The United States has agreed to move forward with some works under the Millennium Challenge Corporation (MCC) while the review of its assistance to Nepal is still ongoing.
In February, the US government informed Nepal that it had suspended MCC assistance for 90 days to review the grants under a new administration. The suspension raised concerns about the future of Nepal’s largest-ever foreign grant aid. Along with USAID, MCC assistance was suspended through an executive order issued by US President Donald Trump.
On Friday, Millennium Challenge Account (MCA) Nepal, the entity responsible for implementing MCC projects, announced that the US government has allowed some procurement activities and essential office operations under the MCC Compact to proceed. However, MCA Nepal clarified that this does not indicate a specific outcome of the US government’s review.
The US has not yet confirmed whether the review of MCC assistance has been completed. MCA Nepal stated that it is closely coordinating with the Government of Nepal and MCC while awaiting further updates.
Despite the uncertainty, MCA Nepal has invited bids for a consultant to oversee footpath improvements on the Dhankhola-Lamahi road section of the East-West Highway. MCC had committed to funding this road project alongside a 315-kilometer high-voltage transmission line.
Finance Ministry officials are optimistic that MCC assistance will continue, as some work has been allowed to proceed. “Let’s think positively,” said Finance Secretary Ghanshyam Upadhyay. However, another official noted that with about a month remaining before the 90-day suspension ends, clarity on the future of MCC funding is expected before the new budget is presented.
If US assistance is discontinued, the Nepal Electricity Authority may take over the transmission line project, a ministry official said. “The work that has already been contracted should continue,” he added.
Earlier, on February 14, MCC informed Nepal that it had temporarily halted grants for power and road infrastructure. The Finance Ministry later confirmed that payments under the Nepal Compact were suspended following a US executive order on January 20.
Under MCC, the US had committed a $550 million grant for power transmission and road upgrading projects, while the Government of Nepal pledged $197 million. The MCC Compact, signed in 2017 and ratified by Nepal’s parliament in 2022, requires projects to be completed within five years of implementation—by August 2028. If projects remain incomplete, unutilized funds will be withdrawn.
Delays have already affected implementation. A previous bid for transmission line construction was canceled after all proposals exceeded budget estimates. While a new bid for 297 kilometers of the 315-kilometer transmission line was invited recently, the 90-day suspension has added further challenges to meeting the deadline.
Meanwhile, reports indicate that the US has also canceled assistance worth over Rs 46 billion for 34 projects under USAID, raising broader concerns about US foreign aid commitments to Nepal.
