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

Contents

• Foreign Assistance: An Introduction to U.S. Programs and Policy
• How Is "U.S. Foreign Assistance" Defined and Counted?
• Foreign Aid Purposes and Priorities
• What Are the Rationales and Objectives of U.S. Foreign Assistance?
• Rationales for Foreign Aid
• Objectives of Foreign Aid
• What Are the Major Foreign Aid Funding Categories and Accounts?
• Bilateral Development Assistance
• Multilateral Development Assistance
• Humanitarian Assistance
• Assistance Serving Both Development and Special Political/Strategic Purposes
• Nonmilitary Security Assistance
• Military Assistance
• Delivery of Foreign Assistance
• What Executive Branch Agencies Implement Foreign Assistance Programs?
• U.S. Agency for International Development
• U.S. Department of Defense
• U.S. Department of State
• U.S. Department of Health and Human Services
• U.S. Department of the Treasury
• Millennium Challenge Corporation
• Other Agencies
• What Are the Different Forms in Which Assistance Is Provided?
• Training
• Expertise
• Grants
• In-Kind Goods
• Economic Infrastructure
• Direct Budget Support
• How Much Assistance Is Provided as Loans and How Much as Grants? What Are Some Types of Loans? Have Loans Been Repaid? Why Is Repayment of Some Loans Forgiven?
• Loan/Grant Composition
• Loan Guarantees
• Debt Forgiveness
• What Are the Roles of Government and Private Sector in Development and Humanitarian Assistance Delivery?
• Which Countries Receive U.S. Foreign Assistance?
• Foreign Aid Spending
• How Large Is the U.S. Foreign Assistance Budget?
• What Does Overseas Contingency Operations (OCO) Mean?
• How Much of Foreign Assistance Dollars Are Spent on U.S. Goods and Services?
• How Does the United States Rank as a Donor of Foreign Aid?
• Congress and Foreign Assistance
• What Congressional Committees Oversee Foreign Aid Programs?
• What Are the Major Foreign Aid Legislative Vehicles?

Summary

Foreign assistance is the largest component of the international affairs budget and is viewed by many Members of Congress as an essential instrument of U.S. foreign policy. On the basis of national security, commercial, and humanitarian rationales, U.S. assistance flows through many federal agencies and supports myriad objectives. These objectives include promoting economic growth, reducing poverty, improving governance, expanding access to health care and education, promoting stability in conflict regions, countering terrorism, promoting human rights, strengthening allies, and curbing illicit drug production and trafficking. Since the terrorist attacks of September 11, 2001, foreign aid has increasingly been associated with national security policy. At the same time, many Americans and some Members of Congress view foreign aid as an expense that the United States cannot afford given current budget deficits.

In FY2018, U.S. foreign assistance, defined broadly, totaled an estimated $46.89 billion, or 1% of total federal budget authority. About 43% of this assistance was for bilateral economic development programs, including political/strategic economic assistance; 35% for military aid and nonmilitary security assistance; 18% for humanitarian activities; and 4% to support the work of multilateral institutions. Assistance can take the form of cash transfers, equipment and commodities, infrastructure, education and training, or technical assistance, and, in recent decades, is provided almost exclusively on a grant rather than loan basis. Most U.S. aid is implemented by nongovernmental organizations rather than foreign governments. The United States is the largest foreign aid donor in the world, accounting for about 20% of total official development assistance from major donor governments in 2018 (the latest year for which these data are available).

Key foreign assistance trends since 2001 include growth in development aid, particularly global health programs; increased security assistance directed toward U.S. allies in the anti-terrorism effort; and high levels of humanitarian assistance to address a range of crises. Adjusted for inflation, annual foreign assistance funding since 2001 has been its highest since the Marshall Plan in the years immediately following World War II. In FY2018, Afghanistan, Israel, Jordan, Egypt, and Iraq received the largest amounts of U.S. assistance, reflecting long-standing commitments to Israel and Egypt, the strategic significance of Afghanistan and Iraq, and the strategic and humanitarian importance of Jordan as the crisis in neighboring Syria continues. Sub-Saharan Africa received 26% of assistance allocated by country or region in FY2018, followed by the Middle East and North Africa, at 24%, and South and Central Asia, at 17%. This was a significant shift from a decade prior, when sub-Saharan Africa received 19% of aid and the Middle East and North Africa 30%, reflecting significant increases in HIV/AIDS-related and humanitarian assistance programs concentrated in Africa between FY2008 and FY2018 and the drawdown of U.S. military forces in Iraq and Afghanistan. Military assistance to Iraq began to decline starting in FY2011, but growing concern about the Islamic State in Iraq and Syria (ISIS) has reversed this trend.

This report provides an overview of the U.S. foreign assistance program by answering frequently asked questions on the subject. It is intended to provide a broad view of foreign assistance over time, and will be updated periodically. For more current information on foreign aid funding levels, see CRS Report R45763, Department of State, Foreign Operations, and Related Programs: FY2020 Budget and Appropriations, by Cory R. Gill, Marian L. Lawson, and Emily M. Morgenstern.

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

U.S. foreign assistance (also commonly called foreign aid—the two terms are used interchangeably in this report) is the largest component of the international affairs budget, for decades viewed by many Members of Congress as an essential instrument of U.S. foreign policy.¹ Since the European Recovery Program (better known as the Marshall Plan) helped rebuild Europe after World War II, in an effort to bolster the economy of postwar Europe, prevent the expansion of communism, and jumpstart world trade, modern U.S. foreign assistance programs have continually evolved to reflect changing foreign policy strategy, global challenges, and U.S. domestic priorities.² The Cold War emphasis on containing communism was replaced by regional development priorities and a focus on counter-narcotics assistance in the 1990s. After the terrorist attacks of September 11, 2001, a large portion of U.S. assistance focused on counterterrorism programs and efforts related to U.S. military interventions in Iraq and Afghanistan. At the same time, global health assistance expanded significantly to address the global HIV/AIDS epidemic. More recently, foreign assistance policy has focused on competing with China and Russia and addressing protracted global humanitarian crises. Each year, the size, composition, and purpose of foreign assistance programs are considered by Congress, primarily through the appropriations process.

This report addresses a number of the more frequently asked questions regarding U.S. foreign assistance; its objectives, costs, and organization; the role of Congress; and how it compares to those of other aid donors. It attempts not only to present a current snapshot of American foreign assistance, but also to illustrate the extent to which this instrument of U.S. foreign policy has evolved over time.

Data presented in the report are the most current, consistent, and reliable figures available, generally updated through FY2018. Dollar amounts come from a variety of sources, including the U.S. Agency for International Development (USAID) Foreign Aid Explorer database (Explorer) and annual Department of State, Foreign Operations, and Related Programs (SFOPS) appropriations acts. As new data are obtained or additional issues and questions arise, the report will be revised.

Foreign assistance abbreviations used in this report are listed in Appendix B.

How Is "U.S. Foreign Assistance" Defined and Counted?

In its broadest sense, U.S. foreign assistance, or foreign aid, is defined under the Foreign Assistance Act of 1961 (P.L. 87-195, FAA), the primary legislative basis of these programs, as

any tangible or intangible item provided by the United States Government [including "by means of gift, loan, sale, credit, or guaranty"] to a foreign country or international organization under this or any other Act, including but not limited to any training, service, or technical advice, any item of real, personal, or mixed property, any agricultural commodity, United States dollars, and any currencies of any foreign country which are owned by the United States Government.... (§634(b))

For many decades, nearly all assistance annually requested by the executive branch and debated and authorized by Congress was ultimately encompassed in the foreign operations appropriations (currently within the Department of State, Foreign Operations and Related Programs [SFOPS] appropriations measure but before FY2008, housed in the Foreign Operations, Export Financing, and Related Programs appropriations measure) and the international food aid title of the agriculture appropriations.³ In the U.S. federal budget, the 150 (international affairs) budget function has subsumed these traditional foreign assistance accounts.⁴ The SFOPS bill and Function 150 budget also include State Department diplomatic and related programs, which are not considered foreign assistance.

By the 1990s, it became increasingly apparent that the scope of U.S. foreign assistance was not fully accounted for by the total of the foreign operations and international food aid appropriations. Many U.S. departments and agencies had adopted their own assistance programs, funded out of their own budgets and commonly in the form of professional exchanges with counterpart agencies abroad. These assistance efforts, conducted outside the purview of the traditional foreign aid authorizing and appropriations committees, grew more substantial and varied in the mid-1990s. The Department of Defense (DOD) Nunn-Lugar effort provided billions in aid to secure and eliminate nuclear and other weapons, as did Department of Energy activities to control and protect nuclear materials—both aimed largely at the former Soviet Union. Growing participation by DOD in health and humanitarian efforts and expansion of health programs in developing countries by the National Institutes of Health and Centers for Disease Control and Prevention, especially in response to the HIV/AIDS epidemic, followed. In the wake of the September 11, 2001 terrorist attacks on the United States, and the subsequent U.S. invasions of Iraq and Afghanistan, DOD-funded and implemented aid programs in Iraq and Afghanistan to train and equip foreign forces and win hearts and minds through development efforts have at times been considerably larger than other military and development assistance programs provided under the foreign operations appropriations.

