Economic Advisory Council Fall 2026 Meeting Minutes

September 25, 2026
10 am - 12:30 pm

Welcoming Remarks

The meeting began with a call to order by EAC Chair Alan Gelb. Representing MCC's Office of the Chief Executive Officer, Monica Chavez offered introductory remarks thanking the EAC members for their feedback and guidance on MCC's analytics and operations. Deputy Vice President of Evaluation and Acting Chief Economist Arif Mamun updated the EAC on the nomination of MCC's new CEO, shared the progress on MCC's newest country programs, and offered an overview of the meeting's Topic Note.

Operationalizing MCC's New UMIC Authority

A Topic Note presenting questions surrounding MCC's new authority to select and operate in certain Upper Middle-Income Countries (UMICs) set the stage for discussion. Two members of the EAC served as initial discussants.

Asli Demirguc-Kunt raised the concern that expanding MCC's pool of candidate countries to include UMICs without a corresponding increase in its budget may stress MCC's resources, diverting funds away from countries with greater and more acute needs. This underscores the importance of selecting countries, even among UMICs, that struggle to access international finance. Relatedly, insomuch as access to finance often emerges as a critical binding constraint, particularly as infrastructure lays claim to a smaller share of national budgets, MCC may consider sharpening its growth diagnostics tools for diagnosing and intervening in specific features of a country's financial system to unlock greater investment capital, as well as institutional reforms. In this light, coordination and partnerships to channel blended finance into projects acquire greater salience in UMIC settings.

Homi Kharas highlighted the tension between MCC's selection criteria, which accounts for scorecard performance, and actual economic needs. Insomuch as UMICs tend to perform better on scorecards, a risk emerges that MCC's country selection may suffer from a bias towards richer countries. Separately, in contrast to traditional positive drivers of growth, MCC may consider how resilience to growth-harming shocks, e.g., natural disasters, extreme weather, and international conflicts, might feature in their growth diagnostics as well as their investment portfolios. Finally, MCC's UMIC efforts should focus on improving total factor productivity (TFP), primarily through Policy and Institutional Reforms (PIR) more so than typical capital inputs, i.e., infrastructure. That said, MCC's five-year clock poses a potential challenge for sustained reform efforts. And certain kinds of infrastructure remain critical to modern sectors' growth, such as digital connectivity and hosting data center capacities.

During the rest of the meeting, members of the EAC offered comments and feedback across a variety of themes, summarized below.

• Retooling Growth Diagnostics? Members broadly agreed that UMIC programs still require rigorous growth diagnostics, but opinions varied on the need for adjustments. Some argued that existing MCC tools remain adequate for identifying constraints, provided they are applied closely to country circumstances and supplemented with political-economy analysis. Others emphasized productivity growth, technology adoption, innovation, and the factors that explain why successful sectors or firms have advanced.

  One suggested approach was to examine how countries reached their current income levels and what can be learned from their successful sectors, firms, and policies. Firm-level surveys of technology adoption, investigation of frontier firms, and analysis of how knowledge and capabilities diffuse beyond growth poles were proposed as useful diagnostic approaches. Complementing this approach, MCC can also identify sectors that are actively dragging down broader growth-such as weak health systems and low-productivity agriculture-rather than focusing only on sectors with the greatest apparent growth potential.

  Members also cautioned that growth in today's UMICs may differ substantially from past development trajectories. Advanced information technology, digital infrastructure, trends in aging and fertility, evolving weather patterns, and innovation trajectories may feature more prominently in diagnostics without displacing attention to poverty, governance, infrastructure, and human capital.

• Geography of growth and poverty. Members stressed that higher average incomes in UMICs have neither eliminated poverty when considering the higher thresholds appropriate for UMICs (i.e., the $8.30 per day poverty line established by the World Bank) nor diminished distributional concerns. UMIC programs should continue to identify pockets of poverty and lagging populations, including in agricultural areas and disadvantaged subnational regions. Members emphasized the need for investment in lagging regions as it would generate long-term dividends for the U.S. There was particular interest in using subnational economic complexity mapping, beneficiary analysis, and other spatial approaches to determine where investments can both support growth and reach poorer populations.

