additionality or diversion? food aid to eastern europe and the former soviet republics and the...

World Developmenr, Vol. 26, No. 1, 3 l-44, 1998 pp. Pergamon 0 1998 Elsevier Science Ltd

All rights reserved. Printed in Great Britain 0305750)3/98 $19.00 + 0.00

PII: 80305-750X(97)10012-2

Additionality or Diversion? Food Aid to Eastern

Europe and the Former Soviet Republics and the

Implications for Developing Countries

CHARLOTTE BENSON and EDWARD J. CLAY* Overseas Development Institute, London, U.K.

Summary. - Substantial flows of assistance to Eastern Europe and the former Soviet republics (FSRs) since 1989 have coincided with stagnating flows of official development assistance to developing countries, raising concerns about the possible diversion of resources to the former from the latter. These concerns are examined empirically for food aid, which formed an important component of initial assistance to the region of Eastern Europe and the FSR, using a supply-based predictor model. Measuring diversion in terms of the difference between actual and forecast levels of food aid flows, the model indicates that European Union (EU) food aid, including Commission and Member State actions, largely involved additional resources. There was however, progressively greater diversion of US food aid from developing countries. The findings are supported by a qualitative examination of the budgetary practices of the US administration and the European Commission, the two largest providers, in financing their food aid to Eastern Europe and the FSR. Globally, the combination of statistical and budgetary evidence suggests that between 10-12 million tons of cereals food aid, or about 20% of shipments, was diverted from developing countries to the region between 1989-90 and 19934.0 1998 Elsevier Science Ltd. All rights reserved

Key words - foreign aid, aid determinants, food security, transitional economies

1. INTRODUCTION: CONCEPTS OF ADDITIONALITY AND DIVERSION

From time to time the international donor community is confronted with a crisis that is widely perceived to require a special response involving additional resources. The African food crisis of 1984-85 (Borton and Clay, 1986) and the southern African drought of 1992 (Benson and Clay, 1994) exemplify such crises, triggering special intemation- ally coordinated responses. More rarely, novel situations arise which require a discreet, but sustained, response such as the post-war Marshall Plan era (Clay, 1993, the rapid decolonization of Africa from the late 1950s and, most recently, the process of political and economic transformation in Eastern Europe and the former Soviet republics (FSRs). Many donors present their responses to such situations as fresh and additional measures, specifically pledged for that purpose. Any suggestion that existing commitments are being repackaged or relabeled or, more seriously, that resources are being diverted from other aid recipients, even if such resources had only been informally allocated, is

strenuously denied. For example, the members of OECD’s Development Assistance Committee (DAC) or the so called Group of 24 (G24) felt a need to be quite explicit on this issue in the case of Eastern Europe and the FSRs:

There has been continued concern among DAC Members and recipient countries alike over potential aid diversion to eastern Europe... At the meeting of the OECD Council at ministerial level in June 1991 ministers reaffirmed their commitment to maintain their level of support for the developing countries: “Ministers

*The suggestions of John Healey on the design of the study, the assistance of Sanjay Dhiri, Caroline Bums and Kate Fraser, as well as the comments of Alan Buckwell, Charles Hanrahan, John Shaw, Hans Singer and World Develop- ment’s anonymous referees are gratefully acknowledged. Officials of the European Commission, the EU Court of Auditors, FAO, the International Grains Council, USDA, USAID and WFP’s INTERFAIS variously assisted by making available statistical data, documentation and discussing technical and policy issues. The study was supported by a grant from the UK Economic and Social Research Council. Final revision accepted: July 12, 1997.

31

32 WORLD DEVELOPMENT

reaffirm that their determination to give high priority to their co-operation with developing countries will not be diminished because of their support for central and eastern Europe” (OECD, 1992, p.17).

Such issues of additionality and diversion are clearly important when substantial resources flows are involved. But, the assessment of such actions and the related statements of governments and agencies is notoriously difficult. First, bureaucratic institutions have enormous scope for covering their tracks by obscuring allocation processes. Second, there are difficulties in defining and exploring alternative counterfactual scenarios - that is, what would have happened on the basis of existing policies had no event occurred which precipitated a policy change. Nevertheless, if democratic governments are to be properly accountable for their international actions, such statements should neither be accepted uncriti- cally or simply disregarded as unverifiable. Rather, the challenge is to find ways of testing, if possibly quantitatively, the validity of such statements.

The combination of the entirely novel circum- stances of supporting reform in Eastern Europe and the FSRs and the extensive initial use of food aid’ in this process offers an opportunity to explore such questions of additionality and aid diversion in a rigorous way with the tools of economic analysis. These efforts involved a clear shift in the aid activities of Western donors and the international financial institutions. Budgetary practice therefore provides one source of evidence on the allocative consequences of the introduction of aid programs for a new set of recipient countries. The widely recognized and documented influence of supply-side conditions in determining the fluctu- ating levels of food aid offers a critical second, independent source of evidence (Taylor and Bye- rlee, 1991; Clay and Benson, 1993). Drawing on such relationships, statistical analysis can be used to provide counterfactual predictions of the likely scale of flows of food aid over the period of analysis - that is, to provide estimates of global levels of food aid under prevailing market conditions had donor policies remained unchanged. Moreover, data on variables reflecting these influences, such as international market prices and changes in per capita food production in exporting and importing countries, as well as food aid flows themselves, are readily available, facilitating modeling.’ Issues of additionality and diversion can therefore be examined within the context of just this one component of foreign assistance.3

2. SCOPE OF THE ANALYSIS

This article reports the findings of an exploration

of these issues of additionality and diversion of aid between mid-1989 and mid-1994, the first five years of Western donor support for reform in Eastern Europe and the FSRs through the use of food aid. A simple statistical model is developed to measure the extent of additional&y of cereals food aid flows to the region. This supply-based predictor model provides a measure of diversion defined in terms of the extent to which actual levels of food aid to developing countries differed from the levels that would have been expected, given the prevailing domestic cereal market conditions.4 The robustness of the model’s findings is then tested through a qualitative examination of the budgetary practices adopted by the US govem- ment and the European Commission, the two major suppliers of food aid to the region, in financing these operations. These practices are analyzed in terms of the extent to which the funding sources drawn upon implied direct competition between food aid to Eastern Europe and the FSRs and to developing countries.

