Sri Lanka at risk of losing US$480mn Millennium Challenge grant
ECONOMYNEXT- Sri Lanka is at risk of losing a 480 million US dollar grant from the Millennium Challenge Corporation (MCC) to improve transportation and land information availability if the island does not sign the agreement by September, an official said.
“The 480 million US dollar program needs to be approved by Sri Lanka before our board meets in September,” Jenner Edelman, the Resident Country Director for the US government owned MCC told EconomyNext.
“We have been waiting for cabinet approval to sign the agreement. If we can’t get the program approved and signed then board members may suggest that we use these resources elsewhere.”
“We are not sure what position the board will take.”
Making Sri Lanka Efficient
The MCC grant is the largest grant from a single source Sri Lanka has ever received.
MCC funding would be used to ease traffic congestion in the Western Province over a 20-year period and improve transportation in the Central, Sabaragamuwa and Uva Provinces, linking producers in the region to export markets through the commercial hub in Colombo.
The transport segment of the project is expected to yield 19 percent of economic rate of return, while a land project which improves land use and administration will deliver a 26 percent return.
The MCC grant has come under heavy attack from a section of local and expatriate Sri Lankans, who claimed that Americans were using the program to acquire land in Sri Lanka to set up military bases.
The grant was set to be signed in December 2018, but a constitutional crisis which pitted President Maithripala Sirisena against Prime Minister Ranil Wickremesinghe delayed implementation, and has now coincided with the renewal of two US-Sri Lanka military agreements.
The renewal of the Acquisition and Cross Servicing Agreement (ACSA) and the Status of Forces Agreement (SOFA) which strengthen military cooperation and determine the status of visiting US armed forces respectively were opposed by President Sirisena.
Edelman said that the renewal of the two military agreements has now been paused, as they do not have a deadline, unlike the MCC grant.
“This is a priority now for our organization and our embassy here because everyone knows that the window is narrowing and we’ve collectively worked so hard to develop this program and get it ready for signature.”
“It is very unfortunate that our grant has been conflated with ACSA and SOFA. They are completely separate,” she said.
“The MCC grant has absolutely nothing to do with these two military agreements which are simply renewals of longstanding agreements Sri Lanka has had with the US for many years.”
She said that MCC is independent, bipartisan and apolitical.
Edelman said that it was the Sri Lankan government which had reached out to MCC and requested funding for economic development.
“Sri Lanka has been working to develop and finalize this program for several years now.”
“In early 2017, the government of Sri Lanka, after extensive consultation with the private sector, civil societies, a number of think tanks, universities and based on a study by Harvard University identified weak transport infrastructure and land as key constraints to economic growth.”
“First they (Sri Lankan government) submitted a concept note and later that year, a project proposal.”
“In 2018 our investment committee and chief executive approved those projects and in October 2018 a team of Sri Lankans led by the Treasury Secretary went to Washington for two weeks to finalize the activities and terms of agreement.”
“We had hoped to fund the agreement in last December. We even had a signing date set but because of the political crisis here in October we had to put the program on hold temporarily.”
Edelman said that even if the MCC board is positive of funding Sri Lanka in September, the project may expire in December if not signed.
MCC, which mainly funds low income and lower middle income countries, will in December decide which countries are eligible for the organization’s funding.
Sri Lanka had graduated from lower middle income to an upper middle income country in July.
“Come December, when it is our annual decision meeting, if the agreement is not finalized, the board may determine that Sri Lanka does not want or need the funding, as it has not been approved here and the country has graduated to upper middle income status,” Edelman said.
She said 480 million US dollars represents a larger grant for a maiden MCC benefactor, as other first timers such as Malawi and Georgia had received 350 million US dollars and 140 million US dollars respectively. (Colombo/Aug26/2019)