Legislative Changes Urged in Loan Program of the Agency for International Development

ID-76-80: Published: Jan 5, 1978. Publicly Released: Jan 5, 1978.

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The Loan Program of the Agency for International Development (AID) consists of foreign economic assistance lending activities; AID has been making and administering loans to foreign countries since 1961. The loans are repayable over periods of up to 40 years, including 10-year grace periods before repayment, and have variable interest rates which are generally low--some less than 1%.

Since 1971, AID has experienced increased problems in collecting both the principal and interest due on its loans. These problems have occurred primarily because borrower countries lack the ability to pay in accordance with their loan agreements. Collection problems have generally been resolved by adding uncollected interest to the loan balance and rescheduling principal due dates to defer payments. By June 30, 1975, borrowers in countries owing $9.3 billion in dollar-repayable loans had missed payments on loans having unpaid balances totalling $5.4 billion. Four countries--India, Pakistan, Chile, and Egypt--required debt relief on all their dollar-repayable loans. Since 1971, with the exception of India, AID has changed its lending pattern but has continued to lend to most countries having problem loans. Questions about the continued need for and age of some loans prompted AID to initiate loan reviews and establish new loan implementation criteria.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should consider amending the Foreign Assistance Act of 1961 to: provide specific authorization for the use of any available loan to make debt relief loans; require the Agency for International Develpment (AID) to prescribe a systematic method of determining annual maximum levels for additional lending to borrowers receiving debt relief loans; and provide an alternative way to alleviate debt repayment problems and preserve a country's ability to obtain additional AID assistance. AID should cancel loans that have remained undisbursed for long periods and rejustify them as new loans when a valid need for the assistance still exists.

 

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