Summary

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.

Under the higher-cost scenario, MCC would obligate the balance of its FY 2004-06 appropriations in the second quarter of FY 2007. Assuming that subsequent compact size remains consistent with MCC projections, an FY 2007 appropriation of $1, $2 or $3 billion will support the funding of compacts through, respectively, the third quarter of FY 2007, the fourth quarter of FY 2007, or the second quarter of FY 2008. The cumulative number of compacts under this scenario ranges from 18 to 23. Under the lower-cost scenario, MCC would obligate the balance of its FY 2004-06 appropriations during the fourth quarter of FY 2007 (about 6 months later than under the first scenario). Assuming that subsequent compact size remains consistent with the average to date, an appropriation of $1, $2 or $3 billion will support the funding of compacts through, respectively, the third quarter of FY 2008, the first quarter of FY 2009, or the third quarter of FY 2009. The cumulative number of compacts under this scenario ranges from 25 to 34.