The Center for Global Development ran an editorial on their blog today, calling for better financing for food aid. They argue that the current year-by-year system makes it hard for relief agencies to build their capacity, and leads to long delays in providing food aid when it is most needed. They make an excellent point.
Currently, food aid is funded through annual allocations of money from government donors. Even if there is a five-year budget that has been approved, the cash itself comes in year by year. In the case of an emergency, additional urgent funding is made available. Aid agencies can’t rely on their budgets more than a year in advance, because the next year’s funding might be lower or higher based on the political and financial situation of their funder. Emergency allocations come through as fast as possible, but that can still take weeks or months.
CGD calls for a totally different funding system. They recommend that aid agencies get several years of funding at once. This would let them use cheaper, better ways of procuring food for food aid. Right now they have to focus on current market prices and do their best. Multi-year funding would let agencies use tools like forward contracts or call options – use the futures market to improve their purchasing power.
The World Food Programme would be the primary beneficiary of a better funding system. Right now, they have issued a call for donations in response to the earthquake in Haiti. They will provide what they can based on their limited resources until they start getting donations in response to their appeal. Then they can scale up their food aid. If they have three years of funding on hand, they could spend up quickly in this emergency, and then refill their coffers once the donations arrive.
In other words, multi-year funding would mean cheaper food aid that arrived faster in emergencies. That’s something everyone wants to see.