Order Code RL31811
CRS Report for Congress
Received through the CRS Web
Appropriations for FY2004:
Foreign Operations, Export Financing, and
Related Programs
Updated September 22, 2003
Larry Nowels
Specialist in Foreign Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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Appropriations are one part of a complex federal budget process that includes budget
resolutions, appropriations (regular, supplemental, and continuing) bills, rescissions, and
budget reconciliation bills. The process begins with the President’s budget request and is
bound by the rules of the House and Senate, the Congressional Budget and Impoundment
Control Act of 1974 (as amended), the Budget Enforcement Act of 1990, and current
program authorizations.
This report is a guide to one of the 13 regular appropriations bills that Congress considers
each year. It is designed to supplement the information provided by the House and Senate
Foreign Operations Appropriations Subcommittees. It summarizes the current legislative
status of the bill, its scope, major issues, funding levels, and related legislative activity. The
report lists the key CRS staff relevant to the issues covered and related CRS products.
This report is updated as soon as possible after major legislative developments, especially
following legislative action in the committees and on the floor of the House and Senate.
NOTE: A Web version of this document with active links is
available to congressional staff at:
[http://www.crs.gov/products/appropriations/apppage.shtml].

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Appropriations for FY2004:
Foreign Operations, Export Financing, and
Related Programs
Summary
The annual Foreign Operations appropriations bill is the primary legislative
vehicle through which Congress reviews the U.S. foreign aid budget and influences
executive branch foreign policy making generally. It contains the largest share —
about two-thirds — of total U.S. international affairs spending.
President Bush has asked Congress to appropriate $18.89 billion for FY2004
Foreign Operations. The budget proposal is $2.7 billion, or 16.7% higher than
regular (non-supplemental) Foreign Operations appropriations for FY2003.
If
enacted, the President’s recommendation would result in one of the largest increases
of regular Foreign Operations funding in at least two decades.
Congress
subsequently approved in mid-April an additional $7.5 billion FY2003 supplemental
foreign aid spending in P.L. 108-11, for Iraq reconstruction, assistance to coalition
partners, and other activities supporting the global war on terrorism. Including the
supplemental brings Foreign Operations appropriations in FY2003 to $23.67 billion.
The FY2004 budget blueprint continues to highlight foreign aid in support of
the war on terrorism as the highest priority, with about $4.7 billion recommended.
The submission also requests funding for four new foreign aid initiatives which
together account for most of the $2.7 billion increase over regular FY2003 levels.
Combined, the Millennium Challenge Account, a new foreign aid concept, the State
Department’s Global AIDS Initiative, and two new contingency funds, total $2.05
billion. Other Foreign Operations programs are left with a more modest 4% increase.
In total, the request includes $1.2 billion for HIV/AIDS, about $350 million
more than enacted for FY2003, and $7.1 billion for military and security-related
economic aid, up nearly $650 million or 10% from regular FY2003 appropriations.
“Core” bilateral development assistance funding, however, would fall by 8%,
although recipients of these accounts are likely to benefit significantly from the new
Millennium Challenge Account and Global AIDS Initiative. Funding for Eastern
Europe and former Soviet programs is cut by 21%.
The FY2004 budget resolution (H.Con.Res. 95) includes $28.65 billion in
discretionary budget authority for International Affairs programs, the same as the
President’s request. To accommodate other priorities, however, the House and
Senate Appropriations Committees decided to reduce the Foreign Operations
allocation by 9.4% and 4.2%, respectively. On July 23, the House passed H.R. 2800,
appropriating $17.12 billion.
The Senate panel reported S. 1426 on July 17,
providing $18.093 billion.
The FY2004 Foreign Operations debate has included discussion of several
significant policy issues, including foreign aid as a tool in the global war on
terrorism, the Millennium Challenge Account, programs to combat HIV/AIDS,
international family planning programs, and Afghan reconstruction.

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Key Policy Staff
Area of Expertise
Name
Tel.
E-Mail
General: Policy issues & budget
Larry Nowels
7-7645
lnowels@crs.loc.gov
General: Policy issues
Curt Tarnoff
7-7656
ctarnoff@crs.loc.gov
Afghanistan reconstruction aid
Rhoda Margesson
7-0425
rmargesson@crs.loc.gov
Africa Aid
Raymond Copson
7-7661
rcopson@crs.loc.gov
Larry Nowels
7-7645
lnowels@crs.loc.gov
Agency for Intl Development
Curt Tarnoff
7-7656
ctarnoff@crs.loc.gov
Andean Regional Initiative
Larry Storrs
7-7672
lstorrs@crs.loc.gov
Debt Relief
Larry Nowels
7-7645
lnowels@crs.loc.gov
Larry Nowels
7-7645
lnowels@crs.loc.gov
Development Assistance
Curt Tarnoff
7-7656
ctarnoff@crs.loc.gov
Disaster aid
Rhoda Margesson
7-0425
rmargesson@crs.loc.gov
Drug/counternarcotics programs
Raphael Perl
7-7664
rperl@crs.loc.gov
Drug/counternarcotics, Colombia
Nina Serafino
7-7667
nserafino@crs.loc.gov
Export-Import Bank
James Jackson
7-7751
jjackson@crs.loc.gov
Family planning programs
Larry Nowels
7-7645
lnowels@crs.loc.gov
Rhoda Margesson
7-0425
rmargesson@crs.loc.gov
Health programs
Tiaji Salaam
7-7677
tsalaam@crs.loc.gov
HIV/AIDS
Raymond Copson
7-7661
rcopson@crs.loc.gov
International affairs budget
Larry Nowels
7-7645
lnowels@crs.loc.gov
Jonathan Sanford
7-7682
jsanford@crs.loc.gov
International Monetary Fund
Jeff Hornbeck
7-7782
jhornbeck@crs.loc.gov
Curt Tarnoff
7-7656
ctarnoff@crs.loc.gov
Iraq reconstruction
Rhoda Margesson
7-0425
rmargesson@crs.loc.gov
Kosovo/Yugoslavia aid
Curt Tarnoff
7-7656
ctarnoff@crs.loc.gov
Microenterprise
Curt Tarnoff
7-7656
ctarnoff@crs.loc.gov
Middle East assistance
Clyde Mark
7-7681
cmark@crs.loc.gov
Military aid/Arms sales
Richard Grimmett
7-7675
rgrimmett@crs.loc.gov
Multilateral Development Banks
Jonathan Sanford
7-7682
jsanford@crs.loc.gov
North Korea/KEDO
Larry Niksch
7-7680
lniksch@crs.loc.gov
Overseas Private Investment Corp
James Jackson
7-7751
jjackson@crs.loc.gov
Peace Corps
Curt Tarnoff
7-7656
ctarnoff@crs.loc.gov
Peacekeeping
Marjorie Browne
7-7695
mbrowne@crs.loc.gov
Refugee aid
Larry Nowels
7-7645
lnowels@crs.loc.gov
Russia/East Europe Aid
Curt Tarnoff
7-7656
ctarnoff@crs.loc.gov
Raphael Perl
7-7664
rperl@crs.loc.gov
Terrorism
Audrey Cronin
7-7676
acronin@crs.loc.gov
Trafficking in Women/Children
Francis Miko
7-7670
fmiko@crs.loc.gov
U.N. Voluntary Contributions
Vita Bite
7-7662
vbite@crs.loc.gov

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Foreign Operations Funding Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Foreign Operations, the FY2004 Budget Resolution, and
Sec. 302(b) Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Foreign Operations Appropriations Request for FY2004 and
Congressional Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Request Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Fighting the War on Terrorism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
New Initiative: The Millennium Challenge Account . . . . . . . . . . . . . . 11
New Initiative: The Global AIDS Initiative . . . . . . . . . . . . . . . . . . . . . 11
New Initiative: The Famine Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
New Initiative: The U.S. Emergency Fund for Complex Crises . . . . . 12
Other Key Elements of the FY2003 Request . . . . . . . . . . . . . . . . . . . . 12
Leading Foreign Aid Recipients Proposed for FY2004 . . . . . . . . . . . . . . . . 15
House Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Senate Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Iraq War Supplemental for FY2003 and Foreign Operations Funding . . . . . . . . 20
Reconstruction Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Congressional Action on Iraq Reconstruction . . . . . . . . . . . . . . . . . . . 21
International Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Congressional Action on International Assistance . . . . . . . . . . . . . . . 27
DOD Authorities to Provide Military Aid . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Congressional Action on DOD Authorities . . . . . . . . . . . . . . . . . . . . . 30
Selected Major Issues in the FY2004 Foreign Operations Debate . . . . . . . . . . . 30
Foreign Aid to Combat Terrorism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Anti-Terrorism Assistance (ATA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Terrorist Interdiction Program (TIP) . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Counterterrorism Engagement with Allies . . . . . . . . . . . . . . . . . . . . . 34
Terrorist Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
USAID Physical Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Aid Restrictions for Terrorist States . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Millennium Challenge Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Congressional Action (Appropriations) . . . . . . . . . . . . . . . . . . . . . . . . 38
Congressional Action (Authorization) . . . . . . . . . . . . . . . . . . . . . . . . . 38
Development Assistance, Global Health Priorities, and HIV/AIDS . . . . . . 43
International HIV/AIDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
International Family Planning and UNFPA Funding . . . . . . . . . . . . . . . . . . 49

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UNFPA Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
“Mexico City” Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Afghanistan Reconstruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Current Operating Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Tokyo Pledging Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Subsequent U.S. Aid Transfers, FY2002 and FY2003 . . . . . . . . . . . . 57
FY2004 Regular Afghanistan Aid Request . . . . . . . . . . . . . . . . . . . . . 58
FY2004 Supplemental Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Iraq Reconstruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
FY2004 Supplemental Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Reconstruction Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Reconstruction Concerns and Critical Assessment . . . . . . . . . . . . . . . 63
Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Selected World Wide Web Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
List of Figures
Figure 1. Foreign Policy Budget, FY2004
By Appropriation Bills - $s billions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Figure 2. Foreign Operations Funding Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Figure 3. Supplemental Funding for Foreign Operations . . . . . . . . . . . . . . . . . . . 7
List of Tables
Table 1. Status of Foreign Operations Appropriations, FY2004 —
H.R. 2800 and S. 1426 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Table 2. Foreign Operations Appropriations, FY1995 to FY2004 . . . . . . . . . . . . 6
Table 3. Foreign Operations New Initiatives FY2004 . . . . . . . . . . . . . . . . . . . . 10
Table 4. Summary of Foreign Operations Appropriations . . . . . . . . . . . . . . . . . 14
Table 5. Leading Recipients of U.S. Foreign Aid . . . . . . . . . . . . . . . . . . . . . . . . 15
Table 6. Iraq Reconstruction, International Aid, and Related Activities . . . . . . 22
Table 7. Proposed Recipients of Supplemental Foreign Aid . . . . . . . . . . . . . . . 28
Table 8. U.S. Assistance to Front-Line States in War on Terrorism . . . . . . . . . 32
Table 9. Comparison of MCA Authorization Legislation . . . . . . . . . . . . . . . . . 41
Table 10. Development Assistance Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Table 11. “Core” Development Assistance Funding . . . . . . . . . . . . . . . . . . . . . 46
Table 12. U.S. International HIV/AIDS Programs . . . . . . . . . . . . . . . . . . . . . . . 47
Table 13. U.S. Assistance to Afghanistan, FY2002-FY2004 . . . . . . . . . . . . . . . 58
Table 14. Iraq Supplemental — Proposed Sector Allocation . . . . . . . . . . . . . . . 61
Table 15. Foreign Operations: Discretionary Budget Authority . . . . . . . . . . . . 72

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Appropriations for FY2004:
Foreign Operations, Export Financing,
and Related Programs
Most Recent Developments
On September 17, 2003, President Bush submitted to Congress an $87 billion
FY2004 supplemental appropriation request to cover additional military costs in Iraq
and Afghanistan, and for reconstruction activities in both countries. Of this total,
$21.29 billion would fall under Foreign Operations spending, including $20.3 billion
for Iraq reconstruction and $800 million for Afghanistan. (Another $390 million
would be available for Afghanistan, drawn from prior year appropriations, for a total
Afghan reconstruction proposal of $1.2 billion.)
Meanwhile, in action on the regular FY2004 Foreign Operations request, on July
23 the House passed, and on July 17 the Senate Appropriations Committee reported
spending bills reducing the President’s budget. The House measure (H.R. 2800)
provides $17.12 billion, an amount $1.8 billion, or 9.4%, below the President’s
request. The Senate bill (S. 1426) appropriates $18.09 billion, $800 million, or 4.2%,
less than the Administration’s proposal. The Administration FY2004 budget request
represents one of the largest increases for Foreign Operations programs in several
decades. At $18.9 billion, the proposal is $2.7 billion, or 16.7% higher than regular
foreign aid funds enacted for FY2003 (excluding the $7.5 billion provided in the
FY2003 Iraq War supplemental).
Funding for HIV/AIDS programs is one of the top priorities in both bills. H.R.
2800 provides $1.27 billion for international HIV/AIDS, roughly $30 million above
the President’s request and $390 million higher than FY2003 levels. S. 1426
includes $1.25 billion, slightly less than the House. The HIV/AIDS totals include
funding for the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria — $400
million in the House measure and possibly as much as $250 million in S. 1426.
Combined with funding approved in the Labor-HHS spending measures (H.R. 2660
and S. 1356), total amounts for international HIV/AIDS in both bills is roughly $1.9
billion, similar to the Administration’s proposal. Out of this combined total, $500
million would be available as a U.S. contribution to the Global Fund from the House
bills and $400 million from the Senate measures. The President had requested $200
million, $100 million from each of the two appropriation bills. House and Senate
bills further restore cuts to bilateral tuberculosis and malaria programs proposed by
the Administration.
On other major issues, the House bill reduces the President’s $1.3 billion
request for the new Millennium Challenge Account to $800 million, while S. 1426
provides $1 billion. Family planning resources are set at $425 million as requested

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CRS-2
in H.R. 2800 and at $445 million in the Senate bill. S. 1426 further includes
language that would effectively overturn the President’s “Mexico City” restrictions
banning foreign non-governmental organizations from receiving U.S. funds if they
engage in certain abortion-related activities. Contributions for the U.N. Population
Fund (UNFPA) are set at $25 million in the House bill and $35 million in the Senate
measure, although amounts are subject to conditions that in FY2002 led to the
termination of U.S. support. Both bills fully fund amounts for Israel, Egypt, and
Jordan.
Introduction
The annual Foreign Operations appropriations bill is the primary legislative
vehicle through which Congress reviews and votes on the U.S. foreign assistance
budget and influences major aspects of executive branch foreign policy making
generally.1 It contains the largest share — about two-thirds — of total international
affairs spending by the United States (see Figure 1).
The legislation funds all U.S. bilateral development assistance programs,
managed mostly by the U.S. Agency for International Development (USAID),
together with several smaller independent foreign aid agencies, such as the Peace
Corps and the Inter-American and African Development Foundations.
Most
humanitarian aid activities are funded within Foreign Operations, including USAID’s
disaster program and the State Department’s refugee relief support.
Foreign
Operations includes separate accounts for aid programs in the former Soviet Union
(also referred to as the Independent States account) and Central/Eastern Europe,
activities that are jointly managed by USAID and the State Department.
Security assistance (economic and military aid) for Israel and Egypt is also part
of the Foreign Operations spending measure, as are other security aid programs
administered largely by the State Department, in conjunction with USAID and the
Pentagon. U.S. contributions to the World Bank and other regional multilateral
development banks, managed by the Treasury Department, and voluntary payments
to international organizations, handled by the State Department, are also funded in
the Foreign Operations bill. Finally, the legislation includes appropriations for three
export promotion agencies: the Overseas Private Investment Corporation (OPIC),
the Export-Import Bank, and the Trade and Development Agency.
1 Although the Foreign Operations appropriations bill is often characterized as the “foreign
aid” spending measure, it does not include funding for all foreign aid programs. Food aid,
an international humanitarian aid program administered under the P.L. 480 program, is
appropriated in the Agriculture appropriations bill. Foreign Operations also include funds
for the Export-Import Bank, an activity that is regarded as a trade promotion program, rather
than “foreign aid.” In recent years, funding for food aid and the Eximbank have been about
the same, so that Foreign Operations and the official “foreign aid” budget are nearly
identical. Throughout this report, the terms Foreign Operations and foreign aid are used
interchangeably.

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CRS-3
Figure 1. Foreign Policy Budget, FY2004
By Appropriation Bills - $s billions
State Dept/Commerce - $8.5
Food Aid, Agriculture - $1.24
4.3%
29.7%
66.0%
Foreign Operations - $18.89
For nearly two decades, the Foreign Operations appropriations bill has been the
principal legislative vehicle for congressional oversight of foreign affairs and for
congressional involvement in foreign policy making. Congress has not enacted a
comprehensive foreign aid authorization bill since 1985, leaving most foreign
assistance programs without regular authorizations originating from the legislative
oversight committees. As a result, Foreign Operations spending measures developed
by the appropriations committees increasingly have expanded their scope beyond
spending issues and played a major role in shaping, authorizing, and guiding both
executive and congressional foreign aid and broader foreign policy initiatives. It has
been largely through Foreign Operations appropriations that the United States has
modified aid policy and resource allocation priorities since the end of the Cold War.
The legislation has also been the channel through which the President has utilized
foreign aid as a tool in the global war on terrorism since the attacks of September 11,
2001. The appropriations measure has also been a key instrument used by Congress
to apply restrictions and conditions on Administration management of foreign
assistance, actions that have frequently resulted in executive-legislative clashes over
presidential prerogatives in foreign policy making.

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CRS-4
Status
Table 1. Status of Foreign Operations Appropriations, FY2004
— H.R. 2800 and S. 1426
Subcomm.
Conf. Report
Markup
House
House
Senate
Senate
Conf.
Approval
Public
Report
Passage
Report
Passage
Report
Law
House
Senate
House
Senate
7/21
7/17
7/23
7/10
—
H.Rept.
S.Rept.
—
—
—
—
—
370-50
108-222
108-106
President Bush submitted his FY2004 federal budget request to Congress on
February 3, 2003, including funding proposals for Foreign Operations Appropriations
programs.
Subsequently, on March 25, the White House requested FY2003
emergency supplemental funds for costs of military operations in Iraq, relief and
reconstruction of Iraq, ongoing U.S. costs in Afghanistan, additional aid to coalition
partners and nations cooperating in the global war on terrorism, and homeland
security. House and Senate Appropriations Committees held several hearings on
both the FY2004 and FY2003 supplemental requests, and approved the supplemental
(P.L. 108-11) on April 12. The House Foreign Operations Subcommittee marked up
draft legislation in July 11, while the full House panel approved the legislation on
July 16 and reported the measure on July 21. The House passed H.R. 2800 on July
23 (370-50). The Senate Committee reported its companion bill on July 17.
Foreign Operations Funding Trends
As shown in Figure 2 below, Foreign Operations funding levels, expressed in
real terms taking into account the effects of inflation, have fluctuated widely over the
past 26 years.2 After peaking at over $33 billion in FY1985 (constant FY2004
dollars), Foreign Operations appropriations began a period of decline to $13.9 billion
in FY1997, with only a brief period of higher amounts in the early 1990s due to
2 Some of these swings, however, are not the result of policy decisions, but due to technical
budget accounting changes involving how Congress “scores” various programs. For
example, the large increase in FY1981 did not represent higher funding levels, but rather the
fact that export credit programs began to be counted as appropriations rather than as “off-
budget” items. Part of the substantial rise in spending in FY1985 came as a result of the
requirement to appropriate the full amount of military aid loans rather than only the partial
appropriation required in the past. Beginning in FY1992, Congress changed how all Federal
credit programs are “scored” in appropriation bills which further altered the scoring of
foreign aid loans funded in Foreign Operations. All of these factors make it very difficult
to present a precise and consistent data trend line in Foreign Operations funding levels.
Nevertheless, the data shown in Figure 2 can be regarded as illustrative of general trends in
Congressional decisions regarding Foreign Operations appropriations over the past 25 years.

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CRS-5
special supplementals for Panama and Nicaragua (1990), countries affected by the
Gulf War (1991), and the former Soviet states (1993).
Figure 2. Foreign Operations Funding Trends
Arguing that declining international affairs resources seriously undermined U.S.
foreign policy interests and limited the ability of American officials to influence
overseas events, Clinton Administration officials and other outside groups vigorously
campaigned to reverse the decade-long decline in the foreign policy budget. Foreign
aid spending increased slightly in FY1998, but beginning the following year and
continuing to the present, Foreign Operations appropriations have trended upward
due in large part to the approval of resources for special, and in some cases
unanticipated foreign policy contingencies and new initiatives. While funding for
regular, continuing foreign aid programs also rose modestly during this period,
supplemental spending for special activities, such as Central American hurricane
relief (FY1999), Kosovo emergency assistance (FY1999), Wye River/Middle East
peace accord support (FY2000), a counternarcotics initiative in Colombia and the
Andean region (FY2000 and FY2002), aid to the front line states in the war on
terrorism and Iraq-war related assistance (FY2003), was chiefly responsible for the
growth in foreign aid appropriations. The average annual funding level during the
FY1999-FY2003 period of $18.68 billion represents a level 36% higher than the low
point in Foreign Operations appropriation in FY1997.
At present, the $24.2 billion appropriated for FY2003 Foreign Operations
programs (real terms) is the largest amount since FY1985. This substantial FY2003
funding level is made up of a combination of the highest regular Foreign Operations
spending bill in over a decade, plus the largest supplemental ($7.5 billion) since
approval of an FY1979 supplemental aid package in support of the Camp David
peace accords signed by Israel and Egypt.

