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Foreign Assistance: An Introduction to U.S. Programs and Policy

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Foreign Aid: An Introduction to U.S. Programs and Policy Curt Tarnoff Specialist in Foreign Affairs Marian Leonardo Lawson Analyst in Foreign Assistance April 9, 2009February 10, 2011 Congressional Research Service 7-5700 www.crs.gov R40213 CRS Report for Congress Prepared for Members and Committees of Congress Foreign Aid: An Introduction to U.S. Programs and Policy Summary Foreign assistance is a fundamental component of the international affairs budget and is viewed by many as an essential instrument of U.S. foreign policy. The focus of U.S. foreign aid policy has been transformed since the terrorist attacks of September 11, 2001. This report provides an overview of the U.S. foreign aid program, by answering frequently asked questions on the subject. There are five major categories of foreign assistance: bilateral development aid, economic assistance supporting U.S. political and security goals, humanitarian aid, multilateral economic contributions, and military aid. Due largely to the implementation of two new foreign aid initiatives—the Millennium Challenge Corporation and the HIV/AIDS Initiative—bilateral development assistance has become the largest category of U.S. aid. In FY2008, the United States provided some form of foreign assistance to about 154 countries. Israel and Egypt placed among the top recipients in FY2008, as they have since the late 1970s, although on-going reconstruction activities in Iraq and Afghanistan now place those nations near the top as well. The impact of the terrorist attacks on September 11, 2001, and the subsequent use of foreign aid to support the war on terrorism are clearly seen in the estimated country-aid levels for FY2008. Pakistan and Jordan are key partners in the war on terrorism and major beneficiaries of U.S. assistance. Also among the leading recipients are some African countries that are the focus of the multi-billion dollar HIV/AIDS initiative. By nearly all measures, the amount of foreign aid provided by the United States declined for several decades but has grown in the past few years. After hitting an all-time low in the mid1990s, foreign assistance levels since FY2004, in real terms, have been higher than any period since the early 1950s, largely due to Iraq and Afghanistan reconstruction and HIV/AIDS funding. The 0.19% of U.S. gross national product represented by foreign aid obligations for FY2008 is consistent with recent years, but quite low compared to the early decades of the foreign assistance program. The United States is the largest international economic aid donor in absolute dollar terms but is the smallest contributor among the major donor governments when calculated as a percent of gross national incomeSince the terrorist attacks of September 11, 2001, foreign aid has increasingly been associated with national security policy. U.S. foreign aid policy has developed around three primary rationales: national security, commercial interests, and humanitarian concerns. These broad rationales are the basis for the myriad objectives of U.S. assistance, including promoting economic growth, reducing poverty, improving governance, expanding access to health care and education, promoting stability in conflictive regions, promoting human rights, strengthening allies, and curbing illicit drug production and trafficking. In FY2010, U.S. foreign assistance totaled $39.4 billion, or 1.1% of total budget authority. In real terms, this was the highest level of U.S. foreign assistance since 1985. The U.S. Agency for International Development and the State Department, the primary administrators of U.S. foreign assistance, provided $10.38 billion in security-related assistance; $10.93 billion for health, education, and social welfare programs; $3.64 billion for governance programs; $5.21 for economic growth activities; and $4.98 in humanitarian assistance. Assistance can take the form of cash transfers, equipment and commodities, infrastructure, or technical assistance, and, in recent decades, is provided almost exclusively on a grant rather than loan basis. Key foreign assistance trends in the past decade include growth in development and humanitarian aid, particularly global health programs, and, in the wake of the September 11, 2001, terrorist attacks, increased security assistance directed toward U.S. allies in the anti-terrorism effort. In FY2010, Afghanistan, Israel, Pakistan, Egypt, and Haiti were the top recipients of U.S. aid, reflecting long-standing aid commitments to Israel and Egypt, the strategic significance of Afghanistan and Pakistan, and emergency earthquake-related assistance to Haiti. Africa is the top recipient region of U.S. aid, at 29%, with the Near East and South and Central Asia each receiving 26%. This is a significant shift from FY2000, when the Near East received 60% of U.S. aid, and reflects significant increases in HIV/AIDS-related programs concentrated in Africa and the expansion of security assistance to Afghanistan and Pakistan. Other notable trends since FY2000 include the increasing role of the Department of Defense in foreign assistance and aid targeted at countries that have demonstrated a commitment to good governance, exemplified by the creation of the Millennium Challenge Corporation. This report provides an overview of the U.S. foreign assistance program by answering frequently asked questions on the subject. It is intended to provide a broad view of foreign assistance over time, and will be updated periodically. For more current information on foreign aid funding levels, see CRS reports on State, Foreign Operations and Related Programs appropriations. Congressional Research Service Foreign Aid: An Introduction to U.S. Programs and Policy Contents Foreign Aid: An Introduction to U.S. Programs and Policy ..........................................................1 Foreign Aid Purposes and Priorities.............................................................................................2 What Are the Rationales and Objectives of U.S. Foreign Assistance? ....................................2 Rationales for Foreign Aid ..............................................................................................2 Objectives of Foreign Aid ...............................................................................................3 What Are the Different Types of Foreign Aid?.......................................................................6 Bilateral Development Assistance ...................................................................................7 Economic Aid Supporting U.S. Political and Security Objectives ....................................7 Humanitarian Assistance .................................................................................................8 Multilateral Assistance ....................................................................................................9 Military Assistance.................Major Foreign Aid Funding Accounts?.............................................................7 Assistance Serving Development and Humanitarian Purposes .........................................7 Assistance Serving Both Development and Special Political/Strategic Purposes ..............8 Assistance Serving Security Purposes.........................................................................................9 What Are the FundingRecent Priorities and Trends in U.S. Foreign Assistance? Aid?...................................... 10.... 11 Trends in Types of U.S. Aid .......................................................................................... 1011 Trends in Programs and Sectors of Special Interest........................................................ 12 Which Countries Receive U.S. Foreign Aid? ....................................................................... 13 Foreign Aid Spending ............................................................................................................... 1615 How Large Is the U.S. Foreign Assistance Budget and What Have Been the Historical Funding Trends? .............................................................................................................. 16 How Does Foreign Aid Compare with Other Federal Programs?.......................................... 1915 How Much of Foreign Aid Dollars Are Spent on U.S. Goods? ............................................. 2018 How Does the United States Rank as a Donor of Foreign Aid? ............................................ 2119 Delivery of Foreign Assistance.................................................................................................. 2320 What Executive Branch Agencies Administer Foreign Aid Programs? ................................. 2321 U.S. Agency for International Development .................................................................. 2321 U.S. Department of State............................................................................................... 2421 U.S. Department of Defense.......................................................................................... 2422 U.S. Department of the Treasury ................................................................................... 2522 Millennium Challenge Corporation ............................................................................... 2522 Other Agencies ............................................................................................................. 2523 What Are the Different Forms in Which Assistance Is Provided? ......................................... 2623 Cash Transfers .............................................................................................................. 2623 Equipment and Commodities ........................................................................................ 2623 Economic Infrastructure................................................................................................ 2624 Training ........................................................................................................................ 2724 Expertise....................................................................................................................... 2724 Small Grants ................................................................................................................. 2724 How Much Aid Is Provided as Loans and How Much as Grants? What Are Some Types of Loans? Have Loans Been Repaid? Why Is Repayment of Some Loans Forgiven?......................................................................................................................... 2725 Loan/Grant Composition............................................................................................... 27 Types of Loans...25 Loan Guarantees ........................................................................................................... 2825 Loan Repayment ........................................................................................................... 2825 Debt Forgiveness .......................................................................................................... 2826 What Are the Roles of Government and Private Sector in Development and Humanitarian Aid Delivery?............................................................................................. 2926 Congress and Foreign Aid ......................................................................................................... 29 Congressional Research Service Foreign Aid: An Introduction to U.S. Programs and Policy 27 What Congressional Committees Oversee Foreign Aid Programs?....................................... 2927 What Are the Major Foreign Aid Legislative Vehicles?........................................................ 3027 Congressional Research Service Foreign Aid: An Introduction to U.S. Programs and Policy Figures Figure 1. Aid Program Composition, FY2008FY2010..............................................................................8 11 Figure 2. Shifts in Program Emphasis (FY1998-2008FY2000-2010)............................................................... 11 Figure 3. Top Foreign Aid Recipients, FY1998.......................................................................... 14 Figure 4. Top Foreign Aid Recipients, FY2008.......................................................................... 14 Figure 5. Regional Distribution of Aid, FY1998 ........................................................................ 15 Figure 6. Regional Distribution of Aid, FY2008 .......12 Figure 3. Regional Distribution, FY2000 and FY2010................................................................. 15 Figure 74. U.S. Foreign Aid: FY1946-FY2008FY2010 ............................................................................ 17 Figure 8. Foreign Aid as % of GDP ...............16 Figure 5. U.S. Foreign Aid: FY1946-FY2010 ............................................................................ 18 Figure 9. Foreign Aid Funding Trends, FY1977-FY2008........................................................... 1917 Figure 106. U.S. Budget Outlays, FY2008 ...FY2010 Est............................................................................... 2017 Figure 11. Economic Aid From Major Donors, 2008 .7. Foreign Aid Funding Trends, FY1977-FY2010................................................................ 22 18 Figure 12. Economic Aid as % of GNI for Major Donors, 2008.......8. Official Development Assistance From Major Donors, 2009.......................................... 23 20 Tables Table 1. Bilateral State/USAID Assistance by Objective: FY2006-FY2008............... and Program Area: FY2006-FY2010 ...................5 Table 2. Foreign Operation Appropriations, FY1997-FY2008Traditional Foreign Assistance, FY2001-FY2010 ........................................................... 19 Table A-1. Aid Program Composition, FY2008 ..............................7 Table 3. Top Recipients of U.S. Foreign Assistance, FY2000 & FY2010 ........................................... 31 14 Table A-21. Program Composition, FY1995-FY2008FY2001-FY2010 .................................................................. 3129 Table A-32. Foreign Aid Funding Trends..................................................................................... 3229 Appendixes Appendix A. Data Tables........................................................................................................... 3129 Appendix B. Common Foreign Assistance Acronyms and Abbreviations ................................... 3432 Contacts Author Contact Information ...................................................................................................... 3533 Congressional Research Service Foreign Aid: An Introduction to U.S. Programs and Policy Foreign Aid: An Introduction to U.S. Programs and Policy U.S. foreign aid is a fundamental component of the international affairs budget and is , for decades viewed by many as an essential instrument of U.S. foreign policy. 1 Each year, it is the subject of extensive extensive congressional debate and legislative and executive branch initiatives, proposing changes in the over the size, composition, and purpose of the program. The focus of U.S. foreign aid policy has been transformed since the terrorist attacks of September 11, 2001. In 2002, a National Security Strategy for the first time established global development, a primary objective of U.S. foreign aid, as a third pillar of U.S. national security, along with defense and diplomacy. diplomacy. A 2010 policy document reiterated that notion, arguing that development “is as central to advancing America’s interests as diplomacy and defense.”2 This report addresses a number of the more frequently asked queries regarding the U.S. foreign aid program, its objectives, costs, organization, the role of Congress, and how it compares to those of other aid donors. In particular, the discussionIt attempts not only to present a current snapshotsnap-shot of American foreign assistance, but also to illustrate the extent to which this instrument of U.S. foreign policy has changed from past practices, especially since the end of the Cold War and the launching of the war on terror U.S. foreign policy has evolved over time. Data presented in the report are the most current, reliable figures available, usually covering the period through FY2008FY2010. Dollar amounts are drawn from a variety of sources, including the Office of Management and Budget (OMB), U.S. Agency for International Development (USAID), and from annual State, Foreign Operations and other appropriations acts. As new data become obtainable or additional issues and questions arise, the report will be modified and revised. Foreign aid acronyms used in this report are listed in Appendix B. 1 Other tools of U.S. foreign policy are the U.S. defense establishment, the diplomatic corps, public diplomacy, and trade policy. American defense capabilities, even if not employed, stand as a potential stick that can be wielded to obtain specific objectives. The State Department diplomatic corps are the eyes, ears, and often the negotiating voice of U.S. foreign policymakers. Public diplomacy programs, such as exchanges like the Fulbright program and Radio Free EuropeVoice of America, project an image of the United States that may influence foreign views positively. U.S. trade policy—through free trade agreements and Export-Import Bank credits, for example—may directly affect the economies of other nations. Foreign aid is probably the most flexible tool—it can act as both carrot and stick, and is a means of influencing events, solving specific problems, and projecting U.S. values specific problems, and projecting U.S. values. 