President Bush and President Kikwete of Tanzania signed a $698 million Millennium Challenge Compact  in February 2008. (Photo: Chris Greenberg)

The Millennium Challenge Corporation (MCC) was established in 2004 to administer the Millennium Challenge Account (MCA), announced by President Bush at the 2002 Financing for Development Conference with the goal of reducing global poverty through the promotion of sustainable economic growth. Its governing board includes the Secretary of State (Chair), the MCC CEO, the USAID Administrator, the Secretary of Treasury, the United States Trade Representative and four civil society members recommended by the Congressional leaders and appointed by the President. It functions within three principles of aid effectiveness: good governance, economic freedom and investments in people.

The MCC provides assistance to low-income or lower middle-income countries, called Compacts, if they reach or exceed the media level of criteria that fall into three baskets: Ruling Justly, Investing in People, and Economic Freedom. Countries must also be at or above the median on a corruption index. Those on the brink of achieving Compact eligibility may qualify for the Threshold Program to focus on areas of weakness and improve eligibility status. Once a Compact or Threshold Agreement is signed the MCA guarantees the allotted funding for the five-year duration of the program. These funds are obligated and set aside; therefore they are not available for other purposes. Unlike other aid initiatives, MCA funds are not cut or diminished part way through a project, allowing programs to be implemented and completed as planned.

Since its establishment, the MCA was expected to increase development assistance overseas by $5 billion a year over current levels of foreign aid by 2006. However, funding levels never even exceeded $2 billion. Annual appropriations were: 2004, $1 billion; 2005 $1.5 billion; 2006 $1.75 billion; 2007, $1.75 billion; 2008, $1.5 billion; and 2009, $875 million. InterAction continues to work with member organizations to gain full funding for this initiative and monitor its implementation and coordination with other U.S. foreign assistance programs.