MCA Nepal established to direct US-funded projectsThe government has established the Millennium Challenge Account (MCA) Nepal, an entity to oversee the implementation of US government-funded projects worth $630 million. The Cabinet decided to set up the MCA Nepal three weeks ago, and the decision became effective after publication in the Nepal Gazette last week.
The government has established the Millennium Challenge Account (MCA) Nepal, an entity to oversee the implementation of US government-funded projects worth $630 million. The Cabinet decided to set up the MCA Nepal three weeks ago, and the decision became effective after publication in the Nepal Gazette last week.
The MCA Nepal will execute schemes with a $500 million grant provided by Millennium Challenge Corporation (MCC), an independent US government agency working to reduce global poverty through economic development.
Following the decision, the government has moved a step closer to enforcing the grant agreement signed between MCC and the Nepal government in September 2017. The incorporation of the MCA Nepal is one of the conditions for enforcing the agreement.
The $500 million grant is part of the $630 million ‘compact programme’ designed by MCC to strengthen the country’s energy and transport infrastructure. The Nepal government will contribute the remaining $130 million.
The government is currently working to give full shape to the seven-member board of directors of the MCA Nepal which will be chaired by the finance secretary.
It will consist of one joint secretary each from the Energy Ministry and the Physical Infrastructure and Transport Ministry, managing director of the Nepal Electricity Authority, one representative each from the private sector and civil society, and the CEO of the MCA.
“We are at the final stage of the appointing one representative each from the private sector and civil society to give full shape to the board,” said Tulasi Prasad Sitaula, the government appointed coordinator of the MCA Nepal.
Similarly, the Finance Ministry has requested MCC to release a preparation fund of $40 million out of the $500 million grant to set up the office and hire staff. “The money will probably be released within a couple of weeks,” said Sitaula.
The rest of the funding will be released once the grant agreement becomes effective after the Nepal government fulfils the preconditions put forth by MCC while signing the agreement.
Getting the Indian government’s consent over the financial terms for the construction of the 400 kV New Butwal Gorakhpur Cross-Border Transmission Line Project, which is being developed under the compact programme, is one of the preconditions set by MCC.
Likewise, the government needs to ensure that land acquisition, site access and forest clearance for the projects being developed under the compact fund are done in a timely manner for the agreement to come into force.
The MCC board of directors selected Nepal for its compact programme in December 2014. Nepal was selected for the MCC programme ‘in recognition of the country’s efforts to establish rule of law and democratic institutions, and its strong performance on MCC’s policy scorecard’.
Since then, MCC has agreed to support two broad projects in Nepal: the Electricity Transmission Project and the Road Maintenance Project, as energy shortages and inferior transport network are two binding constraints for Nepal’s rapid economic growth.
The bulk of the investment being made in Nepal, or $520 million, will be spent on the development of 300 km of the 400 kV transmission line extending from the eastern to the western part of the country and three power substations.
Another $55 million will be used to maintain 305 km of roads. The remaining amount will be used for activities like monitoring and evaluating the projects being implemented, hiring procurement and fiscal agents, and covering other administrative expenses.