Foreign Assistance

U.S. Efforts to Spur Panama's Economy Through Cash Transfers Gao ID: NSIAD-93-56 May 10, 1993

In response to the President's proposals, Congress in 1990 provided nearly $500 million to help revive Panama's ailing economy. Documents at the Agency for International Development (AID), however, do not provide an analytical basis showing how the executive branch justified the size of the total aid package for Panama or the size and composition of the component parts. AID believes that the assistance program has been a success because the Panamanian economy has improved since the program began in mid-1990. Although this large cash infusion probably had an impact, GAO questions whether the U.S. cash grants jump-started the Panamanian economy, especially since 60 percent of the assistance was not disbursed until 1992 or later, well after the economy had begun to rebound.

GAO found that: (1) the Agency for International Development (AID) has not justified the size and composition of Panama's economic aid package with sufficient documentation; (2) although AID believes that the economic assistance program has been a success, the Panamanian economy began recovery before U.S. economic assistance was introduced; (3) AID could not determine the impact of private- and public-sector programs on the Panamanian economy, standard of living, debt, and unemployment due to unspecified target areas, delays in program implementation, and the lack of implementation guidelines; (4) Panama's economy began to recover once political and economic burdens were removed; (5) Panama's gross domestic product was restored to nearly pre-1987 levels and grew by about 9.3 percent in 1991 despite delays in cash grant program implementation; (6) AID needed to thoroughly analyze targeted countries' economies, set economic reform conditions, and withhold funds until conditions were met before providing assistance; and (7) AID assistance could have been effective if private-sector reactivation funds were disbursed after economic reforms were implemented.

Recommendations

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