3. OVERALL AID FLOWS

Since the late 198Os, Eastern Europe and, then, the FSRs have received sizeable pledges of foreign assistance in support of the process of economic and political transformation.5 Donors initially sought to provide the aid in addition to their existing programs to developing countries.6 This was formally reflected in the creation of several new programs specifically concerned with assistance to Eastern Europe and the FSRs (Benson and Clay, 1992). But, these flows have occurred during a period of stagnating aid flows to developing countries, in turn partly a consequence of the end of the Cold War. Official Development Assistance (ODA) fell by 15% in real terms over 1990-95, despite a temporary rise in 199 1. More- over, these total flows have included increasing levels of assistance to nine less advanced Eastern European countries and FSRs. equivalent to 4.8% of total ODA in 1995. Excluding these countries, ODA declined by 19% in real terms during 1990-95. At the same time, more advanced Eastern European countries and FSRs have also received substantial concessional assistance, which the OECD has recorded under a separate list and counted as Official Aid rather than as ODA. Such aid flows were equivalent to 15% of global oda disbursements from DAC countries, multilateral organizations and Arab countries in 1995. Although these flows have been deliberately separated from ODA to increase trans- parency and thus allay concerns of possible diversion of aid from developing countries, the contempora- neous decline in ODA has effectively sustained such concerns.’

ADDITIONALITY

Food aid, the subject of this paper, constituted an important component of the DAC donor community’s initial response to the political and economic reform process in the former Communist bloc. This partly reflected the fact that food aid often forms a major part of immediate, highly visible international responses to perceived situations of distress and hunger. Thus cereals food aid flows to Eastern Europe and the FSRs increased from zero in 1988 89 to 1.6 million ton in 1989-90, rising to a peak of 5.0 million ton by 1993-94 before declining again to, provisionally, 1.6 million ton in 1995-96. Between 1989-90 and 1995-96, the region received 18.4 million ton of cereals food aid, equivalent to 23% of total global receipts.

The decline in food aid to the region in the mid- 1990s reflects both changing perceptions of appro- priate types of assistance to the region and, more fundamentally, a dramatic decline in global food aid from an all-time high of 15.2 million ton in 1992-93 to 7.2 million ton in 1995-96, the lowest level since 1975-76. The latter reflects a number of factors including budgetary pressures in the United States, historically the largest donor, and a temporary rise in world grain prices to a level not experienced since the early 1970s.

Initially, food aid to Eastern Europe and the FSRs was dominated by flows of program (or monetized) aid to Poland and, subsequently, Romania, Bulgaria

OR DIVERSION? 33

and the former USSR as well. This program aid provided a combination of budgetary support from sales revenues as well as balance of payments support. Other more flexible forms of assistance, however, have latterly replaced food aid in meeting such economic assistance requirements.* Instead, food aid flows to the region has increasingly reflected emergency needs: conflict-afflicted Arme- nia, Azerbaidjan, Georgia and former Yugoslav republics received an estimated 68% of cereals food aid to the region in 1994-95 to 1995-96.

4. A “SUPPLY” MODEL OF FOOD AID

A relationship between flows of cereals food aid and cereal market conditions in donor countries can be simply demonstrated by plotting annual cereals food aid shipments and movements in real wheat prices (Figure 1). The strong inverse relationship between the two is partly explained by US budgeting of food aid in largely value rather than volume terms. But the relationship between cereals food aid from the rest of the world, much of which is committed annually in tonnage rather than in value terms, and real wheat prices is also statistically significant.’ The existence of a relationship between cereals food aid and global food aid is supported by earlier analysis by Taylor and Byerlee (1991) who calculated a

1 600

ZL 1970-7 1 1976-77 1982-83 1988-89

-O-Total cereals food aid - -.- - Total excl. USA --‘0” Price (US HArd Winter No.2)

Figure 1. Trends in global cereals food aid and wheat prices, 1970-71 to 1995-96.


higher elasticity of foreign-exchange outlays for food imports with respect to changes in world prices for food aid recipient than non-recipient countries.

Building on the well-established inverse correlation between world prices and cereals aid levels, statistical analysis was employed to estimate the relationship between international and internal market factors and annual levels of food aid shipments in the period up to 1988-89 - that is, before sizeable flows of food aid began to Eastern Europe and the FSRs. Institutional constraints such as the Food Aid Convention, which establishes minimum food aid levels, and international crises that might elicit an exceptional response were also taken into account. The best-fit results in this statistical modelling were used to predict levels of food aid over the subsequent five years up to 1993- 94. These predictions were then compared with actual shipment levels to gauge whether or not food aid flows to Eastern Europe and the FSRs had been additional.” The underlying hypothesis was that, without the developments in Eastern Europe and the FSRs, total food aid levels to developing countries would have continued to be broadly determined by supply factors and so approximated to “predicted’ levels.’ ’ It was decided not to predict food aid levels

beyond 1993-94 because of the real discontinuity in food aid flows, including an apparent change in the factors determining flows of food aid, beyond that date, as indicated by the supply-side modeling. A further description of the model and the results is provided in the Appendix.

The results indicate a strong negative relationship between food aid shipments and wheat prices and a positive one between food aid shipments and the emergency dummy variable. Moreover, for EU, US and global food aid, year-to-year changes in actual flows and fitted levels were all closely correlated between 1980-81 and 1988-89. In contrast, however, the fitted or predicted levels of aid between 1989-90 and 1993-94 indicate quite different policy influences at work. Figures 24 provide a clear graphic presentation of findings.

For the EU, a comparison of actual food aid levels and those predicted by the best-fit equation suggests that flows to Eastern Europe and the FSR up to 1993-94 were largely additional (Figure 2). Ship- ments to developing countries during 1989-90 and 1990-91 and 1993-94 were slightly in excess of predicted levels, and in 1991-92 and 1992-93 slightly below. Thus, over the full five years the differences between predicted and actual levels

I I I I I 1982-83

-m- Incl. EElFSRs

1985-86 1988-89 1991-92

t(o) t( 1) t(2) t(3) t(4) t(5)

- Excl. EE/FSRs - f- Fitted

Actual flows to developing countries:

q Lower than forecast/predicted Higher than forecast/predicted

Figure 2. EU cereals food aid, 1980-81 to 1993-94: actual nndfitted/predictedpows.

ADDITIONALITY OR DIVERSION? 35

1982-83

-g- Incl. EElFSRs

1985-86 1988-89 1991-92

tw t(l) t(2) t(3) t(4) t(5)

- Excl. EElFSRs - +- Fitted


Lower than fitted/predicted Higher than fitted/predicted

Figure 3. US cereals food aid. 1980-81 to 1993-94: actual and fitted/predicted flows

almost cancelled out. Both predicted and actual levels of aid to developing countries also rose slightly in 1992-93, reflecting extra crisis related allocations in response to the drought in southern Africa, as confirmed by evaluations of EU and member state food aid (Clay er al., 1996).

