IMPLICATIONS OF WFP'S ENDORSED BUDGET FOR 2004-2005

UNCLAS ROME 005035

SIPDIS


AIDAC

FROM U.S. MISSION IN ROME

STATE FOR AS/PRM DEWEY, AS/IO HOLMES, PRM/P, EUR/WE AND
IO/EDA BEHREND AND KOTOK
USAID FOR A/AID, AA/DCHA WINTER, AA/PPC, DCHA/FFP LANDIS,
PPC/DP, PPC/DC
USDA/FAS FOR CHAMBLISS/TILSWORTH/GAINOR
GENEVA FOR AMBASSADOR MOLEY, RMA AND NKYLOH/USAID
USUN FOR AMBASSADOR NEGROPONTE AND MLUTZ
BRUSSELS FOR PRM AND USAID/LERNER
NSC FOR JDWORKEN

E.O. 12958: N/A
TAGS: EAID EAGR AORC PREF KUNR WFP UN
SUBJECT: IMPLICATIONS OF WFP'S ENDORSED BUDGET FOR 2004-2005
BY ITS EXECUTIVE BOARD AT THE THIRD REGULAR SESSION, ROME,
OCTOBER 20-24, 2003

REF: (A) ROME 4996

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SUMMARY
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1. At its third regular session (ref A),the Board took note
of world Food Program's (WFP) Biennial Management Plan
budget for 2004-2005, at a level of USD 4.8 billion, an
increase of USD 1.6 billion (66 percent) compared with the
2002-2003 original budget estimate of USD 3.2 billion.
Tonnage wise, the total estimated volume of delivery for
2004-2005 has been proposed at 8.7 million tons (excluding
the Iraq Oil-for-Food Program),an increase of 59 percent
over the 2002-2003 original budget estimate of 5.4 million
tons. This budget breaks with tradition in being based on
anticipated needs, instead of past commitments or projected
donor funding. WFP is already the dominant player in the
delivery of worldwide emergency food aid (68 percent in
2002) and now handles 39 percent of all global deliveries of
food assistance, compared with 31 percent for non-
governmental organizations (NGOs) and 30 percent supplied
bilaterally. In U.S. Mission's view, the organization needs
to reflect upon "how big is beautiful" in its quest for
program interventions of highest quality and impact.

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Background
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2. The donor community made unprecedented contributions,
worth USD 2.1 billion, to WFP's programs in 2003. Compared
with 2002, overall donor contributions to operational
activities (excluding the Iraq Oil-for-Food Program) were up
46 percent. This was driven by major crisis in Iraq, the
Horn of Africa (Ethiopia and Eritrea),Afghanistan, southern
Africa and elsewhere. The United States tapped into P.L. 480
Title II allocations and supplementary funding, the Bill
Emerson Humanitarian Trust and Section 416 (b) resources.


3. What WFP sought in the budget presentation was
endorsement of a major expansionist strategy. As per WFP's
rationale, the budget endeavors to: a) raise funds for 100
percent of all approved programs, not just a certain
percentage of each; and b) provide the technical support and
emergency preparedness capacity to the organization
necessary to do its work properly. In adopting the needs
based approach, WFP sought to distance itself from its
traditional (in their words) "very inefficient way of
running a business by always playing catch-up."

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The numbers
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4. WFP's Biennial Management Plan budget for 2004-2005, at a
level of USD 4.8 billion, is an increase of USD 1.6 billion
(66 percent) compared with the 2002-2003 original budget
estimate of USD 3.2 billion. Net expenditures are estimated
at USD 4.4 billion, an increase of USD 1.47 billion, or 50
percent, compared to the original 2002-2003 estimate of USD
2.93 billion. Tonnage wise, the total estimated volume of
delivery for 2004-2005 has been proposed at 8.7 million tons
(excluding the Iraq Oil-for-Food Program),an increase of 59
percent over the 2002-2003 original budget estimate of 5.4
million tons.
The budget, which is "zero-based" and "needs driven",
thereby reflects the resources considered necessary toM DEWEY, AS/IO
HOLMES, PRM/P, EUR/WE AND
IO/EDA BEHREND AND KOTOK
USAID FOR A/AID, AA/DCHA WINTER, AA/PPC, DCHA/FFP LANDIS,
PPC/DP, PPC/DC
USDA/FAS FOR CHAMBLISS/TILSWORTH/GAINOR
GENEVA FOR AMBASSADOR MOLEY, RMA AND NKYLOH/USAID
USU

implement approved activities for 2004-2005, instead of
focusing, as in the past, on estimated levels of fund
raising.


