|FY 2021 Enacted||FY 2022 Annualized Continuing Resolution||FY 2023 President’s Budget|
For FY 2023, MCC is requesting $31 million for threshold program assistance for new countries to be selected by MCC’s Board of Directors in December 2022. MCC recently signed threshold program agreements with The Gambia and Solomon Islands, which will begin implementation in FY 2022. MCC is currently developing threshold programs in Kenya and Kiribati.
MCC’s threshold programs are a powerful tool to support policy and institutional reforms that address binding constraints to economic growth and advance MCC’s core mission. By focusing on policy reforms and strengthening institutions in critical sectors, threshold programs complement the MCC effect created by the scorecard and allow partner countries to demonstrate, and MCC to assess, the opportunity for an impactful and cost-effective partnership. Because MCC uses the same rigorous, evidence-based approach in threshold programs as it does in compacts, these programs are designed to maximize potential systemic impact and lay the foundation for larger investments. While countries selected for threshold program assistance are not guaranteed compact eligibility, successful engagement in the development and implementation of a threshold program can yield significant advantages for a potential future compact. In the event that a country does not become compact eligible, a threshold program can help create the conditions for additional investment from the private sector or by other donors.
In light of this successful track record, in FY 2022 MCC is exploring opportunities to expand the scope and impact of threshold programs in the context of the agency’s ongoing strategic discussions around MCC@20 and as part of its larger assessment of how to innovate, scale, accelerate and expand its impact. As an immediate first step in that process, MCC is requesting that Congress remove the existing limitation on developing threshold programs with countries that have completed an MCC compact. This change would allow MCC to use the threshold program strategically to partner with promising candidate countries that are on a positive policy trajectory and that previously engaged with MCC through a compact but are not currently compact eligible. This flexibility could be particularly relevant for promising candidate countries recovering from political or policy upheaval, countries whose economies have had significant backsliding as a result of the COVID-19 pandemic, or former compact partners recommitting to improved scorecard performance. Finally, this legislative change would also open opportunities for continued engagement in a country in a concrete, narrow, relevant and high-impact area. See the Proposed Legislative Changes section for more information.
In FY23, MCC is focused on further development of the following threshold programs.
MCC’s Board of Directors selected Kenya as eligible to develop a second threshold program in December 2019. MCC and the Government of Kenya have designed a program to address the lack of connectivity in Nairobi as a binding constraint to economic growth. MCC expects to submit the program for board approval in March 2022 and sign a grant agreement in FY 2022.
The Pacific Islands country of Kiribati was selected for a potential threshold program in December 2020. MCC is coordinating closely with the government and other stakeholders to prioritize and narrow project concepts. MCC expects to complete development and bring the program to the board for approval by the end of the 2022 calendar year.
The funding request for FY 2023 will support threshold programs with countries that may be selected by MCC’s Board of Directors in December 2022. The average size of threshold programs is about $31 million, and the requested funding would allow MCC to begin development of threshold programs with new countries should promising candidates emerge in the annual selection process. Note that MCC’s Board of Directors’ selections for additional threshold programs or the transition of existing threshold programs under development to compact assistance may lead to future shifting of funds to or from this budget line item.