MCC bill nears approval, expanding country eligibility and oversight

To cap its 20th-year celebration, it appears the Millennium Challenge Corporation is poised to receive one of its birthday wishes: A broader pool of countries to partner with. The United States Congress is on the verge of approving a bill that would expand the range of countries eligible to receive MCC’s large grants, which aim to promote economic growth in nations with strong records of good governance. On Wednesday, the House of Representatives passed the National Defense Authorization Act, or NDAA, which includes the Millennium Challenge Corporation Candidate Country Reform Act. The Senate is likely to vote on the bill this week, with the law likely to be enacted by year’s end. MCC currently works with low-income or lower-middle-income countries. However, the proposed legislation would extend eligibility to all countries that qualify for lending from the World Bank’s International Bank for Reconstruction and Development, which supports middle-income nations. The previous metrics did not capture the full picture in a country, whereas the new lending categories include factors such as income inequality, a staffer for Rep. Joaquin Castro, who introduced the bill, told Devex. The new law would enable 33 additional countries to meet MCC’s financial eligibility criteria, including countries in Eastern Europe, such as Moldova, a country where MCC previously worked but has since graduated out of eligibility, along with Pacific Island nations and countries in Latin America that have risen above current income thresholds, notably Guatemala. The new countries must still meet the MCC criteria for good governance, accountability, and transparency before receiving funding, and the agency anticipates that at least half of them will fail to do so, an MCC senior official told Devex earlier this year. This change comes at a time when MCC is navigating its evolution. The agency has already worked with most of the countries that meet its requirements on income, governance, and other legal, investment, and economic policy benchmarks. Several nations have also grown wealthier amid declining global poverty, rendering certain economies no longer eligible for agency support. This bill is seen as an important step for the agency’s future. The impetus for the bill was a shrinking pool of countries eligible for MCC engagement and a desire to make U.S. aid more effective and better aligned with modern times, the staffer said. That required accounting for income inequality, regional disparities, and countries that might be nominally wealthier but still require development assistance and better domestic resource allocation, the staffer said. “From climate resilience to immigration management, I’m looking forward to the expanded impact this will allow U.S. development aid to have on the most important issues of our time,” Castro, a Democrat from Texas, said in a statement. The bill has been a while in the making — a previous version passed the House last year but failed to become law. This year, lawmakers in the House and Senate worked to identify the appropriate metric for eligibility and fine-tune some of the details. There was some last-minute maneuvering to get the bill attached to NDAA, which is considered must-pass legislation. While the House version didn’t include the provision, it ultimately made its way into the Senate edition and was on the table during negotiations for the final bill. Senator James Risch, the top Republican on the Senate Foreign Relations Committee, sponsored the Senate bill and was key to getting it included. While the bill’s main aim is to expand country eligibility, it will also require MCC to report on efforts to undermine MCC programs, especially by China. Several MCC grant agreements have been tangled in domestic political debates regarding China and targeted by Chinese disinformation, including a project in Nepal, which was eventually approved, and another in Sri Lanka, where the project was canceled.