Today CGD released a new publication, Round 3 of the MCA: Which Countries are Likely to Qualify in FY 2006?, that analyzes which countries pass the MCC indicators test, which countries we anticipate will be selected for FY 2006 funding eligibility, and which countries should be selected by the Board.Our analysis has several highlights:
- 33 countries pass the basic indicators test for FY 2006, including 25 countries from the original LIC group and 8 from the new LMIC group. Although the Board is unlikely to select all of these countries, they are likely to choose more than the 17 they selected last year.
- Some of the new counties the Board seems most likely to select from the low-income group include Burkina Faso, East Timor, and Tanzania. Other possibilities include The Gambia and Uganda (each of which pass the test for the first time); and Guyana, Malawi, and Zambia (which are very close to passing these tests).
- It makes little sense for the United States to be considering providing grants to the new lower middle-income country group. These countries are three times richer than the low-income group on average, have access to other sources of financing, and for the most part have already graduated from other aid programs.
- Even if the MCC is eventually going to consider the LMICs, it should not select any in FY2006. The budget for this year will be substantially less than the $5 billion that was anticipated when plans were made to include the LMICs, and the MCC does not yet have the staff or accumulated experience to expand to a new set of countries.
- The Board made too many exceptions in the qualifying process last year, choosing just three-fifths of the countries that passed the tests. This element of subjectivity is necessary, but extensive exceptions could undermine the credibility of the selection process. The Board should be much clearer in explaining its exceptions and consider adding new rules that it has been applying de facto (like a democracy criterion), thus minimizing exceptions.
The MCC faces a growing challenge emanating from the combination of (a) the larger number of countries that pass the tests, (b) a budget for FY 2006 that will be far lower than the $5 billion originally promised by President Bush, and (c) the growing pressure on the MCC to fund larger programs in each country. We analyze that challenge and the options facing the Board in a separate companion note which will be released in the next few days.
