92 20. 06. 94 BALTIC STATES 92/542/EEC 23. 11. 92 ESTONIA 1st tranche 2nd tranche LATVIA 1st tranche 2nd tranche 7 5 7 5 7 5 7 5 7 7 7 6 7 7 - 7 - 7 - 18. 03. 98 15. 12. 97 18. 03. 98 15. 12. 97 18. 03. 98 15. 12. 97 18. 03. 98 15. 12. 97 07. 12. 2001 29. 08. 2003 01. 02. 99 18. 03. 98 26. 02. 2000 20. 11. 2002 - 31. 03. 2000 - 31. 03. 2000 - (c) (a) (c) (a) (c) (a) (c) (a) (c) (c) (c) (c) (c) (c) (c) (c) (d) (c) (d) 180,00 100,00 80,00 250,00 723,30 126. 70 125,00 61. 70 63. 30 290,00 150,00 140. 00 110,00 70,00 40,00 375,00 190,00 185. 00 80,00 125,00 55,00 70. 00 220,00 40,00 20,00 20,00 80,00 40. 00 40,00 100. 00 80,00 123. 30 126,70 61,70 63,30 150,00 140. 00 70,00 40,00 190,00 185,00 80,00 55,00 0. 00 20,00 0. 00 40,00 0,00 0J 80,00 126,70 63,30 140,00 5,00 100,00 0,00 123,30 0. 00 61,70 0. 00 150. 00 0. 00 70,00 40,00 190. 00 185,00 80,00 55. 00 70,00 15. 00 0. 00 40. 00 0. 00 70,00 TARI F fin f?) Financial assistance to non-member countries Changes in amounts outstanding during six-month period, broken down by countries and tranche COUNTRY Decision Date of decision Loan term (years) Expiry date Loan situation • closed (a) - partly disbursed (b) - disbursed in full (c) - not yet disbursed (d) LITHUANIA 1st tranche 2nd tranche MOLDOVA I 1st tranche 2nd tranEC MOLDOVA II UKRAINE I UKRAINE II 1/2 tranche 1/2 tranche 2nd tranche BELARUS 1st tranche 2nd tranche FYROM 1st tranche 2nd tranche ALGERIA I 1st tranche 2nd tranche ALGERIA II 1st tranche 2nd tranche 94/346/EC 13. 06. 94 96/242/EC 94/940/EC 95/442/EC 25. 03. 96 22. 12. 94 23. 10. 95 95/132/EC 10. 04. 95 97/471/EC 22. 07. 97 91/510/EEC 23. 09. 91 94/938/EC 22. 12. 94 ISRAEL REPS. OF FORMER USSR(') 91/408/EEC 91/658/EEC 22. 07. 91 16. 12. 91 7 7 10 10 10 10 10 10 10 - 15 - 5 7 7 - 5 3 27. 07. 2000 16. 08. 2002 07. 12. 2004 08. 08. 2005 30. 10. 2006 28. 12. 2005 29. 08. 2006 30. 10. 2006 28. 12. 2005 - 27. 09. 2012 - 15. 12. 97 17. 08. 2001 27. 11. 202 - 15. 12. 97 28. 09. 97 (c) (b) (c) (c) (c) (c) (c) (c) (c) (c) (d) (c) (d) (a) (c) (c) (d) (a) Amount decided Amount outstanding at 1. 07. 97 Operations in six-month period Amounts disbursed Amounts repaid Amount outstanding at 31. 12. 97 ECU million 100,00 50,00 50,00 45,00 25,00 20,00 15,00 85,00 200,00 55,00 30,00 25,00 40,00 25,00 15,00 400,00 250,00 150,00 200,00 100. 00 100,00 160,00 1 250,00 50,00 25,00 25,00 20. 00 15. 00 85,00 50,00 50,00 0,00 30. 00 0. 00 0,00 0,00 250,00 150,00 100. 00 0. 00 160,00 331,30 f 50,00 25,00 25,00 20,00 15,00 85,00 50,00 50,00 100,00 30. 00 0,00 25,00 0,00 0. 00 150. 00 100. 00 0. 00 0. 00 216. 00 100,00 25,00 250,00 160,00 115. 30 TOTAL 4 205,00 2 866,30 195,00 940,30 2 121. 00 (*) The ECU 216 million outstanding corresponds to the principal due but not paid at 31. 12. 1997 GEOGRAPHICAL AREA Decision Date of decision Rate of guarantee Loan term (years) Date of guarantee contract Amount decided TABLE 6 LOAN GUARANTEES TO EIB Loans signed Amount outstanding at 1. 07. 97 during six-month period at 1. 07. 97 at 31. 12. 97 MED. financial protocols(l) 8. 03. 77 75% (2) MED. horizontal coop. R/1762/92/CEE 29. 06. 92 75% (2) TOTAL MED. C and E Europe 1 90/62/CEE(4) 12. 02. 90 91/252/CEE(5) 14. 05. 91 100% 100% C and E Europe II 93/696/CE(6) 13. 12. 93 100% Asia, Latin America 1 93/115/CEE 15. 02. 93 100% Asia, Latin America II 96/723/CE 12. 12. 96 100% Asia, Latin America II 96/723/CE 12. 12. 96 70% South Africa 95/207/CE 01. 06. 95 100% New mandates 97/256/CE(7) 14. 04. 97 70% TOTAL 15 15 15 15 15 15 15 15 15 15 30. 10. 78/10. 11. 78 09. 11. 92/18. 11. 92 24. 04. 90/14. 05. 90 19. 01. 93/04. 02. 93 22. 07. 94/12. 08. 94 04. 11. 93/17. 11. 93 18. 03. 97/26. 03. 97 21. 10. 97 04. 10. 95/16. 10. 95 25. 07. 97/29. 07. 97 6062 1800 7862 1000 700 3000 750 153 122 300 7105 20992 5385 1800 7185 (3) 928 700 3000 647 50 0 176 75 12761 - - 15 0 15 (3) 0 10 103 52 124 2488 2792 I 2321 466 2787 664 380 486 250 51 0 56 0 2469 779 3248 691 437 761 307 78 0 100 144 4674 5765 (1) Including ECU 1 500 million for Spain, Greece and Portugal. (2) General gurantee of 75% for all credits made available under lending operations under a guarantee contract signed between the Community and the EIB on 30. 10. 78 and 10. 11. 78. By way of exception, a 100% gurantee applies to the emergency aid granted to Portugal in accordance with the Council Decision of 7 October 1975. (3) The Community has guaranteed ECU 5 435. 9 million, of which ECU 141. 5 million is covered by a 100% guarantee for Portugal. (4) Non-member countries: Poland, Hungary. (5) Non-member countries: Czech Republic and Slovak Republic, Bulgaria, Romania. (6) Non-member countries: Poland, Hungary, Czech Republic and Slovak Republic, Bulgaria, Romania. Baltic States and Albania. (7) Non-member countries: Central and Eastern Europe, Mediterranean, Asia and Latin America, South Africa. -35 I. C Expected signature and disbursement of EIB loans The EEB has supplied the figures used for calculation of the assumptions made for drawing up Table 3 (EIB loans to non-member countries from its own resources). Expected signatures At 31 December 1997 a total of ECU 4 838 million was still to be signed: Mediterranean: former mandates. ~. (protocols with Syria). Mediterranean countries: Central and Eastern Europe: Asia and Latin America: Decision of December 1996 Asia and Latin America: South Africa: Disbursement forecasts. _«. o oc ECU 225 million. ECU 1 376 million ECU 2 054 million ECU 70 million ECU 738 million ECU 375 million As regards disbursement of the loans still awaiting signature, it is assumed that nothing will be paid in the year of signature, 10% in the second year, 25% a year between the third and fifth years and 15% in the sixth year. At 31 December 1997 ECU 7 417 million still had to be disbursed against loans signed at that date. The total breaks down as follows:5 Mediterranean Central and Eastern Europe Asia and Latin America South Africa ECU 2513 million ECU 4 052 million ECU 653 million ECU 199 million I. D Payment of the budget guarantee I. D. 1 Borrowing/len ding operations In this type of operation, the Community borrows on the financial market and on-lends the proceeds (at the same rate and for the same term) to Member States (balance of payments), non-member countries (medium-term financial assistance) or firms (NCI, Euratom). 