The Board of Directors of the US-funded Millennium Challenge Corporation (MCC) has approved an additional $50 million in funding for Nepal’s MCC Compact, bolstering its support for the country’s infrastructure development.

This latest funding underscores the shared commitment between MCC and Nepal to prioritize transformative, high-quality infrastructure projects aligned with Nepal’s development goals, the MCC said in a statement.

According to MCC Vice President of Compact Operations Cameron Alford, the funding emphasizes mutual dedication to strengthening Nepal’s electricity grid and promoting long-term economic growth.

“The additional funding reaffirms our mutual dedication to ensuring the compact’s success in strengthening Nepal’s electricity grid and supporting long-term economic growth,” Alford said in a press statement issued on Thursday, January 2.

According to RSS, the state-run national news agency of Nepal, the MCC, established in 2004, is an independent US government development agency aimed at reducing global poverty through economic growth. It offers time-limited grants that combine investments in infrastructure with policy and institutional reforms. Eligible countries must demonstrate good governance, efforts to combat corruption, and respect for democratic rights to qualify for MCC funding.

The initial agreement for the MCC project was signed between the Finance Ministry of Nepal and the US government representatives on September 14, 2017.

However, the MCC was delayed due to widespread protest by a section of the society on the pretext that the grant agreement was allegedly a part of the Indo-Pacific Strategy of the US government.

After much debate and deliberations, the House of Representatives finally ratified the MCC grant agreement on February 27, 2022 with a 12-point explanatory note clarifying that the project should not be associated with any military alliance and that the grant agreement must abide by the Constitution of Nepal.

According to the initial agreement, the United States was supposed to provide US$ 500 million to Nepal for construction of cross-border transmission line and upgrading of roads while Nepal would have to contribute US$ 130 million for the project, expecting the total cost of the MCC project to remain at US$ 630 million.

But the 'supplemental agreement' over the MCC that was signed last year, demands the government to bear additional cost of US$ 67 million, seeking its total contribution of US$ 197 million for the enforcement of the agreement. In the beginning, Nepal was supposed to take up 20.63 per cent financial responsibility for the MCC project and now it has increased to 28.26 percent. The increased responsibility amount is equivalent to Rs 900 million.

The projects under the MCC entered the implementation phase on August 30, 2023. As per the agreement, the MCA Nepal must complete the projects within a deadline of five years. The Government of Nepal must bear the financial burden if the MCA Nepal fails to complete the projects on time.