Other holders of U.S. national debt include U.S. banks and investors, state and local governments, mutual funds, pension funds, insurance companies, and investors in savings bonds. Various agencies and entities within the U.S. government also own debt, which is known as intragovernmental debt.


The U.S. promised not to reduce forces in South Korea without prior consultation, would provide all logistical and financial requirements for the South Korean troops (including equipment modernization), and give economic aid to South Korea — including a $150 million development loan.[31] Given the windfall he had successfully obtained, Park continued his winning strategy to even greater success the second time around.


The U.S. government doesn't seem to be financing the debt of other countries. I couldn't find anything about the money generated from foreign loans given by the U.S. government. It seems to be the ones who are crediting other countries are investors and banks. I know that the U.S. lent money to South Korea at 5% interest rate, but I don't know if it was the government or some private consortium.


1 Answer 1


Short Answer

The U.S. loans money, often interest-free and almost always below a fair market value interest rate, to international agencies such as the International Monetary Fund. The financing cost for the U.S. government to borrow this money with U.S. Treasury bonds and bills at a current rate of about 3.05% per year, is about $10-15 billion U.S. dollars per year. The U.S. federal government's general fund doesn't make a net profit on lending money, directly or indirectly, to other countries as a form of development aid.

The interest that the agencies the U.S. government finances for this purpose that is collected from countries that borrow money from these agencies stays in these agencies. This interest goes towards paying the administrative costs of operating the agencies, economic costs from late payments and bad debt from borrower nations, interest that these agencies pay on loans they receive from non-shareholder lenders, and to reinvest in the agencies' pools of money that they can loan to borrower countries.

Long Answer

The loan referenced in the question is ancient history. As explained in the link in the question, this $150 million loan to South Korea was lent in 1965. As of 2010, South Korea received no development aids or loans from the United States and instead is a source of foreign development aid and loans for other countries.

Of course, South Korea still does receive an indirect subsidy from having a large U.S. military presence in their country, 25,372 U.S. active duty military personnel in addition to a significant U.S. Navy presence in the seas near Korea, at U.S. expense. This U.S. military presence helps bolster South Korean national security against threats from North Korea, the People's Republic of China, and Russia, and supplements its own 555,000 active duty military personnel, 3,100,000 reserve military personnel, and $43 billion a year of its own defense budget expenditures (according to the 2024 World Almanac, hard copy).

This doesn't mean that the U.S. has gotten out of the business of lending money to other countries to aid their economic development entirely. But the U.S. now does so almost entirely indirectly.

This means that the answer isn't easy to find, because it happens off budget, not as a direct line item in the federal budget.

The U.S. makes loans to foreign governments as a form of international aid through multi-lateral agencies such as the International Monetary Fund (IMF), the World Bank Group (WBG), the African Development Bank (AfDB) Group, the Asian Development Bank (AsDB), the European Bank for Reconstruction and Development (EBRD), the Inter-American Development Bank (IDB) Group, and the North American Development Bank (NADB). See Report To Congress From The Chairman of the National Advisory Council On International Monetary and Financial Policies (2023).

These agencies receive their funds that they loan to countries in need from both member governments and private investors. They reinvest loan repayments received into making further loans (and to meet their other expenses and loan related losses).

The International Monetary Fund is the biggest of these agencies and can be used to illustrate the nature of these relationships. As a Congressional Research Service report to Congress about the U.S. role in the IMF explains:

The International Monetary Fund (IMF, the Fund), founded in 1945, is an international organization that works to ensure the stability of the international monetary system. The United States is a founding member of the IMF and the largest financial contributor. Congress helps shape the U.S. participation in the IMF through oversight, appropriations, and other legislation. . . .

Membership: 190 Countries.

Headquarters: Washington, DC.

Executive Board: 24 Directors; the United States, China, Japan, Germany, France, and the United Kingdom each have their own representatives; others are formed into constituencies.

Total Resources: $687 billion in quota; $708 billion of additional pledged or committed resources.

U.S. Financial Commitment: about $117 billion in IMF quota and $44 billion in supplemental funds. Largest Borrowers: Argentina, Egypt, Ukraine, Pakistan, Ecuador.

As the largest shareholder, the United States has its own seat on the executive board. The executive board or board of governors of the IMF can approve loans, policy decisions, and many other matters by a simple majority vote; however, a supermajority vote is required to approve major IMF decisions. The supermajority may require a 70% or 85% vote, depending on the issue. At 17.43% of total voting power, the United States has veto over major policy decisions. The primary source of IMF lending resources is the financial contributions or quota subscriptions of its member nations. A country’s proportion of quota, or quota share, broadly reflects its weight in the global economy; larger economies have larger quotas. A member’s quota also impacts the country’s voting power at the IMF. Countries with larger quotas, and thus larger financial commitments to the institution, have a greater say in how the IMF is run. The United States contributes $117 billion to the IMF quota (17.46%). In addition, the United States has contributed $44 billion to funds at the IMF that supplement quota resources.

As of February 11, 2022, the IMF had total lending commitments around $239.2 billion. Argentina has the highest level of outstanding IMF financing ($40.18 billion), 902% of its quota. Other large borrowers include: Egypt ($19.6 billion), Ukraine ($9.8 billion), Pakistan ($7.84 billion) and Ecuador ($6.86 billion).

Basically, the U.S. makes interest-free and below market rate loans to the IMF and half a dozen other international development banks from the Treasury Department through its accounts at the Federal Reserve, the interest that these agencies collect from borrower nations then funds their administrative costs, their loan related expenses, and increases the pool of funds the agencies have available to them.

These agencies are not a net profit center of the U.S. On a net basis, they cost the U.S. money, mostly indirectly, through costs by loaning money that it obtains through Treasury bonds and other forms of federal debt at a blended interest rate which, as of October 2023, was 3.05% per annum.

For example, $4.91 billion a year of the interest on the U.S. federal government's national debt goes to finance the $161 billion that the U.S. government has loaned to the IMF, interest-free.

The U.S. also sometimes provides payments to one of these agencies to pay its share of administrative expenses and capital improvements for these agencies in which it is a shareholder, which (I think) is part of the U.S. foreign aid budget.

All told, U.S. participation in these agencies costs U.S. taxpayers something on the order of $10-$15 billion a year, which is less than the approximately $38 billion a year of U.S. government direct foreign aid spending. This is a pittance compared to the U.S. government's overall $4,900 billion of annual federal revenues, excluding $1,700 billion (as of Fiscal Year 2023) of federal positive cash flow from new borrowing to cover the annual federal budget deficit.

The total national debt of the U.S. federal government is about $31,460 billion U.S. dollars, upon which is pays about $960 billion a year of interest, about 1%-1.5% of which goes to provide funds which it has lended in turn to international development banks.

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