Millennium Challenge Account Budget Hearing: Is An Uneventful Event A Good Thing?

Last Tuesday, MCC CEO Ambassador John Danilovich faced the House Appropriations Sub-Committee on Foreign Operations in what attendees hoped would be an engaging discussion on the fate of the $3 billion FY08 budget request. Well, Danilovich was engaging but the overall hearing was not. It is a critical year for the MCA -- implementation is poised to take off, countries better understand relations with the MCA and are finalizing compacts, and with a Democratically-controlled Congress the rhetoric behind the bipartisan support for the concept of the MCA will be tested in working out the FY08 budget allocation. Although committee members came prepared with and delivered some good questions, none seemed particularly interested in having a discussion, and it is entirely unclear whether any of them will fight hard for (or against, for that matter) the budget.Two years ago, the Committee suggested that the MCC had more money than program, but now, Danilovich says, "we have more program than money." He said the MCC’s large, unobligated balances are not truly reflective of available funding since much of those funds are actually committed to signed compacts (obligation only occurs at Entry into Force which to date occurs, on average, several months after signing). MCC’s current unobligated and uncommitted balance is $700 million, and adding that to the $1.75 billion allocated to MCC through the FY07 Continuing Resolution, the MCC has under $2.5 billion to award to the remaining 14 eligible countries preparing proposals. MCC expects to use all of this in FY07, with the funds going toward compacts with Mozambique, Morocco, Lesotho, and Sri Lanka. This will leave 10 countries competing for FY08 funding, with possibly eight (at a projected $400-$500 million apiece) that will be ready to sign in that year.The MCC fears that insufficient funding would diminish " the MCC Effect" that has inspired countries to want to earn the MCC seal of approval for good governance. In other words, that countries that make targeted policy changes to meet the indicators (either on their own or through the MCC’s Threshold Program) will ultimately not receive assistance, not because of their performance, but because of unavailable resources.Nita Lowey, Subcommittee Chair, was generally positive about the MCC with some questions and reservations, particularly regarding MCC’s slow disbursements (hence the large, unobligated balances) and the concern that funding to MCC is not additional (as promised by the president) and, in fact, is displacing core development accounts, especially social sector funds. (The latter point was shared by Rep. Jesse Jackson.)Danilovich acknowledges that disbursements have lagged behind the “original, optimistic projections” because in-country implementation capacity was slower to develop than expected, and it wasn’t acceptable to begin disbursements until implementation staff/procedures were in place. MCC is taking steps to speed up implementation by offering templates for basic forms, TA for management information systems, and other resources to country management teams. On the social sector issue, Danilovich emphasized that programs are country-driven, and that some do request assistance for social programs. He referenced the social programs in El Salvador, Ghana and Burkina Faso (education-related) and Indonesia (health-related), and also mentioned that investments in basic infrastructure complement social spending by governments and other donors by enhancing all-season access to clinics and schools. This last point is important and perhaps merits more emphasis. Some countries and sectors are saturated by social sector aid (both in terms of the sheer number of donors who must coordinate and the amount of money which may exceed countries’ absorptive capacity in some cases), and countries look to the MCC to fill holes largely under funded by donors who prefer the more politically marketable interventions of health and education.Other questions were focused on the need to ensure strict monitoring and evaluation, including the wilingness to cut off funds for non-performance. Concerns were expressed about the current compact with Armenia (in light of transparency concerns surrounding the upcoming elections) and the upcoming compact with Sri Lanka (considering the persistent violence between the government and the Tamil separatists). And Rep Knollenberg asked for the status of the two House -recommended NGO vacancies on the MCC Board,. Danilovich replied that both Democratic and Republican nominees were with the White House for approval and he hoped to have a "full Board by the next Board meeting on May 22." We assume the Democratic nominee is still Alan Patricof; any confirmations on the Republication nominee? Rep. Lowey ended the hearing with a specific request for the poverty and social impact assessment tools used by the MCC to make program and beneficiary decisions. Great question!So, in all, a rather uneventful event. Maybe that's a good thing -- no major criticisms, no difficult questions, pretty congenial atmosphere. Particularly given the the overall budget scenario which seems more than ever to pit defense and domestic challenges against international affairs. That said, the emotionlessness of it all left me disappointed.Join the dialogue -- if you were there, what did you think? If you weren't, what do you think will be the fate of the budget request?