Passport

Strong Swiss Franc Is Some Geneva-Based Aid Groups’ Latest Worry

The exchange rate swing means some organizations have less money to go around than they thought.

swissfranc

The past year has severely tested international humanitarian organizations. The Syrian civil war, the rise of the Islamic State, the Ebola outbreak in West Africa, and dozens of other crises have stretched aid groups’ resources thin, forcing many to appeal to donors for additional support. Now some of these groups are facing a different source of strain: unstable currencies.

The financial crisis in the eurozone has for years pinched aid budgets, and the euro’s sharp fall in the past few months has worsened the problem. Now, after the Swiss National Bank in January decided to unpeg the Swiss franc from the euro, Geneva-based organizations are dealing with a huge surge in the franc’s value against the sagging euro. Because many donations come in euros — and the salaries and expenses for many Geneva-based offices are paid in Swiss francs — the exchange rate swing means some organizations have less money to go around than they thought.

Adrian Edwards, a spokesman for UNHCR, the Geneva-headquartered U.N. refugee agency, said his organization is “certainly seeing the effects of exchange rate fluctuations, felt all the more because UNHCR is also dealing currently with record high levels of forced displacement globally — notably from the conflicts in Syria and Iraq.” An official for the Geneva-based International Committee of the Red Cross said it was “too early to say how much money ICRC would lose from its budget” due to Swiss franc gains, but that it would clearly be affected in some way.

Before January, the Swiss National Bank had worked to hold down the franc’s value relative to the euro, despite much greater investor confidence in the franc, in order to keep Swiss exports attractive. By circulating more francs and buying more euros, the SNB held the exchange rate at no less than 1.2 Swiss francs to the euro. But on Jan. 15, the bank decided this policy was no longer sustainable and allowed the franc to float. Since then, the franc has predictably strengthened against the euro, currently trading more than 10 percent above the previous limit, though down from an initial spike almost 30 percent above that cap.

UNHCR’s Edwards said his agency avoided what could have been a more significant cost increase. In recent years the organization has moved many headquarters staff to locations with lower costs of living, such as Budapest. But the increased expenses in Geneva compound a larger problem: the decline of the euro, the currency in which 30 percent of UNHCR contributions are made. To make up for these losses, the agency is considering ways to deliver its services more efficiently at less cost, Edwards said, but he couldn’t yet disclose what those methods would be.

The ICRC is also carefully monitoring the situation. “We are always in close contact with our donors,” the spokesperson said, but added that the agency had not yet made any moves to address the issue.

Najwa Mekki of the U.N. Children’s Fund said UNICEF is also currently assessing how the exchange rate changes might affect its operations and whether it should take steps to make up for losses in eurozone donations due to the change.

Not all Geneva-based organizations are facing a similar pinch. World Health Organization spokesman Tarik Jašarević said the WHO, which mainly operates in dollars, wouldn’t be significantly affected because when viewed over a longer timeframe, the Swiss franc hasn’t strengthened against the dollar the way it has against the euro. Médecins Sans Frontières press officer Tim Shenk said his organization’s Geneva-based operational center divides its revenue and spendings between Swiss francs, euros, and dollars, which helps buffer against fluctuations.

Jakub Adamowicz, a spokesman for budget, transport, and regional policy with the European Commission in Brussels said the exchange rate shift wouldn’t have a big impact on the EU’s budget or affect decisions about funding for Geneva-based aid organizations.

Still, with many of the international crises of last year likely to continue through 2015, it’s bad news when even a few groups are losing money due to something like exchange rates.

FABRICE COFFRINI/AFP/Getty Images

Justine Drennan was a fellow at Foreign Policy. She previously reported from Cambodia for the Associated Press and other outlets. @jkdrennan

Trending Now Sponsored Links by Taboola

By Taboola

More from Foreign Policy

By Taboola