Kathmandu, August 3

The country has concluded all the processes to accept the grant assistance from the Millennium Challenge Corporation (MCC) — an independent US government agency working to reduce global poverty through economic  development — as the Cabinet meeting today decided to accept $500 million grant from the corporation.

Nepal will be able to mobilise $630 million — $500 million from MCC and $130 million from Nepal government as counterpart fund — in electricity transmission and transportation sector over the next five years. The Ministry of Finance (MoF) has been preparing to sign a pact with MCC in September this year before closing of the US fiscal year.

MCC and the Nepal government have mutually agreed to focus on addressing two binding constraints to economic growth, which are the inadequate supply of electricity and the high cost of transportation.

The compact proposal seeks to address these constraints by investing in an Electricity Transmission Project (ETP) and a Road Maintenance Project (RMP). ETP would transform Nepal’s power sector by expanding and strengthening the high voltage electricity transmission network to support new investments in generation and allow greater cross-border electricity trade. The RMP is expected to improve the road maintenance regime in Nepal and complement existing efforts to build new roads by other parties.

The Office of the Millennium Challenge Nepal (OMCN) — a Nepal government office which coordinates development of the MCC programme — has finalised the projects in coordination with MCC that are going to be implemented under the MCC grant.

The government of Nepal has to clear the right of way for the implementation of the projects. Once the project

implementation kicks off, it should be completed within five years. Around 300 km transmission line at a total cost of $400 million and 305-km road will be developed at a total cost of $52 million, according to OMCN.

The MCC had selected Nepal for a smaller threshold programme in December of 2011. The MCC and the government of Nepal had analysed constraints to economic growth and jointly prepared a policy improvement programme based on the results. Given Nepal’s strong performance in its MCC policy indicator scorecard through 2014, MCC’s board of directors selected Nepal as being eligible to develop a compact, a larger grant-based investment.