Monrovia — The decision by the Millennium Challenge Account in January 2021, announcing that it was folding its Compact with the Government of Liberia, came as a major blow to the administration of President George Manneh Weah.
Liberia ended its first compact in 2021 which was a grant of US$257 million that contributed to the rehabilitation of the Mount Coffee Hydroelectric dam. MCC Compact is highly rated by countries for its focus on relaxing constraints to private sector growth.
The Compact which had brought improvement to the electricity supply and left the Liberian government with a sustainable, data-driven road maintenance system, saw its run come to an end after consistent failures by the government over several governance lapses, that made it nearly impossible for the program to continue.
Compact key to Hydro, Water Supply
Over the past years, the Compact had contributed US$146.3 million to the rehabilitation of the Mt. Coffee Hydro Power Plant, the single largest support of any donor to the power plant, constituting 40 percent of the total US$350 million spent to rebuild the hydropower plant.
The supply of 88 Mega Watts power generating capacity at Mt. Coffee represented the largest source of power and renewable energy supply for the Liberia Electricity Corporation (LEC).
The investment in the Mt. Coffee was instrumental in helping the LEC to expand more reliable and affordable power supply to more than 82,000 homes, businesses, and other entities, compared to a little over 34,000 when Mt. Coffee came online in 2016. Mt. Coffee also allowed LEC to reduce the average number of electricity outages by 45 percent since the start of the Compact. Outages are also much shorter now, with a reduction of 83 percent in the average duration of outages.
Prior to the MCC involvement with the hydro, Liberia lacked a skilled workforce to operate and maintain the hydropower plant. The MCC contribution was key to providing on-the-job training for operators and maintenance staff, which allowed for sustainable local operation and maintenance of Mt. Coffee. Additionally, the project has already trained three generations of trainees in hydropower plant operation and maintenance.
Under the Compact, electricity tariffs reduced from US$0.56 per kilowatt-hour to US$0.35 per kWh, representing a 37.5 percent decrease. While this is still a very high tariff, this decrease has made electricity more affordable for ordinary consumers, particularly marginalized households and small and medium enterprises.
Besides the hydro, the MCC compact also funded the construction of a new 48-inch diameter Raw Water Pipeline between Mt. Coffee and the White Plains Water Treatment Plant to replace a damaged 36-inch diameter pipeline that had not been in use since before Liberia’s civil war. By drawing water from Mt. Coffee, the new pipeline’s operation will eliminate saltwater intrusion into the Liberia Water and Sewer Corporation (LWSC) water treatment plant at White Plains, which occurs in the dry season when the St. Paul River experiences low water levels. With the new bigger pipeline, the municipal water supply is not only of much higher quality but because of the use of gravity flow to transport water into the system, LWSC will save an estimated US$780,000 annually in the cost of pumping water into the treatment plant. The new expanded pipeline will contribute to the increased supply of better-quality water to about 1 million residents of Monrovia and surrounding areas. The total project cost is around US$18 million.
A New Lease on Life
Last week, after five years of failures in meeting the criteria and requirement of the Compact, the Weah administration met the threshold that enables it to qualify for a possible return to the Compact.
In the Fiscal Year 2023 scorecard released by the MCC, Liberia earned an unprecedented pass of twelve out of the 20 indicators for the first time since 2008. The country scorecards which is a consolidation of each individual country scores of each of the policy indicators including Economic Freedom, Ruling Justly, and investing in people.
This year unprecedented pass follows a series of other positive international assessments. Recently, Liberia was praised by the Board of International Monetary Fund (IMF), which approved US$22 million in support to the country’s reserve for the Liberia passing Quantitative Performance Criteria under the IMF-supported program. The IMF shows that Liberia continues to peruse impressive macroeconomic and governance reforms.
