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This note explores the countries most likely to be selected for FY07 eligibility. This analysis shows that five fewer LIC pass the indicators test for FY07 than last year and four countries with MCC compacts do not pass: Ghana, Benin, Madagascar, and Cape Verde. Some other countries that are quite far along in the compact development process also fail.
The authors discuss key issues the Board will face this year, chief among them:
The Board must decide on FY07 eligibility for the four countries with signed compacts that do not pass the indicator test. The decisions are largely symbolic: they will not affect compacts in place, the compact development process, or the amount of funding available for these countries. But signals are important, and effectively the Board must decide whether it wants to send a strong signal about the indicators or a strong signal of support for countries in the early stages of implementing a compact.
Most controversially, the authors think it is highly likely that the Board will select both Indonesia and Jordan, but they do not believe that either would be an appropriate choice.
Since FY07 funding is unlikely to differ significantly from the FY06 level of $1.77 billion, the Board's selections should be guided by heightened selectivity. In particular, the authors suggest it should not choose any additional LMICs this year, since overall funding is limited and the LICs have much greater needs and much less access to alternative sources of funding than LMICs.
The Board has an opportunity to strengthen and clarify the purposes of the Threshold Program by being more consistent in its country choices thinking more imaginatively about the purposes of the Program.
The Board must decide how transparent it wants to be in its decision-making. The authors believe the MCC selection process would be strengthened significantly if the Board were more open and transparent in explaining its decisions when selections differ from the indicators results, both in selecting countries that do not meet the tests and not selecting those that do.