The Twin Deficit Hitmen: How EXIM Bank Bleeds America Dry While Funding Its Rivals
It was a few years ago that I sat in the office of one of those “USAID leeches” aka passport bros in Asia, talking about asset management and capital raising. He suggested looking into an entity called Eximbank. Strange, isn’t it? A U.S. Treasury–affiliated organization that was supposedly set up to reduce the U.S. trade deficit yet operates more like a slush fund—much like USAID itself. Even more ironic is how outfits like EXIM and USAID helped fuel China’s explosive growth, furnishing the very trade surpluses that Beijing now channels into infrastructure megaprojects worldwide through its One Belt One Road (OBOR) initiatives.
Established in 1934 to boost U.S. exports, stimulate job growth, and sharpen America’s global competitiveness, EXIMhas since funneled over $700 billion into loans and financing worldwide. Yet despite these grand ambitions, the Bank now draws heavy criticism for:
Inefficient and sometimes corrupt funding practices that benefit foreign entities.
Non-performing loans (NPLs) that shift financial burdens onto U.S. taxpayers.
Wasteful spending on projects yielding minimal benefit to the U.S. economy.
Worsening the U.S. twin deficits—the fiscal deficit and trade deficit—despite claims of supporting domestic industries.
The bank only finances around 2% of U.S. exports annually, and as Goldman Sachs research concluded, private sector financing could easily fill this gap. When combining these factors with Ex-Im's history of questionable practices - including providing billions in guarantees to state-owned foreign companies like Air China and facing allegations of improper gifts and kickbacks - it becomes clear that Ex-Im has outlived its Depression-era purpose and now primarily serves to socialize risks while privatizing profits for the rich in poor countries.
While, falling behind China’s Belt and Road Initiative (BRI), EXIM and related agencies like USAID arguably laid the foundation for China’s financial might, enabling that country to reinvest its massive trade surpluses into global infrastructure projects that rival or eclipse U.S. efforts.
Recent Loans in the 2020s: Failures and Backfires
1. Guyana Gas-to-Energy Project ($526 million, 2025)
Environmental concerns over insufficient reviews and potential ecological damage.
Cost overruns due to delays and unforeseen logistical challenges.
Limited long-term trade benefits as Guyana plans to source maintenance and operational services from non-U.S. suppliers.
2. Poland Nuclear Power Plant ($25 million, 2025)
Project delayed by three years, now expected to be operational in 2036.
Rising material costs and extended timelines have significantly inflated the budget.
Poland’s diversification of suppliers to European and Canadian firms reduces U.S. export opportunities.
3. Malaysia Petrochemical Complex ($688 million, 2025)
Contradicts U.S. climate pledges by supporting a fossil fuel-based project.
Corruption allegations suggest mismanagement of funds during initial construction phases.
Cost escalation increased financing from $525 million to $743 million.
Malaysia expected to rely on regional suppliers for future expansions, limiting U.S. trade benefits.
4. Vietnam Renewable Energy Projects ($100 million+, 2023)
Initial U.S. equipment purchases followed by a shift to lower-cost Chinese suppliers.
Reduced long-term trade benefits as follow-up orders exclude American manufacturers.
5. Kenya Infrastructure Development ($300 million, 2022)
Delays caused by corruption scandals affecting key highway sections.
Cost overruns due to rising material prices and mismanagement.
Kenya turning to cheaper suppliers for subsequent construction phases, reducing U.S. trade benefits.
6. Philippines Telecommunications Expansion ($150 million, 2023)
Implementation delays due to bureaucratic hurdles.
Increased costs from global supply chain disruptions.
Future network upgrades likely to involve Asian manufacturers instead of U.S. suppliers.
7. Ethiopia Agricultural Equipment Financing ($75 million, 2024)
Political instability disrupting project implementation.
Corruption concerns over fund misappropriation by local officials.
Risk of loan defaults due to economic challenges and delayed repayments.
8. Colombia Mining Equipment Loan ($200 million, 2021)
Environmental protests over deforestation and water pollution.
Corruption allegations involving bribery of local officials overseeing mining operations.
Colombia increasingly sourcing mining equipment from European suppliers, limiting U.S. trade benefits.
*While these projects suggest continued global outreach, critics argue that many of EXIM’s deals deliver only fleeting export boosts, do little to address structural trade imbalances, and may enable corruption or poor fiscal stewardship in recipient nations.
Never Compete on Price
In the high-stakes arena of international development financing, the competition between US EXIM and China's Belt and Road Initiative illustrates a classic economic dilemma of subsidized lending. When China offers heavily subsidized loans at around 2% interest (compared to typical market rates of 5%) for African infrastructure projects, it creates an unsustainable competition. The US faces three losing options:
• Match China's rates: This requires American taxpayers to subsidize the difference, often for projects that ultimately benefit Chinese suppliers anyway
• Maintain market rates: This means losing deals to China's cheaper financing
• Partial matching: This creates the worst outcome - spending taxpayer money on subsidies while still losing most long-term benefits to Chinese companies
Real-world examples highlight this pattern:
- Kenya's $300 million infrastructure project started with US EXIM funding but shifted to cheaper suppliers
- Vietnam's renewable energy projects initially used US equipment before transitioning to Chinese manufacturers
- Multiple African nations taking US EXIM loans for initial development before partnering with Chinese firms for expansions and maintenance
This competitive lending becomes a race to the bottom where American taxpayers bear the costs while intended economic benefits evaporate. The result is an expensive, inefficient system that fails to achieve its strategic objectives while draining public resources. EXIM's attempt to "level the playing field" against China's subsidized loans ultimately creates larger losses than gains for the American economy.
