U.S. Monetization Policy: Recommendations for Improvement

Abstract

With more than one billion hungry people in the world, U.S. food aid programs are a critical tool for feeding those in need and working to improve food security on a global scale. For more than fifty years, the United States food aid programs have helped save or improve the lives of hundreds of millions of people. Yet today, as the global need continues to grow and the resources to address it become ever scarcer, the United States must take a hard look at how its food aid programs are delivered.The practice of monetization, or the selling of donated food into overseas markets by private voluntary organizations (PVOs), has become widespread, absorbing approximately 60 percent of nonemergency food aid each year. While monetization provides needed funds for these organizations to operate their programs, it wastes millions in U.S. taxpayer dollars with typical returns of only 50 to 70 cents on the dollar.that might otherwise help save many more lives. In addition to being highly inefficient, monetization has also been proven harmful to regional markets and poor farmers in recipient countries and sometimes to U.S. producers. The practice has been liminated by most other donor countries and the World Food Program, and even some PVOs have turned down funds generated through monetization.While most experts agree that monetization is generally ineffective, the trend toward monetizing ever greater amounts of U.S. food aid has been difficult to stop. Key stakeholders including some U.S. producers and processors, who count on the procurement of food for food aid programs; some PVOs, who count on the revenues generated through monetization; and many in the U.S. shipping industry, who count on sustained volumes of food aid for shipping.all stand in strong opposition to a change in the status quo.Nevertheless, as the U.S. government crafts a food security strategy to end the global scourge of hunger and extreme poverty, it must adapt U.S. food aid policies to current realities and use its scarce resources wisely. Following are two recommendations, meant to be implemented in combination, for scaling back the practice of monetization while addressing the needs of stakeholders. Neither of the recommendations requires changes to existing legislation on food assistance delivery.