Monetizing food aid

Selling rather than giving food aid. This is intended to either: (i) generate counterpart funds – raising local currency in situations where no other alternative sources of funding are available or in situations where the exchange rate is artificially overvalued; (ii) directly affect the food market in order to lower or stabilize prices, regenerate local distribution networks, break local monopolies and discourage hoarding of food; or (iii) provide an income transfer to vulnerable groups by increasing the availability of affordable foods in situations where the demand is stable and food is in short supply.

There are three scenarios where this strategy could be beneficial. (1) Selling the food locally, at the port or in the capital, to generate the maximum amount of local currency. The funds generated finance food security, or other, projects. (2) Selling food aid to local traders/merchants to bring down or stabilize market prices in emergency situation. The main aim is to temporarily prop up the market until it can recover. (3) Selling or bartering food aid directly to consumers. The aim is to improve access to affordable staple foods. This can involve cash for work; food for work; selling food in fair price shops; grain banks; and destocking/restocking programmes in pastoralist communities. Types (2) and (3) have a direct impact on food security. Key problems that can impede effective monetarization are (i) time lags undermining original economic logic (e.g. via devaluing currencies, falling prices), (ii) red tape, (iii) theft of funds and (iv) lack of suitable storage.