Providing Effective Economic Assistance to El Salvador and Honduras: A Formidable Task
NSIAD-85-82
Published: Jul 03, 1985. Publicly Released: Jul 15, 1985.
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Highlights
In response to a congressional request, GAO reviewed U.S. economic assistance programs in El Salvador and Honduras to determine whether: (1) this assistance could be absorbed and administered effectively; and (2) the United States has been able to influence these countries to undertake economic policy reforms to promote long-term stabilization and growth.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| In view of the uncertainties on the extent of congressional support for macroeconomic reform efforts, Congress should provide an explicit statement of the relative importance it attaches to improved economic policies in these countries. | The House Committee on Appropriations, in H.R. 99-747 dated August 5, 1986, expressed concern that AID had released ESF funds even though Honduras had not taken sufficient economic reform measures. The Committee requested a report on economic reform in Honduras before the fiscal year 1987 funds were obligated. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| U.S. Agency for International Development | The Administrator, AID, in consultation with the Secretary of State, should make and present to Congress a detailed analysis of the estimated costs to finance future balance-of-payments deficits in El Salvador and Honduras in the absence of macroeconomic reforms, particularly exchange rate adjustments. |
AID has analyzed El Salvador's and Honduras' balance-of-payments deficits given different policy scenarios. AID presented these analyses to appropriate congressional committees in January 1987.
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| Department of State | The Secretary of State, in cooperation with the Administrator, AID, should initiate interagency discussions to reach more agreement on the degree to which balance-of-payments assistance should be used to influence economic reforms in El Salvador and Honduras. These discussions should include the Department of Treasury, the Office of Management and Budget, and other agencies, such as the Department of Defense, which have responsibility for U.S. programs in these countries. |
Interagency discussions on using U.S. balance-of-payments assistance to influence economic policy reform in El Salvador and Honduras are continuing. An agreement was reached regarding El Salvador in late 1985. AID, State, and other agencies conducted extensive consultations in February 1986 and reached agreement on a U.S. policy reform strategy for Honduras.
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Topics
Balance of paymentsDeficit financingEconomic policiesEconomic stabilizationForeign economic assistanceForeign military assistanceInternational relationsMacroeconomic analysisEconomic assistanceBudget deficit