CGD Analyzes MCC Threshold Program Review

Sarah Jane StaatsToday marks an important board meeting at the Millennium Challenge Corporation (MCC) – one in which the board members will review another set of proposed changes to the MCC Threshold Program. The Threshold Program was designed to encourage countries who are not yet eligible for an MCC Compact by providing assistance and limited funding to those candidate countries, in coordination with the U.S. Agency for International Development (USAID).  Sarah Jane Staats, director of policy outreach at the Center for Global Development, writes about what the review of the Threshold Program means for the MCC’s future.  Staats also touches upon broader principles of foreign assistance reform that are encapsulated in the MCC model.

Staats’ post clearly outlines what the MCC Threshold Program is and how it has worked so far, making note to highlight the flaws within the program that are most likely under review.  These flaws include: data lags, little impact on compact eligibility, and inconsistent criteria, as well as the fact that it seems to undermine what Staats cites as the “MCC Effect,” which is the incentive created for countries to adopt legal, policy, regulatory, and institutional reforms related to MCC eligibility criteria.

Staats also lays out the options for how to reform the Threshold Program.  She writes:

“…the MCC is refocusing the threshold program in an effort to address the design flaws while maintaining the perceived benefits. The new threshold design aims to de-link threshold programs from improvement in the indicators and instead focus on broad policy reform; include clearer selection criteria; use threshold experiences to inform board decisions on eligibility; extend the program to three years; and strengthen engagement with USAID on design, implementation, and evaluation of threshold programs. The major shift in approach centers on a broader definition of what constitutes compact eligibility. Rather than focusing on the indicators alone, the new threshold approach recognizes that eligibility is based on a combination of 1) selection indicator performance, 2) supplementary data and information and 3) board discretion on a country’s perceived commitment to reform among, other things.”

Ultimately, Staats recognizes that reforming the Threshold Program opens the door for a variety of other reforms – especially about how changes at the MCC figure into broader U.S. development reforms. Read the full post here and check out the Rethinking U.S. Foreign Assistance blog for more news on the MCC.

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