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. Last Updated: 07/27/2016

New Aid Agency to Get $5Bln

WASHINGTON -- U.S. President George W. Bush's administration has decided to propose the creation of a federal corporation, separate from the Agency for International Development, to administer its proposed fund for countries that adopt sound economic policies and attack corruption, administration officials said Monday.

The decision resolves one of the most contentious internal wrangles -- who gets to control the money -- concerning the fund, whose goal will be to make aid less wasteful by targeting a small group of "high-performing" countries.

The fund, dubbed the Millennium Challenge Account, was proposed by Bush in March, with the first disbursements scheduled for the fiscal year starting next October and annual funding rising to $5 billion a year by 2006. U.S. foreign aid currently totals about $10 billion a year. That funding would continue.

By choosing to create a stand-alone Millennium Challenge Corp., the White House rejected other options, including putting the fund under the State Department or under USAID.

Secretary of State Colin Powell pushed hard for keeping the fund under his purview, according to sources familiar with the debate, but a compromise was reached in which he will chair a board consisting of other Cabinet-level officials who will make the final recommendations to the president about the countries to receive funding.

Giving control to the State Department risked making the funding too strongly influenced by foreign policy, administration policy-makers said.

But the final compromise risks undercutting USAID, some experts said, by creating the impression that its programs are unlikely to be as effective as those funded by the new corporation.

"This obviously has big implications for USAID because it splinters U.S. foreign assistance a bit," said Steven Radelet, a scholar at the Center for Global Development who until the summer worked on the Millennium Challenge proposal as a deputy assistant treasury secretary. "I think it will be harder for them to attract really good staff, and they'll probably lose some of their good staff to this new agency."