U.S. Development Efforts and Balance-of-Payments Problems in Developing Countries

ID-83-13: Published: Feb 14, 1983. Publicly Released: Feb 14, 1983.

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GAO reviewed U.S. programs designed to assist countries with balance-of-payments problems focusing on: (1) what the United States can contribute to easing the pressures of developing countries' debt burdens while ensuring the most effective and efficient use of limited resources; and (2) what relationship debt rescheduling has to a U.S. bilateral program in the rescheduling country.

The Agency for International Development (AID) administers U.S. balance-of-payments support programs in some developing countries in addition to carrying out the U.S. bilateral development assistance program. AID is faced with the need to balance its development mandate to provide basic human needs with the increased incidence of balance-of-payments difficulties. GAO believes that AID program planners and missions may lack guidance as to which countries and at what point the United States will consider assistance in deteriorating balance-of-payments situations. Since the 1950's, the United States has rescheduled debts of developing countries when they faced imminent default. The United States considers debt rescheduling to be a financial matter with the objective of providing maximum loan repayments to the United States. The United States ties a debt rescheduling agreement to an International Monetary Fund stabilization agreement and seeks maximum debt repayment consistent with the debtor country's economic recovery. Thus, the goals of debt rescheduling are, to some extent, compatible with the goals of development assistance.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Administrator of AID should direct AID missions to develop an action plan for AID to consider, when they determine that a country's balance-of-payments situation is deteriorating to the point of affecting the AID ongoing development assistance effort, taking into account all factors which restrict the agency's role. The plan could include an assessment of whether the AID ongoing projects continue to be appropriate, how they relate to other donor activities, whether the country is following appropriate economic policies, and an estimate of the country's resource needs.

    Agency Affected: United States Agency for International Development

 

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