Banker favours long-term credits

Press, 30 May 1987, Page 11

Banker favours long-term credits

By

ALVER CARLSON

of Reuters

NZPA Washington The head of the United States Export-Import Bank said the United States should consider returning to providing longterm credits for highly indebted trading partners. The bank’s president. John Bohn, said the current agreed international system, under the Organisation for Economic Cooperation and Development, was being circumvented through the use of so-called mixed credits. He suggested that a new system should be explored. “Perhaps in our own interest, and in the interest of alleviating the economic situation in countries which traditionally have been large United States trading partners and allies, it is time to go back to the United States’ strong suit — longterm credits with fixed rates at the option of the borrower,” he said.

Mr Bohn spoke to an insurance group in New York. His remarks were made available by his office.

Over the last few years, the O.E.C.D. countries hawe provided export assistance at rates based

on market conditions which are adjusted every six months.

At present, the poorest countries are lent money to buy exports at a rate of 7.4 per cent, while intermediate countries are charged 8.25 per cent for loans of two to five years, and 8.75 per cent for over five years. Wealthy countries are charged 9.55 to 9.8 per cent, depending on the term of the loan.

Instead, Mr Bohn suggested “trade support facilities” for very longterm loans, for example 25 to 30 years, at a fixed rate of interest.

He said the facilities “would not only help to bridge the trade financing gap left between the needs of these countries and the funds currently available, but they would also increase the competitiveness of United States exports vis-a-vis those from countries which routinely mingle aid and export credits.”

The United States has been highly critical of exporting countries, especially Japan, France, South Korea and Taiwan, for combining aid with export credits, a system which it says high||subsidises exports. w