5 Based on a working assumption that 25% of the loan will be disbursed every year for four years and that the average term will be fifteen years with a three-year period of grace. 36 The loan repayments are scheduled to match the repayments of the borrowings due from the Community. If the recipient of the loan is late in making a repayment, the Commission must draw on its resources to repay the borrowing on the due date. The funds needed to pay the budget guarantee in the event of late payment by the recipient of a loan granted by the Community are raised as follows: a) The amount required may be taken provisionally from cash resources in accordance with Article 12 of Council Regulation No 1552/89 of 29 May 1989 implementing Decision 88/376/EEC, Euratom on the system of the Communities' own resources. This method is used so that the Community can immediately repay the borrowing on the date scheduled in the event of late payment by the recipient of the loan. b) If the delay extends to three months after the due date, the Commission draws on the Guarantee Fund to cover the default. The funds obtained are used to replenish the Commission's cash resources. c) The transfer procedure can be used to provide the budget heading with the appropriations needed to cover the default; any margin available in the guarantee reserve is drawn on first. This method is used when there are insufficient appropriations in the Guarantee Fund and must be authorised in advance by the budgetary authority. d) The re-use of amounts repaid by debtors who have defaulted, leading to activation of the Community guarantee, allows payments to be made within a short period of time always providing, of course, that there are recovered funds available. I. D. 2 Guarantees given to third parties The loan guarantee is in respect of loans granted by a financial institution such as the European Investment Bank (EEB). When the recipient of a guaranteed loan fails to make a payment on the due date, the EIB asks the Community to pay the amounts owed by the defaulter in accordance with the contract of guarantee. The guarantee must be paid within three months of receiving the EIB's request. The EEB administers the loan with all the care required by banking practice and is obliged to demand the payments due after the guarantee has been activated. Since the entry into force of the Regulation establishing a Guarantee Fund for external action, the provisions of the Agreement between the Community and the EIB on management of the Fund state that, after the EIB calls in the guarantee in the event of a default, the Commission must authorise the Bank to withdraw the corresponding amounts from the Guarantee Fund within three months. If there are insufficient resources in the Fund, the procedure used for activating the guarantee is the same as for borrowing/lending operations. 37- II. METHODOLOGICAL NOTE ON THE ANALYSIS OF THE COMMUNITY'S ESTIMATED LENDING CAPACITY IN RESPECT OF NON-MEMBER COUNTRIES OVER THE PERIOD 1997-99 UNDER THE GUARANTEE FUND MECHANISM (TABLE 4) II. A Reserve for loan guarantees to non-member countries As agreed at the Edinburgh European Council, the Interinstitutional Agreement of 29 October 1993 on budgetary discipline and improvement of the budgetary procedure provided for the entry of a reserve for loan guarantees to non-member countries as a provision in the general budget of the European Communities. This reserve is intended to cover the requirements of the Guarantee Fund and, where necessary, activated guarantees exceeding the amount available in the Fund, so that these amounts may be charged to the budget. The amount of the guarantee reserve is the same as in the financial perspective, viz. ECU 300 million at 1992 prices. The amount to ECU 338 million in 1998. reserve comes the in The conditions for the entry, use and financing of the guarantee reserve are laid down in the following decisions: • Council Decision-94/729/EC of 31 October 1994 on budgetary discipline • Council Regulation (ECSC, EC, Euratom) No 2730/94 of 31 October 1994 amending the Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities • Council Decision 94/728/EC of 31 October 1994 on the system of the Communities' own resources. II. B Bases for the calculation of the provisioning of the Guarantee Fund The bases for the provisioning of the Fund are calculated by applying the appropriate rate of guarantee (70%, 75% or 100%): - to the loan guarantees authorised by the Council and to the loan guarantees proposed or being prepared by the Commission on the basis of the estimates of loan signatures contained in the financial statements (EIB and Euratom loans); - to the loans (for financial assistance) authorised by the Council and to the loans proposed or being prepared by the Commission. The annex to Council Regulation (EC, Euratom) No 2728/94 of 31 October 1994 establishing a Guarantee Fund for external actions, which relates to the arrangements for payments into the Guarantee Fund, states that, in the case of borrowing/lending operations or guarantees to financial bodies under a framework facility spread over a number of years and with a microeconomic and structural purpose, payments into the Fund will be made in annual tranches calculated on the basis of the annual amounts indicated in the financial 38 