Military Loans: Repayment Problems Mount as Debt Increases
NSIAD-86-10
Published: Oct 30, 1985. Publicly Released: Dec 02, 1985.
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Highlights
Pursuant to a congressional request, GAO examined the repayment records of countries receiving loans under the U.S. foreign aid programs, to determine: (1) the status of the Guaranty Reserve Fund set up to back the loans; (2) how foreign governments repay the loans; and (3) how U.S. military aid shifted from mostly market rate loans to mostly outright grants and concessional interest rate loans.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| In the event the administration submits another budget proposal for permanent authorization and appropriation authority, Congress should consider such action only in conjunction with actions to rescind future guaranteed loan authority under the Arms Export Control Act. | Congress is not considering any action to provide the authority which would trigger this recommendation. Therefore, this recommendation should not be continued as open. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of State | The Secretary of State should: (1) reassess the Guaranty Reserve Fund's current cash needs and provide the results of this needs assessment to Congress in order that it may consider these needs along with the Administration's recommendations for reimbursing the fund, including any future proposal for permanent authority; and (2) reserve a portion of the funds authorized for loan credits, if justified by the needs assessment, to cover potential defaults and rescheduled debt. |
The Administration's report to Congress complies with this recommendation. The Fund's cash needs will be met through FY 1987. Also, five alternative approaches are provided for reimbursing the Fund, all of which propose permanent authorization and appropriation budget authority. Since cash needs are deemed adequate, it is not necessary to reserve funds for potential defaults.
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Topics
Appropriated fundsAuthorizing legislationForeign economic assistanceForeign military salesGovernment guaranteed loansGovernment liability (legal)GrantsLoan defaultsLoan repaymentsPermanent budget authority