Should the MCC Provide Financing Through Recipient Country's Budgets? An Issues and Options Paper

When the MCA was first introduced, many assumed it would deliver some--perhaps even a large part--of its funding through general budget support. After all, these were countries that were selected for funding because they had strong economic, social and governance policies. But so far this is not the case; the MCC is delivering all of its funding via traditional project finance. For all the innovation the MCC is bringing to the development assistance arena, it is being quite un-innovative in this aspect. In this paper, Sheila Herrling and Steve Radelet review the trends in development assistance toward general budget support and propose an option for the MCC to phase in the disbursement of compact funds through increasing levels of budget support to a selection of countries as they prove their capacity to manage and monitor them.