USCCB - (SDWP) - Millennium Challenge Account

Millennium Challenge Account

May 2003

Background:

The USCCB and CRS have welcomed President Bush’s announcement of a new “Millennium Challenge Account” (MCA) that would increase annual foreign aid funding to combat global poverty and promote development by 50 percent, or $5 billion, in the year 2006, with gradual increases beginning in 2004 (see the joint testimony of USCCB and CRS before the House Foreign Operations Subcommittee; www.usccb.org/sdwp/international). The Administration established three criteria for determining country eligibility for MCA funds: just rule, economic freedom, and investment in people. In November, the Administration further defined the eligibility and implementation process by introducing sixteen performance indicators which correlate to the three eligibility criteria, and announced that not just low income countries but some middle-income countries would be eligible for MCA funds.

USCCB Position:

While we commend the additional resources and are pleased that plans for this new program are advancing, we have several concerns about the administration’s proposal to extend eligibility to lower middle income countries and to adopt criteria which would enable only a very small number of the world’s poorest countries to become eligible. USCCB suggests the following recommendations:

The MCA should be reserved for countries with the greatest need and the fewest options. Lower middle.income countries that would be eligible in year three of the program have more options for addressing the needs of their people through access to a variety of external financing sources as well as more substantial local savings. While these nations clearly have unmet needs, priority should be given to the poorest and most vulnerable with the least ability to access alternative resources.
In addition, there are a substantial number of very poor countries with large unmet needs which can use aid funds effectively for important development programs yet would not meet the strict conditions for eligibility under the President’s proposal. Therefore, if the MCA is to make a truly meaningful contribution to world poverty reduction, it must be available to more countries. We propose establishment of a “second tier” of countries composed of the substantial number of countries which fall short of meeting fully the Administration’s eligibility criteria, and that at least one-third of MCA funds be allocated to the second tier countries beginning in 2005.
The MCA should be implemented in a manner which supports and strengthens poverty reduction by increasing transparency and the level and quality of civil society participation. To ensure that MCA funds are efficiently utilized, local civil society organizations and international private voluntary organizations which partner locally should have direct access to funding under the program.

Status:

Currently, the House and Senate are scheduled to mark-up MCA legislation on 21 May. We will continue to keep you updated.

For Further Information:
Kelly A. Hicks, 202 541-3153 (ph), 202 541-3339 (fax) khicks@usccb.org;
Gerry Flood, 202 541-3167 (ph), 202 541-3339 (fax) gflood@usccb.org;