2 Quote in Department of State and U.S. Agency for International Development, Quadrennial Diplomacy and Development Review, Leading Through Civilian Power, December 2010, p. 21. Development is underscored both Bush and Obama national security strategies of 2002, 2006, and 2010: U.S. National Security Strategy 2002 and 2006, available at http://georgewbush-whitehouse.archives.gov/nsc/nss/2006/, and, National Security Strategy, May 2010, available at http://www.whitehouse.gov/sites/default/files/rss_viewer/national_security_strategy.pdf. Congressional Research Service 1 Foreign Aid: An Introduction to U.S. Programs and Policy A Note on Numbers and Sources The numeric measures of foreign assistance used in this report come from a variety of sources. Different sources are necessary for comprehensive analysis, but can often lead to discrepancies from table to table or chart to chart. One reason for such variation is the different definitions of foreign assistance used by different sources. The Budget of the United States historical tables data on foreign assistance, for example, includes only those programs that fall under the traditional 151 and 152 budget subfunction accountssubfunctions of the International Affairs (function150) budget. This excludes various programs run by federal agencies outside of the traditional State/USAID framework. USAID’s U.S. Overseas Loans & Grants database (Greenbook), in contrast, uses a broad and evolving definition of foreign aid, which in past years has included mandatory retirement accounts, included Departments of Defense and Energy nonproliferation assistance, and other U.S. agency accounts that manysome would not classify as foreign assistance. Official Development Assistance (ODA), reported by the Organization for Economic Cooperation and Development (OECD), differs from both U.S. Budget and Greenbook numbers primarily because it excludes all military assistance. Apparent discrepancies also arise due to funding being recorded at different points in the process. U.S. Budget historichistorical tables represent budget authority, funds appropriated by fiscal year, whereas the Greenbook reports funds obligated by fiscal year. The disparity this creates is apparent when comparing recent aid levels in Figures 7 and 9. Figure 9 shows a sharp spike in appropriations in FY2004 for Iraq Reconstruction, but that appropriation was obligated over multiple years, resulting in the much less dramatic rise in FY2004 and FY2005 obligations depicted in Figure 7. The reporting calendar may result in discrepancies as well—ODA figures, unlike budget and Greenbook Greenbook numbers, are reported by calendar year rather than fiscal year. The differences between sources make precise comparisons difficult. For this reason, CRS has attempted not to mix sources within figures and tables, with the exception of Table A-32 (on which Figure 75 is based), which was necessary because no single source exists foroffers data from 1946 through to 20082010. Though imperfect, this compilation of data is useful for depicting long-term trends in U.S. foreign assistance levels. Foreign Aid Purposes and Priorities What Are the Rationales and Objectives of U.S. Foreign Assistance? Foreign assistance is predicated on several rationales and supports a great many objectives. Both rationales and objectives have changed in importance and emphasis over time. Rationales for Foreign Aid Since the start of modern U.S. foreign aid programs, the rationale for such assistance has been posited in terms of national security. During the past 65 years, there have been three key rationales for foreign assistance. • National Security has been the predominant theme of U.S. assistance programs. From a beginning in rebuilding Europe after World War II and under the Marshall Plan (1948-1951) and through the Cold War, U.S. aid programs were viewed by , U.S. aid programs reflected anti-communist Cold War tensions that continued through the 1980s. U.S. development assistance programs to newly independent states were viewed by policymakers as a way to prevent the incursion of Soviet influence in Latin America, Southeast Asia, and Africa. Military and economic assistance programs were provided to allies offeringcommunist influence and secure U.S. base rights or other support in the anti-Soviet struggle. In the immediate aftermath of the dissolution of the Soviet Union in 1991, aid programs lost their Cold War underpinnings. Foreign aid programs reflected less of a strategic focus on a global scale and instead responded to struggle. After the Cold War, the focus of foreign aid shifted from global anti-communism to disparate regional issues, such as Middle East peace initiatives, the transition to democracy democracy of eastern Europe and republics of the former Soviet Union, and international illicit illicit drug production and trafficking in the Andes. Without an overarching theme security rationale, foreign aid budgets decreased in the 1990s. However, since the September 11, 2001, terrorist attacks in the United States, policymakers frequently have cast foreign assistance as a tool in the global war on Congressional Research Service 2 Foreign Aid: An Introduction to U.S. Programs and Policy terrorism. This has comprised an emphasis on terrorism, increasing aid to partner states in the terrorism war, including and funding the substantial reconstruction programs in Afghanistan and Iraq. As noted, global development is now accepted, along with defense and diplomacy, has been featured as a key element of U.S. national security.2 Even during periods when aid programs were framed in the context of anti-communism, and more recently in the context of anti-terrorism, foreign aid programs were justified for other reasons as well, primarily commercial and humanitarian. Foreign assistance has long been defended as a way to in U.S. national security strategy in both Bush and Obama Administration policy statements Congressional Research Service 2 Foreign Aid: An Introduction to U.S. Programs and Policy • Commercial Interests. Foreign assistance has long been defended as a way to either promote U.S. exports by creating new customers for U.S. products or by by improving the global economic environment in which U.S. companies compete. At the same time, a strong current has existed that explained U.S. assistance as a moral imperative to help poverty-stricken countries and those trying to overcome disasters or conflict. Providing assistance for humanitarian reasons or in response to natural disasters has generally been the least contested purpose of aid by the American • Humanitarian Concerns. Humanitarian concerns drive both short-term assistance in response to crisis and disaster as well as long-term development assistance aimed at reducing poverty, hunger, and other forms of human suffering brought on by more systemic problems. Providing assistance for humanitarian reasons has generally been the least contested purpose of aid by the American public and policymakers alike. Objectives of Foreign Aid The objectives of aid are thought to fit within these rationales. Aid objectives include promoting economic growth and reducing poverty, improving governance, addressing population growth, expanding access to basic education and health care, protecting the environment, promoting stability in conflictive regions, protecting human rights, promoting trade, curbing weapons proliferation, strengthening allies, and addressing drug production and trafficking. The expectation has been that, by meeting these and other aid objectives, the United States will achieve its national security goals as well as ensure a positive global economic environment for American products and demonstrate the humanitarian nature of the U.S. people. Some observers have returned to the view that poverty and lack of opportunity are the underlying causes of political instability and the rise of terrorist organizations, much as poverty was viewed as creating a breeding ground for communist insurgencies in the 1960s, 1970s, and 1980s. Generally speaking, different types of foreign aid support different objectives. Focusing on any single element of the aid program would produce a different sense of the priority of any particular U.S. objective humanitarian nature of the U.S. people. Generally speaking, different types of foreign aid support different objectives. But there is also considerable overlap among categories of aid. Multilateral aid serves many of the same objectives as bilateral development assistance, although through different channels. Both military assistance and economic security assistance serve U.S. objectives in the Middle East and South Asia. Drug interdiction activities, backed in some cases with militaryMilitary assistance, economic security aid—including rule of law and police training—and development assistance programs may support the same U.S. political objectives in the Middle East, Afghanistan, and Pakistan. Military assistance and alternative development programs, are integrated elements of American American counter-narcotics efforts in Latin America and elsewhere. Depending on how they are designed, individual assistance projects on the ground can also serve multiple purposes. A health project ostensibly directed at alleviating the effects of HIV/AIDS by feeding orphan children may also mobilize local communities and stimulate grassroots democracy and civil society while additionally meeting U.S. humanitarian objectives. Microcredit programs may help develop local economies while at the same time providing food and education to the children of entrepreneurs. 2 Development was again underscored in the Bush Administration’s re-statement of the National Security Strategy released on March 16, 2006. Executive Office of the President, U.S. National Security Strategy 2002 and 2006, available at [http://www.whitehouse.gov/nsc/nss/2006]. Congressional Research Service 3 Foreign Aid: An Introduction to U.S. Programs and Policy to the children of entrepreneurs. Water and sanitation improvements both mitigate health threats and stimulate economic growth by saving time previously devoted to water collection, raising school attendance for girls, and facilitating tourism, among other effects. In an effort to rationalize the assistance program more clearly, the Director of Foreign Assistance (DFA) at the State Department developed a framework (Table 1) in 2006 that organizes bilateral U.S. U.S. foreign aid—or at least that portion of it that is managed by the State Department and/or USAID—around five strategic objectives, each of which includes a number of program elements, also known as sectors.3 The five objectives are Peace and Security; Investing in People; Governing Justly and Democratically; Economic Growth; and Humanitarian Assistance. 3 The framework, representing about 90% of the traditional foreign aid program budget in FY2010 (including supplementals), does not include the Millennium Challenge Corporation, Peace Corps, other independent agencies, or international financial institutions. It also excludes non-traditional foreign aid programs, such as DOD-funded activities. The framework also cannot show how programs may cut across multiple objectives or sectors. To some extent, the decision on how to categorize an aid activity remains a subjective one. Congressional Research Service 3 Foreign Aid: An Introduction to U.S. Programs and Policy Generally, these objectives and sectors do not correspond to any one particular budget account in appropriations bills. 4 Peace and Security The Peace and Security objective is composed of six program areas: counter-terrorism; combating weapons of mass destruction; stabilization operations and security sector reform; counternarcotics; transnational crime; and conflict mitigation and reconciliation. With an elevated level of engagement in the aftermath of 9/11, theseThese types of programs have been emphasized by the Bush Administrationpromoted by both Bush and Obama Administrations as essential to the war on terrorism, and to promote terrorism and building stability in failing states that may become permissive environments for terrorism. For FY2008FY2010, the Peace and Security objective was funded at $10.4 billion, up 42% from $7.3 $7.5 billion in FY2006. Major portions of these funds were allocated to Israel, Egypt, Afghanistan, Iraq, Pakistan, and Jordan. Were the DFA framework to include all foreign aid, regardless of source, the DOD training and equipping of Iraqi and Afghan security forces would add $5.8 would add $10.2 billion in FY2008FY2010 under this objective. Investing in People The Investing in People objective is composed of three program areas: health;, education;, and social services and protection for vulnerable people. For FY2008FY2010, the objective was funded at $8.5 billion. 10.9 billion, double the amount provided in FY2006. Most of the funding, 83%, falls in the health program area, particularly the President’s Global AIDS Initiative. those programs addressing HIV/AIDS, which, at $5.7 billion, itself accounts for more than half of the Investing in People objective in FY2010. Health programs also include funds for combating avian influenza, tuberculosis, and malaria. A significant portion of health funds are provided for maternal and child health, and family planning and reproductive health programs. The objective also Investing in people also encompasses most non-agricultural water and sanitation assistance efforts. The objective further includes education programs with the majority of funds focusing on basic education needs, especially in Africa, but increasingly in south and central Asia and the Middle East. 3 The framework, representing about 90% of the traditional foreign aid budget in FY2008 (including supplementals), does not include the Millennium Challenge Corporation, Peace Corps, other independent agencies, and international financial institutions. It also excludes non-traditional foreign aid programs, such as DOD-funded activities. While the framework includes the State Department’s HIV/AIDS program, it is not under the direct management responsibility of the DFA. 4 Most are funded through several accounts. For instance, the objective of Governing Justly and Democratically and each of its individual sectoral elements (see Table 1) are funded through portions of the Development Assistance, SEED, FSA, ESF, and INCLE south and central Asia and the Middle East. Governing Justly and Democratically This objective includes a number of program areas related to promoting the rule of law and human rights, good governance, political competition, and civil society. The two largest components for FY2010 were the rule of law and good governance. Program goals include strengthening the performance and accountability of government institutions, such as the judiciary and police, combating corruption, and supporting elections. Funding levels have grown significantly in recent years; the objective totaled $3.6 billion in FY2010, more than double the amount provided in FY2006. Two-thirds of this aid in FY2010 went to five countries of special political or strategic interest—Afghanistan (40% alone), Iraq, Mexico, Pakistan, and Haiti. 4 Most are funded through several appropriations accounts. For instance, the objective of Governing Justly and Democratically and each of its individual sectoral elements (see Table 1) are funded through portions of the Development Assistance, AEECA, ESF, INCLE, and Democracy Fund accounts. Congressional Research Service 4 Foreign Aid: An Introduction to U.S. Programs and Policy Table 1. Bilateral State/USAID Assistance by Objective and Program Area: FY2006-FY2010: FY2006-FY2008 (in millions of current dollars) Aid Objectives and Program Areas Peace and Security FY2006 FY2007 FY2008 $6,817.1 $8,684.6 $7,480.3FY2009 FY2010 7,318.9 8,684.6 7,522.6 9,599.6 10,380.0 Counter-Terrorism $157.0 $242.1 $178.5188.2 225.0 462.4 Combating WMD $229.9 $228.0 $247.8253.7 410.9 320.6 Stabilization/Security Sector Reform $5,178.0 $5,652.3 6,668.6 $5,579.55,574.3 6,964.5 7,276.9 Counter-narcotics $1,007.1 $1,020.1 1,148.1 $1,125.1 $60.2 $51.2 $73.2 Conflict Mitigation $184.8 $346.6 $276.4 Investing in People $4,957.4 $6,659.4 $8,522.7 Health $2,595.2 $5,705.1 $7,277.2 Education $689.8 $754.5 $928.41,133.7 1,295.3 1,470.4 60.2 51.2 75.6 93.0 100.9 199.3 346.6 297.1 611.1 748.8 5,421.4 6,659.4 8,573.3 10,286.1 10,929.6 4,594.7 5,705.1 7,243.0 8,224.3 9,014.8 Education 689.8 754.5 928.8 1,057.5 1,254.3 Social Services/Protection of Vulnerable $136.9 $199.7 $317.0 $1,233.2 $2,141.3 $2,260.4 Rule of Law & Human Rights $301.1 $532.0 $606.1 Good Governance $354.2 $763.2 $818.9 Political Competition $197.3 $305.4 $288.7 Civil Society $380.6 $540.8 $546.8 $2,826.2 $3,212.2 $2,920.6 Macroeconomic Growth $409.1 $591.5 $330.5 Trade & Investment $408.7 $331.6 $210.9 Financial Sector $277.2 $176.8 $190.8 Infrastructure $414.9 $723.9 $850.4 Agriculture $562.0 $538.1 $487.7 Private Sector Competitiveness $350.5 $385.4 $358.3 Economic Opportunity $111.6 $127.0 $167.9 Environment $292.1 $337.8 $324.0 Humanitarian Assistance $1,808.4 $3,097.4 $3,157.8 Protection, Assistance & Solutions $1,664.1 $2,963.7 $3,025.5 Disaster Readiness $74.8 $78.2 $74.5 Migration Management $69.6 $55.5 $57.7 Transnational Crime Governing Justly & Democratically Economic Growth Source: USAID and Department of State budget documents. Notes: Figures include Iraq funding and supplementals, with exception of FY2008 3rd supplemental appropriation (P.L. 110-329) of $465 million in ESF. Congressional Research Service 5 Foreign Aid: An Introduction to U.S. Programs and Policy Governing Justly and Democratically This objective includes a number of program areas related to promoting the rule of law and human rights, good governance, political competition, and civil society. The two largest components for FY2008 were the rule of law and good governance. Some aid experts believe that development is more effective when the recipient government is democratic in nature and respectful of citizens’ rights. Program goals include strengthening the performance and accountability of government institutions, such as the judiciary and police, and combating corruption. Funding levels have grown somewhat in recent years; the objective totaled $2.3 billion in FY2008. Economic Growth The Economic Growth objective, amounting to $2.9 billion in FY2008, includes a wide range of program areas that are believed to contribute to economic growth in developing economies, including agriculture, the environment, infrastructure, and trade. Agriculture programs focus on science and technology advances that reduce poverty and hunger, trade-promotion opportunities for farmers, and sound environmental management practices for sustainable agriculture. Private sector development programs include support for business associations and microfinance services. Programs for managing natural resources and protecting the global environment focus on conserving biological diversity, improving the management of land, water, and forests, promoting environmentally-sound urban development, encouraging clean and efficient energy production and use, and reducing the threat of global climate change while strengthening sustainable economic growth. Were the DFA framework to encompass all foreign aid, regardless of funding source, the economic growth objective would likely include most of the Millennium Challenge Account, adding perhaps another $1.5 billion in FY08, and much of the Commander’s Emergency Response Program (CERP), the latter funded by DOD at $1.8 billion in FY08199.8 401.4 1,004.3 660.5 Governing Justly & Democratically 1,758.1 2,141.3 2,258.5 2,702.0 3,644.2 Rule of Law & Human Rights 437.5 532.0 612.4 699.3 1,088.5 Good Governance 637.6 763.2 761.9 1,088.4 1,596.8 Political Competition 203.3 305.4 295.2 432.7 312.1 Civil Society 479.8 540.8 593.3 481.7 646.8 3,449.2 3,212.2 3,279.0 3,973.8 5,212.8 Macroeconomic Growth 474.1 591.5 590.1 335.9 287.3 Trade & Investment 416.7 331.6 204.1 216.7 264.6 Financial Sector 280.2 176.8 198.2 142.4 125.4 Infrastructure 755.9 723.9 945.8 1,017.3 1,101.0 Agriculture 567.0 538.1 474.3 1,083.1 1,685.8 Private Sector Competitiveness 530.5 385.4 388.1 563.9 670.1 Economic Opportunity 132.7 127.0 155.1 237.3 241.4 Environment 292.1 337.8 324.2 377.1 837.3 2,451.7 3,097.4 4,071.8 4,883.9 4,975.8 2,294.9 2,963.7 3,888.9 4,658.9 4,483.0 Disaster Readiness 87.3 78.2 125.6 151.1 99.8 Migration Management 69.6 55.5 57.2 74.0 42.0 Transnational Crime Conflict Mitigation Investing in People Health Promoting Economic Growth & Prosperity Humanitarian Assistance Protection, Assistance & Solutions Source: USAID and Department of State budget documents; ForeignAssistance.gov. Notes: Figures encompass State and USAID appropriations only, including supplementals and Iraq and Afghanistan programs. Congressional Research Service 5 Foreign Aid: An Introduction to U.S. Programs and Policy Promoting Economic Growth & Prosperity The Economic Growth objective, amounting to $5.2 billion in FY2010, a 51% increase since FY2006, includes a wide range of program areas that are believed to contribute to economic growth in developing economies. Agriculture programs focus on reducing poverty and hunger, trade-promotion opportunities for farmers, and sound environmental management practices for sustainable agriculture. Private sector development programs include support for business associations and microfinance services. Programs for managing natural resources and protecting the global environment focus on conserving biological diversity; improving the management of land, water, and forests; promoting environmentally sound urban development; encouraging clean and efficient energy production and use; and reducing the threat of global climate change while strengthening sustainable economic growth. Were the DFA framework to encompass all foreign aid, regardless of funding source, the economic growth objective would likely include most of the Millennium Challenge Corporation, adding perhaps another $1.0 billion in FY2010, and much of the Commander’s Emergency Response Program (CERP), the latter funded by DOD at roughly $1.2 billion in FY2010. Humanitarian Assistance Humanitarian assistance responds to both natural and man-made disasters as well as problems resulting from conflict associated with failed or failing states. Responses include protection and assistance to refugees and internally displaced persons and provision of emergency food aid. Programs generally address unanticipated situations and are not integrated into long-term development strategies. In FY2008, humanitarian programs were funded at $3.2 billion. What Are the Different Types of Foreign Aid? The framework introduced by the DFA organizes assistance by foreign policy objective. But there are many other ways to categorize foreign aid. More commonly, Congress and others group traditional foreign aid by five major types of assistance, as illustrated in Figure 1 below. Each category of assistance is funded by discrete aid accounts in the U.S. budget. There are many such accounts, supporting different aid agencies, offices, and programs. This methodology encompasses all traditional aid, a larger universe than that in the DFA framework. 