While the executive branch requests and Congress debates most foreign aid within the parameters of the SFOPS appropriation, both branches of government have sought to ascertain a fuller picture of assistance programs through improved data collection and reporting. Significant discrepancies remain between data available for different types of aid and, therefore, the level of analysis applied to each. (See text box, "A Note on Numbers and Sources," below.) Nevertheless, to the extent possible, this report tries to capture the broadest definition of aid throughout.

Foreign Aid Purposes and Priorities

What Are the Rationales and Objectives of U.S. Foreign Assistance?

Foreign assistance is predicated on several rationales and supports many objectives. The importance and emphasis of various rationales and objectives have changed over time.

Rationales for Foreign Aid

Throughout the past 70 years, there have been three key rationales for foreign assistance:

• National Security. The predominant theme of U.S. assistance programs has been national security. From rebuilding Europe after World War II under the Marshall Plan (1948-1951) and throughout the Cold War, policymakers have viewed U.S. aid programs as a way to prevent the incursion of communist influence and secure U.S. base rights or other support in the anti-Soviet struggle. After the Cold War ended, the focus of foreign aid shifted from global anti-communism to disparate regional issues, such as Middle East peace initiatives, the Development Fund for Africa, the transition to democracy of eastern Europe and republics of the former Soviet Union, and international illicit drug production and trafficking in the Andes. Without an overarching security rationale, foreign aid budgets decreased in the 1990s. However, after the September 11, 2001, terrorist attacks in the United States, policymakers frequently cast foreign assistance as a tool in U.S. counterterrorism strategy, increasing aid to partner states in counterterrorism efforts and funding the substantial reconstruction programs in Afghanistan and Iraq. More recently, policymakers have viewed foreign assistance as a tool to counter the global influence of nations that may threaten U.S. security interests, including China, Russia and Iran.
• Commercial Interests. Foreign assistance has long been defended as a way to either promote U.S. exports by creating new customers for U.S. goods and services or by improving the global economic environment in which U.S. companies compete. Among the objectives of the aforementioned Marshall Plan was to reestablish the capacity of European countries to be U.S. trade partners.
• Humanitarian Concerns. Humanitarian concerns drive both short-term assistance in response to crisis and disaster as well as long-term development assistance aimed at reducing poverty, fighting disease, and other forms of human suffering brought on by more systemic problems. Providing assistance for humanitarian reasons has generally been the aid rationale most broadly supported by the American public and policymakers alike.

Objectives of Foreign Aid

The objectives of aid generally fit within these rationales. In 2006, in an effort to rationalize the assistance program more clearly, the State Department developed a framework that organizes U.S. foreign aid around five strategic objectives, each of which includes a number of program elements, also known as sectors. The five objectives are Peace and Security; Investing in People; Governing Justly and Democratically; Economic Growth; and Humanitarian Assistance. Generally, these objectives and their sectors do not correspond to any one particular budget account in appropriations bills.⁶ Annually, the Department of State and USAID develop their foreign operations budget request within this framework, allowing for an objective and program-oriented viewpoint for those who seek it. USAID's Explorer website (explorer.usaid.gov) currently provides a more complete picture of funds obligated for each objective from all parts of the U.S. government (see Table 1).

Characterizing aid in this way may provide an incomplete picture, as there is considerable overlap among aid categories and purposes. A health project directed at alleviating the effects of HIV/AIDS by feeding orphan children, for example, may also stimulate grassroots democracy and civil society through support of local NGOs. Microcredit programs that support small business development may at the same time enable client entrepreneurs to provide food and education to their children. Water and sanitation improvements may both mitigate health threats and stimulate economic growth by saving time previously devoted to water collection, raising school attendance for girls and facilitating tourism, among other effects.

What Are the Major Foreign Aid Funding Categories and Accounts?

The framework used by the Department of State since 2006 organizes assistance by strategic objective and sector. But there are many other ways to categorize foreign aid, one of which is according to the types of activities foreign aid accounts are expected to support, using broad categories such as military, bilateral development, multilateral development, humanitarian assistance, political/strategic, and nonmilitary security activities. SFOPS appropriations legislation organizes aid accounts by this methodology, which can be applied to the international food aid title of the Agriculture appropriations as well as to DOD and other government agency assistance programs. Figure 1 shows total FY2018 (the most recent year for which complete data are available) foreign assistance obligations from all government agencies categorized this way.

Figure 1. FY2018 Aid Program Composition

Source: USAID Explorer and CRS calculations.

Bilateral Development Assistance

For FY2018, U.S. government departments and agencies obligated about $15.4 billion (33% of total foreign aid) for bilateral development assistance, which is generally intended to improve the economic development and welfare of poor countries. USAID and the State Department jointly implement the majority of bilateral development assistance, administering the Development Assistance (DA) and Global Health (Global Health-USAID and Global Health-State) accounts and the Operating Expenses account that allows USAID to operate. Other bilateral development assistance accounts support the development efforts of distinct agencies, such as the Peace Corps, Inter-American Foundation (IAF), Millennium Challenge Corporation (MCC), and the new U.S. International Development Finance Corporation (DFC) among others.

By far the largest portion of bilateral development assistance is devoted to global health. These programs include maternal and child health, family planning and reproductive health programs, and strengthening the government health systems that provide care. In recent months, addressing the COVID-19 pandemic in developing countries has become a global health priority. The largest share of funding, however, is directed toward treating and combatting the spread of HIV/AIDS, malaria, and tuberculosis. These funds are largely directed through the State Department's Office of the Global AIDS Coordinator to other agencies, including USAID and the Centers for Disease Control and Prevention. The latter agency and the National Institutes for Health also conduct programs funded by Labor-Health and Human Services (HHS) appropriations.⁷

Bilateral development assistance programs also aim to foster sustainable broad-based economic progress and social stability in developing countries. USAID largely manages this aid to fund long-term projects in a wide range of areas. Many programs share the objective in the State Department framework of "promoting economic growth and prosperity":

• Agriculture programs focus on reducing poverty and hunger, promoting trade opportunities for farmers, and encouraging sound environmental practices for sustainable agriculture. This includes Food for Peace Act (FFPA) funds used to provide nonemergency food commodities for development-oriented purposes and send hundreds of U.S. volunteers as technical advisors to train farm and food-related groups throughout the world.⁸
• Private sector development programs include support for business associations, small and medium enterprises, and microfinance services.
• Programs for managing natural resources and protecting the global environment focus on conserving biodiversity; improving the management of land, water, and forests; encouraging clean and efficient energy production and use; and reducing the threat of global climate change.
• Programs with the objective of "governing justly and democratically" include support for promoting rule of law and human rights, good governance, political competition, and civil society.
• Programs with the objective of "investing in people" include support for basic, secondary, and higher education; improving government ability to provide social services; water and sanitation; and health care.

Independent agencies, such as the Peace Corps and Millennium Challenge Corporation also administer programs considered under bilateral development assistance.

Multilateral Development Assistance

A share of U.S. foreign assistance—4% in FY2018 ($1.8 billion)—is provided to finance multilateral development projects. Multilateral aid is funded largely through the International Organizations and Programs (IO&P) account and individual accounts for each of the Multilateral Development Banks (MDBs). This aid is distinct from U.S. dues (assessed contributions) paid to multilateral organizations such as the United Nations, which are not considered foreign assistance.⁹ It is also distinct from bilateral assistance which may be implemented by multilateral agencies under a contract or cooperative agreement with a U.S. agency. Multilateral development assistance is a method of combining U.S. funds with contributions from other donor nations to share the costs of economic development activities, drawing on a wider range of development experience and perspectives. This collaborative approach means the United States has less control over multilateral assistance than over bilateral economic assistance, though it also affords the United States a voice in such multilateral efforts. In determining U.S. contributions to the various multilateral institutions the United States faces the challenge of finding the right balance between the benefits of burden sharing and the constraints of sharing control. Policymakers may also consider the strategic implications of U.S. funding levels relative to those of other donors, as funding may be commensurate with influence in come multilateral fora.

In FY2018, the United States contributed to the United Nations Children's Fund (UNICEF); the United Nations Development Program (UNDP); and MDBs, such as the World Bank.¹⁰ The U.S. share of donor contributions to each of the MDB concessional (subsidized) and nonconcessional (market rate) loan windows varies widely. For the largest MDB, the World Bank, the United States has contributed about 20.5% to the concessional lending window (the International Development Association [IDA]) and about 17.3% to the nonconcessional lending window (the International Bank for Reconstruction and Development [IBRD]).

