The government has begun groundwork to expedite projects under the Millennium Challenge Corporation (MCC) by allocating necessary funds in the annual budget for the next fiscal year.
With the temporary suspension of US funding casting uncertainty over the successful implementation of MCC projects in Nepal, the Ministry of Finance (MoF) is considering continuing these initiatives by mobilizing financial resources independently. An MoF official confirmed that discussions have begun with stakeholders, including other donor agencies, to secure necessary funding.
On February 14, the Washington DC-based MCC Headquarters informed the MoF via email that projects under the US-funded MCC in Nepal have been suspended for 90 days. This suspension follows an executive order issued by US President Donald Trump on January 20, 2025.
Initially, the MCC agreement allocated $500 million in grants to Nepal, with the Nepalese government contributing $130 million. In January 2025, the MCC Board of Directors approved an additional $50 million to cover rising project costs, raising the total Compact value to $747 million.
Nepal and the United States signed the MCC Compact on September 14, 2017, and it came into force on August 30, 2023. The Compact aims to enhance Nepal’s electricity consumption by improving the availability and reliability of power, expanding and strengthening the high-voltage transmission network to support hydropower investments, and facilitating increased electricity trade between Nepal and India. Additionally, it includes a Road Maintenance Project to improve Nepal’s strategic road network. However, the US government’s decision to suspend MCC funding has placed these projects in jeopardy.
To ensure completion of these projects, the Nepalese government is expected to allocate funds through its budgetary programs. While adhering to the Rs 1.9 trillion budget ceiling set by the National Planning Commission (NPC), the government has begun drafting the budget for the fiscal year 2025/26.
The MoF has assigned Budget Division Head Shree Krishna Nepal to coordinate the budget drafting process. Other key officials involved include Foreign Division Head Dhani Ram Sharma, Revenue Division Head Uttar Kumar Khatri, Administration Division Head Than Prasad Pangeni, Deputy Director General of the Inland Revenue Department (IRD) Tirtha Chiluwal, and Joint Controller General Sushila Aryal.