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CRS-6
Due to the unpredictability and significant size of foreign aid supplementals in
recent years, it is becoming increasingly difficult to compare a new budget request
with the previous year when the latter includes a large supplemental. This is
especially true when evaluating the FY2004 Foreign Operations budget plan, which
could also substantially increase through supplementals enacted next year. In this
case, a more informative assessment might compare regular FY2003 and FY2004
Foreign Operations budgets, keeping in mind that FY2003 has already been
augmented with significant supplemental funding. Using this point of reference,
despite falling well short of total amounts appropriated for FY2003, including the
supplemental, the FY2004 Foreign Operations request, if enacted, would be the
highest regular foreign aid spending measure in at least 15 years (in real terms) and
represent the largest single-year increase for regular Foreign Operations
appropriations over the entire 26 year period.
Table 2. Foreign Operations Appropriations, FY1995 to FY2004
(discretionary budget authority in billions of current and constant dollars)
FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02
FY03 FY04
nominal $s
13.61 12.46 12.27 13.15 15.44 16.41 16.31 16.54 23.67 18.89
constant FY04 $s
16.12 14.46 13.95 14.76 17.08 17.71 17.17 17.21 24.15 18.89
Note. FY1999 excludes $17.861 billion for the IMF.
The significance of supplemental resources for Foreign Operations programs in
recent years is illustrated in Figure 3 below. Due to the nature of rapidly changing
international events and the emergence of unanticipated contingencies to which it is
in the U.S. national interest to respond, it is not surprising that foreign aid and
defense resources from time to time are the major reason for considering and
approving supplemental spending outside the regular appropriation cycle.
Supplementals have provided resources for such major foreign policy events as the
Camp David accords (FY1979), Central America conflicts (FY1983), Africa famine
and a Middle East economic downturn (FY1985), Panama and Nicaragua
government transitions (FY1990), the Gulf War (FY1991), and Bosnia relief and
reconstruction (FY1996).
But after a period of only one significant foreign aid supplemental in eight years,
beginning in FY1999 Congress has approved Foreign Operations supplemental
appropriations exceeding $1 billion in each of the past five years. Relief for Central
American victims of Hurricane Mitch, Kosovo refugees, and victims of the embassy
bombings in Kenya and Tanzania in FY1999 totaled $1.6 billion, and was followed
in FY2000 by a $1.1 billion supplemental, largely to fund the President’s new
counternarcotics initiative in Colombia.
As part of a $40 billion emergency
supplemental to fight terrorism enacted in September 2001, President Bush and
Congress allocated $1.4 billion for foreign aid activities in FY2001 and FY2002.
Another $1.15 billion supplemental cleared Congress in FY2002 to augment Afghan
reconstruction efforts and assist other “front-line” states in the war on terrorism.

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CRS-7
Until FY2003, these additional resources have accounted for between 7% and 11%
of total Foreign Operations spending. The $7.5 billion Iraq War supplemental for
FY2003, however, goes well beyond these standards, representing nearly one-third
of the FY2003 Foreign Operations budget.
Figure 3. Supplemental Funding for Foreign Operations
25
20
15
10
5
0
'98
'99
'00
'01
'02
'03
'04
Supplemental
Regular
As a share of the entire $2.24 trillion U.S. budget for FY2003, Foreign
Operations currently represents a 1.06% share, significantly higher than the
traditional level of around 0.75%. This is due largely to enactment of the $7.5
billion supplemental for Iraq reconstruction, aid to coalition partners, and assistance
to other front-line states in the war on terrorism. The FY2004 Foreign Operations
request is projected to total 0.84% of total U.S. federal spending. As a portion of
discretionary budget authority — that part of the budget provided in annual
appropriation acts (other than appropriated entitlements) — Foreign Operations
consumes 2.8% in FY2003, a level that would drop back to 2.4% under the FY2004
budget proposal. By comparison, at the high point of Foreign Operations spending
in FY1985, foreign aid funds represented 2% of the total U.S. budget and 4.6% of
discretionary budget authority. Foreign aid as a percent of discretionary budget
authority remained above 3% in most years between FY1978 and FY1991. In the last
decade, however, it has stood below 3%, with the low point falling in FY2002 to
2.25%.

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CRS-8
Data Notes
Unless otherwise indicated, this report expresses dollar amounts in terms of
discretionary budget authority. The Foreign Operations Appropriations bill
includes one mandatory program that is not included in figures and tables —
USAID’s Foreign Service retirement fund. The retirement fund is scheduled to
receive $43.9 million for FY2004.
In addition, funding levels and trends discussed in this report exclude U.S.
contributions to the International Monetary Fund (IMF), proposals that are enacted
periodically (about every five years) in Foreign Operations bills.
Congress
approved $17.9 billion for the IMF in FY1999, the first appropriation since
FY1993.
Including these large, infrequent, and uniquely “scored” IMF
appropriations tends to distort a general analysis of Foreign Operations funding
trends. Although Congress provides new budget authority through appropriations
for the full amount of U.S. participation, the transaction is considered an exchange
of assets between the United States and the IMF, and results in no outlays from the
U.S. treasury. In short, the appropriations are off-set by the creation of a U.S.
counterpart claim on the IMF that is liquid and interest bearing. For more, see
CRS Report 96-279, U.S. Budgetary Treatment of the IMF.
Foreign Operations, the FY2004 Budget Resolution, and
Sec. 302(b) Allocations
Usually, Appropriations Committees begin markups of their spending bills only
after Congress has adopted a budget resolution and funds have been distributed to the
Appropriations panels under what is referred to as the Section 302(a) allocation
process, a reference to the pertinent authority in the Congressional Budget Act.
Following this, House and Senate Appropriations Committees separately decide how
to allot the total amount available among their 13 subcommittees, staying within the
functional guidelines set in the budget resolution. This second step is referred to as
the Section 302(b) allocation. Foreign Operations funds fall within the International
Affairs budget function (Function 150), representing in most years about 65% of the
function total.
Smaller amounts of Function 150 are included in four other
appropriation bills.
How much International Affairs money to allocate to each of the five
subcommittees, and how to distribute the funds among the numerous programs are
decisions exclusively reserved for the Appropriations Committees. Nevertheless,
overall ceilings set in the budget resolution can have significant implications for the
budget limitations within which the House and Senate Foreign Operations
subcommittees will operate when they meet to mark up their annual appropriation
bills.
On April 11, 2003, the House and Senate agreed to a budget framework for
FY2004 (H.Con.Res. 95) that includes $784.7 billion in discretionary budget
authority. The discretionary budget authority target for the International Affairs
function is $28.65 billion, the same as the President’s request (as re-estimated by

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CRS-9
CBO). This means that the House and Senate Appropriations Committees received
sufficient resources to fully fund the Administration’s foreign policy budget proposal,
including the Foreign Operations request.
The Committees, however, can choose to allocate the $28.65 billion among the
five subcommittees with jurisdiction over the International Affairs programs
differently than what the President proposed or to alter the overall amount for foreign
policy activities. Depending on other competing priorities, the final allocations can
be quite different from those assumed in the budget resolution.
For a number of weeks following passage of H.Con.Res. 95, Appropriation
Committee leaders debated how to distribute the discretionary funds under their
jurisdiction, and especially how to absorb what they identified as a roughly $5 to $7
billion gap in spending requirements and amounts available.
Departing from
traditional practices where House and Senate Committees work separately on
subcommittee allocations, Committee leaders negotiated across both houses with
their leadership and with the White House to establish a common framework within
which to base their initial allocations.
On June 11, House and Senate Appropriations Committee Chairmen announced
an agreed package which would free-up sufficient resources to address the funding
gap and remain within the overall FY2004 discretionary budget cap of $784.7 billion.
As approved by all parties, including the President, the Appropriations Committees
will reduce Defense spending by $3 billion and move $2.2 billion in FY2004 advance
appropriations to FY2003.
The House Appropriations Committee, which also released its allocation for all
13 subcommittees on June 11, made further alternations beyond the basic framework.
The Committee’s distribution adds funding beyond the President’s request for several
subcommittees, including Homeland Security (up $1 billion), VA/HUD (up $600
million), and Commerce, Justice, and State (up $229 million). In addition to the $3
billion reduction for Defense, the House Committee further cut Foreign Operations
by $1.769 billion to $17.12 billion. This 9.4% cut from the President’s request is the
largest percentage reduction for any of the 13 subcommittees.
The Senate Appropriations Committee on June 19 agreed to its allocations,
differing from House levels in several areas, including Foreign Operations. The
Senate panel provides $18.09 billion for foreign assistance, about $800 million, or
4.2%, below the President’s request, but $900 million more than the House. Like the
House, however, the Senate Committee reduced Foreign Operations on a percentage
basis more than any other subcommittee.
Although Senate levels would be easier to accommodate, cuts of this size for
Foreign Operations will require substantial trade-offs among Administration
priorities as well as foreign aid programs of high interest to Congress. With most of
the Foreign Operations increases slated for new initiatives, including the Millennium
Challenge Account and the Global AIDS program, cuts will be necessary for these
new proposals, for continuing activities, or for a combination of both. During
negotiations with the White House, it was reported that President Bush emphasized
that the budget package must not reduce funding for his top spending priorities,

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CRS-10
including the Global AIDS Initiative.3 The Foreign Operations request includes
$1.24 billion of the Administration’s overall $1.9 billion international HIV/AIDS
recommendation.
Foreign Operations Appropriations Request for
FY2004 and Congressional Consideration
Request Overview
On February 3, 2003, President Bush asked Congress to appropriate $18.89
billion for FY2004 Foreign Operations. The budget proposal is $2.7 billion, or
16.7% higher than regular Foreign Operations appropriations for FY2003, as enacted
in P.L. 108-7. If enacted, the President’s recommendation would result in one of the
largest increases of regular (non-supplemental) Foreign Operations funding in
several decades. Congress subsequently approved in mid-April an additional $7.5
billion FY2003 supplemental foreign aid spending in P.L. 108-11, for Iraq
reconstruction, assistance to coalition partners, and other activities supporting the
global war on terrorism. Including the supplemental brings Foreign Operations
appropriations in FY2003 to $23.67 billion.
The FY2004 budget blueprint continues to highlight foreign aid in support of
the war on terrorism as the highest priority. But a notable characteristic of the
submission is the request for funding four new foreign aid initiatives which together
account for most of the $2.7 billion increase over regular FY2003 levels. Combined,
the Millennium Challenge Account (a new structure for delivering foreign aid), the
State Department’s Global AIDS Initiative, and two new contingency funds (Famine
and Complex Crises), total $2.05 billion. Other Foreign Operations programs are left
with a more modest 4% increase.
Table 3. Foreign Operations New Initiatives FY2004
FY2003
FY2004
FY2004 +/-
Enacted*
Request
FY2003
Foreign Operations
$16.192
$18.889
16.7%
New Initiatives for FY2004:
Millennium Challenge Acct
—
$1.300
—
Global AIDS Initiative
—
$0.450
—
Famine Fund
—
$0.200
—
Complex Crises Fund
—
$0.100
—
Total New Initiatives FY2004
—
$2.050
—
Foreign Operations, Less New Initiatives
$16.192
$16.839
4.0%
* Enacted regular appropriations. Excludes $7.5 billion appropriated for Foreign Operations and food
aid in the Iraq War supplemental (P.L. 108-11).
3 National Journal, Congress Daily PM, June 11, 2003.)

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CRS-11
Fighting the War on Terrorism. Since the terrorist attacks in September
2001, American foreign aid programs have shifted focus toward more direct support
for key coalition countries and global counter-terrorism efforts. In total, Congress
has appropriated approximately $17.9 billion in FY2002 and FY2003 Foreign
Operations funding to assist the 26 “front-line” states in the war on terrorism,
implement anti-terrorism training programs, and address the needs of post-conflict
Iraq and other surrounding countries.
Nearly half of all Foreign Operations
appropriations the past two years has gone for terrorism or Iraq war-related purposes.
The FY2004 budget continues the priority of fighting terrorism with $4.7
billion, or 25% of Foreign Operations resources assisting the front-line states. Unlike
a year ago when the President’s FY2003 budget was viewed by many as an
inadequate request, especially for Afghanistan, the FY2004 proposal includes
substantial aid packages for a number of the front-line states. Although the levels for
most countries will not increase much beyond what was provided from regular
FY2003 foreign aid funding, the request largely sustains amounts that have grown
substantially during the past two years.
Anti-terrorism training and technical
assistance programs also rise by 45% above FY2003 levels.
The FY2004 submission does not, however, include follow-on funding for Iraq
relief and reconstruction. Congress approved $2.5 billion in FY2003 supplemental
resources, an amount many view as a down payment of long-term needs in Iraq.
With great uncertainty surrounding the costs of Iraq reconstruction, how much of the
financial burden the United States will shoulder, and the process by the
reconstruction operations will be managed, the Administration has not amended its
pending FY2004 request to include additional amounts.
New Initiative: The Millennium Challenge Account. The largest of the
new initiatives is the Millennium Challenge Account (MCA), a program designed to
radically transform the way the United States provides economic assistance to a small
number of “best performing” developing nations. The request for FY2004 is $1.3
billion with a promise that the MCA will grow to $5 billion by FY2006 and remain
at least at that level in the future. Some MCA supporters argue that the FY2004 level
is too low, saying that the President pledged to implement the initiative in equal
installments over three years and that an appropriation of $1.67 billion is what they
had anticipated. The Administration says that the added MCA funding will be in
addition to and not a substitute for existing U.S. economic aid, but development
advocates are concerned that given the tight budget environment, trade-offs between
regular economic programs and the MCA may be required. (See separate page under
Funding and Policy Issues for more discussion of the MCA.)
New Initiative: The Global AIDS Initiative. In his January 2003 State of
the Union address, President Bush pledged to substantially increase U.S. financial
assistance for preventing and treating HIV/AIDS, especially in the most heavily
inflicted countries in Africa and the Caribbean. The President promised $15 billion
over 5 years, $10 billion of which would be money above and beyond current
funding. The Global AIDS Initiative, which will be housed in the State Department,
represents a portion of that pledge — $450 million in FY2004 — that when
combined with other resources managed by USAID and the Department of Health
and Human Services (HHS), would raise total international HIV/AIDS resources in

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CRS-12
FY2004 to about $1.9 billion. Some observers note, however, that this falls well
short of the anticipated $3 billion per year implied in the President’s speech and
would represent only $500 million in new money to fight AIDS above the FY2003
level. Some further question whether the State Department should be coordinator of
international HIV/AIDS programs, as envisioned in the Initiative, rather than USAID
or HHS. (See separate page under Funding and Policy Issues for more discussion of
the Global AIDS Initiative.)
New Initiative: The Famine Fund. This new contingency fund, with $200
million requested for FY2004, would allow the Administration to provide, under
more flexible authorities, emergency food and other disaster relief support as needs
arise. Executive officials argue that greater flexibility would permit them to respond
rapidly to the human consequences of natural disasters and conflict without having
to divert resources from other economic aid accounts. Critics note, however, that the
existing international disaster assistance account and P.L. 480 food aid program, plus
legislative authorities that allow for temporary borrowing of funds from other aid
accounts perform the same functions as the proposed Famine Fund and question
whether it is necessary.
New Initiative: The U.S. Emergency Fund for Complex Crises. The
Administration proposes to establish within the Executive Office of the President a
$100 million contingency fund allowing the United States to respond quickly to
unforseen complex foreign crises. The resources would not be used to address
victims of natural disasters, but rather would support peace and humanitarian
intervention in conflict situations, including acts of ethnic cleansing, mass killing, or
genocide.
In the past, Congress has been reluctant to approve this type of
contingency fund over which it can apply little oversight. The Administration had
asked lawmakers to launch the Complex Crisis Fund with $150 million as part of the
FY2003 Iraq War supplemental. Congress, however, chose to defer consideration
of establishing such a Fund until the FY2004 appropriation cycle, and instead
allocated the requested resources among various accounts for Iraq reconstruction and
aid to regional states affected by the war.
Other Key Elements of the FY2003 Request. Beyond these specific and
prominent issues, the Foreign Operations proposal for FY2004 seeks to substantially
increase aid activities in a few areas while cutting resources for several programs.
Significant appropriation increases when compared with regular FY2003
appropriations (excluding the Iraq War supplemental) include:
! Security assistance — Economic Support Fund and Foreign
Military Financing. These two core security aid accounts that aim
to support countries strategically important to the U.S., would grow
by a combined $648 million, or 10% above regular FY2003 levels.
Much of the add-on is targeted for a $250 million security aid
package for Turkey and a $145 million new Middle East Partnership
Initiative.
! Peace Corps funding would rise by $64 million, or 22% in an effort
to place 10,000 volunteers by the end of FY2004 and to keep on

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CRS-13
track the President’s longer term plan of having 14,000 Americans
serving in the Peace Corps by FY2007.
! Contributions to the World Bank and other international financial
institutions would grow by $259 million, or 17%, covering all
scheduled U.S. payments to the multilateral development banks, plus
clearing $196 million of U.S. arrears owed to these institutions. The
request further includes an 18% increase for the World Bank’s
International
Development
Association
and
the
African
Development Fund as a “results-based Incentive Contribution” that
had been promised last year if the banks implemented certain
reforms.
! Debt reduction, which received no funding in FY2003 except by a
transfer of $40 million from another aid account, would grow to
$395 million under the Administration’s budget submission. There
are three components to the request: $300 million to cancel bilateral
debt owed by the Democratic Republic of the Congo under the
Heavily Indebted Poor Country (HIPC) initiative; $75 million as a
contribution to the HIPC Trust Fund to make up for unanticipated
shortfalls in implementing the program; and $20 million for the
Tropical Forestry Conservation debt relief activity.
! International narcotics control would grow by $89 million, or
45%, largely to expand significantly programs in Pakistan and
Mexico. The Administration further seeks $731 million for the
Andean Counterdrug Initiative (ACI), an increase from the $700
million regular appropriation for FY2003. The ACI proposal would
generally restore amounts that were cut from the FY2003 request for
Colombia, Ecuador, Brazil, Venezuela, and Panama.
The largest reduction proposed in the President’s Foreign Operations budget
targets assistance to Former Soviet states and Eastern Europe. Collectively, aid
to these countries would decline by $179 million, or 24% from current levels. The
request reflects a reorientation in the former Soviet aid account to focus more on
Central Asian states, linked to the war on terrorism, and to begin the process of
graduation for Russia and Ukraine. Aid to these two nations would fall by 40% from
FY2003 allocations. The request further would cut Armenia’s aid by nearly half,
from $89 million to $49 million. For Eastern Europe, aid levels would fall for nearly
every recipient, with some of the largest reductions scheduled for Serbia,
Montenegro, and Macedonia.
Funding for the Export-Import Bank would also decline under the President’s
budget — from $565 million to $43 million in FY2004 (as re-estimated by CBO).
But because of substantial “carry-forward” resources that were not spent in prior
years, Eximbank officials say that Bank lending can total $14.6 billion in FY2004,
which is at least $2 billion higher than the anticipated level for FY2003.
Assessing the Administration’s request for bilateral development and health
assistance is more complicated and has led to varying interpretations.
With

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CRS-14
implementation of the President’s new Global AIDS Initiative in FY2004,
development and health resources, including funds from USAID’s “core” accounts
for development assistance and child survival/health, and the State Department’s
Global AIDS Initiative, would increase by $205 million, or 6.4% over regular
FY2003 levels.
Depending on the purposes for which Millennium Challenge
Account funds are spent, further additions to development and health programs
might also be expected from MCA allocations.
But excluding the new Global AIDS Initiative and MCA from the equation,
overall funding for USAID’s two “core” accounts would decline in FY2004 by a
combined $245 million, or 7.6%. The implication of this reduction is that with the
exception of HIV/AIDS, nearly all other development programs, including those for
agriculture, basic education, family planning, malaria and tuberculosis, and
democracy programs would be at or slightly below amounts allocated for FY2003.
Some critics charge that this violates the executive’s pledge that MCA funding
would be in addition to and not in place of continuing economic aid programs.
Others express concern that the growth in HIV/AIDS resources comes at the expense
of other key health activities for which resources would decline.
Table 4. Summary of Foreign Operations Appropriations
(Discretionary funds — in millions of dollars)
FY2002
FY2003
FY2003
FY2003
FY2004
Bill Title & Program
Enacted* Regular*
Supp*
Total
Request
Title I - Export Assistance
528
369
—
369
(103)
Title II - Bilateral Economic
10,399
10,094
5,322
15,416
12,642
Aid
Development/Child Survival
2,612
3,205
90
3,295
2,960
aid
Global AIDS Initiative
—
—
—
—
450
Iraq Relief & Reconstruction
—
—
2,475
2,475
—
Israel/Egypt
1,375
1,207
300
1,507
1,055
Millennium Challenge Acct
—
—
—
—
1,300
Title III - Military Assistance
4,232
4,239
2,159
6,398
4,601
Israel/Egypt
3,340
3,378
1,000
4,378
3,460
Title IV - Multilateral Aid
1,383
1,490
—
1,490
1,749
Total Foreign Operations
16,542
16,192
7,481
23,673
18,889
Source: House Appropriations Committee and CRS calculations.
* FY2002 levels include $15.346 billion in regular Foreign Operations appropriations enacted in P.L.
107-115 plus $1.1 billion (net $50 million in rescissions), provided in P.L. 107-206, the FY2002
emergency supplemental appropriation. FY2003 regular includes amounts provided in P.L.
108-7 and are adjusted for a 0.65% across-the-board rescission required by the Act. FY2003
supplemental includes amounts provided in P.L. 108-11.

