Defense Trade:

Status of the Defense Export Loan Guarantee Program

NSIAD-99-30: Published: Dec 21, 1998. Publicly Released: Jan 13, 1999.

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Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) Defense Export Loan Guarantee (DELG) Program, focusing on: (1) the level of program activity to date; (2) the program's financial status; (3) other sources of financing available to borrowing countries; (4) comparing DELG Program characteristics with other U.S. government export financing programs; and (5) examining issues related to the planned fiscal year 1999 transfer of DELG Program responsibilities within DOD.

GAO noted that: (1) since its implementation in 1996, the DELG Program has guaranteed one loan and has not generated enough revenue in fees to cover its operations; (2) the program's ability to attract future activity to generate sufficient revenue for continued operations is uncertain, since countries have other sources that offer financing at a lower cost; (3) further, the availability of loan guarantees is one of numerous factors that affect a country's decision to purchase U.S. defense exports; (4) unlike the DELG Program, other U.S. government-administered programs that offer direct loans or guarantees for defense-related items are designed to operate with U.S. government subsidies, which reduce financing costs to the purchasing countries; (5) decisions on the scope and nature of continued DELG operations pose a challenge to DOD; (6) a report on program operations and any recommended changes has not been submitted to Congress, as required by law; (7) in addition, the DELG Program has not been transferred within DOD as originally planned under the Defense Reform Initiative; and (8) uncertainty about future program responsibility may also be hampering day-to-day operations.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The DELG program is inactive and no loans have been issued since the report was published. DOD has not proposed any legislative changes or taken any actions to make the program viable.

    Recommendation: The Secretary of Defense should ensure that the required report to Congress provides a cost-benefit analysis of the DELG program.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: The DELG program is inactive and no loans have been issued since the report was published. DOD has not proposed any legislative changes or taken action to make the program viable.

    Recommendation: The Secretary of Defense should clarify responsibility for staffing, managing, and providing resources for the program.

    Agency Affected: Department of Defense

 

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