MCC discontinues USD 480 million compact with Sri Lanka

Millennium Challenge Corporation (MCC) has decided to discontinue the proposed compact of USD 480 million with Sri Lanka.

The MCC board took this decision at its meeting on December 15. The MCC unit in Sri Lanka will also be closed accordingly.

In a statement issued yesterday, the MCC announced that the Board has discontinued the proposed Compact with the island nation.

The previous Yahapalana government gave Cabinet approval for the MCC ahead of the 2019 presidential elections. However, the new government, formed after the elections, under President Gotabaya Rajapaksa decided to suspend the signing of the compact.

MCC of the US Government approved the grant to Sri Lanka at its board meeting held on the 25th of April 2019 in Washington D.C. subject to Congressional Notification.

On the request of former PM Ranil Wickremesinghe, the MCC had conducted an evaluation in terms of their investment criteria and selected Sri Lanka as a qualified country to receive grant funding under their Compact Investment Program.

Under the grant, MCC had agreed to kick off a USD 350 million transport project and a USD 67 million land project in Sri Lanka. The remaining USD 63 million was to be allocated to support technical assistance, feasibility and design studies, project administration, and monitoring and evaluation.

However, the proposed grant assistance agreement was met with strong disapproval from various parties citing that it adversely affects the sovereignty of the country as it would pave way for defense deals with the US.

Meanwhile, MCC has selected three new partners – Sierra Leone, Kiribati and Solomon Islands – for new compact partnership and threshold programs.

As a part of the annual selection process, Benin, Burkina Faso, Côte d’Ivoire and Niger have been reselected as eligible for concurrent compact programs for regional integration, while Malawi, Mozambique, Timor-Leste and Tunisia were reselected for compact development.

Further, Ethiopia, Kenya and Gambia were reselected for a threshold program development.

The statement said the MCC also reaffirmed its support for continuing development in Indonesia, Kosovo and Lesotho.

“MCC provides time-limited grants to developing countries that meet rigorous standards for good governance, from fighting corruption to respecting democratic rights, as evaluated by MCC’s scorecard. MCC takes a business-like approach, with bedrock commitments to data, accountability and evidence-based decision making.”

The Full text published on the official MCC website announcing the decision is as follows:

For Immediate Release

December 16, 2020

WASHINGTON, D.C., December 16, 2020 – At its quarterly meeting on December 15, the Millennium Challenge Corporation (MCC) Board of Directors selected new countries as eligible for U.S. Government grant assistance. The Board unanimously selected Sierra Leone for a new compact—MCC’s five-year grant program—to reduce poverty through targeted investments that increase economic growth. The Board also unanimously selected Kiribati for an MCC threshold program—the agency’s smaller grant program focused on policy and institutional reform.

“I am pleased to announce MCC’s new compact partnership with Sierra Leone and new threshold partnership with Kiribati,”  MCC Chief Executive Officer Sean Cairncross  said. “Sierra Leone has been a strong threshold program partner; Kiribati has demonstrated a commitment to MCC’s eligibility criteria. We look forward to working with all of our government partners to achieve sustainable economic growth supported by country ownership and accountability to improve the lives of their citizens.”

Sierra Leone will complete its current MCC threshold program in 2021 and has demonstrated encouraging policy improvement on MCC’s scorecard. A compact will build on Sierra Leone’s continued commitment to sector reform and strong relationship with MCC.

Selecting Kiribati for a threshold program initiates MCC’s engagement with the country—Kiribati has been an important partner to the United States in the central Pacific since a treaty of friendship was signed in 1979, and this project will build upon that relationship.

In addition, the Board unanimously approved a $23 million threshold program with the Solomon Islands. This MCC threshold program aims to assist the Solomon Islands Government in addressing the country’s biggest constraints to economic growth: management of natural resources in the logging sector and insecure access to land which limits tourism investment. This program takes an innovative approach tailored to the unique landscape in the region and integrates components of MCC’s strategic priorities, such as women’s economic empowerment and blended finance.

As part of the annual selection process, MCC’s Board of Directors reselected Benin, Burkina Faso, Côte d’Ivoire, and Niger as eligible for concurrent compact programs for regional integration; Malawi, Mozambique, Timor-Leste, and Tunisia for compact development; and Ethiopia, Kenya, and The Gambia for threshold program development. The Board also reaffirmed its support for continuing compact development in Indonesia, Kosovo, and Lesotho. The Board discontinued the proposed compact with Sri Lanka.

MCC provides time-limited grants to developing countries that meet rigorous standards for good governance, from fighting corruption to respecting democratic rights, as evaluated by MCC’s scorecard. MCC takes a business-like approach, with bedrock commitments to data, accountability, and evidence-based decision making.

Find out more about MCC’s selection process on our  Who We Select  web page.