The United States has reminded Nepal that funding under the Millennium Challenge Corporation’s Nepal Compact is not open-ended and has urged the government and the political parties to take “tangible, near-term steps” to ensure its viability.

The statement sends a clear message that the US is looking for an early decision from Nepal regarding whether it will accept the $500 million US grant, say analysts.

According to Shankar Sharma, an economist and former Nepali ambassador to the United States, the statement from the US embassy in Nepal suggests that the US is still ready to wait but wants an early resolution.

The US Embassy in Nepal in a statement released on Monday, just ahead of the expiry of the implementation deadline for the MCC’s Nepal Compact on Tuesday, said that the United States is aware that [Nepal] Parliament has not yet ratified the MCC Compact.

“Ratification is the next step needed to proceed with the $500M grant, which the two countries signed in September 2017 and which Nepal committed to ratify by September 2019,” said the embassy. “Delaying ratification is delaying the benefits of more jobs and increased economic growth for nearly 23 million Nepalis.”

Sharma, who played an important role in bringing the MCC project to Nepal, said that the US appears to have asked Nepal to decide so that the funds can either be used in Nepal or in other countries where a grant of such a size will be welcomed.

“As long as it remains disputed in Nepal, questions will be raised about the programme elsewhere. So I think the US does not want the programme to linger,” Sharma told the Post.

Parliamentary ratification of the $500 million US grant has remained stalled for a long time due to disputes within the ruling Nepal Communnist Party. As per an agreement signed between Nepal and the MCC in 2017, parliamentary ratification is necessary to implement the programme.

A section of ruling party leaders says House ratification of the US programme in its existing form undermines Nepal’s sovereignty and they have been demanding some amendments to the agreement.

Those in the ruling party who are opposing the MCC also argue that the programme is part of the US-led Indo-Pacific Strategy aimed at ‘containing China’. Some have also taken exception to a clause in the MCC agreement that says the compact will prevail over existing Nepali laws.

Millennium Challenge Corporation (MCC) is an aid agency under the US government and the MCC compact is a large, five-year grant programme under which the fund is provided to the countries that pass the MCC’s eligibility criteria including democracy and transparency.

According to Krishna Gyawali, former National Coordinator at Office of the Millennium Challenge Nepal, the US statement was aimed at suggesting the virtues of the MCC compact programme as well as seeking an early decision from Nepal.

“As far as I understand, the US is keen to give some more time to Nepal to decide despite the expiry of the original deadline set for programme implementation on June 30,” said Gyawali.

Gyawali, who is also a former secretary of the government of Nepal, said as the implementation date was fixed at Nepal’s request, the US could be flexible to wait for some more time.

“But, they may not wait for long if there is no certainty of ratification from Parliament as administrative cost continues to increase,” he said.

He, however, said that the US could build more pressure on Nepal to act fast as the deadline proposed by Nepal for implementation of the programme expired on Tuesday.

The US has not released any amount since late last year for expenses to operate Millennium Challenge Account Nepal (MCA-Nepal), an agency formed to implement the projects under the MCC.

“This is a part of pressure building on Nepal to act fast on ratification after the ratification date set for September 2019 was missed,” said a source at the MCA-Nepal. “Now, the expenses of all the staff and international consultants are being borne by Nepal’s resources.”

Nepal will partner in the programme with budgetary allocation of $130 million. Earlier, the US was releasing money every quarter, the source said.

The government plans to implement two 400KV transmission line projects—Lapsiphedi-Ratmate-Hetauda and Lapsiphedi-Ratmate-Damauli with the funding from the MCC.

Experts say that the statement makes no hint of exiting Nepal but seeks to convince Nepal about the benefits of the compact programme. For example, the US said that the delay in ratification was delaying the benefits of more jobs and increased economic growth for nearly 23 million Nepalis.

The MCA-Nepal said in a statement on Monday that taking the programme into implementation from June 30 was no longer viable due to the delay in its ratification by Nepal’s Parliament and the Covid-19 crisis.

“The MCA-Nepal is working with all relevant authorities to complete the remaining conditions precedent, including parliamentary ratification of the Compact as soon as possible, to Enter into Force and begin implementation,” the statement reads.

Former ambassador Sharma said that the US could be ready to look into disputed provisions of the agreement provided the Nepali government makes requests.

“Even if they are not ready to alter the entire agreement, they may be ready to clarify certain provisions through letters of exchange which may be made part of the agreement,” said Sharma.

In a recent interview with the Post, a senior official at the Finance Ministry said that the US had not shown its readiness to amend the agreement.

“Their recent delegations have suggested that they could pull out from Nepal instead of amending the agreement,” said a Finance Ministry official on condition of anonymity because he is not authorised to speak to the media.

“The template of the agreement signed by other countries is not much different from what Nepal has signed and I doubt if they will be ready to offer separate provisions for Nepal.”