This paper reviews economic developments in the United States during 1992–96. The paper briefly describes improvements in the national income and product accounts (NIPA) and some of their implications for the analysis of long-term trends in U.S. investment and saving. The paper highlights that the effect of the 1990–92 recession on employment was considerably less severe than the effect of the 1981–82 recession. During the 1990–92 recession, employment fell by 1½ percent, compared with a drop of 3 percent during the 1981–82 recession.

Abstract

This paper reviews economic developments in the United States during 1992–96. The paper briefly describes improvements in the national income and product accounts (NIPA) and some of their implications for the analysis of long-term trends in U.S. investment and saving. The paper highlights that the effect of the 1990–92 recession on employment was considerably less severe than the effect of the 1981–82 recession. During the 1990–92 recession, employment fell by 1½ percent, compared with a drop of 3 percent during the 1981–82 recession.

VIII. Official Development Assistance

The U.S. budget for bilateral development assistance is channeled primarily though the Agency for International Development (USAID), the Economic Support Fund (ESF), the multilateral development banks (MDBs), and food aid under Public Law 480 (Table 1). The USAID provides financial support to developing countries, mainly in the form of grants, with a focus on promoting projects related to agricultural development, population control, primary education, health and the environment. The ESF contributes financial assistance to countries facing security risks; a large share of these funds is received by Israel and Egypt. Most of the contributions to the MDBs are directed to the World Bank’s International Development Association (IDA), which provides concessional lending to the poorest nations, mainly in Africa and South Asia. Food aid is administered under Public Law 480. Title 1 of the law provides concessional loans for the purchase of U.S. agricultural commodities. Title 2 provides food aid to government and private organizations. Title 3 provides food aid conditional on policy reforms.

Table 1.

UNITED STATES: Foreign Development Assistance on a Budget Basis

(In billions of dollars)

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Source: U.S. Agency for International Development.

In FY 1996, foreign assistance outlays on a budgetary basis are estimated to increase by $110 million but would decline to 0.12 percent in relation to GDP. Against the background of fiscal consolidation, foreign assistance has come under relatively heavy pressure in recent years. Nevertheless, levels of assistance for Israel and Egypt have been maintained, and humanitarian and refugee relief has expanded. 1/ Moreover, since 1992, the United States has extended economic assistance to the new independent states of the former Soviet Union (NIS), although outlays in FY 1996 are expected to fall slightly.

In its FY 1997 budget, the Administration has requested a small increase in budget authority for foreign assistance. 2/ This increase is primarily intended for the MDBs in order to complete the overdue U.S. contribution to the tenth IDA replenishment and to make the initial U.S. capital contribution to the newly created Middle East Development Bank. In addition, budget authority for bilateral development programs operated by USAID would be increased slightly. Most other foreign assistance programs would remain roughly unchanged relative to FY 1996.

Prospects for Congressional approval of the Administration’s request are not favorable. In June 1996, the House of Representatives voted to cut significantly the Administration’s foreign assistance request. Budget authority for IDA contributions was reduced to $525 million, which would leave the United States’ overdue obligations at $400 million. Requests for capital contributions for the African and Middle East Development Banks were eliminated and contributions to other international institutions were reduced. Aid to Russia and other former Soviet states also was cut below the Administration’s request. Action on the Administration’s foreign assistance request is pending in the Senate.

In its 1995 report on financial flows to developing countries, the OECD Development Assistance Committee (DAC) noted that U.S. Official Development Assistance (ODA) had declined by $2.6 billion in 1995, dropping the United States from second to fourth place in the overall ranking of aid donors (Table 2). However, this sharp decline in ODA was partly related to delays in approving the U.S. budget for FY 1996, which affected the timing of aid disbursements. These delays held up approximately $1 billion in payments to Israel and $0.7 billion in capital subscriptions to the MDBs. In the absence of these delays, the United States would have remained in second position in the overall ranking. U.S. ODA as a percent of GNP continues to be the lowest among the list of DAC participants and is at its lowest level since such accounting was introduced in 1950.

Table 2.

UNITED STATES: ODA by DAC Countries in 1995, Preliminary

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Source: OECD News Release, June 1996.

Norway’s ODA/GNP ratio has been substantially revised downwards due to the introduction of the 1993 System of National Accounts (SNA) and a general update of its national accounts data. Norway is so far the only country to have implemented the new SNA.

1/

For example, two installments of $200 million have been requested for economic reconstruction funding for Bosnia.

2/

Information on projected outlays for foreign assistance in FY 1997 is not yet available.