In contrast, actual levels of US food aid even including flows to Eastern Europe and the FSRs were consistently below predicted levels between 1988-89 and 1992-93, although marginally higher in 1993-94 (Figure 3). These results strongly suggest that food aid has been diverted from developing country recipients to Eastern Europe and the FSRs. This reallocation at the expense of developing countries appears particularly marked after 1991- 92, when the United States had made a special effort to assist drought affected southern Africa (Callihan et al., 1994). But, the direction of annual movements in predicted and actual US food aid levels, were similar, underlining the role that world cereal market conditions continued to play in determining levels of food aid, at least up to 1993-94, despite downward budgetary pressures (discussed below).

Globally, total shipments during 1989-90 to 1993-94, including those to Eastern Europe and the FSR closely matched, while slightly exceeding,

predicted levels (Figure 4). The extraordinarily close correlation between actual and predicted flows during a period when total flows fluctuated between 11.3 and 15.2 million tons confirms the powerful supply-side determinants of overall food aid avail- ability. In terms of donor composition, downward budgetary pressures on US aid also appears to have been compensated partly by higher allocations from other donors, especially the EU.

In contrast, since 1989 there has been no measurable relationship between actual food aid to developing countries and predicted flows: over five years the difference between these flows grew from just under one million to almost five million tons (Figure 4). This widening gap suggests that at a global level food aid to Eastern Europe and the FSRs was only to a limited extent additional, and also involved a substantial diversion of resources from developing countries. The supply-side model estimates the difference between actual and predicted flows and implies that the cumulative totals and proportions of additional and diverted cereals aid over five years were approximately 1.8 million tons (12%) and 12.8 million tons (88%) (Table 1). A test of the robustness of these results is to determine whether an analysis of budgetary practice for the


I I I I 1982-83 1985-86 1988-89 1991-92

t(o) t(l) t(2) t(3) t(4) t(5)

-=- Incl. EElFSRs - Excl. EElFSRs - f- Fitted/predicted


•,I Lower than forecast/predicted Higher than forecast/predicted

Figure 4. Global cereals food aid, 198Wl to 1993-94: actual and fitted(predicted flows.

Table 1. Cereal Food Aid Flows to Eastern Europe and the FSR: additional and diverted aid (million ton)”

Year (July-June) Additional (1) Diverted (2) Total (l)+(2)

1989-90 0.7 0.9 1.6 1990-91 0.1 1.6 1.7 1991-92 0.2 1.7 1.9 1992-93 0.6 3.8 4.4 1993-94 0.1 4.9 5.0 Total (five years) 1.7 12.9 14.6

a“Additional” aid is the difference between “predicted” aid and total aid including EE/FSR and “diverted” aid is the difference between predicted aid and total aid excluding EE/FSR (see Table A2). Cereals food aid includes processed products converted kto grain equivalent. Source: Table A2

major donors yields inconclusive findings.

consistent, contradictory or

5. DONOR BUDGETARY PRACTICES

(a) European Union food aid

Eastern Europe and the FSRs have become an important group of recipients of EU food aid, receiving 7.1 million tons of cereals between mid-

1989 and mid-1996 as well as substantial non-cereals food assistance. The European Commission alone provided around 96% of this food aid, justifying a focus on its budgetary practices. Most of the EU member states also provided some assistance, but information on how they financed their food aid is disparate.12

Commission-managed food aid to the region has largely been financed and organized by Directorate General (DG) I (External Relations), principally under the PologneiIIongrie Assistance k la RCcon-

ADDITIONALlTY OR DIVERSION? 31

struction Economique (PHARE) program (see below), and, in particular, DG VI (Agriculture). Latterly, substantial additional emergency assistance has been provided, largely to the former Yugoslav republics, by the Commission’s emergency food aid unit within the European Community Humanitarian Office (ECHO) which was established in 1992.” Thus, food aid to the region was organised entirely outside the regulatory and budgetary frameworks for non-emergency food aid to developing countries, which is administered by the Food Aid Service of DGVIII (Development). This ad hoc arrangement also largely avoided direct competition for funds, except in the context of emergency assistance.

The sizeable food aid flows funded by DGVI have been financed through the Guarantee section of the European Agricultural Guidance and Guarantee Fund (EAGGF) budget, opportunistically and in- novatively utilizing budgeted resources surplus to the actual requirements of the Common Agricultural Policy (CAP). During 1989-92, a substantial 892 million ECU (MECU), equivalent to US$l, 160 m at 1992 rates of exchange, was appropriated from the EAGGF-Guarantee funds for this purpose. The magnitude of this assistance can be put in context by comparing it with European Development Fund disbursements, the principal source of Commission’s development assistance to ACP developing countries, over the same period, of 6,067 MECU; or total non-emergency food aid disbursements to all developing countries of 2,348 MECU. Albania, the Baltic states, Bulgaria, Poland, Romania and the FSRs, in particular Russia, benefited from this aid. Most was provided in the form of program (non-project) food aid to be sold on local markets rather than to be distributed free as relief.

The use of EAGGF funds in this way was both unprecedented and involved irregularities. Although it apparently involved no diversion of resources from developing countries, it hinted at preferential treat- ment as no developing country had ever been allocated resources from this source. Some member states, such as France, were, in fact, initially opposed to this use of EAGGF-Guarantee funds, arguing that they should be used only as an intervention instrument within the EU internal market. The European Court of Auditors also drew attention to breaches of budgetary rules in the implementation of this aid, concluding that “the EAGGF-Guarantee budget is inappropriate for such aid measures and that the administration of the aid was inadequate” (European Court of Auditors, 1993). Nevertheless, despite continuing opposition from some Member States, a further 165 in MECU was appropriated to finance food aid to Russia in 1994.

