Congressional Budget Justification (CBJ): Congressional Budget Justification, FY 2017 | February 2016

Threshold Programs in Development

Threshold Programs (in millions of $) FY 2015 Enacted FY 2016 Enacted FY 2017 Request
Total Appropriation/Request 899.5 901.0 1,000.0
Threshold Programs 30.0 30.0 30.0

For FY 2017, MCC plans to use up to $30.0 million to support new threshold programs with Sri Lanka and Togo, which were selected by the Board in December 2015 as eligible for threshold program assistance. Development of threshold programs with these two new partner countries will follow the process depicted on the next page, and they are expected to be signed in FY 2017.

In 2015, MCC signed threshold programs with Guatemala and Sierra Leone. The $28.0 million threshold program with Guatemala supports the Administration’s strategy for engagement in Central America by strengthening governance and limiting opportunities for corruption in customs and tax administration, as well as supporting critical investments in secondary education to combat the root causes of the poverty driving illegal immigration. The $44.4 million threshold program with Sierra Leone will build a foundation for the more effective and financially sustainable provision of essential water and electricity services in greater Freetown.

Background

MCC’s threshold program is a powerful tool that provides promising candidate countries with a potential gateway to compact eligibility. The threshold program develops robust policy reform and institutional strengthening programs with promising candidate countries that further three key objectives: (1) accelerate the MCC Effect among aspiring countries by incentivizing continued policy improvement on the scorecard; (2) support better governance in sectors critical to future economic growth; and (3) assess the opportunity for an impactful and cost-effective partnership before committing to a larger compact. MCC is using the same rigorous, evidence-based approach in threshold programs as it does in compacts, leading to high-quality investments that maximize potential systemic impact and lay the foundation for follow-on larger investments.

If successfully implemented, these reforms will reduce constraints to faster economic growth, increase transparency and accountability, 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.

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.

Updates for Programs in Development

Sri Lanka

The MCC Board selected Sri Lanka in FY 2016 as eligible for threshold program assistance. Sri Lanka consistently passed the scorecard from FY 2011 through FY 2015. Though Sri Lanka failed the scorecard in FY 2016 due to failing the democratic rights indicators, this was largely due to the indicators reflecting events in 2014, and likely not yet capturing the democratic rights improvements following the 2015 elections. A threshold program investment is an opportunity to build on the positive political momentum in the country, and allows Sri Lanka the opportunity to further strengthen its scorecard performance. It also allows MCC the opportunity to work with the government on the country’s ongoing efforts in policy reform.

Togo

The Board selected Togo in FY 2016 as eligible for threshold program assistance. Togo has shown consistent improvements on the MCC scorecard over the past three years. The Government of Togo formed a Committee for MCC Eligibility that has been strongly engaged with MCC to strategize and prioritize policy improvements. This includes modernizing the family code to provide equal rights for women and passing stronger legislation to fight corruption. As a result of increased engagement with MCC and the indicator institutions, Togo moved from passing five of 20 indicators in FY 2014 to 10 of 20 indicators in FY 2016. Togo’s eligibility for threshold program assistance will allow MCC to engage with Togo on continued policy reform, as well as offer Togo an opportunity to further strengthen its scorecard performance.

Phases of MCC Threshold Program Development