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Millions of Aid Dollars Lost in Currency Fluctuations – Gender Impacts
The euro
has slumped against the dollar. Photo: Mark Hodson
By Joe
Dyke and Jean Milligan
BEIRUT/GENEVA,
26 March 2015 (IRIN) - Currency fluctuations this year could cost relief
agencies hundreds of millions of dollars in lost income, threatening aid to
millions of people around the world.
A drop in the value of the euro against the
dollar and a spike in the Swiss franc have contributed to shortfalls in funding
for the World Food Programme, the International Committee of the Red Cross and
the UN refugee agency (UNHCR), among others.
At a time when UNHCR is already struggling
with insufficient funding amid an increasing number of global crises, it now
has to cut up to $190 million from its global 2015 budget, the agency told
IRIN.
“The shortfall [in funding] is larger than
what we expected, and that affects both priority activities already planned,
and potentially new emergencies that may arise,” spokesperson Ariane Rummery
said.
UNHCR has already begun implementing the
cuts – which represent 7 percent of its expected $3.5 billion operating budget
this year. Assistant High Commissioner for Operations George Okoth-Obbo told an
NGO conference in Geneva earlier this month UNHCR is now instructing some of
its partner NGOs to stop recruiting staff for projects that were already
agreed.
The value of the euro has been declining
since last summer due to a combination of political issues and economic policies, but has fallen
another 12 percent against the US dollar since January. Of UNHCR’s top 20
donors, seven pay in euros including the European Union.
The euro and euro-pegged currencies together
make up some 30 percent of UNHCR’s usual contributions, but devaluations in the
Japanese Yen, as well as the Canadian and Australian dollars, are also
affecting the value of anticipated contributions, Rummery said.
NGOs based in the Swiss city of Geneva, a
global aid hub, have also been vulnerable to fluctuations in the value of the
Swiss franc, which rose by 30 percent against the dollar in January overnight
after the Swiss National Bank lifted a fixed exchange rate leading the currency
to rise from 1.20 against the euro to equal.
“Overnight, [our Geneva costs] probably went
up 15 percent or so,” said Jamie Macdonald, finance and administration
coordinator at ACAPS, a Geneva-headquartered organisation that researches
humanitarian needs. “It was a big concern.”
The losses of about $300,000 led ACAPS to
cut deployments to the field and scale down other activities. The Swiss franc
has risen slightly and now trades at 1.05 euro but agencies are still wary.
“Because we’re small, we’re very
vulnerable,” ACAPS Director Lars Peter Nissen told IRIN. “It really hurts us.”
More than 250 humanitarian, human rights and development
organisations are headquartered in Geneva, but have operations around the
world. For them, the currency fluctuations have had mixed results. Those
largely funded by the Swiss government who spend in Swiss francs have not been
affected. But those funded in other currencies – especially the euro – and
spending domestically have seen their budgets shrink overnight.
ICRC declined to give exact figures but said
it would need to appeal for more money to cover the income lost in exchange
rates.
“With increasing humanitarian needs around
the world, we've launched a record budget for 2015 and in the first half of the
year are asking for additional funds for seven countries,” said spokesperson
Dorothea Krimitsas. “We need more money to cover these needs, and the
fluctuations are exacerbating the situation."
For the World Food Programme, headquartered
in Rome, about 60 percent of contributions received in 2014 were in US dollars
and 20 percent in euros.
“At current rates, the expected 2015 euro
inflow will bring around six percent less income (in USD), in part offset by
about three percent less worldwide expenditure due to the stronger US dollar,”
WFP spokesperson Jane Howard told IRIN.
The
currency changes will have a major impact on aid budgets. Irin Photo
Over the years, aid agencies have developed
mechanisms to protect themselves from currency volatility, including pre-agreed
exchange rates with donors and suppliers. But this year’s fluctuations were
particularly fast and extreme, and many agencies are only now coming to terms
with the possible impact.
“Refugees cannot face more cuts”
UNHCR’s cuts in particular are likely to
affect the work of NGOs around the world. Rummery said the agency would seek to
prioritise the most essential work.
“Core protection and life-saving activities
won’t be cut [but] in other sectors, there will need to be reductions or delays
in activities.”
She did not specify which ones, but Daryl
Grisgraber, of the advocacy group Refugees International, said education and
psychosocial support programmes are often first on the chopping block.
“If this is a global cut, that is probably
going to mean cuts across the board for anything that is not life-saving,” she
said. “Education and psychosocial are some of the areas that could be cut as
they are not considered urgent.”
She said the cuts would have a major
negative impact: “Refugees themselves will get more and more desperate and do
desperate things – for example migration at sea.”
The number of refugees, asylum seekers and
internally displaced people globally rose above 50 million last year for the
first time since the Second World War. While funding for UNHCR has risen, it
has not kept pace with needs.
“Year after year humanitarians have to do
more with less,” Grisgraber said.
In Afghanistan, where aid funding has been on the decline in recent years, Danielle
Moylan, protection and advocacy manager at the Norwegian Refugee Council, said
the country’s refugees and displaced “cannot face more budget cuts.”
“The humanitarian community in Afghanistan
[is] working hard and [is] committed to staying the course, but without
appropriate funding, millions of needy Afghans will not receive humanitarian
assistance. We are already in the grip of a humanitarian crisis and
Afghans are being pushed to the brink.”
500 job cuts
As part of its cuts, UNHCR is also seeking
to reduce staff positions by five percent – up to 500 jobs. The agency
currently employs 9,300 staff in 125 countries.
Rummery said it would seek to avoid cutting
existing staff jobs, by instead leaving vacant posts empty. Regional offices
will have the flexibility to decide how cuts are made across their different
operations, she added.
UNHCR is also continuing to review the costs
of its headquarters in Geneva – one of the most expensive cities in the world,
now exacerbated by the rise in value of the Swiss franc. In line with other
organisations, in recent years, UNHCR has moved some parts of its work to
Budapest and other cities in part to cut costs.
Rummery added that UNHCR hopes to cut
refugees’ dependence on aid by advocating for better working rights for
refugees. “Wherever possible refugees should be allowed to earn their own
incomes.”
But many governments appear headed in the
opposite direction. Lebanon, for example, which hosts over one million
registered Syrian refugees, has forbidden them from any employment.