Higher inflation in the developing world contributing to loss of NGO spending power, say finance directors
International aid organisations are facing a steep drop in their overseas spending power because of the falling international value of the pound.
The drop in exchange rates, combined with inflation abroad and spiralling commodity costs, has meant the pound now typically buys between 20 and 30 per cent less than it would have done a year ago in countries where many aid agencies operate
Martin Birch, finance director at Christian Aid, said the drop in currency values was like an Icelandic banking crisis for aid organisations.
"The recession is expressing itself in different ways in different parts of the sector," he said. "This is the big one for us."
David Woodbine, finance director at ActionAid UK, said: "It's unusual to have local currencies appreciate against the pound. Normally they lose value, but because inflation is higher in the third world, the real value of what you can buy remains similar."
Woodbine said the double whammy of inflation and falling exchange rates was pushing down the value of the pound. "We can't see the pound strengthening in the short term," he said.
Richard Gough, finance director of Tearfund, said there were relatively few options for international charities when exchange rates worked against them.
"In the short term, there are things you can do to hedge against currency uncertainty," he said. "But in the long term, there's little you can do."
Joni Hillman, donor advocacy officer at Bond, the UK membership body for international development charities, said she knew of one organisation that had reported a budget deficit of 16 per cent across its projects.
"It is a major problem," she said. "We're in discussions with the Department for International Development about how to handle this, and it has been very understanding and supportive.
"But in the end, it has the same problems we do."