Export-Import Bank (Ex-Im Bank) and the Federal Budget
August 29, 2016
Export-Import Bank (Ex-Im Bank) and the Federal Budget
Background
estimates were taken from the President’s budget
What is Ex-Im Bank, and what is the congressional
documents prepared by the Office of Management and
interest? As the official U.S. export credit agency, Export-
Budget [OMB]. The Congressional Budget Office [CBO]
Import (Ex-Im) Bank finances and insures U.S. exports of
uses different models and assumptions when making credit
goods and services on a demand-driven basis. Ex-Im Bank
estimates for purposes of the appropriations process and
operates as an independent agency under a renewable
CBO’s baseline estimates. There are proposals that would
general statutory charter, the Export-Import Bank Act of
change the accounting method for federal credit programs,
1945, as amended (12 U.S.C. §§635 et seq.). On December
increasing their cost. These proposed changes are explained
4, 2015, Ex-Im Bank’s charter was renewed through
in a later section.) Subsidy rates from federal credit
September 30, 2019, by the Fixing America’s Surface
programs are subject to reestimates in future years,
Transportation Act of 2015 (FAST Act; P.L. 114-94,
resulting in new subsidy estimates that may be higher or
Division E).
lower than the original estimate. For example, in FY2015,
the original subsidy rate for Ex-Im Bank’s direct loans was
What is the current size of the Ex-Im Bank’s portfolio?
-9.26%. Currently, the rate has been reestimated as 9.56%.
In FY2015, Ex-Im Bank authorized $0.1 billion in new
The original credit subsidy rate for loan guarantees in
direct loans (export financing and the Tied Aid War Chest)
FY2015 was -3.46%. It is currently reestimated at -2.45%.
and $12.3 billion in new loan guarantees (medium- and
long-term guarantees, short- and medium-term insurance,
What is the amount of the Ex-Im Bank’s offsetting
and the working capital fund). Total authorizations are
collections, and what does the bank do with any surplus
projected to be $15.1 billion for FY2016 and $20.4 billion
revenues? Offsetting collections are defined as funds
for FY2017 (solely through new loan guarantees in each
collected by government agencies from other government
year). At the end of FY2015, the size of Ex-Im Bank’s
agencies or from the public in businesslike or market-
outstanding and undisbursed portfolio (exposure) totaled
oriented transactions that are credited to an expenditure
$102.2 billion ($28.8 billion for direct loans and $73.4
account. They are classified as negative budget authority. In
billion for loan guarantees).
the case of Ex-Im Bank, revenues are collected from
customers, from fees or premiums and loan principal and
Budgetary Considerations
interest payments. Offsetting collections in FY2015 were
How are federal credit programs such as Ex-Im Bank
$0.5 billion after setting funds aside for credit loss reserves.
accounted for in the federal budget? Beginning with
Ex-Im Bank states that $0.4 billion of that amount was in
FY1992, the Federal Credit Reform Act (FCRA) required
excess of operating costs. That amount is calculated on a
that the reported budgetary cost of a credit program equal
cash basis and based on the $0.5 billion in offsetting
the estimated subsidy costs at the time the credit is
collections less the combined $0.1 billion in administrative
provided. FCRA defines the subsidy cost as “the estimated
expenses and deposits retained in Ex-Im Bank’s accounts to
long-term cost to the government of a direct loan or a loan
be available for obligation as allowed under law.
guarantee, calculated on a net present value basis, excluding
administrative costs.” Before FY1992, the budgetary cost of
The amount of excess revenue calculated on a cash basis,
a new loan or new loan guarantee was reported as its net
discussed above, is different from the amount calculated on
cash flow for that fiscal year. The change intended to place
a budgetary basis. For budgetary purposes, the credit
the cost of federal credit programs on a budgetary basis
subsidy calculation incorporates the expected costs as well
equivalent to other federal outlays.
as profits. When a credit account generates a negative
subsidy rate, as is the case with the Ex-Im Bank, a negative
What are the effects of the Ex-Im Bank programs on the
credit subsidy is recorded in the federal budget in the form
budget deficit? The FCRA methodology described above
of offsetting receipts and can be used to offset other costs
resulted in an estimated FY2015 budgetary impact of -$0.4
incurred by the bank. The negative credit subsidy indicates
billion, or a reduction in the budget deficit of $0.4 billion. A
that over the lifetime of the obligations made in this fiscal
negative subsidy indicates that the discounted present value
year, Ex-Im Bank is projected to generate more in offsetting
of cash inflows exceeds the discounted value of cash
collections than what was initially borrowed to provide the
outflows over the life of the loans, resulting in a reduction
direct loan in present-value terms.
in the budget deficit for the fiscal year in which the subsidy
estimate is made. This negative credit subsidy is calculated
How have recent events affected Ex-Im Bank activity?
based on the negative credit subsidy rate multiplied by the
The charter for Ex-Im Bank lapsed from July 1, 2015,
total dollar value of loans and loan guarantees in that year.
through December 3, 2015, covering parts of both FY2015
and FY2016. Although Ex-Im Bank was allowed to manage
The estimated FY2016 and FY2017 subsidies are -$0.6
existing business during the lapse, it was prohibited from
billion and -$1.2 billion, respectively. (These subsidy
approving new authorizations and engaging in business
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link to page 2
Export-Import Bank (Ex-Im Bank) and the Federal Budget
development. Ex-Im Bank direct loans have declined
How would changes to federal credit accounting affect
dramatically in recent years, which is likely attributable to
Ex-Im Bank appropriations? The activities of the
the gradual recovery from the economic recession.