5 However, as 5 In the U.S. federal budget, all commonly accepted, traditional foreign aid accounts are subsumed under the 150, international affairs, budget function. The Office of Management and Budget (OMB) has designated development and humanitarian assistance as subfunction 151 and security assistance as subfunction 152. Currently, all traditional foreign (continued...) Congressional Research Service 6 Foreign Aid: An Introduction to U.S. Programs and Policy noted, the Department of Defense and some other government agencies undertake assistance programs with funding outside traditional foreign aid budget accounts. These non-traditional programs are not captured in this discussion. Iraq and Afghanistan Reconstruction Funding In recent years, reconstruction assistance to Iraq and Afghanistan has accounted for billions of dollars and has, perhaps, disproportionately shaped the portrait of the U.S. foreign aid program. Aid efforts in both countries have been mostly directed at improving the security capabilities of police and armed forces, at building and rehabilitating infrastructure, promoting governance, and stimulating economic growth. Reaching a total of $49 billion in appropriations from all sources in the years FY2003 to FY2009, the U.S. assistance program to Iraq is the largest aid initiative since the 1948-1951 Marshall Plan. Nearly $21 billion of the total was funneled through an Iraq Relief and Reconstruction Fund in just two fiscal years, FY2003 and FY2004. About $22 billion has been provided under the DOD budget, not traditionally included in foreign aid totals, and, therefore, unless otherwise noted, not captured in the context of this report. The Afghanistan program to date accounts for about $11 billion in traditional foreign aid and another $15 billion in DOD-funded aid. While traditional foreign aid amounts noted in this report include figures for Iraq and Afghanistan reconstruction, it is important to keep in mind that these aid efforts—running currently at $2-$3 billion a year—might overshadow and obscure key trends in changing aid budget and policy priorities for the period FY2002-2009. Therefore, at various points throughout the text, a notation may be made stating what a particular amount would equal if Iraq and/or Afghanistan assistance was excluded. Bilateral Development Assistance Development assistance programs are designed chiefly to foster sustainable broad-based economic progress and social stability in developing countries. For FY2008, Congress appropriated $10.3 billion in such assistance, an amount accounting for nearly 37% of total foreign aid FY2010, humanitarian programs were funded at roughly $5.0 billion, double the FY2006 level. Foreign Assistance:Traditional and Non-traditional For decades, most U.S. foreign assistance was defined by discrete authorized accounts, funded by specific annual appropriations legislation, and implemented by foreign policy-focused departments and agencies. In the U.S. federal budget, these traditional foreign aid accounts have been subsumed under the 150, international affairs, budget function. The Office of Management and Budget (OMB) has designated development and humanitarian assistance accounts as falling under subfunction 151 and security assistance accounts as subfunction 152. In FY2009, roughly $35 billion was obligated from traditional aid accounts. Over the years, individual U.S. government departments and agencies began supporting programs that also might be characterized as foreign aid but are formulated and implemented outside of the sphere of U.S. foreign policy agencies and their traditional aid budgets. For instance, in the 1980s, EPA, using its own authorized and appropriated funds, cooperated on joint research with China on the health effects of various pollutants and conducted workshops in India on wastewater treatment in an effort to clean up the Ganges River. Many other U.S. departments and agencies maintain similar technical relationships with other country governments, often in the course of fulfilling their domestic mandates and providing shared benefits to both parties. It is estimated that these non-traditional sources of assistance equaled about $12.6 billion in obligated funds in FY2009, raising total aid from all sources to $47.5 billion. The role of non-traditional aid likely has become more pronounced since the mid 1990s, in particular because of the role of the Department of Defense (DOD) in the aid programs of Iraq and Afghanistan; of DOD and the Department of Energy in nuclear non-proliferation programs, especially in the former Soviet Union; and of the National Institutes of Health (NIH) and Centers for Disease Control (CDC) in the global HIV/AIDS program. These three distinct efforts make up the bulk ( 89%) of FY2009 non-traditional aid obligations. Iraq and Afghanistan alone represented nearly three quarters of all non-traditional aid in that year. The anomalous nature of non-traditional aid activities in Iraq and Afghanistan (see text box below), together with inconsistent historic reporting of non-traditional aid, may distort aid trends. Therefore, this report focuses on traditional foreign assistance, which remains the vast majority of total assistance, in its discussion and charts and graphs. Such assistance corresponds closely to the foreign operations and food aid appropriations in Table 2. Nonetheless, the role of non-traditional aid is raised where appropriate throughout this report, as policymakers in the State Department and Congress contend with how to most efficiently leverage these funds to meet U.S. foreign policy purposes. Congressional Research Service 6 Foreign Aid: An Introduction to U.S. Programs and Policy Table 2.Traditional Foreign Assistance, FY2001-FY2010 (appropriations, in billions of current U.S. $) Foreign Operations P.L. 480 Food Aid Traditional Aid, Total FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 16.31 16.54 23.67 39.05 23.45 23.13 26.38 26.89 34.32 37.49 0.93 0.85 1.81 1.24 1.50 1.59 1.66 2.06 2.42 1.90 17.24 17.39 25.48 40.29 24.95 24.72 28.04 28.95 36.74 39.39 Source: Appropriations legislation; Congressional Budget Justifications. What Are the Major Foreign Aid Funding Accounts? The framework introduced by the Director of Foreign Assistance organizes assistance by foreign policy objective. But there are many other ways to categorize foreign aid, one of which is to sort out and classify foreign aid accounts in the U.S. budget according to what they are expected to accomplish and in what form they are provided. While imperfect—these accounts support a variety of different aid agencies and serve multiple functions—this methodology encompasses all traditional aid, a larger universe than that in the DFA framework. However, as noted, the Department of Defense and some other government agencies undertake assistance programs with funding outside traditional foreign aid budget accounts. These non-traditional programs are not captured in this discussion (see text box above). Assistance Serving Development and Humanitarian Purposes A wide range of aid programs address development and humanitarian concerns. These are provided both bilaterally and multilaterally. In FY2010, $20 billion—53% of U.S. assistance— focused on mitigating human suffering and poverty in developing countries. Bilateral Development Assistance Development assistance programs are designed chiefly to foster sustainable broad-based economic progress and social stability in developing countries. For FY2010, Congress appropriated $12.3 billion in such assistance, an amount accounting for 32% of total foreign aid appropriations. A significant proportion of these funds—largely encompassed by the Development Assistance and the Child Survival & Health accounts—is managed by the U.S. Agency for International Development (USAID) and is used for long-term projects in the areas of economic reform and private sector development, democracy promotion, environmental protection, population control, and improvement of human health. Development activities that have gained more prominence in recent years include basic education, water and sanitation, and support for treatment of HIV/AIDS and other infectious diseases. Other bilateral development assistance goes to distinct institutions, such as the Peace Corps, Inter-American Development Foundation, African Development Foundation, Trade and Development Agency, and Millennium Challenge Corporation. Economic Aid Supporting U.S. Political and Security Objectives For FY2008, Congress appropriated $7.8 billion, 27% of total assistance, for five major programs whose primary purpose is to meet special U.S. economic, political, or security interests. The bulk of these funds—$5.3 billion—was provided through the Economic Support Fund (ESF), designed to advance American strategic goals with economic assistance. ESF funds can be used for development projects, or in other ways, such as cash transfers, to help a recipient country stabilize its economy and service foreign debt. For many years, following the 1979 Camp David accords, most ESF funds went to support the Middle East Peace Process. Since 9/11, ESF has largely (...continued) aid accounts fall under one of these two subfunctions. Congressional Research Service 7 Foreign Aid: An Introduction to U.S. Programs and Policy supported countries of importance in the war on terrorism. In FY2008, for example, about $1.8 billion in ESF was directed at Iraq and Afghanistan alone. Figure 1. Aid Program Composition, FY2008 Bilateral Development 35.5% Econom ic Political Security 27.1% Humanitarian 14.4% Military 17.5% Multilateral 5.5% Source: U.S. Department of State, Summary and Highlights, International Affairs, Function 150, FY2009, House and Senate Appropriations Committees, and CRS calculations. With the demise of the Soviet empire, the United States established two new aid programs to meet particular strategic political interests. The SEED (Support for East European Democracy Act of 1989) and the FREEDOM Support Act (Freedom for Russia and Emerging Eurasian Democracies and Open Markets Support Act of 1992) programs were designed to help Central Europe and the newly independent states of the former Soviet Union (FSA) achieve democratic systems and free market economies. In FY2008, SEED countries were allocated about $294 million while the FSA countries received $397 million in appropriated funds (not counting an emergency appropriation at the end of the fiscal year of $365 million specifically for Georgia). Both accounts have seen decreases as countries graduate from U.S. assistance, from a ten-year high of $676 million in 2001 for SEED and $958 million in 2002 for FSA countries. Especially since 2001, policymakers have given greater weight to several global concerns that are considered threats to U.S. security and well-being—terrorism, illicit narcotics, crime, and weapons proliferation. They have addressed each concern with aid programs that provide a range of law enforcement activities, training, and equipment. In FY2008, the anti-narcotics and crime program accounted for about $1.3 billion in foreign aid appropriations—about a quarter of which was for an Andean anti-narcotics initiative. Anti-terrorism programs added another $150 million, and weapons proliferation-related activities, including humanitarian demining, were funded at $347 million. Humanitarian Assistance For FY2008, Congress appropriated $4.2 billion, 14.4% of assistance, for humanitarian aid programs. 6 Unlike development assistance programs, which are often viewed as long-term efforts 6 Because of the unanticipated nature of many disasters, humanitarian aid budget allocations often increase throughout the year as demands arise. Figures listed here include supplemental funds provided at various stages throughout the year as of the end of FY2008. Congressional Research Service 8 Foreign Aid: An Introduction to U.S. Programs and Policy that may have the effect of preventing future crises from developing, humanitarian aid programs are devoted largely to the immediate alleviation of humanitarian emergencies. A large proportion of humanitarian assistance goes to programs aimed at refugees and internally displaced persons administered by the State Department and funded under the Migration and Refugee Assistance (MRA) and the Emergency Refugee and Migration Assistance (ERMA) accounts. These accounts support, with about $1.4 billion in FY2008, a number of refugee relief organizations, including the U.N. High Commission for Refugees and the International Committee of the Red Cross. The International Disaster Assistance (IDA) and Transition Initiatives (TI) accounts managed by USAID provide relief, rehabilitation, and reconstruction assistance to victims of man-made and natural disasters, activities totaling $694 million in FY2008.7 Food assistance supplements both programs (about $2.1 billion in FY2008). The food aid program, generically referred to as P.L. 480 (after the law that authorizes it) or the Food for Peace program, provides U.S. agricultural commodities to developing countries. USAID-administered Title II (of the public law) grant food aid is mostly provided for humanitarian relief, but may also be used for development-oriented purposes by private voluntary organizations (PVOs) or through multilateral organizations, such as the World Food Program. Title II funds are also used to support the “farmer-to-farmer” program which sends hundreds of U.S. volunteers as technical advisors to train farm and food-related groups throughout the world. A new program begun in 2002, the McGovern-Dole International Food for Education and Child Nutrition Program, provides commodities, technical assistance, and financing for school feeding and child nutrition programs ($100 million in FY2008).8 Multilateral Assistance A relatively small share of U.S. foreign assistance—5.5% in FY2008—is combined with contributions from other donor nations to finance multilateral development projects. For FY2008, Congress appropriated $1.6 billion for such activities implemented by international organizations, like the United Nations Children’s Fund (UNICEF) and the United Nations Development Program (UNDP), and by multilateral development banks (MDBs), such as the World Bank. On average, U.S. contributions represent about 23% of total donor transfers to the MDBs. Military Assistance The United States provides military assistance to U.S. friends and allies to help them acquire U.S. military equipment and training. Congress appropriated $5.1 billion for military assistance in FY2008, 17.5% of total U.S. foreign aid. There are three main programs, administered by the Department of State, but implemented by DOD. Foreign Military Financing (FMF), $4.7 billion in FY2008, is a grant program that enables governments to receive equipment from the U.S. government or to access equipment directly through U.S. commercial channels. Most FMF grants support the security needs of Israel and Egypt. The International Military Education and Training program (IMET), $85 million, offers military training on a grant basis to foreign military officers and personnel. Peacekeeping funds, $261 million in FY2008, are used to support voluntary nonU.N. operations as well as training for an African crisis response force. As noted earlier, since 7 The IDA account was previously known as the International Disaster and Famine Assistance account (IDFA). Until FY1998, food provided commercially under long-term, low interest loan terms (Title I of P.L. 480) was also included in the foreign assistance account. Because of its increasing export focus, it is no longer considered foreign aid. 8 Congressional Research Service 9 Foreign Aid: An Introduction to U.S. Programs and Policy 2002, DOD appropriations, not included in counts of traditional foreign aid, have supported FMF and IMET-like programs in Afghanistan and Iraq at a level of nearly $6 billion in FY2008. What Are the Funding Priorities and Trends in U.S. Foreign Assistance? Tracking changes in the amount of funds distributed to each objective, sector, type of assistance, or funding account is one means of measuring the relative priority placed by the executive branch on any of the aid activities represented by that category of assistance. Because Congress closely examines the executive’s distribution of bilateral economic resources and in a number of cases modifies the President’s proposed budget plan, funding trends also characterize congressional aid priorities and areas of special concern. 9 Trends in Types of U.S. Aid As shown in Figure 2 (and Table A-2), there have been shifts in the use of different types of U.S. assistance in response to world events and changing priorities. Funding a Middle East peace supplemental, the Andean Counter-narcotics Initiative and economic support for countries assisting U.S. efforts in the war on terrorism pushed strategic-oriented economic aid from a 26% share in FY1995 to an average 33% share from FY1997 through FY2002. The injection of significant assistance to Iraq raised political-strategic assistance to 50% in FY2004.10 Excluding the anomaly of Iraq, however, would lower the proportion of political-strategic aid to 29% in FY2004. Even with Iraq funding included in the following years, this grouping of aid drops to about 29% in the period FY2005 through FY2007, reflecting somewhat the impact of a continuing ten-year plan to reduce economic aid to Israel and Egypt, and, except in the case of Afghanistan, less robust aid for partner states in the war on terrorism. The growth of development-related aid in this period also diminished the relative proportion of other forms of assistance. The proportion of total aid represented by political-strategic assistance in FY2008 was 27%. 9 Congressional Research Service 7 Foreign Aid: An Introduction to U.S. Programs and Policy Multilateral Development Assistance A relatively small share of U.S. foreign assistance—7% in FY2010—is combined with contributions from other donor nations to finance multilateral development projects. For FY2010, Congress appropriated $2.6 billion for such activities implemented by international organizations, such as the United Nations Children’s Fund (UNICEF) and the United Nations Development Program (UNDP), and by multilateral development banks (MDBs), such as the World Bank. On average, U.S. contributions represent about 23% of total donor transfers to the MDBs. Humanitarian Assistance For FY2010, Congress appropriated $5.1 billion, 13.5% of assistance, for humanitarian aid programs. 5 Unlike development assistance programs, which are often viewed as long-term efforts that may have the effect of preventing future crises from developing, humanitarian aid programs are devoted largely to the immediate alleviation of humanitarian emergencies. A large proportion of humanitarian assistance goes to programs, administered by the State Department and funded under the Migration and Refugee Assistance (MRA) and the Emergency Refugee and Migration Assistance (ERMA) accounts, aimed at addressing the needs of refugees and internally displaced persons. These accounts support, with about $1.9 billion in FY2010, a number of refugee relief organizations, including the U.N. High Commission for Refugees and the International Committee of the Red Cross. The International Disaster Assistance (IDA) 6 account managed by USAID totaled $1.3 billion in FY2010. It provides relief and rehabilitation assistance to victims of man-made and natural disasters, such as the 2010 Haiti earthquake. Food assistance supplements both programs (about $1.9 billion in FY2010). The food aid program, generically referred to as P.L. 480 (after the law that authorizes it) or the Food for Peace program, provides U.S. agricultural commodities to developing countries. USAID-administered Title II (of the public law) grant food aid is mostly provided for humanitarian relief, but may also be used for development-oriented purposes by private voluntary organizations (PVOs) or multilateral organizations, such as the World Food Program. Title II funds are also used to support the “farmer-to-farmer” program, which sends hundreds of U.S. volunteers as technical advisors to train farm and food-related groups throughout the world. The McGovern-Dole International Food for Education and Child Nutrition Program, a program begun in 2002, provides commodities, technical assistance, and financing for school feeding and child nutrition programs ($210 million in FY2010).7 Assistance Serving Both Development and Special Political/Strategic Purposes Two aid accounts are distinctive in that their primary purpose is to promote special U.S. economic, political, or security interests. Programs funded through these accounts generally aim to promote political and economic stability, often through activities indistinguishable from those 5 Because of the unanticipated nature of many disasters, humanitarian aid budget allocations often increase throughout the year as demands arise. Figures listed here include supplemental funds provided at various stages throughout the year as of the end of FY2010. 6 The IDA account was previously known as the International Disaster and Famine Assistance account (IDFA). 7 Until FY1998, food provided commercially under long-term, low-interest loan terms (Title I of P.L. 480) was also included in the foreign assistance account. Because of its export focus, it is no longer considered foreign aid. Congressional Research Service 8 Foreign Aid: An Introduction to U.S. Programs and Policy provided under regular development and humanitarian programs. 