Letter to House International Relations from USCCB and CRS on Millennium Challenge Account, June 6, 2003

June 6, 2003

The Honorable Henry J. Hyde
Chairman, House International Relations Committee
U.S. House of Representatives
Washington, DC 20515

Dear Mr. Chairman:

On behalf of United States Conference of Catholic Bishops (USCCB) and Catholic Relief Services (CRS) we write to offer our support for establishing the Millennium Challenge Account (MCA) and our recommendations on ensuring that we accomplish the goal of reducing poverty in the world’s neediest countries.

Although we are pleased that President Bush’s MCA proposal would increase U.S. foreign assistance budget by $5 billion dollars, we have a number of concerns about the proposal. In particular, we call your attention to three issues - lower middle income country eligibility, criteria that would result in limited eligibility of the world’s poorest countries, and civil society participation.

As indicated in our joint testimony before the House Foreign Operations Subcommittee, we believe the MCA should be reserved for countries with the greatest need and the fewest options to access other aid. We urge limiting MCA eligibility to the poorest countries—those which qualify for assistance from the International Development Association (IDA), the concessionary financing facility of the World Bank, or which have per capita incomes below $1435. Extending eligibility to lower middle.income countries which have more options for addressing the needs of their people through various external financing sources, as well as more substantial local savings, may well undermine the program objective.

As currently proposed, a substantial number of very poor countries which can use aid funds effectively would be ineligible for MCA funding. We believe that in order to contribute meaningfully to poverty reduction, the MCA must be available to more countries. We recommend establishing a “second tier” composed of a significant number of countries which meet most, but not all, of the Administration's eligibility criteria. Any country with a poor record of protecting the human rights of all of its people, enforcing accountability standards, or developing a poverty reduction strategy with the participation of broad sectors of the society should be excluded. We propose that at least one-third of MCA funds be allocated to the second tier countries beginning in FY2005. We also want to ensure that MCA funds be expended for development activities which are identified as priorities in poverty reduction strategies for second tier countries.

The MCA should be used to support and strengthen poverty reduction strategy processes by increasing transparency and the level and quality of civil society participation in candidate countries. To ensure that MCA funds are efficiently utilized, we also recommend that local civil society organizations and international private voluntary organizations which partner locally have direct access to funding under the program.

We want to emphasize the importance of considering the MCA as one tool in a broader, more comprehensive approach to U.S. foreign assistance. The MCA must provide funds in addition to current levels for core development accounts.

As other provisions of this legislation become clearer, we expect to be offering further comments.

We appreciate your leadership in helping alleviate poverty in developing countries. Thank you for your consideration of our recommendations.

Sincerely,

Mr. Gerard F. Powers
Director
Office of International Justice and Peace

Mr. Ken Hackett
Executive Director
Catholic Relief Services