The IMF in its country economic assessments for the 2022 lauded the Liberia Government for challenging and positive governance initiatives and policies which have broadly maintained macroeconomic stability – lowering inflation within single digit and maintaining a positive real GDP growth of 3.7% despite the monumental global economic challenges, including COVID and the current war in Ukraine. The IMF report also lauded the passage of the new anti-graft LACC legislation.
Following the IMF report, the US Department of States issued its Fiscal Transparency report for 2022, which pointed out significant progress by the Government of Liberia. Key areas of progress in the report included the Government ensuring that the 2022 National Budget was enacted within a reasonable period and that actual revenues and expenditures accurately corresponded with those enacted in the budget, while also ensuring that information on debt for State Owned Enterprises were widely accessible and available online for public scrutiny.
The passing of the MCC Scorecard with a record 12 out 20 indicators surpassing the 9 out 20 in 2022 reinforces the accurate and fair assessment of the continuous improvement in the governance process in Liberia as have been articulated in both the IMF and US State Department reports. Liberia’s MCC success could not have been achieved without the government of Liberia passing the score on the Control of Corruption even if the Government had passed 19 of the 20 policy indicators. Much of Liberia success was generated from the policy areas covering Economic Freedom and Ruling Justly, passing 11 out of the 14 combined indicators in these two categories. Liberia could only pass one indicator out of the six indicators under the Investing People Category, which point the need for more investment in human capital- education and health.
Under the Economic Freedom policy area, Liberia for the first time passed the Trade Policy indicator. Trade policy is a strong indication of the degree of economic freedom and access to trade. The pass indicates that trade liberalization is being achieved in Liberia as the Government works to reduce barriers and bottlenecks to trade. Recent, AMP Terminal in conjunction with the Government of Liberia launched a port digitization platform with the aim of reducing barriers to trade and easing customs processes.
What Does it all mean?
The Government also passed Control of inflation indicator. The Government brought inflation down from a high of 30 percent in 2019 to now around 7 percent and has run one of the most stable macroeconomic regimes in the West African region. The Government passed a new indicator called Employment Opportunity, which gauges attempts by countries and economies to solve employment challenges.
Under the Ruling Justly policy area, Liberia passed 5 out of the 6 policy indicators: including the MUST PASS indicator on Control of Corruption, and other political governance indicators such as Rule of Law, Freedom of Information, civil liberties, and political rights. Passing control of corruption is a must and is the most coveted pass for countries. The corruption indicator appears to suggest that Liberia continues to make progress on anti-corruption reform. The country recently passed a robust LACC law that strongly empowers seven commissioners to independently fight corruption. Recruitment is currently ongoing for the new LACC but recently it faced some setback as the Supreme Court has placed a stay on implementing certain aspects of the law. However, many experts believe this is only temporary setback as the new law is expected to take its course.
While congratulating the Government of Liberia for success pass for the 2023 Millennium Challenge Compact Scorecard, the US States Government through its Embassy in Monrovia also urge the Government of Liberia to increase its performance in the “Investing People” scorecard indicators with focus on investments in primary education, child health, immunization rate, Girl Primary Education Completion rate, etc. The need to increase performance in Investment was also highlighted in the recent World Bank report on human capital which also shows that Liberia needs to invest more in education, especially primary and girl’s education.
To address improving the performance in these indicators, the Government working in collaboration with World Bank will provide about US$500 million to support and implement the new Education Sector Plan developed by the Ministry of Education. Support and Financing of the new education sector planned was fully discussed with the World Bank by the Minister of Education and Minister of Finance and Development Planning.
While supporters of the government have been celebrating the passage of the MCC Compact, the saga is still not over. Passing the MCC scorecard does not immediately qualify Liberia for a compact but represents a necessary first step that put Liberia in a poll of 66 countries that advance to the next stage of evaluation to determine qualification for Compact. During this period of the evaluation, the MCC Board decision will be based on the trend in governance and scorecard indicators, Post Compact assessment-evaluation of the of the first compact, and the Government plan to invest in human capital.