Audit of the local currency - financed Central Bank credit line program

A total of $156 million in local currencies were made available under the Economic Support Fund program to ten different lines of credit during the period 1985-87; 3,413 loans valued at $120.8 million were actually made. The program provided much-needed liquidity to El Salvador"s nationalized banking system. The majority of the loans were used for eligible purposes, and loan recipients were generally satisfied with the way in which the program was being implemented. However, six specific deficiencies were found: (1) While generally complying with A.I.D. and host government requirements, the Central Bank had not developed indicators to measure the accomplishment of objectives. (2) Six of the program"s ten credit lines had funds that were not being fully used by intermediate credit institutions (ICI"s). As a result of this limited activity - which was caused by a lack of information on fund availability, competition from other credit sources, and expiration of a credit line eligibility period - $15.7 million in local currency lay idle. (3) Credit funds totaling $1,576,664 in local currency were not used for purposes approved by the Central Bank. (4) The Central Bank"s loan approval process was slow and cumbersome. (5) Not all ICI"s maintained adequate records on loan payment status, partly because not required to do so by the Central bank. (6) Not all interest reflows were returned to the program; some were used for the expenses of the Secretariat for External Financing, which was not directly involved in the credit line program. Recommendations address these problems.