statement attached to the Commission proposal, adapted where appropriate in the light of the Council decision. For other Community borrowing/lending operations, such as loans for the balance of payments of third countries, whether made in one or more than one tranche, payments into the Fund are calculated on the basis of the total amount for the operation decided on by the Council. The annex to the Regulation establishing the Guarantee Fund states that, as from the second year (in the case of operations spread over a number of years), the amounts to be paid into the Fund will be corrected by the difference recorded on 31 December of the previous year between the estimates that were taken as a basis for the previous payment and the actual figure for the loans signed during that year. Any difference relating to the previous year will give rise to a payment in the following year. The annex states that, when it starts a payment procedure, the Commission will check the situation with regard to the performance of the operations which were the subject of previous payments and, where the commitment deadlines originally laid down have not been met, will propose that this will be taken into account in calculating the first payment to be made at the start of the following financial year for operations already under way. In the second half of 1997 the budgetary authority therefore adopted transfer 58/97 so that payments could be made into the Guarantee Fund in respect of loans to non-member countries (Bulgaria, the Former Yugoslav Republic of Macedonia, Georgia and Armenia). II. C Basis for the provisioning of the Fund in the event of a part guarantee For EIB loans covered by an aggregate 75% guarantee, the Fund is provisioned on the basis of 75%) of the total amount of operations authorised. The guarantee on the EIB loans authorised by the Council on 14 April 1997 is limited to 70% of the total amount of credits opened. The basis for provisioning is 70% of the annual forecast of signatures. II. D Provisioning of the Guarantee Fund The amounts paid into the Fund are obtained by applying the rate of provisioning (14%) to the calculation base set out above. Pursuant to Articles 2 and 4 of the Regulation establishing the Guarantee Fund, the Fund is endowed by payments from the general budget equivalent to 14% of the capital value of the operations until it reaches the target amount. As the target amount was reached at 31 December 1997, the Commission, in accordance with the Regulation, will submit proposals reviewing the rate of provisioning. These proposals will appear in the comprehensive report on the functioning of the Fund which the Commission has to draw up in accordance with Article 3 of the Regulation. -39 ILE Margin remaining in the guarantee reserve The margin remaining in the guarantee reserve is equivalent to the difference between the reserve and the heading for the provisioning of the Guarantee Fund. II. F Residual lending capacity The residual lending capacity is the loan equivalent of the margin left in the reserve, allowing for the guarantee rates in force. 40 in. TABLES: COUNTRY-RISK INDICATORS -41 Country-risk indicators Country: Bulgaria footnotes 1995 1996 1997 Real GDP growth rate (%) Industrial production ( % change) Unemployment Inflation rate Exchange rate (Leva per USD) (end of period) (Dec/Dec) (end of period) 2,1 8,6 11,6 32,8 71 -10,9 -8,3 12,5 310,8 487 -7,4 -11,5 13,7 580 1792 (5) (6) General government balance (as % of GDP) -5,7 -11,0 -3,1 (5) Balance of payments Exports of goods and services (bn USD) Current account balance (% of GDP) Net inflow of foreign direct investment (m USD) Official reserves, including gold (end of period) bnUSD months' imports of goods and services External debt Convertible currency external debt (bn USD, end of period. ) Convertible cuurency debt service (bn USD) principal interest External debt/GDP (%) External debt/exports of goods and services (%) Debt service/exports of goods and services (%) Arrears (on both interest and principal. bn USD) Debt relief agreements and rescheduling Indicators of EU exposure EU exposure/total EU exposure (%) EU exposure/external debt (%) EU exposure/exports of goods and services (%) IMF arrangements Type (Date) On track Indicators of market's perception of creditworthiness Moody's long-term foreign currency rating (end of period) S&P long-term foreign currency rating (end of period) Euromoney Position in the ranking (number of countries) The Institutional Investor Position in the ranking (number of countries) Credit rating Footnotes (1)(2)(3) See explanatory notes. (4) (5) (6) SBA suspended in 09/96. Preliminary First nine months of 1997 compared to same period of 1996 7,0 -0,5 90 1. 5 2,8 10,2 0,9 0,3 0,6 79 151 14 none none 7,3 5,7 7,7 - 6,3 0. 9 115 0,8 1. 6 9,6 1,0 0,4 0,6 99 159 17 none none 8,1 6,5 10,0 (01/97-06/97) (01/97-09/97) 3,0 n. a. 328 2,3 4,6 9,7 (06/97) 0,5 0,3 0,2 n. a. n. a. n. a. none none 5,7 4,8 15,5 (06/97) (06/97) (06/97) (01/97-06/97) (01/97-06/97) SBA (7/96-2/98) no (4) SBA (6/97-5/98) yes none none 03/95 09/95 90 90 (187) (181) 03/95 09/95 93 94 (135) (135) 21. 9 22. 2 none none 03/96 09/96 99 92 (178) (178) 03/96 09/96 92 93 (135) (135) 23. 1 23. 5 B3 none 03/97 09/97 111 96 (179) (180) 03/97 09/97 97 99 (135) (135) 22. 5 22. 