A Slouching Report on the Millennium Challenge Account

June 21, 2007

Usually a big fan of the succint and balanced reporting of Congressional Quarterly, last weeks article by Tom Starks entitled "A Slouching Millennium Challenge." was a let down. A lost opportunity to provide a balanced view to some of the stale assertions. Readers know that because I care about the success of the MCA as a new foreign aid program for a new era, I am often a constructive critic But this article screams for more food for thought:Says Starks:

"...the Millennium Challenge has been on a leaner-than-expected financial diet since its creation three years ago. And in some respects, the program’s administrators have only themselves to blame. They have been slow to distribute funding, giving out more than $83 million of the approximately $6 billion appropriated so far. (Though they also say they have $3 billion obligated, pending benchmark-certification in recipient nations.)"
Two things rubbed me the wrong way about this statement. First, that a rather important point -- that the MCA has obligated half of its total appropriations -- is relegated to a parenthetical. But second, that the rate at which an organization can throw money out the door seems to be the primary success measure. For those interested in reading more of my thoughts on this, click here, but the main points are that the country-driven, public participatory nature of the program was inevitably going to result in slower disbursement rates, greater attention needs to be paid to results on the ground and policy reforms incentivized, and the credibility of the US will be damaged when countries that have taken bold reforms required to meet the standards of te MCA program are met at the finish line without a reward.The artcile continues:
"Then there are the rival aid agencies. Millennium Challenge was supposed to award aid to countries as a supplement to their grants from the U.S. Agency for International Development, or USAID. But Nita M. Lowey, the New York Democrat who chairs the House subcommittee on foreign aid spending, contends that the opposite has occurred, that countries getting MCC money have seen their USAID grants curtailed. The Congressional Research Service recently reported that that has largely been the case in this fiscal year."
It's true, the MCA was supposed to be additional foreign assistance. Unfortunately, a common definition of "additional" is hard to find. On the global level, requests for MCA have been additional. The rubber meets the road at the country level. In my own mind, defining additionality means ensuring that new MCA resources (or the prospect of future MCA resources) does not de facto displace existing US foreign assistance in a country. The problem with contending that MCA money is displacing USAID funding is that numbers in and of themselves do not tell the full story. Sometimes there are good reasons for reductions in USAID funding -- the end of long-term Hurricane Mitch rehabilitation funding in Honduras for example. Or the fact that MCA money is strategically scaling up a USAID agricultural pilot project in Ghana. The problem, as we are finding out ourselves in trying to rigorously assess the question of additionality of MCA resources, is a lack of detail in the budget justification documents of both State Department and the MCC. (Although there is considerably more detail in State's FY08 CBJ, it's just hard to take it entirely on face value given the centrality of decisionamking in the F-process.) Instead of simply using global numbers to make assertions, Congress should specifically ask the two agencies to defend the complementarity of their budget requests and country programming.For those looking for clarification in the Congressional Research Service study cited in the article, don't bother. It essentially says it's too hard to tell.Finally, my favorite:
"Some non-governmental organizations and contractors that operate under traditional models of development funding have begun to feel frozen out of the process — because, under the MCC rules, countries are permitted to create their own plans for the aid they get."
That this is a fact is not the issue. The issue is that the MCA was quite purposefully created as a new institution to rid it of the development and operational success constraints that have plagued USAID programs. The fact that NGOs and US companies can't operate in a business as usual mode is a good thing. International bidding on MCA-funded contracts will bring efficiencies, the countries writing and managing their own development plans will likely bear greater results. The whole point of the MCA was to be less traditional. Unfortunately, US business, NGOs and Congress are not creating the space for the MCA to experiment in what could be more effective programming of our foreign assistance.It's time to seriously undertake a major overhaul of our entire foreign assistance strategy, policy and architecture to leverage real impact on the ground by joining up all the good programs that educate kids and keep people alive through new medicines (Development Assistance and PEPFAR) with the broader programs that build economies with jobs (like the MCA) for those people to have livelihoods. It's less about additionality than it is about strategy and coherence.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.