Oxfam warns on overseas aid schemes as post-Brexit sterling plunge hits finances
Oxfam has warned that the plunging value of the pound is hitting the charity's finances and putting overseas aid programmes at risk.
The organisation's finance director Alison Hopkinson told the Press Association that charities fundraising in sterling are seeing their purchasing power reduced in countries where local currencies are pegged to the US dollar.
"We have some choices to make. We can either reduce the number of hygiene kits or we can dig into our reserves, which are already stretched ... and that obviously puts us in a more financially precarious situation," she said.
Oxfam reported total income of £414.7 million last year, but Ms Hopkinson revealed that its purchasing power has been reduced by 10-12% after the Brexit vote.
The pound plunged as much as 12% against the dollar in the days following the referendum, and 8% against the euro, which has raised the cost of overseas operations including staff and rents, and put programmes including its water sanitation project in the Democratic Republic of the Congo (DRC) under threat.
There are no immediate signs of a reprieve. Sterling has since extended its slide, hitting fresh 31-year lows to sit near 1.27 against the dollar, and reaching five-year lows to trade near 1.13 against the euro this week.
Camfed International, a medium-sized British charity focused on educating young girls across Africa, told the Press Association that the pound devaluation effectively wiped £1.4 million off its balance sheet for the last half of the 2016.
The charity, which uses forward contracts to lock in an exchange rate for up to a year in advance, worked overnight as the referendum result was announced in an effort to mitigate losses as a result of currency fluctuations.
Forward contracts have bought the charity some time to shore up extra funding.
Still, Camfed chief executive Lucy Lake said some projects that were organised in the run-up to Brexit are set to run a deficit of nearly 20%.
"Many of those were fixed at 1.53 to the US dollar. Now, of course, post-Brexit there's a very, very different exchange rate. But our contracts are still held at that prior value of the pound."
"We have to meet the deliverables of those contracts, with around 20% less funding," she said.
A programme that was set to put 10,000 girls through school in Malawi has had to be pared back, forcing Camfed to effectively cut 2,000 school spots for young girls.
Ms Lake said Camfed is starting to ask donors that might have other currencies available to provide funding or grants in euros and dollars, rather than sterling.
Meanwhile, Oxfam's finance director explained that the organisation is trying to persuade donors to share currency risks by agreeing to provide additional funding if their donation falls short as a result of exchange rate fluctuations.
Ms Hopkinson said: "We haven't had any joy with that yet, but we're hopeful."