2 (1) (2) (2) (3) -42 Country-risk indicators Country: Czech Republic footnotes 1995 1996 1997 Real GDP growth rate (%) Industrial production (% change) Unemployment Inflation rate Exchange rate (CK's per USD) (end of period) (Dec/Dec) (end of period) General government balance (as % of GDP) Balance of payments Exports of goods and services (bn USD) Current account balance (% of GDP) Net inflow of foreign direct investment (m USD) Official foreign exchange reserves (end of period) bnUSD months' imports of goods and services External debt Convertible currency external debt (bn USD, end of period. ) Convertible currency debt service (bn USD) principal interest External debt/GDP (%) External debt/exports of goods and services (%) Debt service/exports of goods and services (%) Arrears (on both interest and principal, m USD) Debt relief agreements and rescheduling Indicators of EU exposure EU exposure/total EU exposure (%) EU exposure/external debt (%) EU exposure/exports of goods and services (%) (1) IMF arrangements Type (Date) On track Indicators of market's perception of creditworthiness Moody's long-term foreign currency rating (end of period) S&P long-term foreign currency rating (end of period) Euromoney Position in the ranking (number of countries) The Institutional Investor Position in the ranking (number of countries) Credit rating Footnotes (1)(2)(3) See explanatory notes (4) (5) First nine months of 1997 compared to same period of 1996. First eleven months of 1997 compared to same period of 1996. 4,8 8,7 2,9 7,9 26,6 0,3 28,2 -2. 9 2526 14,0 5,6 16,5 2,6 2,0 0,6 35,1 58,6 9,2 none none 5,8 2,6 2,5 - 4,4 6,8 3,5 8,6 27,1 -0,4 29,7 -8,6 1388 12,4 4,4 20,4 3,8 3,0 0. 8 39,2 68,8 12,8 none none 7. 3 2,8 1,9 - (4) (5) 1. 1 2,3 5,2 10,0 34,4 -1,7 (09/97) 21,5 -7,4 845 11,0 4,6 (01/97-09/97) (01/97-06/97) (01/97-09/97) (10/97) (10/97) 21. 2 (06/97) (06/97) (06/97) (06/97) (06/97) n. a. n. a. n. a. 41. 3 73,8 n. a. none none 5,9 2. 3 2,2 - Baal (09/95) A 03/95 09/95 35 41 (187) (181) 03/95 09/95 33 30 (135) (135) 55. 8 58. 4 Baal A 03/96 09/96 36 35 (178) (178) 03/96 09/96 30 29 (135) (135) 60. 1 62. 0 Baal A 03/97 09/97 37 37 (179) (180) 03/97 09/97 28 28 (135) (135) 62. 8 63. 1 (2) (2) (3) -43 Country-risk indicators Country: Estonia footnotes 1995 1996 1997 Real GDP growth rate (%) Industrial production (% change) Unemployment Inflation rate Exchange rate (Kroons per USD) (end of period) (Dec/Dec) (end of period) 4,3 1,4 4,1 28,9 11,5 4. 0 1,1 4,3 14,8 12. 0 11,7 13,4 3,6 12,5 13,9 (5) General government balance (as % of GDP) -1,2 -1,5 0,4 est. Balance of payments Exports of goods (m USD) Current account balance (% of GDP), excl. official transfers Net inflow of foreign direct investment (m USD) Official foreign exchange reserves (end of period) mUSD months' imports of goods 1838 -7,4 199 583 2,7 2074 -11,7 111 640 2,4 2892 -12,0 152 830 1. 8 (01/97-06/97) (01/97-09/97) (12/97) External debt Convertible currency external debt (incl. to IMF) (m USD, end of period) Convertible currency debt service (m USD) principal interest + charges to IMF External debt/GDP (%) External debt/exports of goods (%) Debt service/exports of goods (%) Arrears (on both interest and principal, m USD) Debt relief agreements and rescheduling Indicators of EU exposure EU exposure/total EU exposure (%) EU exposure/external debt (%) EU exposure/exports of goods (%) IMF arrangements Type (Date) On track Indicators of market's perception of creditworthiness Moody's long-term foreign currency rating (end of period) S&P long-term foreign currency rating (end of period) Euromoney Position in the ranking (number of countries) The Institutional Investor Position in the ranking (number of countries) Credit rating " 268,6 295,2 246,2 21,0 6,0 15,0 7,5 14,6 1,1 none none 0,5 16,5 2,2 51,2 27,5 23,7 6,8 14,2 2,5 none none 0,5 13,8 2,0 51,7 40,1 11. 6 5,3 8,3 1,8 none none 0. 6 19,9 1. 7 est. est. SBA (4/95-6/96) yes SBA (7/96-8/97) yes SBA (11/97-12/98) yes - none none 03/95 09/95 66 76 (187) (181) 03/95 09/95 79 79 (135) (135) 25. 4 26. 3 none none 03/96 09/96 73 71 (178) (178) 03/96 09/96 76 71 (135) (135) 28. 9 31. 1 Baal BBB+ 03/97 09/97 69 63 (179) (180) 03/97 09/97 65 63 (135) (135) 33. 6 36. 9 (4) (D (2) (2) (3) Footnotes (1 ) (2) (3) See explanatory notes (4) Kroon figures have been converted using the yearly average exchange rate of the dollar. In 1996 and 1997, Estonia repaid foreign loans in advance. First half of 1997 compared to same period of 1996, on an annual basis. (5) - 4 4- Country-risk indicators Country: FYROM footnotes 1995 1996 Real GDP growth rate (%) Industrial production ( % change) Unemployment Inflation rate Exchange rate (denar per USD) (end of period) (Dec/Dec) (end of period) 1,6 10,0 23,7 8,6 38,0 0,9 3,0 24,9 0,7 41,3 1997 (8) 2,0 2,7 27,0 5,0 55,2 General government balance (as % of GDP) -1,3 -0,4 -0,6 Balance of payments Exports of goods and services (bn USD) Current account balance (% of GDP) Net inflow of foreign direct investment (m USD) Official reserves, including gold (end of period) mUSD months' imports of goods and services External debt Convertible currency external debt (bn USD, end of period. ) Convertible currency debt service (m USD) principal interest External debt/GDP (%) External debt/exports of goods and services (%) Debt service/exports of goods and services (%) Arrears (on both interest and principal, m USD) Debt relief agreements and rescheduling (m USD) Indicators of EU exposure EU exposure/total EU exposure (%) EU exposure/external debt (%) EU exposure/exports of goods and services (%) IMF arrangements Type (Date) On track Indicators of market's perception of creditworthiness Moody's long-term foreign currency rating (end of period) S&P long-term foreign currency rating (end of period) Euromoney Position in the ranking (number of countries) The Institutional Investor Position in the ranking (number of countries) Credit rating 1. 