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CRS-15
Leading Foreign Aid Recipients Proposed for FY2004
Israel and Egypt remain the largest U.S. aid recipients, as they have been for
many years. However, in the aftermath of the September 11 terrorist attacks, foreign
aid allocations have changed in several significant ways. The request for FY2004
largely continues the patterns of aid distribution of the past two years.
Since September 11, the Administration has used economic and military
assistance increasingly as a tool in efforts to maintain a cohesive international
coalition to conduct the war on terrorism and to assist nations which have both
supported U.S. forces and face serious terrorism threats themselves. Pakistan, for
example, a key coalition partner on the border with Afghanistan, had been ineligible
for U.S. aid, other than humanitarian assistance, due to sanctions imposed after India
and Pakistan conducted nuclear tests in May 1998 and Pakistan experienced a
military coup in 1999. Since lifting aid sanctions in October 2001, the United States
has transferred over $1.5 billion to Pakistan.
Jordan, Turkey, Indonesia, the
Philippines, and India also are among the top aid recipients as part of the network of
“front-line” states in the war on terrorism.
The other major cluster of top recipients are those in the Andean region where
the Administration maintains a large counternarcotics initiative that combines
assistance to interdict and disrupt drug production, together with alternative
development programs for areas that rely economically on the narcotics trade.
Several countries in the Balkans and the former Soviet Union — Federal Republic
of Yugoslavia, Kosovo, Russia, Ukraine, and Georgia — would continue to be
among the top recipients, although at somewhat lower funding levels.
Table 5. Leading Recipients of U.S. Foreign Aid
(Appropriation Allocations; $s in millions)
FY2002
FY2003
FY2003
FY2003
FY2004
Actuala
Regulara
Suppa
Total
Request
Israel
2,788
2,682
1,000
3,682
2,640
Egypt
1,956
1,904
300
2,204
1,876
Iraq
25
10
2,475
2,485
—
Jordan
355
449
1,106
1,555
462
Pakistan
1,045
295
200
495
389
Afghanistan
527
322b
325
647
531
Colombia
406
527
68
595
575
Turkey
253
20
1,000
1,020
255
Peru
197
179
—
179
161
FRYugoslavia
165
151
—
151
114
Ukraine
167
143
2
145
104
Bolivia
134
138
—
138
133
Indonesia
137
132
—
132
122

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CRS-16
FY2002
FY2003
FY2003
FY2003
FY2004
Actuala
Regulara
Suppa
Total
Request
Russia
164
149
—
149
74
Philippines
131
88
60
148
90
Georgia
124
91
—
91
88
West Bank/Gaza
72
75
50
125
75
Kosovo
118
85
—
85
79
India
80
93
—
93
94
Source: U.S. Department of State.
Note: Because of the significant way in which supplementals have affected the ranking of top U.S. aid
recipients, this table lists countries in order of the combined FY2002-FY2004 amounts.
a. FY2002 includes funds allocated from the regular Foreign Operations appropriation, plus funds
drawn from the Emergency Response Fund appropriated in P.L. 107-38 and allocated from the
FY2002 Supplemental Appropriation (P.L. 107-206). FY2003 regular appropriation includes
amounts allocated from the Foreign Operations Appropriation, FY2003 (P.L. 108-7). FY2003
supplemental includes funds allocated from the Iraq War Supplemental (P.L. 108-11).
b. The FY2003 level for Afghanistan includes all amounts earmarked in P.L. 108-7.
House Consideration
On July 23, the House passed (370-50) a $17.12 billion spending bill, H.R.
2800, for FY2004 foreign aid programs. The amount is $1.8 billion, or 9.4% below
the President’s request, but $900 million, or 5.6% higher than regular (excluding
supplemental) Foreign Operations spending approved for FY2003. As one of its top
priority, the House Committee approved $1.27 billion for international HIV/AIDS,
$30 million above the President’s request and $390 million higher than FY2003
levels. The HIV/AIDS total includes $400 million for the Global Fund, compared
with the President’s request of $100 million. Combined with parallel funding
approved in the House Labor-HHS spending measure, the House bill provides in both
bills $1.9 billion for HIV/AIDS, $20 million less than the Administration’s proposal.
Out of this, $500 million would be available as a U.S. contribution to the Global
Fund for which the President proposes $200 million. The bill also restores cuts to
bilateral tuberculosis and malaria proposed by the President, increasing spending for
non-HIV/AIDS infectious diseases from $104 million to $156 million.
For overall “core” bilateral development programs, including HIV/AIDS and
other non-health activities, the House measure is about $140 million higher than the
President’s request and $350 million above regular FY2003 amounts. The House
bill, however, reduces non-health programs by nearly $30 million from the
Administration’s request and $63 million from FY2003 amounts. This would result
in small cuts for activities such as agriculture, economic growth, environment, and
democracy promotion. The House measure, however, places high priority on trade
capacity building activities, increasing funding to $195 million, $35 million higher
than in FY2003. Spending on basic education would also rise under the House
measure, with $259 million specified out of the bilateral development aid funds. In

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CRS-17
FY2003, USAID allocated $217 million for basic education and requested $212
million for FY2004. Across all Foreign Operations accounts, the House bill directs
a total of $350 million for basic education.
On other major issues, the House measure:
! reduces the President’s $1.3 billion request for the new Millennium
Challenge Account to $800 million.
! sets family planning resources at $425 million as requested
! provides $25 million for the U.N. Population Fund (UNFPA), but
with conditions that could reduce or eliminate the contribution.
! fully funds at the requested levels amounts for Israel, Egypt, and
Jordan.
! provides $731 million for the Andean Counterdrug Initiative, as
proposed, but reduces by $43 million funding for regular
counternarcotics programs.
! sets Peace Corps funding at $314 million, $19 million higher than
FY2003 levels but $45 million under the Administration’s budget.
! provides $576 million for the former Soviet Union, as requested,
but $179 million less than FY2003.
! increases the President’s request for East European assistance by
$17 million, with the additional funds set for Bosnia, Serbia, and
Montenegro.
! includes current contributions for several multilateral development
banks, including the World Bank’s International Development
Association (IDA) and the Global Environment Fund, but
excludes arrearage payments and “incentive” contributions for IDA
and the African Development Bank sought by the Administration.
! excludes funds for two new Presidential contingency funds for
Famine and emergency complex crises. The House bill, however,
increases international disaster assistance to $315.5 million,
directing that $80 million be used for famine relief, prevention, and
mitigation.
! deletes $300 million sought for extending debt relief to the
Democratic Republic of Congo. The legislation, however, fully
funds the requests for HIPC debt relief and for tropical forest
conservation.
During House floor debate on July 16, lawmakers adopted several amendments
to H.R. 2800, including:
! a proposal by Congressman Kolbe to clarify the role of the new State
Department HIV/AIDS Coordinator, with the intent to grant the
Coordinator adequate authority to “coordinate” U.S. government
efforts to combat AIDS globally while allowing the traditional
agencies that have managed such programs for many years —
USAID and the Centers for Disease Control and Prevention — to
continue their work without excessive micromanagement by the
Coordinator.

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CRS-18
! an amendment by Congressman Hefley that reduces funding for the
International Military Education and Training (IMET) program by
$600,000. The intent of the proposal is to cut IMET assistance to
Indonesia because of lack of progress in the investigation of an
August 2002 ambush that left two Americans and an Indonesian
from an international school dead. Some believe the Indonesian
military may have been involved. While cutting the IMET account
by the amount requested for Indonesia, the amendment itself does
not limit the State Department’s ability to fund an IMET program for
Indonesia in FY2004.
! a proposal by Congresswoman Bigger to authorize U.S. participation
in the 13th replenishment of the International Development
Association (IDA), the World Bank’s concessional lending facility.
Congress has approved funding for IDA-13, including $850 million
in H.R. 2800, but the money cannot be transferred without a
congressional authorization.
! an amendment by Congressman Alcee Hastings stating a sense of
Congress that the President should use all diplomatic tools available
to ensure that North Korea does not engage in the proliferation of
nuclear weapons.
A central theme of House debate — both on the floor and in Committee — were
efforts to increase assistance proposed in the bill for Africa, especially to increase
funding for HIV/AIDS, malaria, and tuberculosis from the roughly $2 billion level
contained in Foreign Operations and Labor, HHS, and Education appropriation bills
to something closer to the $3 billion amount Congress previously authorized in P.L.
108-25. Although numerous amendments were offered and debated, none were
adopted.
Among specific proposals considered to increase aid to Africa and
programs combating HIV/AIDS were:
! a Congresswomen Lowey amendment at full Committee markup to
add $1 billion in “emergency” funds (an amount that would not
count against the bill’s spending cap) for additional HIV/AIDS
programs, much of which would be delivered in Africa, failed 28-33;
! a Committee amendment proposed by Congresswomen Kilpatrick
to transfer $500 million from the Millennium Challenge Account to
HIV/AIDS lost 27-28. Amendment supporters argued that the MCA
could not utilize all funds appropriated in H.R. 2800 in the first year,
and that Africa would benefit more from HIV/AIDS programs than
from MCA resources for which a few African countries might
qualify. A similar amendment to transfer $300 million from the
MCA to HIV/AIDS lost during House floor debate (192-228).
! an amendment by Congressman Jackson in Committee markup to
shift $200 million from the MCA to HIV/AIDS and provide $588
million in “emergency” funding for more African economic
assistance, Congo debt relief, and a higher amount for the African

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CRS-19
Development Fund failed on a voice vote. A similar proposal by
Congressman Jackson was ruled out of order during House debate.
! a House floor amendment by Congressman McGovern to shift $75
million from the Andean Regional Initiative to HIV/AIDS programs
lost on a vote of 195-226.
Senate Consideration
On July 17, the Senate Appropriations Committee approved an $18.09 billion
spending bill, S. 1426, for FY2004 foreign aid programs. The amount is $800
million, or 4.2%, below the President’s request, but $1.9 billion higher than regular
(excluding supplemental) Foreign Operations spending approved for FY2003.
Because of a higher “302(b) allocation,” S. 1426 is nearly $1 billion more than the
House bill.
As one of its top priorities, the Senate Committee provides $1.25 billion for
international HIV/AIDS, $10 million above the President’s request and $370 million
higher than FY2003 levels. The HIV/AIDS total includes as much as $350 million
for the Global Fund, compared with the President’s request of $100 million. (The
President also requested $100 million for the Global Fund in the Labor/HHS
appropriation measure.) Unlike the House bill, S. 1426 includes HIV/AIDS funds
in both the Child Survival/Health (CS/H) and Global AIDS Initiative accounts. The
Global AIDS Initiative account is a new request for FY2004, funding programs
managed by a new State Department Coordinator. The House bill keeps nearly all
HIV/AIDS funds in the CS/H account, consistent with past practice. The bill also
restores cuts to bilateral tuberculosis and malaria proposed by the President,
increasing spending for non-HIV/AIDS infectious diseases from $104 million to
$185 million.
For overall “core” bilateral development programs, including HIV/AIDS, other
non-health activities, and UNICEF contributions, S. 1426 is about $270 million
higher than the President’s request and $125 million above the House bill. Besides
increasing health programs, S. 1426 also adds to the request for other development
activities, providing about $80 million more than requested and over $100 million
than the House. Basic education programs receive $220 million under bilateral
development assistance, while environmental activities ($485 million) and
microenterprise ($180 million) are other areas emphasized in the Senate bill that are
above the President’s request.
On other major issues, the Senate bill:
! reduces the President’s $1.3 billion request for the new Millennium
Challenge Account to $1 billion.
! sets family planning resources at $445 million, $20 million higher
than the request.
! includes text that would effectively overturn the President’s
“Mexico City” abortion-related restrictions.
! provides $35 million for the U.N. Population Fund (UNFPA), but
with conditions that could reduce or eliminate the contribution.

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CRS-20
! fully funds at the requested levels amounts for Israel, Egypt, and
Jordan.
! reduces to $660 million funding for the Andean Counterdrug
Initiative, but provides full funding for regular counternarcotics
programs.
! sets Peace Corps funding at $310 million, $15 million higher than
FY2003 levels but $49 million under the Administration’s budget.
! provides $596 million for the former Soviet Union, $20 million
above the request and roughly the same as for FY2003.
The
additional funds would off-set proposed reductions for Russia and
Armenia.
! increases the President’s request for East European assistance by
$10 million.
! provides the total request, including arrears payments and an
“incentive” contribution for the World Bank’s International
Development Association (IDA).
Most other multilateral
development bank contributions are set at or near the President’s
request.
! appropriates $100 million for one of the two new Presidential
contingency accounts — the Famine Fund — but deletes funding
for the emergency complex crises fund.
! provides $100 million of $300 million sought for extending debt
relief to the Democratic Republic of Congo. S. 1426 allocates funds
sought for Congo debt relief for other pressing needs in Africa. The
legislation, however, fully funds the requests for HIPC debt relief
and for tropical forest conservation.
Iraq War Supplemental for FY2003 and
Foreign Operations Funding
On March 25, 2003, the President requested a nearly $75 billion FY2003
supplemental that included $7.6 billion for near-term Iraq reconstruction and relief,
additional aid to coalition partners and other states cooperating in the global war on
terrorism, and related USAID administrative expenses. By comparison, the
supplemental request totaled a little less than half of the $16.2 billion appropriated
previously by Congress for FY2003 Foreign Operations activities. The proposal, as
detailed below in Table 6, was roughly divided into two components: Iraq relief and
reconstruction (about $2.85 billion) and aid to coalition partners and other nations
engaged in the war on terrorism (about $4.7 billion).4
Reconstruction Efforts
Normally, it would be presumed that transfers for reconstruction and post-
conflict aid would be made to USAID, the State Department, and other traditional
4 OMB documents estimated the total amount for Iraq reconstruction was $3.5 billion, a
figure that included nearly $500 million from DOD funding for the repair of oil facilities.

---

CRS-21
foreign assistance management agencies. But with plans for the Defense Department
to oversee the governing of Iraq immediately after the end of hostilities, the proposal
stimulated immediate controversy. A number of critics, including Members of
Congress, argued that aid programs should remain under the policy direction of the
State Department and under the authorities of a broad and longstanding body of
foreign aid laws. They pointed out that during other recent reconstruction initiatives
in Bosnia and Kosovo, resources and policy decisions flowed through the Secretary
of State. Others argued that groups which would play a significant role in post-war
rehabilitation efforts — non-governmental organizations (NGOs), foreign donors,
and international organizations — would be reluctant to take direction and funding
from the U.S. military. This, they contended, would hamper relief activities.
Furthermore, the placement of reconstruction funding in a Presidential account
appeared to grant the White House significant discretion in responding to changing
and unanticipated demands, unencumbered by specific programmatic allocations.
The Administration said only that $543 million would cover humanitarian expenses,
$1.7 billion would be set aside for reconstruction needs, and up to $200 million
would be available to reimburse foreign aid accounts from which funds were drawn
prior to the conflict.
As with other parts of the supplemental dealing with defense and homeland
security resources, the White House wanted to maintain maximum flexibility over
the distribution of the appropriations so that it could respond to changing
circumstances and unanticipated contingencies.
Executive officials, who
acknowledged that some or all of the funding would be transferred to DOD, argued
that the military would be best situated following the conflict to immediately launch
the reconstruction efforts. Moreover, the Administration noted that the Defense
office in charge of reconstruction operations would most likely re-direct most of the
resources to the State Department and USAID who would then be responsible for
managing rehabilitation projects. Officials further argued that it was too early to
identify specific reconstruction activities and that it was possible to only provide the
most general outlines of how the money would be spent until assessment teams could
report on the extent of needs throughout the country.
Congressional Action on Iraq Reconstruction. As cleared by Congress,
H.R. 1559 appropriates $2.475 billion for the Relief and Reconstruction Fund,
slightly higher than requested.
The President will be able to apportion Fund
resources directly to five federal agencies: the Departments of Defense, State, Health
and Human Services, Treasury, and USAID. In previous congressional debate, the
House and Senate had each expressed their expectations that these funds would be
channeled to the Secretary of State, and in most instances, further directed to USAID.
The report accompanying S. 762 specifically noted that the funds were not expected
to be transferred to the Secretary of Defense. Nevertheless, the White House
continued to argue for greater flexibility and authority to place reconstruction
resources under DOD auspices, and ultimately conference committee members
agreed.

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CRS-22
Table 6. Iraq Reconstruction, International Aid, and Related Activities
(in millions of dollars)
Activity
Request
House
Senate
Enacted
Iraq Relief and Reconstruction:
Iraq Relief and Reconstruction Fund
$2,443.3
$2,483.3
$2,468.3
$2,475.0
Of which:
Reconstruction priorities for public health, water and sanitation, seaports/airports, food-
$1,700.0
—
—
—
distribution networks, and electricity. Post-conflict emphasis on education, governance,
economic institutions, agriculture, and infrastructure repair.
Humanitarian aid, refugee and displaced persons relief, demining
$543.0
—
—
—
Reimbursement to USAID’s Development, Child Survival and ESF aid accounts previously
fully
fully
$200.0
$260.0
drawn upon to provide food commodities.
reimbursea
reimburse
Reimbursement to USAID’s International Disaster Assistance account for previously drawn
upon resources for food distribution, mainly through the UN WFP, and for immediate
$80.0
$160.0
$112.5
$143.8
reconstruction.
Reimbursement to USAID’s Child Survival/Health account for previously drawn upon
$40.0
$40.0
$90.0
$90.0
resources for water and sanitation reconstruction.
Reimbursement to USAID’s Economic Support Fund account for previously drawn upon
$40.0
—
$40.0
$40.0
resources for emergency relief and non-health reconstruction.
Reimbursement of PL480 food assistance, including the Bill Emerson Humanitarian Trust
—
$319.0
$600.0
$369.0
Replenishment of the Emergency Refugee and Migration Aid (ERMA) fund to restore $17.9
million that has been drawn down for Middle East contingencies and to have funds available
$50.0
$80.0
$75.0
$80.0
for needs worldwide.
Peacekeeping funds for coalition partners engaged in post-conflict Iraq
$200.0
$115.0
$150.0
$100.0
Subtotal, Iraq Reconstruction
$2,853.3
$3,197.3
$3,535.8
$3,297.8

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CRS-23
Activity
Request
House
Senate
Enacted
Assistance to Coalition Partners & Cooperating States in War on Terrorism
Israel military grant.
$1,000.0
$1,000.0
$1,000.0
$1,000.0
Israel economic loan guarantees. Israel will pay all fees associated with the cost of $9 billion
[$9,000.0]b
[$9,000.0]b
[$9,000.0]b
[$9,000.0]b
in loan guarantees.
Egypt economic grant, a portion of which can be used for up to $2 billion in loan guarantees.
$300.0
$300.0
$300.0
$300.0
Jordan economic and military grants.c
$1,106.0
$1,106.0
$1,106.0
$1,106.0
Palestinian economic grant.
$50.0
NS
NS
NS
Turkey economic grant, a portion of which can be used for up to $8.5 billion in direct loans.
$1,000.0
$1,000.0
$1,000.0
$1,000.0
Philippines economic and military grant.
$30.0
NS
$80.0
$60.0
Pakistan military grant and law enforcement aid.c
$200.0
$200.0
d
$200.0
Djibouti economic and military grants.
$30.0
NS
NS
NSe
Oman military grant.
$62.0
NS
NS
NSe
Bahrain military grant.
$90.0
NS
NS
NSe
Colombia military and counter-narcotics grants to support unified campaign against drugs and
$71.0
NS
NS
NSe
terrorism.f
Afghanistan economic, military, anti-terrorism, and demining grants.
$325.0
$325.0
d
$365.0
Middle East Partnership Initiative and Muslim World Outreach.h
$200.0
$105.0
d
NSg
Central Europe military grants.i
$84.1
NS
d
NSi
US Emergency Fund for Complex Foreign Crises — aid to support contingencies for coalition
$150.0
$0.0
$150.0
$0.0
countries .
Subtotal, Aid to Coalition Partners & Cooperating States
$4,698.1
$4,488.1
$4,604.0
$4,518.1

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CRS-24
Activity
Request
House
Senate
Enacted
State Department Administration & Other Activities
State Department Diplomatic and Consular Affairs
$101.4
$106.4
$93.4
$98.4
Of which:
$5.0
$5.0
NS
$5.0
Task Force Surge Support operations.
Baghdad embassy reopening; enacted amount includes diplomatic security
$17.9
$17.9
$17.9
$35.8
Medical supplies
$15.6
$15.6
$15.6
$15.6
Security upgrades
$10.0
$10.0
$10.0
$10.0
Machine Readable Visa fee shortfalls
$35.0
$35.0
$30.0
$32.0
Consular Affairs
—
—
$2.0
—
Worldwide emergency response
—
$30.6
—
—
State Department embassy construction
$20.0
$71.5
$82.0
$149.5
Of which:
$20.0
—
$20.0
$61.5
Temporary facilities in Iraq.
Non-official facilities frequented by U.S. citizens overseas
—
—
$10.0
$10.0
Facilities and security in Rome, Italy
—
—
—
$78.0
USAID mission in Iraq, and, as enacted, IG monitoring of the Iraq Fund, and USAID security
$22.0
$23.0
$23.6
$24.5
needs in Pakistan, Afghanistan, and Indonesia.
Potential emergency evacuations of US government employees, families, and private
$65.7
$65.7
$40.0
$50.0
American citizens.
Radio broadcasting to Iraq and Middle East Television Network
$30.5
$30.5
$62.5
$30.5
Iraq War Crimes Tribunal and investigations into war crimes allegations
—
—
$10.0
$10.0
Subtotal, State Department & Other
$239.6
$297.1
$311.5
$362.9
TOTAL, Iraq Reconstruction, International Aid, & Related Activities
$7,791.0
$7,982.5
$8,451.3
$8,178.8

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CRS-25
NS = Not specified.
a The House Appropriations Committee stated that up to $495 million in reimbursements was included in H.R. 1559.
b No appropriation required.
c DOD funds ($1.3 billion) were requested and enacted for Jordan, Pakistan, and other “key cooperating states” providing logistical and military support to U.S. military operations
in Iraq and in the global war on terrorism.
d Request “supported” in Senate bill.
e Although the enacted supplemental does not set a specific level for this country, the Administration has allocated the full amount requested.
f DOD funds ($34 million) were also requested and enacted for drug interdiction and counter-drug activities in Colombia.
g Due to Congressional reductions in overall ESF funding and increases for Afghanistan and the Philippines, the Administrations allocated $100 million for MEPI.
h House bill funded an Islamic Partnership and Outreach Program.
i The Administration requested funds for 10 Central European nations but has altered the list of recipients and the allocation of military grants following enactment of the supplemental,
as follows: Poland ($15 million requested and allocated); Hungary ($15 million requested; $8 million allocated); Czech Republic ($15 million requested and allocated); Estonia
($2.5 million requested, $2.75 million allocated); Latvia ($2.5 requested, $2.75 million allocated); Slovakia ($6 million requested, $6.5 million allocated); Romania ($15 million
requested and allocated); Slovenia ($5 million requested, $0 allocated ); Lithuania ($3.5 million requested, $4 million allocated); Bulgaria ($5 million requested, $10 million
allocated); Albania $0 requested, $3 million allocated); Macedonia ($0 requested, $1 allocated); and Ukraine ($0 requested, $1.5 million allocated).

