Beyond the Indicators: Delivering Effective Foreign Assistance through the Millennium Challenge Account

July 26, 2007

The launch of the Millennium Challenge Account (MCA) holds the promise of being a watershed event in the history of U.S. foreign assistance. The MCA's importance is partly in its scale (the proposed $5 billion annual budget represents a 50% increase over the current $10 billion foreign aid budget, and a near doubling of the subset of that $10 billion that actually focuses on development objectives) and partly because it provides the U.S. with the opportunity to vastly improve the way in which it delivers foreign assistance. The MCA is intended to be a different sort of aid program with two key differentiating factors:

  1. Its objective of promoting economic growth and development in the world’s poorest countries is much narrower than the multiple objectives of the overall US foreign assistance program.
  2. It will provide assistance only to a select group of countries that are implementing policies consistent with economic growth and development.

This paper discusses how should aid be delivered, once eligibility is determined, to ensure it is as effective as possible in supporting growth and development in recipient countries. The author addresses a broad set of issues including the responsibility for proposing and designing activities, the types of activities that should be funded, the question of funding projects versus programs, institutional issues within the U.S. government, monitoring and evaluation, and coordination with other donors.

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