2 -6,2 13 270,0 1,9 1,1 -7,4 12 267,0 2,0 1,1 1,1 141,0 84,0 57,0 28,5 78,0 10,4 n. a. 326,0 124,0 70,0 54,0 30,8 86,1 9,5 34,0 37,0 (4) (5) (6) (1) 1,2 -8,4 16 279,0 2,0 1,2 117,0 47,0 69,0 38,2 88,6 8,7 none 87,0 0,3 2,4 2,4 SBA (05/95-04/96) yes SBA (05/95-04/96) yes ESAF (04/97) yes (7) none none none none none none (2) (2) (3) 03/95 09/95 108 118 (187) (181) none 03/96 09/96 85 59 (178) (178) none 03/97 09/97 107 151 (179) (180) none none none none Footnotes (1 ) (2) (3) See explanatory notes (4) (5) (6) (7) (8) Discontinuities in the trade series due to changes in the coverage of trade data, particularly in 1996. The current account deficit may be overestimated due to unreported remittances. Debt service excluding IMF; it includes an estimate of debt service due to commercial creditors. Following a programme adjustment in July, the mid-term review was completed on 31 October 1997. Projections. 45- Country-risk indicators Country: Hungary footnotes 1995 1996 1997 Real GDP growth rate (%) Industrial production ( % change) Unemployment Inflation rate Exchange rate (forints per USD) (end of period) (Dec/Dec) (end of period) 1,5 4,6 10,4 28,5 139,5 1,3 3,4 10,5 19,8 164,0 4,0 11,2 10,4 18,4 195,4 (5) (5) (08/97) Consolidated state budget balance (as % of GDP) -6,8 -3,3 -4,6 (5) Balance of payments Exports of goods and services (bn USD) Current account balance (% of GDP) Net inflow of foreign direct investment (m USD) Official reserves (end of period) bnUSD months' imports of goods External debt Convertible currency external debt (bn USD, end of period) Convertible currency debt service (bn USD) principal, including early repayments interest External debt/GDP (%) External debt/exports of goods and services (%) Debt service/exports of goods and services (%) Arrears (on both interest and principal, m USD) Debt relief agreements and rescheduling Indicators of EU exposure EU exposure/total EU exposure (%) EU exposure/external debt (%) EU exposure/exports of goods and services (%) IMF arrangements Type (Date) On track Indicators of market's perception of creditworthiness Moody's long-term foreign currency rating (end of period) S&P long-term foreign currency rating (end of period) Euromoney Position in the ranking (number of countries) The Institutional Investor Position in the ranking (number of countries) Credit rating Eootnotes (1)(2)(3) See explanatory notes (4) (5) For 1995 and 1996, goods only. Preliminary (4) (1) (2) (2) (3) 12,8 -5,8 4453 12. 0 9,5 31,7 7,7 5. 3 2. 4 72,3 185,9 43,8 none none 13,0 3,1 6,6. 14,2 -3,9 1987 9,7 6,9 27,6 7,4 5,1 2,3 63,6 144,1 44,7 none none 9,6 2,7 5,2 22,2 n. a. 1835 8,7 5,0 (01/97-11/97) (01/97-11/97) (11/97) (11/97) 22,8 (11/97) n. a. n. a. n. a. n. a. n. a. n. a. none none 8,6 3,1 3,2 (11/97) (11/97) SBA (3/96-2/98) yes SBA (3/96-2/98) yes Ba1 BB+ 03/95 09/95 50 44 (187) (181) 03/95 09/95 45 48 (135) (135) 46. 4 45. 0 Baa3 BBB- 03/96 09/96 44 44 (178) (178) 03/96 09/96 50 50 (135) (135) 43. 6 44. 7 Baa3 BBB- 03/97 09/97 46 41 (179) (180) 03/97 09/97 48 46 (135) (135) 47. 6 49. 7 46 Country-risk indicators Country: Latvia footnotes 1995 1996 1997 Real GDP growth rate (%) Industrial production (% change) Unemployment Inflation rate Exchange rate (Lats per USD) (end of period) (Dec/Dec) (end of period) -0,8 -6,3 6,1 23. 1 0,54 2. 8 1. 4 7. 2 13,0 0,56 5,6 6. 1 6,7 7,0 0. 59 (4) General government balance (as % of GDP) -3,4 -1,9 n. a. Balance of payments Exports of goods & services (m USD) Current account balance (% of GDP) Net inflow of foreign direct investment (m USD) Official foreign exchange reserves (end of period) mUSD months' imports of goods and non-factor services External debt Convertible currency external debt (m USD, end of period) Convertible currency debt service (m USD) principal interest External debt/GDP (%) External debt/exports of goods & services Debt service/exports of goods & services Arrears (on both interest and principal, m USD) Debt relief agreements and rescheduling Indicators of EU exposure EU exposure/total EU exposure (%) EU exposure/external debt (%) EU exposure/exports of goods (%) IMF arrangements Type (Date) On track Indicators of market's perception of creditworthiness Moody's long-term foreign currency rating (end of period) S&P long-term foreign currency rating (end of period) Euromoney Position in the ranking (number of countries) The. Institutional Investor Position in the ranking (number of countries) Credit rating Footnotes (1 ) (2) (3) See explanatory notes (4) First nine months of 1997 compared to same period of 1996. d) (2) (2) (3) 2088 -0,4 180 527 2,9 403 39,0 n. a. n. a. 9,2 19,3 3,0 none none 0,7 12. 3 4,0 2628 -8,3 288 652 2,9 409 71,0 n. a. n. a. 8,2 15,6 4. 9 none none 0,7 12. 4 1. 9 1304 -8. 0 165 n. a. n. a. 394 n. a. n. a n. a 7. 5 15,1 n. a. none none 0. 7 14,8 4,5 (01/97-06/97) (01/97-06/97) (01/97-06/97) (10/97) (10/97) (10/97) (10/97) (06/97) SBA (4/95-4/96) no SBA (5/96-8/97) yes SBA (9/97-2/99) yes none none 03/95 09/95 106 116 (187) (181) 03/95 09/95 91 89 (135) (135) 22. 6 23. 4 none none 03/96 09/96 89 75 (178) (178) 03/96 09/96 86 88 (135) (135) 24. 7 25. 7 none BBB 03/97 09/97 63 59 (179) (180) 03/97 09/97 79 74 (135) (135) 29. 1 32. 6 -47- Country-risk indicators Country: Lithuania footnotes 1995 1996 1997 Real GDP growth rate (%) Industrial production ( % change) Unemployment Inflation rate Exchange rate (Litas per USD) (end of period) (Dec/Dec) (end of period) General government balance (as % of GDP) Financial balance Fiscal balance Balance of payments 3,0 5,3 7,3 35,7 4,0 (4) (4) -1. 