Options for Achieving Possible Budget Reductions
NSIAD-97-7: Published: Dec 20, 1996. Publicly Released: Jan 10, 1997.
Pursuant to a congressional request, GAO reviewed: (1) how the Export-Import Bank of the United States (Eximbank) spends its program appropriation; (2) program options that the Eximbank may want to consider to reduce the cost of its export financing programs; (3) potential implications of these options; and (4) the nature and extent of Eximbank's involvement in a type of financing known as project financing.
GAO found that: (1) in each of the last 5 fiscal years (FY) 1992 through 1996, the Eximbank has used an average of $750 million of its credit subsidy appropriation to support an average of $13.3 billion in export financing commitments; (2) these appropriations have facilitated exports to areas with important U.S. commercial and strategic interests; (3) high risk markets constituted a relatively small share of the Eximbank's total financing commitments yet absorbed a relatively large share of its subsidy costs in FY 1995; (4) GAO identified two broad options that would allow the Eximbank to reduce subsidies while remaining competitive with foreign export credit agencies (ECA): (a) raising fees for services; and (b) reducing the risks of its programs; (5) both of these options could result in significant reductions in subsidy costs and would allow the Eximbank to continue to operate with reduced federal funding; (6) the specific level of subsidy savings resulting from these program options would be dependent on several factors, including the willingness of exporters and participating banks to absorb increased costs and risks and the reaction of competitor ECAs; (7) the options GAO identified have several trade and foreign policy implications that decisionmakers would need to address before making any changes in the Eximbank's programs; (8) Eximbank officials noted that: (a) any proposed fee increases need to be considered within the broader context of current international efforts to gradually reduce government export finance subsidies; (b) these options could make Eximbank programs less competitive relative to other ECAs; and (c) these options would undermine U.S. government efforts to provide support in some higher-risk markets; (9) the project finance program was created to help U.S. exporters and project lenders compete for contracts for large capital projects in various developing countries; (10) the program has expanded over the past few years and has accounted for an increasing proportion of Eximbank transactions; (11) for FY 1996, project finance deals constituted about 3 percent of the Eximbank's total subsidy costs; (12) although project financing techniques appear to highly leverage available Eximbank resources, Eximbank officials said that this technique is suited only to long-term capital projects that the Eximbank expects to be self-sustaining; and (13) the Eximbank aims to structure its project finance program so as to limit its risks and minimize its budgetary costs.