Eurasian Development Bank

About the Fund

One of the most important initiatives of the member countries of the Eurasian Economic Community (EurAsEC) in response to the recent economic crisis was the establishment of the Anti-crisis Fund (ACF). The decision was taken by the Heads of State of Armenia, Belarus, Kazakhstan, Kyrgyz Republic, Russia and Tajikistan on February 4, 2009 during the meeting of the Interstate Council of the EurAsEC. On June 9, 2009, the Heads of Governments of six states signed the Treaty establishing the Anti-Crisis Fund and the Management Agreement with the Eurasian Development Bank (EDB) giving the EDB the role of ACF funds’ Manager. The fact that the EDB is entrusted to manage the resources of ACF is the recognition of EDB’s role as an effective investment vehicle contributing to the social and economic development of the EurAsEC member states. In December 2009, after the Treaty was ratified by the Parliaments of six member states ACF commenced its operations.

ACF’s main goals are to assist member countries in overcoming the consequences of global financial crisis, to ensure their long-run economic stability and to foster economic integration. The Fund has two main instruments: financial credits and investment loans. Financial credits are granted to finance budget deficits as well as to support balance of payments or national currencies. Investment loans can be used to finance the interstate investment projects. Financial credits are available to central governments only, while investment loans can be provided (if collateralized by a sovereign guarantee, a guarantee of a first-class bank, and/or highly liquid assets) either to ACF member countries or to companies implementing interstate investment projects. All loans are granted within country yearly access limits proportional to gross national income (GNI) per capita.

 ACF country access limits, (25 KB)

As of today, ACF has six members listed above. In spring 2010 other EurAsEC countries were also invited to join. ACF can also finance the investment projects in non-member countries provided that such projects are approved by member countries.

Together the six ACF member countries had contributed US$8.513 billion to the fund with 10% of this sum was invested in cash. If more countries join the size of the ACF may increase to US$10 billion.

The ACF’s top governing body is the Council whose members are the Ministers of Finance of member states. The Council’s decisions are drafted by the Council of Experts where member states are represented by department directors of the Ministries of Finance.

To date, four meetings of ACF Council were held, which have endorsed the fund’s regulatory framework. The Council approved Regulations on the use of ACF funds for providing Financial Credits and Investment Loans; the Regulation on the Management of the Fund’s liquidity and some other important documents. At present EDB is developing its own regulatory documents that detail procedures governing the utilization of ACF funds. Furthermore, EDB will develop policies for procurement, financial management and disclosure as well as environmental and social safeguards. ACF’s regulatory documents are based on the best practices of established International Financial Institutions (IFIs).

On June 18, 2010 ACF Council met in St. Petersburg and approved the first loan of ACF - financial credit in the amount of US$70 million provided to Tajikistan. An Agreement to extend this loan facility to Tajikistan was signed in Dushanbe on 24 July, 2010. The credit was disbursed in a single tranche on 20 August 2010.

The ACF Council’s lending decisions are guided by the following principles. First, all the decisions must rely on meticulous economic, financial and social analysis. Secondly, decisions on individual loans should not be taken in isolation, but must be part of a country’s anti-crisis program as well as of a medium-term strategy of cooperation between a country and the ACF. Finally, transparency and accountability for the use of funds at all stages of project cycle must be ensured. The correct use of funds and the project’s actual implementation stage should be verified by independent audit.

ACF evaluation of a project starts with an application from the member state’s Ministry of Finance. The application should indicate the goals and the anti-crisis potential of the planned project. The application should be sent to the ACF Secretariat in EurAsEC. It will forward the application to relevant Agencies including the ACF Department of the EDB, which will prepare the Evaluation. Then the application is presented to the Council of Experts, which examines it based on the Manager’s Evaluation and drafts the decision for the ACF Council. If the ACF Council’s decision is positive the EDB signs the loan agreement with the borrower, transfers the funds to the latter’s accounts, monitors the project implementation and prepares reports on it for the ACF Council. If the ACF Council sends the application back for revision, the Manager will assist the borrower in finalizing the application.

All ACF loans are repayable, have finite maturities and carry interest. No grant instruments are offered. Loans can be extended in U.S. Dollars or Euros only. New loans are not extended to countries with debt arrears to ACF, its member states and/or to other IFIs. Loans cannot be directly used to refinance government debt or debt service payments. For countries with GNI per capita below $1135 the financial terms comply with the requirements of IMF programs to ensure the long-term sustainability of public debt (grant element of at least 35%). For all other countries interest rates on ACF loans are pegged to the cost of financing of Russia and Kazakhstan on the international capital markets. During the assessment of a particular loan ACF Council may revise the financial terms. Appendices 1 and 2 contain information on ACF’s indicative terms for financial credits and investment loans.

Financial Credits (FCs) may be extended in one or several tranches to the member state’s Ministry of Finance to finance budget deficits or to support balance of payments. Measures supported by FCs should be the part of the borrower’s Anti-crisis program that meets the ACF’s fundamental objectives. FCs can also be used to defend national currencies against speculative attacks. Examples of economic policies supported by financial credits are: improvements in the efficiency and transparency of the budget system and public administration; reduction of risks stemming from quasi-fiscal operations (e.g. activities of state development institutions and SOEs, or subsidization of utility tariffs); reduction of energy losses; and improving the efficiency and targeting of social security programs to soften the effects of the crisis on vulnerable social groups.

ACF’s Investment Loans (ILs) are extended to support international investment projects that have systemic importance for national economies, but cannot obtain financing from commercial sources, EDB itself or from other IFIs. ACF can co-finance the projects in partnership with EDB or with other creditors in case projects cannot be fully financed on market terms. As a priority, ACF will support large-scale investment projects that spur economic integration in the power and infrastructure sectors.

During the ACF Council meetings all the member states agreed that ACF funds should mainly be directed to investment projects. In addition, Kazakhstan and Russia specified that they intend to use ACF loans only to finance investment projects.

Key priorities of ACF will be formulated in its Medium-term Strategy which is currently being developed in close coordination with EDB’s own strategy for 2011-2014. The ACF strategy will also highlight the ACF’s sector priorities which may be different for each of the member states, but generally include power, energy efficiency, transport infrastructure, SME support and the support of innovations.

To ensure that ACF funds are managed efficiently, the minimal loan amount is set at US$30 million for countries with GNI per capita above $5000 and at US$10 million for all other countries.

At present the ACF funds’ Manager is evaluating the two investment applications from Armenia. Two more preliminary requests have been received from Armenia, including the mega-project “North-South Railway” which exceeds Euro 1 billion in size. The Manager has also received a financial credit application from the Kyrgyz Republic. Several preliminary requests for investment loans were sent to the Manager from the governments of Belarus, Kazakhstan, Kyrgyz Republic and Tajikistan. The concept notes for these investment projects are currently prepared for Manager’s consideration.

The ACF funds’ Manager’s activities in the Kyrgyz Republic include the monitoring of the economic conditions and budget needs. The Manager’s experts co-authored the report “Kyrgyz Republic: Reconciliation Reconstruction and Recovery” prepared by the World Bank in July 2010. In addition, the Manager officially attended the Donors’ Conference for the Kyrgyz Republic held in Bishkek on 27th July 2010.

 ACF’s indicative financial terms: financial credits, (30 KB)

 ACF’s indicative financial terms: investment loans., (30 KB)