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Editorial

Foreign Aid in Peril

Thursday, September 16, 2004; Page A30

MORE THAN one would have predicted four years ago, the Bush administration has promoted help for developing countries. Having suggested during his campaign that Africa was not a priority, President Bush greatly expanded programs to help poor countries cope with AIDS, and he promised a 50 percent jump in other foreign assistance. However, that second achievement is in danger of being undermined. In a Senate markup yesterday, only $1.12 billion was allocated to Mr. Bush's new aid initiative, less than half of what he requested.

The new initiative operates outside the government's traditional aid program, which spends about $10 billion annually. It is administered by a new outfit called the Millennium Challenge Corp., and it promises to distribute money in the efficient manner pioneered by the World Bank: The cash will go only to countries with good policies, which are likely to use the money wisely. The existence of this new corporation has already created an incentive for poor countries to improve in the areas that the corporation monitors: corruption, political freedom, sound macroeconomic policies, the ease with which entrepreneurs can set up businesses, and so on.

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This incentive won't last, however, if the carrot shrinks abruptly. When the Millennium Challenge idea was announced in 2002, the administration said it would ramp up to $5 billion a year by 2006, adding that it might aim for $3.3 billion by next year to be on track for that target. But when the administration put forward its budget this year, it said it wanted $2.5 billion for next year. The House responded by allocating half that request. And the Senate, in yesterday's markup, pared it to $1.12 billion.

The Millennium Challenge Corp. has already named 16 countries whose policies are good enough to deserve assistance, and it plans to name more in November. But, according to the Government Accountability Office, the $2.5 billion the administration requested would allow the corporation to assist only between eight and 13 countries, assuming that it wants to be among the biggest donors in the countries it chooses, so that the incentive for good policies is powerful. By cutting the administration's request in half, Congress is further limiting the number of poor countries that will be reached. Why should poor countries listen to U.S. lectures about creating a predictable policy environment to support growth if the United States breaks its own promises?

Last year Congress shortchanged the Millennium Challenge Corp. too, and Mr. Bush waded in to rescue it. He needs to do the same this year if he is to preserve his pro-development credentials -- and one of the most important initiatives of his term.


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