- (Reuters/Jeff J Mitchell)
A report put before Congress has indicated the farcical situation whereby the U.S. is providing hundreds of millions of dollars every year in foreign aid to certain countries, while simultaneously borrowing back billions from those same countries.
A report by the Congressional Research service released in May has shown that in 2010 the U.S. gave $1.4bn in aid to countries that held more than $10bn in Treasury securities.
The report highlights the situation whereby the U.S. provides huge payments in foreign aid to some countries that have invested billions of dollars in U.S. Treasury bonds – in effect lending money to the U.S. Treasury.
Shockingly four countries receiving tens of millions of dollars from the U.S. are also listed in the top 10 richest countries in the world. These were Brazil (receiving $25m), China (receiving $27.2m), India (receiving $126.6m) and Russia (receiving $71.5m).
These four countries however, hold far greater amounts in Treasury bonds: China holds $1.1trillion, Brazil holds $193.5bn, Russia holds $127.8bn, and India holds $39.8bn.
Senator Tom Coburn, R-Ok. has called the policy "dangerous". In a written statement he told: “Borrowing money from countries who receive our aid is dangerous for both the donor and recipient.
“If countries can afford to buy our debt, perhaps they can afford to fund assistance programs on their own. At the same time, when we borrow from countries we are supposedly helping to develop, we put off hard budget choices here at home.
“The status quo creates co-dependency and financial risk at home and abroad.”
In May the U.S. government reached the limit set on the amount it is allowed to borrow - $14.3trillion. It is currently debating the conditions to increase this figure so that it does not default on its financial obligations, which would have serious financial consequences for the U.S. and global economy.