Doomsday looms

US mulls shutting MCC, threatening $300m growth compact

RETHABILE MOHONO

MASERU – Lesotho faces fresh uncertainty over critical development funding after reports emerged that Elon Musk’s newly established Department of Government Efficiency (DOGE) is moving to shut the US Millennium Challenge Corporation (MCC).

The decision, first revealed by international media, threatens to stall or suspend Lesotho’s second MCC compact known locally as Leboela la Seepa Meri which was expected to inject roughly M5.9 billion (US $300 million) into the country’s health, horticulture, and business sectors.

According to MCC staff notified by email this week, ‘there will soon be a significant reduction’ in programmes and personnel, with almost all employees slated for administrative leave as early as May 5 leaving only the acting CEO in place to satisfy statutory requirements.

MCC employees warned that the workforce reduction plan would eliminate virtually all project management capacity within the agency.

Lesotho signed its first MCC compact in 2007, securing an M6.7 billion (US $362 million) grant that funded water, health‑care infrastructure, and private‑sector development projects. In 2022, Lesotho and MCC entered Compact II, earmarking US $300 million for a five‑year programme to drive economic growth, create an estimated 4,000 jobs, and expand services particularly for women, youth, persons with disabilities, and other marginalized groups.

Prime Minister Ntsokoane Matekane during the Compact II launch hailed the compact’s commencement as “a major boost for Lesotho’s investment programme” and urged that “every dollar invested…be used for the benefit of Basotho.”

He stressed at its launch that “the countdown for the five‑year implementation of this programme has begun and we cannot afford any delays.”

On the other hand, Finance Minister Dr Retšelisitsoe Matlanyane during the same event underscored the compact’s strategic importance at a time when Lesotho’s economy “is at a critical point.”

The programme’s multi‑million‑dollar investments in irrigation, health‑system strengthening, and vocational training promised to reduce food imports, empower farmers with modern techniques, and improve livelihoods.

With implementation teams already in place and early projects under way, any protracted suspension could delay or derail infrastructure work and service expansions in rural and urban areas alike.

The looming MCC’s effective shutdown is the latest in a series of actions by the Trump administration and Musk’s DOGE aimed at reducing federal spending on foreign‑aid agencies.

Earlier efforts targeted the US Agency for International Development (USAID), the US Institute of Peace, and the African Development Foundation all of which faced legal challenges.

Established by Congress in 2004 to disburse “time‑limited grants” for infrastructure and policy reforms, MCC compacts now cover more than two dozen countries, from Ukraine to Nepal.

Lesotho has been among its longstanding beneficiaries.

This development compounds recent blows to Lesotho’s health sector: significant cuts to United States funding for HIV programmes have triggered widespread disruptions, threatening the country’s progress in combating the epidemic, according to a report released by UNAIDS last month.

The reductions, affecting projects under the US President’s Emergency Plan for AIDS Relief (PEPFAR), have left critical services paused or terminated, prompting urgent action from the government, civil society, and the United Nations.

Lesotho, a small nation with one of the world’s highest HIV prevalence rates – approximately 23 percent among adults has long relied on international support, particularly from PEPFAR, to sustain its HIV response.

Since its inception in 2003, PEPFAR has been a cornerstone of global efforts to fight AIDS, channeling billions of dollars into treatment, prevention, and care programs across sub‑Saharan Africa.

In Lesotho, this funding has supported a workforce of over 1,500 health professionals and initiatives targeting vulnerable groups, including orphans, key populations, and young women.

However, recent US budgetary decisions have upended these efforts.

According to UNAIDS, approximately 28 percent of PEPFAR support has resumed, 32 percent is still paused, and 40 percent is terminated.

This partial restoration has not stemmed the tide of disruptions, with “804 (53.3 percent) of the 1,508 human resources for health supported through PEPFAR funding” now out of work.

Programs providing voluntary medical male circumcision (VMMC), pre‑exposure prophylaxis (PrEP), and care for key populations remain shuttered, while only a fraction of projects, like those for orphans and vulnerable children in all 10 districts, have been reactivated.

The funding instability stems from a US Government review period, which was concluded on April 20, 2025 with a further 30 days extension.