Annexes to COM(2023)53 - Amendment of DECISION (EU) 2022/563 as regards the amount of macro-financial assistance to Moldova - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2023)53 - Amendment of DECISION (EU) 2022/563 as regards the amount of macro-financial assistance to Moldova. |
|---|---|
| document | COM(2023)53  |
| date | June 14, 2023 |
1.5.3.Lessons learned from similar experiences in the past
Macro-financial assistance operations in partners are subject to ex-post evaluation. Evaluations conducted thus far (on completed MFA programmes), concluded that MFA operations do contribute, albeit sometimes modestly and indirectly, to the improvement of the external sustainability, the macroeconomic stability, and the achievement of structural reforms in the partner. In most cases, MFA operations had a positive effect on the balance of payments of the partner and helped to relax their budgetary constraints. They also led to somewhat higher economic growth.
1.5.4.Compatibility with the Multiannual Financial Framework and possible synergies with other appropriate instruments
Compatibility with the Multiannual Financial Framework
In the 2021-2027 multiannual financial framework, the provisioning of MFA loans will be covered by the External Action Guarantee within Global Europe (Neighbourhood, Development and International Cooperation Instrument). The (indicative) lending capacity foreseen for MFA is sufficient to cover this operation as well as other MFA operations being implemented.
Possible synergies with other appropriate instruments
The EU is among the major donors to Moldova, supporting their economic, structural and institutional reforms as well as civil society. EU financial support to Moldova over 2014-2020 amounted to EUR 518,15 million (the 2021-2027 Multiannual Indicative Programme (MIP), which is under preparation). In this context, this MFA operation complements other EU external actions or instruments used to support Moldova. It is also aligned with the new Global Europe instrument (Neighbourhood, Development and International Cooperation instrument) and the instrument for Pre-accession assistance (IPA-III) for 2021-2027.
The key value added of the MFA in comparison to other EU instruments would be to help create a stable macroeconomic framework, including by promoting a sustainable balance-of-payments and budgetary situation, and an appropriate framework for advancing structural reforms. MFA does not provide regular financial support and is to be discontinued as soon as the partner’s external financial situation has been brought back onto a sustainable path.
MFA would also be complementary to interventions envisaged by the international community, in particular the adjustment and reform programmes supported by the IMF and the World Bank.
1.5.5.Assessment of the different available financing options, including scope for redeployment
By using loans, this MFA operation increases the effectiveness of the EU budget through the leverage effect and provides for the best cost-efficient option.
The Commission is empowered to borrow funds from capital markets on behalf of both the European Union and Euratom using the guarantee of the EU budget. The aim is to obtain funds from the market at the best available rates due to the top credit status (AAA-rated by Fitch, Moody's and DBRS, AA by S&P, all with stable outlook) of the EU/Euratom and then on-lend them to eligible borrowers in the context of lending under the EFSM, BoP, MFA and to Euratom projects. Borrowing and lending is conducted as a back-to-back operation, ensuring that the EU budget does not take any interest rate or foreign exchange risk. The target of obtaining funds at the best available rates for borrowing and lending activities has been achieved because those rates are in line with peer institutions (EIB, EFSM, and ESM).
1.6.Duration and financial impact of the proposal/initiative
X limited duration
– in effect from 2022 to 2024
– Financial impact from 2022 to 2024 for commitment appropriations and from 2022 to 2025 for payment appropriations.
unlimited duration
–Implementation with a start-up period from YYYY to YYYY,
–followed by full-scale operation.
1.7.Management mode(s) planned 4
X Direct management by the Commission
–X by its departments, including by its staff in the Union delegations;
– by the executive agencies
Shared management with the Member States
Indirect management by entrusting budget implementation tasks to:
– third countries or the bodies they have designated;
– international organisations and their agencies (to be specified);
– the EIB and the European Investment Fund;
– bodies referred to in Articles 70 and 71 of the Financial Regulation;
– public law bodies;
– bodies governed by private law with a public service mission to the extent that they are provided with adequate financial guarantees;
– bodies governed by the private law of a Member State that are entrusted with the implementation of a public-private partnership and that are provided with adequate financial guarantees;
– persons entrusted with the implementation of specific actions in the CFSP pursuant to Title V of the TEU, and identified in the relevant basic act.