Humanitarian Assistance

Unlike development assistance programs, which are often viewed as long-term efforts that may have the effect of preventing future crises from emerging, humanitarian assistance programs are devoted largely to the immediate alleviation of human suffering in both natural and human-induced disasters, including conflict associated with failed or failing states. For FY2018, obligations for humanitarian assistance programs amounted to $8.5 billion, 18% of total assistance. The largest portion of humanitarian assistance is managed through the International Disaster Assistance (IDA) account by USAID, which provides relief and rehabilitation to victims of human-induced and natural disasters. Recent responses have addressed the economic and social dislocations of the ongoing crises in Syria, South Sudan, Yemen, and Venezuela. A portion of IDA is used for food assistance through the Emergency Food Security Program.

Additional humanitarian assistance goes to programs administered by the State Department and funded under the Migration and Refugee Assistance (MRA) and the Emergency Refugee and Migration Assistance (ERMA) accounts, aimed at addressing the needs of refugees and internally displaced persons. These accounts support a number of refugee relief organizations, including the U.N. High Commission for Refugees and the International Committee of the Red Cross. The Department of Defense also provides disaster relief under the Overseas Humanitarian, Disaster, and Civic Assistance (OHDACA) account of the DOD appropriations. (For further information on humanitarian programs, see CRS In Focus IF10568, Overview of the Global Humanitarian and Displacement Crisis, by Rhoda Margesson.)

Approximately 80% of FFPA Title II Agriculture appropriations—$1.4 billion in obligations in FY2018—are used by USAID to address emergency needs, mostly to purchase U.S. agricultural commodities to supplement both refugee and disaster assistance programs.¹¹

Assistance Serving Both Development and Special Political/Strategic Purposes

A few accounts promote special U.S. political and strategic interests. Programs funded through the Economic Support Fund (ESF) account generally aim to promote political and economic stability, often through activities indistinguishable from those provided under regular development programs.¹² However, ESF also provides direct budget support to foreign governments and to support sovereign loan guarantees. For FY2018, USAID and the State Department obligated $4.1 billion, nearly 9% of total assistance, through this account.

For many years, following the 1979 Camp David accords, most ESF funds went to support the Middle East Peace Process—in FY1998, for example, 88% of ESF went to Israel, Egypt, the West Bank and Jordan. Those proportions have been significantly lower in recent decades. In FY2008, 19% of ESF funding went to these countries and, in FY2018, 26%. Since the September 2001 terrorist attacks, ESF has largely supported countries of importance in the U.S. global counterterrorism strategy. In FY2008, for example, activities in Iraq and Afghanistan received 56% of ESF funding (21% in FY2018).

Over the years, Congress has established other accounts to meet specific political or security interests (some have since been dissolved once the need was met). One example is the Assistance to Europe, Eurasia, and Central Asia (AEECA) account, established in FY2009 to combine two aid programs that arose from the demise of the Soviet empire to help Central Europe and the newly independent states of the former Soviet Union (FSA) achieve democratic systems and free market economies. Recent SFOPS legislation has also included "funds" and directives drawing from several economic and security assistance accounts to address specific strategic priorities, including the Countering Russian Influence Fund, the Countering Chinese Influence Fund, and the Indo-Pacific Strategy. USAID's Transition Initiatives program also focuses largely on strategic goals, supporting civil society, free media, and inclusive governance in countries and communities in political transition.

In the recent past, several DOD-funded aid programs directed at Afghanistan also supported development efforts with largely strategic objectives. The Afghanistan Infrastructure Fund and the Business Task Force wound down as the U.S. military presence in that country declined; the Commander's Emergency Response Program (CERP) still exists. The latter two programs had earlier iterations as well in Iraq.

Nonmilitary Security Assistance

Several U.S. government agencies support programs to address global concerns that are considered threats to U.S. security and well-being, such as terrorism, illicit narcotics, crime, and weapons proliferation. In the past two decades, policymakers have provided increasing support to these programs. In FY2018, these programs amounted to $2.8 billion, 6% of total assistance.

Since the mid-1990s, three U.S. agencies—State, DOD, and Energy—have provided funding, technical assistance, and equipment to counter the proliferation of chemical, biological, radiological, and nuclear weapons. Originally aimed at the former Soviet Union under the rubric cooperative threat reduction (CTR), these programs seek to ensure that these weapons are secured and their spread to rogue nations or terrorist groups prevented.¹³ The Nonproliferation, Anti-Terrorism, Demining and Related Programs (NADR) account, managed by the State Department, provides for nonproliferation efforts and encompasses civilian anti-terrorism efforts such as detecting and dismantling terrorist financial networks, establishing watch-list systems at border controls, and building partner country anti-terrorism capacities. NADR also funds humanitarian demining programs.

The State Department is the main implementer of counternarcotics programs. The State-managed International Narcotics Control and Law Enforcement (INCLE) account supports counternarcotics activities, most notably in Afghanistan, Pakistan, Peru, and Colombia. Programs funded under INCLE also help develop the judicial systems—assisting judges, lawyers, and legal institutions—of many developing countries, especially in Afghanistan. DOD and USAID also support counternarcotics activities, the former largely by providing training and equipment, the latter by offering alternative crop and employment programs (which are generally considered bilateral development assistance).¹⁴

Military Assistance

The United States provides military assistance to U.S. friends and allies to help them acquire U.S. military equipment and training. At $13.6 billion, military assistance accounted for about 29% of total U.S. foreign aid in FY2018. The Department of State administers three programs, with corresponding appropriations accounts that are then implemented by DOD. Foreign Military Financing (FMF) is the assistance-funded arm of the Foreign Military Sales program, through which the U.S. government procures defense articles for foreign partners. The program supports U.S. foreign policy, as well as the U.S. defense industry, and helps ensure the interoperability of weapons systems among allies and partners. In FY2018, FMF grants primarily supported the security needs of Israel, Egypt, Jordan, and Iraq. The International Military Education and Training program (IMET) offers military training on a grant basis to foreign military officers and personnel. Peacekeeping funds (PKO) are used to support voluntary non-U.N. peacekeeping operations as well as training for an African crisis response force. Since 2002, DOD appropriations have supported FMF-like programs, training and equipping security forces in Afghanistan and Iraq. These programs and the accounts that fund them are called the Afghanistan Security Forces Fund (ASFF) and, through FY2012, the Iraq Security Forces Fund (ISFF). Beginning in FY2015, similar support was provided Iraq under the Iraq Train and Equip Fund.

Delivery of Foreign Assistance

How and in what form assistance reaches an aid recipient can vary widely, depending on the type of aid program, the objective of the assistance, and the agency responsible for providing the aid.

What Executive Branch Agencies Implement Foreign Assistance Programs?

Federal agencies may implement foreign assistance programs using funds appropriated directly to them or funds transferred to them from another agency. For example, significant funding appropriated through State Department and Department of Agriculture accounts is used for programs implemented by USAID (see Figure 2). The funding data in this section reflect the agency that implemented the aid, not necessarily the agency to which funds were originally appropriated.

Figure 2. Foreign Assistance Implementing Agencies, FY2018 (in millions of obligated U.S. dollars)

Source: USAID Explorer and CRS calculations. Notes: MCC = Millennium Challenge Corporation; HHS =Department of Health and Human Services. "Other" agencies that implemented foreign assistance in FY2018 are the Department of Energy, Department of Agriculture, Peace Corps, Department of the Interior, Department of the Army, Department of the Air Force, Department of Labor, Inter-American Foundation, African Development Foundation, Trade and Development Agency, Department of the Navy, Environmental Protection Agency, Department of Justice, Department of Transportation, Department of Homeland Security, and Department of Commerce. The Export-Import Bank and the Overseas Private Investment Corporation/U.S. International Development Finance Corporation are not reflected in the figure because their receipts generally exceed their appropriations, resulting in a net gain in budget terms.

U.S. Agency for International Development

For 50 years, USAID has implemented the bulk of the U.S. bilateral development and humanitarian assistance. It directly implements the Development Assistance, International Disaster Assistance, and Transition Initiatives accounts, as well as a USAID-designated portion of the Global Health Programs account. Jointly with the State Department, USAID co-manages ESF, AEECA, and Democracy Fund programs, which frequently support development activities as a means of promoting U.S. political and strategic goals.¹⁵ Based on historical averages, according to USAID, the agency implements more than 90% of ESF, 70% of AEECA, 40% of the Democracy Fund, and about 60% of the Global HIV/AIDS funding appropriated to the State Department. USAID also implements all Food for Peace Act Title II food assistance funded through agriculture appropriations.

USAID obligated an estimated $20.07 billion to implement foreign assistance programs and activities in FY2018.¹⁶ The agency's staff in 2018 totaled 9,747,¹⁷ of which about 67% were working overseas, overseeing the implementation of hundreds of projects undertaken by thousands of private sector contractors, consultants, and nongovernmental organizations.¹⁸

U.S. Department of Defense

DOD implements all SFOPS-funded military assistance programs—FMF, IMET, and PKO—in conjunction with the policy guidance of the Department of State. The Defense Security Cooperation Agency is the primary DOD body responsible for these programs. DOD also carries out an array of state-building activities, funded through defense appropriations legislation, which are usually in the context of training exercises and military operations. These sorts of activities, once the exclusive jurisdiction of civilian aid agencies, include development assistance to Iraq and Afghanistan through the Commander's Emergency Response Program (CERP), the Iraq Relief and Reconstruction Fund, and the Afghanistan Infrastructure Fund, and elsewhere through the Defense Health Program, counterdrug activities, and humanitarian and disaster relief. Training and equipping of Iraqi and Afghan police and military, though similar in nature to some traditional security assistance programs, has been funded and implemented primarily through DOD appropriations, though implementing the Iraq police training program was a State Department responsibility from 2012 until it was phased out in 2013.

