Friday, 17 January 2014

HERE COMES THE OMNIBUS: US AID REFORMS PASS THE HOUSE


The U.S. Capitol building in Washington, D.C. A U.S.

Appropriators in the U.S. Senate and House of Representatives have finally agreed on a U.S. budget for the remainder of fiscal year 2014 which would keep the government running until the end of September, and in some cases, allow funding to carry over beyond that date.

The bill — which has already passed by a wide margin in the House on Wednesday and is expected to pass through the Senate this week — includes a number of noteworthy reforms of international development cooperation.

So how will these expected reforms affect U.S. foreign aid? Here are a few things tucked into the 1,582-page document:

The $1.1 trillion bill provides $49 billion for State and Foreign Operations discretionary spending, which is a $4.3 billion decrease from enacted fiscal year 2013 levels —but the decrease is mostly due to cuts in Overseas Contingency Operations, including funding for conflict zones like Afghanistan, where the drawdown of U.S. troops is leading to more limited engagement and expenditures.

As always there were winners and losers, and the real impacts will take some time to shake out.

The bill sets U.S. Agency for International Development operations funding at $1.14 billion,  $215 million less than fiscal year 2013. InterAction, a coalition of U.S.-based NGOs, said “it is unclear how difficult this cut will be for the agency to absorb,” since the amount of funding that will carry over from fiscal year 2013 is still unknown.

Focus on bilateral over multilateral

Despite the cuts to USAID’s operational budget, the massive spending bill upholds a recent trend in U.S. foreign assistance appropriations: relatively strong support for U.S. bilateral assistance and much more limited engagement with multilateral organizations such as the United Nations.

The “contributions to international organizations” spending line lost 9 percent from fiscal 2013, according to InterAction, and UNESCO will remain without U.S. funding, which it lost after granting full membership to the Palestinian Authority at the end of 2011.

The Millenium Challenge Corp. is set to receive $898.2 million — a roughly five percent increase. The Peace Corps’ budget is set at $379 million, up from roughly $356 million last year. Funding for global health, humanitarian relief and disaster programs all increased.

The GAVI Alliance, which assists governments with immunization and health services, received a roughly $30 million bump to record its highest-ever budget total, while the International Disaster Assistance account gained $251 million — a 16 percent increase over fiscal 2013 levels.

Clean energy, tax exemptions for partners

A few policy changes included in the bill are sure to make waves, and will soon become the buzz among the Washington, D.C.-based aid community.

The bill paves the way for U.S. funds to start flowing back to Egypt, by relaxing language that prohibits U.S. assistance in the wake of coup, despite ongoing concerns that the Egyptian government has done little to promote democratic reforms or rule-of-law.

The spending package prohibits the Overseas Private Investment Corp. and the Export-Import Bank from blocking overseas investments in coal power. Both agencies help finance foreign investment deals  and are involved in President Barack Obama’s Power Africa initiative to provide greater access to electricity in sub-Saharan Africa through increased U.S. investment.

Stripping away regulations on the types of power deals the two agencies can finance means coal and other fossil fuels could be a bigger piece of the Power Africa puzzle than previously thought possible.

U.S. aid implementers operating in Afghanistan will no doubt be happy to see the inclusion of a section describing penalties for foreign governments who levy taxes against grantees, contractors and subcontractors of U.S. assistance programs. The issue of supposedly “illegal” taxation on development programs came to a head late last year, when a number of U.S. aid partners threatened to withdrawal from Afghanistan if its government continued to intimidate foreign aid groups into paying taxes.

“Assistance provided by the United States shall be exempt from taxation, or reimbursed, by the foreign government, and the Secretary of State shall expeditiously seek to negotiate amendments to existing bilateral agreements, as necessary, to conform with this requirement,” says the omnibus bill. If taxes are levied against assistance implementers, a 200 percent “reimbursement” will be taken out of the country’s fiscal 2015 commitment.

Finally on food aid reform, Devex previously reported that the omnibus deal includes $35 million to make delivery of U.S. food assistance more flexible. A large consortium of U.S.-based NGOs, as well as the Obama administration, and a number of lawmakers from both parties support robust reform of U.S. food aid policies, but the effort has run into resistance from U.S. farmers and shippers, as well as some NGOs who support the current system of food aid “monetization.”

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