Challenging Foreign Aid: A Policymaker's Guide to the Millennium Challenge Account

July 20, 2005

In March 2002, President George W. Bush proposed establishing the Millennium Challenge Account (MCA), a new foreign aid program designed to provide substantial assistance to a select group of low-income countries that are committed to sound development policies. The MCA could bring about the most fundamental changes to US foreign assistance policy in 40 years.

In this study, Steven Radelet examines the MCA's potential promise and possible pitfalls. He offers a rigorous analysis of the MCA’s central challenge: making foreign aid more effective in supporting economic growth and poverty reduction in the poor countries. He systematically explores what makes the MCA different and pinpoints the critical issues that will determine its success or failure.

The book concludes with important recommendations about how the MCA should be strengthened to solidify its innovation and independence and to ensure coordination with other US foreign aid programs. Written at a practical level, this book is an invaluable resource for anyone seriously interested in the MCA and US foreign assistance policy.



  1. Setting the Scene: Big Differences, Big Challenges 189KB
  2. Selecting the Countries, Part I: The Methodology 243KB
  3. Selecting the Countries, Part II: Who Qualifies? 212KB
  4. Designing MCA Programs 117KB
  5. Content, Evaluation, and Harmonization 170KB
  6. A New Corporation? 161KB
  7. Absorptive Capacity: How Much Is Too Much? 199KB
  8. Exit: How Long Should the MCA Commitment Last? 164KB
  9. Toward a Complete Foreign Assistance Strategy 121KB
  10. The Path Forward 149KB
  11. References/Index


"Steve Radelet brings an academic's insight and a policy maker's savvy to an exposition of the most ambitious US foreign aid program in 40 years." George Soros President and Chairman, Soros Fund Management

"The Bush Administration has proposed the Millennium Challenge Account as an important new instrument of US foreign assistance to low-income countries. Steven Radelet is the leading analyst of the MCA. His expertise as a top development practitioner, a scholar, and a former senior Treasury official shows through on every page of this important, judicious, and timely study. It will be a great benefit to policy makers as US foreign assistance is stepped up in the years ahead."Jeffery Sachs Director Earth Institute, Columbia University

"The Millennium Challenge Account is designed to direct more resources to countries that help themselves. Dr. Radelet's important study on the MCA deserves careful and extensive consideration."Peter McPherson President, Michigan State University, and former administrator of the US Agency for International Development

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