  With regard to lagging regions versus established growth poles, some members emphasized the potential of larger urban labor markets and growth poles to achieve the greatest gains. Investments in transport, land-use reforms, housing, and connectivity can amplify their benefits. Others favored country-led prioritization and cautioned against treating agglomeration effects as a universal rule, thus avoiding a rigid binary choice between lagging regions and growth poles. The common thread was the importance of understanding where economic opportunity is located and how poorer populations can gain access to it.

• Rethinking infrastructure. MCC's focus on traditional infrastructure also came under scrutiny. Roads and power plants may be less scarce in UMICs than in poorer countries, but management, reliability, connectivity, and the quality of complementary public goods can remain important constraints that limit private investment. Energy was repeatedly identified as an area where UMIC challenges differ from basic access problems. High costs and unreliable supply can constrain firms and become an energy-security issue.

  Members pointed to digitalization and localized data centers as being increasingly important in UMICs but cautioned against supporting isolated investments without a clear economic rationale or broader development benefit. Digital infrastructure and data centers are electricity-intensive, raising questions about grid reliability and whether private data-center investments generate sufficient spillovers. Clean, least-cost energy solutions and early-stage project preparation were identified as possible areas where MCC technical assistance could help create investment-ready pipelines.

• Policy and institutional reform (PIR). PIR efforts covering policy-based finance, regulatory modernization, and fiscal federalism emerged as areas of emphasis for potential MCC investments in UMICs. Members noted that if MCC investments could create conditions that incentivize reforms, then relatively modest grant financing has the potential to generate outsized impacts.

  But some members cautioned that reform could become a distraction or exceed what MCC's relatively small grants can realistically leverage, particularly in countries where MCC investments amount to a small fraction of total national budgets. Members stressed the value of political economy analysis for understanding veto players, de jure versus de facto rules, and the distribution of power and resources. They noted the challenge of embedding reforms in a way that disrupts the current power structure without being destructive and avoiding a collapse of the local economic order. To what extent can such reforms be achieved within MCC's five-year compact implementation clock was also raised as a cautionary point.

• Strengthening subnational finance. Within many partner countries, cities and regions often face fragmented financing systems and limited access to borrowing. In some cases, financially stronger cities receive central-government grants even though they may be better positioned to access private markets, potentially crowding out resources for less creditworthy jurisdictions. Rather than broad or heavy-handed reforms, members discussed using pilots in subnational governments to mobilize finance, strengthen fiscal systems, and improve infrastructure delivery, with an eye towards demonstration effects for the rest of the country.

• Partnerships for blended finance and additionality. Members suggested MCC's potential for greater collaboration with the U.S. International Development Finance Corporation (DFC) and the World Bank Group. MCC grant financing can support project preparation, technical assistance, regulatory improvements, or policy reforms while other institutions provide downstream investment in UMICs. Clean energy was noted as one area ripe with opportunities. At the same time, participants noted that differing institutional mandates and operating models can make collaboration difficult, and sharing information with private-sector partners can present challenges. Some members also questioned whether MCC should directly support private-sector project preparation or remain focused primarily on public goods.

  Members also asked how MCC can assess and generate meaningful additionality-the assurance that resources support private investments in projects that would otherwise go unfunded. The discussion emphasized the need for distinct analysis of additionality, particularly in countries with greater access to capital markets.

Members Present (In-Person and Online)

• Solly Angel
• Katie Auth
• Asli Demirguc-Kunt
• Shanta Devarajan
• Shahrokh Fardoust
• Raquel Fernandez
• Louise Fox
• Susanna Gable
• Alan Gelb
• Caren Grown
• Seema Jayachandran
• Adnan Khan
• Mushtaq Khan
• Homi Kharas
• S. Akhtar Mahmood
• Will Martin
• Edward Miguel
• Lant Pritchett
• Tauhidur Rahman
• Paul Smoke
• Mark Sundberg
• Franck Weibe

Members Not Present

• Asim Khwaja
• Ravi Kanbur
• Ken Opalo
• Michael Woolcock