5. On WFP's three major programming categories, the USD 3.9
billion direct operational cost biennium budget (the other
part being USD 883 million in support costs) breaks out as
follows:

a) development portfolio - against an estimated 2002-2003
expenditure of USD 393 million (1.14 million tons),WFP
projects a 2004-2005 estimate of USD 539 million (an
addition of USD 146 million). This is a 37 percent increase
in value terms over the 2002-2003 estimates;

b) protracted relief and recovery (PRROs) - against a 2002-
2003 estimate of USD 777 million (1.7 million tons),WFP
projects a 2004-2005 estimate of 2.0 billion (an addition
of USD 1.29 billion). This is a 158 percent increase in
value terms over the 2002-2003 estimates;

c) emergency operations (EMOPs) - against a 2002-2003
estimate of USD 2.2 billion (5.8 million tons),WFP projects
a 2004-2005 estimate of 1.25 billion (a downsizing of USD
984 million) This is a 44 percent decrease in value terms
over the 2002-2003 estimates.

Note. As pointed out by the UN's Advisory Committee for
Administrative and Budgetary Questions (ACABQ),the 2004-
2005 budget does not include a provision for major
emergencies, and that if such emergencies were to occur, the
funds would need to be raised incrementally. End note.

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How WFP plans to resource its 2004-2005 budget
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6. WFP assumes that the United States will provide base
support WFP to the tune of USD 2.2 billion over the biennium
(USD 1.1 billion per year). Support to major emergencies
will be additional. The other top nine donors would remain
at current levels of support. All major OECD donors will be
expected to contribute USD 2.00 per capita, which will
generate an additional USD 500 million. Emerging (new)
donors (e.g., China, India, Brazil, and Russia) will
generate USD 100 million in contributions. Private sector
donations will bring in USD 40-USD 50 million.

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Concerns
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7. WFP's proposed budget is based on its calculation of
anticipated needs throughout the world, rather than upon
past commitments or anticipated donor-funding
availabilities. There is no WFP acceptance of any donor's
position that "this is as much as we can give." A number of
donors viewed WFP's proposed substantive increases as both
overly ambitious and unrealistic. Japan commented "we are
not in a position to reach the USD 2.00 per capita, as this
would mean doubling our contribution to WFP."


8. There has been an overall decline in international food
aid by a third since 1999; with few exceptions (i.e., major
emergencies),it is clear that food assistance in general is
less of a donor priority and it remains highly unlikely thatS, PRM/P,
EUR/WE AND
IO/EDA BEHREND AND KOTOK
USAID FOR A/AID, AA/DCHA WINTER, AA/PPC, DCHA/FFP LANDIS,
PPC/DP, PPC/DC
USDA/FAS FOR CHAMBLISS/TILSWORTH/GAINOR
GENEVA FOR AMBASSADOR MOLEY, RMA AND NKYLOH/USAID
USUN FOR AMBASSADOR NEG

this situation is going to change for 2004-2005.


9. By far the United States has been, is and will continue
to be the leading donor to WFP. Many donors do not believe
it is in the interest of the organization to make WFP even
more dependent on U.S. assistance (presently at 63 percent).


10. The vision of the European Commission and some other
OECD members for WFP is for a smaller organization working
exclusively with cash in well-defined and limited "niche"
circumstances.


11. In these tight budgetary times, WFP must effect cost
savings through the accelerated closure of ineffective
programs, make better (more nimble) use of existing assets,
focus more (on less costly) local hires to staff its
operations, etc. Note. There was no hint in the proposed
budget as to what, if anything, would be "shed" in the 2004-
2005 management/budget plan. End note.


12. Given that WFP's budget is tonnage driven (i.e., it will
need 8.9 million tons to feed x millions of beneficiaries
over the biennium),a widespread drought and heat-wave this
past summer in Europe have witnessed increased international
cereal prices (particularly wheat),mostly in response to a
deterioration of prospects for the European crop. Hence food
aid budgets will probably procure less commodity due to
price hikes, at least in 2004.

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Comment
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13. WFP is already the dominant player in the delivery of
worldwide emergency food aid (68 percent in 2002) and now
handles 39 percent of all global deliveries of food
assistance, compared with 31 percent for non-governmental
organizations (NGOs) and 30 percent supplied bilaterally. If
the worldwide food aid availability "pie" per annum hovers
around 10 million tons, this budget if attained, would push
WFP's market "share" up to 45 percent per annum. It would be
an even higher percentage if the global food aid "pie"
shrinks. The organization needs to reflect upon "how big is
beautiful" in its quest for program interventions of highest
quality and impact. Hall


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2003ROME05035 - Classification: UNCLASSIFIED