8 -3,3 Exports of goods and services (bn USD) Current account balance (% of GDP), excl. official transfers Net inflow of foreign direct investment (m USD) Official foreign exchange reserves (end of period, gross foreign assets) mUSD months' imports of goods and services External debt Convertible currency external debt (m USD, end of period) Convertible currency debt service (m USD) principal interest External debt/GDP (%) External debt/exports of goods and services (%) Debt service/exports of goods and services (%) Arrears (on both interest and principal, m USD) Debt relief agreements and rescheduling Indicators of EU exposure EU exposure/total EU exposure (%) EU exposure/external debt (%) EU exposure/exports of goods and services (%) IMF arrangements Type (Date) On track Indicators of market's perception of creditworthiness Moody's long-term foreign currency rating (end of period) S&P long-term foreign currency rating (end of period) Euromoney Position in the ranking (number of countries) The Institutional Investor Position in the ranking (number of countries) Credit rating 0) (2) (2) (3) 4,2 3,7 6,2 13,1 4,0 -1,9 -3,6 4,2 -2,7 153 834 2,4 (5) (11/97) (01/97-09/97) (01/97-09/97) 6,4 0,7 6,7 8,6 4,0 n. a. n. a. 3,7 n. a. 256 1063 2,1 1076 1407 120 n. a. n. a. 15,3 32,7 3,6 none none 1,4 10,2 2,6 n. a. n. a. n. a. 15,4 n. a. n. a. none none 1,6 9,4 3,6 (6) (10/97) (06/97) 3,2 -3,2 71 819 3,9 757 69 n. a. n. a. 13,9 34,3 3,1 none none 1. 4 13,9 4,8 EFF (10/94-10/97) yes EFF (10/94-10/97) yes EFF (10/94-10/97) yes none none 03/95 09/95 108 118 (187) (181) 03/95 09/95 95 90 (135) (135) 21. 7 22. 9 Ba2 none 03/96 09/96 85 59 (178) (178) 03/96 09/96 89 90 (135) (135) 23. 8 25. 3 Ba1 BBB- 03/97 09/97 72 62 (179) (180) 03/97 09/97 85 80 (135) (135) 27. 4 31. 1 Footnotes (1)(2)(3) See explanatory notes (4) (5) (6) Financial balance does not take into account government net lending, whereas fiscal balance does. First nine months of 1997 compared to same period of 1996. Preliminary. 48 Country-risk indicators Country: Romania footnotes 1995 1996 1997 Real GDP growth rate (%) Industrial production ( % change) Unemployment Inflation rate Exchange rate (lei per USD) (end of period) (Dec/Dec) (end of period) 7,1 9,4 8,0 27,8 2760 4,1 9,9 6,3 56,9 4035 -6,5 -8,2 8,8 151,4 8023 (6) (11/96-11/97) General government balance (as % of GDP) -2,6 -3,9 -4,5 est. Balance of payments Exports of goods and services (bn USD) Current account balance (% of GDP) Net inflow of foreign direct investment (m USD) Official foreign exchange reserves (end of period) mUSD months' imports of goods and services External debt Convertible currency external debt, incl. short-term debt (bn USD, end of period) Convertible currency debt service (m USD) principal interest External debt/GDP (%) External debt/exports of goods and services (%) Debt service/exports of goods and services (%) Arrears (on both interest and principal, m USD) Debt relief agreements and rescheduling Indicators of EU exposure EU exposure/total EU exposure (%) EU exposure/external debt (%) EU exposure/exports of goods and services (%) (1) 7,9 -5,0 417 334 0,4 6,5 1366 1073 293 18,1 68,7 14,5 none none 10,2 11,5 10,1 8,1 -7,2 263 551 0,6 7,1 -5,4 806 2555 2,8 (01/97-10/97) est. m (01/97-09/97) (12/97) (10/97) 8,2 8,8 (08/97) 2000 1632 368 23,1 85,1 20,7 none none 10,2 9,2 12,5 2600 1900 700 27. 2 89,0 23,8 none none 11,0 10,2 12,6 est. est. est. est. est. est. (08/97) (10/97) IMF arrangements Type (Date) On track Indicators of market's perception of creditworthiness Moody's long-term foreign currency rating (end of period) S&P long-term foreign currency rating (end of period) Euromoney Position in the ranking (number of countries) The Institutional Investor Position in the ranking (number of countries) Credit rating SBA (5/94-12/95) yes SBA (4) no (5) SBA (4/97-5/98) yes none none 03/95 09/95 68 64 (187) (181) 03/95 09/95 73 71 (135) (135) 28. 1 29. 7 Ba3 BB- 03/96 09/96 67 61 (178) (178) 03/96 09/96 68 72 (135) (135) 30. 9 31. 0 Ba3 BB- 03/97 09/97 75 75 (179) (180) 03/97 09/97 64 67 (135) (135) 32. 7 34. 1 (2) (2) (3) Footnotes (1) (2) (3) See explanatory notes (4) (5) (6) The SBA approved in May 1994 was augmented and extended through 1997. Suspended in March 1996. New SBA approved by IMF Board on 22 April 1997 First half of 1997 compared to same period of 1996. 49- Country-risk indicators Country: Slovak Republic footnotes 1995 1996 1997 Real GDP growth rate (%) Industrial production (% change) Unemployment Inflation rate Exchange rate (SK's per USD) (end of period) (Dec/Dec) (end of period) 6,8 8,3 13,1 7,2 29,6 6,9 2,5 12. 8 5,4 31,9 6,0 2,0 12,5 6,4 34,8 (5) General government balance (as % of GDP) 0,1 -1,3 n. a. Balance of payments Exports of goods and services (bn USD) Current account balance (% of GDP) Net inflow of foreign direct investment (m USD) Official foreign exchange reserves (end of period) mUSD months' imports of goods and services External debt Convertible currency external debt (bn USD, end of period) Convertible currency debt service (m USD) principal interest External debt/GDP (%) External debt/exports of goods and services (%) Debt service/exports of goods and services (%) Arrears (on both interest and principal, m USD) Debt relief agreements and rescheduling Indicators of EU exposure EU exposure/total EU exposure (%) EU exposure/external debt (%) EU exposure/exports of goods and services (%) (D IMF arrangements Type (Date) On track 11,0 2,3 134 3418 4,1 5,7 1390 1130 260 32,9 52,0 12,7 none none 4,1 5,2 2,8 10,9 -10,1 106 3473 3,4 7,7 1444 1186 258 40,6 70,6 13,3 none none 4,5 4,5 3,2 (01/97-10/97) (01/97-10/97) (01/97-10/97) 9,2 8,4 61 3299 3,2 9,6 (01/97-09/97) n. a. n. a. n. a. 50,6 87,4 n. a. none none 4,3 3,6 3,8 (01/97-09/97) (01/97-09/97) (09/97) (09/97) SBA (7/94-3/96) no (4) - - Indicators of market's perception of creditworthiness Moody's long-term foreign currency rating (end of period) S&P long-term foreign currency rating (end of period) Euromoney Position in the ranking (number of countries) The Institutional Investor Position in the ranking (number of countries) Credit rating Baa3 BB+ 03/95 09/95 53 51 (187) (181) 03/95 09/95 61 59 (135) (135) 33. 2 35. 7 Baa3 BBB- 03/96 09/96 48 49 (178) (178) 03/96 09/96 57 53 (135) (135) 38. 6 41. 2 Baa3 BBB- 03/97 09/97 53 54 (179) (180) 03/97 09/97 52 52 (135) (135) 43. 9 44. 