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Missions and Exchange Rates

  • Timothy D. Terrell,
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A friend of mine, a missionary in the Czech Republic, may have to interrupt his ministry to spend time in the United States raising additional funds. It is not because he has faced higher than expected costs, or because supporters have failed to come through on their promised contributions. Rather, it is because the dollars that supporters send him do not have as much purchasing power in the Czech Republic as they once did.

A year ago, a dollar bought about 36 Czech crowns. Today a dollar would buy less than 28 crowns, a drop of 22 percent. This represents an eight-year low for the dollar against the Czech crown. This reduction in the power of the dollar is not restricted to the Czech currency. In the last year, the dollar has lost about 15 percent of its value relative to an index of currencies around the world. To foreign missionaries, this is equivalent to a 15 percent pay cut.

Ultimately, the decline in the value of the dollar can be traced to the policies of the Federal Reserve System relative to the behavior of other central banks around the world, and to more severe competition for the dollar's place as a favored currency around the world. The euro has gained in strength and acceptability worldwide, and the dollar's continued dominance is not as certain as it once was. At the same time, the Federal Reserve's recession-fighting strategy has relied upon increasing the supply of dollars in circulation. Dumping new dollars on the world market has meant that the dollar has lost value, compared to currencies managed by less reckless central banks.

The costs of inflation are well documented, but missionaries bear a disproportionate burden from exchange rate risk. Unlike an American tourist who can choose to delay travel abroad or travel domestically, missionaries must exchange all of the dollars they receive for the currency of another nation. This adds a volatile element to their income. Not only do supporters back out or trim their contributions (as they have in my Czech friend's case because of his uncompromising dedication to Reformed theology), but the purchasing power of their dollar income can rise or fall dramatically each year.

Ideally a missionary family could hedge against exchange rate fluctuations, effectively stashing away their mission nation's currency when the dollar buys a lot of it, and drawing down those savings when the dollar buys less. Yet this requires a huge amount of savings for times like the present, when the dollar has fallen significantly and may not recover fully for years to come. More often, missionaries would simply take an extra trip to their supporters, asking for increases in giving to offset the effects of the devalued dollar.

Yet this requires time taken away from their important evangelistic work, and in the case of a prolonged decline in the dollar, congregations may find it difficult to understand why a missionary is spending so much time fundraising relative to time on the missions field.

Why shouldn't churches and supporting individuals take this significant risk off the backs of missionaries and their families, and commit to support missionaries by giving funds denominated in the currency the missionaries will actually be spending? As always, the church or supporting individual will need to make adjustments for inflation — this time inflation in the foreign currency rather than the dollar. Of course the church will face greater fluctuations in the dollar value of the missionary budget. These days, such a strategy would mean that the foreign missionary budget would consume a larger proportion of the total. But the supporting churches (and individuals) can surely handle such changes with less pain than the missionary family by itself. For a church with a foreign missionary budget that is 20 percent of the total church budget, a 15 percent decline in the value of the dollar would require either a 3 percent increase in the total church budget or a corresponding decrease in spending in other areas. That may be difficult, but it would not be nearly so difficult as a missionary family having to cut its budget by 15 percent. In any case, the church will face the same budget changes if it accedes to the missionary requests for compensating increases in giving. Making these increases automatic means that the missionaries do not have to make special trips away from the mission field to ask for this assistance.

These considerations may seem inappropriate for a church — indexing missionary budgets by exchange rates or tying giving to figures in the Wall Street Journal may seem too worldly. Yet it is of critical importance that we care for the material needs of missionaries. The best kind of giving is that which anticipates increases in those needs, and fills them before the recipient can begin to ask. What a testimony this could be to those observing the missionary's living circumstances — that the Christians supporting this missionary from thousands of miles away are attentive to each aspect of the needs of their brother!

It should hardly need to be said that this attentiveness should extend to the needs of our ministers here in our own country. Are churches taking inflation into account when deciding whether, and how, to increase the compensation of pastors? When prices rise by 4 percent and the pastor's salary rises by 2 percent, this is effectively a pay cut. Not every church may have growth in giving sufficient to offer any pay increase at all. However, churches should be watchful for changes in economic circumstances that require a change in giving patterns. Adding a new Sunday School wing while letting high-quality pastors and missionaries suffer from a lower income may be a case of "muzzling the ox that treads out the grain."

  • Timothy D. Terrell

Timothy Terrell is associate professor of economics at Wofford College in Spartanburg, South Carolina. He is assistant editor of the Quarterly Journal of Austrian Economics and is an Associated Scholar with the Mises Institute.

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