Liberia: MCC Clarifies Liberia’s Second Compact Process

Liberia’s renewed engagement with the Millennium Challenge Corporation (MCC) has sparked public excitement and, in some quarters, premature expectations of an imminent financial windfall. But during an official visit to Monrovia this week, a senior MCC official moved to reset the narrative, emphasizing that while Liberia is on a promising path toward a second compact, the process is deliberate, country-driven, and far from automatic.

The Acting Managing Director for Africa Department of Compact Operations at MCC, Ms. Carrie Monahan, clarified Liberia’s position during an interview on OK Morning Rush radio on Wednesday, January 21, stressing that energy and transport have emerged from MCC’s economic analyses as the country’s most impactful development priorities.

“This is an iterative process. It takes some time, and we are really just at the start,” Monahan said. “But we are so thrilled with the commitment that we’ve seen from everyone here in Liberia, and we’re really confident we are going to get to a great compact together.”

Liberia is seeking its second MCC compact after successfully completing its first, a milestone that placed the country among a small group of low-income nations able to meet MCC’s strict governance, economic freedom, and investment-in-people criteria. Eligibility alone, however, does not guarantee funding.

MCC’s model requires extensive diagnostics, policy reforms, and national consultations before a compact is finalized. According to Monahan, the current phase focuses on identifying which binding constraints most severely limit Liberia’s growth.

“If you have increased access to energy or roads, you can grow the agricultural sector, you can grow the mining sector, and tourism,” she explained. “Without those, it’s really pretty impossible for an economy to grow.”

MCC’s analysis points to energy and transport as the two sectors with the highest potential economic returns. Yet Monahan was clear that the final decision rests with Liberia.

“So now it’s really up to the government of Liberia which one of those they’re going to choose,” she said. “Of the two, they should choose one, yes.”

That choice must align with President Joseph Nyuma Boakai’s ARREST Agenda and Liberia’s broader national development strategy, reinforcing MCC’s insistence on country ownership.

“Where is the money best placed? That decision is driven by the country,” Monahan added.

The country’s first MCC compact, signed in 2015 and implemented under the Unity Party (UP) administration of former President Ellen Johnson Sirleaf, focused primarily on the energy sector. Valued at approximately US$257 million, the compact sought to address one of Liberia’s most binding constraints: unreliable and costly electricity.

Key interventions included the rehabilitation of the Mount Coffee Hydropower Plant, expansion of electricity transmission and distribution networks in Monrovia and surrounding areas, and institutional reforms at the Liberia Electricity Corporation (LEC). The compact also supported policy and regulatory reforms aimed at improving utility governance and financial sustainability.

Perhaps one of the most enduring reforms from that compact was the establishment of the Road Maintenance Fund, a policy initiative designed to ensure predictable financing for routine road upkeep–an issue that has historically undermined infrastructure investments in Liberia.

“We don’t want to build a road and then 10 years later it’s in disrepair,” Monahan said, citing the Road Maintenance Fund as an example of how MCC embeds sustainability into its investments.

The first compact demonstrated that MCC funding goes beyond physical infrastructure. It also seeks to strengthen institutions, reform policies, and ensure that assets are maintained long after MCC’s five-year funding window closes.

The country’s current dilemma is not whether energy and transport matter, but which sector should take precedence in a single compact. Both suffer from chronic underinvestment and governance challenges, and both directly affect productivity, investment, and social inclusion.

Energy constraints continue to drive up business costs and limit industrial growth, while poor road connectivity isolates rural communities and inflates the price of goods nationwide. MCC’s insistence on choosing one sector reflects its emphasis on focus and impact rather than spreading resources thinly.

To guide this choice, the Ministry of Finance and Development Planning is in the process of recruiting a compact development team, including a national coordinator, economist, and private sector expert.

“That is going to be the key core compact development team, reporting to the Ministry of Finance, and we’ll be working very closely with them,” Monahan said.

The team will lead nationwide consultations with civil society, the private sector, donors, and government institutions to ensure the compact reflects broad national consensus.

Addressing concerns about political interference, Monahan emphasized that MCC compacts are intentionally designed to transcend electoral cycles.

“These are not political compacts. They are for the development of a country,” she said. “They typically span multiple administrations in the country that we work, and also multiple U.S. administrations.”

To safeguard continuity, MCC consults across the political spectrum and builds legal and policy commitments into compact agreements. Sustainability is further enforced through conditionalities requiring governments to maintain MCC-funded assets.

“These are usually conditionalities that we have in our program to ensure that we’re not just throwing away taxpayer money,” Monahan explained.

Implementation, Monahan warned, is often the most challenging phase. MCC operates under a strict five-year implementation window.

“Once the five-year clock starts, we have exactly five years to implement the program–not a single day more,” she said.

Rising construction costs and capacity constraints also pose risks, prompting MCC to apply rigorous economic modeling and independent evaluations.

“For every taxpayer dollar that’s spent, what are the benefits to the people of Liberia?” she asked. “Every project has to have at least a 10 percent economic rate of return.”

Independent evaluators return years after project completion to assess outcomes and publish findings–successful or otherwise.

“It’s important for us to be transparent–what worked, what didn’t work–so we don’t repeat mistakes,” Monahan said.

While dispelling myths of immediate funding, Monahan expressed confidence in Liberia’s prospects if the process remains disciplined and inclusive.

“We are working hand-in-hand with the government of Liberia,” she said. “Together, we believe this compact will stimulate economic growth and truly benefit the Liberian people.”

However, the pursuit of a second MCC compact is as much a test of governance and strategic focus as it is an opportunity for investment. The lessons of the first compact–particularly in energy reform and institutional strengthening–offer a foundation. Whether the country chooses power or roads this time, the outcome will shape its development trajectory for years to come.

By Liberian Observer.