The motives underlying the use of EAGGF funds should also be considered. Faced with a tight budgetary constraint, the EAGGF was one of the

few, and perhaps the only, readily available source of assistance to the region which did not require an additional budgetary subvention. Such concerns are demonstrated by a 100 MECU (US$ll7 m) food aid proposal for the Ukraine in 1994, drawn up following a commitment by the European Council to support the country’s economic and political reform process and clear identification of its need for seed and fertilizer imports. Since no other instrument was available to fund these imports directly, it was proposed that EAGGF-financed food aid should be provided as a form of import support to the Ukraine Government, the foreign currency savings on food imports then being used to finance imports of agricultural inputs originating in the EU. In the event, the proposal was rejected by the European Council, partly because there were no apparent food shortages in the Ukraine and partly because some member states were opposed to the provision of agricultural aid to a potential future international competitor. More generally, examination of the use of EAGGF-financed food aid also suggests that the agricultural budget has been drawn on as one of only a few available sources of financing of any sort rather than because there is a need for food aid per se. The food aid has largely been allocated to non- project uses, with the food aid monetized through market channels rather than used to support direct nutritional interventions. There have even been cases where a commodity provided as food aid was already available in sufficient quantities on the domestic market. For example, part of a milk powder consignment provided to Bulgaria in 1991 was re- exported to Egypt (European Court of Auditors, 1993).14

The very small scale of the food aid provided under the PHARE program is a further indication of the limited need for food aid per se. The Commis- sion’s PHARE initiative was established in 1989, with its own budget, specifically to provide development and humanitarian assistance to Poland and Hungary.” Over time, its coverage was widened to include all of Eastern Europe and the Baltic republics. The Commission began supplying food aid under the PHARE program in 1989, initially to Poland. By the end of 1993, however, only 90 MECU (US$lOS m at the 1993 rate of exchange) had been allocated for food aid (to Poland, Albania and Romania), representing 2.7% of commitments, although probably nearer 5% of disbursements under the program. This limited provision of food aid reflects a deliberate EU policy to direct PHARE resources into longer-term development activities, a policy supported by governments in the region. Indeed, the Multi-Annual PHARE Guidelines 1993- 7 stated that humanitarian aid “should in principle become an increasingly subsidiary part of PHARE and should exclude in principle import programs


such as supply of agricultural inputs, medical products or food which indirectly serve the purpose of balance of payments support” (European Court of Auditors, 1993).

ECHO, which is responsible for emergency assistance worldwide, has also provided some emergency food aid to the region. ECHO does not receive a general budget; instead, funds channelled through the office are supposedly already earmarked for use in particular countries. Thus, at least in theory, Eastern Europe and the FSRs should not compete directly with developing countries for such funding. But ECHO resources were severely strained in 1994 because of the growing demands of a few large conflict related emergencies, including those in Rwanda and former Yugoslavia. Some funding unofficially earmarked for Rwanda was reallocated to former Yugoslavia, implying that in practice there is some competition for resources between different emergency operations.16 Overall, Eastern Europe and the FSRs received 43% of total ECHO assistance (in value terms) during 1993-95 (European Court of Auditors, 1997).

(b) US food aid

During the Cold War, the US government regarded aid as an important element of its foreign policy (Tarnoff, 1995).17 The ending of the Cold War effectively reduced the importance attached to such assistance, while at the same time shifting the focus of foreign policy and aid toward the former Communist bloc (Sewell and Gwin, 1994). The impact of these changes has been felt particularly since 1993, when the Clinton Administration began a major restructuring of US foreign assistance objectives and budget categories. Foreign Operations appropriations, excluding military aid, fell by 8.8% in FY 1994 (October 1993 to September 1994) to US$lO.l bn, only recovering by 1.7% in FY1995. Over the same period, economic support to Eastern Europe and the FSRs increased from 13.6% of total foreign appropriations in FY 1993 to 17.3% in FY 1994, including transfers from the Defence Depart- ment, before falling to 12% in FY 1995. In FY 1994, the FSRs collectively were the second only to Israel as recipients of US foreign assistance from all sources (Tamoff, 1995).

Revisions to the food aid program implemented under the 1990 Farm Bill, including an amendment to make Eastern Europe and the FSRs eligible for food aid, had already begun to reflect the shift in foreign policy objectives. Under the Bill, Public Law 480, which governs a large part of the US food aid program and which falls under Appropriations for Agriculture rather than Foreign Operations, empha- sized the use of food assistance resources to support

the emerging democracies in Eastern Europe and the FSRs as well as to provide famine-relief in Africa (Hanrahan and Leach, 1994). As outlined below, such amendments facilitated increasing flows of food aid to the region between 1989-90 and 1993- 94, prior to the more general decline in total US food aid. In relative terms, food aid shipments to Eastern Europe and the FSRs formed 23.3% of total US food aid between 1989-90 and 1993-94; and 23.5% over the longer period from 1989-90 to 1995-96. Declining creditworthiness of some FSRs” and lack of guarantees to a level which traders considered satisfactory effectively boosted levels of food aid even further as the US Department of Agriculture was increasingly unable to use commercial credits to finance food exports. Instead, food aid programs were drawn on as the only easily available instrument for export support. There was also some reluctance, at least on the part of Russia, to incur further debt and thus to enter into loan agreements (Tarnoff, 1995).

In terms of the financing of such assistance, the US food aid program is divided under a number of budgetary titles, with varying objectives, eligibility criteria and degrees of concessionality (Han&an and Leach, 1994). Food aid to Eastern Europe and the FSRs has largely been offered under three existing programs: the PL480 Title I concessional sales program, the Section 416 grants program of the 1949 Agricultural Trade Act and the Food for Progress program (FFP). The initial US shipments, which concentrated on Eastern Europe, drew particularly on Section 416 which provided almost three- quarters, in volume terms, of food aid to the region between FY1989 and FY1991. The rise in flows in FY 1992, as the emphasis shifted to the FSRs, was financed by increased drawings on all three budget lines, but the FFP program emerged as the largest single source of funding both to the FSRs and Albania, the only East European recipient of US food aid in FY1992. The massive US$885 m increase in US food aid to the FSRs in FY1993, to a total of almost US$l.25 bn, was also largely accounted for by the FFP program which alone provided 76% of the aid, in volume terms. In FY1992 and 1993, the United States also committed food aid totalling US$lO5 m, on grant terms, to the Commonwealth of Independent States (CIS) under an emergency operation, Operation Provide Hope, utilising De- fence Department food supplies left over from the Gulf War together with USDA food stocks.

