My post about the Peace Corps budget yesterday got me thinking and so now I’m back to look at the issue in more detail.  I pulled the historical exchange rate between the US dollar and the Guinea Franc[1] and compared that to the estimated inflation rate from two sources: the CIA WorldFact Book and the International Monetary Fund (IMF)[2].

Nearly every time we look at economic numbers we have to take inflation into account, but I’ve rarely dealt with exchange rates so something in my premise might be off.  But it seems to me that if the number of Guinea Francs (GNF) you can buy with a US Dollar (USD) is decreasing at the same time that you have massive inflation in Guinea, you could see costs for the Peace Corps program soar.  On the other hand, if the exchange rate is favorable, that is, USD is buying more GNF, then it alleviates some of the inflation pain.

Enough talk.  The data:

You might first notice that there is a significant discrepancy between the inflation data reported by the CIA and that reported by the IMF.  Ah the difficulties of determining inflation rates in small economies.  Its hard enough in the United States (consider the CPI and various issues with it (pdf link)).  Point is, we should take these numbers with a grain of salt.

But to summarize, the change in costs for the Peace Corps could have been anywhere from -5.6% to 4.1% in 2006.  Those are small changes that we can live with.  But in 2007 we can see that combined inflationary costs with the falling value of the USD relative to GNF results in an increase in costs of 46.1% to 52.2%.  That is a highly disturbing number.  Then in 2008 we have a net decrease in costs of 1.5%, a nice break from 2007.

And it is the 2007 number we should be concerned about.  Imagine that number repeated across many countries, some perhaps with lower inflation pressures, but most facing the same 2007 decline in dollar value as is seen here.  Is it any surprise the Peace Corps is having budget problems?

Worse, the actual cost in 2007 may be substantially higher.  I calculated the percent change in exchange rates by simply taking the first and last rate for the year.  But this disguises a huge drop in the value of the dollar that occurs in the spring and summer of 2007.  By the end of 2007 the dollar has recovered some, and so the percent change slightly masks the full loss.

And according to “Peace Corps Problems,” a post from a returned Peace Corps volunteer in Guinea, the Peace Corps is having trouble keeping staff because they can’t pay on pare with the mining companies.  Its not the first time I’ve heard of staff losses, though I don’t know if the of staff that resulted in my cancelled trip to Dominica is due to staff being hired away or another reason.

Still, the Peace Corps probably does not see its costs increasing in the same way that consumer prices are increasing, especially since living allowances for volunteers are capped at 10% (I have got to find my reference for that).  And the exchange rates I used are the interbank rates, and I don’t know whether the Peace Corps, as an agency of the US government, commands a better or worse rate.

Here is my spreadsheet with the exchange rates.

FOOTNOTES
1. Onanda.com. http://www.oanda.com/convert/fxhistory. ↑
2. Obtained from indexmundi.com. http://www.indexmundi.com/guinea/inflation_rate_(consumer_prices).html. ↑

If you haven’t read anything about the budget problems the Peace Corps is facing, you can start here.  President Bush promised to double the Peace Corps but he hasn’t done so.  Obama said he would double it as well, so here’s to hoping without much hope.

Anyway, the budget issues are doing more than limiting the number of volunteers and pushing back accepted volunteers to later dates, its also affecting Peace Corps volunteers who are in the field.  I’ve heard of training times being shortened from twelve to seven weeks, of money for language tutors being eliminated, and of cuts in the equipment that the Peace Corps provides.

A few days ago I received information on the first few days of my training schedule.  It was great to have, and it answered a lot of questions that I had.  But there were a few unexpected things as well.  First off, we are required to bring our own bicycle helmets.  This is a reversal of the Guinea welcome book which stated that bicycles and bicycle helmets will be provided to all volunteers[1].  Second, volunteers used to get French-English dictionaries from the Peace Corps, but we will need to bring our own.

Those are two small things, but I worry that small cuts indicate deeper financial issues.  Especially for volunteers in regions of high inflation (the inflation rate in Guinea was 23% in 2007[2]), inflation can substantially affect the purchasing power of their living allowance.  Living allowances for volunteers are limited to a 10% annual increase, larger increases must be approved by the Peace Corps administration (sorry, no source), something I don’t see as likely in the middle of a budget crunch.

Though I haven’t seen it referenced in articles on the Peace Corp’s budget issues, I suspect part of the reason for the Peace Corps sudden budget shortfall is the dramatic decline of the value of the dollar.  For an organization funded in dollars but operating overseas, this could have some significant impacts.  And that may be a good thing, because the value of the dollar has been on the rise again in the last few months (in fact, since the middle of 2007 relative to the Guinean Franc[3]).

All of this is not meant to frighten anyone (especially the parental units).  I just hope that Obama is willing to do what can be done to support the Peace Corps.

And long story short, now I have to buy some more stuff and I’m dangerously close to running out of money, not to mention packing space.

FOOTNOTES
1. Guinea Welcome Book.  Peace Corps. pg 32.  http://www.peacecorps.gov/welcomebooks/gnwb675.pdf↑
2. CIA World Factbook.  https://www.cia.gov/library/publications/the-world-factbook/geos/gv.html. ↑
3. Yahoo! Finance.  http://finance.yahoo.com/currency/convert?from=USD&to=GNF&amt=1&t=5y. ↑