Executive Summary

(in $ millions) FY 2013
Pre-Sequester/ Rescission
FY 2013
Post-Sequester/ Rescission
FY 2014
Enacted
FY 2015
Request
Total Appropriation 898.2 852.7 898.2 1,000.0
Compact Assistance 678.2 643.8 676.2 766.0
Threshold Program 15.0 14.3 20.0 30.0
Compact Development/Oversight:    
609(g) and Due Diligence
95.0 90.2 92.0 94.0
Administrative Expenses 105.0 99.7 105.0 105.0
Office of the Inspector General 5.0 4.7 5.0 5.0

“And this reflects—is representative of my new approach when it comes to development. I believe that the purpose of development should be to build capacity and to help other countries actually to stand on their own feet—whether it’s in agriculture, in health systems, in electricity. Instead of perpetual aid, development has to fuel investment and economic growth so that assistance is no longer necessary, or some of the more successful countries in Africa can start being donors instead of recipients of assistance.”

President Barack Obama, Tanzania, July 2, 2013

The Millennium Challenge Corporation (MCC) is requesting $1.0 billion for fiscal year (FY) 2015. The request is a $101.8 million increase over the enacted FY 2014 level. The increase in funding is based on the opportunity to advance U.S. global development priorities in a limited number of countries that are already demonstrating their commitment to good governance and democratic values, increasing the potential for economic growth and poverty reduction.

When MCC was established in 2004, it was understood that the agency would require enough annual funding to incentivize reform, promote economic growth, and fight poverty. Achieving those goals will be difficult if the recent trend toward smaller compacts continues. MCC will require the requested funding increase to achieve a more strategic and lasting impact on the economic development and public policies of countries the United States will look to as the emerging economic, political, and security partners of the 21st century.

The requested funding will enable the United States to enter into compacts with Liberia, Morocco, Niger, and Tanzania, once the countries have successfully developed compact proposals and upon approval by MCC’s Board of Directors. These countries, home to nearly 100 million people combined, are among the world’s poorest, but each has taken significant steps to improve governance and achieve eligibility for MCC compact assistance. The increase in funding will support significant compact investments in these countries to unlock key constraints to economic growth, incentivize policy and institutional reforms necessary for private investment, and improve the well-being of some of the world’s poorest people.

By combining the prospect of significantly sized compacts with MCC’s policy performance scorecard, MCC is able to incentivize change in countries without spending a single taxpayer dollar. For example, after MCC introduced the gender in the economy indicator, Cote D’Ivoire changed multiple laws in an effort to improve its score, advancing significant legal rights for women at no direct cost to the United States.

Through these investments, MCC will advance U.S. global development priorities in coordination with broader U.S. Government (USG) initiatives. For example, MCC employs an evidence-based decision -making process and has made efforts to publish its data in a manner that achieved a first place ranking in the 2013 Aid Transparency Index. The number one ranking reflects MCC’s commitment to and investment in making data and information across its portfolio—on country selection, investment decisions, program monitoring, and independent evaluations—publicly available, so that the U.S. Congress and other stakeholders can hold the agency accountable and learn from its investments. The requested funding will continue that commitment and investment.

MCC also plans to explore creative financing mechanisms in new MCC compacts to link payments more directly to development results. Such mechanisms could include pay-for- performance, cash-on-delivery or other outcome-based payment approaches that fit within MCC’s operational model.

MCC has identified lack of access to affordable and reliable power as a binding constraint to growth in three African countries with compacts in development: Ghana, Liberia and Tanzania. For example, Ghana completed an economic constraints analysis in June 2011 as part of the Partnership for Growth (PFG), which identified the power sector as the main focus for compact development. MCC projects will support physical assets to generate, transmit and distribute power and help improve financial mechanisms to leverage financing from private investors and independent power producers. MCC may also invest in power sector governance, institutional and regulatory reform, and other measures to reduce electricity distribution losses, improve reliability and access, and create an enabling environment for private investment in the sector.

MCC has worked closely with private sector enterprises, notably General Electric, that plan to make substantial investments as a result of the policy reforms and investments contemplated under MCC’s planned compacts. These investments will also be coordinated with and supported by other USG agencies, such as the Overseas Private Investment Corporation and the U.S. Export-Import Bank.

In addition to the request of $1.0 billion, the Administration is proposing $350 million in resources for MCC as part of the $56 billion Opportunity, Growth and Security Initiative included in the FY 2015 President’s Budget. The resources in the initiative will enable MCC to take advantage of additional compact investment opportunities in Ghana, Liberia and Tanzania.