The Millennium Challenge Account
EDITORIAL
Stabroek News
May 14, 2004
Guyana did not make the cut for funding this year under the new aid programme, the Millennium Challenge Account (MCA) announced two years ago by US President, George Bush to support programmes and policies to foster growth and poverty reduction in poor countries.
One billion US dollars is available in the current fiscal year for 16 eligible countries already named and Congress is being asked to set aside US$2.5 billion for fiscal year 2005. This sum could grow to US$5 billion annually.
Guyana is not the only country which met the criteria set by the Millennium Challenge Act and lost out. Three other countries in this category were - Bhutan, Mauritania and Vietnam. The only difference is that the latter three are expected to receive US$100M to better their chances for selection next year. Guyana does not seem to be in the running.
The Office of the President could not say whether it has been informed why Guyana was disqualified and is not in the running for funding next year. The commercial officer in the local US embassy has not been available to speak on the issue.
Guyana is a Heavily Indebted Poor Country (HIPC) and was the ninth country to qualify for enhanced HIPC debt relief last December. Nine of the 26-HIPC countries have made the MCA eligible list - Benin, Ghana, Madagascar, Mali, Mozambique, Bolivia, Honduras and Nicaragua. Mauritania, if it makes the list next year, will be the tenth.
The selection of the 16 beneficiaries, apart from being poor and being eligible for concessional funding from IDA, was based on their overall performance in three broad categories; ruling justly, encouraging economic freedom and investing in people. In addition, quantitative and qualitative information was used to determine whether a country performed satisfactorily in relation to its peers with emphasis on investment in people, particularly women and children, economic policies that promote private sector growth, the sustainable management of natural resources, and human and civil rights, including the rights of people with disabilities. The selection panel also took into consideration whether adjustments had to be made for data gaps, lags, trends, or strengths or weaknesses in particular indicators.
A look at the overall performance of the countries based on data available on the MCA website (www.mca.gov) indicates that Guyana for all intents and purposes ranked well with its peers for assistance. The category in which it fell below the median was fiscal policy with a score of -15.2 when the median was -3.90. Sri Lanka also had a high score in this category (-9.26) but its deficit declined each year since 2001, reflecting a positive trend and its non-concessional borrowings this year were less than half the 2002 level.
Guyana's fiscal deficit has been widening and the country was not allowed to borrow on non-concessional terms because it is a HIPC country. However, looking at the three categories by themselves, under the category of ruling justly Guyana showed a stable trend in political rights and civil liberties but in the control of corruption, it scored just above the median in 1996 but this began a downward move thereafter with a slight upward movement in 2002. Inability to control corruption was considered a fail grade for the programme. Under this same rubric, government's effectiveness has been seen as fluctuating as was the rule of law and accountability.
The second category, investing in people, saw a continuous upward trend in immunization rates, health expenditure, primary education completion while primary education expenditures saw fluctuations.
The third category, economic freedom, showed fluctuating regulatory quality, a credit rating of 27.4 (the median being 20.1,) trade policy being at the median reflecting an improvement since 2002, inflation fluctuating above the median and fiscal policy well below the median.
Just exactly why Guyana did not qualify would be a matter of speculation until a statement is made on the issue by someone with authority to do so. Corruption may have been the issue coupled with a high fiscal deficit. Or it could be the lack of measures to counter these. Cape Verde got a low trade policy score as did Guyana but it has in place a Value Added Tax system to remove reliance on import revenues and is also making good progress in WTO accession.
The government of Guyana needs to determine why it did not make the list after being touted as one of the potential candidates. And then measures ought to be put in place to ensure that Guyana can make the list next year. After all, an interest free US$62M or more per year could go a far way in fostering growth and reducing poverty.