|Threshold Programs (in millions of $)||FY 2016 Enacted||FY 2017 Enacted||FY 2018 Request|
MCC’s $26.6 million request for FY 2018 together with enacted funding from prior years would support new threshold programs with Kosovo, Togo, and Timor-Leste.
MCC’s threshold program is a powerful tool assisting promising candidate countries in becoming compact eligible. The threshold program develops robust policy reform and institutional strengthening programs to accelerate the “MCC Effect,” which is often used to refer to the power of MCC’s selection criteria to encourage countries to reform their policies, strengthen their institutions, and improve their data quality to boost their performance on MCC’s scorecard and become eligible for MCC assistance. The threshold program supports better governance in sectors critical to future economic growth and assesses the opportunity for an impactful and cost-effective partnership before committing to a larger compact. MCC uses the same rigorous, evidence-based approach to develop threshold programs as it does in compacts, leading to high-quality investments that maximize systemic impact and lay the foundation for larger investments.
If successfully implemented, these reforms help to reduce constraints to 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 on compacts.
Countries with threshold programs are not guaranteed compact eligibility. However, successful implementation of a threshold program yields significant advantages for a potential future compact. For example, a partner country will likely have enhanced its ability to design and implement investments that will generate the greatest results and have a head start on the work necessary to design a high-impact compact.
Threshold Programs in Development
MCC’s Board selected Kosovo as eligible to develop a compact in December 2015. As a result of a decline in its scorecard performance, particularly on the Control of Corruption indicator, the Board transferred Kosovo to the threshold program in December 2016. Building on the constraints to growth analysis conducted during compact development, the MCC and Kosovo teams are in the final stage of threshold program development. MCC expects to sign an approximately $45 million threshold program agreement during FY 2017. The program will support projects to incentivize energy efficiency and to foster more transparent and accountable governance data. The Board is expected to consider this program in FY 2017.
The Board selected Togo as a threshold country in December 2015. Togo has shown consistent improvements on the MCC scorecard over the past four years. As a result of a dedicated reform effort, Togo moved from passing 5 of 20 indicators in FY 2014 to 12 of 20 indicators in FY 2017, including the Control of Corruption indicator. MCC and the Government of Togo have worked closely to conduct a constraints analysis and are currently developing projects to support reforms in the information and communications technology (ICT) sector and to improve land rights and administration. MCC expects to sign the threshold program agreement in early FY 2018.
Timor-Leste was selected for the Threshold Program in December 2016 and MCC is working with the government on an analysis of Timor-Leste’s constraints to economic growth. The Timorese are committed to the new partnership and with the strong support of the U.S. Embassy and USAID, MCC is seeking to develop an economic reform program after the parliamentary elections in July of 2017. MCC expects to conclude development and sign an agreement by the end of FY 2018.
Current Threshold Programs
MCC and the Government of Honduras signed a $15.6 million threshold program agreement in August 2013 to enhance the transparency and efficiency of public financial management, procurement, audit, and oversight of public-private partnerships. In January 2017, the government launched a procurement certification program aimed at improving the transparency, accountability, and quality of public procurement by building the capacity of civil servants and requiring that all procurements above a threshold be managed by certified procurement professionals.
MCC and the Government of Guatemala are partnering to implement a $28 million threshold program. Signed in April 2015, the program is designed to improve the quality of secondary education. In order to increase government spending in social services like education, MCC is also working with Guatemala to mobilize financial resources through reforms in customs and tax administration and by attracting private capital and structuring public-private partnerships for infrastructure.
In November 2015, MCC and the Republic of Sierra Leone signed a $44 million threshold program agreement to support policy reforms and improved governance in the water and electricity sectors. By establishing independent regulation, strengthening key institutions, and increasing transparency and accountability, the program will create a foundation for delivery of financially sustainable water and electricity services to the people of Sierra Leone, and limit opportunities for corruption in service delivery.