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This is one of seven MCC at Ten papers and briefs.
A key pillar of MCC’s model is its focus on policy performance. One of MCC’s defining characteristics is that it provides funding only to countries that demonstrate commitment to good governance and growth-friendly policies. In its first 10 years, MCC has targeted more of its funds toward relatively well-governed countries than almost any other donor worldwide, and certainly more than any other US government agency providing foreign assistance.
There are three main aspects to how MCC takes policy performance into account in its determination of partner countries:
Selecting countries for compact or threshold program eligibility
Suspending, terminating, or otherwise curtailing eligibility and/or program funding
Funding targeted policy reform activities through the threshold program
This paper examines how well MCC’s employment of each of these approaches has supported, in practice, the agency’s core operating principle that policies matter. It explores how MCC’s foreign aid thinking and practice regarding aid targeting based on policy performance remains different from other US foreign aid thinking and practice, and it offers recommendations for how MCC should strengthen its approach in this area in the future.