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US Nepal Relations – Nepal Resistance to US Aid Under MCC

Published Dec 23, 2019
Updated Feb 05, 2020

Even as Nepal Communist Party (NCP) Chairman Pushpa Kamal Dahal hinted at prolonging the parliamentary endorsement process for the Millennium Challenge Corporation (MCC) grant provided by the United States raising concerns of the same being a part of the United States Indo-Pacific Strategy, Millennium Challenge Account-Nepal (MCA- Nepal) clarified that the US government has been providing a compact grant for infrastructure developments in Nepal through the Millennium Challenge Corporation (MCC) and has appealed for timely ratification of the MCC Compact.

In a press statementthe MCA-Nepal said it was established under the Ministry of Finance through Nepal’s own legislative process as a Development Board and appealed for the timely parliamentary ratification of the Compact which will ensure Nepal’s access to the funds for the timely completion of the infrastructure projects to be provided by MCC.

The MCC and the government of Nepal had signed a USD 500 million Compact on September 14, 2017, to support upgrades to Nepal’s roads and energy infrastructures.

The government of Nepal has also allocated USD 130 million to Compact projects through in-kind and monetary contributions the MCA said.

One of the major highlights of the Compact is the ‘Electricity Transmission Project’ which includes the construction of a 400-kv transmission line from Nanglebhar of Kathmandu to Butwal. Furthermore, support would be provided for the infrastructure building of 100-km road.

MCC Compact was a must to give impetus to the projects outlined by the Compact. It would also ensure Nepal’s easy passage the funds to be used to the projects.

“The MCC was signed as a part of aid grant in other countries and so we also signed it. If it is part of the Indo Pacific Strategy (IPS) we should discuss it further,” Dahal reportedly said. The ruling Nepal Communist Party is divided over the MCC grant as the same is believed to be tied to the IPS anddesigned to contain China and its Belt and Road Initiative.

The MCC on the other hand contends that Nepal continues to face extensive economic development challenges caused by high transportation costs to move both goods and people as well as an inadequate supply of electricity. Decades of political transition and the devastating earthquakes of 2015 further compounded Nepal’s development challenges. The MCC’s Nepal Compact is designed to increase the availability of electricity and lower the cost of transportation in Nepal.

These investments will help the Government of Nepal better deliver critical services to its people, ease the movement of goods around the country, and open up new opportunities for private investment. 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.

Amongst the other contentious issues that have been raised in the US and Nepal Relations is Dahal’s reported support to the regime in Venezuela at a time when Washington was making an endeavour to upstage the same.