This choice of budget lines reflected some desire on the part of the US Administration to avoid diversion of resources from developing countries. In previous years, there had been relatively little activity under the FFP program, with underutilized resources thus available to supply food aid to Eastern Europe and the FSRs. But, the FFP budget heading


in turn draws resources from the PL480 Title I program, and competes with Section 416 for Commodity Credit Corporation (CCC) surpluses, implying some indirect competition between budget lines.” Furthermore, the Freedom Support Act, which is the basis of US assistance to the FSRs, waived the statutory limit on the tonnage shipped under the FFP program in both FY1992 and FY 1993 to permit increased flows, thus placing greater indirect pressure on other food aid budget lines. In considering the diversion effects, this point is particularly pertinent in view of the decline in overall PL480 budgets by 8.2% in FY 1994 and by a further 13.9% in FY 1995, to only US$l.2 bn. The PL 480 Title III program, under which grant program food aid is provided to the least developed and food- deficit countries, bore the brunt of the 1995 budget cut, falling by 69% to only US$80 m.

Under the Title I budget there has been, prima facie, more direct competition for resources between Eastern Europe and the FSRs and developing countries. Total annual funding available under Title I is determined by an Appropriations measure voted by Congress every five years, implying relatively little flexibility in meeting additional unanticipated demands. Eastern Europe and the FSRs’ share of allocations rose from relatively modest levels in FYl989-92 to some 24% in FY1993. In the same year, the US Government also provided substantial drought-related assistance to southern Africa, drawing on all four of its food aid programs. So where did the shoe pinch? In the context of renewed con- troversy about the role of foreign policy interests in Title I allocations, in FY1993 large cuts were made in allocations to several traditionally important recipients, notably Egypt, El Salvador and Morocco, identified as among five countries where “foreign policy considerations loom large” in their Title I programs (Hanrahan, 1991). Thus, new politically motivated and also export-enhancing food aid actions involving Eastern Europe and the FSRs simply replaced old ones. Meanwhile, overall flows of food aid to developing countries with exceptional needs, which are supposed to receive priority in the allocation of Title I reserves, were little changed initially. The subsequent effects of continuing aid to the FSRs under increasing budgetary constraints in 1994 and 1995 and beyond are outside the scope of this paper.

The plethora of US food aid budget lines clouds the issues of additionality and diversion. Never- theless, the budgetary evidence is consistent with results of the statistical analysis which suggest that US food aid to Eastern Europe and the FSRs has involved diversion of aid away from long-standing developing country recipients. Ironically, this diversion of resources coincided with an increased emphasis on the allocation of PL480 food aid to

countries with the greatest need and particularly to those where the aid can be used in programs to improve agricultural productivity and nutritional status (USAID, 1995).

6. CONCLUSION

Food aid flows to Eastern Europe and the FSRs in the late 1980s and early 1990s provides an important opportunity for examining the consistency between stated policies and actual practices of the donor community. The general and collective donor insistence on the additionality of aid to the region is not supported by the evidence.

The statistical evidence is quite compelling in broadly quantifying the extent of diversion of food aid. Globally the supply side model suggests an increasing level of diversion over five years equivalent to over 12 million tons or about 20% of total food aid over the same period. When evidence from budgeting analysis is taken into account, this would appear to be an upper limit estimate of the extent of diversion. In the case of the EU, there is little direct evidence of diversion. Instead, the EU’s provision of food aid demonstrated some degree of sensitivity to exceptional needs generated by international emergencies, in particular by its use of unconventional EAGGF budgetary sources to finance food aid to Eastern Europe and the FSRs. In contrast, some diversion of US food aid undisputedly occurred in the context of overall downward budgetary pressures. Globally, therefore, diversion was also largely attributable to US actions.

By the mid to late 1990s the issue of aid diversion has perhaps become less contentious and more transparent in donor practices. A number of Eastern European countries and FSRs have been added to the list of countries eligible for official development assistance, and more donors are revising their legislation to permit flows of assistance to these countries from conventional aid programs. By 1997, 10 countries in the region had become eligible for ODA (OECD, 1996), while the revised 1995 Food Aid Convention permits flows of food aid to these countries to be counted against minimum commitments. The European Commission has also revised the list of eligible countries under its conventional food aid program to bring it in line with the new FAC and OECD definitions (European Commission, 1996). In the absence of extra resources and even with contraction in some aid programs, such changes imply direct and transparent competition between “new” and “old’ developing countries for aid. What this investigation has shown is that this was the reality from the outset. More generally, the research reported in this article also demonstrates that official statements on contentious issues of development


policy such as the allocation of aid resources are susceptible to rigorous economic analysis. The combination of formal quantitative modeling and more subjective budgetary analysis can be particularly effective in testing such statements, contribut- ing to greater accountability in development policy.

Are there policy implications of this exploration? Nobody appears to have responsibility for regularly posing the questions about donor behavior explored in this article. The institutional burden for donor accountability rests primarily upon the independent audit agencies such as the European Court of Auditors and the US General Accounting Office reporting to their respective legislatures. These audit bodies have an extremely important function in democratic societies in monitoring agency performance in relation to their legal responsibilities for proper use of public funds. But, they lack a mandate to evaluate policies. At the international level the DAC, although in effect a donor club, plays a useful

role in monitoring collective performance of its members through its annual reports. Its margin for maneuver, however, is constrained in terms of what it can require of members. Thus in 1991 it abandoned publishing annual estimates for food aid expenditure because of inconsistent and incomplete reporting by members. Its special reports on member state development cooperation are also heavily negotiated and do not provide an independent audit. Institutions in civil society have sought an increasing role in ensuring donor accountability, but they are heavily single issue and event focused. The huge effort of organizing around the November 1996 World Food Summit is a case in point. They do not collectively, regularly or with analytical rigor monitor donor performance. There is, then, a gap in the arrangements in monitoring donor performance that is perhaps of increasing importance in a period of severe budgetary pressures and rapidly changing policy priorities.

NOTES

1. The distinction between food aid on a wholly grant or concessional credit basis and commercial credits is not entirely clear (Shaw and Singer, 1996). For the purposes of this study, the FAO Committee on Surplus Disposal definition of food aid is adopted, defining food aid as:

- gifts or donations of food commodities by bilateral, multilateral and non-governmental organizations and pri- vate individuals;- monetary grants tied to food purchases; and- sales and loans of food commodities on credit terms with a repayment period of over three years (World Bank/ World Food Program, 1991).

2. Food aid is much better documented than other forms of assistance because donor reporting requirements for this type of assistance fall not only under OECD reporting procedures but also under the separate reporting procedures of the International Grains Council and the World Food Program (Jost, 1991).

3. Food aid levels have been relatively small in relation to global cereals since the early 1980s - IO-15 million tons in comparison with 300 million tons of recorded trade flows (excluding those within the European Union). Annual variations in food aid of 2-3 million tons therefore represent under 1% of cereals trade and can be ignored as a significant determinant of prices in the short run. Note: all quantities are expressed in metric tons or tonnes.