–If more than one management mode is indicated, please provide details in the ‘Comments’ section.
Comments
2. MANAGEMENT MEASURES
2.1.Monitoring and reporting rules
Specify frequency and conditions.
The actions to be financed under this Decision will be implemented under direct management by the Commission from headquarters and with support of the Union delegations.
This assistance is of macroeconomic nature and its design is consistent with the IMF-supported programme. The monitoring of the action by the Commission services will take place on the basis of progress in the implementation of the IMF arrangement and the implementation of specific reform measures to be agreed with the authorities of the partners in a Memorandum of Understanding with a frequency that is consistent with the number of instalments (See also point 1.4.4).
2.2.Management and control system(s)
2.2.1.Justification of the management mode(s), the funding implementation mechanism(s), the payment modalities and the control strategy proposed
The actions to be financed under this Decision will be implemented under direct management by the Commission from headquarters and with support of the Union delegations.
MFA disbursements are dependent on successful reviews, and tied to the fulfilment of conditionality attached to each operation. The implementation of conditions is closely monitored by the Commission, in close coordination with the Union Delegations.
2.2.2.Information concerning the risks identified and the internal control system(s) set up to mitigate them
Risks identified
There are fiduciary, policy and political risks related to the proposed MFA operations.
There is a risk that the MFA could be used in a fraudulent way. As MFA is not designated to specific expenses (contrary to project financing, for example), this risk is related to factors such as the general quality of management systems in the partner’s Central Bank and the Ministry of Finance, administrative procedures, control and oversight functions, the security of IT systems and the appropriateness of internal and external audit capabilities.
A second risk stems from the possibility that the partner will fail to service the financial liabilities towards the EU stemming from the proposed MFA loans (default or credit risk), which could be caused for example by a significant additional deterioration of the balance of payments and fiscal position of the partner.
Internal control systems
The macro-financial assistance will be liable to verification, control, and auditing procedures under the responsibility of the Commission, including the European Anti-Fraud Office (OLAF), and by the European Court of Auditors as foreseen by Article 129 of the Financial Regulation
Ex-ante: Commission assessment of management and control system in the beneficiary country. For each beneficiary country, an ex-ante operational assessment of the financial circuits and control environment is carried out by the Commission, if necessary, with technical support from consultants. An analysis of accounting procedures, segregation of duties and internal/external audit of the Central bank and the Ministry of Finance are carried out to ensure a reasonable level of assurance for sound financial management. Should weaknesses be identified, they are translated into conditions, which have to be implemented before the disbursement of the assistance. Also, when needed, specific arrangements for payments (e.g. ring-fenced accounts) are put in place.
During implementation: Commission checks of periodic partner declarations. The payment is subject to (1) monitoring by DG ECFIN staff, in close coordination with the EU Delegations and with the external stakeholders, like the IMF, of the implementation of the agreed conditionalities, and (2) the normal control procedure provided for by the financial circuit (model 2) used in DG ECFIN, including the verification by the financial unit of the fulfilment of conditions attached to the disbursement of the assistance mentioned above. The disbursement relating to MFA operations may be subject to additional independent ex-post (documentary and/or on-the-spot) verifications by officials of the ex-post control team of the DG. Such verifications may also be initiated at the request of the responsible AOSD. Interruptions and suspensions of payments, financial corrections (implemented by Commission), and recoveries may be practiced where needed (it has not occurred so far), and are explicitly foreseen in the financing agreements with the partners.
