Millennium Challenge Corporation

https://crsreports.congress.gov

Updated January 17, 2025

Millennium Challenge Corporation

• Singular Mission. Congress created MCC to focus

exclusively on economic growth and poverty reduction, refraining from setting sectoral or geographic priorities.

Figure 1. MCC Compacts, 2004-2024 By sector focus and by region, by dollar value

Millennium Challenge Corporation

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As of September 30, 2024, eight countries were actively implementing compacts: Côte d’Ivoire, Mongolia, Senegal, Nepal, Lesotho, Kosovo, Malawi, and Indonesia, in order of launch. MCC had signed but not yet launched compacts with four other countries (Timor-Leste, Benin, Mozambique, and Belize). Since its creation, MCC has signed 45 compacts in 32 countries worth over $17 billion, although not all have been fully implemented.

Budget The Biden Administration proposed $937 million in MCC funding for FY2025, matched in House-passed (H.R. 8771) and Senate-proposed (S. 4797) measures (Table 1). Since FY2011, annual appropriations have settled near $900 million, supporting two new compacts a year on average.

Table 1. MCC Funding, Millions Current USD

Fiscal Year 2021 2022 2023 2024 2025

Request $800 $912 $930 $1,073 $937

Enacted $912 $912 $930 $930 n.a.

Rescission -$515 -$100 -$475

Source: Public Laws and MCC budget requests. Note: Enacted does not include rescissions, which may apply to prior year appropriations.

Issues for Congress In MCC’s third decade, Congress may examine MCC’s impact and model in the context of active issues like MCC’s budget, operational challenges, and program focus.

Budget Management. Enacted funding has never approached the $5 billion annual budget MCC once envisioned. MCC administers a modest share of total U.S. foreign assistance—less than 1% of FY2022 obligated nonmilitary aid, compared with 8.8% in 2008, MCC’s peak funding year. Congress has rescinded over $1 billion in prior-year MCC funding since FY2022, after the Board canceled some compacts due to policy concerns. Congress may consider whether MCC’s flat budget trendline is consistent with the agency’s mandate and current U.S. development priorities. These trends coincide with a two- decade U.S. reorientation in aid toward health and humanitarian assistance and away from MCC’s focus on governance and economic growth.

Compact Timelines. In MCC’s first decade, compacts launched about three years after initial selection; during its second decade, that period grew to around five years, as countries delayed launches to stand up implementation units and meet policy conditions. MCC says reforms in 2021 have begun to accelerate that timeline. Members may assess such delays, their contributing factors, and possible consequences for impact.

Board Membership. The Senate has not confirmed a private sector Board member since 2019, leaving three of the four seats vacant. The sole remaining member’s term expired in 2024, but Congress granted a term extension allowing the Board to maintain a decisionmaking quorum. Congress may address this issue again before that extension expires at the end of December 2024.

Threshold Authority. Congress has restrained MCC’s threshold programs, first with a hard cap on funding in FY2011 and later with a decade-long restriction on threshold programs in prior compact countries. Congress lifted the latter restriction in FY2024 after MCC identified some past compact recipients whose governance had eroded and then improved. Members may consider merits or drawbacks of using threshold programs to not only reward democratic progress but also arrest democratic decline, notably where committed governments face external threats such as malign foreign influence and transnational crime.

Country Candidacy Thresholds. Economists have increasingly focused on a “middle-income trap” for countries that escape extreme poverty only for growth to stagnate. Potentially in keeping with this focus, Congress amended MCC’s income ceiling for candidacy (Section 5122 of P.L. 118-159) from low- and lower-middle-income status up to the World Bank’s graduation threshold for concessional lending ($7,895 GNI in FY2025). Members may assess how an expanded pool may affect MCC programs and budget.

Countering China. MCC’s mission is meant to focus on development rather than great power competition, and the agency has touted its ability to work in certain places because of that lack of focus on geopolitics. Officials have justified some recent programs on foreign policy grounds, and MCC is a partner to some executive initiatives to counter China. Members may weigh MCC’s role, if any, in

Millennium Challenge Corporation

https://crsreports.congress.gov | IF12850 · VERSION 4 · UPDATED

countering China and potential consequences for the organization’s mission and overseas reputation. Nick M. Brown, Analyst in Foreign Assistance

IF12850

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