4. The analysis relates to cereals food aid shipments in volume terms (metric tons or ton) because of data constraints. Shipments of non-cereals food aid, are excluded because these are determined by a wide variety of factors which cannot be easily contained within a simple analytical framework. Associated administrative, transport, handling and other costs borne by donors are also excluded from the analysis.

5. Eastern Europe is defined to include Albania, Bulgaria, the Czech and Slovak Republics, Hungary, Poland, Romania and the former Yugoslav republics. The term “former Soviet republics” is used to denote the 15 republics of the former USSR and, prior to December 199 1, the USSR itself.

6. The term “developing country” as used in this paper specifically excludes any East European country or FSRs which during the 1990s have been added to the list of countries eligible for official development assistance. The implications of these changes are taken up in the concluding section of the paper.

I. For example, debate about diversion has been renewed in the context of discussions on EU member state contributions to the European Development Fund (EDF)) from 1998, when existing pledges run out. The EDF is the main program under the Lome Convention providing development assistance, including aid and trade provisions, to African, Caribbean and Pacific (ACP) countries, and is funded directly by member states’ contributions (ODI, 1995). Many ACP countries believe that the announced cuts in German and British contributions to the EDF reflect changing aid priorities as donors devote more resources to Eastern Europe, the FSRs and the Mediterranean littoral countries.

8. For a fuller discussion of program food aid see Clay et al. (1996).

9. A simple regression in logarithmic form of global cereals food aid against a wheat price series over 1970-71 to 1993-94 yielded a t-statistic of -10.2 on the price series, an adjusted R2 of 0.82 and an F-statistic of 103.8. A similar regression for cereals food aid excluding the United States


yielded a t-statistic of -6.1 on the price series, an adjusted R* of 0.61 and an F-statistic of 37.4.

10. An alternative naive, or intransient policy, model was also computed for both the period 1980-81 to 1988-99 and 198&81 to 1993-94 which assumed that food aid flows in a particular year were simply a function of those in the previous year - ie, of the form:

FA, = (Y + pFA,_, + t,

where FA, is food aid in year t. This relationship was computed for global, US and EU food aid. But, the results were not statistically valid.

11. Donors were committed to providing a minimum of 7.6 million tons of cereals food, or the cash equivalent, annually between 1986-87 and 1994-95 (and 7.5 million tons between 1980-81 and 1986-87) to developing countries under the FAC. During the study period, food aid flows to Eastern Europe and the FSRs were not permitted to be counted as part of donors’ minimum annual food aid contributions under the FAC, implying that the FAC should have provided an effective floor which prevented diversion. But, these minimum obligations had been regularly exceeded by most donors, overall by 72% between 1987-88 and 1989-90 (Clay and Benson, 1993). Thus commitments were too low to ensure the additionality of food aid to Eastern Europe and the FSRs.

12. For example, Germany and the United Kingdom provided emergency aid outside their normal food aid programs whereas Greece apparently allocated part of its very small Food Aid Convention commitment as aid to Albania. For analysis of policy and evidence on expenditure of EU member state food aid programs see Clay and Benson (1993); Clay et al. (1996).

13. ECHO’s establishment brought together all services of the Commission involved in humanitarian emergency assistance and related budget lines, including food aid. The European Court of Auditors (1997) special study provides a

further account and assessment of ECHO’s operations during 1992-95.

14. The provision of food aid, because it is one of the only available forms of assistance, raises issues which are beyond the scope of this paper. Food aid is not a particularly flexible form of assistance and can have disincentive effects which have been widely discussed in the context of developing countries (see, for example, Maxwell, 1991). Thus, food aid should not be considered as interchangeable with, and of equivalent value to, other forms of aid.

15. The Technical Assistance for the Commonwealth of Independent States (TACIS) program was initiated in 1991 as a complementary program providing technical assistance to the 12 FSRs excluding the Baltic republics. Prior to FY1994, all funds were allocated to technical assistance activities, with no allocations to humanitarian operations. But a small 50 MECU part of the 1994 500 MECU TACIS budget could be spent on humanitarian assistance. This funding was passed on to ECHO.

16. In 1994, EAGGF resources were used to complement ECHO resources in some FSRs, focusing on government actions. The more flexible ECHO resources provided support where aid could not be provided through govem- ments, such as in refugee camps in Georgia, Nagomo- Karabakh (Azerbaijan), Tajikistan and Kyrgyzstan.

17. Indeed, when the US Agency for International Development (USAID) was founded in 1961, Congres- sional opposition to its creation “was overcome by the argument that AID projects were needed to ‘contain’ Soviet influence in the Third World” (Kirschton, 1993).

18. Tamoff (1995) reports one US study which estimated a 68% risk that Russia would default on a loan and an 81% risk that the Ukraine would default.

19. The CCC is part of the US Department of Agriculture. It acquires surplus food stocks in the course of its price support operations.

REFERENCES

Benson, C. and Clay, E. J. (1992) Eastern Europe and the Former Soviet Union: Economic Change, Social Welfare and Aid. ODI Special Report, Overseas Development Institute, London.

Benson, C. and Clay, E. J. (1994) The Impact of Drought on sub-Saharan African Economies: A Preliminary Exam- ination. ODI Working Paper 77, Overseas Development Institute, London.

Borton, J. and Clay, E. J. (1986) The African food crisis of 1982-1986. Disasters 10(4), 258-272.

Callihan, D. M. er al. (1994) Famine averted: the United States Government response to the 1991/92 southern African Drought. Management Systems International, Washington DC.

Clay, E. J. (1995) Conditionality and program food aid: From the Marshall Plan to structural adjustment. In Aid and Political Conditionality, ed. 0. Stokke. Frank Cass, London.

Clay, E. J. and Benson, C. (1993) Food Aid Programs of the European Community and its Member States: A Comparative Statistical Analysis. ODI Working Paper 72, Overseas Development Institute, London.

Clay, E. J., Dhiri, S. and Benson, C. (1996) Joint Evaluation of European Union Program Food Aid: Synthesis Report. A study commissioned by the Working Group of Heads of Evaluation Services Development, of the EU member states and the European Commission. Overseas Development Institute, London.


Egg&on, R. C. (1987) Determinants of the Levels and Distribution of PL 480 Food Aid; 1955-79. World Development l!?(6), 797-808.

European Commission (1996) Council Regulation (EC) No 1292/96 of 27 June 1996 on food aid policy and food aid management at special operations in support of food security, OJ C166. European Commission, Brussels, July 5, 1996.

