Financial Condition of the U.S. Export-Import Bank

GAO discussed the financial condition of the Export-Import Bank (Eximbank). GAO qualified its assessment of the fiscal year (FY) 1982 financial statements because it was unable to express an opinion on the adequacy of Eximbank's reserve for contingencies and defaults. Due to a net loss in FY 1982 the reserve decreased, and the risk that it will incur further reductions from future losses remains. Between FY's 1975 and 1982, the reserves increased by 25 percent; in contrast, outstanding commitments increased by 75 percent. GAO stated that it cannot be predicted whether the delinquent, purchased, and prospective loans will eventually be paid or become losses. If they become losses, Eximbank would suffer an additional financial burden from the interest cost for these borrowings. The widening gap between the reserve and Eximbank's outstanding commitments also has been affected by a costly arrangement with Private Export Funding Corporation (PEFCO), a Government-sponsored commercial corporation which raises funds for export financing in the private market using unconditional Eximbank guarantees. The increased cost to be incurred by Eximbank under the PEFCO agreement can be viewed as the difference in the interest rate charged PEFCO for its portion of loans under the agreement and the interest rate at which these loans were guaranteed to the borrowers by Eximbank. This cost cannot be determined until the loans are disbursed. GAO believes that Eximbank's current financial dilemma has intensified to the point where Congress needs to clarify its intent.