Chapter 6


The classification of food aid into the three categories is not always clear, as approaches to
food aid utilisation have become more flexible and rather complex. Project or programme
food aid may be used for relief purposes, or the counterpart funds generated through
monetised programme aid may be allocated to specific projects or for relief purposes. Such
issues will be addressed more specifically in the following sections.

In general one can state that the food security situation in the countries depending on food aid
is severely affected by the reduced food aid deliveries in various respects; to compensate for
the decreased food aid commercial imports have to be increased at significantly higher prices,
worsening the balance of payment situation and leading to diminished food supplies and
higher market prices. Furthermore, less food is available in support of specific vulnerable
groups.

2.2 Programme food aid

Programme, or non-project, food aid is not targeted at specific beneficiaries or groups but
provided to the governments of recipient countries, both as loans or grants. It is usually
destined for sale on the local markets, but may also be used to build up food security or food
buffer stocks. The main purpose of programme food aid is to provide balance of payments
and budgetary support.

Programme food aid gives balance of payments support to the extent that it substitutes for
commercial food imports which otherwise would have to be undertaken by the recipient
country, if programme food aid were not provided. The "aid component", or the amount of
balance of payments support, depends on the conditions under which programme food aid is
provided. These conditions vary significantly among donors and recipient countries, and
sometimes even between different consignments from the same donor to the same recipient.
Some examples of typical conditions and their implications for the amount of balance of
payments support are given in the following table.


 Table 6.2: Conditions of programme food aid and balance of payments support

 Typical conditions of programme aid deliveries Amount of implicit balance of payments support

Grant on cif./fob. Basis Cif./fob. value of deliveries in world market
 prices

Delivery on cif./fob. basis, payable in local Cif./fob. value of deliveries in world market
currency, cash, loan or counterpart fund prices
arrangement

Delivery on cif./fob. basis against soft loan Implicit credit subsidy involved (difference
payable in foreign currency between concessional and market conditions for
 foreign credits)


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