European Court of Auditors (1993) Annual Reporr Concerning the Financial Year 1992 Together with the Institutions’ Replies, OJ C309/01. European Court of Auditors, Brussels.

European Court of Auditors (1997) Special Report No 2/97 concerning humanitarian aid from the European Union between 1992 and I995 together with the Commission’s replies, OJ C143/40. European Court of Auditors, Brussels.

Hanrahan, C. E. (1991) The 1990 Farm Bill: Food Aid Reauthorisation Issues, CRS Issue Brief IB9003.5, Updated version. Congressional Research Service. Library of Congress, Washington DC.

Hanrahan, C. E. and Leach, L. (1994) P. L.480 Food Aid: History and Legislation, Programs, and Policy Issues. CRS Report for Congress 94-303 S. Congressional Research Service, Library of Congress, Washington DC.

Jost, S. (1991) An introduction to the sources of data for food aid analysis with special reference to sub-Saharan Africa. In Food Aid Reconsidered, ed. E. J. Clay and 0. Stokke. Frank Cass, London.

Kirschton, D. (1993) The 1990 Farm Bill; Food Aid Reauthorisation Issues, CRS Issue Brief IB90035, Updated version. Congressional Research Service, Library of Congress, Washington DC.

Maxwell, S. (1991) The disincentive effect of food aid: A pragmatic approach. In Food Aid Reconsidered, ed. E. J. Clay and 0. Stokke. Frank Cass, London,

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Policies of the Members of the Development Assistance

Committee. OECD, Paris. Organisation for Economic Co-operation and Development

( 1996) Development Cooperation 1995: Efforts and

Policie.~ of the Members of the Development Assistance

Committee. OECD, Paris. Overseas Development Institute (1995) ELI aid post-

Maastricht: Fifteen into One? ODI Briefing Paper

1995 (2). Overseas Development Institute, London. Sewell, J. and Gwin, C. (1994) US foreign assistance:

Facing new challenges. In Crisis or Transition in

Foreign Aid, ed. A. Hewitt, ODI Special Report. Overseas Development Institute, London.

Shapouri, S. and Missiaen, M. (1990b) Food Aid:

Motivation and Allocation Criteria, Foreign Agricultural

Economic Report 240. USDA, Washington DC. Shaw, D. J. and Singer, H. W. (1996) A future food aid

regime: Implications of the final act of the Uruguay

Round. Food Policy 21(4/5), 447460. Tarnoff, C. (1995) The Former Soviet (inion and US

Foreign Aid: Implementing the Assistance Program,

CRS Report for Congress 95-170 F. Congressional

Research Service, Library of Congress, Washington DC. Taylor, D. and Byerlee, D. (1991) Food aid and food

security: A cautionary note. Canadian Journal of

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United States Agency for International Development,

Washington DC.

World Bank/World Food Program (1991) Food Aid in Africa: An Agenda for the 1990s. World Bank/WFP, Washington, DC/Rome.

APPENDIX A: A SUPPLY-SIDE MODEL OF FOOD AID

The supply-side relationships influencing food aid levels were explored using multiple regression analysis. The equations were estimated using ordinary least squares (OLS) in logarithmic form, with donor cereals food aid shipments in grain equivalence as the dependent variable. Separate analyses were undertaken for the two major donors, the EU (including both Community Action managed by the Commission and Member State national actions), and the United States, as well as for global food aid. The United States provided 65% and the EU 29% of total food aid to Eastern Europe and the FSRs between 1989-90 and 1993-94. Separate analyses were undertaken for 1970-71 to 1988-89 and 198G-81 to 1988-89 to capture possible changes over time in the relative importance of the various factors determining food aid, in the light of donors’ assertions that they have gradually shifted away from the use of food aid primarily as an instrument of surplus disposal toward one of development assistance. The regression analysis excluded food aid to Eastern Europe and the FSRs as the region received virtually no food aid before 1989-90, except from the United States which allocated 2% share of its food aid to the region between 1981-82 and 1985-86.

Four explanatory variables were tested: wheat price, levels of wheat stocks and dummy variables for food emergencies and the changing levels of Food Aid Conven- tion commitments. The price series was based on that for US No.2 Hard Winter (ordinary) wheat in US dollar terms, deflated using the US GDP deflator. This price series was selected following discussions with the International Grains Council. No account was taken of movements in other currencies against the US dollar, although this could have had implications for levels of food aid flows from non-US donors. Since wheat constitutes the single most important commodity within total cereals food aid and, with the notable exception of rice, movements in the price of cereals are generally highly correlated, this price series was considered a reasonable proxy for a more general cereals price series.

Wheat stock data were based on beginning-of-year stock levels in the major wheat-exporting countries (Argentina, Australia, Canada and the United States). EU wheat stocks were excluded because: (a) data are not publicly available for the period before 198&81; (b) they were affected by the access of new member states; and (c) from 199&91 they included former East German stocks, thus causing dis-


continuities in the series which could not be easily adjusted for due to data constraints. Alternative stock measures might include some notion of minimum stocks, below which a donor’s program might decline significantly; or of “old” stocks which are near the end of their storage life and so need to be drawn down quickly. Such data, however, are not readily available.

The regression analysis also included a dummy variable to take account of widely recognised extraordinary relief programs in 1984-85 and 1992-93, both in response to droughts in sub-Saharan Africa. For the longer period, 1970-71 to 1988-89, an additional dummy variable was included to take account of the major increases in donor minimum annual food aid commitments under the Third Food Aid Convention of 1980, from 4.2 million ton to 7.6 million ton. Ex ante, food aid shipments were expected to be higher when wheat prices were lower and stocks higher. Food aid flows were expected to be positively correlated with both the emergency and FAC dummy variables.

Regressions were run using a variety of price and stock lags. The testing of a range of lags was justified on the basis of the fact that there is commonly some lag between programing and shipment of food aid, but that information is not readily available on the average length of such delays because more lengthy lags can place donors in a poor light. The use of a range of lagged prices was therefore intended to acknowledge and take account of this reality. Unsurpris- ingly, different price lag structures yielded stronger results for different donors, reflecting varying intervals between the programing and shipment of aid. In the US case, food aid is (largely) budgeted annually in value terms. As a result, interyearly fluctuations in volume were found to be highly correlated with real price movements in the same year. The EU food aid budget is based on quantitative commitments costed at prevailing prices. Price levels are therefore more likely to influence next year’s food aid commitment through budgetary constraints. The results were again consistent with its practice.