Ex-Im Bank are classified as discretionary. As a federal
credit program, the bank’s activities are subject to federal
As of August 2016, the Ex-Im Bank had three vacancies on
credit accounting rules and the calculation of a credit
its Board of Directors, which is composed of five members
subsidy. The Ex-Im Bank’s credit subsidy was negative in
through its charter. With fewer than three members, the
FY2015 and is estimated to be negative in FY2016 and
board lacks the quorum that allows it to engage in certain
FY2017. Therefore, no appropriation is required to cover
business. On its website, Ex-Im Bank states that “without a
the cost of the subsidy for budgetary purposes. However, if
quorum, the Board of Directors cannot conduct any
the credit subsidy calculation resulted in a positive subsidy
business including considering applications for medium-
rate or if the methodology for calculating subsidies for
and long-term transactions exceeding $10 million.”
federal credit programs changed and led to a positive
subsidy rate, then an appropriation from Congress would be
Figure 1. Ex-Im Bank’s New Authorizations by Fiscal
required to cover the credit subsidy amount.
Year, FY2007-FY2017
(in bil ions of U.S. dol ars)
Separately, Congress provides an appropriation for the
activities of the Ex-Im Bank’s Inspector General and sets an
upper limit on its administrative expenses as part of the
Department of State, Foreign Operations, and Related
Programs appropriations act. These expenses are not
included in the credit subsidy calculation, unlike the
majority of the bank’s activities, but are recorded on a cash
basis. Because Ex-Im Bank collects revenues from its
customers, classified in the federal budget as offsetting
collections, it is able to reimburse Treasury for the costs of
those expenses, resulting in a net appropriation of zero.
What are the effects of the Ex-Im Bank programs on the
federal debt? The budgetary impact (the credit subsidy) of
the Ex-Im Bank’s activities is different from the impact on
the federal debt. Ex-Im Bank must borrow money from the
U.S. Treasury when it issues a new direct loan or pays an
obligation on a loan guarantee. Treasury issues securities to
Sources: OMB and Export-Import Bank. Figure created by CRS.
the extent that incoming revenues are insufficient to cover
Notes: Totals may not sum due to rounding. FY = Fiscal Year.
Ex-Im Bank’s obligation. That borrowing from the
FY2016 and FY2017 figures are OMB estimates.
Treasury increases the size of the U.S. federal debt in the
amount borrowed on a dollar-for-dollar basis. Therefore,
Figure 1 shows annual new Ex-Im Bank authorizations for
while the loan or loan guarantee remains outstanding, the
both loan guarantees and direct loans from FY2007 through
activities of the bank increase the size of the U.S. debt.
FY2017. Total authorization activity declined from
Obligation repayments then reduce the amount of debt
$35.8 billion in FY2012 to $12.4 billion in FY2015 and is
outstanding to Treasury and the amount of federal debt.
projected to rise to $20.4 billion by FY2017. The negligible
direct loan authorizations in FY2015, FY2016, and FY2017
The size of the credit subsidy calculated for budgetary
are roughly consistent with direct loan authorization levels
purposes should reflect the size of the long-term cost (or
from prior to the economic downturn.
debt burden) on the Treasury, though the estimates are
inherently inexact. Outstanding funds borrowed from
What are some budget proposals regarding potential
Treasury by Ex-Im Bank totaled $22.7 billion at the end of
reforms to federal credit accounting, and how would
FY2015. (Repayments to Treasury for outstanding debt do
they affect Ex-Im Bank’s budgetary impact? Some
not affect Ex-Im Bank’s treatment in the budget.)
proposals to change the methodology for scoring federal
credit programs from an FCRA approach, based on
For more information on the policy issues surrounding the
Treasury interest rates, to a fair-value approach, based on
Ex-Im Bank, see CRS In Focus IF10017, Export-Import
market rates (i.e., higher interest rates to account for market
Bank of the United States (Ex-Im Bank), by Shayerah Ilias
risk) have been introduced and considered in recent
Akhtar, and CRS Report R43671, Export-Import Bank:
Congresses. In the 114th Congress, S. 399 and H.R. 119
Frequently Asked Questions, coordinated by Shayerah Ilias
would shift the scoring methodology to a fair-value
Akhtar.
approach. H.R. 1872, as introduced in the 113th Congress,
would have made such a change. CBO projected in the cost
Grant A. Driessen, Analyst in Public Finance
estimate for H.R. 1872 that if the accounting change were
applied to federal credit programs, the 10-year cost of Ex-
IF10457
Im Bank would increase from -$14 billion to $2 billion.
That would mean that Ex-Im Bank’s budgetary impact
would shift from reducing the deficit to increasing it over
the 10-year period.
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Export-Import Bank (Ex-Im Bank) and the Federal Budget
Disclaimer
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https://crsreports.congress.gov | IF10457 · VERSION 2 · NEW