Govt signs program implementation agreement with MCC

Agreement signing was a condition to start the 5-year clock for the largest US grant to Nepal

KATHMANDU, Oct 1: The government has signed a program implementation agreement with the Millennium Challenge Corporation (MCC) representing the US Government, taking the implementation of the US$ 500 million MCC Compact a step forward. The signing of the agreement comes in the wake of criticisms from some leaders of the ruling party over a plan to ratify the Compact agreement in the parliament.

Minister of Finance Dr. Yubaraj Khatiwada signed on behalf of Government of Nepal and Mr. Anthony Welcher, Vice President of the Department of Compact Operations, MCC signed on behalf of the U.S. government, represented in Nepal by Mr. Troy E. Kofroth, Resident Country Director amid a ceremony held at the Ministry of Finance on Sunday. 

Under the Compact program, the US is providing Nepal the highest amount of grant which will be spent for the implementation of Electricity Transmission Project (ETP) and Road Maintenance Project (RMP).

According to the Millennium Challenge Account Nepal (MCA-Nepal), the program implementation agreement is an important step toward implementing the Compact as it further specifies the terms for implementing the Compact and its activities in Nepal including details of the implementation arrangements, fiscal accountability and disbursement and use of MCC funding, among other matters.

MCA Nepal is the entity established by the government to implement the MCC Compact programs. With its signing, Nepal has met one of the key conditions precedent to the June 30, 2020 entry into force (EiF) date after which the five-year clock to implementation of the Compact will start. The EiF date is crucial as the projects financed under the MCC compact must be completed within five years, according to an official of the MCA-Nepal.

Other key conditions were the declaration of the ETP as a national pride project, passage of legislation related to the Electricity Regulatory Commission and formation of the commission and ratification of the compact agreement from the parliament.

The condition for the ratification of the compact agreement from the parliament has drawn criticisms from some leaders and members of parliament from the ruling party Nepal Communist Party, raising concerns over the fate of the largest grant from the US.

Under the compact, the MCC will provide $500 million in grant while the government will chip in $130 million for the implementation of Electricity Transmission Project (ETP) and Road Maintenance Project (RMP). Altogether 318-kilometer transmission lines of 400kV and three large-capacity substations will be built under the ETP, while the RMP is focused primarily on the maintenance of 300 kilometers of strategic roads.

In September 2017, the US Government’s Millennium Challenge Corporation signed the Compact with the Government of Nepal. The Compact aims to increase the availability and reliability of electricity, improve the quality of the roads network and facilitate power trade between Nepal and India, according to the MCC.