8 (2) (2) (3) Footnotes (1 ) (2) (3) See explanatory notes (4) (5) The mid-term review of the programme, which had been scheduled for February 1995, was not completed. First nine months of 1997 compared to same period of 1996. 50- Country-risk indicators Country: Moldova footnotes 1995 1996 Real GDP growth rate (%) Industrial production ( % change) Unemployment Inflation rate Exchange rate (leu per USD) (end of period) (yearly average) (end of period) -1,9 -6,0 1,4 24 4,50 -8,0 -5,1 1,8 15 4,59 1997 (3) -0,5 n. a. 1,6 11 4,68 General government balance (as % of GDP) -5,9 -10,0 -4,5 est. Balance of payments Exports of goods (m USD) Current account balance (% of GDP) Net inflow of foreign direct investment (m USD) Official foreign exchange reserves (end of period) mUSD months' imports of goods External debt Convertible currency external debt (m USD, end of period) Convertible currency debt service (m USD) principal interest External debt/GDP (%) External debt/exports of goods (%) Debt service/exports of goods (%) Arrears (on both interest and principal, m USD) Debt relief agreements and rescheduling Indicators of EU exposure EU exposure/total EU exposure (%) EU exposure/external debt (%) EU exposure/exports of goods(%) (1) 739 -8,1 63,7 257 3,2 801 -18,8 40,0 315 4,1 573,2 n. a. 15,7 358 n. a. (01/97-09/97) (01/97-06/97) 696,3 818,2 935,0 91,0 n. a. n. a. 38,0 91,1 11,0 none none 0,8 8,7 7,9 n. a. n. a. n. a. 57,6 102,1 n. a. none none 1,0 9,3 9,5 n. a. n. a. n. a. n. a. n. a. n. a. none none 0,8 n. a. n. a. IMF arrangements Type (Date) On track Indicators of market's perception of creditworthiness Moody's long-term foreign currency rating (end of period) S&P long-term foreign currency rating (end of period) Euromoney Position in the ranking (number of countries) The Institutional Investor Position in the ranking (number of countries) Credit rating Footnotes (1 ) (2) (3) See explanatory notes Preliminary, unless otherwise indicated. SBA (3/95-3/96) yes EFF (5/96-5/99) yes EFF (5/96-5/99) no none none 03/95 09/95 157 141 (187) (181) none none 03/96 09/96 134 125 (178) (178) Ba2 none 03/97 09/97 113 104 (179) (180) (2) none none none none none none 51 Country-risk indicators Country: Belarus footnotes 1995 1996 1997 Real GDP growth rate (%) Industrial production ( % change) Unemployment Inflation rate Exchange rate ( Rbs per USD) (end of period) (yearly average) (average) -10,4 -11,5 2,7 244 11500 2,6 3,3 3,9 39,3 15500 9,8 17. 6 2,3 63,8 31000 General government balance (as % of GDP) -2,3 -1,8 -2,0 est. Balance of payments. Exports of goods and services (bn USD) Current account balance (% of GDP) Net inflow of foreign direct investment (m USD) Official foreign exchange reserves (end of period) mUSD months' imports of goods and services External debt Convertible currency external debt (bn USD, end of period) Convertible currency debt service (m USD) principal interest External debt/GDP (%) External debt/exports of goods and services (%) Debt service/exports of goods and services (%) Arrears (on both interest and principal, m USD) Debt rescheduling agreement Indicators of EU exposure EU exposure/total EU exposure (%) EU exposure/external debt (%) EU exposure/exports of goods and services (%) (D IMF arrangements Type (Date) On track (01/97-11/97) 4,7 -4. 7 7 377,0 0,7 1,5 178,0 n. a. n. a. 14,7 32. 7 3,4 460 none 0,5 2,6 0,8 5,4 -9. 1 6 10,0 0. 0 1,0 163,2 n. a. n. a. 8. 1 17,6 3,0 n. a. none 0,5 4,0 0,7 SBA (12/95-11/96) no (4) SBA (12/95-11/96) no (4) 6,4 n. a. n. a. n. a. n. a. 0,9 170,4 n. a. n. a. 7,9 n. a n. a n. a none 0,4 3,8 n. a. Indicators of market's perception of creditworthiness Moody's long-term foreign currency rating (end of period) S&P long-term foreign currency rating (end of period) Euromoney Position in the ranking (number of countries) The Institutional Investor Position in the ranking (number of countries) Credit rating none none 03/95 09/95 135 134 (187) (181) 03/95 09/95 112 112 (135) (135) 15. 2 15. 5 none none 03/96 09/96 128 142. (178)(178) 03/96 09/96 116 118 (135) (135) 14. 5 14. 6 none none 03/97 09/97 154 131 (179) (180) 03/97 09/97 118 121 (135) (135) 14. 5 14. 2 (2) (2) (3) Footnotes (1)(2)(3) See explanatory notes (4) The first quarterly review of the programme, initially scheduled for December 1995, has never been completed. -52 Country-risk indicators Country: Ukraine footnotes 1995 1996 Real GDP growth (%) Industrial production ( % change) Unemployment Inflation rate Exchange rate (Krb per USD) (Hrv per USD for 1996) (end of period) (Dec/Dec) - auction / interbank - cash (end of period) (end of period) -11,8 -11,7 0,6 182,0 179400 186000 -10,0 -5,1 1,3 39,7 1,9 1,9 1997 (6) -3,0 -1,9 2. 6 15,0 1,7-1. 9 1. 7-1,9 (7) (08/97) General government balance (as % of GDP) -5,0 -3,2 -4. 6 Balance of payments Exports of goods and services (bn USD) Current account balance (excl. transfers) (% of GDP) Net inflow of foreign direct investment (bn USD) Gross official foreign exchange reserves mUSD weeks' imports of goods and services External debt Convertible currency external debt (bn USD, end of period) Convertible currency debt service (m USD) principal interest External debt/GDP (%) External debt/exports of goods and services (%) Debt service/exports of goods and services (%) Arrears (on both interest and principal, m USD) Debt relief agreements and rescheduling Indicators of EU exposure EU exposure/total EU exposure (%) EU exposure/external debt (%) EU exposure/exports of goods and services (%) ' (1) 16,4 -5,0 0,27 1134 3,7 8,1 1531 986 545 23,3 53. 6 9,3 236 (4) 1,5 1,4 0,7 20,3 -3,9 0,52 1994 5,3 9,2 1221 716 505 21,2 45,3 6,0 n. a. (4) 3,0 2. 6 1,2 20. 9 -3. 6 0. 