US Embassy Assures Continued MCC Support in Nepal

The United States has reaffirmed its commitment to continue implementing the Millennium Challenge Corporation (MCC) Compact in Nepal, according to the US Embassy in Kathmandu.

Following the US government’s decision to phase out some other international aid programs, including USAID, questions had arisen regarding the continuity of MCC assistance. However, the embassy clarified that MCC funding for Nepal will remain intact.

A spokesperson for the embassy said the US foreign assistance review had recommended the continuation of the MCC Nepal Compact. “We have informed the Government of Nepal of this decision,” the spokesperson said.

Under the compact, which involves $500 million in U.S. funding and $197 million in counterpart investment from Nepal, the country is working to build 315 kilometers of electricity transmission lines and upgrade key road networks. The program aims to strengthen Nepal’s power transmission infrastructure and road connectivity, contributing to economic growth and regional energy promotion.

In a statement issued earlier, the embassy noted that in February this year, US Secretary of State Marco Rubio had approved a special exemption for the MCC Nepal Compact when the U.S. paused MCC assistance for 90 days during a foreign aid review. “This exemption has ensured the continued implementation of the MCC Nepal Compact,” the statement said, adding that the embassy would remain engaged with stakeholders to ensure effective delivery, transparency, and alignment with the priorities of both governments.

The embassy further stated that MCC is working closely with Nepal’s Ministry of Finance and MCA-Nepal to ensure transparency, good governance, and prudent risk management in ongoing projects.

Reports in some international media outlets had earlier speculated that the MCC program might be discontinued. However, after the corporation proposed a significantly reduced budget of $224 million for Fiscal Year 2026, down from $930 million in FY 2025, it signaled the continuation of MCC operations globally, including in Nepal.

The Government of Nepal has also anticipated the continuation of MCC funding, expecting a grant of Rs 5.68 billion under the program in the current fiscal year’s budget. Last year, the government had estimated Rs 9.9 billion in MCC grants.

The MCC Nepal Compact includes the construction of the 18-kilometer Butwal–Gorakhpur transmission line segment on the Nepal side, considered critical for increasing cross-border power trade with India.

Established in 2004 under US President George W. Bush, the MCC partners with developing countries to reduce poverty and promote economic growth through infrastructure investments such as electricity supply and road networks. Nepal signed the MCC Compact in 2017, and after prolonged debate, Parliament ratified the agreement with a 12-point interpretative declaration in February 2022. The program’s full-scale implementation began nearly two years ago.