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CRS-26
The enacted bill further directs higher and more specific amounts that should be
used to replenish several foreign aid accounts that had been drawn upon in order to
preposition food and medicine stocks in the region and for other pre-conflict
humanitarian purposes.
The conference agreement directs “full and prompt”
reimbursement of USAID and State Department accounts from the Iraq Fund. The
supplemental provides $143.8 million for international disaster assistance, $112.5
million of which will restore funds diverted previously for Iraq. The remaining
balance will augment USAID disaster relief resources to respond to foreign
contingencies that may arise through the end of FY2003. Similarly, Congress
increased the State Department’s refugee reserve account from the $50 million
requested to $80 million in order to address needs in the Persian Gulf region as well
as other global requirements.
International Assistance
The Administration’s supplemental appropriation proposal, which was only slightly
modified by Congress, provided about $4.7 billion in additional aid to 23 countries
and regional programs that are contributing to the war in Iraq and cooperating in the
global fight against terrorism. See the table below for a complete list of proposed
recipients. Among the largest and most complex aid packages would be:
! Jordan — $700 million in economic grants and $406 million in
military transfers. This would be on top of Jordan’s regular $452 aid
package from the U.S.
! Israel — $1 billion in supplemental military aid (on top of the $2.7
billion regular FY2003 assistance) and $9 billion in economic loans
guaranteed by the U.S. government over the next three years. Israel
would pay all costs — fees that may total several hundred millions
of dollars — associated with these economic stabilization loans.
Conditions on how the funds would be spent, similar to those that
were applied in the early 1990s when Israel drew on a $10 billion
U.S.-backed loan package, would be employed.
! Turkey — $1 billion for economic grants which could be applied to
fees associated with $8.5 billion in direct loans or loan guarantees.
! Afghanistan — $325 million in economic grants, anti-terrorism,
demining, and military transfers. This would be in addition to
roughly $350 million already scheduled for Afghanistan this year.
! Egypt — $300 million for economic grants, a portion of which could
be used to gain access to up to $2 billion in loan guarantees.
Depending on the terms of the loan, if Egypt chose to receive the full
$2 billion, about $120 million or more of the $300 million would be
applied to the costs faced by the United States of guaranteeing the
loans. The Administration further proposed to reprogram $379.6
million in previously appropriated commodity import program aid
to Egypt as a cash transfer. The supplemental would come on top of
$1.9 billion in regular U.S. aid to Egypt.

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CRS-27
! Pakistan — $200 million in military grants and law enforcement
assistance. Pakistan currently receives $305 million in FY2003.
The Administration further requested $150 million to initiate a U.S. Emergency Fund
for Complex Emergencies, a contingency account that would allow the President to
address quickly unforseen needs of coalition partners. The Fund, which would be
managed by the White House, had originally been proposed for an FY2004 startup
of $100 million.
Congressional Action on International Assistance. H.R. 1559, as
approved, includes $4.52 billion in additional aid to countries and regional programs,
about $180 million less than requested. Nearly all of this reduction, however, comes
from Congress’ decision not to fund the President’s $150 million emergency account
for complex crises. In most other cases, the Administration has been able to allocate
these foreign aid resources as it had intended. Congress earmarked funding at the
requested levels for Israel, Egypt, Jordan, and Pakistan, while adding resources for
Afghanistan and the Philippines. Turkey may receive “not to exceed” $1 billion in
aid that is conditioned on a requirement for the Secretary of State to certify that
Turkey is cooperating with the United States in Operation Iraqi Freedom (including
facilitating the movement of humanitarian aid into Iraq), and has not unilaterally
deployed forces in northern Iraq. The restriction on Turkey’s aid package, the size
of which could grow to $8.5 billion if the loan option is implemented, combines text
in House and Senate-passed bills. Earlier, the House had defeated two amendments
that would have eliminated aid to Turkey or reduced it by $207 million.
For Israeli loan guarantees, the enacted supplemental includes the full $9 billion
proposal, but adds conditions not included in the Administration’s proposal. Loans
may be issued in $3 billion allotments in each of FY2003 to FY2005, a provision that
will allow the President to reduce disbursements in the second and third years if
Israel violates any of the loan conditions. One such condition added by Congress
prohibits loan resources from supporting any activity in geographic areas that were
not administered by Israel prior to June 5, 1967. This is similar to a condition
attached to the 1992 $10 billion loan guaranty package for Israel, some of which was
not disbursed because of continued Israeli settlement activity in the West Bank area.

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CRS-28
Table 7. Proposed Recipients of Supplemental Foreign Aid
($s millions)
Anti-
Narcotics/
Economic
Loans
Military
TOTAL
Terrorism
Law
Jordan
$700a
—
$406a
—
—
$1,106
Israel
—
[$9,000]
$1,000a
—
—
$1,000
Turkey
$1,000a
[$8,500]*
—
—
—
$1,000
Afghanistan
$127b
—
$170a
$28a
—
$325
Egypt
$300a
[$2,000]*
—
—
—
$300
Pakistan
—
—
$175a
—
$25a
$200
Bahrain
—
—
$90
—
—
$90
Colombia
—
—
$37
—
$34a
$71
Oman
—
—
$62
—
—
$62
Palestinians
$50
—
—
—
—
$50
Djibouti
$25
—
$5
—
—
$30
Philippines
— c
—
$30
—
—
$30
Czech Rep.
—
—
$15
—
—
$15
Hungary
—
—
$15
—
—
$15d
Poland
—
—
$15
—
—
$15
Romania
—
—
$15
—
—
$15
Slovakia
—
—
$6
—
—
$6d
Bulgaria
—
—
$5
—
—
$5d
Slovenia
—
—
$5
—
—
$5d
Estonia
—
—
$3
—
—
$3d
Latvia
—
—
$3
—
—
$3d
Lithuania
—
—
$3
—
—
$3d
* Up to this amount. Loans would not require additional appropriations since economic grants would
be used to pay for loan fees.
a. Amount is earmarked or recommended in the enacted supplemental appropriation.
b. The enacted supplemental appropriation provides $167 million.
c. The enacted supplement appropriation includes $30 million for economic aid for the Philippines.
d. Following enacted of the supplemental, the Administration has modified its plans to allocate funds
for this recipient. See footnote “i” in Table 6, above, for the allocated amounts.

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CRS-29
While most of the President’s request for international assistance is supported
in the enacted emergency supplemental, the Administration had to reduce economic
assistance in one instance. Congress cut Economic Support Fund appropriations by
$20 million, but because of earmarks and additions for Afghanistan and the
Philippines, and $10 million to investigate possible Iraqi leadership war crimes,
executive officials had $100 million less than requested in economic assistance for
countries not protected by legislative directives. Non-earmarked programs included
$50 million for the Palestinians, $25 million for Djibouti, and $200 million for the
Middle East Partnership Initiative. The Administration chose to fully allocate
amounts for the Palestinians and Djibouti, but cut resources for the Middle East
Partnership Initiative (including Muslim Outreach) to $100 million, half of the level
requested.
The State Department also chose to modify its distribution of military aid grants
to several Central Europe states. Most significantly, the executive branch decided
to add funds (not requested) for Albania, Macedonia, and Ukraine, and increase
amounts above the requested levels for Estonia, Latvia, Lithuania, and Bulgaria. As
off-sets, the State Department cut funds for Hungary and eliminated the $5 million
request for Slovenia. These alterations appear to reflect Administration views on the
extent to which selected countries supported or did not support U.S. operations in
Iraq. See footnote “i” in Table 6 above for specific amounts allocated to each
recipient.
DOD Authorities to Provide Military Aid
Under sections relating to Defense Department funds and authorities, the
supplemental proposed two items that drew particular congressional attention. The
key issue was whether they infringed on congressional oversight and the State
Department’s traditional role in directing foreign aid policy and resource allocations.
They were both similar to proposals made last year in the FY2002 supplemental that
focused on the war on terrorism and were closely scrutinized by Congress.
The first would provide $1.4 billion for the Defense Department,
“notwithstanding any provision of law,” to pay Jordan, Pakistan, and other nations
that have provided logistical and military-related support to U.S. military operations
in Iraq or in the global war on terrorism. In the past, Defense officials argue,
competing demands on regular military aid resources have delayed reimbursement
to key friends that provide services to American forces. Congress approved funding
in the FY2002 supplemental for this purpose, but included a 15-day prior notification
requirement that is not part of the FY2003 supplemental draft legislation.
The more controversial authority concerned DOD’s request for $150 million to
support “indigenous forces” assisting U.S. military operations, including those aimed
at the global war on terrorism. Decisions to draw on these funds would be made by
the Secretary of Defense, with the concurrence of the Secretary of State. The
Defense Department defines indigenous forces as “irregular forces and resistance
movements” and notes that such forces “generally conduct military and para-military
operations in enemy-held or hostile territory and conduct direct offensive low-

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CRS-30
intensity, cover, or clandestine operations.”5 Although it was unclear from the budget
justification and bill text exactly what groups and under what scenarios the
Administration would utilize these resources, a senior Administration official
suggested that the intent was to have resources available for groups in Iraq. Deputy
Secretary of State Richard Armitage testified on March 27 that because of the
uncertainty of the war’s duration, it might be necessary to transfer additional arms
and equipment to Kurdish and other forces, and that the $150 million would provide
a “hedge” in case of a more prolonged conflict.
In last year’s supplemental
appropriation debate, DOD asked for $30 million to support indigenous forces, funds
that would be exclusively under the control of the Secretary of Defense. Congress
rejected the proposal, however. At that time, the House Appropriations Committee
observed in deleting the request that the Secretary of State’s primary responsibility
over U.S. military assistance programs is well established and that the Administration
had the necessary authorities under existing foreign aid laws to undertake the
requested activities.6
Congressional Action on DOD Authorities.
H.R. 1559, as enacted,
provides the $1.4 billion for nations supporting U.S. military operations in the global
war on terrorism, but does not authorize the $150 million for aid to indigenous
forces.
Selected Major Issues in the FY2004 Foreign
Operations Debate
While the Foreign Operations appropriations bill can include virtually any
foreign policy issue of interest to Congress, the annual debate usually focuses on
several major policy and spending issues. Among those for FY2004 are likely to
include the following.
Foreign Aid to Combat Terrorism
Since the September 11, 2001 terrorist attacks and the initiation of military
operations in Afghanistan, combating global terrorism has become one of the top
priorities of American foreign assistance. Indeed, Secretary of State Powell has said
at several 2003 congressional hearings that fighting terrorism is the most important
objective of the FY2004 Foreign Operations request.
While there is disagreement regarding the extent to which foreign aid can
directly contribute to reducing the threat of terrorism, most agree that economic and
security assistance aimed at reducing poverty, promoting jobs and educational
opportunities, and helping stabilize conflict-prone nations can indirectly address
some of the factors that terrorists use in recruiting disenfranchised individuals for
their cause. As illustrated in the table below, the United States has provided more
5
U.S. Office of Management and Budget, FY2003 Request for Supplemental
Appropriations, March 25, 2003.
6 H.Rept. 107-480, May 22, 2002.

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CRS-31
than $5.9 billion to 26 so-called “front-line” states in the global war on terrorism in
immediate post-September 11 and FY2002 appropriations, while FY2003 regular and
supplemental spending bills have provided $7.1 billion.
The Administration
proposes $4.8 billion for the “front-line” states in FY2004. (None of these figures
include post-conflict reconstruction assistance for Iraq which totals about $2.5 billion
enacted, plus $20.3 billion anticipated in an FY2004 supplemental request.)
While increased levels of foreign aid are only one sign of the importance the
United States assigns to the support provided by these front-line states, the amounts
allocated since September 11 are in sharp contrast to the $3.4 billion provided to
these 26 countries prior to the attacks in regular FY2001 appropriations. Additional
economic and military assistance has been particularly evident in a few countries,
including Jordan, Pakistan, Afghanistan, Turkey, the Philippines, Kyrgyzstan,
Tajikistan, Uzbekistan, Oman, Yemen, and Djibouti.
Foreign aid can be programmed in a number of ways that contribute to the war
on terrorism.
Assistance can be transferred, as has occurred in Pakistan and
Afghanistan, to bolster efforts of a coalition-partner government, to counter domestic
dissent and armed attacks by extremist groups, and to promote better health care,
education, and employment opportunities to its people. Security assistance can
finance the provision of military equipment and training to nations facing threats
from their own internally-based terrorist movements.
While there has been congressional support for additional foreign aid resources
aimed at countering terrorism, some warn that the United States needs to be cautious
about the risks of creating a close aid relationship with governments that may have
questionable human rights records, are not accountable to their people, and are
possibly corrupt. Some Members have been especially critical of Administration
efforts to include in aid proposals for “front-line” states legislative language that
would waive all existing restrictions and prohibitions on the transfers. Instead, these
critics argue, the Administration should specifically identify any obstacles to
proceeding with a country aid program and seek a congressional waiver for those
particular problems. For example, in late 2001 when the Administration wanted to
provide Pakistan with $600 million in fast-disbursing economic aid, instead of
providing a blanket waiver of legislative obstacles, Congress approved in P.L. 107-57
specific waivers of aid prohibitions that applied to countries that engaged in missile
proliferation, whose leaders came to power through a military coup, and which were
behind in debt payments to the United States.

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CRS-32
Table 8. U.S. Assistance to Front-Line States in War on
Terrorism
($s in millions)
FY2001
FY2001
FY2002
FY2003
FY2004
Pre-9/11a
Post-9/11a
Enacted
Estimate
Request
Egypt
1,992
—
1,960
2,204
1,876
Jordan
229
—
355
1,555
462
Afghanistan
32
194
492
647
658
Pakistan
5
993
153
317
395
Turkey
2
20
233
1,020
255
India
138
—
174
184
140
Indonesia
133
—
137
132
137
Philippines
49
—
131
148
90
Bangladesh
127
—
113
123
104
Ethiopia
144
—
103
144
80
Georgia
109
—
124
93
90
Armenia
93
—
98
97
56
Kenya
86
—
78
63
75
Kyrgyzstan
36
4
81
45
50
Tajikistan
30
—
94
27
47
Azerbaijan
41
—
56
56
50
Uzbekistan
31
80
80
52
57
Kazakhstan
51
2
56
52
42
Yemen
5
—
30
14
32
Oman
1
—
26
20
26
Morocco
17
—
18
16
21
Turkmenistan
9
—
20
11
11
Djibouti
1
—
3
29
2
Tunisia
5
—
5
7
12
Algeria
0
—
2
1
1
Malaysia
1
—
1
1
1
TOTAL
3,367
1,293
4,623
7,058
4,770
Source: U.S. Department of State and CRS calculations. Countries are listed in order of the size of
aid provided and requested since September 11, 2001. Amounts include funds appropriated for
programs under jurisdiction of the Foreign Operations spending measure, plus food assistance
provided in the Agriculture appropriation bill.
a. FY2001 pre-September 11 are amounts allocated from regular FY2001 appropriations. FY2001
post-September 11 are amounts distributed from the Emergency Response Fund, funding for
which was provided in P.L. 107-38, enacted in September 2001.

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CRS-33
Beyond substantial amounts of bilateral aid for “front-line” states, the Foreign
Operations appropriation bill funds several global programs specifically aimed at
anti-terrorism efforts overseas and the provision of security for USAID employees
living abroad.
Anti-Terrorism Assistance (ATA). Since FY1984, the State Department
has maintained the ATA program designed to maximize international cooperation in
the battle against global terrorism. Through training, equipment transfers, and
advice, the ATA program is intended to strengthen anti-terrorism capabilities of
foreign law enforcement and security officials. Since its initiation in 1984, over
23,000 officials from 112 countries have participated in ATA projects. ATA funding
is included within the Foreign Operations account of Non-proliferation, Anti-
terrorism, Demining, and Related Programs (NADR).
Resources for the $38 million annual ATA program (FY2001) rose sharply
following September 11, with an additional $45.5 million allocated out of the
Terrorism Emergency Response Fund. Congress approved $38 million for FY2002
and $64.2 million for FY2003. Increased funding for FY2003 is intended to finance
three ATA program strategies:
! expanding existing U.S.-based training activities;
! initiating new in-country programs in participant nations; and
! adding program flexibility to respond rapidly to changing global
circumstances.
For FY2004, the State Department seeks $106.4 million for ATA programs, up
nearly two-thirds from existing levels. Most FY2004 training will continue for
training of officials from the “front-line” states, with a focus on in-country training
in Afghanistan, Pakistan, and Indonesia. The ATA program further plans to launch
a Mobile Emergency Training Teams (METT) initiative ($10 million) which will
deliver in-country instruction for VIP protection, bomb squads, and crisis response
operations. The State Department had planned to begin METT in FY2002 but
reprogrammed a $20 million appropriation in order to provide protective service for
Afghan President Karzai.
Terrorist Interdiction Program (TIP). As one response to the 1998
bombings of American embassies in East Africa, the State Department launched the
TIP, an activity intended to restrict the ability of terrorists to cross international
borders, launch attacks, and escape. TIP strengthens border security systems in
particularly vulnerable countries by installing border monitoring technology, training
border security and immigration officials in its use, and expanding access to
international criminal information to participating nations. Like ATA, funds for TIP
are part of the NADR account in the Foreign Operations spending bill.
Since September 11, the State Department has expanded from 34 to 60 the
number of countries where it believes TIP would immediately contribute to the
global counterterrorism campaign. The $4 million TIP budget doubled for FY2001
following September 11, and grew to $14 million in FY2002. After falling back to
$5 million for FY2003, the request for FY2004 is $11 million. The Administration
plans to expand operations in up to ten new countries with the additional resources.

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CRS-34
Counterterrorism Engagement with Allies. Following the September 11
attacks, the United States began to conduct Senior Official Policy Workshops and
multilateral conferences in order to better respond to terrorist incidents involving
weapons of mass destruction overseas. With $3 million from emergency FY2002
supplemental spending, the State Department conducted workshops in 18 countries
as well as several regional conferences. The $2.5 million budget request for FY2004
would finance ten scheduled workshops, including three in Greece in advance of the
2004 Olympic games.
Terrorist Financing. In December 2001, an interagency review group
identified 19 countries where a significant terrorist financing threat existed, and with
$3 million allocated from the Emergency Response Fund, launched a training and
technical assistance program. The State Department allocated $10 million out of the
FY2002 supplemental appropriation to expand the program, while the Treasury
Department is utilizing approximately half of its $10 million FY2003 “Technical
Assistance” program for these purposes. In FY2004, Treasury proposes $5 million
for combating terrorist financing activities.
USAID Physical Security. USAID maintains about 97 overseas facilities
where much of its workforce — including both Americans and foreign nationals —
is located. Many missions are based in places where there is a high threat of terrorist
activity, and especially since the 1998 embassy bombings in Kenya and Tanzania,
agency officials have been concerned about insuring adequate security. In countries
where USAID is or is scheduled to be co-located with the U.S. embassy, the State
Department’s Foreign Buildings Operations office had been responsible for financing
USAID secure facilities. These funds are appropriated in the Departments of
Commerce, Justice, and State appropriations. Nevertheless, there have been serious
construction delays for USAID co-located facilities — especially in Uganda — due
to competing State Department building priorities and conflicting congressional
directives.
In an effort to overcome these problems, USAID requested for FY2003 a new
Foreign Operations account — the Capital Investment Fund — that would support
enhanced information technology ($13 million) and facility construction ($82
million) specifically at co-located sites where security enhancements are needed.
USAID planned to use the money in FY2003 for construction projects in Kenya,
Guinea, Cambodia, and Georgia. Congress, however, reduced funding for this
account to $43 million, with $30 million assumed for Kenya and $10 million for a
new facility in Afghanistan.
With reductions made to the FY2003 request, USAID is proposing a $146.3
million Capital Investment Fund request for FY2004. Of the total, $20 million will
support information technology needs, while the balance will finance construction
of seven co-located facilities where the State Department is already building new
embassies. In addition to Guinea, Cambodia, and Georgia, which went unfunded in
FY2003, USAID requests resources for co-located missions in Zimbabwe, Armenia,
Mali, and Uganda. For construction of co-located missions at embassies where
building will begin in FY2004 or later, resources for USAID facilities will be drawn
from State Department appropriations under the Capital Surcharge Proposal.

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CRS-35
Security upgrades for the 64 overseas missions situated some distance from
American embassies have been provided out of USAID operating expenses, a
Foreign Operations account that has been under funding stress in recent years due to
agency relocation costs in Washington, D.C., replacement of failed financial
management systems, and dwindling non-appropriated trust funds used to finance
some in-country costs. As a result, security upgrades for some USAID missions have
been deferred due to funding shortfalls. For FY2003, USAID estimates that it will
spend $7.1 million for security needs out of its operations account, compared to
$6.75 million in FY2002. USAID is requesting the same amount — $7.1 million —
for FY2004 as it has available this year.
Aid Restrictions for Terrorist States.
Annual Foreign Operations
spending bills routinely include general provisions prohibiting U.S. assistance to
countries engaged in terrorist activities or providing certain types of support to
terrorist groups. Included in the FY2003 funding measure are two:
! Sec. 527 prohibits bilateral U.S. assistance to any country that the
President determines grants sanctuary from prosecution to any
individual or group which has committed an act of international
terrorism, or otherwise supports international terrorism.
The
President could waive the restrictions for national security or
humanitarian reasons.
! Sec. 543 prohibits U.S. aid to a government which provides lethal
military equipment to a country that the Secretary of State has
determined is headed by a terrorist supporting government. The
President could waive the requirement if it is important to U.S.
national interests.
Despite these restrictions, however, certain types of humanitarian foreign assistance
may be provided “notwithstanding” other provisions of law, which would override
the terrorism restrictions. Disaster and refugee relief, child survival and HIV/AIDS
programs, emergency food and medicine, and demining operations are among the
categories of U.S. assistance that could potentially be provided to a country that
would otherwise be ineligible.
Congressional Action. For specific counter-terrorism programs, the House
and Senate bills (H.R. 2800 and S. 1426, respectively) provide:
! $90 million (House) and $106.4 million (Senate) for ATA activities
— the Senate bill is at the President’s request;
! $5 million (House) and $11 million (Senate) for the TIP program —
the request is $11 million;
! H.R.
2800
excludes
funds
for
the
counter-terrorism
engagement/workshops programs;
! H.R. 2800 increases by $5 million funds for combating terrorist
financing efforts, with most of the additional resources directed
towards Southeast Asia, the Pacific Rim, and South America; S.
1426 reduces by $2 million the Treasury Department account out of
which these activities are funded, but did not specify where this
reduction would be made.

