Official export credit agencies have fulfilled their mandate to facilitate and promote national exports through two principal means: channeling financial “subsidies to export credits and providing cover on terms better than those available in the market. The first of these involved explicit, though often opaque, subsidies that had a strong measure of domestic political support. The second was long perceived as a nonsubsidized, even profitable, activity, since with the full faith and credit of government treasuries behind them, agencies could offer insurance for political risk that was potentially too catastrophic for private insurers to handle. The risk itself was perceived to be less, since agencies, as official creditors, were thought to be able to count on eventual, even if delayed, repayment of sovereign credit.

Official export credit agencies have fulfilled their mandate to facilitate and promote national exports through two principal means: channeling financial “subsidies to export credits and providing cover on terms better than those available in the market. The first of these involved explicit, though often opaque, subsidies that had a strong measure of domestic political support. The second was long perceived as a nonsubsidized, even profitable, activity, since with the full faith and credit of government treasuries behind them, agencies could offer insurance for political risk that was potentially too catastrophic for private insurers to handle. The risk itself was perceived to be less, since agencies, as official creditors, were thought to be able to count on eventual, even if delayed, repayment of sovereign credit.

In the 1980s perceptions changed. Budgetary strains in most industrial countries have been accompanied by a declining willingness of electorates to subsidize exports. Reflected in, and reinforced by, adherence to the OECD Consensus by OECD member agencies, this trend has reduced the role of agencies as a channel for financial subsidies. At the same time the prolonged cash flow deficits associated with repeated debt reschedulings have led to doubts about the ultimate profitability of export credit insurance, leading to modifications of accounting practices and pressures to increase revenues and cut costs.26 Agencies have responded by the various steps described in this paper.

Against this background of financial strain, institutional developments are reshaping the world of export credit insurance.

Developments in the OECD Consensus27

To limit the subsidization of exports through export finance, the agencies covered by this study have agreed to be bound by the provisions of the OECD Consensus on officially supported export credits, which have gradually evolved since they were first outlined in 1976. The Consensus establishes guidelines concerning financial terms and also sets minimum grant element requirements for mixed credits. It does not, however, extend to the terms and conditions of insurance and guarantees provided by official agencies and thus does not govern the provision of implicit support through the premium structure.

Consensus guidelines were last strengthened in July 1987. For the richer (Category I) countries, interest rates could be no lower than market-related rates in the relevant currency. For the poorest (Category III) and intermediate (Category II) countries, agencies could still use a fixed spread over an SDR-weighted average of market-related rates (the matrix rate), if that were lower than the market-related rate in the relevant currency. The 1987 reforms also changed the rules governing the use of mixed credits. The required level of concessionality for mixed credits was raised to 30 percent (and further to 35 percent a year later) for Category II countries, and to 50 percent for Category III countries. Mixed credits are not permitted for Category I countries.

No agency reported lower demand for export credit cover as a result of the increase in the minimum matrix interest rates or the abolition of the matrix rates for Category I countries. Although the purpose of the increase in the minimum grant element for mixed credits was to discourage their use, OECD data indicate that the volume of offers has increased. Definitive data on new commitments are not available, and as there may be several competing offers for individual projects, it is difficult to form an assessment of the actual level of activity. Nonetheless, there is a general perception that the increase in the required grant element has not yet led to a decline in mixed credits.

Some agencies indicated that it was not their countries’ policy to provide mixed credits, as resources from development aid budgets are primarily channeled to developmental or humanitarian projects, whereas most mixed credits are directed at investment in infrastructure and capital goods imports. Other agencies, however, said that they were prepared to provide such credits to secure an export contract, if a minimum standard was met in terms of its contribution to the importing country’s overall development.

Several agencies noted that there are a significant number of countries, particularly in Asia, where competition among agencies means that mixed credits are virtually a requirement for securing major export contracts. Concern was also expressed that, as there has been little increase in the aid budgets of most major industrial countries, the share of foreign aid going to support mixed credits has increased. In the process some ODA resources may have been diverted away from noncreditworthy poor countries to those countries, often middle-income, where export credit competition is strongest.

Discussions among the participants in the Consensus on further reform are continuing. Agencies and their guardian authorities indicated that issues for possible consideration include (1) further restrictions on the use of matrix interest rates, perhaps starting with abolition of matrix rates for Category II countries, and a general reconsideration of the existing provisions for interest subsidies; (2) lengthening the maximum repayment periods of conforming credits (particularly for Category I countries) to match the longer maturities now offered by commercial lenders for similar projects; and (3) further tightening the provisions on mixed credits, perhaps defining eligibility more closely in terms of developmental criteria.

Competition from Private Insurers

Over time most agencies have found themselves insuring a declining share of their countries’ exports, as private insurers, commercial banks, and self-insurance by exporters increase their role. In part this reflects the growing proportion of exports going to industrial countries, where these other forms of insurance have always played the largest role, but it also represents a declining share of business in most strong markets. This is limiting the opportunities for agencies to use profits earned from business in strong markets to subsidize losses elsewhere.

A number of private companies offer cover for export credits. Some, such as NCM of the Netherlands and Hermes of Germany, provide cover both as agents of the government for officially supported credits and as private insurers for other credits; but others conduct only private business. Their operations are concentrated on trade between industrial countries, but to a limited extent they also provide cover for trade with developing countries, predominantly in short-term business. In practice it is difficult for private insurance companies to compete with officially supported medium-term export credits where there is a substantial transfer risk. Nonetheless, some private insurers are now willing to provide cover up to perhaps three years for political risk and five for commercial risk.

Commercial banks and other financial institutions involved in trade finance often assume all or part of the risk, and a number of agencies noted increasing competition from banks in the better markets. In particular, agencies mentioned that commercial banks had recently been active in supporting trade with the Soviet Union. For medium- and long-term business with Category I countries, for which interest rate subsidies are not permissible, some banks are prepared to offer longer repayment terms than those permitted under the terms of the OECD Consensus.28

The third form of competition is self-insurance. This is particularly prevalent among companies that sell to buyers in industrial countries where there is little political risk. It is also widely used by companies that sell to established trading partners or subsidiary companies. In such situations, companies may feel able to bear the transfer risk, counting on their well-established commercial links and commitment to a long-term involvement to ensure payment, albeit with some possibility of delay.

Agencies have responded to increased competition in a number of ways. With their more flexible premium structures, they are now able to adjust premiums rapidly in the face of recent developments. They have also developed whole turnover policies, which are designed to prevent competitors from taking only the low-risk business. Some agencies have also invested heavily in information technology. This has improved their access to information on the creditworthiness of importers and has significantly reduced the time required to process individual applications.

Possible Consequences of the Single European Market for Official Export Credit Agencies

With the Single European Act, which took effect July 1, 1987, countries of the European Community have committed themselves to remove all remaining barriers to the free movement of labor, capital, goods, and services within the Community by December 31, 1992. Of particular importance to the activities of the European export credit agencies, the members of the Community are committed to the full liberalization of financial markets29 and the cross-border exchange of services, including insurance services.

The liberalization of the insurance industry will place official export credit insurance agencies from all member states on the same footing. Moreover, changes in regulatory and supervisory provisions will subject state-owned or -operated insurance companies to the same legal and regulatory framework as private companies.

The European agencies in this study broadly agreed that introduction of the unified market in 1992 would have an impact on the operations of the export credit support system in the member states, but they believed the changes would be evolutionary rather than revolutionary. There were diverse views on the likely effect of the Community’s legal framework on the ability of countries to offer official export credit support to national exporters.

For intra-European trade, it seems clear that the Single European Act will prohibit any export credit agency from providing insurance cover to its own nationals on terms more favorable than those it would grant to exporters in other Community countries. These requirements will also reinforce the tendency toward harmonization of cover policy for extra-European trade and may, in some instances, lead to privatization of at least some aspects of agency business. For example, a recent report on the future of the United Kingdom’s ECGD proposes that the short-term operations of the agencies should be split from the medium- and long-term business and that private sector involvement and capital should be introduced to the operation.30

But the same report recommends that the medium-and long-term business of the agency should continue to be conducted as a government department. This reflects the view that agencies will still be free to conduct “national interest” business for extra-European trade. Opinions differ on this question, and some argue that a strict interpretation of the law would require any agency to offer cover to all European exporters on the same terms. Nonetheless, most agencies believe that by judicial interpretation or by amendment of the law, “national interest” support for capital goods exports will continue to be permitted.

All the European agencies agreed, however, that it is likely to become increasingly difficult for agencies to operate national content rules. With the progressive integration of European production and trade, the practical problems of ascertaining the national content of exports may become insurmountable. Thus, although agencies are likely to continue to provide cover for medium- and long-term credits to the better markets, the weakening of the link to promotion of national exports may make agencies increasingly reluctant to extend cover for the more difficult cases, even when there are close traditional and cultural links between the countries. Moreover, as export subsidies would no longer be closely targeted on national exporters, there may be further impetus to reform the OECD Consensus, in particular regarding the use of matrix interest rates.

Some agencies noted that there may be other implications of the introduction of the unified market. The close cooperation and exchange of information on cover policy among official agencies might be affected by an environment in which agencies directly competed with each other. A common European export credit agency might also be created; this has been proposed by the Commission of the European Communities but has not been endorsed by members of the Community.

Appendix I Cover Policy Toward Fourteen Developing Countries

To achieve a better understanding of agencies’ cover policy response in various situations, the staff discussed with 12 agencies and their export credit authorities the evolution of cover policies in a sample of 14 developing countries. The sample reflected both geographical distribution and a wide range of circumstances regarding countries’ external positions and their relations with official creditors.

This section briefly reviews the evolution of export credits and cover policies for these countries. Each case study begins with some remarks on the volume of export credits for the country, both generally and for the private sector, where the data seem reliable enough to permit some conclusions to be drawn. (The shortcomings of the data mean that they need to be interpreted with great caution.31) The review generally summarizes key aspects of the evolution of cover policy up to April/May 1987, as recorded in the last study of officially supported export credits,32 provides a brief overview of export credit agencies’ perceptions of the country’s economic situation over the last two years, and summarizes cover policy at the time of the staff discussions with agencies in the period May–July 1989.

Tables 2 and 3 summarize the stance of cover policies in 1987 and 1989, distinguishing between medium and long term, and short term.33

Table 2.

Stance of Cover Policies (Medium- and Long-Term) for Selected Countries, 1987 and 1989

(In number of agencies recording indicated stance)

article image
Source: The export credit agencies of the 11 countries visited.

Includes cases where only security requirements are imposed.

Includes agencies that consider applications only on a case-by-case basis. As a result, the number of agencies imposing restrictions may exceed the number of restrictions identified in the right-hand portion of the table.

Includes in some cases annual limits on new transactions.

Three agencies are open without restrictions for the private sector.

For one agency, applies to private sector only; restrictions apply to public buyers.

