Prague Economic Papers 2021, 30(2):156-170 | DOI: 10.18267/j.pep.762

Problems with Long-term Financial Sustainability of Export Credit Agencies

Mikuláš Pýcha ORCID...a
a Prague University of Economics and Business, Faculty of Finance and Accounting, Prague, Czech Republic

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.

Keywords: State support, export credit, minimum premium rates, OECD consensus, export credit agency
JEL classification: G22, G29, H81

Received: January 21, 2020; Revised: June 24, 2020; Accepted: September 21, 2020; Prepublished online: December 9, 2020; Published: April 14, 2021  Show citation

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Pýcha, M. (2021). Problems with Long-term Financial Sustainability of Export Credit Agencies. Prague Economic Papers, 30(2), 156-170. doi: 10.18267/j.pep.762
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