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CRS-36
The Senate measure further acknowledges the contributions made by several
countries in the war in Iraq — including Albania, El Salvador, Macedonia, Mongolia,
East Timor, and Uganda — and encourages the Administration to increase military
assistance to these nations.
More generally, House and Senate recommendations in H.R. 2800 and S. 1426
would largely, although not totally, support bilateral security and military aid requests
for the “front-line” states. Most assistance for these 26 nations is drawn from the
Foreign Military Financing (FMF) and the Economic Support Fund accounts in the
Foreign Operations bills. The President’s $4.4 billion FMF request would fall
slightly (0.7%) under S. 1426 and by $100 million (2.2%) under the House measure,
possibly resulting in very small cuts, if any at all, for the “front-line” state nations.
For ESF, however, the situation would be more problematic for the
Administration to fully fund the President’s request, especially under the House-
passed levels. H.R. 2800 reduces the executive’s ESF recommendation by $275
million (10.8%), but the impact on certain countries, including some “front-line”
states, would be more significant. About 70% of the ESF appropriation is earmarked
at or above levels requested for countries of special congressional interest, including
the “front-line” nations of Afghanistan, Egypt, and Jordan. On the other side of the
equation, the legislation reduces by $100 million amounts available for the Middle
East Partnership Initiative. Of the remaining ESF funds, at the House-passed level
the Administration would need to cut non-earmarked countries collectively by about
21%. Among these non-earmarked ESF recipients are the “front-line” states of
Pakistan ($200 million requested), Turkey ($200 million), Indonesia ($60 million),
the Philippines ($20 million), and India ($20 million), which would most likely have
to absorb some of the ESF reductions.
A similar situation exists in the Senate bill, although with an ESF cut of only
$120 million (5%) the impact on “front-line” states would be less significant. Still,
aid to non-earmarked recipients would fall collectively by about 18% below
requested amounts and include the same “front-line” nations cited above.
Millennium Challenge Account
In a speech on March 14, 2002, at the Inter-American Development Bank,
President Bush outlined a proposal for the United States to increase foreign economic
assistance beginning in FY2004 so that by FY2006 American aid would be $5 billion
higher than three years earlier. The funds would be placed in a new Millennium
Challenge Account (MCA) and be available to developing nations that are pursing
political and economic reforms in three areas:
! Ruling justly — promoting good governance, fighting corruption,
respecting human rights, and adhering to the rule of law.
! Investing in people — providing adequate health care, education,
and other opportunities promoting an educated and healthy
population.
! Fostering enterprise and entrepreneurship — promoting open
markets and sustainable budgets.

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CRS-37
If fully implemented, the initiative would represent one of the largest increases in
foreign aid spending in half a century, outpaced only by the Marshall Plan following
World War II and the Latin America-focused Alliance for Progress in the early
1960s.
The concept is based on the premise that economic development succeeds best
where it is linked to free market economic and democratic principles and policies.
Conditioning assistance on policy performance and accountability by recipient
nations is not new to U.S. aid programs. Since the late 1980s at least, portions of
American development assistance have been allocated to some degree on a
performance-based system. What is different about the MCA is the size of the
commitment; the competitive process that will reward countries for what they have
already achieved not just what is promised for the future; the pledge to segregate the
funds from U.S. strategic foreign policy objectives that often strongly influence
where U.S. aid is spent; and to the decision to solicit program proposals developed
solely by qualifying countries.
If Congress fully funds the President’s MCA request and assuming that FY2003
will be the baseline from which to compare growth in foreign aid spending during
implementation of the MCA, a $5 billion increase by FY2006, combined with other
announced foreign aid initiatives, would result in a $19.3 billion foreign aid budget.
In real terms (constant FY2003 dollars), taking into the account the estimated effects
of inflation, U.S. economic assistance in FY2006 would be $18.2 billion, the highest
amount since FY1979 and the signing of the Camp David Middle East peace accords,
and FY1985, an unusual year in which the United States responded to special Middle
East economic stabilization and African famine requirements. The nominal increase
between FY2003 and FY2006 would be about 47%, while in real terms, FY2006
funding would be nearly 38% more. These figures are less than Administration
claims of a 50% increase in funding due to the MCA, a figure that is apparently
calculated using the $10 billion aid level in FY2000 as the base year. Because of the
size of the U.S. economy and continued growth projected over the next several years,
the MCA increases will have minimal impact on the amount of U.S. aid as a percent
of GDP. According to current projections, assistance would rise from the 2002 level
of 0.12% of GDP to 0.15%.
During the first year of the MCA, participation will be limited to the 74 poorest
nations that are eligible to borrow from the World Bank’s International Development
Association and have per capita incomes below $1,435. The list will expand to
include all lower-middle income countries by FY2006 with per capita incomes below
$2,975. Participants will be selected largely based on 16 performance indicators
related to the three categories of good governance, economic freedom, and investing
in people. Countries that score above the median on half of the indicators in each of
the three areas will qualify. Emphasizing the importance of fighting corruption,
however, should a country fall below the median on the corruption indicator (based
on the World Bank Institute’s Control of Corruption measure), it will be
automatically disqualified from consideration.
To manage the MCA, the Administration has proposed the creation of a
Millennium Challenge Corporation (MCC), a new independent government entity

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CRS-38
separate from the Departments of State and the Treasury and from the U.S. Agency
for International Development (USAID). The White House envisions a staff of about
100, drawn from various government agencies and non-governmental organizations,
led by a CEO confirmed by the Senate. A review board, chaired by the Secretary of
State and composed of the Secretary of the Treasury and the Director of OMB, would
oversee operations of the MCC.
The decision to house the MCA in a new organization has been one of the most
debated issues during early congressional deliberations of the President’s foreign aid
initiative. The Administration argues that because the MCA represents a new
concept in aid delivery, it should have a “fresh” organizational structure,
unencumbered by bureaucratic authorities and regulations that would interfere in
effective management. Critics, however, contend that if the MCA is placed outside
the formal U.S. government foreign aid structure, it will lead to further fragmentation
of policy development and consistency. Some believe USAID, the principal U.S. aid
agency, should manage the MCA, while others say that the MCA should reside in the
State Department where more U.S. foreign policy entities have been integrated in
recent years. At least, some argue, the USAID Administrator should be a member
of the MCC Board, possibly in place of the OMB Director.
For FY2004, the Administration seeks $1.3 billion for the MCA’s first year and
remains committed to a $5 billion budget by FY2006. Some believe, however, that
the FY2004 request is less than promised a year ago. At the time, Administration
officials implied that funding might be phased in over three years in equal
increments, resulting in a $1.67 billion program in FY2004, a $3.34 billion level in
FY2005, and $5 billion in FY2006. In the President’s budget submission this year,
however, budget officials say the pace at which resources will rise was never
specifically set, and that only the $5 billion target for FY2006 is a firm commitment.
Congressional Action (Appropriations). H.R. 2800, as passed by the
House, provides $800 million for the Millennium Challenge Account in FY2004,
while S. 1426, reported in the Senate, includes $1 billion. Both are below the $1.3
billion request. Funding is subject to authorization.
Congressional Action (Authorization).
In legislation related to the
Foreign Operations appropriations bill, the Senate and House have taken action to
authorize the Millennium Challenge Account, first in bills directly applying to the
MCA, modified texts of which have been incorporated into omnibus foreign policy
authorizing legislation.
On May 29, 2003, the Senate Foreign Relations Committee reported S. 1160,
legislation providing $1 billion for the MCA in FY2004, $2.3 billion in FY2005, and
$5 billion in FY2006. On a vote of 11-8, the Committee further approved an
amendment by Senators Biden and Hagel that would establish the MCA inside the
State Department under the direction of the Secretary of State. The legislation
abandoned the separate corporation proposal put forward by the Administration.
Secretary of State Powell wrote the Committee saying he would advise the President
to veto the legislation if this provision to locate the MCA in the State Department
remained in the bill.

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CRS-39
Senator Lugar, who opposed the Biden-Hagel amendment,
proposed an
alternative structure in new legislation. S. 1240, as introduced on June 11, would
create a Millennium Challenge Corporation, headed by a CEO who would report to
the Secretary of State. Senator Lugar intended that such an arrangement would
provide the Corporation with the same degree of independence and status as USAID,
but with a chain of command that would permit the Secretary of State to broad
direction of the MCA. S. 1240 created a Board of Directors, made up of the
Secretary of State (Chairman), the Secretary of the Treasury, the USAID
Administrator, the U.S. Trade Representative, and the MCC CEO. The full Senate
adopted the general approach proposed by Senator Lugar when it voted on July 9 to
incorporate a modified text of MCA authorizing legislation into S. 925, the Foreign
Affairs Authorization, Fiscal Year 2004. The revised composition of the Board of
the Directors proposed in S. 1240 is included. The approved text further strengthens
the explicit relationship between the Corporation and the Secretary of State by adding
that the CEO shall “report to and be under the direct authority and foreign policy
guidance of the Secretary.” The Administration has not expressed objection to the
revised legislation.
S. 925, as amended, also would permit low-middle income nations to participate
in the MCA program only if appropriations in FY2006 and beyond exceed $5 billion
annually. In such years, these relatively wealthier countries may compete for only
20% of the total appropriation. In many other areas, however, the legislation adopts
the broad concepts recommended by the executive.
On June 12, the House International Relations Committee reported an MCA
authorizing measure — H.R. 2441 — containing at the time significant differences
with the Senate and the Administration. The legislation authorizes $1.3 billion for
FY2004, as requested, $3 billion for FY2005, and $5 billion for FY2006. Unlike the
original Senate measure, H.R. 2441 created a new Millennium Challenge
Corporation sought by the President, but altered the composition of the Board of
Directors and the authority of the MCC’s Chief Executive Officer. The Board, as
designed under H.R. 2441, included the Secretary of State as Chairman and the
Secretary of the Treasury, as proposed, but deletes the Director of OMB and adds the
USAID Administrator, the U.S. Trade Representative, and the CEO of the MCC.
The bill also included four additional members, to be appointed by the President from
a list submitted by the majority and minority leaders of the House and Senate. The
Board would further include as non-voting ex-officio members the CEO of OPIC,
and the Directors of the Trade and Development Agency, Peace Corps, and OMB.
Additionally, H.R. 2441 designated the CEO of the Corporation as the
individual responsible for determining eligible countries rather than the Board of
Directors, as recommended by the Administration. The House bill allowed low-
middle income countries to participate in the MCA beginning in FY2006 regardless
of the amount of money appropriated, but limits the allocation to these relatively
wealthier countries to 20% of MCA assistance. Similar to the Senate, the House
incorporated a slightly modified version of H.R. 2441 as Division A in H.R. 1950,
an omnibus foreign policy authorization bill. The House passed H.R. 1950 — now
called the “Millennium Challenge Account, Peace Corps Expansion, and Foreign
Relations Authorization Act of 2003” — on July 16.

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CRS-40
The table below summarizes differences among Senate, House, and
Administration proposals.

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CRS-41
Table 9. Comparison of MCA Authorization Legislation
Issue
Administration
Senate (S. 925)a
House (H.R. 1950)a
Board of Directors, chaired by Sec. of
Board of Directors, chaired by the Sec. of
State, with Treasury, USTR, USAID,
Board of Directors, chaired by Sec. of
State, with Treasury, USAID, USTR, and
MCC CEO, and 4 others nominated by
MCA oversight
State, with Treasury and OMB
the MCA’s Chief Executive Officer
the President from a Congressional list.
(CEO)
Non-voting members include OPIC,
OMB, Peace Corps, and TDA.
Independent Millennium Challenge
Independent Millennium Challenge
Corporation whose CEO reports to and be
Independent Millennium Challenge
MCA organization
Corporation
under the direct authority and foreign
Corporation
policy guidance of the Sec. of State
CEO “manages” the Corporation,
reporting to and under the direct authority
CEO “heads” the Corporation, reporting
MCA coordinator
CEO of Corporation
and foreign policy guidance of the Sec. of
to the President
State
Selection of eligible
Board of Directors
Board of Directors
CEO of Corporation
countries
Nine members named by the CEO to
advise on MCA policy, review eligibility
MCC Advisory Council
None
None
criteria, evaluate the MCC, assess MCC
capabilities, and make recommendations
to the CEO.

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CRS-42
Issue
Administration
Senate (S. 925)a
House (H.R. 1950)a
FY2004 - IDA eligible
FY2004 - IDA eligible
FY2004 - IDA eligible
FY2005 - per cap GNP less than $1,435
FY2005 - per cap GNP less than $1,435
Country income
FY2005 - per cap GNP less than $1,435
eligibility
FY2006 - per capita GNP less than
FY2006 - per capita GNP less than
FY2006 - per capita GNP less than
$2,975 only if funds exceed $5 billion;
$2,975; low-middle income countries
$2,975
low-middle income countries capped at
capped at 20%
20%
15% of MCA funds available for
10% of MCA funds available for countries
Aid to “near-miss”
countries demonstrating a development
General support
failing to qualify because of inadequate
countries
commitment but fail to meet a sufficient
data or missing one indicator
number of performance indicators
CEO consultation with Congress on
eligibility criteria; notification 15 days in
Disclosure in Federal Register and on the
advance on grants exceeding $5 million;
Internet of eligible countries, programs
MCA contracts and performance posted
“Compacts” with countries published in
Oversight and reports
supported, and performance; proposed
on the Internet.
Federal Register and on the Internet;
performance indicators open to public
advance notification of aid termination;
comment; annual report to Congress
annual reports to Congress from the CEO
and Advisory Council
FY2004 - $1.3 billion
FY2004 - $1 billion
FY2004 - $1.3 billion
Funding
FY2005 - no decision
FY2005 - $2.3 billion
FY2005 - $3 billion
FY2006 - $5 billion
FY2006 - $5 billion
FY2006 - $5 billion
a. The status of the Senate bill is based on S. 925, the Foreign Affairs Act, Fiscal Year 2004, as amended during debate on July 9 and 10. S. 925 remains pending in
the Senate. Previously, the Senate Foreign Relations Committee had approved legislation authorizing the Millennium Challenge Account in S. 1160. A modified
text of S. 1160 was subsequently incorporated into S. 925 as Division C on July 9. The House bill, H.R. 1950, is also a combined foreign policy authorization measure
to which earlier MCA authorizing text was added. The House International Relations Committee had reported H.R. 2441, which was incorporated, with modifications,
to H.R. 1950, and passed by the House on July 16.

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CRS-43
Development Assistance, Global Health Priorities, and
HIV/AIDS
A continuing source of disagreement between the executive branch and
Congress is how to allocate the roughly $3.2 billion “core” budget for USAID
development assistance and global health programs. Among the top congressional
development aid funding priorities in recent years have been programs supporting
child survival, basic education, and efforts to combat HIV/AIDS and other infectious
diseases. The Administration has also backed these programs, but officials object to
congressional efforts to increase funding for children and health activities when it
comes at the expense of other development sectors. Most recently during the
FY2003 and FY2004 budget cycles, some Members of Congress have argued that it
has been the executive branch that has added funds for Administration priorities by
cutting resources for other development activities.
In years when Congress has increased appropriations for its priorities, but not
included a corresponding boost in the overall development aid budget, resources for
other aid sectors, such as economic growth and the environment, have been
substantially reduced. This was more problematic during the mid-to-late 1990s when
world-wide development aid funding fell significantly. In more recent years, and
especially for FY2003, Congress increased overall development assistance so that
both congressional and executive program priorities could be funded without
significant reductions for non-earmarked activities. Nevertheless, Administration
officials continue to argue that such practices undermine their flexibility to adjust
resource allocations to changing global circumstances.
In 2001, the Bush Administration set out revised USAID core goals for
sustainable development programs focused around three “spheres of emphasis” or
“strategic pillars” that include Global Health, Economic Growth and Agriculture, and
Conflict Prevention and Developmental Relief.
The Administration further
introduced a new initiative — the Global Development Alliance (GDA) — in an
effort to expand public/private partnerships in development program implementation.
Under the initiative, USAID identifies good development opportunities being
conducted by private foundations, non-governmental organizations, universities, and
for-profit organizations, and provides parallel financing to leverage resources already
committed to these activities. USAID officials envisioned that the agency would
become much more of a coordinating and integrating institution to expand and
enhance development efforts of these non-governmental development partners.
Although it started out as a much more ambitious project — USAID requested $160
million for FY2002 — the GDA has received relatively modest funding allocations:
$20 million in FY2002 and $14.9 million in FY2003. The FY2004 request seeks $15
million.
Underscoring the importance of the debate over funding allocations of
development aid resources has been an elevation by the Administration of the value
of foreign economic assistance as an instrument of U.S. foreign policy since the
terrorist attacks of September 11, 2001. President Bush has announced plans to
launch two major foreign aid initiatives — the Millennium Challenge Account and
the Global AIDS Initiative — that if approved by Congress, would significantly boost

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CRS-44
funding for development assistance programs. Moreover, the President’s September
2002 National Security Strategy established global development, for the first time,
as the third “pillar” of U.S. national security, along with defense and diplomacy.
For FY2004, the President seeks a substantial increase in overall development
assistance, although the programs are configured differently than they have been in
the past, raising questions in some observers’ minds about the Administration’s
commitment to broad-based, worldwide development. For “core” development
assistance — programs that match the current structure of USAID’s “strategic
pillars” and Foreign Operations appropriation accounts for Development Assistance
and Child Survival and Health Program Fund — the Administration proposes $2.96
billion, as shown in Table 10. This represents a $245 million, or 7.7% reduction
from current amounts for FY2003. With the exception of HIV/AIDS, democracy
programs, and to a far less extent agriculture and economic growth activities, all
other development sectors would receive less funding in FY2004 than appropriated
for FY2003.
Table 10. Development Assistance Funding
($s — millions)
FY2002
FY2003
FY2004
FY04 +/- FY03
Actual
Estimate
Request
$
%
USAID “Core Development” Programs:
Economic Growtha
$1,031.6
$1,151.7
$1,133.0
($18.7)
-1.6%
Global Healthb
$1,467.5
$1,824.6
$1,615.0
($209.6)
-11.5%
Democracy/Conflict/Humanitariana
$146.4
$213.9
$211.9
($2.0)
-0.9%
Subtotal, “Core Development”
$2,645.5
$3,205.1
$2,959.9
($245.2)
-7.7%
Global AIDS Initiative
—
—
$450.0
$450.0
—
Millennium Challenge Account
—
—
$1,300.0
$1,300.0
—
TOTAL, Development Aid
$2,645.5
$3,205.1
$4,709.9
$1,504.8
47.0%
Source: USAID.
a. USAID’s “strategic pillars” for Economic Growth and Democracy correspond to the Development
Assistance account in title II of annual Foreign Operations appropriations bills.
b. USAID’s “strategic pillar” for Global Health corresponds to the Child Survival and Health Program
Fund account in title II of annual Foreign Operations appropriations bills.
Two new initiatives proposed for FY2004 that would be managed outside of
USAID “core development” programs, however, push overall U.S. development
assistance well above FY2003 levels. With the additions of the Global AIDS
Initiative and the Millennium Challenge Account, for which $450 million and $1.3
billion, respectively, are requested, total development aid in FY2004 would grow to
$4.7 billion, or 47% higher than FY2003 amounts.

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CRS-45
While development assistance supporters applaud the increases sought for the
new initiatives, they remain concerned over the reductions proposed for USAID’s
“core” development accounts. The latter are worldwide activities that serve multiple
development needs in over 55 countries that range from nations with a sound
commitment to economic and democratic reforms, to countries emerging from
conflict, to failed states that confront humanitarian crises. The HIV/AIDS and MCA
proposals, on the other hand, are more narrowly focused.
The Global AIDS
Initiative, implementing prevention, treatment, and care projects, will be focused
largely on 14 priority countries in Africa and the Caribbean. The Millennium
Challenge Account will likely support programs in the first year in perhaps as few as
5-8 “best-performing”countries that have demonstrated progress in the areas of
governance, economic freedom, and social investments in people.
The
Administration further had said that funding for the MCA would be in addition, not
a substitute for continuing “core” development resources. Critics charge that the
FY2004 budget request violates that pledge by cutting amounts for the “core”
programs.
What some observers find most problematic about the FY2004 development
assistance request is that increases for selected areas, especially those for HIV/AIDS,
to some extent result from reductions in other development programs. (See Table
11.) Among health programs, each sub-sector is cut, except for HIV/AIDS. Funding
for other infectious diseases, including tuberculosis and malaria, would fall by one-
third under the President’s budget request, child survival activities would be cut by
11%, reproductive health would drop by 5%, and vulnerable child programs would
be reduced from $27 million to $10 million. The Administration recommended
similar reductions in its FY2003 budget request last year, but Congress restored most
of the funds that would have been lost under the President’s recommendation. For
example, USAID had sought $110 million out of the Child Survival and Health
Program Fund account for FY2003, an amount that rose to $154.5 million due to
subsequent congressional additions in the Foreign Operations appropriation.
Aside from global health programs, USAID proposes a mix of budget increases
and cuts for other “core” development sectors. Those scheduled for higher spending
include:
! Agriculture programs would increase by 4% to $261 million.
! Economic growth activities, including trade and investment
programs, would rise less than 1%.
! Democracy and local governance would grow by 20%, although
large increases for Afghanistan and Pakistan would leave similar
programs in Africa and Latin America below FY2003 levels.
Funding for other “core” development areas would fall:
! Environmental activities would drop by 6% to $286 million.
! Basic education, a high congressional priority for a number of years,
would fall by 2% to $212 million, and resources for higher education
would be cut by 17%.
! Human rights and conflict prevention programs would be reduced
collectively by over one-third.

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CRS-46
Resources for some or all of these sectors, however, could rise, and in some cases
significantly, when MCA programs are selected. The $1.3 billion sought by the
President in FY2004 would be allocated among a selected few “best performing,”
low income countries, supporting the highest development priority identified by the
participant nation.
Table 11. “Core” Development Assistance Funding
($s — millions)
FY2001
FY2002
FY2003
FY2004
Strategic “Pillar”
Actual
Actual
Estimate
Request
Economic Growth/Agriculture/Trade
$844.6
$1,031.6
$1,151.7
$1,133.0
Agriculture
$160.4
$201.9
$258.8
$268.4
Environment
$274.1
$278.9
$303.0
286.4
[of which global climate change]
[$112.7]
[$110.0]
[$109.3]
[$109.0]
Economic Growth
$246.6
$331.8
$313.2
$315.8
[of which micro-enterprise]
[$90.7]
[$79.0]
[$79.0]
[$79.0]
Basic Education for Children
$102.8
$150.0
$216.6
$212.0
Higher Education and Training
$60.4
$62.3
$60.1
$50.3
Global Healthb
$1,324.3
$1,467.5
$1,824.6
$1,615.0
Child Survival/Maternal Health
$295.4
$337.0
$321.9
$284.6
Vulnerable Children
$29.9
$25.0
$26.8
$10.0
HIV/AIDS (bilateral)c
$289.3
$395.0
$587.7
$650.0
Global Fund for AIDS, TB, & Malaria
$100.0
$40.0
$248.4
$100.0
Other Infectious Diseasesc
$123.7
$165.0
$154.5
$104.4
Family Planning/Reproductive Health
$376.2
$385.5
$366.1
$346.0
UNICEF contribution
$120.0
$120.0
$119.2
$120.0
Democracy, Conflict, &
$156.8
$146.4
$213.9
$211.9
Humanitarian
Democracy & Local Governance
$131.3
$119.4
$136.8
$164.8
Human Rights
$25.2
$27.0
$26.8
$19.5
Conflict
—
—
$50.3
$27.6
[Global Development Alliance]
[ — ]
[$20.0]
$14.9
[$15.0]
TOTAL, Development Aid
$2,325.7
$2,645.5
$3,205.1
$2,959.9
Note: Amounts in this table reflect levels allocated from USAID’s “core” development aid accounts:
Development Assistance and the Child Survival and Health Program Fund. In addition to figures shown here,
funds are drawn from other economic aid programs — Economic Support Fund, aid to Eastern Europe, and
former-Soviet assistance — that are co-managed by USAID and the State Department. For activities such as
basic education and global health, most funding comes from these “core” development accounts. In other areas,
however, especially economic growth , agriculture, and democracy, a sizable amount of resources are drawn
from these non-“core” accounts. Because USAID does not have data estimating for FY2003 how much each
sector will receive across all appropriation accounts, it is only possible to draw comparisons for “core”
development aid resources.
Source: USAID.