2.2.3.Estimation and justification of the cost-effectiveness of the controls (ratio of "control costs ÷ value of the related funds managed"), and assessment of the expected levels of risk of error (at payment & at closure)
The control systems in place, such as the ex-ante operational assessments or the ex-post assessments, ensured an effective error rate for the MFA payments of 0%. There are no known cases of fraud, corruption or illegal activity. MFA operations have a clear intervention logic, one that allows the Commission to evaluate their impact. The controls enable the confirmation of assurance and of attainment of policy objectives and priorities.
2.3.Measures to prevent fraud and irregularities
Specify existing or envisaged prevention and protection measures, e.g. from the Anti-Fraud Strategy.
To mitigate the risks of fraudulent use several measures have been and will be taken:
First, the Loan Agreement comprises of a set of provisions on inspection, fraud prevention, audits and recovery of funds in case of fraud or corruption. It is further envisaged that a number of specific policy conditions will be attached to the assistance, including in the area of public finance management, with a view to strengthening efficiency, transparency, and accountability. Also, the assistance will be paid to a specific account of the Central Bank of the partner.
Moreover, in line with the requirements of the Financial Regulation, the Commission services have carried out an Operational Assessment of the financial and administrative circuits of Moldova to ascertain that the procedures in place for the management of programme assistance, including MFA, provide adequate guarantees. The assessment was carried out in 2020, and covers areas such as budget preparation and execution, public internal financial control, internal and external audit, public procurement, cash, and public debt management, as well as the independence of the central bank. Developments in that area will be further closely monitored by the EU Delegations in the respective partner. The Commission is also using budget support assistance to help the respective partners improve their PFM systems, and these efforts are strongly supported by other donors.
Finally, the assistance will be liable to verification, control and auditing procedures under the responsibility of the Commission, including the European Anti-Fraud Office (OLAF), and the European Court of Auditors as foreseen by Article 129 of the Financial Regulation.
3. ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE
3.1.Heading(s) of the multiannual financial framework and expenditure budget line(s) affected
·Existing budget lines
In order of multiannual financial framework headings and budget lines.
| Heading of multiannual financial framework | Budget line | Type of expenditure | Contribution | |||
| Number | Diff./Non-diff. 5 | from EFTA countries 6 | from candidate countries 7 | from third countries | within the meaning of Article 21(2)(b) of the Financial Regulation | |
| 14.02.01.70.06 [MFA loans – EAG] | Diff. | NO | NO | NO | NO | |
| 14.20.03.01 [MFA Grants] | Diff. | NO | NO | NO | NO |
·New budget lines requested – Not applicable
3.2.Estimated financial impact of the proposal on appropriations
3.2.1.Summary of estimated impact on operational appropriations
– The proposal/initiative does not require the use of operational appropriations
–X The proposal/initiative requires the use of operational appropriations, as explained below:
EUR million (to three decimal places)
| Heading of multiannual financial framework | 6 | Heading 6 - 'Neighbourhood and the World' |
