After a section of the ruling party leaders expressed reservations about the Millennium Challenge Corporation’s Nepal compact, under which the United States will provide $500 million in grants to Nepal, the party’s standing committee on Sunday said that a decision on the matter would be taken by the party secretariat.

Ruling party leaders as well as experts, however, describe the commotion over the US programme as “unnecessary” and warned of multiple consequences if such reservations led to the failure to ratify the compact from the Parliament’s ongoing winter session.

One of the major concerns raised by some Nepal Communist Party (NCP) leaders is whether the Millenium Challenge Corporation (MCC) is part of Washington’s Indo-Pacific Strategy. The standing committee meeting has instructed the government to hold talks with the US government to ascertain whether the MCC falls under the broad umbrella of the US’ strategy, which many believe to be an attempt to counter China in the region.

“The US government should clarify whether the MCC is part of the US strategy,” said Bhim Rawal, a standing committee member who has been a vocal critic of the MCC. “The prime minister and members of the secretariat will hold discussions to decide whether to ratify it or not.”

Under the MCC, Nepal has received $459.5 million as ‘programme funding’ and an additional grant of $40.5 million as a ‘compact development fund’, where the government of Nepal will chip in $130 million.

“If Parliament fails to endorse the MCC, it will have multiple effects,” said Ram Sharan Mahat, a Nepali Congress leader and former finance minister. “Our ties with the US may take a beating. In terms of aid and economic relations, it will invite more implications because the US is Nepal’s largest donor.”

Ruling party leaders’ concerns primarily stem from the suspicion that the MCC comes with strings attached.

US officials, while denying that there are any additional strings, have repeatedly asserted that the MCC is definitely a part of the Indo-Pacific Strategy, which they’ve described as a broad strategy that the US is pursuing in the region.

A US Embassy spokesperson told the Post that the Indo-Pacific Strategy (IPS) is not something to join.

“The people saying ratifying MCC means ‘joining’ the IPS are not noting that the IPS is not something to join. People saying these things are also referring to IPS as a military alliance or military strategy, which again is not true,” said Andie De Arment, the US embassy spokesperson. “IPS has a security component but it has equally important economic and governance pillars.”

Referring to the statements made by Foreign Minister Pradeep Gyawali, Arment said that ratifying the MCC does not amount to “joining the IPS”.

“Because you cannot join, but also, as you know, IPS talks about our general overall policy; MCC is under that large umbrella,” she said.

Despite reservations, leaders who have close relations with Prime Minister KP Sharma Oli said that they are confident that the ongoing House session will ratify the MCC compact.

According to them, the decision to hand over the responsibility to take a decision to the secretariat means that the programme is a step closer to being ratified.

“The secretariat will take the required decision after making an assessment of leaders’ views on the MCC,” said Rajan Bhattarai, foreign relations advisor to Oli. “As per my understanding, the party will approve it to get the US programme passed from the House.”

Nepal became eligible for the MCC, announced in 2002 by US President [George W] Bush, in 2011 and signed the compact in 2017. But before implementation, the compact needs to be ratified by Nepal’s Parliament. It did not pass during the previous House session because of—by Oli’s own admission—the reluctance of Krishna Bahadur Mahara, who was House Speaker until early October.

“We completed several steps and negotiations before accepting the US grant so there is no chance to roll back the decision and if the government decided to hold it back, we will oppose it,” said Mahat.

Mahat cautioned that failing to ratify the MCC compact could not just affect US assistance, but also assistance from institutions like the World Bank and the Asian Development Bank.

“Overall, it will have a negative impact on our relations with the US and erode our international credentials,” he said.

Mahat’s assertions were echoed by Govinda Nepal, a left-leaning economist and former economic advisor to the Finance Ministry.

“When the MCC was approved, there was no IPS and it was designed by Nepal as per our needs,” said Nepal. “Several prime ministers and finance minister are well aware of our participation in the process.”

Ruling party leaders too fear a loss of credibility.

“We will lose the moral high ground to talk to the US government regarding other matters,” said Bishnu Rijal, deputy head of the ruling party’s foreign affairs department. “This is not just a question of aid or economic assistance. From human rights to transitional justice, the role of the United States is important.”

Rijal, however, was confident that the government would follow through with its commitment, just as it has with many other international obligations.