Africa: MCC Board Approves Zambia Compact, Suspends Compact With Malawi

press release

Washington, DC — The U.S. Government's Millennium Challenge Corporation (MCC) Board of Directors, chaired by Secretary of State Hillary Rodham Clinton, held its quarterly meeting yesterday. During the meeting the Board approved a new compact with Zambia, authorized Threshold Program assistance of $2 million for Niger, and voted to suspend the Malawi Compact due to a pattern of actions by the Government of Malawi that is inconsistent with the democratic governance criteria that MCC uses to select its compact partners.

The Board also discussed the unconstitutional military seizure of power in Mali. (See "Statement from MCC CEO Daniel W. Yohannes on the Situation in Mali," March 22, 2012)

MCC maintains compact partnerships only with countries that demonstrate a clear commitment to good governance, economic freedom and investing in their citizens. Through its actions over the past year, the Government of Malawi has failed to meet this standard. MCC CEO Daniel Yohannes stated, "An MCC compact is a partnership, and the commitment to democratic rights, accountable government and sound economic management is fundamental to that partnership. In light of our ongoing concerns about democratic governance in Malawi, MCC has formally suspended the compact. The future of this compact now rests on the actions of the Malawian government leadership between now and June, when the MCC Board is next scheduled to meet."

MCC's planned $350 million investment in the power sector was expected to provide close to $2 billion in net income benefits to nearly six million Malawians, the great majority of whom live on less than $2 per day. As a result of the Board's action, all MCC assistance to Malawi is suspended. The MCC Board expressed very serious concerns about the economic and political situation in Malawi, and emphasized the need for the Government of Malawi to respect the rights of its citizens and civil society organizations to assemble and speak freely. MCC will continue to monitor events in Malawi closely, and the Board will decide whether to terminate the compact at its meeting in June, provided action is not required before then.

While the Government of Malawi had taken initial steps in the right direction after the violence of July 2011, more recent events -- including the arrests of opposition and human rights leaders and inflammatory rhetoric by senior government officials -- supported MCC's finding of a pattern of actions inconsistent with good democratic governance. The lack of progress on economic policy to bring the country's IMF program back on track has contributed to significant deterioration of the economic environment and put at risk the viability of MCC's planned compact investments. Malawi's decision to allow Sudanese President Omar al-Bashir to attend a trade summit in Lilongwe, despite the International Criminal Court's (ICC) outstanding warrant for his arrest, further deepened MCC's concerns.

During the meeting, the MCC Board also approved a $354.8 million compact with Zambia. Zambia has demonstrated its commitment to democratic governance and the rule of law, including free and fair elections in September 2011 and a peaceful transition of power. The compact, which addresses one of Zambia's most binding constraints to economic growth, invests in the water sector in the rapidly urbanizing capital city of Lusaka. The compact builds on more than 15 years of water sector reform by the Government of Zambia. In addition to infrastructure investments in water supply, sanitation and drainage, the MCC investment will support the government's reform efforts through institutional strengthening to improve the health and productivity of city residents.

The project prioritizes social and gender integration and includes activities to expand project benefits for women and vulnerable groups.

In addition, the Board approved an MCC investment of up to $2 million for education activities in Niger, completing activities from a suspended Threshold Program. Niger's eligibility for MCC assistance was reinstated in June 2011 in recognition of Niger's return to democratic rule after a constitutional referendum and free and fair local, parliamentary and presidential elections. The funding, which follows on MCC's earlier $17 million investment that built 63 school complexes in Niger, will support school-based strategies to improve academic performance and to increase girls' enrollment, retention and completion.

MCC is working to develop additional Threshold Program activities with the Government of Niger under the agency's revised program concept.

For more information about MCC and its programs around the world please visit www.mcc.gov.

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