The fund used to defend the U.S. dollar in global foreign exchange markets suffered a multimillion-dollar loss in 2003 because of accounting maneuvers used to avoid the federal debt ceiling, a Congressional watchdog agency said on Thursday.

In February 2003, while Treasury awaited the annual flood of April income tax receipts, it announced a debt issuance suspension period, allowing the Treasury Secretary to take special steps to avoid issuing more debt than Congress had allowed.

"Because (the Exchange Stabilization Fund’s) obligations are considered part of the federal government’s outstanding debt subject to the debt ceiling, that debt is reduced when the Secretary of the Treasury does not reinvest ESF’s maturing obligations. Since the ESF was not fully invested in Treasury obligations, it incurred interest losses of $3.6 million during the 2003 debt issuance suspension period," the General Accounting Office said in a report.

"Treasury does not have statutory authority to restore these interest losses," the GAO said in the report looking at actions the Treasury Department took to forestall piercing the Congressionally set debt limit.

Many of those steps involved not rolling over some maturing debt held by federal retirement funds and the ESF, which serves as the reserve fund the U.S. government taps when it intervenes in global currency markets to defend the dollar or prop up another currency.

In addition, the GAO also warned that the possible long-term gains or losses to a federal retirement fund and the Federal Finance Bank because of similar moves may not be known for years.

"Regardless of whether they sustain any additional gains or losses over the long term, the Civil Service fund, FFB and the Treasury general fund incurred increased risks of gains or losses that they would not have incurred if these transactions had not occurred," the GAO said.

The debt limit was eventually raised to $7.384 trillion on May 27, 2003, the second time it has been increased during President George W. Bush’s tenure. On Thursday, Treasury Secretary John Snow warned lawmakers they may need to increase the limit again by late summer.

As of May 14, 2004, the ESF held about $81.04 billion, including about $23.17 billion in foreign currency reserves. The law gives the Treasury Secretary wide latitude in how ESF is used. In 1995, former Treasury Secretary Robert Rubin used it to offer loan to Mexico, over the loud objections of many Republicans.

Still, the GAO said Treasury had acted "consistent with legal authorities provided to the Secretary" in the matter.