In FY2018, DOD implemented an estimated $13.31 billion in foreign assistance programs.¹⁹

U.S. Department of State

The Department of State manages and co-manages a wide range of assistance programs. It is the lead U.S. civilian agency on security and refugee related assistance, and has sole responsibility for administering the International Narcotics Control and Law Enforcement (INCLE) and Nonproliferation, Antiterrorism, Demining and Related Programs (NADR) accounts, the two Migration and Refugee accounts (MRA and ERMA), and the International Organizations and Programs (IO&P) account. State is also home to the Office of the Global AIDS Coordinator (OGAC), which manages the State Department's portion of Global Health funding in support of HIV/AIDS programs, though many of these funds are transferred to and implemented by USAID, the National Institutes of Health, and the Centers for Disease Control and Prevention.

In conjunction with USAID, the State Department manages the Economic Support Fund (ESF), AEECA assistance to the former communist states, and Democracy Fund accounts. For these accounts, the State Department largely sets the overall policy and direction of funds, while USAID implements the preponderance of programs. In addition, the State Department, through its Bureau of Political-Military Affairs, has policy authority over the Foreign Military Financing (FMF), International Military Education and Training (IMET), and Peacekeeping Operations (PKO) accounts, and, while it was active, the Pakistan Counterinsurgency Capability Fund (PCCF). These programs are implemented by the Department of Defense. Police training programs have traditionally been the responsibility of the International Narcotics and Law Enforcement (INL) Office in the State Department, though programs in Iraq and Afghanistan were implemented and paid for by the Department of Defense for several years.

State is also the organizational home to the Office of U.S. Foreign Assistance Resources (formerly the Office of the Director of Foreign Assistance), which was created in 2006 to coordinate U.S. foreign assistance programs. The office establishes standard program structures and definitions, as well as performance indicators, and collects and reports data on State Department and USAID aid programs.

The State Department implemented about $7.36 billion in foreign assistance funding in FY2018, though it has policy authority over a much broader range of assistance funds.²⁰

U.S. Department of Health and Human Services

The U.S. Department of Health and Human Services implements a range of global health programs through its various component institutions. As an implementing partner in the President's Emergency Plan for AIDS Relief (PEPFAR), a large portion of HHS foreign assistance activities are related to HIV prevention and treatment, including technical support and preventing mother to child transmission of HIV/AIDS. The Centers for Disease Control and Prevention (CDC) participates in a broad range of global disease control activity, including rapid outbreak response, global research and surveillance, information technology assistance, and field epidemiology and laboratory training. The National Institutes of Health (NIH) also conduct international health research that is reported as assistance.

In FY2018, HHS institutions implemented $2.12 billion in foreign assistance activities.²¹

U.S. Department of the Treasury

The Department of the Treasury's Under Secretary for International Affairs administers U.S. contributions to and participation in the World Bank and other multilateral development institutions. Presidentially appointed U.S. executive directors at each of the banks represent the United States' point of view. Treasury also deals with foreign debt reduction issues and programs, including U.S. participation in the Highly Indebted Poor Countries (HIPC) initiative. The agency manages the distribution of funds and negotiates program structure, but does not implement programs. Treasury, however, does directly implement a bilateral technical assistance program offering temporary financial advisors to countries implementing major economic reforms and combating terrorist finance activity.

For FY2018, the Department of the Treasury managed foreign assistance valued at about $1.56 billion.²²

Millennium Challenge Corporation

Created in February 2004, the Millennium Challenge Corporation (MCC) seeks to concentrate significantly higher amounts of U.S. resources in a few low- and lower-middle-income countries that have demonstrated a strong commitment to political, economic, and social reforms relative to other developing countries. A significant feature of the MCC effort is that recipient countries formulate, propose, and implement mutually agreed five-year U.S.-funded project plans known as compacts. Compacts in the 27 recipient countries selected to date have emphasized infrastructure projects. The MCC is a U.S. government corporation, headed by a chief executive officer who reports to a board of directors chaired by the Secretary of State. The Corporation maintains a relatively small staff of about 300.

The MCC obligated about $615.3 million in FY2018.²³

Other Agencies

A number of other government agencies play a role in implementing foreign aid programs.

• The Peace Corps, an autonomous agency with FY2018 obligations of $433.1 million,²⁴ supports about 7,300 volunteers in 61 countries.²⁵ Peace Corps volunteers work on a wide range of educational, health, and community development projects.²⁶
• The Trade and Development Agency (TDA), which obligated $13.7 million in FY2018, funds project preparation assistance, such as feasibility studies, and partnership building activities, such as trade missions, likely to generate U.S. exports for overseas infrastructure and other projects.²⁷
• Until recently, the Overseas Private Investment Corporation (OPIC) provided political risk insurance, loans, and guarantees for U.S. private investments in developing countries. Its insurance activities were self-sustaining, but credit reform rules required a relatively small appropriation to back up U.S. guarantees and for administrative expenses. The Better Utilization of Investments Leading to Development Act of 2018 (BUILD Act), signed into law in October 2018 (P.L. 115-254), authorized consolidation of OPIC and USAID's Development Credit Authority into a new U.S. International Development Finance Corporation (DFC), which became operational in December 2019.²⁸ For FY2018, as for most prior years, OPIC receipts exceeded appropriations, resulting in a net gain to the Treasury.²⁹ The DFC is also expected to operate at a net gain to the Treasury.
• The Export-Import (Ex-Im) Bank provides financing and insurance to facilitate the export of U.S. goods and services when the private sector is unwilling or unable to do so and/or to counter foreign export credit financing. Ex-Im Bank receives an annual appropriation for administrative expenses, but its revenues from interest, risk premia, and other fees charged for its support often exceed its appropriation, creating a net gain to the Treasury.
• The Inter-American Foundation and the African Development Foundation, obligating $30.1 million and $17.7 million, respectively, in FY2018,³⁰ finance small-scale enterprise and grassroots self-help activities aimed at assisting poor people.

What Are the Different Forms in Which Assistance Is Provided?

Figure 3. Assistance by Type, FY2018 Obligations

Source: USAID Explorer and CRS calculations.

Most U.S. assistance is now provided as a grant rather than a loan, so as not to increase the heavy debt burden carried by many developing countries. However, the forms a grant may take are diverse. The most common type of U.S. development aid is project-based assistance (77% in FY2018), in which aid is channeled through an implementing partner, most often a contractor or nongovernmental organization, to complete a specific project. Aid is also provided in the form of contributions to international organizations such as the United Nations, technical assistance, and direct budget support (cash transfer) to governments. A portion of aid money is also spent on administrative costs (see Figure 3). Within these categories, aid may take many forms, as described below.

Training

Transfer of knowledge and skills is a significant part of most assistance programs. The International Military Education and Training Program (IMET), for example, provides training to officers of the military forces of allied and friendly nations. Tens of thousands of citizens of aid recipient countries receive short-term technical training or longer-term degree training annually under USAID programs. More than one-quarter of Peace Corps volunteers are English, math, and science teachers, and also fall into this category. Other aid programs provide law enforcement personnel with anti-narcotics or anti-terrorism training.

Expertise

Many assistance programs provide expert advice to government and private sector organizations. For example, the Department of the Treasury, USAID, and U.S.-funded multilateral banks all place specialists in host government ministries to make recommendations on policy reforms in a wide variety of sectors. USAID has often placed experts in private sector business and civic organizations to help strengthen them in their formative years or while indigenous staff are being trained. While most of these experts are U.S. nationals, in Russia, USAID funded the development of locally staffed political and economic think tanks to offer policy options to that government.

Grants

USAID, the Inter-American Foundation, and the African Development Foundation often provide aid in the form of grants directly to local organizations to foster economic and social development and to encourage civic engagement in their communities. Grants are sometimes provided to microcredit organizations, such as village-level women's savings groups, which in turn provide loans to microentrepreneurs. Small grants may also address specific community needs. Recent IAF grants, for example, have supported organizations that help resettle Salvadoran migrants deported from the United States and youth programs in Central America aimed at gang prevention.