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CRS-47
International HIV/AIDS. By far, the largest growth area for development
assistance is for HIV/AIDS prevention, treatment, and care programs (Table 12).
Resources requested under the Foreign Operations bill for HIV/AIDS in FY2004
total $1.24 billion, a 41% increase over $882 million appropriated for FY2003.
Moreover, the Administration is seeking another $680 million for international
HIV/AIDS from non-Foreign Operations accounts, most importantly for the Centers
for Disease Control and Prevention funded under the Labor/HHS/Education
appropriation bill. The total request across all appropriation measures for FY2004
is $1.92 billion. (The Administration frequently uses a total of $2 billion in its
estimates of FY2004 funds requested for international HIV/AIDS programs. These
executive estimates include USAID resources for tuberculosis and malaria that are
not calculated in the $1.92 billion level shown in Table 12.) A controversial issue
likely to arise during congressional consideration is the President’s decision to
propose $200 million for the Global Fund — $100 million each from Foreign
Operations and Labor/HHS/Education. For FY2003, Congress raised the U.S.
contribution to $350 million and subsequently authorized “up to” $1 billion for
FY2004 in P.L. 108-25, the United States Leadership Against HIV/AIDS,
Tuberculosis, and Malaria Act of 2003.
Table 12. U.S. International HIV/AIDS Programs
($s millions)
FY2002
FY2003
FY2004
Program
Actual
Estimatea
Request
USAID Child Survival/Health account for bilateral
$395.0
$591.5
$650.0
programs
USAID Child Survival/Health account for the
$40.0
$250.0
$100.0
Global Fund
USAID other non-“core” development assistance
$40.0
$38.5
$40.0
accounts
Foreign Military Financing
—
$2.0
$1.5
State Department Global AIDS Initiative
—
—
$450.0
Subtotal, Foreign Operations appropriations
$475.0
$882.0
$1,241.5
CDC Global AIDS Program
$143.8
$183.8
$293.8
CDC International Applied Prevention Research
$11.0
$11.0
$11.0
NIH International Research
$218.2
$252.3
$274.7
DOD HIV/AIDS prevention education with African
$14.0
$7.0
—
militaries
DOL AIDS in the Workplace Initiative
$8.5
$10.0
—
USDA Section 416(b) Food Aid
$25.0
$25.0
—
Global Fund contribution from NIH (& other
$160.0
$100.0
$100.0
sources in FY02)
TOTAL
$1,055.5
$1,471.1
$1,921.0
Sources: House and Senate Appropriations Committees, Departments of State and HHS, USAID, and
CDC.
a. The FY2003 Consolidated Appropriation Act (P.L. 108-7) required an across-the-board rescission
of 0.65% for each account, an amount not calculated in these figures.

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CRS-48
Congressional Action. On July 23, the House approved $3.55 billion for
“core” bilateral development programs, an amount about $140 million higher than
the President’s request and $350 million above regular FY2003 amounts. H.R. 2800,
while adding over $320 million to FY2003 totals for the Child Survival and Health
account, reduces non-health programs by nearly $30 million from the
Administration’s request and $63 million from FY2003 amounts. At these levels,
this would result in small cuts for activities such as agriculture, economic growth,
environment, and democracy promotion.
For one of the highest Administration and congressional foreign aid priorities,
the House provides $1.27 billion for international HIV/AIDS, $30 million above the
President’s request and $390 million higher than FY2003 levels. Combined with
parallel funding approved in the House Labor-HHS spending measure, the House
provides in both bills $1.9 billion for HIV/AIDS, $20 million less than the
Administration’s proposal. Out of this, $500 million — $400 million from the
Foreign Operations bill — would be available as a U.S. contribution to the Global
Fund for which the President proposes $200 million, $100 million from each bill.
H.R. 2800 also restores cuts to bilateral tuberculosis and malaria proposed by the
President, increasing spending for non-HIV/AIDS infectious diseases from $104
million to $156 million.
The House measure, within the Development Assistance account, places high
priority on trade capacity building activities, increasing funding to $195 million, $35
million higher than in FY2003. Spending on basic education would also rise under
the House measure, with $259 million specified out of the bilateral development aid
funds. In FY2003, USAID allocated $217 million for basic education and requested
$212 million for FY2004. Across all Foreign Operations accounts, the House bill
directs a total of $350 million for basic education.
In S. 1426, the Senate bill provides $3.68 billion in overall “core” bilateral
development programs, including HIV/AIDS, other non-health activities, and
UNICEF contributions. S. 1426 is about $270 million higher than the President’s
request and $125 million above the House bill.
As one of its top priorities, the Senate Committee provides $1.25 billion for
international HIV/AIDS, $10 million above the President’s request and $370 million
higher than FY2003 levels. The HIV/AIDS total includes as much as $350 million
for the Global Fund, compared with the President’s request of $100 million. (The
President also requested $100 million for the Global Fund in the Labor/HHS
appropriation measure.) Unlike the House bill, S. 1426 includes HIV/AIDS funds
in both the Child Survival/Health (CS/H) and Global AIDS Initiative accounts. The
Global AIDS Initiative account is a new request for FY2004, funding programs
managed by a new State Department Coordinator. The House bill keeps nearly all
HIV/AIDS funds in the CS/H account, consistent with past practice. The bill also
restores cuts to bilateral tuberculosis and malaria proposed by the President,
increasing spending for non-HIV/AIDS infectious diseases from $104 million to
$185 million. Of that total, tuberculosis is to receive $80 million, while malaria
funding is set at $85 million.

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CRS-49
Besides increasing health programs, S. 1426 also adds to the request for other
development activities, providing about $80 million more than requested and over
$100 million more than the House. Basic education programs receive $220 million
under bilateral development assistance, while environmental activities ($485 million)
and microenterprise ($180 million) are other areas emphasized in the Senate bill that
are above the President’s request.
International Family Planning and UNFPA Funding
U.S. population assistance and family planning programs overseas have sparked
continuous controversy during Foreign Operations debates for nearly two decades.
For FY2004, the Administration requests $425 million for bilateral population
assistance, the same as proposed last year, but below the $446.5 million appropriated
by Congress for FY2003. Although funding considerations have at times been
heatedly debated by Congress, the most contentious family planning issues addressed
in nearly every annual congressional consideration of Foreign Operations bills have
focused on two matters: whether the United States should contribute to the U.N.
Population Fund (UNFPA) if the organization maintains a program in China where
allegations of coercive family planning have been widespread for many years, and
whether abortion-related restrictions should be applied to bilateral USAID population
aid grants (commonly known as the “Mexico City” policy).
UNFPA Funding. The most contentious issue usually concerns the abortion
restriction question, but most recent attention has focused on UNFPA and a White
House decision in July 2002 to block the $34 million U.S. contribution to the
organization. During the Reagan and Bush Administrations, the United States did
not contribute to UNFPA because of concerns over practices of forced abortion and
involuntary sterilization in China where UNFPA maintains programs. In 1985,
Congress passed the so-called Kemp-Kasten amendment which has been made part
of every Foreign Operations appropriation since, barring U.S. funds to any
organization that supports or participates “in the management” of a program of
coercive abortion or involuntary sterilization. In 1993, President Clinton determined
that UNFPA, despite its presence in China, was not involved in the management of
a coercive program. In most years since 1993, Congress has appropriated about $25
million for UNFPA, but added a directive that required that the amount be reduced
by however much UNFPA spent in China. Consequently, the U.S. contribution has
fluctuated between $21.5 million and $25 million.
For FY2002, President Bush requested $25 million for UNFPA. As part of a
larger package concerning various international family planning issues, Congress
provided in the FY2002 Foreign Operations bill “not more than” $34 million for
UNFPA. While members of the Appropriations Committees say it was their intent
to provide the full $34 million, the language allowed the President to allocate
however much he chose, up to a $34 million ceiling. According to February 27,
2002, testimony by Arthur Dewey, Assistant Secretary of State for Population,
Refugees, and Migration before the Senate Foreign Relations Committee, the White
House placed a hold on UNFPA funds in January 2002 because new evidence
suggested that coercive practices were continuing in Chinese counties where UNFPA
concentrates its programs. A September 2001 investigation team, sponsored by the
Population Research Institute, concluded that a consistent pattern of coercion

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CRS-50
continued in “model” UNFPA counties, including forced abortions and involuntary
sterilizations. Refuting these findings, a UNFPA-commissioned review team found
in October 2001 “absolutely no evidence that the UN Population Fund supports
coercive family planning practices in China or violates the human rights of Chinese
people in any way.”
(See House International Relations Committee hearing,
Coercive Population Control in China: New Evidence of Forced Abortion and
Forced Sterilization, October 17, 2001. See also testimony of Josephine Guy and
Nicholaas Biegman before the Senate Foreign Relations Committee, February 27,
2002.)
Although most observers agree that coercive family planning practices continue
in China, differences remain over the extent to which, if any, UNFPA supports
involuntary activities and whether UNFPA should operate at all in a country where
such conditions exist. Given the conflicting reports, the State Department sent its
own investigative team to China for a two-week review of UNFPA programs on May
13, 2002. The team, which was led by former Ambassador William Brown and
included Bonnie Glick, a former State Department official, and Dr. Theodore Tong,
a public health professor at the University of Arizona, made three findings and
recommendations in its report dated May 31:
Findings:
! There is no evidence that UNFPA “knowingly supported or
participated in the management of a program of coercive abortion or
involuntary sterilization” in China;
! China maintains coercive elements in its population programs; and
! Chinese leaders view “population control as a high priority” and
remain concerned over implications of loosening controls for
socioeconomic change.
Recommendations:
! The United States should release not more than $34 million of
previously appropriated funds to UNFPA;
! Until China ends all forms of coercion in law and practice, no U.S.
government funds should be allocated to population programs in
China; and
! Appropriate resources, possibly from the United States, should be
allocated to monitor and evaluate Chinese population control
programs.
Despite the team’s recommendation to release the $34 million, Secretary of
State Powell decided on July 22, 2002, to withhold funds to UNFPA and to
recommend that they be re-directed to other international family planning and
reproductive health activities.
(The authority to make this decision had been
delegated previously by the President to the Secretary of State.)
The State
Department’s analysis of the Secretary’s determination found that even though
UNFPA did not “knowingly” support or participate in a coercive practice, that alone
would not preclude the application of Kemp-Kasten. Instead, a finding that the
recipient of U.S. funds — in this case UNFPA — simply supports or participates in
such a program, whether knowingly or unknowingly, would trigger the restriction.

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CRS-51
The team found that the Chinese government imposes fines and penalties on
families that have children exceeding the number approved by the government, a
practice that in some cases coerces women to have abortions they would not
otherwise undergo.
The State Department analysis concluded that UNFPA’s
involvement in China’s family planning program “allows the Chinese government
to implement more effectively its program of coercive abortion.” (The full text of the
State Department’s analysis is online at the State Department’s web site at
[http://www.state.gov/g/prm/rls/other/12128.htm].
The
State
Department’s
assessment team report is also online, at [http://www.state.gov/g/prm/rls/rpt/
2002/12122.htm].)
Critics of the Administration’s decision oppose it not only because of the
negative impact it may have on access to voluntary family planning programs by
persons in around 140 countries where UNFPA operates, but also because of the
possible application of the determination for other international organizations that
operate in China and to which the U.S. contributes.
For FY2003, the President proposed no funding for UNFPA, although $25
million was requested in “reserve” for the account from which UNFPA receives its
funding. Presumably, this could be made available to UNFPA if it is found not to be
in violation of Kemp-Kasten. Following several legislative attempts to reverse the
Administration’s denial of UNFPA — in both FY2002 supplemental appropriations
and regular FY2003 Foreign Operations measures — Congress approved in P.L. 108-
7, the Consolidated Appropriations Act for FY2003, a provision allocating $34
million to UNFPA, the same as in FY2002, so long as several conditions were met.
The most significant requirement is that the President must certify that UNFPA is no
longer involved in the management of a coercive family planning program. The
President has not yet issued a determination regarding the status of UNFPA funding
for FY2003.
Like for FY2003, the FY2004 Foreign Operations request does not propose
funding for UNFPA, but places $25 million in “reserve” for unidentified voluntary
contributions to international organizations.
“Mexico City” Policy. The debate over international family planning policy
and abortion began nearly three decades ago, in 1973, when Congress added a
provision to the Foreign Assistance Act of 1961 prohibiting the use of U.S.
appropriated funds for abortion-related activities and coercive family planning
programs. During the mid-1980s, in what has become known as the “Mexico City”
policy (because it was first announced at the 1984 Mexico City Population
Conference), the Reagan Administration, and later the George H. W. Bush
Administration restricted funds for foreign non-governmental organizations (NGOs)
that were involved in performing or promoting abortions in countries where they
worked, even if such activities were undertaken with non-U.S. funds. Several groups,
including International Planned Parenthood Federation-London (IPPF-London),
became ineligible for U.S. financial support. In some subsequent years, Congress
narrowly approved measures to overturn this prohibition, but White House vetoes
kept the policy in place. President Clinton in 1993 reversed the position of his two
predecessors, allowing the United States to resume funding for all family planning

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CRS-52
organizations so long as no U.S. money was used by those involved in abortion-
related work.
Between 1996 and 2000, the House and Senate took opposing positions on the
Mexico City issue, actions that repeatedly held up enactment of the final Foreign
Operations spending measures. The House position, articulated by Representative
Chris Smith (N.J.) and others, supported reinstatement of the Mexico City policy
restricting U.S. aid funds to foreign organizations involved in performing abortions
or in lobbying to change abortion laws or policies in foreign countries. The Senate,
on the other hand, rejected in most cases House provisions dealing with Mexico City
policy, favoring a position that left these decisions in the hands of the
Administration. Unable to reach an agreement satisfactory to both sides, Congress
adopted interim arrangements during this period that did not resolve the broad
population program controversy, but permitted the stalled Foreign Operations
measure to move forward. The annual “compromise” removed House-added Mexico
City restrictions, but reduced population assistance to $385 million, and in several
years, “metered” the availability of the funds at a rate of one-twelfth of the $385
million per month.
In FY2000, when the issue became linked with the separate foreign policy
matter of paying U.S. arrears owed to the United Nations, a reluctant President
Clinton agreed to a modified version of abortion restrictions, marking the first time
that Mexico City conditions had been included in legislation signed by the President
(enacted in the Foreign Operations Act for FY2000, H.R. 3422, incorporated into
H.R. 3194, the Consolidated Appropriations Act for FY2000, P.L. 106-113).
Because the President could waive the restrictions for $15 million in grants to
organizations that refused to certify, there was no major impact on USAID family
planning programs in FY2000, other than the reduction of $12.5 million in
population assistance that the legislation required if the White House exercised the
waiver authority.
When Congress again came to an impasse in FY2001, lawmakers agreed to
allow the new President to set policy. Under the FY2001 Foreign Operations
measure, none of the $425 million appropriation could be obligated until after
February 15, 2001.
Subsequently, on January 22, 2001, two days after taking office, President Bush
issued a Memorandum to the USAID Administrator rescinding the 1993
memorandum from President Clinton and directing the Administrator to “reinstate
in full all of the requirements of the Mexico City Policy in effect on January 19,
1993.” The President further said that it was his “conviction that taxpayer funds
should not be used to pay for abortions or to advocate or actively promote abortion,
either here or abroad.” A separate statement from the President’s press secretary
stated that President Bush was “committed to maintaining the $425 million funding
level” for population assistance “because he knows that one of the best ways to
prevent abortion is by providing quality voluntary family planning services.” The
press secretary further emphasized that it was the intent that any restrictions “do not
limit organizations from treating injuries or illnesses caused by legal or illegal
abortions, for example, post abortion care.” On February 15, 2001, the day on which
FY2001 population aid funds became available for obligation, USAID issued specific

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CRS-53
policy language and contract clauses to implement the President’s directive. The
guidelines are nearly identical to those used in the 1980s and early 1990s when the
Mexico City policy applied.
Critics of the certification requirement oppose it on several grounds.
They
believe that family planning organizations may cut back on services because they are
unsure of the full implications of the restrictions and do not want to risk losing
eligibility for USAID funding. This, they contend, will lead to higher numbers of
unwanted pregnancies and possibly more abortions. Opponents also believe the new
conditions undermine relations between the U.S. Government and foreign NGOs and
multilateral groups, creating a situation in which the United States challenges their
decisions on how to spend their own money. They further argue that U.S. policy
imposes a so-called “gag” order on the ability of foreign NGOs and multilateral
groups to promote changes to abortion laws and regulations in developing nations.
This would be unconstitutional if applied to American groups working in the United
States, critics note.
Supporters of the certification requirement argue that even though permanent
law bans USAID funds from being used to perform or promote abortions, money is
fungible; organizations receiving American-taxpayer funding can simply use USAID
resources for permitted activities while diverting money raised from other sources to
perform abortions or lobby to change abortion laws and regulations. The certification
process, they contend, closes the fungibility “loophole.”
Since re-instatement of the Mexico City policy in early 2001, several bills have
been introduced to reverse the policy, but none has passed either the House or Senate.
The policy continues to apply to FY2003 family planning aid programs and will
presumably continue in FY2004.
Congressional Action. On July 23, the House approved $425 million for
bilateral family planning programs, as requested. For UNFPA contributions, the
House bill (H.R. 2800) provides $25 million, available only under certain conditions:
! none of the funds can be used in China;
! funds must be maintained by UNFPA in a separate account and may
not comingle amounts;
! UNFPA does not perform abortions;
! UNFPA does not provide any resources for the Chinese State
Planned-Birth Commission or its regional affiliates; and
! U.S. contributions will be reduced by whatever amount, if any,
UNFPA spends in China.
In addition, the terms of the Kemp-Kasten amendment continue to apply, the terms
of which resulted in a cut-off of U.S. contributions in FY2002.
On July 17, the Senate Appropriations Committee approved its FY2004 Foreign
Operations (S. 1426), including several significant changes regarding international
family planning funding and policy. The Administration is likely to oppose, as it has
in the past, provisions in the Senate measure. For bilateral family planning activities,
the Senate bill provides $445 million, $20 million above the President’s request. In

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Section 691, the bill effectively reverses the Administration’s Mexico City policy.
Specifically, the provision states that foreign NGOs shall not be declared ineligible
for U.S. funds solely on the basis of health or medical services they provide
(including counseling and referral services) with non-U.S. government funds. This
exemption would apply so long as the services do not violate the law of the country
in which they are performed and that they would not violate U.S. laws if provided in
the United States. Section 691 further provides that non-U.S. government funds used
by foreign NGOs for advocacy and lobbying activities shall be subject to conditions
that also apply to U.S. NGOs. Since it is largely held that American NGOs would
not be subject to these restrictions under the Constitutional protection of free speech,
it is possible that this latter exemption would lift current prohibitions that apply to
overseas NGOs.
Although the White House has not yet issued its “Statement of Administration
Policy” for S. 1426, in its assessment of the House companion measure, H.R. 2800,
the executive said that it would “oppose any legislation that would infringe upon the
President’s ability to enforce current Administration policy regarding international
family planning.” Addition of such a provision to the House bill, the Statement said,
would result in a Presidential veto.
For UNFPA, S. 1426 provides $35 million in FY2004, but makes these funds,
together with those appropriated for FY2002 and FY2003, subject to Kemp-Kasten
limitations and current restrictions that apply in FY2003.
In authorizing legislation related to portions of the Foreign Operations
appropriation bill, the House voted on July 15 (216-211) to delete a committee-
approved amendment added to H.R. 1950 that sought to restore U.S. funding to
UNFPA. On May 8, the International Relations Committee had approved a provision
offered by Congressman Crowley that authorized $50 million for a U.S. contribution
to UNFPA for each of FY2004 and FY2005. The Crowley amendment further would
have altered existing law for determining UNFPA eligibility by requiring that the
President find that UNFPA does not “directly” support or participate in coercive or
involuntary activities. This would appear to make it more difficult for the President
to block funding for UNFPA than under conditions that apply for this year. Not only
would the Crowley amendment have added the word “directly,” but also defined the
circumstances under which UNFPA would be found ineligible as “knowingly and
intentionally working with a purpose to continue, advance or expand the practice of
coercive abortion or involuntary sterilization, or playing a primary and essential role
in a coercive or involuntary aspect of a country’s family planning program.”
In another authorizing bill — S. 925, the Foreign Relations Authorization for
FY2004 — the Senate added on July 9 an amendment by Senator Boxer that, like S.
1426, would effectively reject the President’s Mexico City policy. Senate opponents
had tried to table the Boxer amendment, an effort that failed on a vote of 43-53. The
Administration strongly opposes the Boxer amendment and says the President would
veto the bill if it remains in the legislation.

