Congressional Budget Justification (CBJ): Congressional Budget Justification, FY 2016 | January 2015

Threshold Programs

(in $ millions) FY 2014 Enacted FY 2015 Enacted FY 2016 Request
Total Appropriation 898.2 899.5 1,250.0
Threshold Program 20.0 30.0 30.0

Threshold Programs entail a structured and disciplined diagnostic and design process. MCC begins with a rigorous analysis of the constraints to economic growth and the policies and institutions that reinforce those constraints to growth. MCC threshold program assistance supports government efforts at reform in these areas, which have the potential for the greatest impact on growth.

For FY 2016, MCC plans to use up to $30.0 million to support the planned Cote d’Ivoire threshold program.  The recently approved program with Guatemala and the program in development with Sierra Leone will rely on prior year balances.

Background

Threshold programs assist countries to become compact eligible by supporting their efforts to implement key policy and institutional reforms and thereby demonstrate their commitment to MCC’s eligibility criteria. If successfully implemented, these reforms will reduce constraints to faster economic growth and provide MCC critical information about a candidate country’s political will and capacity to undertake the types of reforms that would have the greatest impact in compacts.

MCC develops each threshold program in partnership with the candidate country through a structured and disciplined diagnostic and design process. The process begins with a rigorous analysis of the binding constraints to economic growth. MCC and the candidate country then assess the policies and institutions that reinforce those constraints and design a program that will support reforms aimed at alleviating the constraints.

Countries with threshold programs are not guaranteed compact eligibility. For those that are selected, successful implementation of their threshold program will yield significant advantages for a potential future compact.

For example, the partner country will likely have enhanced its ability to design and implement investments that will generate the greatest results, and MCC will also have a head start on the work and relationship necessary to design a high-impact compact. In some cases, MCC may also be able to make early progress on longer duration reforms that ultimately enhance the sustainability of the results of a compact.

Leveraging the Private Sector: For the Honduras threshold program, now being implemented, MCC is supporting the development and management of public-private partnerships to reform and deliver better value for money in the country’s electricity sector. As part of the process of developing the threshold program, MCC mobilized funding from other donors to screen the Honduran PPP pipeline and identify the projects with the strongest potential for success.

Threshold Programs in Development

Guatemala

MCC’s board selected Guatemala as eligible for threshold program assistance in FY 2013 and recently approved a threshold program in December 2014. The program will support the Government of Guatemala in implementing policy and institutional reforms aimed at providing quality educational opportunities for Guatemala’s youth that have relevance to the labor market, and mobilizing additional government resources that are needed to address binding constraints to economic growth.

Sierra Leone

MCC selected Sierra Leone as eligible to develop a compact in FY 2013. However, Sierra Leone did not pass the control of corruption indicator in FY 2014 and FY 2015, a hard hurdle for passing the MCC scorecard. In FY 2015, the board determined that Sierra Leone would no longer be eligible for compact assistance, but did select Sierra Leone as eligible to develop a threshold program. This decision allows MCC to remain engaged with Sierra Leone and assist the country to regain eligibility for a compact as it deals with the devastating consequences of the Ebola Virus Disease outbreak.

Following the analysis to identify binding constraints to economic growth, MCC and the Government of Sierra Leone focused compact development on inadequate access to electricity and inadequate access to improved water, sanitation, and hygiene (WASH) services as well as the ineffective policies and institutions that underlie and exacerbate these constraints.

In consultation with Sierra Leoneans, MCC will determine which aspects of the work done during compact development are appropriate for a threshold program and might be undertaken as the economy recovers from the Ebola outbreak. MCC will consider projects already under development as well as additional activities that could assist Sierra Leone improve its performance in the areas measured by MCC’s scorecard.

Cote d’Ivoire

MCC’s board selected Cote d’Ivoire as eligible for threshold program assistance in FY 2015. MCC is working with the Government of Cote d’Ivoire to undertake the analysis to identify binding constraints to economic growth in the country. After further analysis of identified constraints, MCC will work with the government to design a program that supports policy and institutional reform in those areas.