In five cases, off cover only for public sector transactions.

Table 3.

Stance of Cover Policies (Short-Term) for Selected Countries, 1987 and 1989

(In number of agencies recording indicated stance)

article image
Source: The export credit agencies of the 11 countries visited.

Includes cases where only security requirements are imposed.

Includes agencies that consider applications only on a case-by-case basis. As a result, the number of agencies imposing restrictions may exceed the number of restrictions identified in the right-hand portion of the table.

Includes in some cases annual limits on new transactions.

Five agencies are open without restrictions for the private sector.

In one case, restrictions of cover policy apply only for public sector transactions; open with restrictions for private sector transactions.

Open with restrictions for private sector.

As was noted in the main paper, in many instances a “ceiling” is now not so much a restriction as a guideline on general exposure. Agencies are relying more and more on premiums to affect the demand for cover, so that the distinction between open without restrictions and open with restrictions, while perhaps indicative of agencies’ attitude, may not in fact represent a substantive difference in the actual availability of cover.

Charts 47 and 8 indicate, respectively, the evolution of the stock of commitments (as reported by the Berne Union and the BIS-OECD) and the extent of commitments to the private sector (as reported to the OECD by member agencies). All of these series suffer from methodological problems, as discussed in the next Appendix.

Chart 4.
Chart 4.

Algeria, Brazil, Chile, and China: Export Credit Exposure,1 1982–88

(Exchange rate adjusted stocks; in billions of U.S. dollars)

Sources: Berne Union; BIS-OECD; and Fund staff estimates.1 Data do not represent net flows and should be used with caution in light of explanations provided in Appendix II.2 Total commitments, that is, both principal and interest on disbursed and undisbursed credits, including amounts in arrears when reported as unrecovered claims, and arrears on rescheduling agreements.3 Disbursed principal only.
Chart 5.
Chart 5.

Colombia, Côte d’Ivoire, Egypt, and India: Export Credit Exposure,1 1982–88

(Exchange rate adjusted stocks; in billions of U.S. dollars)

Sources: Berne Union; BIS-OECD; and Fund staff estimates.1 Data do not represent net flows and should be used with caution in light of explanations provided in Appendix II.2 Total commitments, that is, both principal and interest on disbursed and undisbursed credits, including amounts in arrears when reported as unrecovered claims, and arrears on rescheduling agreements.3 Disbursed principal only.4 Berne Union data for Colombia are not available prior to 1986.
Chart 6.
Chart 6.

Indonesia, Kenya, Mexico, and Nigeria: Export Credit Exposure,1 1982–88

(Exchange rate adjusted stocks; in billions of U.S. dollars)

Sources: Berne Union; BIS-OECD; and Fund staff estimates.1 Data do not represent net flows and should be used with caution in light of explanations provided in Appendix II.2 Total commitments, that is, both principal and interest on disbursed and undisbursed credits, including amounts in arrears when reported as unrecovered claims, and arrears on rescheduling agreements.3 Disbursed principal only.
Chart 7.
Chart 7.

Thailand and Turkey: Export Credit Exposure,1 1982–88

(Exchange rate adjusted stocks; in billions of U.S. dollars)

Sources: Berne Union; BIS-OECD; and Fund staff estimates.1 Data do not represent net flows and should be used with caution in light of explanations provided in Appendix II.2 Total commitments, that is, both principal and interest on disbursed and undisbursed credits, including amounts in arrears when reported as unrecovered claims, and arrears on rescheduling agreements.3 Disbursed principal only.4 Thailand is not covered in the Berne Union quarterly survey.
Chart 8.
Chart 8.

Proportion of Commitments Made to Private Nonguaranteed Buyers, 1983–881

(In percent)

Source: OECD, Secretariat of the Export Credit Group.1 Medium- and long-term commitments with an initial maturity of over one year; includes both insured interest as well as principal.


Algeria is the third largest recipient of export credits among developing countries; at the end of 1988 the disbursed stock amounted to about $11.1 billion. In recent years, the stock of export credits has decreased somewhat, reflecting the decline in the volume of imports in recent years as well as the availability of other sources of finance, with a corresponding decline in the level of commitments reported to the Berne Union (Chart 4).

When Algeria’s external position deteriorated after 1986 because of the weakening of the oil market, several agencies tightened their cover stance. Three agencies moved Algeria to a higher risk category and/or applied higher premiums for medium- and long-term credits, and imposed a variety of other restrictions. Regarding short-term cover, three agencies for some time imposed extended claims-waiting periods geared to avoid claims payouts to exporters arising from frequent administrative delays, but short-term cover policy was otherwise generally unrestricted.

The renewed decline in the world prices of hydrocarbons seriously affected Algeria’s external performance in 1988. The current account, after registering a small surplus in 1987, moved into deficit, in part because a drought necessitated particularly high cereal imports that year. Debt amortization also rose substantially in 1988, requiring higher capital inflows and a further drawdown of reserves. The bunching of debt service obligations continued in 1989. In reaction to these developments, the Algerian authorities adopted an adjustment program supported by the use of Fund resources under a stand-by arrangement.

Export credit agencies were impressed by the authorities’ commitment to adjustment, as evidenced by the authorities’ approach to the Fund. The policy of compressing imports to a level sustainable by export earnings was not seen as favorable to growth, in view of the need for investment expenditures, but was nonetheless considered a sign of the authorities’ determination to avoid debt rescheduling. Agencies had responded to Algeria’s difficulties with increasing caution in granting cover, but all remained open for medium- and long-term as well as short-term business. Agencies recognized that closing cover could precipitate the need for rescheduling. Reflecting the large exposure most agencies have to Algeria, several agencies have limits on total country exposure (in one case, this limit takes the form of a revolving ceiling, whereby new credits can be covered only if sufficient outstanding exposure has been retired) or on the size of individual transactions. Three agencies have reacted to the frequent delays in payments transfers with extended claims-waiting periods for medium-term credits. Short-term cover is generally free of restrictions, aside from the extended claims-waiting periods applied by five agencies and the reduced percentage cover imposed by one agency.

Certain agencies have acceded to Algeria’s request to provide or support the financing with medium-term credits of consumer imports normally financed by short-term credits. Others have been reluctant to do so.


Brazil is the second largest recipient of officially supported export credits in the developing world; at the end of 1988 the disbursed stock was estimated at $11.8 billion. In recent years, there has been little change in the disbursed stock after allowance for the effect of exchange rate changes (Chart 4).

During 1985 and 1986, Brazil suspended a large part of its debt service payments to Paris Club creditors pending a new Paris Club rescheduling. In response, agencies adopted a progressively more restrictive stance of cover policy and by the end of 1986 most were off cover. The rescheduling agreement reached in January 1987 consolidated arrears but made consolidation of 1987 debt service conditional on a midyear policy assessment and satisfactory financing arrangements between Brazil and its bank creditors. One agency reopened without restrictions but most maintained a wait-and-see attitude, pending the midyear appraisal of Brazil’s program, which had not been supported by the use of Fund resources. The 1987 consolidation did not go into effect, however, and by the end of the year most major agencies were off cover for medium term and the others open only on a very restricted basis. Agencies advised Brazil that relaxation of cover policy would not be considered until agreement was reached with the Fund on a program supported by the use of Fund resources, followed by Paris Club rescheduling. Most agencies remained open for short-term cover, however, though in some cases restrictions were applied.

One agency reopened once it was announced in June 1988 that understandings on a program had been reached between Brazil and the Fund, and another agency reopened once the Fund’s Board approved the arrangement in principle. Several other agencies reopened over the following year. During that period, Brazil maintained a strong external performance, but agencies expressed concern at the continued weakness in the internal economy, as reflected in high and rising inflation. Two agencies thus remained closed for medium-term cover pending evidence of an improvement in macroeconomic performance, and all but one of the other agencies maintained restrictions on medium-term cover. These generally took the form of exposure ceilings or transaction limits, but several were also subjecting applications to case-by-case review.

Reflecting Brazil’s good record of servicing short-term debt, all agencies were open for short-term cover, in three cases with restrictions.


The stock of export credits to Chile has increased significantly in recent years, and reached $1.2 billion at the end of 1988, some 40 percent higher than the end-1984 level (after allowance for the estimated effect of exchange rate changes). Since 1986, there has been a sharp increase in the level of agencies’ commitments, which may presage some further increase in the disbursed stock of export credits (Chart 4). A high proportion of export credits has gone to private buyers without a guarantee from the Government (Chart 8).

Since 1985, Chile has successfully implemented a strong adjustment program, its efforts being supported by an unexpectedly strong recovery of copper prices and the consequent improvement in the terms of trade. Inflation has been curbed; fiscal adjustment has been strong; and the exchange rate has continued to be adjusted in line with inflation. By reducing external financing requirements and through various forms of debt buybacks and conversions, Chile has reduced its total outstanding stock of external debt by $2.3 billion between 1985 and June 1989, and its medium- and long-term debt to commercial banks has been reduced by $5.9 billion during the same period.

Chile sought a rescheduling of its commercial bank and official bilateral debt in 1985. In contrast to then standard practice, the request for a rescheduling by official creditors did not adversely affect the cover policy stance of most agencies because of the narrow coverage requested by the Chilean authorities, the excellent debt service record, and the recognition that Chile had approached the Paris Club reluctantly and only at the insistence of its bank creditors. By the end of 1986 Chile’s success in realizing the objectives of its adjustment program had led to a progressive relaxation of most agencies’ restrictions on cover. Only three agencies were closed for medium-term cover, all for noneconomic reasons.

At the further rescheduling in February 1987, Paris Club creditors again viewed favorably the limited coverage of the agreement as well as Chile’s strong record of policy implementation and good payments record. Apart from the three agencies that were off cover in 1986, only one agency suspended cover at the time of the new rescheduling, and that agency reopened after the conclusion of the bilateral agreement. Throughout both reschedulings, short-term cover remained virtually unrestricted because of the solid payments record, and the overall stance of cover for the private sector was generally more liberal, as these debts were not covered by the reschedulings.

All agencies in the present survey indicated that Chile’s successful recovery since 1985 had lowered their perceived risk of providing cover. Several agencies consequently relaxed restrictions on medium-term cover in the last year. By the middle of 1989 all agencies were open, and although most maintained limits on the size of individual transactions or on overall exposure, these were seen more as part of an overall portfolio management strategy rather than as an instrument to actively restrict cover. In only one case is there an annual limit on new business. Two agencies upgraded Chile to a lower risk category in early 1989, with an attendant reduction in insurance premiums, and several others indicated that they would be favorably disposed toward further liberalizing cover policy at the time of their next country review. As for short-term cover, only two agencies had restrictions; these were an extended waiting period and a ceiling on total exposure.


