U.S. Foreign Aid Explained

Lane Vanderslice

(Washington, June 5, 2005) This article presents and briefly explains 19 principal components of United States government assistance to foreign countries. This includes programs managed by the United States Agency for International Development (USAID), the State Department, the Treasury, and the Millennium Challenge Corporation. Programs of other government agencies such Health and Human Services, which have grown in recent years, are not included. This article is based on the U.S. Foreign Assistance Reference Guide, an excellent description of U.S. foreign aid programs. (See this document at  http://www.dec.org/pdf_docs/PNADC240.pdf .) This document is definitely worth reading for those interested in U.S. foreign aid, for its greater program detail and for its statements of purpose for the programs, which are strongly oriented to promoting U.S. security.

For purposes of discussion and analysis we have divided foreign assistance into four principal components: development, humanitarian, military and security, and drug law enforcement. All figures below are for 2005. Funding levels for 2005 in this article include only regular appropriations and not (in some cases substantial) supplemental appropriations.

Development Assistance

Five accounts/programs are included in the development assistance category:

• The USAID Development Assistance account (DA $1,448 million) which provides aid to poor countries in all areas outside of health, which has its own account. The principal areas appear to be (USAID has no specific breakout for this account) economic growth including agriculture, education, and democracy and governance. The principal country recipients of this aid are: Afghanistan ($150 million), Sudan ($70 million), Indonesia ($32.7 million) and South Africa ($26.8 million).
• The USAID Child Survival and Health account (CSF $1,538 million). This account supports assistance to basic health programs including HIV/AIDS prevention and control, child health programs such as immunization, maternal health, and family planning. It also makes contributions to the AIDS/TB/Malaria global fund, which provides assistance in these areas to developing countries. The largest recipients in this account are Nigeria ($43.7 million), India ($43.4 million), Ethiopia ($39.2 million), and Bangladesh ($36.5 million)
• Global HIV/AIDS Initiative (GHAI $1,374 million). The State Department GHAI account is the primary source of funding for activities in fifteen focus countries under the President’s Emergency Plan for AIDS Relief (PEPFAR), the purpose of which is to rapidly expand integrated treatment, prevention, and care programs to achieve three specific goals:1) To support treatment of 2 million HIV-infected people; 2) To prevent 7 million new HIV infections; and 3. To support care for 10 million people infected and affected by HIV/AIDS, including orphans and vulnerable children. The largest recipients in this account are Uganda ($159 million),  Kenya ($139 million), South Africa ($129 million), Zambia ($120 million), and Nigeria ($108 million).
• Transition Initiatives (TI  $49 million). A very small USAID account designed to help countries in crisis move to a more stable situation. (This small category is included as a separate category because it is included in the U.S. Foreign Assistance Reference Guide.  HN  would have included this funding as part of USAID development assistance.  Given the importance of "fragile states," the term for states often racked by conflict and whose governments are barely able to carry out basic functions, State/USAID is probably trying to increase this category of funding.)
• The Millennium Challenge Account (MCA $1,488 million). This is the newest foreign aid program, established in 2003, administered by a new government agency, the Millennium Challenge Corporation.  The MCA was designed by the Bush administration to reward sound government in developing countries by providing substantial economic assistance to such countries. It was designed to combat the "mistaken"  previous and current approach to development assistance where foreign aid is, to a significant extent, assigned not on the basis of effective use of assistance, but on the basis of political factors and, to a more limited extent, humanitarian concerns. The principal reason for allocation of U.S. foreign aid to countries is political. Our government wants influence over other governments and countries to advance a United States agenda. This is by far the principal reason why  the U.S. government  funds foreign aid.  So to establish a new, presumably independent, agency to address the "mistaken" approach of past foreign aid which emphasizes political allocations seems 1) either clueless or deliberately ignoring political factors  and 2) doomed to failure as an approach as it will be captured by the essentially political and possibly narrow U.S. government security concerns.  USAID is an independent U.S. government agency, but it has been "captured" by standard U.S. foreign policy interests.  (In general, nominally independent U.S. government agencies are far from being independent of current U.S. government political concerns.) 
• Multilateral Economic Assistance. This consists of two parts, U.S. contributions to international organizations and programs (IOP $326 million) managed by the State Department and contributions to multilateral development banks managed by the United States Treasury (MDB $1,229 million).  The largest recipient of the two accounts are the World Bank ($850 million), UNICEF   ($120 million), the Global Environment Facility managed by the World Bank ($107 million), the Asian Development Bank ($100 million) and the United Nations Development Fund ($90 million).
• Support for Eastern Europe (SEED $395 million)  A State Department/USAID program designed to help Eastern European countries make the transition from socialism to capitalism. The principal beneficiaries are Serbia/Montenegro $102 million, Kosovo, $72 million, and Bosnia Herzegovina, $41 million.
• FREEDOM Support Act (FSA ).  A State Department/USAID program  that supports democracy and stability in countries of the former Soviet Union.  Principal beneficiaries in 2005 are Georgia ($90 million), Russia ($80 million), Ukraine ($80 million) and Armenia ($62 million). 