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Afghanistan Reconstruction7
Congress is currently considering simultaneous requests for additional
reconstruction aid for Afghanistan. In the regular FY2004 Foreign Operations budget
proposal, submitted in February 2003, the Administration seeks $550 million for
economic and military support for Kabul. More recently, as part of the President’s
$87 billion FY2004 supplemental request, most of which would support U.S. military
operations in Iraq and Afghanistan, and Iraq reconstruction, the White House
proposes $799 million additional aid for Afghanistan. The Administration further
plans to re-program $390 million prior year DOD, State Department, and USAID
appropriations for Afghan reconstruction.
The conditions in Afghanistan represent a challenging mix of ongoing security
concerns, infrastructure destruction, and humanitarian needs likely requiring a robust
and sustained intervention. While the hunt for Al Qaeda forces within Afghanistan
continues, transitional and reconstruction assistance has also moved ahead. An
examination of the progress of reconstruction efforts and aid priorities since
December 2001 reveals the complexity of the tasks at hand and the important roles
to be played by the United States and the international community. The case of
Afghanistan may present a special category of international crisis response, in which
the United States and others pursue the war on terrorism in a country while
simultaneously providing humanitarian and reconstruction assistance.
So far, the international community has continued to provide large amounts of
aid and resources for the reconstruction effort. A long-term commitment will likely
be necessary to ensure that a stable, democratic Afghanistan emerges and will not fall
prey to the twin evils of drugs and terrorism. The outcomes of the international
donors conference in January 2002 and other donor conferences since then indicate
a strong willingness on the part of the international community to assist in the
restoration of Afghanistan. However, reconstruction costs are estimated by some to
be more than $15-$30 billion over the next decade.
Current Operating Environment. Key developments since September 11,
2001, and the collapse of the Taliban focus on three main pillars:
First, the
development of plans for security including the International Security Assistance
Force (ISAF), and in the future, an Afghan National Army and police force; second,
establishing the political framework through the Bonn Conference and Afghanistan
Interim Administration (AIA), the loya jirga and Islamic Transitional Government
of Afghanistan (ITGA), and renewed diplomatic ties with the international
community; and third, the creation of a strategy for reconstruction beginning with the
Tokyo Reconstruction Conference in January 2002.
The current operating
environment continues to highlight the importance of these three themes and the
work that remains to be done to assure Afghanistan’s recovery.
The most serious challenge facing Afghanistan today is the lack of security.
Former commanders maintain control over their own areas and continue fighting with
their rivals, making difficult the extension of control by the national government, the
7 This section was prepared by Rhoda Margesson.

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CRS-56
provision of humanitarian assistance, and the implementation of plans for
reconstruction.
With the continued fighting and insecurity, the process of
demobilization and integration of combatants has also been slow. U.S. forces are
continuing to train a new Afghan National Army that it is hoped will ultimately allow
the Kabul government to maintain security on its own, and enable foreign forces to
depart Afghanistan. With about 4,500 recruits trained so far, the U.S. government
estimates that it will be at least five years until the army reaches full strength,
currently planned for 70,000.
Ensuring a secure environment for reconstruction gained greater attention with
an initiative by the Pentagon to expand the role of the U.S. military in Afghanistan.
In December 2002, DOD announced that it would be setting up eight “provincial
reconstruction teams” (PRTs), composed of U.S. combat and civil affairs officers,
to provide security for reconstruction workers and to extend the influence of the
Kabul government. Three of these PRTs are already in operation and observers say
NGOs are gravitating to areas where they are present due to improved security. This
marks a departure from the previous policy of relying solely on security through the
development of an Afghan national army or expansion of the ISAF, and engages U.S.
forces beyond military action to oust the Taliban and Al Qaeda.
Still, factional fighting and increased criminal activity have undermined
humanitarian operations. In some cases, where operations were directly targeted,
this has led to the temporary suspension of U.N. missions or withdrawal of aid
agencies from certain areas. The United Nations has begun a database to record
national security incidents and to provide more effective, timely information and
situation assessments.
The strength and influence of the central government is viewed as a key factor
that will determine the success of the intervention and assistance on the part of the
international community.
Humanitarian and reconstruction programs face the
challenge of maintaining their foothold despite the complex humanitarian
requirements (such as population returns and resettlement, food security, shelter, and
winter assistance) and reconstruction problems (such as rebuilding the infrastructure,
economy and agricultural base; addressing landmines and environmental damage;
and reestablishing health, education, and community centers.) At the end of 2003,
Afghanistan is to begin preparing for national elections to take place by June 2004.
A loya jirga in October 2003 is to consider a draft permanent constitution.
Apart from the security problems, the current operating environment presents
a number of other urgent challenges. The collapsed infrastructure, rugged terrain, and
extreme weather are significant factors with regard to access, food aid, logistics, and
plans for reconstruction. The humanitarian needs and support required for recovery
in Afghanistan must be understood in the context of the continuing vast numbers of
refugees and IDPs, the differences among the regions in which they are located, and
the political and security situation throughout the country. There is a need for
stronger links between humanitarian and reconstruction projects so that Afghans can
begin to move beyond initial reintegration to more permanent resettlement. UNHCR
plans to assist 1.2 million refugees and 300,000 IDPs during 2003, although some
have raised concerns that the infrastructure may not yet be able to support this many
returnees.

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The United States has international help in carrying out the reconstruction of
Afghanistan. The United States is training the new army and about 9,000 U.S. troops
continue to combat Taliban/Al Qaeda remnants. The U.S. Treasury Department is
advising the government on its budget and other financial affairs.
Among
contributions by other countries, Italy is providing advice on judicial reform and
Germany is helping establish a national police force. The United States, Japan and
Saudi Arabia are financing the rebuilding of the Kabul-Qandahar-Herat major
roadway.
There have been some reports that Afghanistan officials have complained about
the slow pace at which pledged funds were being paid. In a similar vein, the United
States has been critical of other donors for not meeting their “fair share” of the cost
of recovery and for not doing enough on a multilateral level. On the one hand,
determining the “fair share” of the costs of reconstruction for any one country or
group of countries varies from conflict to conflict and depends in part on the
resources being spent on conflicts elsewhere. On the other hand, the way in which
funds are distributed — be it multilaterally through U.N. agencies or bilaterally with
funds supporting international organizations and NGOs directly — appears to be at
issue in Afghanistan. Others are concerned that international donors might shift their
focus to Iraq reconstruction, and lose interest or run too low on resources to continue
to participate in Afghan reconstruction.
Tokyo Pledging Conference.
The International Conference on
Reconstruction Assistance to Afghanistan held in Tokyo in January 2002 gave the
Afghan Interim Authority (AIA) a chance to demonstrate its commitment to the next
phase of Afghanistan’s recovery and provided the international donor community an
opportunity to come together and formally demonstrate support for this initiative.
The sixty-one countries and twenty-one international organizations represented
pledged $1.8 billion for 2002. The U.S. government pledged $297 million, drawn
from existing sources — either from the $40 billion Emergency Terrorism Response
supplemental (P.L. 107-38) that was passed shortly after the September 11, 2001
attacks or from regular FY2002 appropriations. The total pledged at Tokyo was $4.5
billion, with some states making pledges over multiple years and commitments to be
carried out in different time frames. Some countries offered support in kind but
placed no monetary value on that.
Subsequent U.S. Aid Transfers, FY2002 and FY2003. Since the Tokyo
pledging conference, through supplemental and regular appropriation bills, Congress
has approved an additional $970 million in U.S. assistance to Afghanistan, making
Kabul one of the largest recipients of American aid.
An emergency FY2002
supplemental measure (P.L. 107-206) added $258 million for Afghanistan to amounts
previously allocated, bringing the total amount of U.S. assistance in FY2002 to $686
million, well in excess of funding pledged at the Tokyo conference. Thus far in
FY2003, Congress has passed in regular (P.L. 108-7) and supplemental (P.L. 108-11)
appropriation acts over $700 million, of which $647 million falls under Foreign
Operations programs. In each of these actions, Congress has increased levels beyond
those requested by the Administration. The $40 million add-on in P.L. 108-11 will
permit USAID to accelerate the Kabul-Qandahar-Herat road construction project that
is jointly financed with Japan and Saudi Arabia.

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In related legislation, the Afghanistan Freedom Support Act of 2002 (P.L. 107-
327, S. 2712), passed by congress on November 15, 2002, and signed by the
President on December 4, 2002, authorizes an additional $3.3 billion for Afghanistan
over four years.
Included is $2 billion for humanitarian, reconstruction, and
enterprise fund assistance through FY2006 and $300 million in drawdown from U.S.
military stocks of defense articles and equipment for Afghanistan and other countries
and organizations participating in restoring Afghan security. The legislation also
includes a Sense of Congress that calls for an expanded International Security
Assistance Force with an authorization of an additional $1 billion over two years.
FY2004 Regular Afghanistan Aid Request. For regular FY2004 Foreign
Operations funding, the Administration requests $550 million for Afghanistan, an
amount that would make Kabul the fourth largest recipient of U.S. aid. Although the
FY2004 proposal is less than for FY2002 and FY2003, when funding for
humanitarian programs in FY2004 (food, refugees, disaster relief) are added, the total
sum is likely to be near or above previous years. (Humanitarian funds are usually not
allocated on a country basis until the fiscal year begins.) Nearly half of the $321
million FY2004 economic aid request would continue infrastructure rehabilitation,
focusing largely on roads, bridges, schools, health clinics, and waste water facilities.
Table 13. U.S. Assistance to Afghanistan, FY2002-FY2004
($s — millions)
FY2004
FY2004
FY2002
FY2003
FY2003
FY2003
Regular
Supp
Actual
Regular
Supp
Total
Request
Request
Development/Health
39.7
89.9
—
89.9
171.0
—
Disaster relief
191.0
94.0
—
94.0
a
—
Food aid
159.5
26.7
—
26.7
a
—
Refugee relief
—
55.0
—
55.0
a
—
Economic/Security
105.3
49.5
167.0
216.5
150.0
422.0
(ESF)
Anti-terrorism/
43.4
5.0
28.0
33.0
19.0
35.0
Demining
Narcotics/Law
66.0
—
—
0.0
40.0
120.0
Enforcement
Military aid
57.3
21.3
170.0
191.3
150.0
222.0
Peacekeeping
23.9
4.9
—
4.9
20.0
—
TOTAL
686.1
346.3
365.0
711.3
550.0
799.0b
a. Although Afghanistan is likely to receive assistance from these humanitarian aid accounts, the
FY2004 request does not provide specific amounts for most countries.
b. In addition, the Administration plans to re-program $390 million from previously appropriated
DOD, State Department and USAID funds for Afghanistan.
FY2004 Supplemental Request.
The Administration’s $1.2 billion
supplemental aid request, of which $799 million would be for new appropriations

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and $390 million would come from previously appropriated DOD, State Department,
and USAID funds, would more than double U.S. assistance to Afghanistan in
FY2003. The proposal comes at a time of growing criticism over delays in aid
delivery, deteriorating security conditions, and concern that U.S. and international
attention was shifted to Iraq. Key features of the $799 million in new appropriation
include targeting projects that would have the most immediate impact on the lives of
the Afghan population, such as:
! $402 million for security, with funding included to train and support
police, border patrol, the military and counter-narcotics forces,
disarmament and de-mobilization programs, and courthouse
construction in Kabul.
! $129 million to reinforce the authority of the Government of
Afghanistan with budget support for high priority projects, technical
experts placed in Afghan ministries, and voter registration and
election support.
! $105 million for completion of the Kabul-Kandahar-Herat major
highway, a program jointly financed by the United States, Japan, and
Saudi Arabia;
! $163 million for social programs and critical infrastructure,
including education, health, and local projects.
An additional $390 million will be made available from reallocated, prior-year funds,
but the Administration has not specified how they would be used. The White House
is further asking that the $300 million limit on military drawdowns from DOD stocks
enacted in the Afghanistan Freedom Support Act of 2002 (P.L. 107-327) be increased
to $600 million.
If progress on security, road construction, and reconstruction efforts are made
in advance of the planned June 2004 elections, it could increase the chances of the
success of moderates in those elections. Additional funding could also have an
impact on decisions by the international community at the upcoming donors
conference, possibly resulting in larger contributions. It could also help efforts of the
Afghan government to expand ISAF, which is now limited only to Kabul.
Increased funding could also have negative implications. There are concerns
that it could add to the already high levels of corruption. Some experts are concerned
about absorption capacity and whether additional funds can be allocated quickly and
effectively. If progress is not achieved, the increase could be seen as largely
symbolic and ineffective. Others have raised the possibility that the United States
will be seen giving too much support to the Karzai government in advance of the
elections next spring.
Congressional Action.
FY2004 Regular Appropriations.
Legislation passed by the House
provides not less than $600 million for Afghan reconstruction in FY2004 from all

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accounts in the bill. H.R. 2800 directs that of the total, not less than $150 million
should be drawn from the Economic Support Fund for Afghanistan, as requested.
The $600 million House earmark is $50 million higher than the Administration’s
request, although the President’s proposal does not reflect funds drawn from the
refugee and disaster relief Foreign Operations accounts which could count towards
the $600 million House target. The House Appropriations Committee further urges
the State Department Coordinator of Assistance to Afghanistan and USAID to
allocate at least $10,000,000 ($5 million from funds in H.R. 2800) to support Afghan
women, to include the construction of 17 Women’s Centers that provide legal and
protective services, computer and literacy classes, and vocational courses.
The Senate measure — S. 1426 — also provides $600 million. The Senate
Appropriations Committee highlighted several aspects of U.S. reconstruction efforts
for continued support: training for the Afghan National Army and national police,
combating narcotics production, bolstering democratic institutions, protecting and
strengthening opportunities for Afghan women in the economy and politics of the
country, including support for women-led Afghan NGOs, supporting the Afghan
Human Rights Commission and the Judicial Reform Commission, targeting aid on
Afghan communities and families were victims of military operations, and removing
mines, ordnance, and munitions in Afghanistan.
FY2004 Supplemental. The White House submitted its formal supplemental
request on September 17 and Congress is conducting numerous hearings.
Iraq Reconstruction8
Responding to mounting concerns regarding delays, impact, and expansion of
Iraq reconstruction activities, President Bush submitted to Congress on September
17, 2003, a $20.3 billion request in additional Iraq reconstruction and security
funding. The resources are part of an $87 billion package covering U.S. military
costs and smaller amounts for accelerating rehabilitation efforts in Afghanistan. This
new supplemental follows earlier approval in April of roughly $3 billion for the
purposes of relief and reconstruction in Iraq in the Emergency Wartime Supplemental
Appropriations Act, 2003 (P.L. 108-11; H.R. 1559). Of the total provided in P.L.
108-11, $2.48 billion was placed in a special Iraq Relief and Reconstruction Fund
supporting efforts in a wide range of sectors, including water and sanitation, food,
electricity, education, and rule of law. The FY2003 supplemental also provided
$489.3 million through the Department of Defense budget for repair of oil facilities.
FY2004 Supplemental Proposal. The new request is intended to fund the
most pressing, immediate needs in Iraq, with the aim of having a noticeable impact
on the two greatest reconstruction concerns that have been raised since the
occupation of Iraq began — security and infrastructure. More than $5 billion would
be targeted at improving the security capabilities of the Iraqi people and government
— including training and equipment for border, customs, police, and fire personnel,
and to develop a new Iraqi army and a Civil Defense Corps. Enhanced efforts to
reform the judicial system would also be made.
8 This section was prepared by Curt Tarnoff and Rhoda Margesson.

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CRS-61
Most of the remaining supplemental reconstruction request would go toward
rapid improvements in infrastructure, including electricity, oil infrastructure, water
and sewerage, transportation, telecommunications, housing, roads, bridges, and
hospitals and health clinics. These, according to Administration officials who have
briefed Members of Congress and staff, represent the most urgent needs over the next
12 months, but by no means address total reconstruction requirements in the coming
year.9 Other concerns in such areas of government reform, agriculture, economic
development, and education, are not included in the Administration request. A
relatively small amount of funds — $300 million — have been requested for
programs designed to encourage the growth of the private sector and jobs training.
Table 14. Iraq Supplemental — Proposed Sector Allocation
($s — billions)
Security
$5.136
Public safety, including border enforcement, police, fire, & customs
$2.100
Security forces and Iraq Civil Defense Corps
$2.100
Justice and civil society development
$0.900
Reconstruction
$15.168
Electric power rehabilitation
$5.675
Oil infrastructure rehabilitation
$2.100
Water and sewerage services repair and improvement
$3.710
Water resources improvement
$0.875
Transportation and telecommunications rehabilitation
$0.835
Housing, building, road, and bridge repair/reconstruction
$0.470
Health facility construction and medical equipment replacement
$0.850
Private sector business initiatives and job training programs
$0.353
Refugee aid, local governance, other human rights/civil society
$0.300
TOTAL
$20.304
Source: Office of the Coalition Provisional Authority Representative, September 8, 2003, and OMB,
FY2004 Supplemental Appropriation request, September 17, 2003.
Reconstruction Overview. Among the key policy objectives laid out by the
Bush Administration in conjunction with the war in Iraq were the restoration of basic
human services and the economic and political reconstruction of the country. While
9 Congressional briefing by executive branch officials, September 8, 2003.

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immediate overall responsibility for the war and management of U.S. military activity
in post-war Iraq belongs to the Commander of U.S. Central Command, the Coalition
Provisional Authority (CPA) is responsible for the administration of Iraq and
implementing assistance efforts there. The Authority is headed by L. Paul Bremer,
appointed by the President on May 6. He reports to Defense Secretary Rumsfeld.
The CPA is staffed by officials from agencies throughout the U.S. government as
well as personnel from other coalition member nations. A Coalition Coordinating
Council provides liaison with NGOs, donor countries, and U.N. agencies and directs
humanitarian affairs.
The CPA has initiated a process intended to lead to Iraqi self-rule. It has
appointed a 25-member Iraqi Governing Council and provided it with specific
powers and duties, including the choosing of a cabinet to serve as ministers under the
supervision of CPA advisors and the responsibility to set in motion formulation of
a national constitution. It has encouraged establishment of councils in villages and
cities throughout the country to run local affairs and identify community needs. With
CPA funding and encouragement, institutions of civil and economic society have
been reconstituted. Schools, including universities, hospitals and health clinics, are
functioning. The oil-for-food program continues to provide basic foodstuffs. New
police and security forces are being trained. Programs to renovate and repair electric
power, water, oil production, roads and bridges, airports, and the seaport were
launched. Jobs programs have been instituted to help stimulate the economy and
lessen unemployment.
Although much has been accomplished since the U.S. occupation began in
April, the occupation authority in the view of many has failed to successfully
reestablish order and security, restore infrastructure, and introduce political and
economic reform, including Iraqi self-governance, in a timely manner.
These
problems are interlinked; the successful conduct of much reconstruction work is
contingent on an environment of order and stability, and the lack of visible progress
in restoring basic infrastructure and institutions of security opens the door to political
discontent and opposition. The $20.3 billion supplemental request apparently seeks
to address those infrastructure and security concerns that have made insufficient
progress and on which other U.S. objectives in Iraq hinge.
Until recently, the Administration had suggested that the cost of reconstruction
up to the end of 2003 could largely be met by Iraqi and already previously
appropriated U.S. resources. A national budget for Iraq covering the rest of the year,
announced by the CPA on July 7, estimated expenditures of $6.1 billion and the
creation of a Central bank currency reserve of $2.1 billion, for a total budget of $8.2
billion. New oil revenue, taxes, and profits from state owned enterprises would make
up $3.9 billion of these costs, according to the CPA’s analysis. The remaining deficit
of $4.3 billion would be covered by recently frozen and seized assets ($2.5 billion),
the Development Fund for Iraq ($1.2 billion), and $3 billion in already appropriated
U.S. assistance. Iraq was projected to have $1.1 billion remaining for reconstruction
by end of December 2003. (See [http://www.cpa-iraq.org/Budget2003.pdf] for text
of the budget.)
The Administration request suggests that a re-assessment of Iraq’s immediate
reconstruction needs demanded greater outlays of revenue than projected in July. It

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also suggests that presumed sources of additional revenue in the coming year —
chiefly, oil export production and international donor contributions — might not be
as large as originally anticipated.
In any case, the result is a supplemental
reconstruction request nearly 20% larger than the size of the entire national budget
for Iraq projected on an annualized basis in early July.
Reconstruction Concerns and Critical Assessment.
Total Reconstruction Costs. As noted above, the supplemental request is
intended to meet only the most important, immediate needs in Iraq in the 2004 fiscal
year. The eventual cost of Iraq reconstruction is not known, and pre-war estimates
by analysts that ranged from $30 to $105 billion over ten years were highly
speculative.10 More recently on July 31 in an interview with CNBC, Ambassador
Bremer said that total reconstruction costs could fall between $50 and $100 billion,
while John Taylor, Undersecretary of the Treasury for International Affairs, told a
Senate Committee that expenses would total $50 to $75 billion.11 As part of the lead-
in to an international donors conference to be held in Madrid on October 24, the
World Bank has been conducting a needs assessment of 14 economic and social
sectors. Bank estimates will likely establish the targets by which the adequacy of
available resources will be judged. If Iraqi oil revenues are not sufficient to meet the
projected needs — which appears likely in the near term by most accounts — and
other international donors do not pledge significant contributions, the United States
will likely face increased financial demands.
Iraqi Oil Revenues and Financing Reconstruction. Up until recently,
the Administration had expected most costs of reconstruction to be borne by Iraq
through receipts from its oil exports. While the decrepit state of oil production
infrastructure and recurrent sabotage to pipelines and facilities have forced experts
to downgrade expectations of potential exports and receipts, any sustained increase
in production will assist the reconstruction effort. Current rates of production are
nearing 2 million barrels a day, but Iraqis do not expect to reach the prewar level of
2.8 million barrels until spring.
After subtracting 0.5 million barrels/day for
domestic consumption, a level of 2.3 million might generate between $18.5 billion
and $23 billion annually, depending on the price of oil. Production levels of 6
million barrels/day, possible within a decade, would require significant investment
outlays.12 In the near term, Administration officials say that their budget calculations
assume an average production of 2 million barrels per day over the next 12 months,
generating about $12 billion in revenues that will roughly cover government
10 Both high and low estimates are in William D. Nordhaus, “The Economic Consequences
of a War with Iraq,” in War in Iraq: Costs, Consequences, and Alternatives, American
Academy of Art&Sciences, 2002.
11
Interview with Paul Bremer, CNBC News, July 31, 2003; testimony of John Taylor,
Undersecretary of the Treasury for International Affairs, before the Senate Banking
Committee, September 16, 2003
12 See Petroleum section by Larry Kumins in CRS Report RL31944, Iraq’s Economy: Past,
Present, Future, pp. 17-23.