8 For FY2010, Congress appropriated $9.6 billion, 25% of total assistance, through these accounts. The bulk of these funds—$8.8 billion in FY2010—was provided through the Economic Support Fund (ESF). For many years, following the 1979 Camp David accords, most ESF funds went to support the Middle East Peace Process. A significant amount of funding still goes to Egypt, the West Bank, Lebanon, and Jordan—$1.2 billion in FY2010. Since 9/11, however, ESF has largely supported countries of importance in the war on terrorism. In FY2010, for example, about $5.0 billion in ESF was directed at Iraq, Afghanistan, and Pakistan. The Assistance to Europe, Eurasia and Central Asia account (AEECA) combines two aid programs that were established at the demise of the Soviet empire to meet particular strategic political interests. The SEED (Support for East European Democracy Act of 1989) and the FREEDOM Support Act (Freedom for Russia and Emerging Eurasian Democracies and Open Markets Support Act of 1992) programs were designed to help Central Europe and the newly independent states of the former Soviet Union (FSA) achieve democratic systems and free market economies. In FY2010, roughly $742 million was appropriated. Over the years, funding has decreased significantly as countries in the region graduate from U.S. assistance, many joining the European Union. Assistance Serving Security Purposes A number of U.S. civilian and military-implemented aid programs directly address national security concerns, most seeking to strengthen the military capacity and civilian law enforcement competence of U.S. allies and cooperating developing countries. Civilian Security Assistance Two State Department-managed accounts are aimed at global concerns that are considered threats to U.S. security and well-being—terrorism, illicit narcotics, crime, and weapons proliferation. They have addressed each concern with aid programs that provide a range of law enforcement activities, training, and equipment. Especially since 2001, policymakers have given greater weight to these programs. In FY2010, the International Narcotics and Law Enforcement (INCLE) account represented about $2.8 billion in foreign aid appropriations. This account has grown substantially in FY2010 as the State Department takes on the burden of training police forces in Iraq. The Nonproliferation, Anti-Terrorism, Demining, and Related Programs (NADR) account received $754 million in appropriations in FY2010. Anti-terrorism programs include detecting and dismantling terrorist financial networks, establishing watch-list systems at border controls, and building developing country anti-terrorism capacities. Nonproliferation efforts include support to the International Atomic Energy Agency and building capacity to detect and interdict transfer of weapons and delivery systems over borders. 8 The DFA estimates that about 93% of ESF is implemented by USAID. CRS estimates that in FY2007, more than 59% of AEECA funds went to development purposes. Congressional Research Service 9 Foreign Aid: An Introduction to U.S. Programs and Policy While both accounts focus on security threats, they each support programs of a development or humanitarian nature. INCLE helps develop the judicial system—assisting judges, lawyers, and legal institutions—of many developing countries and the NADR program funds humanitarian demining programs. Military Assistance The United States provides military assistance to U.S. friends and allies to help them acquire U.S. military equipment and training. Congress appropriated $4.7 billion for military assistance in FY2010, 12.5% of total U.S. foreign aid. There are three main programs, administered by the Department of State, but implemented by DOD. Foreign Military Financing (FMF), $4.3 billion in FY2010, is a grant program that enables governments to receive equipment from the U.S. government or to access equipment directly through U.S. commercial channels. Most FMF grants support the security needs of Israel and Egypt. The International Military Education and Training program (IMET), $108 million, offers military training on a grant basis to foreign military officers and personnel. Peacekeeping funds, $332 million in FY2010, are used to support voluntary non-U.N. operations as well as training for an African crisis response force. As noted earlier, since 2002, DOD appropriations, not included in counts of traditional foreign aid, have supported FMF and IMET-like programs in Afghanistan and Iraq at a level of more than $10 billion in FY2010. Iraq and Afghanistan Reconstruction Funding Between 2002 and 2010, reconstruction assistance to Iraq and Afghanistan from all U.S. sources accounted for $104 billion and has, perhaps, disproportionately shaped the portrait of the U.S. foreign aid program. Nearly $21 billion of the total was funneled through an Iraq Relief and Reconstruction Fund in just two fiscal years, FY2003 and FY2004. Another $57 billion of the total has been provided under the DOD budget, not traditionally included in foreign aid totals, and, therefore, unless otherwise noted, not captured in the context of this report. While traditional foreign aid amounts noted in this report include figures for Iraq and Afghanistan reconstruction, it is important to keep in mind that these traditional aid efforts—$5 billion in FY2010—might overshadow and obscure key trends in changing aid budget and policy priorities for the period FY2002-2010. Therefore, at various points throughout the text, notations state what a particular amount would equal if Iraq and/or Afghanistan assistance was excluded. Congressional Research Service 10 Foreign Aid: An Introduction to U.S. Programs and Policy What Are the Recent Priorities and Trends in U.S. Foreign Aid? Tracking changes in the amount of funds distributed to each objective, sector, type of assistance, or funding account is one means of measuring the relative priority placed by the executive branch on any of the aid activities represented by that category of assistance. Because Congress closely examines the executive’s distribution of bilateral economic resources and in a number of cases modifies the President’s proposed budget plan, funding trends also characterize congressional aid priorities and areas of special concern.9 Trends in Types of U.S. Aid Figure 1. Aid Program Composition, FY2010 Source: U.S. Department of State, Summary and Highlights, International Affairs, Function 150, FY2011; House and Senate Appropriations Committees; CRS calculations. As shown in Figure 2 (and Table A-1), there have been shifts in the use of different types of U.S. assistance in response to world events and changing priorities. Grouping aid in the categories noted above, a number of notable trends over the last decade can be identified. Increase in development/humanitarian aid. Between FY1990 and FY1995, development/humanitarian-related aid rose steadily from a 38% share to nearly 48%. The growth of more politically driven economic programs in central Europe and the former Soviet Union, plus sizeable cuts to development aid in FY1996/FY1997 and increased emphasis on civilian security concerns drove the share down to an average of 41% during the late 1990s through FY2002. The approval of significant amounts of funding for two new presidential aid priorities, the Millennium Challenge Corporation and the President’s Emergency Plan for AIDS Relief (PEPFAR), boosted development/humanitarian assistance to over half of total U.S. foreign aid by FY2006, its highest proportion since 1980. In FY2010, its share was at 53%. Increase in health aid. Most of the increase in development/humanitarian aid can be attributed to the rise in health assistance. The proportion of total foreign aid represented by health programs has gone from about 5% of aid in the late 1990s to 21% of all aid in FY2010. Increase in civilian security aid. A modest decline in the portion of aid allocated to securityrelated assistance over the past decade, from about 28% to 30% of total aid at the end of the 1990s to 22% in FY2010 tells two countervailing stories. One is the decline in military aid discussed below. The other is the significant increase in civilian security programs during this period. In the late 1990s, anti-terror and counter-narcotics programs represented around 3% of 9 It is important to note that the amount of resources allocated to any single development sector relative to other sectors in any given year is not necessarily a good measure of the priority assigned to that sector. Different types of development activities require varying amounts of funding to have impact and achieve the desired goals. Democracy and governance programs, for example, are generally low-cost interventions that include extensive training sessions for government officials, the media, and other elements of civil society. Economic growth programs, on the other hand, might include infrastructure development, government budget support, or commodity import financing, activities that require significantly higher resources. What may be a better indicator of changing priorities is to compare funding allocations over time to the same objective or sector. 10 Of the $18.4 billion provided in FY04 for Iraq from the IRRF, $5 billion was utilized in the same way as military assistance and delegated to DOD for implementation. The remainder was used in ways similar to ESF and, therefore, is considered political-strategic assistance for purposes of this analysis. Congressional Research Service 10. Congressional Research Service 11 Foreign Aid: An Introduction to U.S. Programs and Policy Figure 2. Shifts in Program Emphasis (FY1998-2008) (as % of total U.S. foreign assistance) 100 80 60 40 20 0 99 98 '01 '00 '03 '02 '04 w/o Iraq '04 '05 '06 '08 '07 Military Aid Economic Political/Strategic Aid Bilateral/Multilateral/Humanitarian Aid Source: U.S. Department of State and CRS calculations. Notes: To illustrate the impact of Iraq funding on the aid program, the column “FY04 without Iraq” excludes $18.4 billion in Iraq Relief and Reconstruction Fund (IRRF) aid. total U.S. assistance. As a result of the Andean Counter-Narcotics Initiative launched in FY2000 and the strengthening of anti-terror programs following the September 11, 2001, terrorist attacks, civilian security programs rose to 9% of total aid by FY2010. Decline in military aid. For more than two decades, military assistance as a share of total aid obligations has has declined, a trend that began after military aid peaked at 42% in FY1984. Despite increases in other forms of assistance in the period from 1998FY1999 through FY2004, military aid hovered in the 25% range as the because the United States provided additional security support to many of the partner states in the war on terrorism and other countries that might face new external threats due to the pending conflict in Iraq Iraq, military aid averaged 26% of total aid. From FY2005, however, its share continued to fall, largely due to the rise in relative prominence of development/humanitarian aid. In FY2010prominence of the development assistance category. In FY2008, military assistance represented less than 1813% of total aid. However, as discussed in a later section, foreign assistance provided by thewith new Department of Defense, and not counted in estimates of traditional foreign aid, has been increasing with operations in Iraq and Afghanistan, with new authority to train and equip foreign militaries, and with anti-narcotics activities in Latin America and Afghanistan. Perhaps the most striking trend in this period has been the growth in development-related assistance, including humanitarian aid, food aid, and contributions to multilateral institutions. Development-related aid rose steadily from a 38% share in FY1990 to nearly 48% by FY1995. The growth of more politically driven economic programs in central Europe and the former Soviet Union, plus sizable cuts to development aid in FY1996/1997 and increased emphasis on security assistance following the September 11 terrorist attacks, drove the share down to an average of 41% during the late 1990s through FY2002. If Iraq funding were excluded in FY2004, the proportion of development aid would jump to 47%, rather than the deep decline to 25% if Iraq is included. With the approval of significant amounts of funding for two new presidential aid priorities, the Millennium Challenge Corporation and the HIV/AIDS Initiative, development assistance grew to represent over half of total U.S. foreign aid by FY2005, the highest proportion in more than twenty years. This share has since continued to increase, reaching 55% in FY2008. Congressional Research Service 11 Foreign Aid: An Introduction to U.S. Programs and Policy Trends in Programs and Sectors of Special Interest There are multiple ways to define and categorize U.S. foreign assistance programs. At various of Defense authority to train and equip foreign militaries, especially in Iraq and Afghanistan, and with increased anti-narcotics activities in Latin America and Afghanistan, funding for security aid programs has to a large extent shifted from the traditional foreign aid budget to the defense budget. Figure 2. Shifts in Program Emphasis (FY2000-2010) (as % of total U.S. foreign assistance appropriations) Source: U.S. Department of State and CRS calculations. Notes: To illustrate the impact of Iraq funding on the aid program, the column “FY04 without Iraq” excludes the anomalous $18.4 billion in Iraq Relief and Reconstruction Fund (IRRF) aid provided in that one year. Trends in Programs and Sectors of Special Interest At various times, congressional and public attention centers on one or another slice of the aid effort. For instance, the large community of non-governmental organizations (NGOs) working on international sustainable development activities most often concerns itself with what it calls “core developmentsome call “core accounts,” usually defined as including the USAID Child Survival and Health, USAID Development Assistance, Millennium Challenge, and HIV/AIDS accounts. Collectively, these have grown exponentially over the ten year period from 1998 to 2008, from $1.9 billion to $9.6 billion, largely due to the launching of the HIV/AIDS and MCA programs. One of the most striking changes in the distribution of economic aid resources in recent years has been the sharp growth in funding for health programs, especially in the area of HIV/AIDS and other infectious diseases (see Table 1). In 2004, the Bush Administration launched a five-year Global AIDS Initiative, the President’s Emergency Plan for AIDS Relief (PEPFAR), with the goal of treating two million HIV-infected individuals, and caring for ten million infected people and AIDS orphans that eventually provided over $18 billion. The program was re-authorized in 2008 (P.L. 110-293) at $48 billion for FY2009 through FY2013 to support prevention and treatment of HIV/AIDS, malaria, and tuberculosis. Spending on non-AIDS infectious diseases has increased by 400% since FY2001. Funding has also risen notably for Child Survival and Maternal Health projects that aim to reduce infant mortality, combat malnutrition, improve the quality of child delivery facilities, and raise nutritional levels of mothers. Funding for these activities has grown by 45% in the past seven years. Public support and congressional and Administration action often raise the priority given to specific sectors or programs. In recent years, high profile programs include support for microenterprise, basic education, clean water and sanitation. For each of these specific interests, funding has been boosted by Congress in the form of legislative directives or earmarks in the annual foreign aid appropriations legislation. Funding for microenterprise, for instance, went from $58 million in FY1988 to $111 million in FY1996 and $216 million in FY2006. Congress mandated a level of $245 million for microenterprise assistance in FY2008. Basic education programs were funded at about $95 million in FY1997; they were set at $700 million in FY2008. Funding for water and sanitation projects was not closely tracked ten years ago; the directed level for FY2008 was $300 million. Some sectors once strongly favored by Congress and the executive branch have lost out in the funding competition in recent decades. Agriculture programs have seen significant decreases since the 1970s and 1980s when they represented the bulk of U.S. development assistance. In FY1984, for instance, agriculture and rural development received an appropriation of $725 million from the development assistance account, compared to $315 million in FY1998 and $413 million in FY2008 from all USAID/State accounts. Programs managing natural resources and protecting the global environment fell from $504 million in FY2002 to $324 million in FY2008. The rapid rise in HIV/AIDS funding overshadows to some extent reductions for other health sectors. Spending on family planning and reproductive health programs has been flat during the past 15 years, with the FY2008 level of $457 million only slightly higher than the 15-year average of $444 million. Congressional Research Service 12 Foreign Aid: An Introduction to U.S. Programs and Policy Which Countries Receive U.S. Foreign Aid? In FY2008, the United States is providing some form of foreign assistance to about 154 countries. Figure 3 and Figure 4 identify the top 15 recipients of U.S. foreign assistance for FY1998 and FY2008, respectively.11those most poverty-focused.10 Collectively, these accounts 10 Different organizations would count different programs as poverty-focused, but most would likely include Global Health, Development Assistance, Millennium Challenge Corporation, International Organizations & Programs, Transition Initiatives, Disaster Assistance, Migration and Refugee Assistance, and Food Aid. Congressional Research Service 12 Foreign Aid: An Introduction to U.S. Programs and Policy have grown exponentially over the 10-year period from 2000 to 2010, from $3.8 billion to $17.0 billion (a 348% increase), largely due to the launching of the HIV/AIDS and MCA programs, as well as a substantial rise in humanitarian aid funding. As noted earlier, one of the most striking changes in the distribution of economic aid resources in recent years has been the sharp growth in funding for health programs, especially in the area of HIV/AIDS and other infectious diseases (see Table 1). In 2004, the Bush Administration launched a five-year Global AIDS Initiative, the President’s Emergency Plan for AIDS Relief (PEPFAR), with the goal of treating 2 million HIV-infected individuals, and caring for 10 million infected people and AIDS orphans that eventually provided over $18 billion. The program was reauthorized in 2008 (P.L. 110-293) at $48 billion for FY2009 through FY2013 to support prevention and treatment of HIV/AIDS, malaria, and tuberculosis. Encompassing all health programs, a Global Health initiative introduced by President Obama in 2009 promises expenditures of $63 billion between 2009 and 2014. Overall, traditional health funding has gone up more than 550% since FY2001. Spending on TB and malaria has increased by 400% since FY2004. Funding has also risen notably for Child Survival and Maternal Health projects that aim to reduce infant mortality, combat malnutrition, improve the quality of child delivery facilities, and raise nutritional levels of mothers. Funding for these activities has grown by 160% in the past 10 years. Public support and congressional and Administration action often raise the priority given to specific sectors or programs. In recent years, high-profile programs include support for microenterprise, basic education, clean water and sanitation. Congress helped boost each of these specific interests through legislative directives in the annual foreign aid appropriations legislation. Funding for microenterprise went from $58 million in FY1988 to $154 million in FY1999 and $267 million in FY2009. Basic education programs were funded at about $95 million in FY1997; the level rose to $981 million in FY2010. Funding for drinking water supply and sanitation projects was an estimated $215 million in FY2002; in FY2009, it reached $514 million. Some sectors once strongly favored by Congress and the executive branch lost out in the funding competition in recent decades. Yet, with support from the Obama Administration, they are making a notable rebound. Agriculture programs saw significant decreases from the 1970s and 1980s when they represented the bulk of U.S. development assistance. In FY1984, agriculture and rural development received an appropriation of $725 million from the development assistance account, compared to $315 million in FY1998 and $473 million in FY2008 from all USAID/State accounts. The FY2010 level is $1.7 billion, reflecting a 2009 Feed the Future presidential initiative to provide $3.5 billion in agriculture funding over three years. Programs managing natural resources and protecting the global environment fell from $504 million in FY2002 to $324 million in FY2008. Environmental programs received $837 million in FY2010, more than doubling in just two years. Which Countries Receive U.S. Foreign Aid? In FY2010, the United States is providing some form of foreign assistance to about 149 countries.11 Table 3 identifies the top 15 recipients of U.S. foreign assistance for FY2000 and 11 Generally, assistance to a country is funneled, in various forms, to the country’s private sector, non-governmental organizations, local communities, individual entrepreneurs, and other entities. Assistance is provided directly to the government of a country where the intention is to effect policy reforms, improve governance, or work with a sector in (continued...) Congressional Research Service 13 Foreign Aid: An Introduction to U.S. Programs and Policy FY2010, respectively. Assistance, although provided to many nations, is concentrated heavily in certain countries, reflecting the priorities and interests of United States foreign policy at the time. As shown in the figures below, there are both similarities and sharp differences among country aid recipients for the two periods. The most consistent thread connecting the top aid recipients over the past decade has been continuing U.S. support for peacestrategic interests in the Middle East, with large programs maintained for Israel and Egypt and a relatively smaller program for West Bank/Gaza. The commitment to Latin America counter-narcotics efforts is also evident in both periods, with Peru and Bolivia appearing in FY1998 and Colombia and Mexico among the top U.S. aid recipients a decade later. Assisting countries emerging from conflict, usually under more temporary circumstances, is another constant aspect of U.S. foreign aid. Haiti and Bosnia, leading recipients in FY1998, have been replaced currently by Sudan, Afghanistan, and Iraq. But there are also significant contrasts in the leading aid recipients since FY1998. The impact of the terrorist attacks on September 11, 2001, and the subsequent use of foreign aid to support other nations threatened by terrorism or helping the U.S. combat the global threat is clearly seen in the country aid allocations for FY2008. Afghanistan, Pakistan, and Jordan, none of which was a top recipient in FY1998, are key partners in the war on terrorism. Another relatively new feature of American assistance—the emphasis on HIV/AIDS programs— is evident in FY2008 aid figures with Ethiopia, Kenya, Nigeria, and South Africa among the top recipients, largely due to their selection as focus countries for the Bush Administration’s HIV/AIDS Initiative. A further shift concerns the former Soviet states in which the United States invested large sums to assist in their transitions to democratic societies and market-oriented economies. In FY1998, Ukraine, Armenia, Georgia, and Russia were among the top fifteen U.S. aid recipients. By FY2008, only Georgia remains because of a U.S. reconstruction initiative following Georgia’s recent conflict with Russia. 