In-Kind Goods

Assistance may be provided in the form of food commodities, weapons systems, or equipment such as generators or computers. Food aid may be provided directly to meet humanitarian needs or to encourage attendance at a maternal/child health care program. Weapons supplied under the military assistance program may include training in their use. Equipment and commodities provided under development assistance are usually integrated with other forms of aid to meet objectives in a particular social or economic sector. For instance, textbooks have been provided in both Afghanistan and Iraq alongside a broader teacher training and educational reform effort. Computers may be offered in conjunction with training and expertise to fledgling microcredit institutions. Since PEPFAR was first authorized in 2004, antiretroviral drugs (ARVs) provided to individuals living with HIV/AIDS have been a significant component of global health assistance.

Economic Infrastructure

Although once a significant portion of U.S. assistance programs, construction of economic infrastructure—roads, irrigation systems, electric power facilities, etc.—has been a relatively small component of aid efforts after the 1970s. Because of the substantial expense of these projects, they were to be found only in large assistance programs, such as that for Egypt in the 1980s and 1990s, where the United States constructed major urban water and sanitation systems. The aid programs implemented in support of post-U.S. invasion reconstruction in Iraq and Afghanistan were an exception, supporting the building of schools, health clinics, roads, power plants, and irrigation systems. In Iraq alone, more than $10 billion went to economic infrastructure. The Millennium Challenge Corporation now oversees much of this economic infrastructure portfolio, using a competitive selection process to direct such programs toward well-governed countries in which these investments may be more sustainable.

Direct Budget Support

Although it is the exception rather than the rule, some countries receive aid in the form of a cash grant to the government. Dollars provided in this way support a government's balance-of-payments situation, enabling it to purchase more U.S. goods, service its debt, or devote more domestic revenues to developmental or other purposes. Cash transfers have been made as a reward to countries that have supported the United States' counterterrorism operations (Turkey and Jordan in FY2004), to provide political and strategic support (both Egypt and Israel annually for decades after the 1979 Camp David Peace Accord), and in exchange for undertaking difficult political and economic reforms.

How Much Assistance Is Provided as Loans and How Much as Grants? What Are Some Types of Loans? Have Loans Been Repaid? Why Is Repayment of Some Loans Forgiven?

Under the Foreign Assistance Act of 1961, the President may determine the terms and conditions under which most forms of assistance are provided, though Congress included provisions encouraging the use of grants over loans in some instances, such as development assistance to the least developed countries. In general, the financial condition of a country—its ability to meet repayment obligations—has been an important criterion of the decision to provide a loan or grant. Some programs, such as humanitarian and disaster relief programs, were designed from the beginning to be entirely grant activities.

Between 1946 and 2018, the United States loaned $115.5 billion in foreign economic and military aid to foreign governments, and while most foreign aid is now provided through grants, $11.0 billion in loans to foreign governments remained outstanding at the end of FY2018.³¹

Loan/Grant Composition

During the past two decades, nearly all foreign aid—military as well as economic—has been provided in grant form. While loans represented 32% of total military and economic assistance between 1962 and 1988, this figure declined substantially beginning in the mid-1980s, until by FY2001, loans represented less than 1% of total aid appropriations. The de-emphasis on loan programs came largely in response to the debt problems of developing countries, some of which was attributable to aid loans. Both Congress and the executive branch have generally supported the view that foreign aid should not add to the already existing debt burden carried by these countries. The Trump Administration has sought to shift that approach to some degree, encouraging the use of loans over grants for Foreign Military Financing assistance in successive budget requests, but Congress has not supported such a change.

Loan Guarantees

Although a small proportion of total current aid, there are significant USAID-managed programs that guarantee loans, meaning the U.S. government agrees to pay a portion of the amount owed in the case of a default on a loan. A Development Credit Authority (DCA) loan guarantee, for example, in which risk is shared with a private sector bank, can be used to increase access to finance in support of any development sector. The DCA was transferred from USAID and merged with the former Overseas Private Investment Corporation to form the new DFC in 2019 (P.L. 115-254) to enhance U.S. development finance capacity. The DFC has authority to provide loan guarantees as well.

USAID has also provided loan guarantees in recent years to improve the terms or amounts of financing from international capital markets for Ukraine and Jordan. In these cases, assistance funds representing a fraction of the guarantee amount are set aside to cover possible default.³² Previously, under the Israeli Loan Guarantee Program, the United States guaranteed repayment of loans made by commercial sources to support the costs of immigrants settling in Israel from other countries and may issue guarantees to support economic recovery.³³

Debt Forgiveness

The United States has also forgiven some debts owed by foreign governments and encouraged, with mixed success, other foreign aid donors and international financial institutions to do likewise. In some cases, the decision to forgive foreign aid debts has been based largely on economic grounds as another means to support development efforts by heavily indebted, but reform-minded, countries. The United States has been one of the strongest supporters of the Heavily Indebted Poor Country (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). These initiatives, which began in the late 1990s, include participation of the World Bank, the International Monetary Fund, and other international financial institutions in a comprehensive debt workout framework for the world's poorest and most debt-strapped nations.³⁴

The largest and most hotly debated debt forgiveness actions have been implemented for much broader foreign policy reasons with a more strategic purpose. Poland, during its transition from a communist system and centrally planned economy (1990—$2.46 billion); Egypt, for making peace with Israel and helping maintain the Arab coalition during the Persian Gulf War (1990—$7 billion); and Jordan, after signing a peace accord with Israel (1994—$700 million), are examples. Similarly, the United States forgave about $4.1 billion in outstanding Saddam Hussein-era Iraqi debt in November 2004 and helped negotiate an 80% reduction in Iraq's debt to creditor nations later that month.

What Are the Roles of Government and Private Sector in Development and Humanitarian Assistance Delivery?

Most development and humanitarian assistance activities are not directly implemented by U.S. government personnel but by private sector entities, such as individual personal service contractors, consulting firms, universities, private voluntary organizations (PVOs), or public international organizations (PIOs). Generally speaking, U.S. government foreign service and civil servants determine the direction and priorities of the aid program, allocate funds while keeping within legislative requirements, ensure that appropriate projects are in place to meet aid objectives, select implementers, and monitor the implementation of those projects for effectiveness and financial accountability. Both USAID and the State Department have promoted the use of public-private partnerships, in which private entities such as corporations and foundations are contributing partners, not paid implementers, in situations where business interests and development objectives coincide.³⁵ As foreign direct investment in developing countries has increased significantly in recent decades, far exceeding foreign assistance from governments in many countries, agencies have sought partnerships and other means of channeling those investments in support of U.S. development priorities.

Which Countries Receive U.S. Foreign Assistance?

In FY2018, the United States provided some form of bilateral foreign assistance to more than 180 countries.³⁶ Aid is concentrated heavily in certain countries, reflecting the priorities and interests of United States foreign policy at the time. Table 2 identifies the top 15 recipients of U.S. foreign assistance for FY1998, FY2008 and FY2018, to show shifts in priority countries over time.

As shown in the table above, there are both similarities and sharp differences among country aid recipients for the three periods. The most consistent thread connecting the top aid recipients over the past two decades has been continuing U.S. strategic interests in the Middle East, with large programs maintained for Israel and Egypt as well as for Iraq, following the 2003 invasion. Two key countries in the U.S. counterterrorism strategy, Afghanistan and Pakistan, made their first appearances on the list in FY2002. Of the two, only Afghanistan remains among the top recipients in FY2018.

In FY1998, one sub-Saharan African country appeared among leading aid recipients; in FY2018, seven of the 15 are sub-Saharan African. Many are focus countries under the PEPFAR initiative to address the HIV/AIDS epidemic; newer initiatives such as Power Africa, Feed the Future, and Invest Africa have also driven funds there. In FY1998, three countries from Eastern Europe and the former Soviet Union made the list, as many from the region had for much of the 1990s, representing the effort to transform the former communist nations to democratic societies and market-oriented economies. None of those countries appear in the FY2018 list. In FY1997, four Latin American countries make the list; no countries from the region appear in FY2018.

On a regional basis, the Middle East/North Africa (MENA) region has received the largest share of U.S. foreign assistance for many decades. Although economic aid to the region's top two recipients, Israel and Egypt, began to decline in the late 1990s, the dominant share of bilateral U.S. assistance consumed by the MENA region was maintained in FY2005 by the war in Iraq. Despite the continued importance of the region, its share continued to slip substantially through FY2018 as the effort to train and equip Iraqi forces diminished.

Figure 4. Regional Distribution of Assistance, FY1998, FY2008, and FY2018

Source: USAID Explorer and CRS calculations. Percentages may not add up to 100% due to rounding. Note: World = Unallocated by Country/Region.

After September 11, 2001, South and Central Asia emerged as a significant target of U.S. assistance, rising from a roughly 3% share 20 years ago to 23% in FY2008 but retreating to 17% in FY2018, largely tracking U.S. national security priorities in Afghanistan and Pakistan. Similarly, the share represented by African nations has increased from 10% in FY1998 to 19% in FY2008, and reaching 26% in FY2018, largely due to the HIV/AIDS initiative that funnels resources mostly to African countries and to a range of other efforts to address the region's development challenges. Meanwhile, the share of aid to Europe/Eurasia, which greatly surpassed that of Africa in FY1998, has declined significantly in the past decade, to about 4% in FY2018, with the graduation of many East European aid recipients and the termination of programs in Russia. East Asia/Pacific has remained at a low level during the past two decades, while the Western Hemisphere's share has risen and fallen based on U.S. interest in Colombia and Central American countries, and disasters such as the 2010 earthquake in Haiti (see Figure 4).

