WASHINGTON, USA --President Bush plans to create a new government agency to dole out billions of dollars in foreign aid, forcing the world's poorest countries to compete against one another if they want a share, administration officials said on Monday.

Ghana is one of the first countries in line for such assistance. In fiscal 2004, Ghana could compete with other poor nations for the $5 billion.

Strict conditions would be set for countries to qualify under the so-called Millennium Challenge Account program aimed at rewarding cash-strapped governments that embrace civil rights, root out corruption, open up their markets and adopt other policies favored by Washington.

Taking on critics who say the United States does not provide its fair share of foreign aid, Bush has promised $5 billion a year for the new program starting in fiscal 2006. Money would begin to flow in the fiscal 2004 budget, which will be unveiled in February, but officials said the dollar amounts for 2004 and 2005 have yet to be set.

The money would be in addition to the roughly $10 billion the United States distributes each year for foreign development assistance or $17 billion counting security funds.

"The evidence shows that when official development assistance is put into a policy environment that is a bad one, it's not just ineffective, it's downright harmful. It perpetuates bad policies, it perpetuates misery and it crowds out private capital," a senior administration official said.

In contrast, the official said, when foreign aid is directed to countries with sound policies, private capital increases, helping to boost economic growth and fight poverty.

At a U.N. development conference in March, Bush touted the program as part of the U.S.-led war against terrorism, and put his advisers to work hammering out the details.

Under Bush's plan, the Millennium Challenge Account would be rolled out in phases over the next three years.

In fiscal 2004, the world's poorest countries, including Haiti, Nepal and Ghana, could compete for assistance.

The number of eligible countries would expand in the second and third years as program resources grow to a total of $5 billion annually.

Once fully phased in, the Philippines, Jordan, Thailand, Peru and more than 100 other countries could compete for foreign aid, but administration officials expect just 10 to 20 to receive assistance each year under the program.

COUNTRIES RANKED

To win a share of the resources, countries would be ranked based on 16 separate "performance indicators," from civil rights to spending on public health and education.

A country's' "economic freedom" would be judged on its credit rating, inflation, budget deficits, openness to trade and quality of regulatory policies.

Bush drew the line at corruption. "Corruption is pass-fail. If you can't pass corruption you're presumed ineligible," an official said.

Those countries which perform better than the average on most indicators could qualify for a share of the resources, pending a review by a cabinet-level panel which will make final recommendations to the president.

To administer the program, Bush will ask Congress to create the so-called Millennium Challenge Corporation. The independent agency would be supervised by a board of directors composed of cabinet-level officials and chaired by Secretary of State Colin Powell.

Officials said the new agency would directly employ around 100 people and draw heavily on the expertise -- and staff -- of the U.S. Agency for International Development and other federal departments.

The new aid could flow to the countries themselves, as well as nongovernmental organizations and the private-sector.

As initially proposed earlier this year, $1.67 billion would start flowing in the fiscal 2004 budget climbing to around $3.33 billion the following year. At the end of the three-year start-up period, an extra $5 billion a year would automatically be included in the budget.

But administration officials said the fiscal 2004 commitment would probably be smaller than the $1.67 billion initially promised since it remains to be seen how many countries will qualify.

Mary McClymont, president of InterAction, welcomed the plan but expressed concern about the administration's commitment to provide full funding. "It could be a very important tool to help improve overall aid effectiveness and fight poverty," she said. "But of course what we will be watching is to make sure the funds in fact materialize."