11 FY2008 is the latest year for which reliable data is available, and includes supplemental funds that largely went for activities in Iraq, Afghanistan, and Georgia. Figures do not include Millennium Challenge Corporation Compacts as MCC appropriations are not broken out by recipient country until they are obligated, a one-time event for each country and on a scale that would distort the aid picture in any given year. Congressional Research Service 13 Foreign Aid: An Introduction to U.S. Programs and Policy Figure 3.Top Foreign Aid Recipients, FY1998 (appropriations in millions, US$) 0 Israel Egypt Bosnia Ukraine Russia India Peru Ethiopia Haiti Indonesia Georgia Bangladesh Bolivia Armenia West Bank/Gaza 500 1,000 1,500 2,000 2,500 3,000 3,500 3,000 2,117 240 233 139 138 120 117 106 100 98 93 91 89 85 Source: USAID and Department of State. Figure 4.Top Foreign Aid Recipients, FY2008 (appropriations in millions, US$) 0 Israel Afghanistan Egypt Jordan Pakistan Iraq Kenya South Africa Colombia Nigeria Ethiopia Georgia West Bank/Gaza Mexico Sudan 500 1,000 1,500 2,000 2,500 3,000 3,500 2,380 1,957 1,706 938 738 605 599 574 541 486 455 429 407 403 392 Source: USAID and State Department. Finally, a striking feature of the more recent aid recipients is the robust level of assistance provided to those below the top-ranked two or three countries. Ten years previously, the gap between the second and third recipients, Egypt and Bosnia, was nearly $2 billion. In FY2008, the gap between the second and fourth recipients, Afghanistan and Jordan, was less than $1 billion, and, on average, the bottom dozen recipients received more than four times what their counterparts received in FY1998. Congressional Research Service 14 Foreign Aid: An Introduction to U.S. Programs and Policy Figure 5. Regional Distribution of Aid, FY1998 Europe/ Eurasia 14.9% East Asia 2.9% Africa 13.3% Middle East 56.5% Latin America 8.2% South Asia 4.3% Source: USAID and Department of State. Note: Based on appropriated levels. Figures include supplemental appropriations and Iraq. Figure 6. Regional Distribution of Aid, FY2008 Europe/ Eurasia 6.2% East Asia 4.0% Middle East 33.8% Africa 28.6% South Asia 16.6% Latin America 10.8% Source: USAID and Department of State. Note: Based on appropriated levels. Figures include supplemental appropriations and Iraq. On a regional basis (Figure 5 and Figure 6), the Middle East has for many years received the bulk of U.S. foreign assistance. With economic aid to the region’s top two recipients, Israel and Egypt, declining since the late 1990s and overall increases in other areas, however, the share of bilateral U.S. assistance consumed by the Middle East fell from nearly 57% in FY1998 to nearly 34% by FY2008. Congressional Research Service 15 Foreign Aid: An Introduction to U.S. Programs and Policy Since September 11, 2001, South Asia has emerged as a significant recipient of U.S. assistance, rising from a 4% share ten years ago to about 17% in FY2008, largely because of aid to Afghanistan and Pakistan. Similarly, the share represented by African nations has increased from a little more than 13% to nearly 29% in 2008, largely due to the HIV/AIDS Initiative, that funnels resources mostly to African countries. Latin America, despite a renewed effort to deter illicit narcotics production and trafficking with large aid programs, is a region where the proportion of total U.S. assistance has remained level. With the graduation of several East European aid recipients in recent years and the phasing down of programs in Russia, Ukraine, and other former Soviet states, the Europe/Eurasia regional share has fallen significantly. The proportion of assistance provided to East Asia grew in the past decade, but the region remains the smallest area of concentration, accounting for 4% of U.S. foreign aid in FY2008programs for Jordan and West Bank/Gaza. Table 3.Top Recipients of U.S. Foreign Assistance, FY2000 & FY2010 (in millions of current US$) FY2000 FY2010 Israel 4,069 Afghanistan 4,102 Egypt 2,053 Israel 2,220 Colombia 899 Pakistan 1,807 West Bank/Gaza 485 Egypt 1,296 Jordan 429 Haiti 1,271 Russia 195 Iraq 1,117 Bolivia 194 Jordan 693 Ukraine 183 Kenya 688 Kosovo 165 Nigeria 614 Peru 120 South Africa 578 Georgia 112 Ethiopia 533 Armenia 104 Colombia 507 Bosnia 101 West Bank/Gaza 496 Indonesia 94 Tanzania 464 Nigeria 68 Uganda 457 Source: Department of State, Foreign Operations CBJ FY2002, FY2011. Note: Includes supplementals and Millennium Challenge Corporation Compact disbursements in FY2010. The biggest difference in the leading aid recipients since FY2000 is the emergence of three countries connected to the impact of the terrorist attacks on September 11, 2001. Afghanistan, Pakistan, and Iraq do not appear on the FY2000 list; they are among the top six recipients of U.S. assistance in FY2010. Another striking difference is the disappearance in FY2010 of any Europe and Eurasia recipients. In FY2000, six of the top 15 recipients were from this region, representing the effort to transform the former communist countries to democratic societies and marketoriented economies. Taking their place in FY2010, are six African countries, all focus countries (...continued) which the government is the predominant element, such as in healthcare where the Ministry of Health would play a determinative role. Often, in cases where a government is believed to be taking action contrary to U.S. interests, Congress has specified that assistance to that government be prohibited or limited, while not affecting overall assistance to the country. Congressional Research Service 14 Foreign Aid: An Introduction to U.S. Programs and Policy under the initiative to address the HIV/AIDS epidemic. Haiti’s presence in the FY2010 list is due to the humanitarian response to the January 2010 earthquake. On a regional basis, the Middle East has for many years received the bulk of U.S. foreign assistance. With economic aid to the region’s top two recipients, Israel and Egypt, declining since the late 1990s and overall increases in other areas, however, the share of bilateral U.S. assistance consumed by the Middle East fell from nearly 60% in FY2000 to nearly 26% by FY2010. Figure 3. Regional Distribution, FY2000 and FY2010 Source: USAID and Department of State. Notes: Based on appropriated levels. Figures include supplemental appropriations, Iraq and Afghanistan. Since September 11, 2001, South and Central Asia has emerged as a significant recipient of U.S. assistance, rising from a roughly 2% share 10 years ago to about 26% in FY2010, largely because of aid to Afghanistan and Pakistan. Similarly, the share represented by African nations has increased from a little less than 9% to nearly 29% in 2010, largely due to the HIV/AIDS Initiative, that funnels resources mostly to African countries. With the graduation of many East European aid recipients in recent years and the phasing down of programs in Russia, Ukraine, and other former Soviet states, the Europe/Eurasia regional share has fallen significantly, from a little more than 13% in FY2000 to under 4% in FY2010. Latin America, despite a renewed effort to deter illicit narcotics production and trafficking with large aid programs, is a region where the proportion of total U.S. assistance has remained about level at around 13%, as has the proportion of assistance provided to East Asia, accounting for 3% in FY2010. Foreign Aid Spending How Large Is the U.S. Foreign Assistance Budget and What Have Been the Historical Funding Trends? There are several methods commonly used for measuring the amount of federal spending on foreign assistance. Amounts can be expressed in terms of budget authority (funds appropriated by Congress), outlays (money obligations (amounts contractually committed), outlays or disbursements (money actually spent), as a percentpercentage of the total federal budget, as a percent of percentage of total discretionary budget authority (funds that Congress directly controls, excluding mandatory Congressional Research Service 15 Foreign Aid: An Introduction to U.S. Programs and Policy budget authority (excluding mandatory and entitlement programs), or as a percentage of the gross domestic product (GDP) (for an indication of the national wealth allocated to foreign aid). By nearly all of these measures, some of which are illustrated in Figure 7 and Figure 8, foreign foreign aid resources fell steadily over several decades since the historical high levels of the late 1940s and early 1950s. This downward trend was sporadically interrupted, with spikes in the 1960s and early 1970s, 1979, and the mid-1980s interrupted, largely due to major foreign policy initiatives such as the Alliance for Progress for Latin America in 1961 and, the infusion of funds to implement the Camp David Middle East Peace Accords in 1979, and a spike in military assistance in 1985. The lowest point in U.S. foreign aid spending came in 1997 when foreign operations appropriations fell near $18 billion (in constant dollar terms) and represented roughly 29% of the peak foreign aid committed during the Marshall Plan period. Congressional Research Service 16 Foreign Aid: An Introduction to U.S. Programs and Policy Figure 7. U.S. Foreign Aid: FY1946-FY2008 (obligations, in millions of constant 2008 US$) 60,000 obligations 50,000 40,000 30,000 20,000 10,000 19 46 19 49 19 52 19 55 19 58 19 61 19 64 19 67 19 70 19 73 19 76 19 79 19 82 19 85 19 88 19 91 19 94 19 97 20 00 20 03 20 06 0 Source: U.S. Overseas Loans and Grants (Greenbook) July 1,1945-September 30, 2006; House and Senate appropriations legislation; CRS calculations. Notes: This figure is based in the data from Table A-3. See the notes following Table A-3 for an explanation of the methodology used. Following the September 11 terrorist attacks, foreign aid became a key instrument in fighting the global war on terrorism and contributing to the reconstruction of Afghanistan and Iraq. See Figure 9 at the end of this section for a more detailed snapshot of foreign aid funding trends and related foreign policy events. As a percent of gross domestic product, prior to the mid-1960s, in most years foreign aid represented over 1%. Following the Vietnam War, foreign assistance as a percent of GDP ranged between 0.5% and 0.25% for the next 20 years. The program’s share of GDP dropped to its lowest level ever in FY2001 (0.15%), but has risen somewhat in recent years, averaging about 0.20% between FY2006 and FY2008 (Figure 8). Congressional Research Service 17 Foreign Aid: An Introduction to U.S. Programs and Policy Figure 8. Foreign Aid as % of GDP Source: Greenbook, U.S. Department of Commerce, CRS calculations. Congress appropriates most foreign aid money through annual State-Foreign Operations appropriations bill. That legislation represents the most direct congressional action on foreign assistance spending decisions, although small but growing amounts of foreign aid are funded in other legislation.12 Like other measures of foreign assistance programs, State-Foreign Operations appropriations declined in the mid-1990s to near $16 billion in 2008 dollars, the lowest level during the past decade in real terms (Table 2). Appropriated amounts rose beginning in FY1998 and averaged about $19 billion in constant dollars through the next four years. The combination of additional funding for the war on terrorism, Afghanistan reconstruction, and new foreign aid initiatives focused on HIV/AIDS and the Millennium Challenge Corporation, have pushed average annual Foreign Operations appropriations well above $20 billion consistently since FY2003. Including Iraq funding, FY2004 was the largest Foreign Operations appropriations level, in real terms, in at least 30 years.13 12 Most notably, food aid and certain Department of Defense aid programs are not appropriated in the Foreign Operations measure, while the Export-Import Bank, an activity not considered “foreign aid,” is funded in the Foreign Operations annual bill. 13 Due to changes over time in appropriation “scoring,” calculating historic Foreign Operations appropriations that are precisely equivalent to the methodology used currently is virtually impossible. This is especially true since Congress altered, beginning in FY1992, the methodology for “scoring” credit programs. The 30-year estimate noted here compares the FY2004 appropriation level of $44.0 billion ( in FY2008 dollars) with total foreign aid obligations of about $40 billion (real terms) in the early 1970s. Congressional Research Service 18 Foreign Aid: An Introduction to U.S. Programs and Policy Table 2. Foreign Operation Appropriations, FY1997-FY2008 (in billions of dollars) FY97 FY98 FY99 FY00 FY01 FY02 FY03 $ Current 12.3 13.2 15.4 16.4 14.9 16.5 23.7 $ Constant 2008 16.3 17.3 19.7 20.3 17.9 19.5 27.4 FY04 FY05 FY06 FY07 FY08 39.0 (20.6) 22.3 23.2 26.08 27.7 44.0 (23.2) 24.3 24.5 26.81 27.7 Source: Annual appropriations acts; CRS calculations. Notes: FY1999 excludes $17.861 billion for the IMF because it is offset by a U.S. claim on the IMF that is liquid and interest bearing, resulting in no outlays from the U.S. treasury. The FY2004 figure in parenthesis shows the total without Iraq reconstruction funds to illustrate the significant but anomalous impact of those funds on total foreign assistance spending. Figure 9. Foreign Aid Funding Trends, FY1977-FY2008 (budget authority, in millions of constant 2008 US$) 45,000 40,000 Middle East supplemental; military aid peaks Iraq Reconstruction Deficit reduction measure enacted 35,000 30,000 US$, in millions Cold War ends 25,000 20,000 September 11 terrorist attacks MCC; HIV/AIDS Camp David Peace Accords First Gulf War 15,000 Wye River Peace Aid; Colombia Counternarcotics 10,000 5,000 07 05 20 20 03 20 01 20 99 19 97 19 95 19 93 19 91 19 89 19 87 19 85 19 83 19 81 19 79 19 19 77 0 Source: Budget of the United States Government: Historic Tables Fiscal Year 2009, Table 5.1: Budget Authority by Function and Subfunction, 1976-2013; appropriations acts for FY2008. How Does Foreign Aid Compare with Other Federal Programs? Foreign aid spending is a relatively small component of the U.S. federal budget. As part of the estimated total amount spent in FY2008 on all discretionary programs (those controlled by Congress through appropriations), entitlements, and other mandatory activities, foreign aid outlays represent an estimated 1%. This figure is in line with typical foreign aid outlay amounts, which have generally equaled slightly less than 1% of total U.S. spending. Figure 10 compares foreign aid outlays for FY2008 with those of other major U.S. government spending categories. Congressional Research Service 19 Foreign Aid: An Introduction to U.S. Programs and Policy Figure 10. U.S. Budget Outlays, FY2008 Other 10% Health 10% Social Security 20% Education 3% Income Security 13% Medicare 14% Interest on Debt 8% Foreign Aid 1% Defense 21% Source: Budget of the United States Government: Historic Tables Fiscal Year 2009, Table 3.2: Outlays by Function and Subfunction, FY2008 Estimates. How Much of Foreign Aid Dollars Are Spent on U.S. Goods? Most U.S. foreign aid is used to procure U.S. goods and services, although amounts of aid coming back to the United States differ by program. No exact figure is available due to difficulties in tracking procurement item by item, but some general estimates are possible for individual programs, though these may vary from year to year. In FY2008, roughly 87%, or $4.1 billion, of military aid financing was used to procure U.S. military equipment and training. The remaining 13%, $614 million, was allocated to Israel for procurement within that country. Food assistance commodities are purchased wholly in the United States, and most expenditures for shipping those commodities to recipient countries go entirely to U.S. freight companies. Under current law, 14 three-fourths of all food aid must be shipped by U.S. carriers. On this basis, a rough estimate suggests that more than 90%—or nearly $1.85 billion in FY2008—of food aid expenditures were spent in the United States. Because U.S. contributions to multilateral institutions are mixed with funds from other nations and the bulk of the program is financed with borrowed funds rather than direct government contributions, the U.S. share of procurement financed by MDBs may even exceed the amount of the U.S. contribution, as occurred in 2003. However, no recent figures showing procurement on a nation-by-nation basis are available. 