In June 2011, the U.S. Government Accountability Office issued a report (GAO-11-636), titled: International Food Assistance: Funding Development Projects through the Purchase, Shipment, and Sale of U.S. Commodities Is Inefficient and Can Cause Adverse Market Impacts. The report found that the inefficiency of the monetization process reduced funding available to the U.S. government for development projects by $219 million over a 3-year period.
Since the Food Security Act of 1985, Congress has authorized monetization—the sale of U.S. food aid commodities in developing countries to fund development.
In 1988, the authorized use of monetization funds was expanded to incorporate funding of food-security-related development projects, and in 1995, a minimum monetization level for nonemergency food assistance was set at 10 percent, which was then increased to 15 percent in 1996. The 2002 Farm Bill authorized the McGovern–Dole International Food for Education and Child Nutrition Program and allowed it to raise cash through monetization.
The practice of selling commodities for cash to fund development programs originated in part from U.S. government farm subsidies that contributed to a surplus of agricultural commodities owned by the U.S. government. However, the U.S. government no longer has surplus agricultural commodities. Current monetization requires the U.S. government to purchase the commodities from the commercial market and ship them abroad for implementing partners to sell them in another market to generate cash.
Ocean transportation represents about a third of the cost to procure and ship commodities for monetization, and legal requirements to ship 75 percent of the commodities on U.S.-flag vessels further increase costs. Moreover, the number of participating U.S.-flag vessels has declined by 50 percent since 2002, and according to USAID and USDA, this decline has greatly decreased competition.
The primary uses for NAMA products are for nutritional interventions among needy populations, either for emergencies or development objectives. Therefore, monetization of NAMA produced food is rare. NAMA supports the most efficient and effective methods of delivering food aid. We believe that monetization whose sole objective is to generate funds for other development objectives is an inefficient use of scarce funding.
Last updated August 2011