Millennium Challenge Compact Closing Gradually, Would Liberia Seal An Extension?

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Monrovia – Retaining the Millennium Challenge Compact for a second five years has always remained a daunting task for the George Weah-led government and with the clock ticking for the agreement to elapse, sealing another Compact seems pretty iffy.  

The former administration of Ellen Johnson-Sirleaf maneuvered to clinch the US$257 million agreement with the United States government when the country’s economy took a nosedive as a result of the Ebola virus outbreak. 

Before then, Washington already had her eyes on solving Liberia’s two major binding constraints: unstable and expensive electricity and bad roads connectivity. These remain the Achilles heels of the war-torn country’s economic progress; so, its traditional diplomatic partner was poised to help fill the void and remedy the situation. 

According to the Millenium Challenge Account Liberia (MCA-L), the agency responsible to manage the Compact in Liberia, “40 percent of the US$344 million spent to reconstruct the Mount Coffee Hydro Power Plant” was contributed by the MCC.   

The Impact: Upgrading the Power sector

The upgrade of Mount Coffee, which is Liberia’s main source of electricity from the pre-war capacity of 66 megawatts to 88 megawatts, has made some inroads on the power sector albeit several challenges including power theft.

Meanwhile, the MCC has helped light 54,000 households compared to a little over 30,000 households in 2015 before the hydro plant came online.

It says it will continue to support the Liberia Electricity Corporation (LEC) to connect more households and businesses to the power grid. 

But this will only continue for the next 18 months while the current Compact remains in play. If another does not go through, support will instantaneously be extinguished putting more constraint on the government to improve the energy sector.  

With 18 months left to the end the current Compact, technical experts from Liberia and the United States have been identifying the remaining “tasks to be completed” but there are major concerns about the government entering another Compact with the US government.

According to a press release from MCA-L, representatives of MCA-L and MCC ended a two week planning this week, “focusing on ways to sustain the compact investments in the energy and road sectors. Together, the experts produced an outline of the compact closure plan, listing out tasks and key milestones to be accomplished before January 20, 2021, the compact end date.”

“Together with Liberian government implementing entities, MCC and MCA-L project directors determined a range of measures to sustain the Millennium Challenge Compact investments in Mt. Coffee Hydro Power Plant, the Liberia Electricity Corporation, the Liberia Electricity Regulatory Commission, the Liberia Water, and Sewer Corporation’s Raw Water Pipeline, and road maintenance after the compact closes in January 2021,” the release adds.

The compact has supported the passage of the Electricity Law of 2015 by giving birth to Liberia Electricity Regulatory Commission (LERC), which is keen on opening the market up for competition as an effort to improve effective service delivery to customers.

At the same time, the MCA-L says the compact is also “funding the design and construction of a US$18 million 5km raw water pipeline from the Mt. Coffee hydro dam to the White Plains Water Treatment Plant to provide access to quality water to about 1 million people in Monrovia”. 

The compact has poured millions into the supporting the Ministry of Public Works and the National Road Fund, drafting Liberia`s five-year road maintenance plan, and collecting data of the conditions of all roads connecting county capitals, which will be used to annually update the road maintenance plan.  

The compact helped establish gender units within the Liberia Electricity Corporation, the Ministry of Public Works, and the Ministry of Mines and Energy to support the compact’s goal to ensure that vulnerable populations, including poor women, war-affected youths, and other minority groups benefit from compact projects.

However, the big question is: will Liberia get another Compact? Numbers do not lie, they say; and to clinch another agreement means Liberia must improve its performance on the scorecard. 

The scorecard focuses on several important aspects of a country’s governance including economic freedom, ruling justly and investing in people. A country must pass these standards to earn another compact.

Since 2017 and 2018, Liberia has tried to passed half of the 20 MCC indicators, but it has fallen below. In 2019, the country passed just eight of the 20 indicators.

Dismal Showing on 2019 Scorecard

For the economic freedom category, which has eight different sectors, Liberia failed fiscal policy (-4.4), trade policy (60.1), regulatory quality, (-0.15) gender in the economy (7.0), land rights and access (0.55). However, the country passed access to credit (36) and business start-up (o.946)

The country also performed poorly in its approach to invest in people by failing in five and passing only one of the six sectors. Health expenditure failed with 1.13; primary education was far below the average with 0.85; and child health with 62.2 amongst others.

Under the ruling justly category, the country managed to pass four and failed two. It scooped good averages in political rights (84%), civil liberties (80%), control of corruption (0.12%) and freedom of information (56). But it failed in government effectiveness (-0.45) and rule of law (-0.07).

This year’s scorecard is equally devasting like last year’s, which was released November and placed Liberia in the red. In that report, Liberia’s performance on economic freedom was at 4.4% with an inflation rate of 15% and for regulatory quality performance, it earned -0.15% and trade policy with a 60.1 score. 

For ruling justly, Liberia scored miserably in its fight against corruption, government effectiveness and rule of law.

For the fight against corruption, Liberia scored one of the lowest (0.12); government effectiveness was graded – 0.45 while rule of law earned – 0.07%. 

With these dismal showing in the last two years, it makes it quite challenging for Liberia to emulate the feat of west African countries like Ghana and Senegal that have already gained their second compact to foster development in their respective countries.

Risk Losing Road Fund

Meanwhile, there are unending issues surrounding the road fund. The Road Fund Act was passed by the Legislature and allows for a levy on every gallon of petroleum, with the money set aside for the “purpose of financing road and bridge maintenance works and directly associated planning, programming and management activities.”

According to the Act, consumers carry the burden of paying US$0.25 on every gallon of petroleum with that money collected in taxes from importers and pay in a special account.

However, the refusal of importers to pay the levy is impeding the initiative, may see government lose a matching fund of US$7 million that should be provided by the MCC.

According to the Compact, the government is obligated to providing a matching fund of US$7 million as road fund.

But as US and Liberian experts working on the compact carefully develop their last set of plans ahead on 2021 January, the government has to act swiftly to improve its scorecard and at the same time fetch the US$7 million for road fund.

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