Untying Food Aid

Canada just announced that it would move to “untie” its food aid – which means that it is removing restrictions on the origin of the food that is provided as aid. Previously, Canada’s food aid was linked to the provision that domestically grown food was to be used for international aid – which is recognized as detrimental to aid effectiveness:

It is widely acknowledged that tied aid—that is, aid that must be used to purchase goods or services from a particular donor country—undermines aid effectiveness. It has been clearly documented that tying aid raises the cost of many goods, services, and works by 15-30 percent40, and the cost of food by 40 percent […] But beyond these financial aspects, tied aid hinders developing country ownership of programmes and requires procurement procedures that often circumvent local procurement systems. This not only results in higher transaction costs, but also limits incentives and efforts to harmonise donor procedures and co-ordinate their activities.(p.41 of the report)

That leaves only the United States as a major donor country that still ties its food aid. The IRIN report notes that

Almost all food aid donated by the USA is tied to domestic requirements for procurement, processing and shipping. According to Barrett [Development Economics professor at Cornell University], it costs more than two dollars of US taxpayers’ money to deliver one dollar’s worth of food procured as in-kind food aid.

More here.

There has been a lot of media trumpetting over the $770 million food aid package that President Bush recently announced – which Bush coupled with a call to spend 25% of those funds on purchasing food locally. The Washington Post reminds us that historically, the United States has provided about half of all global food assistance and that the United States is the world’s largest provider of food aid, delivering more than $2.1 billion to 78 developing countries last year.

The US move to increase its food aid budget is laudable, and does indeed demonstrate leadership. There are caveats though – the funds requested will only be made available after October 1, when the federal fiscal year begins, which means, as Democratic congress men pointed out, “that [it] is far too late for the urgency of this problem. If you’re hungry and your government is collapsing, waiting until December 2008 or January 2009 for food to hit the ground is just too late”. Coupled with the fact that tied food aid is inefficient, and that other policy options are available that would have a more immediate impact, it seems that American food aid will fall short of helping resolve the global food crisis.

Perhaps this new series of Congress hearings on foreign assistance reform should give us hope.

Meanwhile, in somewhat related news, in Somalia, food riots kill 2 – and food aid to Palestinians in Gaza is threatened by fuel restrictions.

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