Problems with Long-term Financial Sustainability of Export Credit Agencies
Problems with Long-term Financial Sustainability of Export Credit Agencies

Summary/Abstract: This paper focuses on national support for export and examines whether, following the OECD arrangement, long-term financial sustainability is assured without sustained fiscal help. Rules on permitted state support in this area are stated by the OECD Consensus, which is meant to guarantee a level playing field for all exporters, to encourage competition among exporters based on the quality and prices of goods, and at the same time, not distort the free market. The main objective is that every export credit agency (ECA) should be self-sustainable with no need for state subsidies. However, this may not be achieved. This research proves inadequacy of minimum premium rates (MPR) due to insured interest. This issue arises mainly from the application of MPRs to the principal value of the insured loan with no correspondence to the insured interest amount. As many ECAs are publicly owned, all systematic losses must be covered by state budgets, which is against OECD agreements and is not allowed.

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