Corruption, Non-Performing Loans, and Waste
Corruption Cases
Bribery of an EXIM Loan Officer
A former loan officer accepted over $78,000 in bribes to approve unqualified loan applications, highlighting internal misconduct.
Fraud Convictions (2009–2016)
Forty-six individuals were convicted of defrauding EXIM through schemes that cost taxpayers millions of dollars.
Brazil’s Petrobras Scandal
EXIM financed up to $360 million in deals with companies implicated in bribery, underscoring lax oversight.
Delinquent Federal Tax Debtors
$1.7 billion in loans went to companies with delinquent federal tax debts, pointing to failures in due diligence.
Non-Performing Loans (NPLs)
Overdue Transactions
In 2022, 35 transactions totaling $234.5 million were more than 1,000 days past due, with slim prospects of recovery.
High-Risk Regions
Politically unstable countries and resource extraction projects (e.g., Nigeria, parts of Latin America) have elevated default risk and NPLs.
Data Management Gaps
A lack of centralized credit performance data constrains EXIM’s ability to manage risk or collect on delinquent borrowers.
Wasteful Spending
Chad-Cameroon Pipeline ($300 million)
Heralded as an economic boon, it quickly drew accusations of corruption and delivered scant local benefits.
Pan-American Highway
Billions invested, but many sections remain incomplete, plagued by local corruption and mismanagement.
Emirates Airline ($3.4 billion)
Critics label the loan guarantee for Boeing planes as “corporate welfare” that subsidized a foreign airline at the expense of U.S. carriers.
The Role in the Twin Deficits
Although EXIM was intended to bolster the U.S. economy, its operations have inadvertently exacerbated both the fiscal deficit and the trade deficit.
Fiscal Deficit Impact
Taxpayer-Backed Losses
Defaults on high-risk loans ultimately fall on the U.S. Treasury, raising government expenditures.
Subsidized Risk
Many financed ventures occur in unstable regions, heightening default risk for which taxpayers bear responsibility.
Operational Shortfalls
Between FY2018 and FY2023, EXIM’s fee collections often failed to cover administrative costs and loan-loss reserves, requiring taxpayer funds.
Trade Deficit Impact
Limited Export Gains
EXIM covers only a small slice of total U.S. exports, and recipients often turn to non-U.S. suppliers for follow-up maintenance or additional orders.
Boosting Foreign Competitiveness
By building infrastructure abroad, EXIM indirectly enhances other nations’ production and export capacities, sometimes at America’s expense.
Big Deals, Little Structural Change
High-dollar transactions with a narrow group of corporations do not address the deeper causes of America’s persistent trade deficit.
Illustrative Cases
Chad-Cameroon Pipeline: $300 million yielded questionable returns and potential losses.
Aircraft Sales to Emirates: Boeing got short-term sales, but ongoing parts and servicing shifted to non-U.S. providers.
Mexico’s Infrastructure Projects: Follow-up contracts for the Pan-American Highway often went to non-U.S. firms.
Competing with China’s Global Strategy
Despite EXIM’s mandates, China’s Belt and Road Initiative (BRI) frequently outpaces American efforts by offering:
Less Conditional, Faster Loans
Beijing’s minimal requirements and rapid approvals lure countries needing quick financing.
Long-Term Supply Chain Ties
After initial construction, nations remain dependent on Chinese technology and services, shrinking the window for U.S. exports.
Irony of U.S. Aid to China’s Growth
USAID and EXIM, in their own ways, helped foster China’s trade surpluses; today, those funds are reinvested in massive global infrastructure ventures that rival or eclipse U.S. influence. This is part of the long history of EXIM making deals with strategic adversaries:
In 1973, the Bank extended $199 million to the Soviet Union for trade facilitation, and in 2001, an additional $500 million went to Russia. Although circumstances vary over time, these examples underscore how EXIM’s mandate to promote exports often overrides broader considerations of long-term strategic alignment or risk exposure. Critics note that it is difficult to see these deals as advancing U.S. security interests when they potentially empower competitors and fail to yield enduring trade dividends.
The Enemy of China’s Enemy is China’s Friend
Agencies like EXIM and USAID were initially tasked with advancing U.S. global standing, but over time they have arguably contributed to China’s economic ascendancy, financing trade surpluses that now fund Beijing’s One Belt One Road projects. As for EXIM:
Corruption and Fraud: Multiple scandals highlight systemic oversight failures.
Non-Performing Loans: Risky bets in volatile regions leave taxpayers footing the bill.
Wasteful Expenditures: Large-scale projects often deliver marginal benefits to the U.S. while empowering foreign competitors.
Twin Deficits: Fiscal and trade imbalances worsen due to taxpayer-backed guarantees and short-lived export gains.
Limited Impact on Exports: EXIM finances less than 2% of U.S. exports, suggesting that most exports occur without its support. Economists argue that it redistributes export opportunities rather than increasing net exports.
Taxpayer Risk: EXIM’s activities expose taxpayers to financial risks, with improper accounting practices and potential hidden costs. The Congressional Budget Office estimated EXIM could cost taxpayers $2 billion over ten years, contrary to claims of profitability.
Cat & Mouse with China: EXIM’s processes cannot compete with China’s global financing engine.
Thus, the U.S. finds itself, ironically, having financed the rise of a major economic rival. Unless structural reforms address EXIM’s underlying inefficiencies and its failure to meaningfully reduce the trade deficit, the Bank risks remaining an expensive, underperforming tool overshadowed by China’s expansive and agile strategy.