STATEN ISLAND, New York — The Millennium Challenge Corporation is “an independent U.S. foreign assistance agency” established by Congress in 2004 to aid developing countries in the fight against poverty through economic development, its website says. H.R. 8463, the Millennium Challenge Corporation Eligibility Expansion Act, is currently in the House Committee on Foreign Affairs and looks to expand the number of countries eligible for assistance from the program. H.R. 8463 would not impact the existing purpose and role of the MCC or require a large increase in appropriations, which explains the bipartisan support it has in the House of Representatives with both Democratic and Republican supporters moving to increase the number of countries potentially eligible for aid.
About the Millennium Challenge Corporation
The MCC is an aid agency created in 2004 with bipartisan support to improve United States aid programs to foreign and underdeveloped countries. The organization utilizes “a private sector approach” along with development and analytic tools “to reduce poverty through economic growth.”
The agency is independent and separate from the State Department and USAID but provides similar support with grants to low-income, developing countries that show certain developmental commitments.
The distinctive characteristics and guiding principles of the agency are its competitive selection process based on 20 policy performance indicators and country-led solutions and implementation. Once the MCC awards aid to a country, the MCC selects “a local accountable entity” to manage the program’s implementation and ensure that it produces results.
MCC operates by evaluating candidate countries based on their existing governance, potential to reduce poverty and create economic growth as well as existing investments in sectors such as education, public health and the environment. In order to qualify as a candidate, the World Bank must classify the country as low-income or lower-middle-income and the U.S. must not prohibit the country from receiving federal assistance. The organization also assesses countries under a scorecard that must demonstrate a “commitment to just and democratic governance, investing in people and economic freedom.” The 2022 Country Scorebook covers data on 81 countries, including 66 candidate countries. To become a candidate, a country must meet certain requirements laid out by Congress.
Increasing the Pool of Applicants for MCC’s Aid
The Foreign Affairs Committee of the House of Representatives has approved legislation to expand the pool of countries that could become potential candidates for programs operated under the Millennium Challenge Corporation. Rep. Joaquin Castro [D-TX] introduced the Millennium Challenge Corporation Eligibility Expansion Act on July 21, 2022, and co-sponsors include 13 other representatives from both the Democratic and Republican parties.
The bill proposes that the number of candidate countries eligible for MCC compacts be increased from the current number of 81 to 125 — the countries with “the lowest gross national incomes” as assessed by the World Bank.
The “MCC has signed 38 compacts,” or five-year agreements, with 29 eligible countries to fund programs to reduce poverty and increase economic growth, worth more than $12 billion. Recipient countries to date include Madagascar, Liberia, Nepal, Senegal, Zambia and Morocco. MCC also incentivizes policy reform with its threshold program for countries that “do not qualify for MCC compact assistance” but actively show efforts to meet the criteria. Threshold assistance aims to help improve a developing country’s “policy environment” to eventually become eligible to receive compact assistance. MCC has completed threshold agreements worth more than $640 million to countries such as Kenya, Guyana, Peru and Uganda.
Because the agency already has a large selection of countries at present, an expansion of the pool would not necessarily lead to an increase in the number of countries that actually receive aid. Thus, the Congressional Budget Office (CBO) expects that the passing of the Millennium Challenge Corporation Eligibility Expansion Act would not require a significant increase in funding or cause many changes to the agency’s ability to carry out its goals. CBO estimates that the cost of increasing the countries eligible for selection under the bill’s proposal would not amount to more than $500,000 over the next five-year period.
MCC’s work has led to remarkable developmental improvements and the Millennium Challenge Corporation Eligibility Expansion Act will give more countries the opportunity to receive aid to help alleviate poverty threats in especially vulnerable areas of the globe. With a greater selection pool comes more hope and possibilities for the improvement of developing countries’ economic systems and poverty relief.
– Nethya Samarakkodige
Photo: Wikimedia Commons