Yesterday President Obama released his budget request for the FY2011. The Millennium Challenge Account, which funds the Millennium Challenge Corporation (MCC), saw an increase of $175 million over last year, bringing the total to $1.28 billion for FY2011. Last year Congress approved $1.08 billion for the MCA.
We welcome this increase as a harbinger of continued interest in the MCC, which is especially exciting considering the difficult economic climate. We were concerned that given the budget environment, the MCA could have taken a hit and been unable to fund crucial compacts in the pipeline like those of Zambia and Malawi.
The MCC is a unique foreign assistance institution that support country-led development plans. The MCC focuses specifically on supporting programs that reduce poverty by encouraging sustainable economic growth through market-based investments in agriculture, infrastructure, water, education, private sector development, and capacity building. The MCC selects countries to receive assistance based on their performance on 17 policy indicators. Countries then construct a “compact” which outlines the greatest barriers to their own development and proposes initiatives to address those hurdles. The MCC currently has compacts with 11 sub-Saharan Africa countries, valued at a total of approximately $5 billion.
Several countries are in the process of compact development and are expected to complete and sign those compacts in FY2011, including Malawi, Zambia, Cape Verde, and Indonesia. While the increase in the account is very exciting, it may not be enough to fully fund the two or three compacts that could come due next year.
We’ll also be keeping an eye on the MCC as the institution settles in with their new CEO, and contemplates possible reforms—like concurrent and regional compacts. The budget request may be in, but be sure to check back here for other MCC developments.