If Parliament doesn't endorse the Millennium Challenge Corporation compact even during the upcoming winter session, serious questions will be raised about the future of the multi-million dollar US aid agreement, a senior official from MCC Nepal said.

With some sections within the ruling Nepal Communist Party expressing reservations about the compact terming it part of the US Indo-Pacific Strategy, the agreement hasn’t been ratified even after three years after both the governments signed the compact.

Under the programme, Nepal is to receive $500 million, which is to be used to fund the construction of a cross-border transmission line and improvement of roads.

“Nepal has conveyed a message to the MCC that the compact will be endorsed during the winter session of Parliament,” said Sanjay Poudyal, deputy resident country director of MCC, at a webinar organised by the Society of Economic Journalists of Nepal on Friday. “The failure to do so during the next session of Parliament could invite serious questions about the future MCC in Nepal.”

He, however, wasn’t certain whether failure to get the compact endorsed would lead to its collapse. “This is a decision to be taken by the MCC leadership,” he added.

Officials from the two countries signed the MCC compact in 2017 and the government had promised to get the programme endorsed through Parliament by September 2019, the next step towards processing the $500 million grant.

Those in the ruling party who are opposing the MCC 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 provisions of the compact will prevail over existing Nepali laws.

With parliamentary ratification delayed, the agreed deadline of June 30 to start the implementation of the MCC compact has already been missed.

In a statement on June 29, the US embassy in Nepal warned that availability of the funding under the Millennium Challenge Corporation Compact Programme is not open-ended and whether to accept the grant under the programme is Nepal’s choice.

“Tangible, near-term steps in Nepal are necessary to ensure the continued viability of the programme,” said the US embassy in Kathmandu in a statement on June 29.

Troy E Kofroth, resident country director at the MCC’s mission in Nepal also reiterated the same position during the webinar on Friday. “The MCC grant is available but it is not open-ended even though we have not set a specific cut off date,” he said. “That is why we are urging Nepal to endorse it at the earliest.”

Officials at the MCC resident country mission said that the MCC has been forced to face US lawmakers regarding the implementation of the compact in Nepal amid delays in getting it ratified by Parliament.

Kofroth said that Nepal’s failure to endorse it could also raise questions about the reliability of Nepal. “The people of the US could question how reliable Nepal would be for future cooperation,” he said.

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

Amid controversy over the US aid programme, leaders of the ruling Nepal Communist Party recently agreed to get the compact ratified after some revisions. Some leaders have proposed that clarifications from the US side be sought on some of the agreement’s provisions. But, the MCC Residence Office in Nepal said that the US has not yet received any communication seeking clarification.

“In fact, we have already prepared to clarify potential issues that may arise,” said Poudyal. “We have repeatedly said we are ready to clarify things over which questions have been raised. But, we have not yet received any official letter from the Nepali side.”

Citing delay in parliamentary approval, the MCC has also halted releasing its share of the fund for preparatory works since last September.

On questions regarding the relation of the compact with the Indo Pacific Strategy and China’s Belt and Road Initiative, Kofroth rejected that they are related. “The MCC came into existence long ago when the Indo Pacific Strategy and the Belt and Road Initiative were not introduced,” he said.