Amid confusion over whether the Millennium Challenge Nepal Compact will continue, the US Embassy in Kathmandu said it is expecting a “constructive” outcome from the ongoing review.

In April last week, after the US Department of Government Efficiency (DOGE), which was then headed by the billionaire Elon Musk, decided to shut down MCC’s global operations, there has been no official confirmation on whether its Nepal operations will continue. The review of MCC’s global operations and its outcome has yet to be out. Following DOGE’s decision, the fate of two infrastructure projects in Nepal has become uncertain, and there is ambiguity within the government about how to proceed if the MCC discontinues its support.

In February 2025, the US Secretary of State approved a specific exception to the 90-day pause on US foreign assistance for the MCC Nepal Compact, the US Embassy in Kathmandu said in a statement on Wednesday, while the US government’s review on US foreign assistance continues.

The MCC had allocated $500 million for two infrastructure-related projects in Nepal and additionally Nepal is also investing another $$197 million. “Under this exception, the MCC Nepal Compact is authorized to continue with full implementation. MCC and the US Mission in Nepal continue to engage stakeholders in support of a constructive outcome of the review,” said the embassy.

Nepal and the MCC signed an agreement in September 2017 to execute energy and road upgrade projects, where the US would pump in $500 million in aid, while Nepal would inject $150 million. Nepal’s contribution was later increased to $197 million.

The total investment in the road upgrade and transmission line projects could have gone up to $749 as the MCC board had decided to allocate another $50 million to fill the funding gap.

MCC is closely working with the Ministry of Finance and MCA-Nepal to ensure that the activities undertaken or initiated under the compact, including potential new obligations, are aligned with priorities of both the US and Nepal governments, and ensure transparency, sound governance, effective delivery, and prudent risk management, said the US Embassy statement.

“Ahead of the MCC shutdown, on February 18, the MCC notified the Nepal government that payments related to activities funded under the Nepal Compact had been halted, in compliance with a 90-day freeze imposed by an executive order of US President Donald Trump on January 20. With the three-month period over, DOGE on April 25 decided to shut down US aid programmes that span over 40 countries, even though there was no official announcement to this effect. “The United States remains committed to its bilateral relationship with Nepal and supporting the Nepali people through efforts that promote prosperity and long-term economic resilience,” the embassy added.