Since 1984 the stock of export credits to China has declined, recovering slightly in 1988 to reach $4.5 billion. This appears to have resulted from the willingness of private lenders to extend new credits without cover from an export credit agency. In 1988 the stock of agencies’ commitments sharply increased with the inception of a number of large projects (Chart 4).

China’s economic development over the last five years has been characterized by consistently high real GDP growth. The economy has shown signs of overheating, with inflation rising to almost 30 percent by the end of 1988. In the early part of 1989, output growth slowed and inflationary pressures abated somewhat. China’s overall external position remained strong in 1988, as heavy foreign borrowing more than offset a deterioration in the current account balance. However, its external position worsened substantially in the first half of 1989, owing to a further widening of the current account deficit and a sharp reduction in net capital inflows. China’s external debt is estimated to have more than doubled since the end of 1985, but it remains low relative to GDP. The debt service ratio has risen to around 10 percent. At present, there is uncertainty regarding the future path of China’s external debt position and its debt service ratio, reflecting in part China’s restricted access to foreign capital since June 1989.

Until recently, agencies maintained a very open stance of cover policy, and export credit flows were largely demand driven. Agencies were also willing to increase support of transactions with the private sector in China, although there remained some problems in distinguishing between private and public sector borrowers and in procuring suitable guarantees. (Most agencies required a guarantee from the Bank of China for medium- and long-term transactions, and only three were open without additional security requirements for this business.) In the aftermath of the political developments in 1989 in China, however, some agencies changed their cover policies. Uncertainty about future developments led most to adopt a more cautious stance in the middle of 1989. In July 1989, after the European Community recommended that member countries suspend cover for new export credits to China, several agencies stopped granting new cover. In December 1989 the Community withdrew its recommendation concerning commercial credits, but maintained its position on providing mixed credits.

Agencies mentioned that China is a major recipient of mixed credits; the level of activity in this area was also adversely affected by political developments.


After doubling between 1983 and 1986, there has been little change in the disbursed stock of export credits to Colombia over the last two years. At the end of 1988 the stock amounted to $3.3 billion (Chart 5).

During 1985–86 Colombia successfully implemented adjustment programs that restored internal and external balances and facilitated a pickup in economic growth to about 5 percent. These results were achieved by tightening financial policies and by devaluing the peso in real effective terms. Although the basic thrust of these policies was maintained in the following years, a sharp decline in coffee prices and supply shocks lowered real GDP growth to 3.7 percent in 1988. With one of the lowest external debt to GDP ratios in Latin America, Colombia has managed its external debt prudently and has not needed to reschedule its debt. Commercial banks have responded favorably by maintaining Colombia’s access to capital markets in these years. In June 1989 a new loan totaling $1.65 billion was obtained from commercial banks.

After 1985, agencies progressively relaxed the moderate restrictions imposed in 1983 and 1984. By mid-1987 ceilings on medium-term commitments were generally not restrictive. Reflecting political uncertainties and continuing difficulties in arranging commercial bank financing, medium-term cover policy in the middle of 1989 was cautious, but not exceptionally tight; one agency tightened existing restrictions, while another lowered its ceiling on total exposure after a particularly bad claims experience. Two agencies mentioned the possibility of moving Colombia to a higher risk category, but most regarded the outlook as quite favorable, in view of its proven record of prudent management, solid policy implementation, and timely debt service payments.

Short-term cover policy has been liberal: one agency had an extended waiting period on short-term transactions, and a second had a low limit on total exposure. Other agencies were open for short-term cover without restrictions.

Côte d’Ivoire

There has been little change in the stock of disbursed export credits to Côte d’Ivoire in recent years; at the end of 1988, the stock amounted to $0.9 billion (Chart 5). Through much of the 1980s, agencies were open for business with private borrowers even when cover for public buyers was severely restricted; this is reflected in the high proportion of new credits extended to nonguaranteed private buyers (Chart 8). These credits tended to have shorter maturities than those granted to public buyers, and as a result, the proportion of the flow to private buyers was significantly higher than the corresponding stock. As cover policy for even private buyers became more restrictive, however, the proportion of new cover for private buyers fell sharply in 1988.

Although serious economic difficulties resulted in significant arrears on Côte d’Ivoire’s public sector debt in late 1983, causing many agencies to suspend cover, improvements in the overall economic situation and the regularization of relations with external creditors by 1986 led export credit agencies to relax cover policy. With multiyear rescheduling arrangements concluded that year between Côte d’Ivoire and its Paris and London Club creditors, it appeared that the country was at the exit phase of its debt-servicing problems. Given the solid implementation of previous bilateral rescheduling agreements, all agencies remained on cover after the Paris Club rescheduling and continued to liberalize restrictions on medium-term cover for the public sector into early 1987. Throughout the period of debt-servicing difficulties, cover policies for the private sector have generally been less restrictive than for the public sector. This reflected the absence of transfer risk, since convertibility is assured through the country’s membership in the West African Monetary Union.

Since 1987 Côte d’Ivoire’s economic performance has been dominated by the decline in world market prices for coffee and cocoa and the accumulation of significant domestic and external payments arrears. By early 1989, all agencies were pessimistic about the country’s situation and prospects, given the disappointing record of policy implementation and the difficulties it had in reaching agreement with the Fund on key policy issues. The poor debt service record since the 1986 reschedulings and the accumulation of external payments arrears cast doubts on Côte d’Ivoire’s ability to support commercial credits.

Reflecting this assessment, cover policy had been progressively tightened over the previous two years, especially for transactions with the public sector. A number of agencies had downgraded the country into higher risk categories; eight agencies were off medium-term cover for public sector borrowers; and the others were open only under restrictions for private buyers. One agency was closed for all short-term cover, while another was open for short term only for the private sector. Others remained open for short term, but subject to restrictions, such as limits on the size of individual transactions, a limit on maturity terms, and a reduction in the percentage of cover.

Although convertibility of the currency had enabled agencies to maintain a generally more open cover stance for private sector transactions, many noted that the overall economic decline had significantly increased the commercial risk element; in addition, government arrears to domestic private enterprises could impair the ability of the latter to meet scheduled external debt service obligations. Thus, most agencies placed some restrictions on cover for private buyers, though only three were off cover entirely.


The stock of export credits to Egypt has increased rapidly in recent years; after allowance for the estimated effects of exchange rate changes, from 1983 to 1988 the stock increased by about 80 percent to $13.2 billion (Chart 5), making Egypt the largest recipient of export credits. During the mid-1980s, some agencies were open for business with private buyers even when there were tight restrictions on new business with public sector borrowers. As a result, a high proportion of new cover was given to private sector buyers without a government guarantee (Chart 8).

Despite the structural weakness of Egypt’s balance of payments, which became more pressing after the decline of world oil prices in late 1985, and the attendant debt-servicing difficulties, most agencies remained on cover through early 1987, reflecting strategic considerations. However, most agencies had begun to tighten cover policies during 1985, primarily through commitment ceilings and security requirements, but also, in two cases, to the extent of going off medium-term cover completely. Restrictions were also applied to short-term cover. For both types of cover, however, strong demand led to significant increases in the exposure of the agencies to Egypt.

By the end of 1986 further deterioration in the external position led to an escalation of arrears and increased claims payments, effectively forcing several of the agencies off cover, though in some cases cover for the private sector was maintained subject to a transfer guarantee. Many agencies rated Egypt in the highest risk category. Some agencies applied restrictions to short-term cover.

In May 1987 the Fund approved a stand-by arrangement for Egypt, which was shortly followed by a Paris Club rescheduling. Agencies remained cautious, but by the end of 1987 most were open for medium-term cover, albeit with restrictions. Egypt’s economy continued to be characterized by severe structural and financial imbalances, however, and cover policies were progressively tightened, particularly after external payments arrears again emerged.

At the middle of 1989, agencies were pessimistic in their evaluation of Egypt’s present and future prospects. Egypt’s record of policy implementation was considered generally weak, and the authorities’ difficulties in reaching agreement with the Fund on important elements of a new adjustment program were interpreted as a sign that the adjustment process would be protracted.

Cover policy stances reflected this negative evaluation. Seven agencies were completely closed for medium-term cover, and one was also off cover for short-term transactions. Where cover was still available, and for short-term transactions in general, premium surcharges and extended waiting periods were imposed, and irrevocable letters of credit or other payments guarantees were required by many agencies. Those agencies still open for cover had imposed transaction and total commitment limits, and some had fixed the maximum credit terms they would support.


After allowing for the estimated effects of exchange rate change, the stock of export credits to India increased by almost 60 percent between 1983 and 1988 to $3.6 billion (Chart 5), one of the largest increases among major recipients of export credits. This increase may reflect, in part, mixed credits channeled through export credit agencies.

Export credit agencies have traditionally maintained a very liberal cover policy stance toward India. As of mid-1987, all agencies were open without restrictions for short-term cover and only two had imposed ceilings on total commitments for medium- and long-term transactions.

In the middle of 1989 agencies regarded India’s economic performance as largely satisfactory and were impressed by the authorities’ policy response to the 1987 drought. They also noted India’s success in promoting exports. However, some expressed concern over the rapidly rising external indebtedness and the shift in its structure toward commercial debt.

Most agencies thus believed a more cautious stance would be appropriate, but cover policies have generally not been significantly tightened. This reflected the relatively low exposure most agencies had to India. One agency, in fact, recently upgraded India to a lower risk category to promote demand. However, two agencies indicated that they did not upgrade India, despite strong recent performance, because of the structural limitations facing the economy, and one agency downgraded India because of its rapidly rising debt. Nonetheless, all but two agencies were completely open for medium-term cover, and these two had nonrestrictive ceilings. Short-term cover was unrestricted except for one agency that maintained a ceiling on total commitments.

Agencies noted that India was a major recipient of mixed credits, particularly in connection with large-scale projects, which make up a significant part of the exposure of several agencies to India. This has tended to circumscribe the nature of agency involvement.

Several agencies indicated an interest in increasing their involvement with private sector buyers, while at the same time noting a general lack of demand. Special governmental facilities have been established in three creditor countries to channel resources to the private sector in the form of (1) a soft money credit line with a nongovernment development bank in India that is affiliated with the World Bank; (2) a credit line facility with the State Bank of India in support of small-scale transactions; and (3) the provision of parallel financing on relatively easy terms for a certain portion of qualified projects, leaving it up to the exporter to find commercial financing for the remainder.


The stock of export credits to Indonesia has declined gradually over the past few years to $6.9 billion (Chart 6). A compression of imports coupled with the availability of other sources of financing has reduced demand for new cover.

Indonesia’s external position weakened with the softening of the oil market in the 1980s, particularly after the sharp decline of oil prices in 1986. The concurrent decline in the dollar relative to other currencies resulted in sizable increases in the dollar value of Indonesia’s debt service. In response to these developments, the authorities implemented strong adjustment policies aimed at increasing the country’s outward orientation and broadening its base beyond the oil sector. Indonesia also instituted stringent controls over new borrowing, particularly by the private sector. The controls included a government-set limit on the total amount of export credits received in any one year. The Government has also favored limited recourse financing of investment expenditure.

