Foreign Aid

Improvement Needed in Loan Reporting and Administration Gao ID: NSIAD-87-2 October 23, 1986

In response to a congressional request, GAO reported on economic and military loan and grant aid to foreign countries, focusing on the Agency for International Development's (AID) loan management and reporting.

GAO noted that: (1) AID did not adequately consider current income levels or future economic prospects of recipients in establishing loan interest rates and repayment periods; (2) recipients of minimum loan terms did not strictly meet statutory criteria; (3) AID provided minimum interest rates to countries with significantly different per-capita incomes; (4) AID accelerated only one country's loan repayments, and did not accelerate loan repayments for some countries with highly developed economies; (5) a number of loan recipients rescheduled their loans, sometimes repetitively, to avoid being in default and cut off from further aid; (6) in 1985, AID provided new loans to several countries at the same time that they rescheduled the old loans; (7) AID had not determined the collectibility or realizable value of loans in its portfolio, and had written off few loans; (8) loan data AID and other agencies independently submitted to Congress provided much useful information, but reports had varying formats and classifications which hindered program analysis and, in some respects, the information presented was incomplete and misleading; and (9) Congress may not be fully aware of how debt reschedulings have prevented loan defaults and allowed countries to receive further aid, since AID ceased publishing annual program summaries, including financial statements, of its loan operations in 1979.


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