Millennium Challenge Corporation changes country selection criteria

The Millennium Challenge Corporation quietly released its annual scorecards assessing whether countries are eligible for hundreds of millions in U.S. funding last week — and they look quite different from last year. These changes loosen key criteria — notably on corruption — but it remains to be seen what their impact will be and how they will translate to what countries MCC chooses for new grants next month. MCC, a U.S. development agency, operates through a unique model, selecting partner nations based on a rigorous set of policy criteria and then codesigning large-scale grant agreements to tackle barriers to economic growth. These grants, called compacts, hinge on MCC’s scorecard, which measures factors such as government corruption, economic policy, land rights, health, and education spending. And that scorecard has changed this year. In the past, to be eligible for funding, countries had to pass half of the scorecard’s indicators and traditionally two “hard hurdles”: one on corruption and the other on democratic rights. But now, there are 22 indicators, rather than the 20 from last year, with some new indicators and some that appear to have been renamed. One of the most significant changes is that instead of having to pass a corruption hard hurdle, countries now need to either pass a corruption hurdle or a “government accountability” hurdle, rating factors including whether a country has free and fair elections and transparency. These changes make it easier for some countries to qualify, as in the past, many countries may have met other criteria but failed the corruption indicator. In addition, the previous democratic rights hurdle has been replaced by a new metric called personal freedom. “These do seem like more substantial changes than we’ve seen in recent years,” said Erin Collinson, the director for policy outreach at the Center for Global Development. “Some of them appear to reflect interests of the administration and others reflect availability of data.” For example, the scorecard leans into economic indicators as it seeks to orient foreign engagement around commercial relationships and shifts away from measures of vaccines, which are out of favor with this administration. The new scorecard also appears to expand the pool of countries MCC can work in, reducing restrictions in countries the administration may want to work with. The loosening of the corruption hurdle raises some questions, including who benefits or may suffer from this and other scorecard changes. The scorecard has often been sacrosanct, after all, MCC was founded on the theory that well-governed countries that are not corrupt are a better bet for aid dollars. But some experts and former MCC officials have long wanted changes to the scorecard. Some experts have been calling for a change to the corruption hard hurdle for more than a decade, arguing that it doesn’t accurately measure corruption, is slow to reflect change, and is overly limiting of where the agency can work. The combination of the changes to the scorecard and MCC’s ability to work in an expanded pool of countries — a change Congress approved last year — paves the way for countries to be newly eligible. That includes Ukraine and several countries in Latin America, some of which will benefit from the elimination of a corruption hard hurdle and a flexibility in income levels that makes higher-income countries eligible for grants. In the past, such changes to the scorecard likely would have involved more public outreach and engagement, but the U.S. government shutdown and a lack of political leadership installed thus far at the agency may have made it harder for MCC to do so, Collinson said. MCC declined to comment for this story. What’s different One of the big differences is that countries no longer have to pass the corruption indicator, a barrier that prevented several countries from qualifying for MCC grants. In its selection criteria and methodology report, MCC writes that corruption is “an unacceptable tax on economic growth and an obstacle to private sector investment” but adds that the control of corruption and accountability “hard hurdle” helps ensure it works with countries “committed to combatting corruption and strengthening transparent and accountable governance.” In cases where a country passes one but not both of those indicators, the board will examine why and consult with experts to evaluate the trajectory of the country. Some think that these changes are a positive development. “MCC’s founding theory is that being selective in picking partners is the right way to ensure effective investments and the changes they made this year are very much in line with both that principle and data integrity,” James Mazzarella, senior director at the Atlantic Council, told Devex. “Controlling corruption is fundamental for economic growth but the indicator they use isn’t measuring that well enough, so it makes sense to have a clearer picture by combining it with other indicators.” In addition to Ukraine, which passes the new corruption and accountability hurdle, but was previously ineligible because the test was only based on corruption, Bolivia, Ecuador, El Salvador, Honduras, Paraguay, Peru, the Philippines, and Mongolia now qualify as well. There are other changes in indicators, some that seem in line with Trump administration priorities. MCC has done away with an indicator for immunization rates in favor of one for chronic disease. It has also added more economy-related indicators. “I’m not surprised the administration is leaning more into some of the economic indicators like market access and business start-ups,” Collinson said. “It feels like things the administration talks about. It is clear it wants our assistance to be directed to places where there are investments beneficial to America’s own economic growth and prosperity.” Some of those changes may also be driven by the availability of new data. MCC relies on third-party data, and some datasets might be new, such as the Business Ready, or B-READY, report from the World Bank, which returned in 2024 after its predecessor, the Doing Business report, was shut down. MCC had used data from the annual Doing Business reports. While some countries benefit from the relaxed corruption “hard hurdle,” it seems other countries are somewhat hurt by the new set of indicators, with some — such as Belize and Sierra Leone — which passed last year, now don’t meet half of the MCC indicators. In some cases, it seems that they lack data for some of the new economic indicators and tend to struggle in that area. A long time coming Some experts and former MCC officials, including Mazzarella, had long been calling for changes to the scorecard, which they felt were too stringent and in some cases inaccurate or outdated, even though it has driven the agency’s success, they told Devex last year. At the time, they suggested that changing the scorecard would be difficult as its indicators were seen by many as sacrosanct. “The scorecard is a good guide, but it’s also a prison,” a former senior government official told Devex last year, adding that it is “imprecise and everybody uses it as a precise instrument.” The evaluation framework is a self-imposed restriction, Jonathan Nash, a former acting CEO at MCC, said last year, arguing that the agency “in some ways has painted itself into a corner.” But “this idea of loosening up the scorecard or getting rid of certain indicators is just anathema to a number of people inside the building,” he said, adding that there has long been a concern that altering the scorecard could be perceived as weakening the funding terms and that would not bode well in Congress. It remains to be seen if the changes will ultimately be positive or negative, but they indicate that the administration is interested in continuing MCC’s work. That in and of itself is significant because of concerns at one point that the agency — like the U.S. Agency for International Development — would be shuttered completely.