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operating expenses, but not the type of urgent reconstruction needs identified in the
supplemental request.13
Roughly $503 million has already been allocated from the 2003 Emergency
Wartime Supplemental for repair of oil facilities and restoration of production and
distribution systems. The Administration request for these purposes under the
FY2004 supplemental is $2.1 billion. Additional sums for Iraqi security forces are
in part intended to create an Iraqi force that would prevent pipeline and other oil
facility sabotage.
Contracting Concerns. An Administration decision applied to the early
reconstruction contracts to waive the normal competitive bidding requirements and
request bids from specific companies which were seen to have preexisting
qualifications received considerable attention by the business community. The
closed bidding and lack of transparency disturbed a number of legislators, and some
Members of Congress asked the GAO to determine whether contracting agencies are
following appropriate procedures.
Some observers have noted that, in addition to many American firms, a number
of international organizations and non-U.S. companies were excluded from the
selections made by USAID and other agencies, and even British companies were not
considered despite that country’s role in the war. U.S. officials point out that only
a few select firms possess the particular skills that would qualify them for the job
specifications for Iraq reconstruction, and that time and security clearances were also
critical factors. Foreign entities, potentially excluded by “buy America” provisions
of law, and other U.S. firms can participate as sub-contractors to the selected
American firms. Sub-contractors are likely to compose half or more of the total cost
of each contract.
Security Needs for Reconstruction. Lack of security and order continues
to threaten reconstruction efforts, including supply of electrical power and movement
of assistance personnel. As a result, many Iraqis are angry and alienated by the
occupation. Critics point to a lack of readiness on the part of the U.S. military to
anticipate security needs and provide support to reconstruction implementors and call
for an increase in force deployment, including international help. Some also criticize
the decision of the CPA administrator to disband the Iraqi military as contributing to
the disorder.14
Pace of Establishing Iraqi-Led Governance. Perhaps as important to
many critics as the lack of order has been the slow pace of forming an Iraqi authority
which could provide Iraqis with a sense of ownership in the reconstruction and
democratic processes. As a result, foreign aid workers have had no counterpart in the
Iraqi ministries able to make decisions that might advance reconstruction.
Appointment of a Governing Council on July 13, concessions by the CPA
13 Congressional briefing by executive branch officials, September 8, 2003.
14 “Priorities for Rebuilding Iraq,” Financial Times, June 26, 2003. “Two-Way Street on
Iraq,”David Ignatius in Washington Post, July 4, 2003. “Wolfowitz Concedes Iraq Errors,”
Washington Post, July 24, 2003.

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CRS-65
Administrator, and installation of 25 government ministers on September 3 may have
a positive impact. But appointed, instead of elected or chosen by an Afghan-like
national assembly, the Council will have to establish its legitimacy in the eyes of
Iraqis and the international community to be fully effective. Until the Council is
embraced by Iraqis, serious policy decisions likely to be made by it and the CPA,
such as on privatization of state-owned enterprises, may have little long-term
legitimacy and support.15
Conversely, some analysts argue that the pace of self-governance may now be
too hurried, driven by the timetable of the U.S. presidential election or to meet
international demands rather than Iraqi needs. They argue that time must be allowed
for democratic institution building.
U.N. and International Community Role in Reconstruction. The
administration has sought to keep control of post-war reconstruction in U.S. hands,
rather than internationalizing it as had been done in Kosovo and Bosnia. Critics assert
that were the U.N. in a position of greater responsibility, it would deflect Iraqi
criticism of the United States, legitimize occupation policies, and encourage financial
and peacekeeping participation by bilateral donors. Some Members of Congress have
criticized the current modus operandi because of the financial cost and strain put on
the U.S. military. Senator Hagel has urged, “We need to internationalize this as
quickly as we can.” Donors, reportedly, are unresponsive to U.S. pleas for assistance
— 24 of 70 invited countries have reportedly offered peacekeeping aid, but numbers
of troops are described as low — partly because they are not being offered a “seat at
the table” in determining the future of Iraq.16
A key factor for donors attending the October 24 pledging conference is likely
to be the extent to which they have a say in the use of funds. As noted, up to now,
donors have been reluctant to provide assistance because they were wary of being
perceived as supporting a unilateral U.S. policy. In response to this concern, donors
discussed, at a September 6 meeting in Brussels, the concept of creating Iraq
reconstruction trust funds, managed by the U.N. or World Bank, which would accept
and distribute contributions. Control over how the money was spent, according to
Undersecretary of State Alan Larson, who represented the U.S. at the September 6
meetings, would be handled by some sort of a multilateral management board that
might include officials from international organizations, major donors, and Iraqis
representing interim ministries. Under Secretary Larson also said that no decision
had been made as to whether the United States would participate in a trust fund.17
15 “Unrest Grows Over Rebuilding Iraq,” Financial Times, June 25, 2003. “Give Iraqis a
Say in Running Their Country,” David Phillips in Financial Times, July 10, 2003.
16 Senator Hagel quoted in “U.S. to Form New Iraqi Army,” Washington Post, June 24,
2003. “Facing Reality in Iraq,” Washington Post, July 8, 2003. “Kerry Raps Bush Policy
on Postwar Iraq,” Washington Post, July 11, 2003. “Getting Help in Iraq,”, July 17, 2003.
“American needs Europe to Win Peace in Iraq,” Robert Hunter in Financial Times, July 21,
2003.
17
(Iraq Reconstruction an International Responsibility, Larson Says. Press briefing by
Under Secretary of State for Economic, Business, and Agricultural Affairs Alan Larson,
(continued...)

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CRS-66
Civilian Administration.
Some assert that the American civilian
reconstruction effort, which reports to the Secretary of Defense, was never given
sufficiently high priority by the Defense Department’s leaders to receive the security
and technical support it needed to be effective. The CPA has been described as
understaffed, lacking experience and knowledge of the country, and too isolated from
the Iraqi people (with headquarters in a former palace and requiring a military
bodyguard when they venture outside).18
Reliance on the Military. Although reconstruction is inherently a civilian
effort, in its early stages it has been implemented largely by military personnel. Prior
to the war, it was anticipated that the military would fill humanitarian needs as the
war was winding down — a role the military has played to some degree in other
crises. In part because the reconstruction phase of assistance arrived earlier than
expected, military civil affairs teams are reportedly making decisions at the
grassroots level regarding election of local councils, selection of community leaders,
prioritization of needs, and other reconstruction activities. Some assert that these are
roles for which they have not been prepared and which emphasize to the Iraqi people
the “occupation” character of the U.S. presence. Some critics suggest that a corps of
civilian reconstruction specialists should have been deployed around the country.
Along these lines, a July 17 Assessment Mission report recommended the
establishment of 18 provincial CPA offices in Iraq, with 20-30 staff in each.19
Clarity of Reconstruction Strategy.
The Administration has been
criticized for a lack of openness and clarity regarding its plans for the reconstruction
process, with a consequent negative affect on the stability and trust of the Iraqi
people in the work of the Coalition Provisional Authority. Some attribute problems
in reconstruction to “secretive decision-making by the Defense Department civilians
who led the planning.”20 Indecision and changes of mind regarding reconstruction
policy have been common. There has been no clear plan for a long-term process
leading to final Iraqi government control. A lack of clarity regarding plans for the
use of oil reserves may also have sown suspicion amongst the Iraqi people. Critics
call for a more open process for the use of oil, giving greater control to the U.N. over
the Iraq Development Fund. On the domestic front, Members of Congress have
complained about the failure of the Administration to provide a clear accounting of
anticipated costs and plans for the future of Iraq.21
17 (...continued)
September 4, 2003.
Text available at
[http://usinfo.state.gov/topical/pol/terror/texts/
03090434.htm].)
18 “We’re Getting in Our Own Way,”Washington Post, June 22, 2003. “Appoint the Best
to Iraq, Not the Best-Connected,” Michael Massing in Washington Post, July 6, 2003.
“Unrest Grows Over Rebuilding Iraq,” Financial Times, June 25, 2003.
19
John Hamre, and others. Iraq’s Post-Conflict Reconstruction: A Field Review and
Recommendations, July 17, 2003, page 5.
20 “Wolfowitz Concedes Iraq Errors,” Washington Post, July 24, 2003.
21 “Getting Back on Track in Postwar Iraq,” Joseph Lieberman in Washington Post, July 7,
2003. “Struggle for Democratic Iraq May Be Long and Costly, Says Senator,”Washington
(continued...)

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CRS-67
Congressional Action.
FY2004 Regular Foreign Operations Appropriations. The President
did not request, nor did either House or Senate bills provide, additional funding for
Iraq reconstruction in the FY2004 Foreign Operations Appropriations measures.
Although the House did not address Iraq reconstruction funding matters in H.R.
2800, Sec. 572 of the legislation requires that Iraq reconstruction contracts awarded
with appropriated funds be subject to full and open competition.
FY2004 Iraq Reconstruction Supplemental. The White House submitted
its formal supplemental request on September 17 and Congress is conducting
numerous hearings.
For Additional Reading
Overview
CRS Report 98-916. Foreign Aid: An Introductory Overview of U.S. Programs and
Policy, by Curt Tarnoff and Larry Nowels.
CRS Report RL31687.
The Millennium Challenge Account: Congressional
Consideration of a New Foreign Aid Initiative, by Larry Nowels.
CRS Report RL31829, Supplemental Appropriations FY2003: Iraq Conflict,
Afghanistan, Global War on Terrorism, and Homeland Security, by Amy
Belasco and Larry Nowels.
Foreign Operations Programs
CRS Report RS20329. African Development Bank and Fund, by Raymond Copson.
CRS Issue Brief IB10050. AIDS in Africa, by Raymond Copson.
CRS Issue Brief IB88093. Drug Control: International Policy and Approaches, by
Raphael Perl.
CRS Report 98-568, Export-Import Bank: Background and Legislative Issues, by
James Jackson.
CRS Report RL31712. The Global Fund to Fight to Fight AIDS, Tuberculosis, and
Malaria: Background and Current Issues, by Raymond Copson and Tiaji
Salaam.
CRS Report RS21181. HIV/AIDS International Programs: Appropriations, FY2002-
FY2004, by Raymond Copson.
21 (...continued)
File, June 30, 2003. “Facing Reality in Iraq,” Washington Post, July 8, 2003.

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CRS-68
CRS Report RS20622. International Disasters: How the United States Responds,
by Lois McHugh.
CRS Report RL30830. International Family Planning: The “Mexico City” Policy,
by Larry Nowels.
CRS Report RL30932, Microenterprise and U.S. Foreign Assistance, by Curt
Tarnoff.
CRS Issue Brief IB96008. Multilateral Development Banks: Issues for the 108th
Congress, by Jonathan Sanford.
CRS Report 98-567. The Overseas Private Investment Corporation: Background
and Legislative Issues, by James Jackson.
CRS Report RS21168. The Peace Corps: USA Freedom Corps Initiative, by Curt
Tarnoff.
CRS Report RL30545.
Trafficking in Women and Children: The U.S. and
International Response, by Francis Miko.
CRS Issue Brief IB96026. U.S. International Population Assistance: Issues for
Congress, by Larry Nowels.
CRS Report RL31689. U.S. International Refugee Assistance: Issues for Congress,
by Rhoda Margesson.
CRS Report RL31433. U.S. Global Health Priorities: USAID’s Global FY2003
Budget, by Tiaji Salaam.
Country and Regional Issues
CRS Report RL31355.
Afghanistan’s Path to Reconstruction: Obstacles,
Challenges, and Issues for Congress, by Rhoda Margesson.
CRS Report RL30883. Africa: Scaling up the Response to the HIV/AIDS Pandemic,
by Raymond Copson.
CRS Issue Brief IB95052. Africa: U.S. Foreign Assistance Issues, by Raymond
Copson.
CRS Report RL31383. Andean Regional Initiative (ARI): FY2002 Supplemental and
FY2003 Assistance for Colombia and Neighbors, by Nina Serafino and K. Larry
Storrs.
CRS Report RS21213. Colombia: Summary and Tables on U.S. Assistance, by Nina
Serafino.
CRS Issue Brief IB93087. Egypt-United States Relations, by Clyde Mark.

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CRS-69
CRS Report RS21301. The Food Crisis in Southern Africa: Background and Issues,
by Charles Hanrahan.
CRS Issue Brief IB95077. The Former Soviet Union and U.S. Foreign Assistance,
by Curt Tarnoff.
CRS Report RL31833.
Iraq: Recent Developments in Humanitarian and
Reconstruction Assistance, by Rhoda Margesson and Curt Tarnoff.
CRS Issue Brief IB85066. Israel: U.S. Foreign Assistance, by Clyde Mark.
CRS Issue Brief IB93085. Jordan: U.S. Relations and Bilateral Issues, by Alfred
Prados.
CRS Report RL31412. Mexico’s Counter-Narcotics Efforts Under Fox, December
2000 to April 2002, by K. Larry Storrs.
CRS Report RS21457, The Middle East Partnership Initiative: An Overview, by
Jeremy Sharp.
CRS Report RL31744. Middle East: U.S. Foreign Assistance, FY2002, FY2003, and
FY2004 request, by Clyde Mark.
CRS Report RS21353. New Partnership for Africa’s Development (NEPAD), by
Nicholas Cook.
CRS Report RS20895. Palestinians: U.S. Assistance, by Clyde Mark.
CRS Report RL31814.
Potential Humanitarian Issues in Post-War Iraq: An
Overview for Congress, by Rhoda Margesson and Johanna Bockman.
CRS Report RL31759. Reconstruction Assistance in Afghanistan: Goals, Priorities,
and Issues for Congress, by Rhoda Margesson.
CRS Issue Brief IB98043. Sudan: Humanitarian Crisis, Peace Talks, Terrorism and
U.S. Policy, by Ted Dagne.
CRS Report RL31785. U.S. Assistance to North Korea, by Mark Manyin and Ryun
Jun.
CRS Report RL31362.
U.S. Foreign Aid to East and South Asia: Selected
Recipients, by Thomas Lum.
Selected World Wide Web Sites
African Development Bank
[http://www.afdb.org/home.htm]

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CRS-70
African Development Foundation
[http://www.adf.gov/]
Asian Development Bank
[http://www.adb.org/]
CRS Current Legislative Issues: Foreign Affairs
[http://www.crs.gov/products/browse/is-foreignaffairs.shtml]
Export-Import Bank
[http://www.exim.gov/]
Global Fund to Fight AIDS, Tuberculosis, and Malaria
[http://www.globalfundatm.org/]
Inter-American Development Bank
[http://www.iadb.org/]
Inter-American Foundation
[http://www.iaf.gov/index/index_en.asp]
International Fund for Agricultural Development
[http://www.ifad.org]
International Monetary Fund
[http://www.imf.org/]
Overseas Private Investment Corporation
[http://www.opic.gov/]
Peace Corps
[http://www.peacecorps.gov/]
Trade and Development Agency
[http://www.tda.gov/]
United Nations Children’s Fund (UNICEF)
[http://www.unicef.org/]
United Nations Development Program (UNDP)
[http://www.undp.org/]
United Nations Population Fund (UNFPA)
[http://www.unfpa.org/]
United Nations Program on HIV/AIDS (UNAIDS)
[http://www.unaids.org/]
U.S. Agency for International Development — Home Page
[http://www.usaid.gov/]

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CRS-71
U.S. Agency for International Development — Congressional Budget Justification
[http://www.usaid.gov/policy/budget/]
U.S. Agency for International Development — Emergency Situation Reports
[http://www.usaid.gov/our_work/humanitarian_assistance/disaster_assistance/cou
ntries/fy2003_index.html]
U.S. Agency for International Development — Foreign Aid Data (“Greenbook”)
[http://qesdb.cdie.org/gbk/index.html]
U.S. Department of State — Home Page
[http://www.state.gov/]
U.S. Department of State — Foreign Operations Budget Justification, FY2004
[http://www.state.gov/m/rm/rls/cbj/2004/]
U.S. Department of State — International Affairs Budget Request, FY2004
[http://www.state.gov/m/rm/rls/iab/2004/]
U.S. Department of State — International Topics and Issues
[http://www.state.gov/interntl/]
U.S. Department of the Treasury — Office of International Affairs
[http://www.ustreas.gov/offices/international-affairs/index.html]
World Bank
[http://www.worldbank.org/]
World Bank HIPC website
[http://www.worldbank.org/hipc/]

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CRS-72
Table 15. Foreign Operations: Discretionary Budget Authority
(millions of dollars)
FY2003
FY2003
FY2003
FY2004
FY2004
FY2004
Program
FY2004 Senate
Regulara
Supp.b
Total
Request
House
Enacted
Title I - Export and Investment Assistance:
Export-Import Bank
564.4
—
564.4
42.6
37.4
41.4
—
Overseas Private Invest Corp
(242.5)
—
(242.5)
(205.6)
(206.6)
(206.6)
—
Trade/Development Agency
46.7
—
46.7
60.0
50.0
50.0
—
Total, Title I - Export Aid
368.6
0.0
368.6
(103.0)
(119.2)
(115.2)
—
Title II - Bilateral Economic:
Development Assistance:
Child Survival & Health (CS/H)
1,824.6
90.0
1,914.6
1,615.0c
2,235.8c
1,555.0c
—
Global AIDS Initiative
—
—
—
450.0
d
700.0
—
Development Assistance Fund (DA)
1,380.0
—
1,380.0
1,345.0
1,317.0
1,423.0
—
Subtotal, CS/H, AIDS, & DA
3,204.6
90.0
3,294.6
3,410.0
3,552.8
3,678.0
—
Intl Disaster Aid
288.1
143.8
431.9
235.5
315.5
235.5
—
Famine Fund
—
—
—
200.0
e
100.0
—
Transition Initiatives
49.7
—
49.7
55.0
55.0
55.0
—
Development Credit Programs
7.5
—
7.5
8.0
8.0
8.0
—
Subtotal, Development Aid
3,549.9
233.8
3,783.7
3,908.5
3,931.3
4,076.5
—
USAID Operating Expenses
568.3
24.5
592.8
604.1
604.1
604.1
—
USAID Inspector General
33.1
—
33.1
35.0
35.0
35.0
—
USAID Capital Investment Fund
42.7
—
42.7
146.3
49.3
100.0
—
Subtotal, Development Aid & USAID
4,194.0
258.3
4,452.3
4,693.9
4,619.7
4,815.6
—

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CRS-73
FY2003
FY2003
FY2003
FY2004
FY2004
FY2004
Program
FY2004 Senate
Regulara
Supp.b
Total
Request
House
Enacted
Economic Support Fund (ESF)
2,255.2
2,422.0
4,677.2
2,535.0
2,240.5
2,415.0
—
International Fund for Ireland
24.8
—
24.8
[12.5]f
19.6
—
—
Eastern Europe/Baltic States
521.6
—
521.6
435.0
452.0
445.0
—
Former Soviet Union
755.1
—
755.1
576.0
576.0
596.0
—
Emergency Fund for Complex Crises
—
—
—
100.0
—
—
—
Iraq Relief and Reconstruction Fund
—
2,475.0
2,475.0
—
—
—
—
Inter-American Foundation
16.1
—
16.1
15.2
15.2
16.3
—
African Development Foundation
18.6
—
18.6
17.7
17.7
18.7
—
Peace Corps
295.1
—
295.1
359.0
314.0
310.0
—
Millennium Challenge Account
—
—
—
1,300.0
800.0
1,000.0
—
Intl Narcotics/Law Enforcement
195.7
25.0
220.7
284.6
241.7
284.6
—
Intl Narcotics — Andean Initiative
695.5
34.0
729.5
731.0
731.0
660.0
—
Migration & Refugee Assistance
781.9
—
781.9
760.2
760.2
760.2
—
Emergency Refugee Fund (ERMA)
25.8
80.0
105.8
40.0
15.8
40.0
—
Non-Proliferation/anti-terrorism
304.4
28.0
332.4
385.2
335.2
385.2
—
Treasury Dept. Technical Assistance
10.7
—
10.7
14.0
19.0
12.0
—
Debt reduction
—
—
—
395.0
95.0
195.0
—
Total Title II-Bilateral Economic
10,094.5
5,322.3
15,416.8
12,641.8
11,252.6
11,953.6
—
Title III - Military Assistance:
Intl Military Ed. & Training
79.5
—
79.5
91.7
91.1
91.7
—
Foreign Mil Financing (FMF)
4,045.5
2,059.1
6,104.6
4,414.0
4,314.0
4,384.0
—

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CRS-74
FY2003
FY2003
FY2003
FY2004
FY2004
FY2004
Program
FY2004 Senate
Regulara
Supp.b
Total
Request
House
Enacted
Peacekeeping Operations
114.3
100.0
214.3
94.9
85.0
84.9
—
Total, Title III-Military Aid
4,239.3
2,159.1
6,398.4
4,600.6
4,490.1
4,560.6
—
Title IV - Multilateral Economic Aid:
World Bank - Intl Develop. Assn
844.5
—
844.5
976.8
850.0
976.8
—
World Bank Environment Facility
146.9
—
146.9
185.0
107.5
171.0
—
World Bank-Multilateral Investment. Guaranty
1.6
—
1.6
4.0
4.0
1.1
—
Inter-Amer. Development Bank
42.7
—
42.7
63.5
25.0
39.5
—
Asian Development Bank
97.3
—
97.3
151.9
151.9
136.9
—
African Development Fund
107.4
—
107.4
118.1
107.4
118.1
—
African Development Bank
5.1
—
5.1
5.1
5.1
5.1
—
European Bank for R & D
35.6
—
35.6
35.4
35.4
35.4
—
Intl Fund for Ag Development
14.9
—
14.9
15.0
15.0
15.0
—
Intl Organizations & Programs
193.9
—
193.9
194.6c
194.6
194.6c
—
Total, Title IV - Multilateral
1,489.9
—
1,489.9
1,749.4
1,495.9
1,693.5
—
TOTAL, Foreign Operations
16,192.3
7,481.4
23,673.7
18,888.8
17,119.4
18,092.5
—
Sources: House Appropriations Committee and CRS adjustments.
a. Pursuant to Sec. 601 of P.L. 108-7, the Consolidated Appropriations Act, FY2003 and within which regular Foreign Operations funds were enacted, most accounts were reduced
by 0.65%. Figures for each account in this column include the 0.65% across-the-board rescission.
b. FY2003 supplemental includes funds appropriated in P.L. 108-11, the Iraq War Supplemental.

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CRS-75
c. The Child Survival and Health (CS/H) request includes a $120 million proposed contribution to UNICEF. The Administration requested and the Senate bill (S. 1426) placed these
funds in title IV, International Organizations and Programs account. For several years, however, Congress has made the UNICEF contribution part of the CS/H account, and
for comparative purposes, the UNICEF funds are included in the CS/H total for each column. Accordingly, the $120 million UNICEF transfer is excluded from the FY2004
International Organizations and Programs (I,O&P) request and Senate level. If the UNICEF contribution is included in I,O&P account, the Senate levels would be $1.435 billion
for CS/H and $314.6 million for I,O&P.
d. Funding for the Global AIDS Initiative is included in the Child Survival and Health account.
e. Funding for the Famine Fund is included in the International Disaster Aid account.
f. The Administration request includes the Ireland Fund as part of the Economic Support Fund.

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