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Posted by on Mar 21, 2007 in At TMV | 0 comments

The Power of Foreign Aid

Back in 2002, Bush began an initiative called the “Millennium Challenge Account” (MCA) which upped the foreign aid budget for poor countries. The goal of this program was to encourage democratic governance and liberal economic policies by offering aid in exchange for the implementation of various reforms.

How much success has the program had since its creation five years ago? A lot. It seems that giving states a monetary incentive to implement reforms is one of the most effective ways of encouraging change. The following is from an article last week in The Wall Street Journal:

When he announced the initiative in 2002, Mr. Bush promised it would be an effective way to fight poverty and disease overseas. The grants would be big enough to jolt a country into economic growth but would go only to nations that met criteria for open markets, social spending and honest, democratic government. So far, the Millennium Challenge Corp., which runs the program, has approved grants valued at $3 billion to 11 countries. Another 11 countries have gotten “threshold” grants aimed at improving their scores on the 18 eligibility criteria. Altogether, 40 countries — from Nicaragua to Madagascar — perform well enough to compete for aid.

Mr. Danilovich [the director of the MCA project] says the program creates an incentive for countries to make sometimes-painful policy changes, and points to Lesotho as proof. Traditionally, married women in the southern African country had the same legal rights as children; they couldn’t buy land or borrow money without permission from their husbands. With the Millennium Challenge Corp. pressing for changes, the Lesotho Parliament passed a law in November putting married women on equal legal footing with their husbands.

“We were very instrumental in getting that bill into Parliament,” says Sophia Mohapi, the Millennium Challenge Corp.’s representative in Lesotho. The country is now negotiating a $360 million aid package.

…continued at Foreign Policy Watch.