| DG: ECFIN | Year 2021 | Year 2022 | Year 2023 | Year 2024 | Year 2025 | TOTAL | ||
| □ Operational appropriations | ||||||||
| Budget line 8 14.02.01.70.06 [MFA loans – EAG] | Commitments | (1a) | 10.8 | 9 | 19.8 | |||
| Payments | (2a) | 10.8 | 9 | 19.8 | ||||
| Budget line 14.20.03.01 [MFA Grants] | Commitments | (1b) | 30 | 45 | 75 | |||
| Payments | (2b) | 20 | 55 | 75 | ||||
| Appropriations of an administrative nature financed from the envelope of specific programmes 9 | ||||||||
| Budget line 14.20.03.01 | (3) | 0.15 | 0.15 | |||||
| TOTAL appropriations for DG ECFIN | Commitments | =1a+1b +3 | 40.8 | 54 | 0.15 | 94.95 | ||
| Payments | =2a+2b +3 | 30.8 | 64 | 0.15 | 94.95 |
□ TOTAL operational appropriations | Commitments | (4) | 40.8 | 54 | 94.8 | |||
| Payments | (5) | 30.8 | 64 | 94.8 | ||||
| □ TOTAL appropriations of an administrative nature financed from the envelope for specific programmes | (6) | 0.15 | 0.15 | |||||
| TOTAL appropriations under HEADING 6 of the multiannual financial framework | Commitments | =4+ 6 | 40.8 | 54 | 0.15 | 94.95 | ||
| Payments | =5+ 6 | 30.8 | 64 | 0.15 | 94.95 |
If more than one operational heading is affected by the proposal / initiative, repeat the section above: (EUR million (to three decimal places))
| Heading of multiannual financial framework | 7 | Heading 7 – ‘European public administration’ |
| DG: ECFIN | Year 2021 | Year 2022 | Year 2023 | Year 2024 | Year 2025 | TOTAL | ||
| Human Resource | 0.034 | 0.044 | 0.044 | 0.011 | 0.011 | 0.144 | ||
| Other administrative expenditure | 0.020 | 0.020 | 0.040 | |||||
| TOTAL appropriations under HEADING 7 of the multiannual financial framework | Appropriations | 0.034 | 0.064 | 0.064 | 0.011 | 0.011 | 0.184 | |
| (Total commitments = Total payments) | 0.034 | 0.064 | 0.064 | 0.011 | 0.011 | 0.184 |
This section should be filled in using the 'budget data of an administrative nature' to be firstly introduced in the Annex to the Legislative Financial Statement (Annex V to the internal rules), which is uploaded to DECIDE for interservice consultation purposes.
| Year 2021 | Year 2022 | Year 2023 | Year 2024 | Year 2025 | TOTAL | |||
| TOTAL appropriations under HEADINGS 1 to 7 of the multiannual financial framework (Reference amount) | Commitments | =4+ 6 | 0.034 | 40.864 | 54.064 | 0.011 | 0.161 | 95.134 |
| Payments | =5+ 6 | 0.034 | 30.864 | 64.064 | 0.011 | 0.161 | 95.134 |
3.2.2.Estimated output funded with operational appropriations
Commitment appropriations in EUR million (to three decimal places)
3.2.3.Summary of estimated impact on administrative appropriations
–X The proposal/initiative requires the use of appropriations of an administrative nature, as explained below:
EUR million (to three decimal places)
| Year 2021 | Year 2022 | Year 2023 | Year 2024 | Year 2025 | TOTAL |
| HEADING 7 of the multiannual financial framework | ||||||
| Human resources | 0.034 | 0.044 | 0.044 | 0.011 | 0.011 | 0.144 |
| Other administrative expenditure | 0.020 | 0.020 | 0.040 | |||
| Subtotal HEADING 7 of the multiannual financial framework | 0.034 | 0.064 | 0.064 | 0.011 | 0.011 | 0.184 |
| Outside HEADING 7 12 of the multiannual financial framework | ||||||
| Human resources | ||||||
| Other expenditure of an administrative nature | ||||||
| Subtotal outside HEADING 7 of the multiannual financial framework |
| TOTAL | 0.034 | 0.064 | 0.064 | 0.011 | 0.011 | 0.184 |
The appropriations required for human resources and other expenditure of an administrative nature will be met by appropriations from the DG that are already assigned to management of the action and/or have been redeployed within the DG.
