In somewhat of a surpise move, the Millennium Challenge Corporation Board of Directors reinstated Yemen's eligiblity to apply for Threshold Program finance. Recall that in a bold move in 2005, clearly distinguishing the MCC from other donor agencies, Yemen's eligibility was suspended due to massive slippages in policy performance against the 16 MCA eligibility indicators.Yemen truly has shown remarkable and demonstrable effort in undertaking many policy reforms and, based on meetings I had with Yemeni officials it is quite apparent they care deeply about regaining the MCC "seal of approval" -- substantially more than The Gambia (whose eligibility was suspended in 2006). And, importantly, they believe (as do I) that the MCC's suspension from eligibility was THE motivating factor in the series of subsequent reform actions. "MCA Effect" in action.
"The proposed reform program designed for the MCA country plan as well as the process that ensued helped pave the way for the current reform momentum."
There is no doubt in my mind that Yemen should be congratulated for its tremendous reform efforts, even rewarded as was done by multiple donors with
$4.7 billion in pledges last November at the Consultative Group meeting. Yet the timing of the MCC's decision puzzles me -- Why now? Why not wait until the FY08 indicator run is done where hopefully the reform actions will show up in the data, bringing Yemen closer to its other Threshold colleagues?This is a situation when the transparency of decisionmaking based on objective performance indicators -- something that distinguishes the MCC from all other donors -- becomes problematic. Based on the
FY2007 indicator run (latest publicly available), we see upward trends on political rights, corruption, immunizations, girls primary completion (not a steep trend, but still upward). That said, it also shows downward trends on fiscal policy, voice and accountability, and civil liberties. It fails a total of 13 of the 16 indicators, 4 more than the next lowest ranking eligible Threshold country. We still don't know whether the reforms will move any of those indicators in the next round. Technically, the indicators don't matter in a case of reinstatement; the
MCC's Suspension and Termination Policy states only that:
"The Board may reinstate assistance or eligibility for a country that was subject to a suspension or termination upon the recommendation of the CEO, in full consultation with Board Members and agencies, that the country or entity has taken corrective action or has demonstrated a sufficient commitment to correcting each condition for which assistance was suspended or terminated."
But should the indicators matter? Should they play just as much of a role as they do at suspension? What do you think?
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise.
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