The US Millennium Challenge Corporation says unconstitutional moves by the Vanuatu government could impact on its compact with the administration in Port Vila.
But the MCC says the recent attempt by Ham Lini's government to ban the opposition from parliament hasn't threatened its Compact.
Implementation of the 66 million US dollar MCC fund began last month, after Vanuatu met the series of criteria indicators, including good governance.
Although the government launched a motion to discipline opposition MPs who tried to oust it, the MCC's associate country director for Vanuatu, Lucas Black, says the country has made great strides in meeting the criteria for the fund.
"If there was to be a deterioration in the political situation, for instance something against the constitution or a crackdown on political freedom etcetera, that would then be reflected in the indicators and there would be either a termination of assistance or we would attempt to address it with the government."
The MCC's Lucas Black