Millennium Challenge Corporation board meeting – BAD NEWS FOR MALAWI & SENEGAL

MCC signed a $350 million compact with Malawi in April 2011, but put the compact on hold in July following political violence and related concerns with Malawi’s commitment to good governance. The president of Malawi recently told international donors to “go to hell.”  The MCC compact would have focused on Malawi’s power sector and was expected to have far-reaching benefits for Malawi’s citizens. I’ve heard several MCC staff say the Malawi compact would have been the “best yet” so they are understandably disappointed at the turn of events (but shouldn’t be motivated by the sunk cost argument or pressure to get money out the door). The board is now faced with a tough decision: maintain the hold, suspend or terminate the compact. Merely maintaining the hold risks looking like inattention. So my guess is that the real debate is between suspension and termination.  The optimist may choose suspension to send a signal to the government while still holding some policy leverage and hope for near-term change. The pessimist may choose outright termination to show that the MCC only works with good performers and can’t spare slim funds or staff time when country performance reverses.

Meanwhile, Senegal is not officially on the agenda, but ongoing concerns with President Wade’s run for a third term in office, perceptions of corruption and spots of violence merit board attention (recall MCC has a $540 million compact with Senegal). The MCC says it is watching the election events and I doubt the board will take any action before the second round of elections this weekend, but it should be prepared for possible policy responses and risks to MCC’s reputation.