Foreign Aid Spending

How Large Is the U.S. Foreign Assistance Budget?

There are several methods commonly used for measuring the amount of federal spending on foreign assistance. Amounts can be expressed in terms of budget authority (funds appropriated by Congress), obligations (amounts contractually committed), and outlays or disbursements (money actually spent). Assistance levels are also sometimes measured as a percentage of the total federal budget, as a percentage of total discretionary budget authority (excluding mandatory and entitlement programs), or as a percentage of the gross domestic product (GDP) (for an indication of the national wealth allocated to foreign aid). By nearly all of these measures, foreign aid resources fell gradually on average over several decades since the historical high levels of the late 1940s and early 1950s (see Appendix A). This downward trend was sporadically interrupted, largely due to major foreign policy initiatives such as the Alliance for Progress for Latin America beginning in 1961, the Vietnam War in the 1960s and 1970s, the infusion of funds to implement the Camp David Middle East Peace Accords in 1979, and an increase in military assistance to Egypt, Turkey, Greece and others in the mid-1980s. The lowest point in U.S. foreign aid spending since World War II came in FY1997, when foreign assistance obligations fell to just above $20 billion (in 2018 dollar terms).

While foreign aid consistently represented just over 1% of U.S. annual gross domestic product in the decade following World War II, it fell gradually to between 0.2% and 0.4% for most years in the past three decades. Foreign assistance spending has comprised, on average, around 3% of discretionary budget authority and just over 1% of total budget authority each year since FY1977, though the percentages have sometimes varied considerably from year to year. Foreign aid dropped from 5% of discretionary budget authority in FY1979 to 2.4% in FY2001, before rising sharply in conjunction with U.S. activities in Afghanistan and Iraq starting in FY2003 (see Figure 5; Appendix A).

Figure 5. Aid as a Percentage of the Federal Budget and GDP, FY1976-FY2017 Estimate

Sources: OMB Historic Budget Tables FY2021; USAID Explorer; CRS calculations.

As previously discussed, since the September 11, 2001, terrorist attacks, foreign aid funding has been closely tied to U.S. counterterrorism strategy, particularly in Iraq, Afghanistan, and Pakistan. President George W. Bush and Obama Administration global health initiatives, the creation of the Millennium Challenge Corporation, and growth in counter-narcotics activities have driven funding increases as well. The Budget Control Act of 2011, and the drawdown of U.S. military forces in Iraq, and to some degree Afghanistan, led to a notable dip in aid obligations in FY2013, but aid levels have risen again with efforts to address the crisis in Syria, counter-ISIL activities, and humanitarian aid. The use of the Overseas Contingency Operations (OCO, discussed below) designation has enabled this growth. Figure 6 shows how trends in foreign aid funding in recent decades can be attributed to specific foreign policy events and presidential initiatives.

Figure 6. Foreign Assistance Funding Trends, FY1976-FY2018 Estimate (in billions of constant FY2018 U.S. dollars)

Source: USAID Explorer. Notes: MCC = Millennium Challenge Corporation; PEPFAR = President's Emergency Plan for AIDS Relief; GHI = Global Health Initiative; BCA = Budget Control Act; Human. = humanitarian.

What Does Overseas Contingency Operations (OCO) Mean?

Congress and the Administration distinguish between enduring (also referred to as base, regular, or ongoing), emergency supplemental, and OCO funds. Funds designated as emergency or OCO are not subject to procedural limits on discretionary spending in congressional budget resolutions, or the statutory discretionary spending limits provided by the Budget Control Act of 2011 for FY2011-FY2021 (BCA, P.L. 112-25).

Prior to FY2012, the President typically submitted to Congress requests for additional funding (after initial annual budget requests), referred to as emergency supplementals. These funding packages historically were approved to address emergency, war-related, or otherwise off-cycle budget needs.

In contrast to emergency supplemental appropriations, the Obama Administration included an OCO request within its regular budget request in FY2012 for what it described as short-term, temporary, war-related funding for the frontline states of Iraq, Afghanistan, and Pakistan. The OCO designation had previously been applied to war-related Department of Defense (DOD) costs but had not yet been used outside that scope. Congress not only adopted the OCO designation in the FY2012 SFOPS appropriations legislation, but expanded it to include funding for additional accounts and countries. In every fiscal year since, Congress has appropriated more OCO-designated funding than has been requested by the Administration (see Figure 7).

Figure 7. Overseas Contingency Operations, FY2012-FY2020 (in billions of current U.S. dollars)

Sources: SFOPS Congressional Budget Justifications; annual SFOPS appropriations.

As the use of OCO expanded, the Administration requested and Congress enacted fewer emergency supplementals. However, there have been a handful of supplementals since FY2012 to address unanticipated emergency situations. These include supplementals for the Ebola response in West Africa in FY2015, the Zika response in FY2016, and counter-ISIS activities in FY2017. Most recently, the Trump Administration requested and Congress enacted supplemental funds to combat the Coronavirus Disease 2019 (COVID-19).

With the BCA expiring at the end of FY2021, the future of OCO is unclear. The Trump Administration has indicated its preference to phase out SFOPS OCO; in its FY2019, FY2020, and FY2021 budget requests, the Administration did not request OCO funding within the international affairs budget, but did request OCO funding for DOD, including for DOD aid accounts. Congress used the OCO designation for both DOD and SFOPS accounts in its final appropriations for FY2019 (P.L. 116-6) and FY2020 (P.L. 116-94), but at lower levels compared to prior fiscal years. It remains to be seen whether this is the beginning of a downward trend in OCO use for foreign aid.³⁷

How Much of Foreign Assistance Dollars Are Spent on U.S. Goods and Services?

Congress historically sought to enhance the domestic benefits of foreign aid by requiring that most U.S. foreign aid be used to procure U.S. goods and services.³⁸ The conditioning of aid on the procurement of goods and services from the donor-country is sometimes called "tied aid," and while quite common for much of the history of modern foreign assistance, it has become increasingly disfavored in the international community.³⁹ Studies have shown that tying aid increases the costs of goods and services by 15%-30% on average, and up to 40% for food aid, reducing the overall effectiveness of aid flows.⁴⁰ The United States joined other donor nations in committing to reduce tied aid in the Paris Declaration on Aid Effectiveness in March 2005, and the portion of tied aid from all donors fell from 70% of total bilateral development assistance in 1985 to about 20% in 2018. However, an estimated 40% of U.S. bilateral development assistance was tied in 2018, the highest percentage among major donors, perhaps reflecting the perception of policymakers that maintaining public and political support for foreign aid programs requires ensuring direct economic benefit to the United States.⁴¹ About 67% of U.S. foreign assistance funds in FY2018 were obligated to U.S.-based entities.⁴²

A considerable amount of U.S. foreign assistance funds remain in the United States, through domestic procurement or the use of U.S. implementers, but the portion differs by program and is hard to identify with any accuracy. For some types of aid, the legislative requirements or program design make it relatively easy to determine how much aid is spent on U.S. goods or services, while for others, this is more difficult to determine.

• USAID. Most USAID funding is implemented through contracts, grants, and cooperative agreements with implementing partners. While many implementing partner organizations are based in the United States and employ U.S. citizens, there is little information available about what portion of the funds used for program implementation are used for goods and services provided by American firms. Procurement reform efforts initiated by USAID in 2010 have aimed to increase procurement and implementation by host country entities as a means to enhance country ownership, build local capacity, and improve sustainability of aid programs, including by changing geographic preferences for procurement from the United States to the United States and developing countries.
• Food assistance commodities, until recently, were purchased wholly in the United States, and generally required by law to be shipped by U.S. carriers,⁴³ suggesting that the vast majority of food aid expenditures are made in the United States. Starting in FY2009, a small portion of food assistance was authorized to be purchased locally and regionally to meet urgent food needs more quickly. Successive Administrations and several Members of Congress have proposed greater flexibility in the food aid program, potentially increasing aid efficiency but reducing the portion of funds flowing to U.S. farmers and shippers. To date, these proposals have been largely unsuccessful.⁴⁴
• Foreign Military Financing, with the exception of certain assistance allocated to Israel, is used exclusively to procure U.S. military equipment and training.⁴⁵
• The Millennium Challenge Corporation (MCC) bases its procurement regulations on those established by the World Bank, which calls for an open and competitive process, with no preference given to donor country suppliers. Between FY2011 and FY2017, the MCC awarded roughly 15% of the value of compact contracts to U.S. firms.
• Multilateral development aid is mixed with funds from other nations and the bulk of the program are financed with borrowed funds rather than direct government contributions. Information on the U.S. share of procurement financed by MDBs is not publicly unavailable.