14 The Cargo Preference Act, P.L. 83-644, August 26,1954. Congressional Research Service 20 Foreign Aid: An Introduction to U.S. Programs and Policy Although a small proportion of funding for bilateral development and political/strategic assistance programs results in transfers of U.S. dollars, the services of experts and project management personnel and much of the required equipment is procured from the United States. Section 604 of the Foreign Assistance Act of 1961 (P.L. 87-195; 22 U.S.C. §2151)—often referred to as the “Buy America” provision—limits the expenditure of foreign assistance funds outside the United States, though subsequent amending legislation has loosened the restriction to allow for more expenditures within poor countries receiving assistance. Countries receiving MCC Compact grants are required to follow a modified version of World Bank procurement guidelines that call for open competition, excepting only specific countries subject to sanctions under U.S. law. In addition to the direct benefits derived from aid dollars used for American goods and services, many argue that the foreign aid program brings significant indirect financial benefits to the United States. First, it is argued that provision of military equipment through the military assistance program and food commodities through P.L.480, the Food For Peace program, helps to develop future, strictly commercial, markets for those products. Second, as countries develop economically, they are in a position to purchase more goods from abroad and the United States benefits as a trade partner. The use of “tied” aid—which is conditional on procurement of goods and services from the donor-country or a limited group of designated countries—has become increasingly disfavored in the international community. Critics of such conditional aid argue that it inhibits a sense of responsibility and support on the part of recipient governments for development projects and impedes the integration of the host country into the global economy.15 Studies have shown that tying aid increases the costs of goods and services by 15%-30% on average, and up to 40% for food aid, reducing the overall effectiveness of aid flows.16 Reflecting donor concerns about these findings, the average percent of official bilateral development assistance from donor countries that was tied fell from 70% in 1985 to 15% in 2007. Meanwhile, 31% of U.S. bilateral development assistance in 2007 was tied, down sharply from 55% in 2006.17 This is the highest level of tied aid among donor countries, and widely believed to reflect policy makers’ perception that maintaining public and political support for foreign aid programs requires ensuring direct economic benefit to the United States. The United States joined other donor nations in committing to reduce tied aid in the Paris Declaration on Aid Effectiveness in March 2005, but the Declaration did not set target goals on tied aid as it did for the other indicators of progress identified in the document.18 How Does the United States Rank as a Donor of Foreign Aid? For decades, the United States ranked first among the developed countries in net disbursements of economic aid, or “Official Development Assistance (ODA)” as defined by the international donor 15 OECD Report on The Developmental Effectiveness of Untied Aid, p.1, available at http://www.oecd.org/dataoecd/5/22/41537529.pdf. 16 Id., p.1 17 see http://stats.oecd.org/wbos/Index.aspx?DatasetCode=TABLE1; 2008 DAC Reporting Documents, Table 7B, provided by Bill McCormick at USAID. 18 Paris Declaration on Aid Effectiveness: Ownership, Harmonization, Alignment, Results and Mutual Accountability, a product of the High Level Forum on Aid Effectiveness; Paris, France (March 2, 2005). Congressional Research Service 21 Foreign Aid: An Introduction to U.S. Programs and Policy community.19 In 1989, for the first time, Japan supplanted the United States as the largest donor. The United States was again the leading donor from 1990 to 1992, and fluctuated between a second and third position from 1993 to 2000. In 2001, it again became the largest contributor and remained in that position in 2008, the most recent year for which data is available, with a commitment of $26 billion. Germany followed at $13.9 billion, the United Kingdom at $11.4 billion, and France at $10.9 billion. Japan, which has significantly scaled back its foreign aid program in recent years, gave $9.36 billion in 2008. As a group, the 22 members of the Organization for Economic Cooperation and Development (OECD)’s Development Assistance Committee (DAC), representing the world’s leading providers of economic aid, transferred $119.76 billion in 2008, a 10.2% increase over 2007 levels in constant dollars. Figure 11. Economic Aid From Major Donors, 2008 (in millions, US$) United States 26,008 Germany 13,910 United Kingdom 11,409 France 10,957 Japan 9,362 Netherlands 6,993 Spain 6,686 Sweden 4,730 Canada 4,725 Italy 4,444 Norway 3,967 Australia 3,166 Denmark 2,800 Belgium 2,381 Switzerland 2,016 Austria 1,681 Ireland 1,325 0 5,000 10,000 15,000 20,000 25,000 30,000 U.S. Dollars Source: OECD/DAC. Even as it leads in dollar amounts of aid flows to developing countries, the United States is often among the last when aid transfers by developed country donors are calculated as a percent of gross national income (GNI).20 In 2008, as has been the case since 1993, the United States ranked last among major donors at 0.18% of GNI, sharing the distinction in this instance with Japan. Sweden ranked first at .98% of GNI, while the United Kingdom dispensed 0.43%, France 0.39%, 19 The OECD Glossary of Statistical Terms defines ODA as “flows of official financing administered with the promotion of economic development and welfare of developing countries as the main objective, and which are concessional in character with a grant element of at least 25%. By convention, ODA flows comprise contributions of donor government agencies, at all levels, to developing countries and to multilateral institutions.” ODA does not include military assistance. 20 Gross National Income (GNI) comprises GDP together with income received from other countries (notably interest and dividends), less similar payments made to other countries. Congressional Research Service 22 Foreign Aid: An Introduction to U.S. Programs and Policy and Germany 0.38%. The average for all DAC members in 2008 was 0.47%, up from .25% in 2003. Figure 12. Economic Aid as % of GNI for Major Donors, 2008 0.98 Sweden 0.88 Norway 0.82 Denmark 0.8 Netherlands 0.58 Ireland 0.47 Belgium 0.43 United Kingdom 0.43 Spain 0.42 Austria 0.41 Switzerland 0.39 France 0.38 Germany 0.34 Australia 0.32 Canada Italy 0.2 Japan 0.18 United States 0.18 0 0.2 0.4 0.6 0.8 1 1.2 % of GNI Source: OECD/DAC. Delivery of Foreign Assistance How and in what form assistance reaches an aid recipient can vary widely, depending on the type of aid program, the objective of the assistance, and the agency responsible for providing the aid. What Executive Branch Agencies Administer Foreign Aid Programs? U.S. Agency for International Development For over 40 years, the bulk of the U.S. bilateral economic aid program has been administered by the U.S. Agency for International Development (USAID). Created by an executive branch reorganization in 1961, USAID became an independent agency in 1999, although its Administrator reports to and serves under the “direct authority and foreign policy guidance” of the Secretary of State. USAID is directly responsible for most bilateral development assistance and disaster relief programs, including economic growth, global health, many democracy programs, and Title II of P.L. 480 (Food for Peace program) food assistance. These programs amounted to $5.138 billion in FY2008. In conjunction with the State Department, USAID Congressional Research Service 23 Foreign Aid: An Introduction to U.S. Programs and Policy manages the ESF, SEED, and FSA programs, amounting to $6.05 billion in FY2008.21 USAID’s staff in late 2008 totaled 7,291, of which only about 2,692 were U.S. citizen “direct hire” employees. Almost three quarters of USAID staff—about 5,273—are U.S. citizen foreign service employees and foreign nationals working overseas in one of the 84 country missions, six regional offices, and three representational offices to oversee the implementation of hundreds of projects undertaken by thousands of private sector contractors, consultants, and non-governmental organizations. 22 U.S. Department of State In addition to those programs jointly managed with USAID, the Department of State administers several aid programs directly. Individual offices at State oversee activities dealing with international narcotics control and law enforcement, terrorism, weapons proliferation, non-U.N. peacekeeping operations, refugee relief, and voluntary support for a range of international organizations such as UNICEF. In FY2008, appropriations for these State Departmentadministered bilateral aid programs totaled about $2.4 billion. State is also home to the Office of the Global AIDS Coordinator, created to manage President Bush’s Global AIDS Initiative, which administered $4.6 billion in FY2008 for international HIV/AIDS, tuberculosis, and malaria programs. The funds are channeled through USAID, the Department of Health and Human Services, the Centers for Disease Control, the National Institutes for Health, and other implementing agencies. In addition, State has policy authority, together with the Department of Defense, over the FMF and IMET programs, which are implemented by the DOD’s Defense Security Cooperation Agency. The Director of Foreign Assistance (DFA), a State Department position created in 2006, is charged with coordinating U.S. assistance programs. Until January 2009 when a separate acting DFA was appointed, the DFA served concurrently as the Administrator of USAID. The DFA has authority over most State Department and USAID programs. Though the DFA is also tasked with providing “guidance” to other agencies that manage foreign aid activities, major foreign aid programs, such as the Millennium Challenge Account and the Office of the Global AIDS Coordinator, have remained outside of the DFA’s authority. U.S. Department of Defense Most military assistance, including Foreign Military Financing (FMF) and International Military Education and Training (IMET), is administered by the Department of Defense in conjunction with the Bureau of Political-Military Affairs in the State Department. The Defense Security Cooperation Agency is the primary DOD body responsible for Foreign Military Financing and related training programs. DOD has also been involved in an expanded range of foreign assistance activities in recent years, providing development assistance to Iraq and Afghanistan through the Commander’s Emergency Response Program (CERP) and the Iraq Relief and Reconstruction Fund, and elsewhere through the Defense Health Program, counter-drug activities, and humanitarian and disaster relief activities. While DOD managed about $4.9 billion in traditional military aid in FY2008, other funds appropriated through defense appropriations 21 The State Department generally determines the policy on distribution of funds from these accounts, but the funds are appropriated and attributed to USAID when foreign assistance is reported by obligations. 22 Semi-Annual USAID Worldwide Staffing Pattern Report, data as of November 30, 2008, Table 1. Congressional Research Service 24 Foreign Aid: An Introduction to U.S. Programs and Policy legislation, and not counted as foreign assistance for the purposes of this report, have been used to carry out state-building development activities, usually in the context of training exercises and military operations, that were once the exclusive jurisdiction of civilian aid agencies. U.S. Department of the Treasury The Treasury Department administers three foreign aid programs. U.S. contributions to and participation in the World Bank and other multilateral development institutions are managed by Treasury’s Under Secretary for International Affairs. Presidentially appointed U.S. executive directors at each of the banks represent the United States’ point of view. Treasury also deals with foreign debt reduction issues and programs, including U.S. participation in the Highly Indebted Poor Countries (HIPC) initiative. The Treasury Department further manages a technical assistance program, offering temporary financial advisors to countries implementing major economic reforms and combating terrorist finance activity. For FY2008, funding for activities falling under the Treasury Department’s jurisdiction totaled about $1.3 billion. Millennium Challenge Corporation A new foreign aid agency was created in February 2004 to administer the Millennium Challenge Account (MCA) initiative. The account is intended to concentrate significantly higher amounts of U.S. resources in a few low- and low-middle income countries that have demonstrated a strong commitment to political, economic, and social reforms. A significant feature of the MCA program is that recipient countries formulate, propose and implement mutually-agreed multi-year U.S.funded projects known as Compacts. Compacts in the 18 recipient countries selected to date have emphasized construction of infrastructure. The Millennium Challenge Corporation (MCC) is charged with managing this results-oriented, competitive foreign aid delivery mechanism. The MCC is a U.S. government corporation, headed by a Chief Executive Officer who reports to a Board of Directors chaired by the Secretary of State. The Corporation maintains a relatively small staff of about 300. The MCC managed a budget of $1.5 billion in FY2008. Other Agencies Other government agencies that play a role in implementing foreign aid programs include the Peace Corps, the Trade and Development Agency (TDA), and the Overseas Private Investment Corporation (OPIC). The Peace Corps, an autonomous agency with an FY2008 budget of $331 million, supports nearly 8,000 volunteers in 76 countries. Peace Corps volunteers work in a wide range of educational, health, and community development projects. TDA finances trade missions and feasibility studies for private sector projects likely to generate U.S. exports. Its budget in FY2008 was $50 million. OPIC provides political risk insurance to U.S. companies investing in developing countries and the new democracies and finances projects through loans and guarantees. It also supports investment missions and provides other pre-investment information services. Its insurance activities have been self-sustaining, but credit reform rules require a relatively small appropriation to back up U.S. guarantees and for administrative expenses. For FY2008, Congress appropriated $71 million to OPIC. Two independent agencies, the Inter-American Foundation and the African Development Foundation, also administer U.S. foreign aid. Both organizations emphasize grassroots development by providing financial support to local private organizations in developing Congressional Research Service 25 Foreign Aid: An Introduction to U.S. Programs and Policy countries. For FY2008, Congress appropriated $21 million and $29 million, respectively, to the Inter-American Foundation and the African Development Foundation spending since World War II came in 1996 and 1997, when foreign assistance obligations fell to below $15 billion (in 2010 dollar terms). Figure 4. U.S. Foreign Aid: FY1946-FY2010 Sources: U.S. Overseas Loans and Grants (Greenbook), Office of Management and Budget Historic Budget Tables, FY2011; annual appropriations legislation and CRS calculations. Notes: The data in this table for FY1946-FY1976 represent obligated funds reported in the USAID Greenbook (the most reliable source available for pre-1970s data), while FY1977-FY2010 are budget authority figures from the OMB Historic Budget Tables, reflecting the 151 and 152 budget subfunctions. The Greenbook accounts included in the total have been selected by CRS to correlate with the function 151 and 152 budget accounts, allowing for fairly accurate comparison over time. FY1976 includes both regular FY1976 and transition quarter (TQ)funding. Congressional Research Service 16 Foreign Aid: An Introduction to U.S. Programs and Policy While foreign aid represented over 1% of Figure 5. U.S. Foreign Aid: FY1946-FY2010 U.S. annual gross domestic product from 1946 through the mid-1950s, it has ranged between 0.5% and 0.25% for the past three decades. Foreign assistance spending represents, on average, around 3% of discretionary budget authority and just over 1% of total budget authority each year since 1977, though the percentages have varied considerably from year to year and have generally declined. Foreign aid dropped from nearly 4.5% of discretionary budget authority in 1984 to 2% in 2002, before rising rapidly Source: Historic Budget Tables, FY2011; CRS in conjunction with U.S. activities in calculations. Afghanistan and Iraq starting in 2003. As a portion of total budget authority, foreign assistance reached 2% in 1979 and 1985, but hovered under 1% throughout the 1990s. (Figure 5). In 2010, foreign assistance accounted for 3.2% of discretionary budget authority and 1.1% of total budget authority (Figure 6). Figure 6. U.S. Budget Outlays, FY2010 Est. Since the September 11, 2001, terrorist attacks, foreign aid funding has been closely tied to U.S. strategy in Iraq and Afghanistan. Bush and Obama Administration global health initiatives have driven funding increases as well. Figure 7 shows how trends in foreign aid funding in recent decades can be attributed to specific foreign policy events and presidential initiatives. Source: U.S. Historic Budget Tables, FY2011. Congressional Research Service 17 Foreign Aid: An Introduction to U.S. Programs and Policy Figure 7. Foreign Aid Funding Trends, FY1977-FY2010 Source: Budget of the United States Government: Historic Tables Fiscal Year 2011, Table 5.1: Budget Authority by Function and Subfunction, 1976-2013; appropriations acts for FY2010. Note: MCC = Millennium Challenge Corporation; PEPFAR = President’s Emergency Plan for AIDS Relief; GHI = Global Health Initiative. How Much of Foreign Aid Dollars Are Spent on U.S. Goods? Most U.S. foreign aid is used to procure U.S. goods and services, although amounts of aid coming back to the United States differ by program. For some types of aid, the legislative requirements or program design make it relatively easy to determine how much aid is spent on U.S. goods or services, while for others, this is more difficult to determine: • USAID. Most USAID funding (Development Assistance, Global Health, Economic Support Fund) is implemented through grants and cooperative agreements with implementing partners. While many implementing partner organizations are based in the United States and employ U.S. citizens, there is little information available about what portion of the funds used for program implementation are used for goods and services provided by American firms. • Food assistance commodities are purchased wholly in the United States, and generally required by law to be shipped by U.S. carriers,12 suggesting that the vast majority of food aid expenditures are made in the United States. • Foreign Military Financing, with the exception of certain assistance allocated to Israel, is used to procure U.S. military equipment and training.13 • Millennium Challenge Corporation. The MCC uses procurement regulations established by the World Bank, which calls for an open and competitive process, with no preference given to donor country suppliers. As a result, MCC contracts 12 The Cargo Preference Act, P.L. 83-644, August 26,1954. For the research, development and procurement of advanced weapons systems, not less than $583.86 million of aid to Israel in FY2010 could be used for offshore procurement (about 11% of total Foreign Military Finance for that year). 13 Congressional Research Service 18 Foreign Aid: An Introduction to U.S. Programs and Policy are sometimes awarded to firms from developed countries other than the United States, which has been a source of some controversy. • Multilateral development aid. Multilateral aid funds are mixed with funds from other nations and the bulk of the program is financed with borrowed funds rather than direct government contributions. As a result, the U.S. share of procurement financed by MDBs may even exceed the amount of the U.S. contribution. The Foreign Assistance Act of 1961 limits the expenditure of foreign assistance funds outside the United States.14 Aid conditioned in this way on the procurement of goods and services from the donor-country is sometimes called “tied aid,” and has become increasingly disfavored in the international community.15 Studies have shown that tying aid increases the costs of goods and services by 15%-30% on average, and up to 40% for food aid, reducing the overall effectiveness of aid flows.16 The United States joined other donor nations in committing to reduce tied aid in the Paris Declaration on Aid Effectiveness in March 2005, and the portion of tied aid from all donors fell from 70% of total bilateral development assistance in 1985 to 12.5% in 2008. However, 25% of U.S. bilateral development assistance in 2008 was tied, perhaps reflecting the perception of policymakers that maintaining public and political support for foreign aid programs requires ensuring direct economic benefit to the United States.17 In addition to the direct benefits derived from aid dollars used for American goods and services, many argue that the foreign aid program brings significant indirect financial benefits to the United States. First, it is argued that provision of military equipment through the military assistance program and food commodities through P.L.480, the Food For Peace program, helps to develop future, strictly commercial, markets for those products. Second, as countries develop economically, they are in a position to purchase more goods from abroad and the United States benefits as a trade partner. How Does the United States Rank as a Donor of Foreign Aid? With the exception of several years between 1989 and 2001, during which Japan periodically ranked first among aid donors, the United States has led the developed countries in net disbursements of economic aid, or “Official Development Assistance (ODA)” as defined by the international donor community. 