Millennium Challenge Account

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The Millennium Challenge Account (MCA) is a development aid fund established by the US government in 2004 . The fund is characterized by strict award conditions, unbureaucratic allocation of funds, a transparent allocation process, greater involvement of the recipient countries in the use of funds, and extensive independence from political influences. In order to guarantee independence and an unbureaucratic allocation process, the funds are administered by an independent organization founded for this purpose, the Millennium Challenge Corporation (MCC). The Chief Executive Officer of the MCC is appointed by the US Senate . The US Secretary of State (since 2017 Rex Tillerson ) chairs the MCC Board of Directors . Also represented on the board are the head of the US Agency for International Development ( USAID ) and the treasurer of the federal government.

Originally, the fund was to be provided with five billion US dollars, which would have meant an increase in US spending on development aid by around 50% (or global development aid by 9%). To date, Congress has approved $ 2.48 billion.

To date, the MCA has declared a total of 17 countries eligible and concluded four contracts with eligible developing countries ( Cape Verde , Honduras , Nicaragua , Madagascar ) for a total of around 600 million US dollars.


The creation of the MCA pursued a variety of goals for the administration of President George W. Bush . The decisive factor here is the growing criticism of current development aid programs, especially from the conservative side. The lack of development success in developing countries is criticized, which is the result of insufficient attention to economic framework conditions in the allocation of funds, a lack of willingness to reform on the part of the recipient countries and insufficient efficiency orientation of the development programs.

The terrorist attacks of September 11, 2001 were decisive for the establishment of the MCA . The MCA was first included in the US National Security Strategy (NSS) from 2002. The MCA is intended to help reduce poverty and instability in developing countries, which are seen as one of the most important reasons for international terrorism.


Low income countries with a median annual income of less than $ 1,465 are eligible for the MCA . From 2006, lower middle income countries with an average per capita income of between US $ 1465 and US $ 3035 will also be funded.

For the selection of eligible countries, 16 publicly available indicators are used, which have been divided into three categories:

1. Ruling Justly 1. Control of Corruption 2. Rule of Law 3. Voice and Accountability 4. Government Effectiveness 5. Civil Liberties 6. Political Rights

2. Investing in People 7. Immunization Rate 8. Primary Education Completion Rate 9. Public Primary Education Spending / GDP 10. Public Expenditure on Health / GDP

3. Economic Freedom 11. Country Credit Rating 12. Inflation 13. Regulatory Quality 14. Budget Deficit / GDP 15. Trade Policy 16. Days to start a Business

To qualify for MCA funding, a candidate country must be above median on at least half of the indicators in each category. The median for corruption is particularly important. If a country is below the median on this indicator, it is automatically disqualified for MCA funds. In this way, only those countries are to be promoted that have shown their readiness for reforms, good economic policy and good governance .

Autonomy in the use of funds

The concentration of the MCA on top performers enables the recipient countries to use the funds largely autonomously. This solves one of the problems other development agencies are facing. Since development aid often flows to countries with bad and corrupt governments, development aid can only be used in clearly defined projects, which in most cases are not sustainable and do not contribute to the development of the recipient country. The MCA funds, on the other hand, are managed and used independently by the MCA recipient countries, which ensures that they meet the needs of the country.

Review by Jeffrey Sachs

The well-known American development economist criticizes American policy under the Bush administration in his book "The End of Poverty". Only about a billion dollars a year flow into the Millennium Challenge Account, while the Iraq war and its aftermath cost about five billion dollars a month.

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