Millennium Challenge Account

The Millennium Challenge Account (MCA) is a bilateral development fund announced by the Bush administration in 2002 and created in January, 2004. Through this program, the administration proposed to permanently increase United States foreign aid funding by $5 billion by 2005 through a new government agency, the Millennium Challenge Corporation (MCC). Countries are selected on a competitive basis through a set of 16 indicators designed to measure a country’s effectiveness at ruling justly, investing in people, and fostering enterprise and entrepreneurship.

This approach by the Bush administrasion is in so far new, as it uses a fully transparent method of choosing the recipient countries. All indicators used and the whole process of qualifying are publically available at the homepage of the MCA. Through this open process, the administration hopes to keep the MCA away from political influence. Other development programs like USAID (United States Agency for International Development) suffer from many different and sometimes conflicting goals, which often are a result of political pressures.

The focus of the MCA is to promote economic growth in the recipient countries.

The Program emphasizes good economic policies in recipient countries. The Bush administration follows the insight that development aid works better in countries with good economic policies, such as free markets and low corruption.

In the first year (2004), 17 countries were made eligible for a MCA loan: Armenia, Benin, Bolivia, Cape Verde, Georgia, Ghana, Honduras, Lesotho, Madagascar, Mali, Mongolia, Morocco, Mozambique, Nicaragua, Senegal, Sri Lanka, and Vanuatu. Madagascar and Honduras were the first countries to receive actual funding from the MCA. As of May 2005, Nicaragua, Cape Verde and Georgia are next in line to receive money.

In late 2004, Congress provided only $1.5 billion of the $2.5 billion the President had asked for the MCA. It is therefore likely that the objective of increasing US foreign aid by 50% through the MCA will not be met.