Despite the adverse external developments, export credit agencies’ cover policies remained virtually unrestricted, agencies viewed Indonesia’s difficulties as temporary, given its rich resource base and its excellent record of debt service payments and policy implementation. The stance of cover policy also reflected low demand for export credits during this period, partly as a consequence of the Government’s debt management strategy.

In the middle of 1989, agencies expressed some concern over the economy’s high indebtedness and its continuing vulnerability to developments in oil prices. Nonetheless, cover policy for medium- and long-term transactions generally remained open. Although five agencies maintained limits on total exposure or consider transactions above a certain amount on a case-by-case basis, these were long-standing policies seen to be necessitated by the existing high exposure. One agency recently downgraded Indonesia into a higher risk category.

With the exception of two agencies, short-term cover was available without restrictions: restrictions included a 20 percent surcharge on premiums for commercial risk imposed in 1988, a ceiling on overall exposure in view of high demand, and a case-by-case treatment of new applications.

Certain agencies noted that the Indonesian private sector should be able to bear a larger volume of export credits within the context of a prudent debt management strategy. However, most agencies commented on the difficulty of supporting transactions with the private sector. Besides the regulatory constraints imposed on the private sector, the legal system makes the enforcement of contracts and debt collection problematic. Agencies have also found it difficult to obtain suitable credit information on prospective private sector clients.


There has been little change in the disbursed stock of export credits to Kenya in recent years; at the end of 1988, the stock was $0.9 billion (Chart 6).

After tightening cover policy for Kenya in the early 1980s in response to debt-servicing difficulties, and also reflecting some uncertainty over the course of economic policy, export credit agencies gradually eased restrictions following the strong improvement in Kenya’s external position in 1986. Two agencies were open without restrictions for medium- and long-term cover by early 1987, while the other agencies applied relatively flexible ceilings on total commitments or limits on the size of individual transactions. The payments experience was generally quite good; the few claims payments that agencies made were primarily related to commercial risk. Nearly all agencies were open without restrictions for short-term cover.

In response to declining coffee prices and other developments in 1987, the authorities adopted a major stabilization and structural adjustment program, supported by the use of Fund resources. Program implementation in 1988 was very strong and most program targets were realized. In 1989 the Fund continued its support for Kenya’s adjustment efforts with an enhanced structural adjustment facility arrangement.

The pragmatic approach Kenya had taken to solving its problems, particularly in dealing with its external debt, was well regarded by all agencies. The adjustment program was well handled and the country was considered well managed. Future prospects were generally considered favorable, although structural constraints remained. As a consequence, agencies maintained cover policies that were considerably more liberal than for most heavily indebted low-income countries. While most agencies placed Kenya in a high premium category, this primarily reflected the structural limits to its payments capacity. For the same reasons, most agencies maintained ceilings on the value of individual transactions or overall exposure and are cautious about increasing exposure in the face of heavy demand, but have not imposed other forms of restrictions. None of the agencies interviewed had significantly tightened policies since 1987, nor did major alterations appear likely in the near future. Agencies felt that since Kenya was one of the few heavily indebted low-income countries that had avoided rescheduling, it was important to maintain an open stance; but Kenya’s primary requirement was for concessional aid or mixed credits.

Agencies expressed interest in increasing involvement with private sector buyers in Kenya. One agency sought to actively promote support for private sector transactions by establishing a special facility with the commercial banks represented in Kenya.


Mexico, which has continued to receive substantial amounts of export credits in recent years, is now the fourth largest recipient of export credits in the developing world. At the end of 1988 the disbursed stock was $9.8 billion, up by one fourth since 1983 (Chart 6). Since 1985, a large proportion of new commitments has been made to private sector buyers without the support of a government guarantee (Chart 8).

With the improvement in the external position in 1983 and 1984, export credit agencies gradually relaxed the restrictive cover policies introduced in reaction to Mexico’s cessation of payments to bank creditors in mid-1982 and the Paris Club rescheduling of private sector debt in June 1983. However, in response to the sharp drop in oil prices in early 1986, several agencies tightened their cover policy stances, and two suspended medium- and long-term cover. No further agencies suspended cover following the 1986 Paris Club rescheduling of public sector debt; in fact, certain agencies liberalized cover policies to exercise greater flexibility in support of Mexico’s adjustment efforts. This general evolution may, in part, have resulted from an ad hoc meeting of 12 agencies to discuss Mexico’s adjustment program, although the meeting did not lead to an explicit coordination of policies.

By the spring of 1987, all agencies were open for medium-term cover, mostly subject to ceilings on total commitments, occasionally in conjunction with limits on individual transactions. Agencies were very cautious with regard to private sector transactions, however, reflecting the large claims payouts made in the past. Short-term cover for the public sector, but not the private sector, remained relatively unrestricted, with some agencies requiring an irrevocable letter of credit, while others reviewed applications on a case-by-case basis.

Between 1987 and 1989 Mexico made significant gains in tightening fiscal policy and in public sector pricing, resulting in an increase in the primary surplus, despite the fall in oil prices during this period. Consequently, inflation declined sharply, but GDP growth remained sluggish and the external performance weakened, as indicated by the decline in the level of net international reserves. One major agency remained open for all cover without restrictions during this period; this, in fact, had been that agency’s stance since 1982. Other agencies maintained a variety of restrictions on both short-term and medium-term cover, ranging from transactions and exposure ceilings of varying degrees of restrictiveness to reduced percentages of cover, extended waiting periods, and maximum credit terms.

Shortly before the staff’s discussions with export credit agencies in mid-1989, Mexico adopted a comprehensive adjustment program supported by a three-year arrangement under the extended Fund facility. The program was the first to envisage debt and debt service reduction by commercial banks under the newly modified debt strategy. The program was also supported by a further Paris Club rescheduling of part of Mexico’s public sector debt.

Agencies’ views of Mexico’s prospects were much influenced by the country’s significance as the first application of the new debt strategy. Noting that much would depend on the actual outcome of negotiations with the commercial banks, the agencies assumed a wait-and-see attitude. Nevertheless, in view of Mexico’s excellent payments record, all agencies remained open throughout the rescheduling process. Although one agency reacted to reports that Mexico was seeking a change in the cutoff date by administratively delaying decisions on cover applications, most agencies, in fact, moved in the direction of relaxation at the time of the rescheduling. One agency raised its ceiling on medium-and long-term transactions and another placed its ceiling on a revolving basis—both in response to particularly heavy demand for cover. In a third case, the existing premium surcharge was reduced by half, and several other agencies were considering relaxing their cover policy stances.


A rapid increase in the disbursed stock of export credits to Nigeria came to an end in 1986 after the emergence of serious payments difficulties. The $1.3 billion reduction in the recorded stock in 1987–88 to $6.8 billion is likely the result of the omission from the data of some rescheduled loans and arrears; over this period, arrears on or capitalization of interest should have resulted in a significant increase in the stock (Chart 6). Following the emergence of payments difficulties in the early 1980s, agencies continued to provide cover for public buyers even when tight restrictions had been imposed on cover for private buyers. As a result of the widespread accumulation of arrears in 1986, however, most agencies closed for business with private buyers; the few new commitments were made predominantly to public sector buyers (Chart 8).

Although Nigeria began accumulating substantial external payments arrears in 1983, export credit agencies, while tightening cover policies somewhat, did not substantially limit the provision of export credits and cover until 1984; this reflected both a general confidence in the overall prospects of the oil-based economy and the competitive pressure to maintain a presence in this important market. However, by mid-1984, virtually all agencies had suspended new medium-term cover. Some remained open for short-term cover, despite substantial arrears on such credits.

Toward the end of 1986 Nigeria undertook a Fund-supported program. Nigeria ran into difficulties, however, implementing both the program and the subsequent Paris Club rescheduling agreement. The rescheduling was hampered by slow progress in reconciling data and the very protracted process of concluding the bilaterals. Performance under the signed bilaterals was also mixed: some creditors who reached agreement early received full payments; others received partial and untimely payments; and a few received no payments at all.

Cover policies had been incrementally tightened prior to the 1986 Agreed Minute. Many agencies imposed limits on individual transactions and overall exposure, extended claims-waiting periods in view of the persistent payments delays, and reduced percentages of cover for both short- and medium- to long-term transactions. By the middle of 1987 all agencies had suspended medium-term cover.

With a new Fund arrangement approved in February 1989 and the subsequent Paris Club rescheduling, two agencies reopened for medium-term cover, but with stringent security requirements and tight restrictions. In response to the long experience with poor payments and the exceptional restructuring of short-term claims, all but three agencies were also closed for short-term cover, and those three all imposed tight restrictions.

Several agencies indicated they would require a solid record of implementing both adjustment policies and bilateral agreements before they would consider reopening. Certain agencies noted that in any case they would require an exceptional guarantee of repayment before any further involvement in large-scale projects.


Although agencies have been consistently open for business with Thailand in recent years, there has been little change in the stock of disbursed credits, which reached $1.5 billion at the end of 1988 (Chart 7). Thailand has traditionally not been an important market for commercial export credits, partly reflecting the domestic preference for financing that would not create debt.

Thailand’s economy has responded impressively to the adjustment strategy implemented over the last few years. Real GDP growth is projected to continue at over 7 percent a year through the medium term. The current account deficit of 1988, amounting to 3 percent of GDP, was comfortably financed by capital inflows, primarily direct investment, allowing the maintenance of a strong reserve position and continuing improvement of the external debt indicators. Thailand enjoys excellent standing in international credit markets.

The main constraints on the further strengthening of the economy are infrastructural bottlenecks. Continued growth of the economy is expected to require increased use of foreign savings, higher imports, and larger current account deficits. The growth strategy pursued by the authorities focuses on promoting foreign direct investment rather than incurring large external debt and on encouraging private participation.

At the middle of 1989, all agencies with one exception were open for cover without restrictions. The one exception maintains a very large ceiling on both short-term and medium- and long-term transactions and, for the latter, requires a guarantee from the Ministry of Finance or the Bank of Thailand for public sector buyers and a guarantee from the Bank of Bangkok for private sector buyers. All would like to increase their involvement in the Thai market, particularly in the flourishing private sector. Many agencies have upgraded Thailand’s risk rating, lowering premiums and otherwise relaxing the conditions of cover; an increase in autonomous demand has not occurred. However, demand from Thai importers is relatively weak. (One agency indicated that Thai importers seem reluctant to demand foreign financing, preferring to pay higher local financing rates rather than bear a foreign exchange risk.) Several agencies are considering further upgrading the country.


Turkey has received substantial amounts of export credits in recent years; between 1983 and 1988, the disbursed stock increased by over 90 percent to $9.0 billion after allowance for the effect of exchange rate changes (Chart 7).