18 In 2009, the most recent year for which data are available, the United States disbursed $28.83 billion in ODA, or 24% of the $120 billion in net ODA disbursements that year from the 29 members of the Organization for Economic Cooperation and 14 Section 604 of the Foreign Assistance Act of 1961 (P.L. 87-195; 22 U.S.C. §2151)—often referred to as the “Buy America” provision—requires that funds be spent “only in the United States, the recipient country, or developing countries” unless the assistance requires commodities or services that are not available in any such country or the President determines that procurement from an otherwise excluded country is necessary. 15 OECD Report on The Developmental Effectiveness of Untied Aid, p.1, available at http://www.oecd.org/dataoecd/5/ 22/41537529.pdf. 16 Id., p. 1. 17 2010 OECD Development Cooperation Report, p. 225. 18 The OECD Glossary of Statistical Terms defines ODA as “flows of official financing administered with the promotion of economic development and welfare of developing countries as the main objective, and which are concessional in character with a grant element of at least 25%. By convention, ODA flows comprise contributions of donor government agencies, at all levels, to developing countries and to multilateral institutions.” ODA does not include military assistance. Congressional Research Service 19 Foreign Aid: An Introduction to U.S. Programs and Policy Development’s (OECD’s) Development Assistance Committee (DAC), representing the world’s leading providers of economic aid. France ranked second at $12.60 billion, Germany at $12.08 billion, and the United Kingdom at $11.49 billion. Japan, which has significantly scaled back its foreign aid program in recent years, gave $9.47 billion in 2009. Figure 8. Official Development Assistance From Major Donors, 2009 (in millions, US$) Source: OECD/DAC. Includes all countries providing at least $2 billion in ODA in 2009. Even as it leads in dollar amounts of aid flows to developing countries, the United States often ranks low when aid transfers by developed country donors are calculated as a percentage of gross national income (GNI). 19 In 2009, the United States ranked third from last among major donors at 0.20% of GNI, slightly higher than Japan (0.18%) and Italy (0.16%). Sweden ranked first at 1.12% of GNI, while the United Kingdom dispensed 0.52%, France 0.46%, and Germany 0.35%. The average for all DAC members in 2009 was 0.31%, up from .22% in 1999. Delivery of Foreign Assistance How and in what form assistance reaches an aid recipient can vary widely, depending on the type of aid program, the objective of the assistance, and the agency responsible for providing the aid. 19 Gross National Income (GNI) comprises GDP together with income received from other countries (notably interest and dividends), less similar payments made to other countries. Congressional Research Service 20 Foreign Aid: An Introduction to U.S. Programs and Policy What Executive Branch Agencies Administer Foreign Aid Programs? U.S. Agency for International Development For 50 years, the bulk of the U.S. bilateral economic aid program has been administered by the U.S. Agency for International Development (USAID). USAID is directly responsible for most bilateral development assistance and disaster relief programs, including economic growth, global health, many democracy programs, and Title II of P.L. 480 (Food for Peace program) food assistance. In conjunction with the State Department, USAID also manages most of the ESF and AEECA programs, which frequently support development activities as a means of promoting U.S. political and strategic goals.20 USAID also administers more than half of the Global HIV/AIDS funding appropriated to the State Department. USAID’s staff in late 2010 totaled 8,844, of which more than 70% (6,368) were working overseas, managing the implementation of hundreds of projects undertaken by thousands of private sector contractors, consultants, and nongovernmental organizations.21 Funding for programs administered by USAID totaled about $22.0 billion in FY2010.22 U.S. Department of State In addition to those programs jointly managed with USAID, the Department of State directly administers activities dealing with international narcotics control and law enforcement, terrorism, weapons proliferation, democracy promotion, non-U.N. peacekeeping operations, refugee relief, and voluntary support for a range of international organizations such as UNICEF. In FY2010, total funding for these programs was about $12.03 billion. State is also home to the Office of the Global AIDS Coordinator (OGAC), created to manage President Bush’s Global AIDS Initiative, which administered $5.4 billion in FY2010 for international HIV/AIDS, tuberculosis, and malaria programs. Most of these programs, however, are implemented by USAID, the National Institutes of Health, and the Centers for Disease Control. In addition, the State Department, through its Bureau of Political-Military Affairs, has policy authority over the Foreign Military Financing (FMF), International Military Education and Training (IMET), Peacekeeping Operations (PKO), and the Pakistan Counterinsurgency Capability Fund (PCCF), which totaled $4.7 billion. These programs are administered by the Department of Defense. Police training programs, traditionally the responsibility of the International Narcotics and Law Enforcement (INL) Office in the State Department, have, in the case of Iraq and Afghanistan, been undertaken by DOD, mostly with DOD’s own appropriations. In FY2010, the State Department began a process to assume responsibility for police training in Iraq. State is also the organizational home to the Director of Foreign Assistance (DFA), a position created in 2006 to coordinate U.S. foreign assistance programs. The DFA has authority over most 20 The State Department determines the policy on distribution of funds from these accounts. 21 Semi-Annual USAID Worldwide Staffing Pattern Report, September 30, 2010. Of total staff, 3,377 were U.S. direct hires, 4,508 were nationals of the foreign countries in which they work, and 703 were U.S. personal service contractors. 22 This includes 93% of ESF, 70% of AEECA, and 60% of State Global HIV/AIDS accounts. Congressional Research Service 21 Foreign Aid: An Introduction to U.S. Programs and Policy State Department and USAID programs, and is also tasked with providing “guidance” to other agencies that manage foreign assistance activities. However, major foreign aid programs, such as the Millennium Challenge Corporation and the Office of the Global AIDS Coordinator, remain outside of the DFA’s authority. U.S. Department of Defense As noted above, DOD administers all traditional aid-funded military assistance programs—FMF, IMET, PKO, and PCCF—following the policy guidance of the Department of State. The Defense Security Cooperation Agency is the primary DOD body responsible for these programs. In FY2010, funding for these assistance programs totaled $4.7 billion. DOD also carries out an array of state-building activities, funded through defense appropriations legislation, which are usually in the context of training exercises and military operations and are not counted as foreign assistance for the purposes of this report. These sorts of activities, once the exclusive jurisdiction of civilian aid agencies, include development assistance to Iraq and Afghanistan through the Commander’s Emergency Response Program (CERP) and the Iraq Relief and Reconstruction Fund, and elsewhere through the Defense Health Program, counter-drug activities, and humanitarian and disaster relief. Training and equipping of Iraqi and Afghan police and military, though similar in nature to some traditional security assistance programs, has also mostly been funded through DOD appropriations. U.S. Department of the Treasury The Treasury Department’s Under Secretary for International Affairs administers U.S. contributions to and participation in the World Bank and other multilateral development institutions. Presidentially appointed U.S. executive directors at each of the banks represent the United States’ point of view. Treasury also deals with foreign debt reduction issues and programs, including U.S. participation in the Highly Indebted Poor Countries (HIPC) initiative, and manages a technical assistance program offering temporary financial advisors to countries implementing major economic reforms and combating terrorist finance activity. For FY2010, funding for activities falling under the Treasury Department’s jurisdiction totaled about $2.7 billion. Millennium Challenge Corporation The Millennium Challenge Corporation (MCC) was created in February 2004 with the purpose of concentrating significantly higher amounts of U.S. resources in a few low- and lower-middle income countries that have demonstrated a strong commitment to political, economic, and social reforms. A significant feature of the MCC effort is that recipient countries formulate, propose and implement mutually agreed multi-year U.S.-funded project plans known as compacts. Compacts in the 22 recipient countries selected to date have emphasized construction of infrastructure. The MCC is a U.S. government corporation, headed by a Chief Executive Officer who reports to a Board of Directors chaired by the Secretary of State. The Corporation maintains a relatively small staff of about 300. The MCC managed a budget of just over $1.1 billion in FY2010. Congressional Research Service 22 Foreign Aid: An Introduction to U.S. Programs and Policy Other Agencies A number of other government agencies play a role in implementing foreign aid programs. The Peace Corps, an autonomous agency with an FY2010 budget of $400 million, supports about 8,655 volunteers in 77 countries. Peace Corps volunteers work in a wide range of educational, health, and community development projects. The Trade and Development Agency (TDA) finances trade missions and feasibility studies for private sector projects likely to generate U.S. exports. Its budget in FY2010 was $55.2 million. The Overseas Private Investment Corporation (OPIC) provides political risk insurance to U.S. companies investing in developing countries and the new democracies and finances projects through loans and guarantees. It also supports investment missions and provides other pre-investment information services. Its insurance activities have been self-sustaining, but credit reform rules require a relatively small appropriation to back up U.S. guarantees and for administrative expenses. For FY2010, Congress appropriated $29 million to OPIC. The Inter-American Foundation and the African Development Foundation, appropriated $23 million and $30 million, respectively, in FY2010, finance smallscale enterprise and grassroots self-help activities aimed at assisting poor people. What Are the Different Forms in Which Assistance Is Provided? Most U.S. assistance is now provided as a grant (gift) rather than a loan, but the forms a grant may take are diverse. Cash Transfers Although it is the exception rather than the rule, some countries receive aid in the form of a cash grant to the government. Dollars provided in this way support a government’s balance-ofpayments situation, enabling it to purchase more U.S. goods, service its debt, or devote more domestic revenues to developmental or other purposes. Cash transfers have been made as a reward to countries that have supported the United States in its war on terrorism (Turkey and Jordan in FY2004), to provide political and strategic support (both Egypt and Israel annually for decades after the 1979 Camp David Peace Accord), and in exchange for undertaking difficult political and economic reforms. Countries receiving cash transfers in 2007 were Pakistan ($200 million), Egypt ($284 million), Jordan ($116 million), and Lebanon ($250 million).The Philippines, Pakistan, Jordan, Egypt, and Uganda received aid in the from of cash transfers in FY2010.23 Equipment and Commodities Assistance may be provided in the form of food commodities, weapons systems, or equipment such as generators or computers. Food aid may be provided directly to meet humanitarian needs or to encourage attendance at a maternal/child health care program. Weapons supplied under the military assistance program may include training in their use. Equipment and commodities provided under development assistance are usually integrated with other forms of aid to meet objectives in a particular social or economic sector. For instance, textbooks have been provided in both Afghanistan and Iraq as part of a broader effort to reform the educational sector and train teachers. Computers may be offered in conjunction with training and expertise to fledgling 23 Information provided by USAID LPA, February 2, 2011. Congressional Research Service 23 Foreign Aid: An Introduction to U.S. Programs and Policy microcredit institutions. In recent years, antiretroviral drugs (ARVs) provided through PEPFAR programs to individuals living with HIV/AIDS have been a significant component of commoditybasedcommodity-based assistance. Economic Infrastructure Although once a significant portion of U.S. assistance programs, construction of economic infrastructure—roads, irrigation systems, electric power facilities, etc.—was rarely provided after the 1970s. Because of the substantial expense of these projects, they were to be found only in large assistance programs, such as that for Egypt in the 1980s and 1990s, where the United States constructed major urban water and sanitation systems. In the past decade, however, the aid programs in Iraq and Afghanistan have supported the building of schools, health clinics, roads, power plants, and irrigation systems. In Iraq alone, more than $10 billion has gone to economic infrastructure. Economic infrastructure is now also supported by U.S. assistance in a wider range of developing countries through the Millennium Challenge AccountCorporation. In this case, recipient countries design their own assistance programs, most of which, to date, include an infrastructure component. Congressional Research Service 26 Foreign Aid: An Introduction to U.S. Programs and Policy Training Transfer of know-how is a significant part of most assistance programs. The International Military and Educational Training Program (IMET) provides training to officers of the military forces of allied and friendly nations. Tens of thousands of citizens of aid recipient countries receive short-term technical training or longer -term degree training annually under USAID’s participant training program programs. More than one-third of Peace Corps volunteers are English, math, and science teachers. Other Other aid programs provide law enforcement personnel with anti-narcotics or anti-terrorism training. Expertise Many assistance programs provide expert advice to government and private sector organizations. The Treasury Department, USAID, and U.S.-funded multilateral banks all place specialists in host government ministries to make recommendations on policy reforms in a wide variety of sectors. USAID has often placed experts in private sector business and civic organizations to help strengthen them in their formative years or while indigenous staff are being trained. While most of these experts are U.S. nationals, in Russia, USAID has funded the development of locallystaffedlocally staffed political and economic think tanks to offer policy options to that government. Small Grants USAID, the Inter-American Foundation, and the African Development Foundation often provide aid in the form of grants that may then be used by U.S. or indigenous organizations to further their varied developmental purposes. For instance, grants are sometimes provided to microcredit organizations, which in turn provide loans to microentrepreneurs. Through the USAID-funded Eurasia Foundation, grants are provided to help strengthen the role of former Soviet Union nongovernmental organizations in democratization and private enterprise development. Congressional Research Service 24 Foreign Aid: An Introduction to U.S. Programs and Policy How Much Aid Is Provided as Loans and How Much as Grants? What Are Some Types of Loans? Have Loans Been Repaid? Why Is Repayment of Some Loans Forgiven? Under the Foreign Assistance Act of 1961, the President may determine the terms and conditions under which most forms of assistance are provided. In general, the financial condition of a country—its ability to meet repayment obligations—has been an important criterion of the decision to provide a loan or grant. Some programs—, such as humanitarian and disaster relief programs—, were designed from the beginning to be entirely grant activities. Loan/Grant Composition During the past two decades, nearly all foreign aid—military as well as economic—has been provided in grant form. Between 1962 and 1988,While loans represented 32% of total military and economic assistance. This between 1962 and 1988, this figure declined substantially beginning in the mid-1980s, until by FY2001, loans represented less than 1% of total aid appropriations. In 2009, the most recent years for which data are available, the United Stated provided no official development assistance in the form of loans. The de-emphasis on loan . The de-emphasis on loan programs came largely in response to the debt problems of developing countries. Both Congress Congressional Research Service 27 Foreign Aid: An Introduction to U.S. Programs and Policy and the executive branch supported the view that foreign aid should not add to the already existing debt burden carried by these countries. Types of LoansLoan Guarantees Although a small proportion of total current aid, there are several significant USAID-managed programs that provide direct loans or guarantee loans. Under the Israeli Loan Guarantee Program, the United States has guaranteed repayment of loans made by commercial sources to support the costs of immigrants settling in Israel from other countries. Other guarantee programs support lowincome housing and community development programs of developing countries and microenterprise and small business credit programs. A Development Credit Authority in which risk is shared with a private sector bank can be used to support any development sector. Loan Repayment Between 1946 and 2006, the United States loaned more than $108 billion in foreign aid, and while most foreign aid is now provided through grants, $22.6 billion in loans to foreign governments remained outstanding in 2007.23 Most recipients of U.S. loans remain current or only slightly in arrears on debt payments.two significant USAID-managed programs that guarantee loans. A Development Credit Authority program loan guarantee, in which risk is shared with a private sector bank, can be used to increase access to finance in support of any development sector. Under the Israeli Loan Guarantee Program, the United States has guaranteed repayment of loans made by commercial sources to support the costs of immigrants settling in Israel from other countries and may issue guarantees to support economic recovery. 24 Loan Repayment Between 1946 and 2009, the United States loaned nearly $109 billion in foreign aid, and while most foreign aid is now provided through grants, $15.0 billion in loans to foreign governments remained outstanding at the end of 2009.25 For nearly three decades, Section 620q of the Foreign Assistance Act (the Brooke amendment) has prohibited new assistance to any country that falls more than one year past due in servicing its debt obligations to the United States. Argentina, Democratic Republic of the Congo, Somalia, Sudan, Syria, and Zimbabwe are countries to which the provision applies as of October 2008.24 The President may waive application of this prohibition if he determines it is in the national interest., though the President may waive application of this prohibition if he determines it is in the national interest. Currently, countries in violation of Brooke are Argentina, Democratic Republic of Congo (DRC), 24 Israel has not drawn on any loan guarantees since FY2004. U.S. Overseas Loans and Grants: Obligations and Loan Authorizations, July 1, 1945-September 30, 2008 (Greenbook). 25 Congressional Research Service 25 Foreign Aid: An Introduction to U.S. Programs and Policy Somalia, Sudan, Syria, and Zimbabwe. However, for FY2010, restrictions were waived in whole or in part for the DRC, Somalia, and Zimbabwe. 26 Debt Forgiveness The United States has also forgiven debts owed by foreign governments and encouraged, with mixed success, other foreign aid donors and international financial institutions to do likewise. In total, the United States forgave or reduced about $24.39 billion owed by foreign governments between 1990 and 2007.25 and 2008 through legislative and bilateral negotiation.27 In some cases, the decision to forgive foreign aid debts has been based largely on economic grounds as another means to support development efforts by heavily indebted, but reformminded, countries. The United States has been one of the strongest supporters of the Heavily Indebted Poor Country (HIPC) Initiative. This initiative, which began in the late 1990s and continues in 20082010, includes for the first time participation of the World Bank, the International Monetary Fund, and other international financial institutions in a comprehensive debt workout framework for the world’s poorest and most debt-strapped nations. The largest and most hotly debated debt forgiveness actions have been implemented for much broader foreign policy reasons with a more strategic purpose. Poland, during its transition from a 23 U.S. Overseas Loans and Grants (Greenbook) 2006; U.S. Department of the Treasury and the Office of Management and Budget. U.S. Government Foreign Credit Exposure as of December 31, 2006, part 1, p. 20. 