In terms of stocks, strong correlations were found in separate regressions of US stocks against the real wheat price. Regressions using both price and stocks as explanatory variables were, therefore, not conducted for the United States. Meanwhile, stocks were found to be an insignificant explanatory factor of global food aid. The emergency dummy was a significant variable in all three cases, implying that international emergencies may also precipi-

tate additional food aid flows. Further regressions were run for food aid flows to developing countries, with aid to Eastern Europe and the FSRs included as an independent variable. Insignificant although generally negative correlations were found.

Chow F tests were also run to test the stability of the estimated relationships, comparing the results for 197&71 to 1988-89 and 1980-81 to 1988-89. These revealed significant changes in relationships between the 1970s and 1980s. both globally and individually for each of the donors examined. The FAC dummy variable failed to provide a sufficient explanation of this shift in relationship. Because of these findings the predictions for 1989-90 to 1993-94 were based on the regression results for 1980-81 to 1988- 89, although this implied that the predictor model was based on only a short run of data. This was recognized as an inherent problem of any attempt to mode1 policies as, by their very nature, prevailing policy environments are typically short-lived.

Regression results with the highest explanatory power for each donor during 198tX81 to 1988-89 are reported in Table Al. Generally they indicate a strong relationship between wheat prices and food aid shipments. Two earlier studies reported findings that are consistent with the results presented in this paper. First, Shapouri and Missiaen (1990) conducted a similar analysis of domestic factors determining total volumes of food aid provided by each of the United States, the European Community and Canada. In the case of the United States, they differentiated between food provided under PL480 Title II, other PL 480 program food aid and total food aid. Multiple regressions using an OLS estimation in linear form were run, with grain stocks, grain price, government budget agricultural outlays and a dummy variable to take account of extraordinary relief operations in recipient countries as explanatory variables. In the case of the United States, a dummy variable was also used to represent the political party of the incumbent President. Regressions were run for 1961-86 for the United States and 197&86 for the EC and Canada. Overall, strong relationships were found.

Second, Eggleston (1987) also undertook a statistical analysis of the factors determining levels of US food aid over 1955-79. He found a positive correlation between the level of or changes in US agricultural surpluses and levels of PL 480 aid, with an R* of 0.67. The other two explanatory variables, per capita food production in

Table Al. “Supply” model logarithmic regression results for 1980-81 to 198849”

Wheat price Regression coefficients Emergency Adjusted Durbin-Watson Donor lag Constant Wheat price Dummy F R2 statistic

EU 12 months 4.598 -0.578 0.147 14.41** 0.77 2.01 (-4.54)** (2.92)*

USA 0 months 5.199 -0.614 0.090 14.45** 0.77 1.80 (-4.89)** (2.1 I)*

Global 6 months 5.239 -0.532 0.084 27.83** 0.87 1.88 (-6.86)** (3.13)**

‘T-statistics are given in parentheses. The emergency dummy was assigned a value of 1 in 1984-85 and 1992-93 and 0 in other years. *Significant at the 5% level (one-tailed t-test) **Significant at the 1% level (one-tailed t-test)


Table A2. Predicted and actual levels of food aid to developing countries based on “best-fit” supply models (thousand ton)a

Donor Independent Variables

Predicted levels Actual levels of Difference of food aid food aid

Year Excluding Including Excluding Including Excluding (July/ EElFSRs EE/FSRs EEfFSRs EE/FSRs EE/FSRs June) (I) (2) (3) (l)-(2) (l)-(3)

EU

USA

Global

Wheat price lagged 12 months 1989-90 1,884 3,316 1,916 Emergency dummy 199@91 1,967 2,610 2,396

1991-92 2.42 1 3.487 2,342 1992-93 3,026 4,115 2,419 1993-94 2,250 3,111 2,336

Wheat price lagged 0 months 1989-90 6,391 6,018 5,942 Emergency dummy 199&91 7,977 7,260 6,277

1991-92 7,052 7,052 6,304 1992-93 9,076 8,467 5,830 1993-94 7,473 7.825 3,663

Wheat price lagged six months 1989-90 10,622 11,315 9,732 Emergency dummy 199G9 1 12,229 12,357 10,675

1991-92 12,876 13,091 11,164 1992-93 14,552 15,168 10,789 1993-94 12,543 12.663 7.624

-1,431 -643

~ 1,066 - 1,089

-861 R’=0.522b

379 717

609 -351

R2=0.753b -693 -128 -215 -617 -120

R2=0.944b

-31 -429

79 607 -86

R2=0.149b 456

1,700 748

3,245 3,810

R2=0.000b 890

1,553 1,712 3,763 4,918

R2=0.000b

aPredicted/fitted levels of food aid are based on regression estimates of relationships over the period 198&8 1 to 1988-89 as reported in Table Al. bR2 calculated by regressing actual food aid flows, including and excluding flows to Eastern Europe and the FSRs, against predicted levels over 1989-90 to 1993-94.

recipient countries and a dummy variable indicating the party of government in the US, were not found to be significant.

The results of the best-fit regressions were then used to forecast levels of food aid for 1989-90 to 1993-94, which were then compared with actual flows, including and excluding food aid to Eastern Europe and the FSRs, to measure the level of diversion (Table A2). These results are summarized in Table 1 in terms of the implied levels of “additional” and “diverted” food aid.

Chow F tests were also run to assess the stability of the estimated relationships, comparing the results with those obtained over the longer periods, 1970-7 1 to 1993-94 and 198&81 to 1993-94 as relevant. These tests revealed significant changes in relationships between the 1970s and 1980s. both globally and individually for each of the donors examined, which the FAC dummy variable failed to explain

sufficiently. But estimated relationships for global and US food aid for 1980-81 to 1988-89 were found to be stable over the longer period 1980-81 to 1993-94 at both the 1% and 5% level of significance including assistance to Eastern Europe and the FSRs but unstable excluding such assistance. This provided further evidence of some diversion of food aid from traditional developing country recipients as well as support for the use of the regression results for 198&81 to 1988-89 to forecast food aid flows over the subsequent five years. In contrast, the estimated relationship for EU assistance over 1980-81 to 1988-89 was found to be stable over the longer period 1980-81 to 1993-94 at both the 1% and 5% level of significance excluding flows to Eastern Europe and the FSRs but unstable when including them. These results support the finding that there was additionality in the case of EU food aid to Eastern Europe and the FSRs.

additionality or diversion? food aid to eastern europe and the former soviet republics and the...

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