SEED and FSA are assistance to countries in the former Soviet bloc to help with the transition from socialism to capitalism.  These countries have much higher living standards and much lower levels of desperate poverty and hunger than the countries that receive the other categories of development assistance. Because of the higher income levels of countries in Eastern Europe and the former Soviet Union, much of this assistance is not counted as Official Development Assistance.

Humanitarian Assistance

Three accounts are included in the Humanitarian Assistance category:

• Food for Peace (FFP $1,173 million).  Food for Peace, also known as PL 480, ships purchased U.S. farm commodities abroad to address famine and food insecurity, in large part in response to specific crises.  In 2004 the principal beneficiaries were  Ethiopia ($281 million),  Sudan ($268 million), countries of Southern Africa ($135 million) and Uganda ($72 million). There has been a great deal of controversy over this account. Only U.S. food can be provided to assist food crises through this account in spite of the fact that it frequently might be better to purchase food elsewhere--such as a neighboring country to a country in food crisis, where it can be more rapidly shipped.  The political durability of this program rests on the fact that it is supported by U.S. farm interests, which appreciate another source of purchases of U.S. food..
• Migration and Refugee Assistance (MRA) and Emergency Refugee and Migration Assistance (EMRA)($794 million for both).  These State Department administered accounts assist refugees by providing funding to the United Nations High Commissioner for Refugees, the International Committees of the Red Cross and other organizations, as well as support of refugee resettlement in the United States. Principal beneficiaries (in terms of area of location or origination of refugees) Africa $208 million, Near East ($97 million) and South Asia ($58 million).
• International Disaster and  Famine Assistance (IFDA $367 million) funds humanitarian programs that provide relief and reconstruction assistance and (since 2004) famine assistance funding, that amounted to $20 million in 2005. Principal beneficiaries in 2003 were Iraq ($82 million), Sudan ($41 million), Congo ($31.9 million) and Ethiopia ($31.8 million). 

Military and Security Assistance

Four accounts are included in the military and security account category:

• Foreign Military Financing (FMT $4,745 million) finances foreign country purchase of military equipment.  2005 proposed expenditures include Israel ($2,230 million), Egypt ($1,300 million), Afghanistan ($400 million), Pakistan ($300 million), Jordan ($206 million) and Colombia ($108 million).
• Economic Support Fund (ESF $2,481 million) The State Department. As ESF money is supposed to be provided in accordance with development objectives where possible, USAID has some role. The principal 2005 aid recipients are Afghanistan($672 million), Egypt ($575 million), Israel ($480 million), Jordan ($250 million), Pakistan ($200 million)
• International Military Education and Training (IMET $89 million).  IMET provides training to military students from allied and friendly nations, in part to establish relations between the U.S. military and foreign military.  Countries receiving the largest amount of such military training in 2005 include Turkey, Jordan, Thailand, Pakistan and Poland.
• Peacekeeping Operations (PKO $103 million) supports United Nations and other multi-country peacekeeping operations. Principal areas where funded peacekeeping operations took place in 2004 are Africa, Afghanistan and the Sinai.

Narcotics Control and Law Enforcement

Two accounts are included in narcotics control and law enforcement assistance

• International Narcotics Control and Law Enforcement Assistance (INCLE $326 million).  Managed by the State Department, INCLE provides drug control assistance and also various types of other law enforcement assistance especially in the areas of anti-terrorist activities, money laundering, corruption, organized crime and trafficking in persons. The principal 2004 beneficiaries were Afghanistan ($90 million), Pakistan ($40 million) and Mexico ($40 million).
• Andean Counterdrug Initiative (ACI $725 million).  Managed by the State Department and USAID, the program tries to reduce the flow of drugs to the United States by coca and opium poppy eradication, interdiction of essential chemicals for making drugs, prosecution of drug cases, and economic development that provides alternatives to illegal crops. Principal 2004 beneficiaries were Colombia ($463 million),  Peru ($116 million), and Bolivia ($91 million).

The table of assistance types appears below.

Hunger Notes and its readers are most interested in assistance that goes to developing countries.  This includes most of development assistance going to developing countries,  $7,452 million and humanitarian assistance,  $2,336 million.  This total, $9,788 million, is half of total U.S. foreign assistance.  The rest is basically military and security assistance, and drug and law enforcement assistance in areas of concern to the United States.

Of assistance that principally goes to poor countries,  development assistance and humanitarian assistance, 86 percent is development assistance and 14 percent is humanitarian assistance.  A significant portion of humanitarian assistance, Food for Peace/PL 480 is United States food.  This food assistance is supported by U.S. farm groups in order to provide another market for U.S. crops and would certainly be significantly less if were provided as cash.

Lane Vanderslice is the editor of Hunger Notes 

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