Summary: GAO reviewed the Agency for International Development's (AID) Housing Guaranty (HG) program to assess the use of the program in an environment of high external debt, balance-of-payment difficulties, and other economic problems in recipient countries. The HG program is the U.S. Government's principal means of providing shelter assistance to developing countries and offers full repayment guaranty of principal and interest to private U.S. lenders for commercial rate loans.
Worldwide economic conditions have adversely affected the HG program. Some countries' loan repayments have consistently been in arrears, and some countries have stopped participating in the program because of high interest rates and economic problems. GAO found that: (1) AID has had difficulty validating host-country income statistics; (2) shelter programs in the countries reviewed depend heavily on subsidies making self-sufficiency elusive; and (3) local currency devaluations in relation to the U.S. dollar and inflation have made cost recovery difficult. Current AID efforts to promote new lending include offering loans for their foreign exchange value, developing creative financial packages, and modifying the requirement for a country to obtain a government guaranteed loan. GAO also found that debt rescheduling is threatening the liquidity of the program's reserve fund and the U.S. Government's contingent liability for program loans has increased to over $1 billion. However, GAO believes that exempting the HG program from reschedulings is not the solution, stating that exemption would undermine the overall effectiveness of the process, establish an undesirable precedent, and would shift costs to the Department of the Treasury.
