CLARIFICATION ON POSSIBLE FUNDING SOURCES FOR ADDITIONAL FOOD

C O N F I D E N T I A L SECTION 01 OF 02 ISLAMABAD 002468

SIPDIS

E.O. 12958: DECL: 07/22/2018
TAGS: ECON ETRD EAGR EAID PGOV PREL PK
SUBJECT: CLARIFICATION ON POSSIBLE FUNDING SOURCES FOR ADDITIONAL FOOD
AID TO PAKISTAN

REF: A. ISLAMABAD 2233

B. ISLAMABAD 2400

ISLAMABAD 00002468 001.3 OF 002


Classified by Ambassador Anne Patterson, reasons 1.4 (b),(d)


1. (C) Summary: In a response to a National Security Council
request to provide clarity on proposed food assistance to
Pakistan in advance of the Prime Minister's upcoming visit to
Washington, the following cable outlines possible financial
modalities of increased food assistance to Pakistan. This
cable is a follow up to Islamabad 2233 (Ref A),which proposed
six U.S. program options for food aid to Pakistan. This cable
will attempt to clarify and distinguish between program options
utilizing existing resources, funds available in fiscal year
2009 and additional resources. One new option, granting a
GSM-102 line of credit to the Government of Pakistan (GOP) is
also proposed. End Summary.

OPTION ONE: PROVIDE WHEAT TO THE GOP
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2. (C) The Government of Pakistan (GOP) has requested that
the U.S., through the Department of Agriculture (USDA),
establish a wheat monetization program under its Food for
Progress Program. The program would supply wheat directly
to the GOP which would in turn sell the wheat at a subsidized
price through a nationwide network of utility stores. A
USD 20 million monetization program would supply approximately
40,000 tons of wheat and feed approximately 400,000 people for
one year. GOP local currency profits from wheat sales would
be used to fund nationwide food and agriculture programs.
Post understands that the monetization program request has been
submitted to USDA and is under consideration. We believe we can
resolve the phyto-sanitary provisions regarding commercial wheat
sales to Pakistan.

OPTION TWO: PROVIDE EMERGENCY FUNDING TO THE WFP
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3. (C) The World Food Program (WFP) currently distributes food
directly to 3.7 million Pakistanis. The U.S., through the U.S.
Department of Agriculture's (USDA) McGovern-Dole Food for
Education Program, directly supports WFP operations in Pakistan
and has contributed USD 9.8 million in both cash and commodities
this fiscal year. Embassy Islamabad's Foreign Agricultural
Service (FAS) has requested that, pending USDA's FY09 funding
authority and the satisfactory resolution of the import
permit for U.S. wheat, an additional USD 10 million be
provided for FY09 to maintain existing McGovern-Dole programs.

OPTION THREE: PL-480 FUNDING FOR THE WFP
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4. (C) The U.N., World Health Organization (WHO),Food and
Agriculture Organization (FAO) and World Food Program (WFP)
recently completed an inter-agency emergency food needs
assessment mission to Pakistan, concluding that an additional
9.5 million people have become "severely food insecure" by
rising agricultural prices. The team suggested providing
emergency food aid to Pakistan. The GOP has formally
requested that the U.S. provide additional resources to the
WFP. Post has requested that USD 30 million in PL-480 funds
be allocated for Pakistan for the purchase of cooking oil and
wheat as well as direct support to WFP distribution activities
(Ref B). USD 30 million in PL-480 funds would provide food
assistance to roughly 600,000 people. Embassy notes that the
recent supplemental provided USD 500 million in excess of the
administration's request for PL-480 programs and suggests
that these funds could be used in this strategically important
country.


OPTION FOUR: REPROGRAM PIPELINE USAID FUNDS FOR THE WFP
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5. (C) Embassy Islamabad has identified USD 8.5 million in
the FY08 Economic Support Fund (ESF) budget that can be
provided directly to the World Food Program (WFP) for food
supplements for partial year school feeding programs. U.S.

ISLAMABAD 00002468 002 OF 002


funds would supply supplemental food aid to 400,000 students.
Emergency food activities would begin in late August or early
September and coincide with the start of Ramadan, a time in
which food shortages are often exacerbated. Supplemental
commodities purchased with these funds would be clearly
labeled as a gift from the U.S. Funds can be allocated
immediately. So long as FY08 funds are replaced with FY09
supplemental funds, there will be no impact on existing
programs.

OPTION FIVE: USE FY09 USAID SUPPLEMENTAL FUNDING
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6. (C) Of the recently signed USD 150 million FY09
supplemental, USAID Pakistan would like to utilize a total
of USD 58.5 million for food assistance and agricultural
reform, specifically USD 8.5 million to backfill FY08
resources and USD 50 million for a new USAID agricultural
productivity program. The FY09 supplemental will
technically become available on October 1, 2008.


7. (C) While short term food assistance is justified on
humanitarian grounds, the long term solution to Pakistan's
food deficit is reform of the agricultural sector.
Agricultural development remains a top Government of
Pakistan (GOP) priority with additional funding allocated
in Pakistan's FY08-09 federal budget. USD 50 million of
FY09 supplemental funds would make an initial start in
increasing agricultural productivity. Post intends this
program, scheduled to begin in FY09, to utilize USD 100
million over the five-year 2009-2013 period. The remainder
of the USD 100 million program would come from 2010 to 2013
economic support fund (ESF) one-year budgets.

ADDITIONAL OPTION: GSM-102
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8. (C) The U.S. Department of Agriculture (USDA) is
considering a GSM-102 line of export credit for the
purchase of wheat. The line of credit would be USD
100 million at approximately three percent interest and
limited to three years in duration. These funds are
contingent on USDA's FY09 budget. It is Post's
understanding that this request is currently under USDA
consideration but Post does not know to what extent credit
can be provided or what funding trade-offs vis-a-vis other
countries would be required. This is not a major benefit
nor a short-term solution for hunger but would help
commercial sales of wheat to Pakistan.

PATTERSON