In addition to the direct benefits derived from aid dollars used for American goods and services, many argue that the foreign aid program brings significant indirect financial benefits to the United States. For example, analysts maintain that provision of military equipment through the military assistance program and food commodities through the Food for Peace Act, Title II program helps to develop future, strictly commercial, markets for those products. More broadly, as countries develop economically, they are in a position to purchase more goods from abroad and the United States benefits as a trade partner. Since an increasing majority of global consumers are outside of the United States, some business leaders assert that establishing strong economic and trade ties in the developing world, using foreign assistance as a tool, is key to U.S. economic and job growth.⁴⁶

How Does the United States Rank as a Donor of Foreign Aid?

Since World War II, with the exception of several years between 1989 and 2001, during which Japan ranked first among aid donors, the United States has led the developed countries in net disbursements of economic aid, or "Official Development Assistance (ODA)" as defined by the Organization for Economic Cooperation and Development's (OECD's) Development Assistance Committee (DAC).⁴⁷ In 2018, the most recent year for which data are available, the United States disbursed $33.79 billion in ODA, or about 20% of the $169.98 billion in total net ODA disbursements by all donors that year, as reported to the OECD, ranking first among donors (see Figure 8). While the top five donors have not varied for more than a decade, there have been shifts lower down the ranking. For example, Turkey has become a much more prominent ODA donor in recent years (ranked 6^th in 2016, with $8.61 billion in ODA, compared to 21^st in 2006), reflecting large amounts of humanitarian aid to assist Syrian refugees.⁴⁸

Figure 8. Top 15 Bilateral Donors of Official Development Assistance, 2018 (in millions of U.S. dollars)

Source: OECD/DAC, data available at http://www.oecd.org/dac/financing-sustainable-development/development-finance-data/statisticsonresourceflowstodevelopingcountries.htm.

Even as it leads in dollar amounts of aid flows to developing countries, the United States often ranks low when aid is calculated as a percentage of gross national income (GNI).⁴⁹ This calculation is often cited in the context of international donor forums, as a level of 0.7% GNI was established as a target for donors in the 2000 U.N. Millennium Development Goals. In 2017 (the most recent comprehensive data available), the United States ranked at the bottom among major donors at 0.18% of GNI. The United Arab Emirates, which has significantly increased its reported ODA in recent years, ranked first among top donors at 1.03% of GNI, followed by Sweden at 1.02% and Luxembourg at 1.00%.

There has also been increased interest in China's activities in developing countries, though China is not an OECD member and does not regularly report ODA disbursements. The OECD estimates that China's international development co-operation reached $4.8 billion in 2017, up from $3.6 billion in 2016, including $2.3 billion in multilateral assistance.⁵⁰ While estimated Chinese ODA is still relatively small compared to that of major donor countries, policymakers are paying increasing attention to growing Chinese investments and financing in developing countries that do not meet the ODA definition. China has touted its "Belt and Road" Initiative as an effort to boost economic development and connectivity from China across regions to create "strategic propellers" for its own development.⁵¹ However, China has provided little official aggregate information on the initiative, including on the number of projects, the amounts and terms of financing, and metrics for success.

Congress and Foreign Assistance

What Congressional Committees Oversee Foreign Aid Programs?

Numerous congressional authorizing committees and appropriations subcommittees maintain responsibility for U.S. foreign assistance. Several committees have responsibility for authorizing legislation establishing programs and policy and for conducting oversight of foreign aid programs. In the Senate, the Committee on Foreign Relations, and in the House, the Committee on Foreign Affairs, have primary jurisdiction over bilateral development assistance, political/strategic and other economic security assistance, military assistance, and international organizations. Responsibility over food aid, which primarily lies with the Agriculture Committees in both bodies, is periodically shared with the Foreign Affairs Committee in the House. U.S. contributions to multilateral development banks are within the jurisdiction of the Senate Foreign Relations Committee and the House Financial Services Committee. The large nontraditional aid programs funded by DOD, such as Nunn-Lugar Cooperative Threat Reduction programs and the military aid programs in Afghanistan and Iraq, come under the jurisdiction of the Armed Services Committees. Some global health assistance, such as research and other activities done by the Centers for Disease Control and Prevention, may fall under the jurisdiction of the House Energy and Commerce and Senate HELP committees.

Most foreign aid appropriations fall under the jurisdiction of the SFOPS Subcommittees, with food assistance appropriated by the Agriculture Subcommittees. As noted earlier, however, certain military, global health, and other activities that have been reported as foreign aid have been appropriated through other subcommittees in recent years, including the Defense and the Labor, Health and Human Services, Education and Related Agencies subcommittees. (For current information on SFOPS Appropriations legislation, see CRS Report R45763, Department of State, Foreign Operations, and Related Programs: FY2020 Budget and Appropriations, by Cory R. Gill, Marian L. Lawson, and Emily M. Morgenstern.)

What Are the Major Foreign Aid Legislative Vehicles?

The most significant permanent foreign aid authorization laws include

• the Foreign Assistance Act of 1961, as amended, covering most bilateral economic and security assistance programs (P.L. 87-195; 22 U.S.C. 2151);
• the Arms Export Control Act (1976), authorizing military sales and financing (P.L. 90-629; 22 U.S.C. 2751);
• the Agricultural Trade Development and Assistance Act of 1954 (P.L. 480), covering food aid (P.L. 83-480; 7 U.S.C. 1691); and
• and the Bretton Woods Agreement Act (1945), authorizing U.S. participation in multilateral development banks (P.L. 79-171; 22 U.S.C. 286).⁵²

In the past, Congress usually scheduled debates every two years on omnibus foreign aid legislation that amended these permanent authorization measures. Congress has not enacted into law a comprehensive foreign assistance authorization measure since 1985, although foreign aid authorizing bills have passed the House or Senate, or both, on numerous occasions. Foreign aid bills have frequently stalled at some point in the debate because of controversial issues, a tight legislative calendar, or executive-legislative foreign policy disputes.⁵³ In contrast, DOD assistance is authorized in annual National Defense Authorization legislation.

In lieu of approving a broad State Department/USAID authorization bill, Congress has on occasion authorized major foreign assistance initiatives for specific regions, countries, or aid sectors in stand-alone legislation or within an appropriation bill. Among these are the following:

• the SEED Act of 1989 (P.L. 101-179; 22 U.S.C. 5401);
• the FREEDOM Support Act of 1992 (P.L. 102-511; 22 U.S.C. 5801);
• the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 (P.L. 108-25; 22 U.S.C. 7601);
• the Tom Lantos and Henry J. Hyde United States Global Leadership Against HIV/AIDS, Tuberculosis, and Malaria Reauthorization Act of 2008 (P.L. 110-293);
• the Millennium Challenge Act of 2003 (Division D, Title VI of P.L. 108-199);
• the Enhanced Partnership With Pakistan Act of 2009 (P.L. 111-73; 22 U.S.C. 8401);
• the Global Food Security Act of 2016 (P.L. 114-195; 22 U.S.C. 9306); and
• the BUILD Act (P.L. 115-254).

In the absence of regular enactment of foreign aid authorization bills, appropriation measures considered annually within the SFOPS spending bill have assumed greater significance for Congress in influencing U.S. foreign aid policy. Not only do appropriations bills set spending levels each year for nearly every foreign assistance account, SFOPS appropriations also incorporate new policy initiatives that would otherwise be debated and enacted as part of authorizing legislation.

Appendix A. Data Table

Appendix B. Common Foreign Assistance Abbreviations

Author Contact Information

Acknowledgments

This report was originally coauthored by retired CRS Specialist in Foreign Policy Curt Tarnoff.

