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1 1 (January 17, 2025)

handle is hein.crs/govesde0001 and id is 1 raw text is: Congressional Research Service Infer ning t ~e legi latave dab to Si! C. 1914 S Updated January 17, 2025 Millennium Challenge Corporation Overview The Millennium Challenge Corporation (MCC) is an independent agency established in 2004 by the Millennium Challenge Act (Title VI of Division D, P.L. 108-199). It was created amid intense congressional debate over U.S. foreign aid effectiveness. MCC reflects some views that emerged from that debate, with features such as the following: * Singular Mission. Congress created MCC to focus exclusively on economic growth and poverty reduction, refraining from setting sectoral or geographic priorities. * Competitive Selection. MCC is to select countries through objective and quantifiable indicators, rewarding well-governed poor countries where MCC may produce sustained, substantial poverty reduction. * Country Ownership. Recipients must design and implement their own programs, under MCC oversight. * Fixed Timeline. MCC obligates all funds upon program approval and strictly limits implementation timelines. * Evidence and Openness. MCC subjects programs to extensive evaluation and releases nearly all reporting and congressional notifications publicly. For more information on MCC, see CRS Report RL32427, Millennium Challenge Corporation: Overview and Issues. Selection MCC awards assistance through a competitive selection process based on countries' performance on a quantitative scorecard of indicators sourced from third-party organizations. The Board of Directors chooses countries in a three-step process, usually between August and December, and is currently making selections for FY2025. Candidacy. Countries are candidates if their per capita gross national income (GNI) is below the World Bank's lower-middle-income threshold ($4,515 for FY2025) and if they are not prohibited from receiving U.S. foreign aid. Scorecards. MCC issues a scorecard for every country under the GNI threshold, including prohibited countries. Countries pass or fail on each of 20 indicators, organized by three themes: investing in people, economic freedom, and ruling justly. Countries pass by outperforming the median in their income group (low-income and lower-middle- income) for most indicators, but some have a set minimum value. Countries must meet three minimum hard hurdles for the Board to consider them for a compact: pass more than half of the indicators, meet a minimum score on one of the two democracy indicators (civil liberties and political rights), and surpass the median on a control of corruption indicator. Selection. MCC's Board reviews countries' scorecards alongside other factors, such as MCC's budget availability, candidates' track record with previous compacts (if any), potential impact on poverty, and the country's governance trajectory, among other factors. Programs MCC offers two types of programs for selected countries. MCC's flagship program is the compact, a five-year grant agreement generally valued between $100-$700 million. Partner governments develop and implement compacts under MCC guidelines and oversight. First, countries perform a growth diagnostic, an analysis of the principal constraints (usually one to three) to faster economic growth and poverty reduction. Countries select constraint(s) and propose corresponding projects to MCC's Board. If the Board approves, MCC and the partner country sign a compact. Compacts do not launch immediately. A usually years-long interim period follows, during which countries continue preparatory activities to make implementation feasible within five years. The Board may deselect countries during this period if governance erodes. Compacts generally invest in hard physical infrastructure and incorporate complementary policy reforms and administrative capacity-building. As with broader U.S. development aid, sub-Saharan Africa is a top MCC focus region (Figure 1). Transport and energy are the top sectors. Figure I. MCC Compacts, 2004-2024 By sector focus and by region, by dollar value Land Reform HealthJ Sector Source: MCC budget request, FY2025; CRS analysis of MCC data.

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