When the Millennium Challenge Account was first introduced, many folks assumed it would deliver some -- perhaps even a large part -- of its funding through general budget support. After all, these were countries that were selected for funding because they had strong economic, social and governance policies. But that is not the case. The MCC is delivering all of its funding via traditional project finance. For all the innovation the MCC is bringing to the development assistance arena, it is being quite un-innovative in this aspect. In a new paper, Steve Radelet and I review the trends in development assistance toward general budget support and propose an option for the MCC:
"The debate between those who support providing aid through budget systems and those who oppose it has become stale. Those who support the approach emphasize the gains from greater efficiency and coordination, while those who oppose it focus on fiduciary risks of providing assistance through weak government systems. We propose a different approach that could be pioneered by the MCC and potentially influence aid agencies around the world: the MCC should provide an initially small share of its assistance through budgetary channels to a subset of countries that surpass minimum standards of fiduciary and financial oversight and control, and increase that share as countries improve and strengthen their operations".
There is much to consider in this debate and we hope it will inspire some discussion. Bring it on!
