Round Eight of the Millennium Challenge Account

cgd_logoOn December 7 the Center for Global Development (CGD) held a discussion on  the upcoming Millennium Challenge Corporation (MCC) country selection process for FY11. CGD director of policy outreach Sarah Jane Staats, head of the Center’s Millennium Challenge Account (MCA) Monitor, presented her forecast for which countries will likely be selected for compact or threshold funding during the coming fiscal year.  In addition to its predications, CGD continues to call for the MCC to become more transparent on the reasons behind country selections.

Staats began with an explanation of the selection process that vets poor countries which have demonstrated a commitment to poverty reduction and economic growth as measured by 17 indicators.  Eligible countries must meet the anti- corruption indicator as well as score above the relative median of their peer income groups on at least three indicators across three policy categories (Ruling Justly, Encouraging Economic Freedom, and Investing in People).  The MCC board is allowed to use discretion to select countries that do not meet the indicators as well as to not select countries that do meet the indicators.   It is the use of this discretion that has largely fueled community calls for increased transparency in the country selection process.

The MCC distributes funding to countries that fall within three categories: low income countries, low to middle income countries, and threshold countries.  Of the low-income countries, CGD predicts that Malawi and Zambia are strong choices because they both pass the indicators and are currently developing compacts.  Ghana also passes the indicator test and may be selected for a second compact.  For lower-middle income countries, Cape Verde and Georgia are most likely to be selected.

This year’s selection process for threshold countries, however, is expected to be slightly different as the MCC has developed a new threshold program that incorporates broad policy and institutional reforms. In the past, MCC’s threshold program has focused on helping countries become eligible for MCC compact funding.  The previous approach towards threshold countries relied heavily on the use of indicators. However, this model suffered from several flaws including long data lags that impacted the output data for the shorter threshold programs.  To date, the selection criteria remain unknown, though CGD recommends that the MCC choose only one threshold country this year so that they have time to pilot the direction of the program.

Due to the decreasing pool of new country partners it is likely that second compacts may have a larger role in future country selections. The MCC will have to work through these country selection issues which have largely been the result of changes to original funding levels.

Currently, the MCC selection process is facing further setbacks due to the lack of a required public board member.  Alan Patricof and Mark Green were nominated for two of the board positions but are still awaiting approval by the Senate Foreign Relations Committee (SFRC).  The SFRC recently postponed their meeting until December 14th, the day before the MCC board meeting.  Staats predicts that the MCC board will still meet on December 15th but will be unable to finalize country selections for FY11.

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