After the severe payments difficulties of the late 1970s and the early 1980s, Turkey’s economy experienced a strong recovery, characterized by sustained high GDP growth rates, increasing investment ratios, and improvements in domestic savings. Difficulties have been experienced in recent years in restraining inflation and in controlling monetary developments, but these have largely been outweighed by exceptionally strong external performances, particularly an impressive growth in export volumes. As a consequence, the trade and current account balances have improved significantly over the last five years.

With the recovery in economic performance, agencies gradually relaxed their cover policy stances, in certain instances raising ceilings to accommodate strong demand, accepting more exposure on their own accounts, and normalizing the percentage of cover and the claims-waiting periods. By 1987 several agencies had dropped their commitment ceilings or transactions limits, though others continued to restrain the increase in their exposure by means of restrictive ceilings or premium surcharges. Certain restrictions continued to be applied to short-term transactions.

Turkey’s recent debt management policies have been directed at raising new medium- and long-term funds to meet rising repayment obligations stemming from the expiration of grace periods from earlier reschedulings and the extensive reliance, until 1988, on short-term credits. The country has experienced little difficulty in the recent past in filling its external borrowing requirements, as its payments record has been quite good. The agencies surveyed for the present report were impressed by Turkey’s external performance and consistent payments record on the external debt, but some expressed concern about its fiscal performance and persistent high inflation.

Given the strong balance of payments outlook, none of the agencies has significantly tightened cover policies in the recent past: although many restrictions of varying degrees are in force, these are primarily the result of exposure considerations and generally do not reflect a negative evaluation of Turkey’s prospects. The restrictions include limits on transactions and overall exposure. Three export credit agencies have upgraded the country to a lower risk category within the last 12 months, and two others have recently raised the level of their ceilings. Some export credit agencies have reduced the percentage of cover available on transactions that exceed the set limit (in one particular case, the ceiling has been placed on a revolving basis).

Short-term cover is restricted by most agencies, either through the requirement of a payments transfer guarantee or through the imposition of an exposure limit. Only two agencies require an irrevocable letter of credit (in one case, only for private sector buyers), and there is only one reported case of the extension of the claims-waiting period.

Appendix II Technical Note on Export Credit Statistics

In this and past Fund staff papers on officially supported export credits, the quantitative analysis of developments has been based on two statistical sources: the Berne Union and the OECD. The Berne Union quarterly survey includes data on outstanding commitments, unrecovered claims, outstanding offers, and (since mid-1987) new commitments during the last quarter from each member agency for the 40 countries. These data have been provided to the Fund staff on a confidential basis for its use in analyzing various aggregates for individual debtor countries.

The most attractive feature of the Berne Union series is that data are collected in the way most agencies actually keep their books; that is, the concept “commitments” encompasses insured principal and, in most cases, interest on undisbursed as well as disbursed credits. This facilitates consistency in reporting and avoids the errors that can occur when agencies are asked to make estimates of statistical concepts for which they have no hard numbers. The Berne Union data also have the advantage of being a leading indicator, in the sense that they include agencies’ undertakings to insure future exports. The main problem with using the Berne Union numbers is that they are not comparable with other types of debt statistics and do not reflect current financing flows. They also include the insurance of certain transactions that are not exports, for example, performance bonds or insurance against expropriation of machinery used on construction projects; these amounts are, however, relatively inconsequential.

The OECD compiles two types of data on export credits. The first are published in Statistics on External Indebtedness: Bank and Trade-Related Non-Bank External Claims on Individual Borrowing Countries and Territories, which it prepares jointly with the BIS (Table 4). This series was published for the first time in April 1984, and data are available, with breaks in the series, from December 1983. This series reports stocks of export credits on a basis readily comparable with other external debt data, that is, outstanding amounts of disbursed principal only, and brings together the information available to the BIS on banking credits and to the OECD on export credits to provide a breakdown of outstanding amounts among nonguaranteed bank claims, guaranteed bank claims, and nonbank officially supported export credits. However, since the concepts used do not reflect the way most export credit agencies keep their accounts, for certain creditor countries estimation by either the reporting country or the staff of the OECD is required. Another difference between the Berne Union and the BIS-OECD series is that while the former covers only export credit agencies, the latter also covers the U.S. Commodity Credit Corporation, and direct lending by institutions such as the Export-Import Bank of Japan. The coverage is not exhaustive, however; for example, credits from the Canadian Wheat Board are not included.

Table 4.

Outstanding Stocks of Officially Supported Export Credits and Nonguaranteed Bank Credits, 1983–88

(In billions of U.S. dollars; current exchange rate basis)1

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Source: BIS-OECD, Statistics on External Indebtedness: Bank and Trade-Related Nonbank External Claims on Individual Borrowing Countries and Territories (Basle and Paris, various issues).

Reported stock data are converted into dollars using the actual exchange rates prevailing at end of each period. Changes in the stocks reflect both new flows and valuation changes resulting from exchange rate movements between the dollar and other currencies.

The data for the end of 1988 are not comparable to those for earlier years; improvements in the method of collecting the raw data and estimating the stock of disbursed credits have led to a break in the series. Changes in the method of reporting arrears of two creditors increased the outstanding stock by $1.6 billion at the end of 1986. At the same date, some $14 billion of guaranteed claims of French banks were moved to the unguaranteed row. The net effect of these changes is thus to reduce the reported stock of officially supported export credits by $12.4 billion at the end of 1988. Staff calculations suggest that after allowance for this adjustment and the impact of exchange rate changes the disbursed stock of export credits was broadly unchanged in 1988.

In this table, country coverage is limited to Fund members and is in accordance with the Fund’s World Economic Outlook (WEO) definition of developing countries, excluding offshore banking centers. The classification of countries with and without debt-servicing problems also conforms to WEO definitions; in particular, the eight “capital exporting” developing countries are not included in either group. Elsewhere in this paper a broader definition of developing countries is employed.

Nonbank export credits include insured suppliers’ credits and credits extended directly by official export financing institutions. There is no published breakdown of nonbank credits into its two components.

Bank credits with creditor country official guarantee.

Total outstanding bank credits less amounts with creditor country official guarantees; the latter are included here as guaranteed bank credits under the heading of officially supported export credits.

Recent efforts to improve the quality of the BIS-OECD data have introduced a substantial break in the series. Beginning with the estimates for the stock of debt at the end of 1988, improvements in the recording of arrears by EKN and COFACE had the net effect of increasing the estimated stock by $1.6 billion. At the same date, improvements in the quality of reported information and the method of estimating the stock of disbursed credits from the data on total commitments led to a reduction in the estimated stock of bank loans officially guaranteed by COFACE of $14 billion, with no change in the total stock of (guaranteed and unguaranteed) bank loans. The net effect of these changes has been to reduce the estimate of the aggregate stock of disbursed officially supported export credits by $12.4 billion; individual countries affected by these revisions have not been identified explicitly in the BIS-OECD publication. Another substantial break occurred at the end of 1985 when data on officially supported loans of Austrian banks were no longer included in the data on export credits, but were reinsured in the total figure for bank lending; the amount involved was $22 billion.34

The second set of data from the OECD is compiled by the Secretariat of the Export Credit Group. This records the flow of new commitments to support export credits with initial maturities of over one year, and initial maturities of over five years, as well as the stock of officially supported short-term credits.35 These are prepared for the OECD Export Credit Group and are shown in Chart 1.

The data submitted by individual agencies on the flow of new commitments and the stock of existing commitments provide a breakdown between loans to or guaranteed by the government of the borrowing country and loans to private buyers without a government guarantee. The data on private nonguaranteed borrowing should be interpreted with caution; in some cases they could include loans guaranteed by public sector bodies (such as the central bank) in the borrowing country. Moreover, one agency said that it was not able to provide a reliable breakdown of new commitments. No data relating to commitments are published, but some data have been made available to the staff on a confidential basis.

The series on the stock of commitments and the stock of disbursed credits prepared by both the OECD and the Berne Union are affected by variations among agencies in their treatments of arrears and restructured credits. Most agencies include arrears and restructured export credits (including capitalized interest) in their reports to the Berne Union and the OECD. However, neither France nor the United Kingdom, which together account for perhaps one third of total officially supported export credits, has included restructured credits, which are not the responsibility of the agencies, in their reports to the OECD creditor reporting system. Moreover, refinanced credits are not reported by these agencies or those of Japan or Spain to the Berne Union. Together these four agencies account for about half of total officially supported export credits. Not only do restructured credits covered by these agencies drop out of the data, but arrears with countries that have not rescheduled are omitted by some agencies. These variations make the reported numbers for countries that have experienced debt-servicing difficulties particularly difficult to interpret; the data understate the original stock of disbursed credits to the extent that some loans have been transferred to the official sector.

The impact of these difficulties on the data can be seen clearly in the data for Nigeria (Chart 3). In 1987, the disbursed stock of export credits (valued at constant exchange rates) should have increased: in the context of a multilateral rescheduling agreement, official creditors agreed to restructure principal payments and to capitalize interest falling due during 1987, and payments on post-cutoff date debt were negligible. After allowance for the effect of exchange rate changes, however, both Berne Union and OECD data show falls in the recorded stocks over the same period.

Recent efforts to enhance the quality of the data should improve the treatment of arrears by the agencies of France, Spain, and Sweden. Moreover, the French agency has indicated that future returns to both the OECD and the Berne Union will include credits covered by current restructurings; but no adjustment will be made for amounts covered by previous restructuring agreements.

A major improvement in the BIS-OECD data on disbursed stocks has been the publication since 1987 of the estimated impact of exchange rate changes on the stock of export credits. Rough estimates of the impact of exchange rate changes for earlier periods have been supplied to the staff on a confidential basis and have been used to estimate the exchange rate adjusted stocks displayed in Charts 47, and discussed in Appendix I.36 In principle these estimates allow the net effect of transactions on the change in reported stock to be identified, although in practice other factors, such as the treatment of arrears and debt reorganizations, also affect the stock.

The OECD estimates of the impact of exchange rate changes are computed by a standard method that revalues stocks at the beginning of the period using the exchange rates prevailing at the end of the period; the effect of exchange changes is then calculated as the difference between the change in the stock valued at actual exchange rates and the change valued at constant exchange rates. The method should adjust correctly for the impact of exchange rate changes on cover when the currency of the agency’s exposure matches that of the underlying loan, and should provide a partial correction for credits in which the exposure of individual agencies is in a different currency from the underlying credit. Several agencies report the value of their commitments as the size of their contingent liability, which may diverge from the actual value of the loan. The point is best seen from a simple example given below.

