And the US agencies face the challenge of finding an alternative funding mechanism.
Oxfam GB (Charity number 202918, Annual Report) has released a report on hunger in Africa that questions one of the cornerstones of US foreign aid: food distribution by US NGOs (Causing Hunger: an overview of the food crisis in Africa (PDF 268 Kb)). This type of aid is still what many people associate with the idea of foreign aid, but Oxfam claims that such aid serves US domestic needs and disrupts local economies, is slow in arriving in emergency situations, and can be culturally inappropriate or nutritionally lacking. And it is costly: Canada spent 40 percent of its food aid budget on transportation before it switched to a model of local food purchases.
Back in the US, Prof. Christopher Barrett of Cornell reported last year on the challenge faced by US NGOs in ending their dependence on in-kind food aid. Not only do these organizations distribute food aid directly, they also sell donated food to support other development projects, a processed called monetization in the US. (Food Aid At A Crossroads: The Shared Challenge NGOs Face).
Prof. Barrett paper identifies the agencies that have the largest stake in the status quo of food aid, members of a group called the Coalition for Food Aid. In 2005, it members were Adventist Development and Relief Agency International, ACDI/VOCA, Africare, American Red Cross, CARE, Catholic Relief Services, Counterpart International, Food for the Hungry International, International Orthodox Christian Charities, International Relief and Development, Mercy Corps, OIC International, Save the Children and World Vision.
Food surpluses are no longer the source of funds for these agencies. Now the US government procures food on the open market, something like $2 billion dollars' worth. European governments have already switched to direct monetary aid and local food purchases. The US has been slow to follow suit, in part because of the entrenched interests of the NGOs.
Food aid, like all in-kind aid, has the effect of boosting a charity's program exepnse ratio. The charities dependent upon food aid fear that the loss of the in-kind support will make them appear less efficient and thus cut their fundraising effectiveness.
So in-kind aid has become like an addiction for development NGOs, difficult to quit without pain.