24 Information provided by Department of State, F Bureau, 1/6/2009. 25 U.S. Department of the Treasury and the Office of Management and Budget. U.S. Government Foreign Credit Exposure as of December 31, 2006, part 1, p. 9. Congressional Research Service 28 Foreign Aid: An Introduction to U.S. Programs and Policy communist system and centrally-communist system and centrally planned economy (1990—$2.46 billion),; Egypt, for making peace with Israel and helping maintain the Arab coalition during the Persian Gulf War (1990—$7 billion),; and Jordan, after signing a peace accord with Israel (1994—$700 million), are examples. Similarly, the United States forgave about $4.1 billion in outstanding Saddam-era Iraqi debt in November 2004, and helped negotiate an 80% reduction in Iraq’s debt to Paris Club members later later that month. 26 What Are the Roles of Government and Private Sector in Development and Humanitarian Aid Delivery? Most development and humanitarian assistance activities are not directly implemented by U.S. government personnel but by private sector entities, such as individual personal service contractors, consulting firms, non-profit non-government organizations (NGOs), universities, or charitable private voluntary organizations (PVOs). Generally speaking, government foreign service and civil servants determine the direction and priorities of the aid program, allocate funds while keeping within legislative requirements, ensure that appropriate projects are in place to meet aid objectives, select implementorsimplementers, and monitor the implementation of those projects for effectiveness and financial accountability. At one time, USAID professionals played a larger role in implementing aid programs, but the affect of budget cuts on personnel and the emergence of private sector alternatives over the past thirty years has led to a shift in responsibilities.27 Private sector aid implementors, usually employed as contractors or grantees, may be individual personal service contractors, consulting firms, non-profit non-government organizations (NGOs), universities, or charitable private voluntary organizations (PVOs). These carry out the vast array of aid projects in all sectorsIn recent years, USAID has sought to increase its workforce and technical capacity28 in part to reduce its reliance on private sector implementers. At the same time, both USAID and the State Department have promoted the use of public-private partnerships, in which private entities are not paid implementers, but rather contributing partners with interests that coincide with development priorities. For example, USAID has partnered with 26 Information provided to CRS by the State Department, February 1, 2011. 27 U.S. Department of the Treasury and the Office of Management and Budget. U.S. Government Foreign Credit Exposure as of December 31, 2008, p. 22. 28 The Development Leadership Initiative, begun in 2008, is intended to realize this transition. Congressional Research Service 26 Foreign Aid: An Introduction to U.S. Programs and Policy the Heinz corporation in Egypt to train farmers in a particular method of producing processing tomatoes that are suitable for use in Heinz products. The farmers learned to grow a higher-value crop, raising their income potential in furtherance of USAID objectives. Heinz, which provided technical assistance as well as funding for a local processing plant at a later stage of the process, strengthened its supply chain. Congress and Foreign Aid What Congressional Committees Oversee Foreign Aid Programs? Numerous congressional authorizing committees and appropriations subcommittees maintain responsibility for U.S. foreign assistance. Several committees have responsibility for authorizing legislation establishing programs and policy and for conducting oversight of foreign aid programs. In the Senate, the Committee on Foreign Relations, and in the House, the Committee on Foreign Affairs, have primary jurisdiction over bilateral development assistance, ESF and other economic security assistance, military assistance, and international organizations. Food aid, primarily the responsibility of the Agriculture Committees in both bodies, is shared with the Foreign Affairs Committee in the House. U.S. contributions to multilateral development banks are within the jurisdiction of the Senate Foreign Relations Committee and the House Financial Services Committee. Traditionally, most foreign aid appropriations fall under the foreign aid appropriations are provided entirely through subcommittees of the Appropriations panels in both the House and Senate. Most foreign aid funds fall under the jurisdiction of the State-Foreign Operations Subcommittees, with food assistance appropriated by 26 For more on debt relief for Iraq, see CRS Report RL33376, Iraq’s Debt Relief: Procedure and Potential Implications for International Debt Relief, by Martin A. Weiss. 27 Currently there are about 2,400 U.S. direct hire personnel at USAID, down from 3,406 in 1992 and 8,600 in 1962. Congressional Research Service 29 Foreign Aid: An Introduction to U.S. Programs and Policy the Agriculture Subcommittees. As noted earlier, however, a growing segment of military activities that could be categorized as foreign aid have been appropriated through the Defense Subcommittees in recent years. What Are the Major Foreign Aid Legislative Vehicles? The most significant permanent foreign aid authorization laws are the Foreign Assistance Act of 1961, covering most bilateral economic and security assistance programs (P.L. 87-195; 22 U.S.C. 2151),; the Arms Export Control Act (1976), authorizing military sales and financing (P.L. 90-629; 22 U.S.C. 2751),; the Agricultural Trade Development and Assistance Act of 1954 (P.L. 480), covering food aid (P.L. 83-480; 7 U.S.C. 1691),; and the Bretton Woods Agreement Act (1945), authorizing U.S. participation in multilateral development banks (P.L. 79-171; 22 U.S.C. 286).2829 In the past, Congress usually scheduled debates every two years on omnibus foreign aid bills that amended these permanent authorization measures. Although foreign aid authorizing bills have passed the House or Senate, or both, on numerous occasions, Congress has not enacted into law a comprehensive foreign assistance authorization measure since 1985. Instead, foreign aid bills have frequently stalled at some point in the debate because of controversial issues, a tight legislative calendar, or executive-legislative foreign policy disputes.29 30 29 Separate permanent authorizations exist for other specific foreign aid programs such as the Peace Corps, the Millennium Challenge Corporation, the Inter-American Foundation, and the African Development Foundation. 30 A few foreign aid programs that are authorized in other legislation have received more regular legislative review. Authorizing legislation for voluntary contributions to international organizations and refugee programs, for example, are usually contained in omnibus Foreign Relations Authorization measures that also address State Department and public diplomacy issues. Food aid and amendments to P.L.480 are usually considered in the omnibus “farm bill” that (continued...) Congressional Research Service 27 Foreign Aid: An Introduction to U.S. Programs and Policy In lieu of approving a broad authorization bill, Congress has on occasion authorized major foreign assistance initiatives for specific regions, countries, or aid sectors in stand-alone legislation or within an appropriation bill. Among these are the SEED Act of 1989 ( P.L. 101-179; 22 U.S.C. 5401),; the FREEDOM Support Act of 1992 (P.L. 102-511; 22 U.S.C. 5801),; the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 (P.L. 108-25; 22 U.S.C. 7601),; the Tom Lantos and Henry J. Hyde United States Global Leadership Against HIV/AIDS, Tuberculosis, and Malaria Reauthorization Act of 2008 (P.L. 110-293), and; the Millennium Challenge Act of 2003 (Division D, Title VI of P.L. 108-199); and the Enhanced Partnership With Pakistan Act of 2009 (P.L. 111-73; 22 U.S.C. 8401). In the absence of regular enactment of foreign aid authorization bills, appropriation measures considered annually within the State-Foreign Operations spending bill have assumed greater significance for Congress in influencing U.S. foreign aid policy. Not only do appropriations bills set spending levels each year for nearly every foreign assistance account, State-Foreign Operations appropriations also incorporate new policy initiatives that would otherwise be debated and enacted as part of authorizing legislation. 28 Separate permanent authorizations exist for other specific foreign aid programs such as the Peace Corps, the InterAmerican Foundation, and the African Development Foundation. 29 A few foreign aid programs that are authorized in other legislation have received more regular legislative review. Authorizing legislation for voluntary contributions to international organizations and refugee programs, for example, are usually contained in omnibus Foreign Relations Authorization measures that also address State Department and public diplomacy issues. Food aid and amendments to P.L.480 are usually considered in the omnibus “farm bill” that(...continued) Congress re-authorizes every five years. Congressional Research Service 3028 Foreign Aid: An Introduction to U.S. Programs and Policy Appendix A. Data Tables Table A-1. Aid Program Composition, FY2008 Aid Program $s (billions) % of total aid Bilateral Development $10.298 35.5% Humanitarian $4.169 14.4% Multilateral Development $1.594 5.5% Economic Political/Security $7.840 27.1% Military $5.068 17.5% TOTAL $28.969 100.0% Source: House and Senate Appropriations Committees and CRS calculations. Note: Based on appropriated levels in the 151 and 152 subfunction accounts. Table omits operational expense accounts. Table A-2. Program Composition, FY1995-FY2008 (current $ in billions, and as % of total aid) Fiscal Year Development/ Humanitarian Economic Political/Security Military Total 1995 $6.539 47.6% $3.636 26.4% $3.572 26.0% $13.747 1996 $5.096 41.4% $3.689 29.9% $3.536 28.7% $12.321 1997 $4.969 41.0% $3.827 31.6% $3.333 27.5% $12.129 1998 $5.575 42.8% $4.038 31.0% $3.425 26.3% $13.038 1999 $6.433 42.1% $5.352 35.0% $3.507 22.9% $15.292 2000 $5.331 33.1% $5.780 35.9% $4.998 31.0% $16.109 2001 $6.365 43.8% $4.430 30.5% $3.753 25.8% $14.548 2002 $6.649 41.3% $5.557 34.6% $3.875 24.1% $16.081 2003 $8.361 34.1% $9.737 39.7% $6.399 26.1% $24.497 2004 $9.520 24.6% $19.310 49.9% $9.849 25.5% $38.679 2004 (w/o Iraq) $9.520 47.0% $5.873 29.0% $4.849 24.0% $20.242 2005 $11.531 47.9% $7.027 29.2% $5.502 22.9% $24.060 2006 $12.087 50.6% $6.891 28.9% $4.902 20.5% $23.880 2007 $13.784 50.9% $7.957 29.4% $5.365 19.8% $27.106 2008 $16.061 55.4% $7.840 27.1% $5.068 17.5% $28.969 Source: USAID, House and Senate Appropriations Committees, and CRS calculations. Notes: Based on appropriated levels in the 151 and 152 subfunction accounts. FY2004 without Iraq subtracts $18.4 billion in Iraq Relief and Reconstruction Funds from political-strategic aid—$5 billion from military aid and the rest from political-strategic aid. Table omits operational expense accounts. Congressional Research Service 31 Foreign Aid: An Introduction to U.S. Programs and Policy Table A-3. Foreign Aid Funding Trends Fiscal Year 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976a 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 Billions of current US& Billions of constant 2008 $s As % of GDP As % of total discretionary budget authority $3.08 $6.71 $3.18 $8.30 $5.97 $7.61 $6.81 $4.98 $4.77 $4.10 $4.85 $4.87 $4.01 $5.07 $5.22 $5.48 $6.53 $6.38 $5.27 $5.42 $6.90 $6.34 $6.76 $6.64 $6.57 $7.84 $9.02 $9.45 $8.50 $6.91 $9.11 $7.78 $9.01 $13.85 $9.69 $10.54 $12.32 $14.20 $15.52 $18.13 $16.62 $14.80 $13.97 $28.38 $56.07 $24.26 $61.27 $48.72 $57.12 $50.39 $35.57 $34.76 $30.09 $33.90 $34.07 $27.33 $34.32 $34.61 $35.89 $42.50 $40.77 $33.21 $33.77 $41.75 $37.24 $38.17 $35.92 $33.93 $38.72 $43.32 $42.62 $34.97 $26.20 $32.65 $26.24 $28.42 $39.87 $25.10 $24.91 $27.46 $30.41 $31.85 $35.91 $32.30 $27.76 $22.85 1.38% 2.75% 1.18% 3.10% 2.03% 2.24% 1.90% 1.31% 1.25% 0.99% 1.11% 1.06% 0.86% 1.00% 0.99% 1.01% 1.12% 1.03% 0.79% 0.75% 0.88% 0.76% 0.74% 0.67% 0.63% 0.70% 0.73% 0.68% 0.57% 0.42% 0.47% 0.34% 0.35% 0.50% 0.31% 0.32% 0.35% 0.36% 0.37% 0.41% 0.35% 0.29% 0.28% — — — — __ — — — — — — — — — — — — — — — — — — — — — — — — — — 3.15% 3.47% 5.02% 3.11% 3.09% 3.46% 3.66% 3.66% 3.97% 3.79% 3.32% 3.08% Congressional Research Service 32 Foreign Aid: An Introduction to U.S. Programs and Policy Fiscal Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Billions of current US& $14.85 $16.02 $17.05 $16.43 $17.91 $17.04 $16.14 $14.68 $13.66 $14.69 $17.55 $16.39 $15.33 $17.93 $22.40 $29.69 $30.17 $27.26 $26.08 $27.68 Billions of constant 2008 $s $25.52 $26.13 $26.67 $24.95 $26.41 $24.50 $22.58 $19.94 $18.15 $19.21 $22.44 $20.27 $18.46 $21.24 $25.93 $33.50 $32.92 $28.80 $26.81 $27.68 As % of GDP 0.26% 0.27% 0.27% 0.25% 0.25% 0.23% 0.21% 0.18% 0.16% 0.16% 0.18% 0.16% 0.15% 0.16% 0.19% 0.24% 0.23% 0.20% 0.20% 0.19% As % of total discretionary budget authority 3.15% 3.22% 3.12% 3.09% 3.42% 3.32% 3.22% 2.93% 2.67% 2.77% 3.02% 2.80% 2.31% 2.44% 2.64% 3.27% 3.06% 2.73% 2.59% 2.40% Source: USAID, Office of Management and Budget, annual appropriations legislation and CRS calculations. Notes: The data in this table represent obligated funds reported in the USAID Greenbook up through FY2006 (FY2007-FY2008 are appropriations), but the Greenbook accounts included in the total have been adjusted by CRS to allow for accurate comparison over time. CRS has attempted to include only programs that correlate with the traditional foreign assistance budget accounts, excluding, for example, such Greenbook additions as State Department accounts for embassy security and Foreign Service retirement , Cooperative Threat Reduction funds to the former Soviet Union, and certain funds administered by the Department of Defense in Iraq and Afghanistan. FY2008 % of GDP based on 3rd Quarter reports. a. FY1976 includes both regular FY76 and transition quarter (TQ)funding, and the GDP calculation is based on the average FY76 and TQ GDP. Congressional Research Service 33 Foreign Aid: An Introduction to U.S. Programs and Policy Appendix B. Common Foreign Assistance Acronyms and Abbreviations Program Composition, FY2001-FY2010 ( as % of total aid) 2001 2002 2003 2004 2004 w/out Iraq 43.8 41.3 34.1 24.6 47.0 47.9 50.6 50.9 55.4 49.4 52.9 21.9 20.3 14.8 13.6 25.9 26.7 31.7 34.1 35.7 30.5 32.4 9.1 8.6 6.6 4.3 8.3 6.4 6.7 4.7 5.5 5.2 7.0 Humanitarian 12.7 12.5 12.8 6.7 12.8 14.8 12.2 12.0 14.2 13.8 12.5 Political/Strategic Development 26.1 26.1 34.5 45.8 21.2 20.5 21.7 22.3 20.9 22.5 25.3 Security 30.2 32.5 31.4 29.6 31.8 31.6 27.7 26.8 23.6 28.1 21.8 4.4 8.4 5.2 4.1 7.8 8.7 7.2 7.1 6.1 7.0 9.3 25.8 24.1 26.1 25.5 24.0 22.9 20.5 19.8 17.5 21.1 12.5a Development/Humanitarian Bilateral Development Multilateral Development Civilian Security Assistance Military Assistance 2005 2006 2007 2008 2009 2010 Source: USAID, House and Senate Appropriations Committees, and CRS calculations. Notes: Table omits operational expense accounts. a. Does not include funding from FY2009 supplemental appropriations that were considered “forward funding” of the FY2010 request. Those numbers are reflected in the FY2009 number. Table A-2. Foreign Aid Funding Trends Fiscal Year 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 Billions of current US$ Billions of constant 2010 $ As % of GDP As % of Discretionary Budget Authority 3.08 6.54 2.87 8.00 5.92 7.34 6.64 4.72 4.59 3.72 4.25 3.99 3.38 4.23 4.21 32.04 68.67 26.65 77.32 53.86 62.36 52.16 36.59 32.45 27.89 32.00 28.83 22.89 28.97 27.66 1.4% 2.8% 1.1% 2.9% 2.2% 2.3% 1.9% 1.3% 1.2% 0.9% 1.0% 0.9% 0.7% 0.9% 0.8% - Congressional Research Service As % of Total Budget Authority - 29 Foreign Aid: An Introduction to U.S. Programs and Policy Fiscal Year 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976a 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Billions of current US$ Billions of constant 2010 $ As % of GDP As % of Discretionary Budget Authority 4.52 5.09 5.13 4.22 4.24 5.03 4.56 4.03 3.54 3.47 4.19 4.32 4.53 6.97 5.43 7.94 7.50 8.76 10.86 10.33 9.49 11.34 12.85 14.01 20.23 14.30 13.12 13.62 12.96 14.09 15.84 13.34 12.48 12.23 12.29 11.12 11.11 12.55 14.84 14.50 14.78 14.64 25.17 29.13 33.21 32.24 26.16 25.82 30.29 26.79 22.98 18.90 17.93 20.04 19.89 20.11 28.46 20.31 27.20 24.23 26.69 30.42 26.21 21.73 24.26 26.20 27.39 38.41 26.36 23.32 23.34 21.39 22.61 24.39 19.65 17.84 17.17 16.78 14.88 14.55 16.32 19.06 18.19 18.10 17.69 29.76 0.9% 0.9% 0.9% 0.7% 0.6% 0.7% 0.6% 0.5% 0.4% 0.3% 0.4% 0.4% 0.3% 0.5% 0.3% 0.4% 0.4% 0.4% 0.4% 0.4% 0.3% 0.4% 0.4% 0.4% 0.5% 0.3% 0.3% 0.3% 0.2% 0.2% 0.3% 0.2% 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.2% 0.1% 0.1% 0.1% 0.2% 3.3% 3.0%. 3.4% 3.9% 3.3% 2.8% 3.2% 3.3% 3.3% 4.4% 3.3% 2.9% 3.0% 2.8% 2.8% 2.9% 2.5% 2.4% 2.4% 2.5% 2.2% 2.2% 2.4% 2.6% 2.5% 2.2% 2.0% 3.0% Congressional Research Service As % of Total Budget Authority 1.5% 1.6% 1.7% 1.9% 1.5% 1.3% 1.4% 1.5% 1.5% 2.0% 1.4% 1.3% 1.2% 1.1% 1.1% 1.1% 0.9% 0.8% 0.8% 0.8% 0.7% 0.7% 0.7% 0.8% 0.8% 0.8% 0.7% 1.1% 30 Foreign Aid: An Introduction to U.S. Programs and Policy Fiscal Year 2004 2005 2006 2007 2008 2009 2010 Est. Billions of current US$ Billions of constant 2010 $ As % of GDP As % of Discretionary Budget Authority 38.18 21.95 23.60 26.85 28.20 36.42 39.39 44.02 24.50 25.50 28.30 28.68 37.09 39.39 0.3% 0.2% 0.2% 0.2% 0.2% 0.3% 0.3% 4.2% 2.2% 2.4% 2.5% 2.4% 2.4% 3.2% As % of Total Budget Authority 1.6% 0.8% 0.8% 0.9% 0.8% 0.9% 1.1% Source: U.S. Overseas Loans and Grants (Greenbook), Office of Management and Budget Historic Budget Tables, FY2011; annual appropriations legislation and CRS calculations. Notes: The data in this table for FY1946-FY1976 represent obligated funds reported in the USAID Greenbook (the most reliable source for pre-1970s data), while FY1977-FY2010 are budget authority figures from the OMB Historic Budget Tables, reflecting the 151 and 152 budget subfunctions. The Greenbook accounts included in the total have been selected by CRS to correlate with the function 151 and 152 budget accounts, allowing for fairly accurate comparison over time. a. FY1976 includes both regular FY1976 and transition quarter (TQ) funding, and the GDP calculation is based on the average FY1976 and TQ GDP. Congressional Research Service 31 Foreign Aid: An Introduction to U.S. Programs and Policy Appendix B. Common Foreign Assistance Acronyms and Abbreviations AEECA Assistance to Europe, Eurasia, and Central Asia DA Development Assistance DOD Department of Defense ERMA Emergency Refugee and Migration Assistance ESF Economic Support Fund FMF Foreign Military Financing FSA FREEDOM (Freedom for Russia and Emerging Eurasian Democracies and Open Markets) Support Act of 1992 GDP Gross Domestic Product GNI Gross National Income HIPC Heavily Indebted Poor Country IBRD World Bank, International Bank for Reconstruction and Development IDA World Bank, International Development Association IDA International Disaster Assistance IMET International Military Education and Training IMF International Monetary Fund INCLE International Narcotics Control and Law Enforcement MCC Millennium Challenge Corporation MDBs Multilateral Development Banks MRA Migration and Refugees Assistance NADR Non-Proliferation, Anti-Terrorism, Demining and Related Programs NGO Non-Governmental Organization ODA Official Development Assistance OECD Organization for Economic Cooperation and Development OFDA Office of Foreign Disaster Assistance OPIC Overseas Private Investment Corporation OTI Office of Transition Initiatives PEPFAR President’s Emergency Plan for AIDS Relief P.L. 480 Food for Peace/Food Aid PVO Private Voluntary Organization SEED Support for East European Democracy Act of 1989 TDA U.S. Trade and Development Agency UNDP United Nations Development Program UNICEF United Nations Children’s Fund USAID U.S. Agency for International Development Congressional Research Service 3432 Foreign Aid: An Introduction to U.S. Programs and Policy Author Contact Information Curt Tarnoff Specialist in Foreign Affairs ctarnoff@crs.loc.gov, 7-7656 Congressional Research Service Marian Leonardo Lawson Analyst in Foreign Assistance mlawson@crs.loc.gov, 7-4475 3533