An export credit for $100 has been insured in deutsche mark and the insurance contract has specified an exchange rate of DM3 = $1 to be used in calculating any claim payment; Hermes will record a contingent liability of DM300. If the actual exchange rate is DM2 = $1, the contingent liability will be reported as $150, rather than $100. The method of estimating the impact of valuation changes would correct for the effect of exchange rate changes provided that there is no change in the disbursed stock, although the valuation of transactions could be misstated. If half of the loan were amortized (when the prevailing exchange rate continued at DM2 per dollar), the creditor would receive $50, but the estimate of the disbursed stock would fall by $75, reflecting the change in the agency’s contingent liabilities. There are no obvious solutions to this problem, as the data required for a full adjustment are not available. It should be stressed that this is not a pervasive problem; only 10 to 20 percent of the stock of credits are affected. The distortions induced would be important only if current exchange rates differed markedly from the average of historical contract rates.

A further complication in interpreting the OECD and the Berne Union data concerns the treatment of mixed credits. All export credit agencies report the commercial component of mixed credits in their returns. However, the institutional arrangements for providing mixed credits vary between creditor countries. Some countries arrange the financing by mixing concessional loans provided by the national aid agency with commercial export credits to achieve the desired level of concessionality; for these countries the data on export credits covers only the commercial loans. In contrast, other countries, including Sweden and the United Kingdom, provide the whole of the financing in the form of commercial credit supported by cover from the export credit agency, but arrange for some part of the interest to be paid directly to the lender by the aid agency. For these countries the whole of the mixed credit will be reported as an export credit.

Appendix III The Financial Position of Export Credit Agencies

The profit and loss position of export credit agencies’ sovereign business is obscured by uncertainties as to the ultimate recovery of arrears and restructured claims. In light of this, one commonly used indicator of recent developments in export credit agencies’ business is the cash flow37 (Chart 9). But this needs to be interpreted with considerable caution for a number of reasons. First, a cash flow deficit does not necessarily imply an operating loss, as claims payments made under insurance policies may subsequently be recovered in full; second, comparisons among agencies are hampered by differences in the accounting treatment of arrears and restructured debts.38

Chart 9.
Chart 9.

Net Cash Flows of Agencies, 1981–871

(In billions of SDRs)

Source: OECD, Secretariat of the Export Credit Group.1 The net cash flow is premiums plus recoveries less payments of claims.

Data reported to the OECD by 19 official export credit agencies show that a highly negative net cash flow continued in 1987, although there was some improvement from the nadir in 1986. The data show a reduction of the negative net cash flow of almost 6 percent, from SDR 2.7 billion in 1986 to SDR 2.5 billion in 1987. Several agencies recorded improvements in their cash flow, although this was partially offset by deteriorations in the position of some large agencies.

As discussed above, agencies have responded to the developments of the cash flow position by adjusting their premium schedules to reflect better the risk of the covered transactions and by introducing more differentiated policies, although the scope of these changes has varied widely. Nevertheless, total premium income in 1987 was higher than in 1986 for only 4 agencies of the 11 surveyed in this paper, and only in two cases was total premium income in 1987 higher than in 1985. This development primarily reflects the decline in the value of new cover issued: only two agencies registered an increase over 1986 and only in one case was the value of new cover in 1987 higher than in 1985.

Similarly, the net claims position (gross claims payments less recoveries) of all but three of the agencies surveyed deteriorated in 1987, although the experience of the agencies varied. In two cases, the deterioration occurred despite improved recoveries because of larger claims payments, while in five agencies, weaker recoveries were primarily responsible for larger overall net claims.

Recent Developments in the Accounting Practices of Agencies

There have been a number of recent developments in the accounting practices of several of the export credit agencies covered by this study. The first change concerns the treatment of restructured claims; the second, the balance sheet provisions for possible eventual losses on sovereign risk loans; and the third, the treatment of concessional rescheduling.

Debt Reorganizations

Until recently, several export credit agencies restructured guaranteed commercial bank loans by refinancing the loan. A new guarantee would be issued that would cover the restructured amounts of principal and interest; in most cases, agencies only made cash payments for arrears. This form of restructuring tended to mask developments in agencies’ portfolios; loans restructured would not be reflected in agencies’ cash flows but rather would continue to be shown as contingent liabilities.

A number of guardian authorities argued that as the debt crisis had been more protracted than had been anticipated in the early 1980s, debt reorganizations could no longer be seen as solutions to purely temporary payments difficulties. This has led to pressures from guardian authorities and parliamentary supervisors for greater transparency in the treatment of debt reorganizations to place the costs of supporting export credits in published accounts of the agency and the government budget. Accordingly, there has been a shift away from refinancing guaranteed bank loans toward rescheduling these credits by making direct payments from the agency, or the supporting government, to the original lender. The agency or government concerned would hold the restructured asset directly, instead of recording a contingent liability. Both ECGD and COFACE have now ceased refinancing operations and rely instead on debt rescheduling.

The impact of this change has been to increase agencies’ cash flow deficits. As payments to policy-holders have to be made to reschedule guaranteed commercial bank loans, the full amount of reorganization of original maturities is reflected in the cash flow. This, in turn, has drawn attention to the budgetary cost of supporting export credits and given impetus to moves to put the operations of agencies on a more commercial footing.

Provisions for Sovereign Loans

As official export credit agencies are supported by the full guarantee of their governments, they have not generally been obliged to follow the accounting practices required of commercial lenders and insurance companies. In particular, agencies have normally reported the value of sovereign claims at the full contractual value and have not made any provisions for bad or doubtful debts, although they have held reserves against commercial risks in their portfolio. Recently, under increasing pressure from parliamentary supervisors and public auditors, there has been some move toward making provisions against some sovereign loans. It is important to note, however, that no agency has reduced the contractual value of its claims; agencies continue to view sovereign claims as being repayable in full. The provisions have been made to provide parliamentary and guardian authorities with a transparent picture of the total portfolio of lending and insurance business. The amounts are based on an assessment of the long-term ability of the agency to recover the loans. Clearly, it may be a prolonged period before it is possible to ascertain whether or not these provisions will prove adequate.

In the United Kingdom, ECGD has determined the size of provisions against sovereign loans by applying a modified version of the Bank of England matrix.39 Provisions are made only for pre-cutoff date claims; none are made for post-cutoff date loans, as these have a favored status in the hierarchy of debts. In Belgium, OND has made provisions against both arrears and future contingent liabilities for countries with payments difficulties. EDC of Canada and Eximbank of the United States have both been subject to public criticism from their respective auditing authorities about the lack of provision for doubtful sovereign loans. Both have argued that as their governments maintain that all sovereign loans are collectible at the full contractual value, there is no need for provisions.40 In the case of EDC, however, some part of the contractual value of claims is held as an item not shown on the balance sheet. When arrears accumulate, the loan is put on nonaccrual status and arrears of interest appear as an item not shown on the balance sheet; arrears of principal continue to be shown on the balance sheet. In this way, the balance sheet records less than the full contractual value of sovereign claims in some difficult cases.

Treatment of Concessional Rescheduling

A number of countries in sub-Saharan Africa have reached agreements to reschedule commercial debts to official creditors on concessional terms in line with the options approach. Under these agreements, some agencies have forgiven part of the debt service subject to relief, while others have rescheduled at submarket interest rates. (Some have instead granted very long maturities, in which case no accounting questions arise.) At the time of the staff discussions, the treatment of these concessions in most agencies’ accounts had not been finalized. It appears, however, that most agencies will not absorb the concessions on their books but will receive compensating payments from their governments, in most cases from the aid budget.

Agencies normally provide insurance or guarantees for only some part of the value of a contract; the remaining part is covered by a cash down payment from the debtor country or a loan from a private creditor. In a restructuring agreement, some agencies will negotiate on behalf of the uninsured private creditor, who will receive the same terms as the official creditor. Monies recovered by the agency are prorated with the private creditor. (For some agencies, provision for such treatment is part of the insurance or guarantee contract.) In the case of concessional rescheduling, some official creditors have obliged private creditors to accept the same terms as the agency, and thereby give matching concessions on the uninsured portions of the loans; others consider concessional rescheduling a form of foreign aid and believe the cost of it should be borne by governments rather than private lenders.

Appendix IV The OECD Consensus on Export Credits41

The Arrangement on Guidelines for Officially Supported Export Credits, commonly called the “Consensus,” was established in 1978, and replaced the original Consensus on Converging Export Credit Policies of 1976. The Consensus and the Arrangement had their origins in more limited understandings achieved within the framework of the OECD Group on Export Credits and Credit Policies.42 Apart from general guidelines that came into effect in July 1972,43 the Export Credit Group formulated several separate understandings regulating the extension of export credits in particular sectors.44

The original Consensus set up targets for the minimum interest rates permissible for officially supported export credits and required the prior notification to other participant countries of “derogations,” that is, of credits extended by any one participant at terms and conditions not conforming with the guidelines. The Arrangement also established procedures by which participants could match the terms of derogating credits. Guidelines for the conditions under which mixed credits could be granted were also set out.

The 1978 Arrangement laid out four main elements concerning the terms under which agencies would provide cover: (1) a minimum cash down payment of 15 percent of the export contract value payable by the importer at or before the starting point of the contract; (2) a maximum repayment period of eight and one-half years for relatively rich (Category I) and intermediate (Category II) countries and of ten years for relatively poor (Category III) countries,45 with the principal repayment in equal semiannual installments beginning no later than six months after the starting point; (3) a matrix of minimum interest rates applicable for conforming credits;46 and (4) a minimum grant element for mixed credits of 15 percent. Derogations from these guidelines were permitted subject to prior notification. Although the Arrangement placed limits on the ability of agencies to subsidize exports with submarket interest rates, it did not set the terms and conditions of the insurance or guarantees issued in support of export credits.

Developments in the Arrangement in the 1980s

The “No-Derogation Engagement”

The treatment of nonconforming credits, which were, in effect, still allowed under the terms of the original Arrangement, was regulated in December 1982. The Arrangement was amended to prohibit participants from offering export credits that do not conform to the main conditions of the Arrangement concerning repayment terms (“no-derogation engagements”), minimum interest rates, or the minimum concessionality level (see below). The Arrangement reaffirmed the right of any participant to match the terms of derogating credits; it also sets out in detail the procedures to be followed in prior notifications and in matching derogating credits.

The Income Categories

Since July 6, 1982, the Arrangement has classified as Category I all countries with a GDP per capita of over $4,000 per annum according to 1979 data published in the 1981 World Bank Atlas; as Category II all countries not classified in Categories I or III; and as Category III all countries eligible for IDA credits plus any low-income countries or territories whose GNP per capita would not exceed the IDA eligibility level. At the same time, certain countries that had previously been classified in Category III as relatively poor were reclassified to Category II, raising the minimum interest rates allowed under the terms of the Consensus. In order to cushion this “graduation impact,” the maximum repayment term for Category II countries that had been classified as Category III before July 6, 1982, is ten years; and the minimum interest rate applicable for credits with a duration between eight and one-half years and ten years is the same as that applicable to credits with a duration between five and eight and one-half years.

