Aid to Nicaragua

Upon assuming office in April 1990, the democratically elected government of Nicaraguan President Chamarro confronted an economy plagued by hyperinflation, high unemployment, and dire social needs. The United States recently provided almost $500 million in economic support to help Nicaragua overcome its economic and social problems. It plans to give another $142 million in fiscal year 1992 and about $200 million annually through fiscal year 1996. This report discusses the effectiveness of and lessons learned from U.S. assistance to Nicaragua.

GAO found that: (1) the Agency for International Development's (AID) balance-of-payments support to Nicaragua totalled $265.5 million with $75 million for debt payment assistance to international financial institutions; (2) AID financial assistance relies on implementation of predetermined economic reforms, and AID Nicaraguan bank deposits have accrued $6.7 million in interest; (3) preconditioned reforms include changing to a market economy, unifying exchange rates, stabilizing public revenues, and reducing fiscal debt; (4) U.S. assistance contributed to the reduction of Nicaraguan inflation and the resolution of $303.2 million in debts to the World Bank and International Monetary Fund (IMF); (5) future assistance from IMF and other banks totals $450 million; (6) additional investment promotion and economic growth measures involve settling property disputes and resolving political conflicts; (7) continued U.S. assistance depends upon the settlement and guarantee of rights of an estimated 150 outstanding expropriated U.S. property claims; (8) 9 of 18 projects were immediate-impact projects involving providing schoolbooks and pharmaceuticals; (9) the remaining 9 long-term projects involve natural resource management and strengthening democratic institutions; (10) settlement of the estimated 20,000 former resistance members and their dependents was delayed due to problems in demobilization and repatriation, the government's failure to provide enough land, and an increase of beneficiaries to 117,500; and (11) U.S. aid for the resettlement of resistance members totalled $28.8 million, with an additional $10.9 million for program expansion and $2.8 million to mediate disputes between the resistance and the government.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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