Analysis of Future Millennium Challenge Corporation Obligations

The Millennium Challenge Corporation (MCC)--intended to provide aid to developing countries that have demonstrated a commitment to ruling justly, encouraging economic freedom, and investing in people--has received appropriations for fiscal years (FY) 2004-06 totaling more than $4.2 billion. About $3.8 billion of this amount has been set aside for compact assistance. As of January 2006, MCC had signed or approved eight compacts obligating about $1.5 billion, leaving an unobligated balance of about $2.3 billion. To assist in this year's budget deliberations, this letter provides a range of estimates under two scenarios of how quickly MCC could obligate this balance and three possible levels of FY 2007 appropriations at the current pace of compact award. The President has requested an additional $3 billion for MCC for FY 2007. To address this objective, we analyzed MCC's FY 2005 and 2006 budget presentations and other corporation records. We selected two illustrative scenarios for future MCC obligations: (1) a "higher cost" scenario in which the average size of future compacts is consistent with MCC projections and (2) a "lower cost" scenario in which future compacts are consistent with the average compact size to date.