Minimum Interest Rates

The matrix of minimum interest rates established by the original Arrangement could only be adjusted by a unanimous decision of the participants after negotiation—there was no provision for automatic adjustment to maintain the relation to market rates. This problem was addressed in October 1983 when the participants adopted the Uniform Moving Matrix (UMM) (after sharply increasing the fixed matrix rates in November 1981)47 (Table 5). To avoid placing credits denominated in low-interest rate currencies at a competitive disadvantage, the participants also agreed to establish market-based “commercial interest reference rates” (CIRRs) (Chart 10). The minimum interest rate at which a participant could provide export credits was to be the lower of the matrix rate and the CIRR of the currency in which the credit is denominated. A standard formula for fixing the CIRRs was adopted in June 1986.48

Table 5.

OECD Consensus Arrangement—Uniform Moving Matrix Interest Rates, 1986–89

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Source: OECD press releases, Paris 1986–89.

In July 1988, minimum rates for Category I countries were eliminated. The margins for calculating minimum rates for Category II countries were increased from 75 basis points to 105 basis points in the maturity range of 2–5 years, and from 125 basis points to 155 basis points in the maturity range of 5–8.5 years. The margin for calculating minimum rates for Category III countries was increased from a discount of 10 basis points to a surcharge of 20 basis points in the maturity range of 2–10 years. The basis for calculating minimum interest rates is the weighted average of the long-term government bond yields of the five SDR currencies.

As of January 1988, one set of rates applies to all credits for Category II and III countries with maturities in excess of five years.

Available only to countries classified in Category III before July 6, 1982.

Chart 10.
Chart 10.

Commercial Interest Reference Rates for Credits in Major Currencies, July 1988–Sept. 1989

(In percent per annum)

1 As reported by OECD Monthly Press Reports.2 Corresponds to the yield in long-term government bonds. Data drawn from IMF, International Financial Statistics (September 1989).

In July 1987, the participants agreed to raise the minimum matrix for intermediate (Category II) countries and poor (Category III) countries by 30 basis points to reduce the subsidy element,49 and to replace the matrix minimum interest rate for export credits to relatively rich (Category I) countries with the appropriate CIRRs.

The current formulas for calculating the matrix rates are:

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Mixed Credits

The original Arrangement followed the Development Assistance Committee criterion for determining the grant element of mixed credits, using a flat 10 percent discount rate. This gave countries with low interest currencies a competitive advantage over countries with high interest rate currencies: as nominal interest rates were low, only small interest subsidies were required for loans to yield a high grant element when discounted at the flat rate of 10 percent. Similarly, in credits that mixed concessional and commercial loans, comparatively small proportions of concessional assistance were needed to meet the required grant element. To redress this situation, the participants in the Consensus decided in June 1986 to move in two steps (July 1987 and July 1988) to a formula for calculating the grant element of aid credits, now to be called the “concessionality level”: the formula gives 75 percent of the weight to a market-related rate and a 25 percent weight to the flat 10 percent discount rate51 and thus more closely reflects market interest rates. In addition, the minimum concessionality level for Category III countries was raised to 50 percent, and for Category II countries to 30 percent on July 15, 1987, and to 35 percent a year later.

Appendix V Glossary of Selected Terms of Officially Supported Export Credits

Agreed Minute

—the terms agreed upon in a Paris Club rescheduling meeting are embodied in an Agreed Minute. The Minute normally specifies the coverage of debt service payments to be consolidated, the cutoff date, the consolidation period, the proportion of payments to be rescheduled, the provisions regarding the down payment, and the repayment schedule for both the rescheduled and deferred debt. Delegates to the meeting undertake to recommend to their governments the incorporation of these terms in the bilateral agreements that implement the rescheduling.

Berne Union (International Union of Credit and Investment Insurers)

—an association founded in 1934 of 40 export credit and investment insurance agencies, all participating as insurers and not as representatives of their governments. The main purposes of the Union are to work for sound principles of export credit insurance and maintenance of discipline in the terms of credit in international trade. To this end, members exchange information and furnish the Union with relevant information, consult on a continuing basis, and cooperate closely.

Bilateral agreements

—agreements reached bilaterally between a debtor country and each of the creditor countries participating in a Paris Club rescheduling. The agreements establish the legal basis of the debt rescheduling as set forth in the Agreed Minute. Bilateral agreements specify the interest rate on amounts deferred or rescheduled (moratorium interest), which is agreed bilaterally between the debtor and each creditor.

Bilateral deadline

—the date by which all of the bilateral agreements must be concluded. The period for concluding bilateral agreements is now generally six to seven months from the date of the Agreed Minute.

Buyers’ credit

—a financial arrangement in which a bank, another financial institution, or an export credit agency in the exporting country extends a loan directly to a foreign buyer or to a bank in the importing country.

Claims-waiting period

—the period that exporters or banks must wait after payments delays occur before the agency will pay the corresponding claim.


—loans or grants to developing countries made by commercial banks, export credit agencies, or other official institutions in association with the World Bank and other multilateral development banks in support of programs or projects appraised by the latter institutions.

Commercial risk

—the risk of nonpayment by a non-sovereign or private sector buyer or borrower in his home currency arising from default, insolvency, and/or failure to take delivery of goods that have been shipped according to the supply contract (compared with transfer risk arising from an inability to convert local currency into the currency in which the debt is denominated).


—a firm obligation to furnish resources of a specified amount under specified financial terms and conditions and for specified purposes for the benefit of a recipient country, expressed in an agreement or equivalent contract undertaken by the government or an official agency acting on its behalf. Usually includes principal and contractual interest payable by the importing country on disbursed and undisbursed credits. Commitments are defined as total payments obligations of the importing country, and not just the maximum liabilities of the agency. Thus, they should include, among other things, the percentage of loss that could be borne by the exporters or banks, nontransferable amounts, and adjustments for possible price increases where premiums have been paid. They include guaranteed and direct credits.

Consensus (The Arrangement on Guidelines for Officially Supported Export Credits)

—see Appendix IV.


—provision of export credit guarantees or insurance against risks of payments delays or nonpayments relating to export transactions. Cover is usually, though not always, provided for both commercial and political risk. Cover can be provided from date of contract or date of shipment.

Cutoff date

—the date before which loans must be contracted for their debt service to be covered by a Paris Club rescheduling. Decisions about whether to include debt service due under previous multilateral official reschedulings are made independently of whether those previous agreements were before or after the cutoff date.

Debt refinancing

—procedure by which overdue payments or future debt service obligations on an officially supported export credit are converted into a new “refinancing” loan extended by an institution other than the export credit agency. The refinancing loan can be extended either by a governmental institution or by a commercial bank, and in the latter case will carry the guarantee of the export credit agency.

Debt rescheduling

—procedure by which overdue payments or future debt service obligations on an existing officially supported export credit are converted into a claim of the export credit agency on the debtor country carrying a revised stream of payments. Because of common usage, the term “rescheduling” may also refer in this paper to the general concept of debt restructurings.

Debt restructuring

—rescheduling or refinancing of debt service payments in arrears and/or of future debt service payments, undertaken in response to external payments difficulties.


—the sale of receivables by an exporter. The assess are sold at a discount to a factoring company that assumes all commercial and political risks, and has no recourse to the exporter in the event of the failure of the importer to make the due payments.


—the sale of promissory notes issued by an importer. The notes are endorsed by the central bank or government in the borrowing country and are sold to a forfaiting company that carries all of the political risk with no recourse to the exporter should the importer fail to make the due payments.

Grant element

—a measure of the concessionality of a loan. Defined as the difference between the face value of the loan and the present value of the stream of repayments on that loan, it is expressed as a percentage of the face value.

Limited recourse financing

—the financing of a major capital project in which the lender looks principally to the cash flow and earnings of the project as a source of funds for repayment and to the assets of the project as collateral for the loan, rather than to the general creditworthiness of the borrower.

National interest account

—account or system under which an export credit agency extends cover to certain transactions that are not considered eligible for cover on the basis of the normal criteria of the agency, because of the size or risk of the transaction involved. Cover may be extended under government instructions when the transaction is considered beneficial to the national economy, would promote social and economic progress in the buyer country, or when there is a special interest of the government.

OECD Export Credit and Credit Guarantees Group, OECD Trade Committee

—a forum in which 22 OECD member countries participate in the Arrangement on Guidelines for Officially Supported Export Credits (the Consensus). Aside from coordinating export credit terms, the OECD Export Credit Group has also served as a forum for exchanging information on debtor country situations and agencies’ practices; at the meetings of the Group the governmental authorities of the agencies are represented.


—amount for which an export credit agency is committed to provide cover if the exporter succeeds in obtaining a contract. Mostly refers to medium-term business, because most agencies do not make offers for normal short-term business. Data are approximate, normally exclude interest, and will often overlap, since more than one agency competes for the same project.

Officially supported export credits

—loans or credits to finance the export of goods and services (and possibly some local costs) that are extended or guaranteed by an official export credit agency in the creditor country. For these export credits, the financing element—as opposed to the guarantee or insurance element—may derive from various sources. It can be extended by an exporter (suppliers’ credit) or through a commercial bank in the form of financial trade-related credit provided either to the supplier (also suppliers’ credit) or to the importer (buyers’ credit). It can also be extended directly by official institutions of the exporting countries, usually in the form of medium-term finance as a supplement to resources of the private sector, and generally for export promotion for capital equipment and large-scale, medium-term projects.

Paris Club

—forum in which creditor countries meet with the debtor to consider a request for the rescheduling of debt service payments on loans extended or guaranteed by their governments or official agencies. The Paris Club has neither a fixed membership nor an institutional structure and its meetings are open to all official creditors that accept its practices and procedures. During these meetings the participating creditors agree with the debtor country on the broad terms of the rescheduling, which are set forth in an Agreed Minute and which the representatives agree to recommend to their respective governments.

Percentage cover

—the proportion of any loss suffered by the exporter on which the agency will pay claims.

Political risk

—the risk of borrower country government actions that prevent, or delay, repayment of export credits. These actions assume that the importer has deposited on time the amounts due in local currency. Many export credit agencies also include such events as war, civil war, revolution, or other military or civil disturbances that prevent the exporter from meeting the supply contract or the buyer from making payment. Some also include physical disasters such as cyclones, floods, or earthquakes.

Repayment period/credit period

—the period during which repayments under the financing are due to be made; this period usually starts after the end of performance under the commercial contract.

Security requirement

—payment guarantee required by export credit agencies for extending cover in certain markets, varying primarily with the legal and administrative setting within the borrowing country. It could consist of an irrevocable letter of credit, a confirmed irrevocable letter of credit, a government guarantee, or a central bank guarantee.

Short-term commitments

—commitments relating to sales of consumer goods and raw materials, which are usually covered under comprehensive or whole turnover policies for which credit terms are normally no longer than six months. Because of the specific guarantee or accounting system of some agencies, short-term commitments may include credits of up to two years in certain cases.