41 2406 6,0 10,3 1500 944 556 19,4 49,2 7,1 n. a (4) 4,0 3,1 #VALUE! IMF arrangements Type (Date) On track Indicators of market's perception of creditworthiness Moody's long-term foreign currency rating (end of period) S&P long-term foreign currency rating (end of period) Euromoney Position in the ranking (number of countries) The Institutional Investor Position in the ranking (number of countries) Credit rating Footnotes (1)(2)(3) See explanatory notes (4) (5) (6) (7) Rescheduling of debt owed to Russia and Turkmenistan. Suspended in November 1995. IMF projections, unless otherwise indicated. Second quarter of 1997 compared to same period of 1996. SBA (04/95-04/96) no (5) SBA (05/96-02/97) yes SBA (07/97-06/98) yes none none 03/95 09/95 145 138 (187) (181) 03/95 09/95 109 111 (135) (135) 15. 5 15. 7 none none 03/96 09/96 136 135 (178) (178) 03/96 09/96 107 111 (135) (135) 16. 7 16. 6 none none 03/97 09/97 136 129 (179) (180) 03/97 09/97 109 105 (135) (135) 17. 6 19. 8 (2) (2) (3) 5 3- Country-risk indicators Country: Algeria footnotes 1995 1996 Real GDP growth rate (%) Hydrocarbon production ( % change) Inflation rate Exchange rate (dinars per USD) (Dec/Dec) (end of period) General government balance (as % of GDP) Balance of payments Exports of goods and services (bn USD) Current account balance (% of GDP) Net inflow of foreign direct investment (m USD) Official foreign exchange reserves bnUSD months' imports of goods and services External debt Convertible currency external debt (bn USD, end of period) Convertible currency debt service (bn USD) principal interest External debt/GDP (%) External debt/exports of goods and services (%) Debt service/exports of goods and services (%) Arrears (on both interest and principal, m USD) Debt relief agreements and rescheduling (bn US$) Indicators of EU exposure EU exposure/total EU exposure (%) EU exposure/external debt (%) EU exposure/exports of goods and services (%) (D 3,9 4. 4 21,9 52. 2 -1,4 10,3 -5,4 0,0 2,1 2,1 32,5 9,4 7,1 2. 3 78,6 297,1 42,5 none 4,9 12,2 2,8 8,9 3,8 6. 3 15,1 56,2 3,0 13,2 2,7 0,3 4,2 4,5 33,5 7,4 5,2 2. 2 73,2 240,1 29,2 none 3,5 11,6 2,7 6,8 1997 (4) 2,3 8,3 6,1 58,0 2,3 13,9 6,7 0,4 7,6 9,0 32,6 6,4 4,2 2,2 69,5 238,0 33,1 none 2,2 7,7 1,9 4,5 IMF arrangements Type (Date) On track Indicators of market's perception of creditworthiness Moody's long-term foreign currency rating (end of per. ) S&P long-term foreign currency rating (end of period) Euromoney Position in the ranking (number of countries) The Institutional Investor Position in the ranking (number of countries) Credit rating Footnotes (1) (2) (3) See explanatory notes Projections. (4) SBA/EFF (5/94 - 5/95) yes EFF/CCFF (5/95 - 5/98) yes EFF (5/95-5/98) yes none none 03/95 09/95 102 107 (187) (181) 03/95 09/95 89 91 (135) (135) 23. 5 22. 8 none none 03/96 09/96 109 97 (178) (178) 03/96 09/96 95 95 (135) (135) 21. 5 22. 8 none none 03/97 09/97 102 97 (179) (180) 03/97 09/97 96 96 (135) (135) 23. 2 24. 5 (2) (2) (3) 54 Country-risk indicators Country: Israel footnotes 1995 1996 Real GDP growth rate (%) Industrial production (% change) Unemployment Consumer Price Index Exchange rate (shekel per USD) (yearly average) (yearly average) (end of period) 7. 1 8. 4 6,9 8,1 3,12 4,5 5,4 6,7 10,6 3,24 1997 (6) 2. 0 3,2 8,1 6,8 3,53 (4) (5) Central government overall deficit (as % of GDP) -3,1 -4. 2 -3,2 Balance of payments Exports of goods (bn USD) Current account balance (% of GDP) Net inflow of foreign direct investment (bn USD) Gross official foreign exchange reserves bnUS$ months' imports of goods External debt Convertible currency external debt (bn USD, end of period) Convertible currency debt service (bn USD) principal interest (gross) External debt/GDP (%) External debt/exports of goods and services (%) Debt service/exports of goods and services (%) Arrears (on both interest and principal, m USD) Debt relief agreements and rescheduling Indicators of EU exposure EU exposure/total EU exposure (%) EU exposure/external debt (%) EU exposure/exports of goods (%) IMF arrangements Type (Date) On track Indicators of market's perception of creditworthiness Moody's long-term foreign currency rating (end of period) S&P long-term foreign currency rating (end of period) Euromoney Position in the ranking (number of countries) The Institutional Investor Position in the ranking (number of countries) Credit rating Footnotes (1 ) (2) (3) See explanatory notes (4) (5) (6) First nine months of 1997 compared to same period of 1996. Seasonaly-adjusted data for the third quarter. Projections, unless otherwise indicated. 29,2 -4. 4 1,2 8. 7 2,6 45,2 5. 6 2,5 3. 1 51. 2 155. 9 19,2 none none 4,4 0,7 1,7 - 31,0 -5,6 1,7 11,8 3,6 48,1 5,5 2,2 3. 3 49. 3 155,2 17,7 none none 3. 9 0,6 1,6 - 32,9 -3. 6 2,4 20,3 6,3 50,8 6,8 3,4 3,4 50,7 154,4 20,7 none none 1. 5 0,2 0,4 - (9/97) (9/97) A3 A- 03/95 09/95 31 31 (187) (181) 03/95 09/95 43 42 (135) (135) 47. 9 49. 2 A3 A- 03/96 09/96 33 32 (178) (178) 03/96 09/96 41 40 (135) (135) 50. 8 52. 2 A3 A- 03/97 09/97 35 33 (179) (180) 03/97 09/97 39 40 (135) (135) 52. 2 52. 9 (1) (2) (2) (3) Explanatory notes for country-risk indicators -55- Standard footnotes (1 ) (2) (3) Includes only EIB and BOP loans (outstanding disbursements) to CEEC, NIS and MED The higher the ranking number, the lower the creditworthiness of the country. Countries are rated on a scale of zero to 100; 100 represents the least chance of default. A given country may improve its rating and still fall in the ranking if the average global rating for all rated countries improves. Abbreviations and English words used in tables S&P Standard and Poor's CCFF= Compensatory and Contingency Financing Facility EFF= SBA = STF= Extended Financing Facility Stand-By Arrangement Systemic Transformation Facility est. = n. a. = prelim. = estimates not available preliminary c 56 ISSN 0254-1475 COM(98) 252 final DOCUMENTS EN 01 09 17 Catalogue number : CB-CO-98-271-EN-C ISBN 92-78-35341-8 Office for Official Publications of the European Communities L-2985 Luxembourg