3.2.3.1.Estimated requirements of human resources
–X The proposal/initiative requires the use of human resources, as explained below:
Estimate to be expressed in full time equivalent units
| Year 2021 | Year 2022 | Year 2023 | Year 2024 | Year 2025 | ||
| □ Establishment plan posts (officials and temporary staff) | ||||||
| 20 01 02 01 (Headquarters and Commission’s Representation Offices) | 0.100 | 0.250 | 0.150 | 0.010 | 0.100 | |
| 20 01 02 03 (Delegations) | ||||||
| 01 01 01 01 (Indirect research) | ||||||
| 01 01 01 11 (Direct research) | ||||||
| Other budget lines (specify) | ||||||
| □ External staff (in Full Time Equivalent unit: FTE) 13 | ||||||
| 20 02 01 (AC, END, INT from the ‘global envelope’) | 0.200 | 0.350 | 0.200 | 0.010 | 0.100 | |
| 20 02 03 (AC, AL, END, INT and JPD in the delegations) | ||||||
| XX 01 xx yy zz 14 | - at Headquarters | |||||
| - in Delegations | ||||||
| 01 01 01 02 (AC, END, INT - Indirect research) | ||||||
| 01 01 01 12 (AC, END, INT - Direct research) | ||||||
| Other budget lines (specify) | ||||||
| TOTAL | 0.300 | 0.600 | 0.350 | 0.020 | 0.200 |
XX is the policy area or budget title concerned.
The human resources required will be met by staff from the DG who are already assigned to management of the action and/or have been redeployed within the DG, together if necessary with any additional allocation which may be granted to the managing DG under the annual allocation procedure and in the light of budgetary constraints.
Description of tasks to be carried out:
| Officials and temporary staff | Director Dir. D: Supervise and manage the operation, liaise with Council and Parliament for the adoption of the Decision and the approval of the Memorandum of Understanding (MoU), negotiate the MoU with the authorities of Moldova, review reports, lead missions and assess progress with conditionality compliance. HoU/DHoU Dir. D: Assist the Director in managing the operation, liaising with Council and Parliament for the adoption of the Decision and the approval of the MoU, negotiating with the Moldovian authorities the MoU and Loan Facility Agreement (together with DG BUDGET), reviewing reports and assessing progress with conditionality compliance. DG BUDGET (Units E1, E3 under the supervision of the Director): Prepare the Loan Facility Agreement (LFA), negotiate it with the authorities of Moldova and have it approved by the responsible Commission services and signed by both parties. Follow up the entry into force of the LFA. Prepare the Commission decision(s) on the borrowing transaction(s), follow up the submission of the Request(s) for Funds, select the banks, prepare and execute the funding transaction(s) and disburse the funds to Moldova. Carry out the back-office activities to follow up the reimbursement of the loan(s). Prepare the corresponding reports on these activities. |
| External staff | Desk economists, MFA Sector (Dir. D): Prepare the Decision and MoU, liaise with the authorities and the IFIs, conduct review missions, prepare Commission staff reports and Commission procedures related to the management of the assistance, liaise with external experts for the operational assessment and the ex-post evaluation. |
3.2.4.Compatibility with the current multiannual financial framework
The proposal/initiative:
–X can be fully financed through redeployment within the relevant heading of the Multiannual Financial Framework (MFF).
3.2.5.Third-party contributions
The proposal/initiative:
–X does not provide for co-financing by third parties
3.3.Estimated impact on revenue
–X The proposal/initiative has no financial impact on revenue.
(1) Decision (EU) 2022/563 of the European Parliament and of the Council of 6 April 2022 providing macro-financial assistance to the Republic of Moldova (OJ L 109, 8.4.2022, p. 6).
(2) ABM: activity-based management; ABB: activity-based budgeting.
(3) As referred to in Article 54(2)(a) or (b) of the Financial Regulation.
(4) Details of management modes and references to the Financial Regulation may be found on the BudgWeb site: https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx
(5) Diff. = Differentiated appropriations / Non-diff. = Non-differentiated appropriations.
(6) EFTA: European Free Trade Association.
(7) Candidate countries and, where applicable, potential candidates from the Western Balkans.
(8) According to the official budget nomenclature.
(9) Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research.
(10) Outputs are products and services to be supplied (e.g.: number of student exchanges financed, number of km of roads built, etc.).
(11) As described in point 1.4.2. ‘Specific objective(s)…’
(12) Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research.
(13) AC= Contract Staff; AL = Local Staff; END= Seconded National Expert; INT = agency staff; JPD= Junior Professionals in Delegations.
(14) Sub-ceiling for external staff covered by operational appropriations (former ‘BA’ lines).