Malawi has failed to qualify for a second Millennium Challenge Compact (MCC) funding with the United States citing corruption as a major hurdle. In this interview Edward Monster, public affairs officer at the US Embassy explains more to Weekend Nation deputy editor MOSES MICHAEL-PHIRI. Excerpts:

Corruption fundamentally undermines economic growth

Malawi has failed to meet some of the requirements for the second MCC compact?  Give us an overview of the selection process and key issues the MCC Board looks for, for a country to qualify for a compact?

On December 19, MCC’s Board of Directors met to select countries eligible for MCC assistance in 2018. MCC partners with countries committed to good governance, as measured primarily by MCC’s annual policy indicator scorecards. The policy indicator scorecards focus on the areas of ruling justly, investing in people, and economic freedom. Countries are selected for MCC assistance through the compact and threshold programmes because of their commitment to strong policy performance.

 

So why wasn’t Malawi selected for a second compact?

Selection for a second compact is not automatic. Second compacts are very competitive and subject to higher expectations and greater scrutiny for MCC funding eligibility. When considering a second compact, MCC’s Board of Directors looks for successful implementation of the first compact; a commitment to sector reforms; and continued improvement on MCC’s scorecard, especially on issues of democratic rights and control of corruption.

It often takes time for MCC’s Board to be assured that a country is meeting these higher standards. To date, only half of first compact MCC countries have received a second compact. MCC’s Board re-examines all eligible countries each December. The Board’s decision this year does not preclude the Board from considering Malawi in the future if Malawi continues to pass MCC’s scorecard.

 

What does this mean for Malawi’s current compact?

All MCC compacts are subject to a strict, five-year clock, and MCC’s current partnership with the Government of Malawi will end in September 2018.

Compacts are not extended in any country, which is why it is critical that the Government of Malawi successfully complete compact projects in this final year.

The Government of Malawi must be focused on implementation of current efforts, including completion of infrastructure investments and necessary reforms in the power sector.

Implementing these investments will not only help move the government toward its commitments to expanding economic opportunity, but successful implementation will also be important to MCC’s Board in considering future partnerships.

 

Is there hope that Malawi could receive a second compact in the future?

If a country is selected for a second compact, it is important to note that it is not as an extension of the first compact. A second compact investment is an entirely new program subject to MCC’s strict investment planning and development approach, which takes years to develop.

MCC’s Board re-examines all eligible countries each December. The Board’s decision this year does not preclude the Board from considering Malawi in the future if Malawi continues to pass MCC’s scorecard.

Looking forward, therefore, it will be important for Malawi to: Demonstrate a strong and successful close-out to the current compact, including clear measures to ensure sustainability of efforts, such as of adoption of an electricity tariff in line with the costs of maintaining and expanding the national system; conclusion of independent power purchase agreements; and sound corporate governance and financial stability of its electricity utility, Escom [Electricity Supply Corporation of Malawi].

Malawi must also show a strong commitment to combating corruption, especially given the trajectory on the Control of Corruption indicator in recent years. Corruption fundamentally undermines economic growth, which is why MCC examines a country’s commitment to combating corruption when choosing partner countries and when developing and implementing programs.

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