Specific policy

—a policy covering an individual export contract against failure to receive sums due from the overseas buyer.

Suppliers’ credit

—a financing arrangement under which the supplier (exporter) extends credit to the buyer in the importing country.

Waiting period

—see claims-waiting period.

Whole turnover, comprehensive, or global coverage

—insurance or guarantee cover for all or a negotiated portion of the export transactions of a supplier (exporter) or bank. These policies generally provide insurance at a lower premium rate than specific policies because the risks for the agency are spread across a broader range of transactions and frequently across several debtor countries.

Note: For information on the titles and availability of World Economic and Financial Surveys published prior to 1988, please consult the most recent IMF Publications Catalog or contact IMF Publication Services.


Export Credit Enhanced Leverage Program.


The implementation of export credit policy is influenced by the institutional arrangements for providing official export credit support, which differ widely from country to country. The export credit agency itself can be a department within a ministry, an independent governmental agency, or even a private firm operating under instruction from, and for the account of, the government; a number of countries provide officially supported credits through more than one channel. Of the cases studied here, the Federal Republic of Germany and the Netherlands conduct their insurance and guarantee programs for supporting export credits through private companies (Hermes and NCM). In most cases, agency activity is subject to ministerial, and usually interministerial, guidance and review. Throughout this paper, the convention is adopted of referring to the activities, policy stance, and financial position of the agency. It should be understood that the agencies have varying degrees of independence in these matters and that, where the agency is a private firm, the reference is exclusively to its government-mandated business. The term “governmental authorities” is used to refer to the ministry or ministries under whose guidance the agency operates or that are represented on its board of directors.


A description of the available data is provided in Appendix II. The discussion here is based on unpublished data from the OECD and the Berne Union on new commitments of officially supported export credits.


This figure may be compared to the $20.4 billion of new commercial bank commitments, as reported by the OECD. There are conceptual differences in the two series: the commercial bank series relates to principal only, whereas the export credit series includes future interest; on the other hand, the commercial bank series includes new money packages associated with reschedulings (which correspond to Paris Club rescheduling of interest, not export credits). On balance it appears that in recent years officially supported export credits to developing countries have been significantly greater than nonguaranteed export financing from commercial banks.


Country categories refer to conventions adopted under the OECD Consensus on export credits and do not match the World Economic Outlook definitions of developing countries.


Unpublished quarterly data on new commitments to 40 countries (5 of which are not members of the Fund) are available from the third quarter of 1987.


In this paper “mixed credit” is used to encompass all forms of commercial tied-aid credits that have a concessional element as defined by the OECD Consensus, produced either by mixing grants and commercial loans or by direct interest subsidies on commercial loans.


The data relate to notifications to the OECD of offers to provide such credits, rather than firm commitments. As more than one agency may make an offer relating to a particular project, these data are prone to double counting.


These data are presented and discussed in Appendix II.


These loans are not export credits.


The evolution to 1987 was described in earlier studies in this series; see Officially Supported Export Credits: Developments and Prospects (Washington: International Monetary Fund, 1988). That paper also provided a detailed discussion of the instruments of cover policy.


Some agencies’ premiums for one-year credits, for example, now range from less than 1 percent to as much as 15 percent.


Agencies typically insure (or provide a direct loan) up to 85 percent of the value of the transaction, but may reduce this percentage.


Under Berne Union guidelines, certain types of exports such as consumer goods are normally financed with short-term credits. A number of agencies reported that on an exceptional basis they had provided three-year revolving lines of cover for such exports to one major recipient of export credits, but that no generalized extension of such terms was to be expected.


Poland, Turkey, and Zaïre.


Measured in terms of BIS-OECD data on the disbursed stocks of export credits outstanding at the end of 1983.


A confidential quarterly survey by the Berne Union that covers data from member agencies on each of 40 developing countries.


Since 1985, 15 more countries have rescheduled for the first time, bringing to 38 percent the share of rescheduling countries in the 1983 exposure of export credit agencies.


Rescheduled claims are treated as pre-cutoff date debts and are thus eligible, in principle, to be re-rescheduled.


It should be noted that the cutoff date applies not only to officially supported export credits but also to all other lending by bilateral creditors.


Arrears on short-term debt have in a small number of cases been included in consolidations.


See “Paris Club Implements Menu Approach for Low-Income Countries,” IMF Survey, April 3, 1989. There has also been a major expansion of forgiveness of ODA loans, a process that began in 1979.




For example, the Paris Club does not exempt pre-cutoff date loans protected by escrow accounts from Paris Club reschedulings.


Negative pledge clauses obligate the borrower not to create liens on any of its foreign exchange assets for the benefit of a creditor other than the lender protected by such clauses, unless the lender gives its consent to the lien, or the lender is offered a pro rata share in the lien, or the lender is offered another lien of equivalent value.


The net cash flow of the agencies covered by this study deteriorated sharply after the onset of the debt crisis. From 1983 to 1987, the aggregate cash flow deficit of the agencies averaged over SDR 2 billion a year. Developments in cash flows and accounting practices of agencies are reviewed in Appendix III.


Details of the provisions and operation of the OECD Arrangement on Guidelines for Officially Supported Export Credits are given in Appendix IV.


Nor are banks barred from making disbursements to importers in advance of payments falling due to the exporter, thereby providing temporary working balances for the importer.


The European Monetary System in the Context of the Integration of European Financial Markets, IMF Occasional Paper No. 66 (Washington: International Monetary Fund, 1989).


Review of Status Options for ECGD by R. T. Kemp (London: ECGD, April 1989). In December 1989, the U.K. Government announced it would propose legislation that would implement the main recommendations of the Kemp report.


The sources and characteristics of the available data are discussed in Appendix II.


Op cit.


Except for India and Thailand, which were not included in the sample in 1987. As is noted in the case studies, agencies have a very open cover stance toward those countries.


The historical edition of the BIS-OECD statistics (forthcoming) will provide revised data back to December 1983, and will include adjustments for debts guaranteed by Austria.


These data were displayed in Chart 1 and Table 1.


The estimates of the impact of valuation changes on the Berne Union data employed in this paper assume that the currency composition of total commitments and unrecovered claims reported by the members of the Berne Union matches that of the disbursed stock of credits reported to the OECD.


The cash flow is defined as premium income and recoveries received, less claims paid and operating expenses.


An insured claim restructured by refinancing (i.e., issuing a new guarantee to a private sector lender) will not be reflected in the cash flow, whereas one rescheduled, with a cash payment by the agency to the claimant, would be. Agencies that make direct loans, moreover, do not make claims payments when the loans fall into arrears or are restructured, so their cash flow will not be affected.


The Bank of England matrix provides the basis for calculating the provisioning requirements of British commercial banks for their external loans.


In January 1990 Eximbank announced that it would make provisions for doubtful debts, equivalent to about 40 percent of the portfolio of sovereign exposure.


This section is based upon the Arrangement on Guidelines for Officially Supported Export Credits, OECD, Paris, June 1988; and discussions with the staff of the OECD.


The OECD Export Credit Group, which was established in 1963, is composed of senior government officials and is open to all OECD countries with official export credit agencies.


The guidelines were the Exchange of Information System and the Prior Consultation Procedure.


Among these were the 1971 Understanding on Export Credits for Ships, a separate OECD agreement relating to new oceangoing vessels; the 1974 Understanding on Export Credits for Ground Satellite Communication Stations; the Sector Understanding on Export Credits for Nuclear Power Plants (which took effect in its final form in 1984); and the Sector Understanding on Export Credits for Civil Aircraft (which took effect in March 1986). The latter two understandings come under the general umbrella of the Arrangement, which does not deal with these sectors.


The provision of support for export credits to Category I countries with a repayment period of more than five years up to eight and one-half years was subject to prior notification.


The rates set were as follows:

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This Uniform Moving Matrix established a single matrix of minimum interest rates that would move automatically as market rates fluctuate and apply to all currencies used for extending export credits.


The CIRR is set for each currency at a fixed margin of 100 basis points above a base rate defined as the yield on the secondary market for government bonds with a residual maturity of five years, except where the participants agree otherwise. Participants notify the OECD Secretariat of changes in the CIRRs monthly, and changes in the CIRRs are made as necessary on the fifteenth day of each month.


Notwithstanding the minimum matrix rates, participants may choose to apply the relevant CIRRs also to credits extended to Category II and Category III countries. If the terms of such financing are fixed before the date of the contract, a premium of 30 basis points is added to the relevant CIRR. Participants are prohibited from taking action that allows banks providing export finance to offer throughout the duration of a floating rate loan the choice between (1) the matrix rate; (2) the CIRR at the time of the original contract; and (3) the short-term market rate, whichever is lower.


SDR* refers here to the average yield on government or public sector bonds of the five currencies constituting the Fund’s special drawing right, weighted by the proportions of those five currencies in the SDR. These yield rates are reported to the OECD Secretariat on a monthly basis. Adjustments to the matrix rates are made, at the beginning of July and January of each year, if the SDR* for the immediately preceding June or December, respectively, differs by 50 basis points or more from the SDR* underlying the preceding adjustment in the matrix rates.


Thus on July 15, 1987, the flat 10 percent discount rate was replaced by a differential discount rate (DDR) for each currency, calculated according to the formula: CIRR* + 1/2 (10 – CIRR*). On July 15, 1988, this formula was amended to: CIRR* + 1/4 (10 – CIRR*). In these formulas, CIRR* is the average of the monthly CIRRs for the currency in question during the six months preceding the fixing of the DDRs, which are set for one year on each January 15. If the tied or partially tied credit is in the form of a financing package, combining concessional loans or grants or other official flows with a purely commercial credit, the overall concessionality level is determined by dividing the sum of the results obtained by multiplying the nominal value of each component of the package with the respective concessionality level of each component by the aggregate nominal value of the components.

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    Algeria, Brazil, Chile, and China: Export Credit Exposure,1 1982–88

    (Exchange rate adjusted stocks; in billions of U.S. dollars)

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    Colombia, Côte d’Ivoire, Egypt, and India: Export Credit Exposure,1 1982–88

    (Exchange rate adjusted stocks; in billions of U.S. dollars)

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    Indonesia, Kenya, Mexico, and Nigeria: Export Credit Exposure,1 1982–88

    (Exchange rate adjusted stocks; in billions of U.S. dollars)

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    Thailand and Turkey: Export Credit Exposure,1 1982–88

    (Exchange rate adjusted stocks; in billions of U.S. dollars)

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    Proportion of Commitments Made to Private Nonguaranteed Buyers, 1983–881

    (In percent)

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    Net Cash Flows of Agencies, 1981–871

    (In billions of SDRs)

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    Commercial Interest Reference Rates for Credits in Major Currencies, July 1988–Sept. 1989

    (In percent per annum)