Nepal | August 23, 2019

Govt registers $500m pact signed with US in Parliament

Jagdishor Panday

Kathmandu, July 16

The government today registered a $500-million grant agreement signed between Nepal and the US in the Parliament Secretariat for ratification.

The $500-million grant is part of the $630-million “compact programme” designed by the Millennium Challenge Corporation, an independent foreign aid agency of the US government, for Nepal.

The money will be used to build energy and transport network in Nepal, paving the way for the country to attract more domestic and foreign investment, foster economic growth and reduce poverty.

The agreement was signed by then Nepali finance minister Gyanendra Bahadur Karki and Acting MCC CEO Jonathan Nash in Washington, DC on 14 September 2017. It must be ratified by the Federal Parliament before it comes into effect.

Article 279 of Nepal’s constitution states that the treaties or agreements to which Nepal or the government of Nepal is to become a party must be ratified by two-thirds of the total number of members of both the Houses of the Federal Parliament. Unless a treaty or agreement is ratified, acceded to, accepted or approved by lawmakers, it shall not apply to the government of Nepal or Nepal, states the constitution.

The agreement registered in the Parliament Secretariat states that the MCC will provide a grant of $459.5 million as ‘programme funding’ and another grant of $40.5 million as ‘compact CDF’. The Nepal government has committed to contributing $130 million to the programme.

The US government’s grant will be used to support two projects in Nepal: the Electricity Transmission Project and the Road Maintenance Project, as lack of energy and transport infrastructure has been identified as two major binding constraints for rapid economic growth of the country.

These projects will focus on increasing power consumption by facilitating power trade and by improving the availability and reliability of power supply in Nepal’s electricity grid; and maintaining road quality across the strategic road network.

The fund can also be used for financial management and procurement activities; administrative activities (including start-up costs such as staff salaries) and administrative support expenses, such as rent, purchase of computers and other information technology or capital equipment; monitoring and evaluation activities; feasibility, design, and other project preparatory studies and activities; and other activities to facilitate implementation of the agreement as approved by the MCC, according to the agreement.

The MCC board of directors had selected Nepal for its compact programme in December 2014. Nepal was selected for the MCC programme “in recognition of the country’s efforts to establish rule of law and democratic institutions, and its strong performance on MCC’s policy scorecard”.

Earlier, the US government had said MCC was a part of the Indo-Pacific Strategy. But the agreement signed between Nepal and the US does not mention that.

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A version of this article appears in print on July 17, 2019 of The Himalayan Times.


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