US halts multi-million MCC pact aimed to bolster road, transmission capacity in Nepal

Issuing a release on Tuesday, the Finance Ministry stated,"The US aid agency Millennium Challenge Corporation (MCC) has informed stakeholders through an e-mail dated 2081/11/2 (16 February, 2025) that the payment to be made from MCC Fund for the projects being implemented under the compact concluded between the Government of Nepal and the said agency on 29 Bhadra, 2074 BS (14 September, 2014) have been suspended in accordance with the Executive Order of the US President issued on January 20, 2025 regarding the 90-day moratorium."

The multi-million US Dollar Millennium Challenge Corporation (MCC) pact had started its work formally on 30 August, 2023. The five-year project had aimed to improve road and electricity connectivity, which went to the floor following an agreement between the Government of Nepal and MCC after substantial progress on project preparation was achieved two years ago.

In August of 2023, then Nepalese Finance Minister Prakash Sharan Mahat and Vice President-Compact Operations at MCC, Cameron Alford, had exchanged the letter on the Entry into Force (EIF) of the Nepal Compact. The EIF marks the fulfilment of necessary conditions and preparation to ensure successful completion of Compact projects within a five-year timeline.

Nepal and MCC signed the MCC Nepal Compact on 14 September 2017 for two projects, the Electricity Transmission Project and the Road Maintenance Project, which will work to increase the reliability of electricity and lower the cost of transportation in Nepal.

The program is co-funded by the US Government's Millennium Challenge Corporation (MCC) Compact grant of USD 500 million and the Government of Nepal's contribution of USD 197 million.

The MCA-Nepal (Millennium Challenge Account-Nepal) till that time had completed its preparatory works to reach out to the phase of former implementation of the project, which has a life span of five years.

The multi-million-dollar pact was ratified by parliament on February 27, 2022, with "interpretative declaration" as the public in Nepal has been driven by misinformation about the Millennium Challenge Corporation, a US foreign assistance agency that aims to fight poverty, as a military pact.

Despite the fact that Nepal was the first country in the region to qualify for the programme and an agreement to this effect was signed in September 2017, some opposition leaders have been claiming otherwise. The US Government's MCC signed an USD 500 million compact with the Government of Nepal in September 2017 aimed at maintaining road quality, increasing the availability and reliability of electricity, and facilitate cross-border electricity trade between Nepal and India--helping to spur investments, accelerate economic growth, and reduce poverty.

The project aimed to support Nepal to better deliver critical services to its people, ease the movement of goods around the country, and open new opportunities for private investment--all to create sustainable development for the people of Nepal.

According to MCC, strengthening the reliability of key infrastructure will put the country's economy on a firmer growth trajectory, advance stability, support regional security, and reduce poverty.

An additional USD 130 million contribution from the Government of Nepal in support of the compact--the largest up-front partner country contribution in MCC's history--was expected to enable even greater impact and benefits for the Nepali people. (ANI)