Download Locations

• Open CRS (User submitted)

Summary

In a speech on March 14, 2002, President Bush outlined a proposal for a major new U.S. foreign aid initiative. The Millennium Challenge Corporation (MCC) provides assistance through a competitive selection process to developing nations that are pursuing political and economic reforms in three areas: ruling justly, investing in people, and fostering economic freedom. The MCC differs in several respects from past and current U.S. aid practices: the competitive process that rewards countries for past and current actions measured by 17 objective performance indicators; the pledge to segregate the funds from U.S. strategic foreign policy objectives that often strongly influence where U.S. aid is spent; and the requirement to solicit program proposals developed solely by qualifying countries with broad-based civil society involvement. As announced by the President Bush in March 2002, the initial plan had been to fund the MCC annually at $5 billion by FY2006, but this figure has never been reached. The Administration has sought a combined $15.0 billion for the MCC program, FY2004-FY2009, while Congress appropriated $8.3 billion, or little more than half of the total sought (55%). Under the FY2009 Omnibus appropriations (P.L. 111-8), Congress provided $875 million to the MCC. On May 7, 2009, the Administration issued its FY2010 budget request, providing $1.425 billion for the MCC. Congress authorized the MCC in P.L. 108-199 (January 23, 2004). Since that time, the MCCs Board of Directors has approved 18 Compacts: with Madagascar (April 2005), Honduras (June 2005), Cape Verde (July 2005), Nicaragua (July 2005), Georgia (September 2005), Benin (February 2006), Vanuatu (March 2006), Armenia (March 2006), Ghana (August 2006), Mali (November 2006), El Salvador (November 2006), Mozambique (July 2007), Lesotho (July 2007), Morocco (August 2007), Mongolia (September 2007), Tanzania (September 2007), Burkina Faso (June 2008), and Namibia (July 2008). In June 2009, the Madagascar Compact was terminated early, as were uncontracted components of the Nicaragua Compact. A suspension of the roads portion of the Armenia Compact has been continued. MCC implementation matters continue to unfold, including the relationship of MCC and USAID, sectors chosen, and the impact of rising costs on country programs. A growing question raised by some Members of Congress concerns the level of funding to support MCC programs. Some fear that insufficient funds might force the MCC to reduce the number of recipients or the size of the grants. Others, however, support reductions in the MCC budget, disturbed by the slower-than-anticipated pace of Compact agreements and lack of concrete results to date. This report will be updated as events unfold.

XML