Footnotes

1.	Other tools of U.S. foreign policy are the U.S. defense establishment, the diplomatic corps, public diplomacy, and trade policy. American defense capabilities, even if not employed, stand as a potential stick that can be wielded to obtain specific objectives. The State Department diplomatic corps are the eyes, ears, and often the negotiating voice of the U.S. government abroad. Public diplomacy programs, such as the Fulbright program and Voice of America, project an image of the United States that may influence foreign views. U.S. trade policy—through free trade agreements and Export-Import Bank financing, for example—may directly affect the economies of other nations. Foreign aid is a particularly flexible tool—it can act as both carrot and stick, and is a means of influencing events, solving specific problems, and projecting U.S. values.
2.	For more information on the Marshall Plan, see CRS Report R45079, The Marshall Plan: Design, Accomplishments, and Significance.
3.	Congress currently appropriates most foreign affairs funding through the annual SFOPS appropriations bill. Prior to FY2008, Congress provided funding for the Department of State, international broadcasting, and related programs within the Commerce, Justice, State, the Judiciary, and Related Agencies appropriations and separately appropriated funding for the U.S. Agency for International Development (USAID) and foreign aid within the Foreign Operations, Export Financing, and Related Programs appropriations. For more information, see CRS Report R44637, Department of State and Foreign Operations Appropriations: History of Legislation and Funding in Brief, by Emily M. Morgenstern.
4.	The President's budget and the congressional budget resolution classify federal budgetary activities into functional and subfunctional categories that represent the major purposes of the federal government.
5.	Greenbook data, now available as part of USAID Explorer (https://explorer.usaid.gov), provides aid obligation data by broad accounts from 1946 to 2013 and program sector breakdowns from 2001 to 2013.
6.	Most of these objectives are funded through several appropriations accounts. For instance, the objective of Governing Justly and Democratically and each of its individual sectoral elements (see Table 1) are funded through portions of the Development Assistance, Assistance to Europe, Eurasia, and Central Asia (AEECA), Economic Support Fund (ESF), International Narcotics Control and Law Enforcement (INCLE), and Democracy Fund accounts, as well as by various programs run through other agencies (i.e., those outside of the Department of State, USAID, and the Department of Defense).
7.	For more information on global health assistance, see CRS Report R43115, U.S. Global Health Appropriations: FY2001-FY2019, by Tiaji Salaam-Blyther.
8.	For more information on international food aid programs, see CRS Report R45422, U.S. International Food Assistance: An Overview, by Alyssa R. Casey.
9.	For more on U.S. payments to the United Nations, see CRS Report R45206, U.S. Funding to the United Nations System: Overview and Selected Policy Issues, by Luisa Blanchfield.
10.	For more information on the MDBs, see CRS Report R41170, Multilateral Development Banks: Overview and Issues for Congress, by Rebecca M. Nelson.
11.	Until FY1998, food provided commercially under long-term, low-interest loan terms (Title I of the Food for Peace Act [sometimes referred to as P.L. 480]) was also included in the foreign assistance account. Because of its export focus, it is no longer considered foreign aid. For more information on food aid programs, see CRS Report R45422, U.S. International Food Assistance: An Overview, by Alyssa R. Casey.
12.	USAID estimates that over 90% of ESF funds are implemented by USAID for development purposes.
13.	For further information on nonproliferation efforts, see CRS Report R43143, The Evolution of Cooperative Threat Reduction: Issues for Congress, by Mary Beth D. Nikitin and Amy F. Woolf.
14.	For more information on counternarcotics efforts, see CRS Report RL34543, International Drug Control Policy: Background and U.S. Responses, by Liana W. Rosen.
15.	The State Department determines the distribution of funds from these accounts.
16.	See USAID Explorer.
17.	Total includes employees from the USAID Office of Inspector General, but does not include institutional support contractors.
18.	USAID Agency Financial Report, FY2018.
19.	USAID Explorer.
20.	Ibid.
21.	Ibid.
22.	Ibid.
23.	Ibid. For more information on MCC, see CRS Report RL32427, Millennium Challenge Corporation: Overview and Issues, by Nick M. Brown.
24.	Ibid.
25.	The Peace Corps, Agency Financial Report, Fiscal Year 2018, Washington, DC.
26.	For more information on these agencies, see CRS Report RS21168, The Peace Corps: Overview and Issues, by Nick M. Brown.
27.	USAID Explorer. For more information on TDA, see CRS In Focus IF10673, U.S. Trade and Development Agency (TDA), by Shayerah Ilias Akhtar.
28.	For more information on the BUILD Act and DFC, see CRS Report R45461, BUILD Act: Frequently Asked Questions About the New U.S. International Development Finance Corporation, by Shayerah Ilias Akhtar and Marian L. Lawson, and CRS In Focus IF11436, U.S. International Development Finance Corporation (DFC), by Shayerah Ilias Akhtar and Nick M. Brown.
29.	For more information, see CRS Report 98-567, The Overseas Private Investment Corporation: Background and Legislative Issues, by Shayerah Ilias Akhtar, and CRS Report R45461, BUILD Act: Frequently Asked Questions About the New U.S. International Development Finance Corporation, by Shayerah Ilias Akhtar and Marian L. Lawson.
30.	USAID Explorer.
31.	U.S. Overseas Loans and Grants: Obligations and Loan Authorizations, July 1, 1945-September 30, 2018 (Greenbook), CONG-R-0105. For nearly three decades, Section 620q of the Foreign Assistance Act (the Brooke amendment) has prohibited new assistance to the government of any country that falls more than one year past due in servicing its debt obligations to the United States, though the President may waive application of this prohibition if he determines it is in the national interest.
32.	The assistance provided to guarantee the loan varies depending on the risk. For example the Administration requested $275 million in ESF-OCO funds in FY2016 to support a $1 billion loan guarantee for Ukraine.
33.	Israel has not drawn on any loan guarantees since FY2004.
34.	For more information on these programs, see CRS Report RS21482, The Paris Club and International Debt Relief, by Martin A. Weiss.
35.	For more on the use of public-private partnerships in foreign assistance, see CRS Report R41880, Foreign Assistance: Public-Private Partnerships (PPPs), by Marian L. Lawson.
36.	Generally, USAID and other agencies funnel development assistance, in various forms, to a country's private sector, nongovernmental organizations, local communities, individual entrepreneurs, and other entities. Assistance is provided directly to the government of a country where the intention is to bring about policy reforms, improve governance, or work with a sector in which the government is the predominant element, such as in health care where the Ministry of Health would play a determinative role. Often, in cases where a government is believed to be taking action contrary to U.S. interests, Congress has specified that assistance to that government be prohibited or limited, while not affecting overall assistance to the country.
37.	For more information on foreign affairs OCO, see CRS In Focus IF10143, Foreign Affairs Overseas Contingency Operations (OCO) Funding: Background and Current Status, by Emily M. Morgenstern. For broader OCO trends, including those related to DOD, see CRS Report R44519, Overseas Contingency Operations Funding: Background and Status, by Brendan W. McGarry and Emily M. Morgenstern.
38.	The "Buy America" provision of the Foreign Assistance Act of 1961 (P.L. 87-195, §604), originally required that aid procurement be made within the United States unless a detailed determination of the need to procure elsewhere was made by the President. In FY1993, Congress amended this section to allow for procurement in the United States, the recipient country, or any developing country, but in developed countries only if necessary.
39.	Overseas Development Institute, The Developmental Effectiveness of Untied Aid, available at http://oecd.org/dac/evaluation/dcdndep/41537529.pdf.
40.	Ibid.
41.	Data available at http://www.oecd.org/dac/financing-sustainable-development/development-finance-data/statisticsonresourceflowstodevelopingcountries.htm, Table 23.
42.	USAID Explorer. Entities include government agencies, nongovernmental and faith-based organizations, enterprises, and universities.
43.	The Cargo Preference Act, P.L. 83-644, August 26, 1954.
44.	For more information on food aid programs and authorities, see CRS Report R45422, U.S. International Food Assistance: An Overview, by Alyssa R. Casey.
45.	For the research, development and procurement of advanced weapons systems, not less than $815.3 million of aid to Israel in FY2015 could be used for offshore procurement (about 14% of total Foreign Military Finance for that year).
46.	See "Foreign Assistance Promotes U.S. Economic Prosperity," U.S. Global Leadership Coalition, at https://www.usglc.org/resources/foreign-assistance-economic-prosperity-key-facts/.
47.	The OECD Glossary of Statistical Terms defines ODA as "flows of official financing administered with the promotion of economic development and welfare of developing countries as the main objective, and which are concessional in character with a grant element of at least 25%. By convention, ODA flows comprise contributions of donor government agencies, at all levels, to developing countries and to multilateral institutions." ODA does not include military assistance or aid to developed countries, such as Israel and Russia.
48.	OECD data for 2018 is available at http://www.oecd.org/dac/financing-sustainable-development/development-finance-data/statisticsonresourceflowstodevelopingcountries.htm.
49.	Gross National Income (GNI) comprises GDP together with income received from other countries (notably interest and dividends), less similar payments made to other countries.
50.	From "Other official providers not reporting to the OECD" report on the OECD website at https://www.oecd-ilibrary.org/sites/18b00a44-en/index.html?itemId=/content/component/5e331623-en&_csp_=b14d4f60505d057b456dd1730d8fcea3&itemIGO=oecd&itemContentType=chapter#section-d1e19813. See also "China's Massive Belt and Road Initiative" by Andrew Chatzky and James McBride, Council on Foreign Relations, at https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative.
51.	National Development and Reform Commission (NDRC), Ministry of Foreign Affairs, and Ministry of Commerce of the People's Republic of China (PRC), "Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road," First Edition, March 2015, http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html.
52.	Separate permanent authorizations exist for other specific foreign aid programs such as the Peace Corps, the Millennium Challenge Corporation, the Inter-American Foundation, and the African Development Foundation.
53.	A few foreign aid programs that are authorized in other legislation have received more regular legislative review. Authorizing legislation for voluntary contributions to international organizations and refugee programs, for example, are usually contained in omnibus Foreign Relations Authorization measures that also address State Department and public diplomacy issues. Food aid and amendments to the Food for Peace Act (P.L.480) are usually considered in the omnibus "farm bill" that Congress reauthorizes every five years. The most recent farm bill was signed into law as P.L. 115-334 on December 20, 2018.