Within two days, Prime Minister Sher Bahadur Deuba and Foreign Minister Narayan Khadka have made conflicting statements over the United States’ Millennium Challenge Corporation Compact, which has been awaiting parliamentary ratification for three years as political leaders spar over the pros and cons of the aid.

Coalition partners Nepali Congress, Communist Party of Nepal (Maoist Centre), Communist Party of Nepal (Unified Socialist), Janata Samajbadi Party, and Rastriya Janamorcha are divided over their perception of the terms of the $500 million US grant and whether the compact should be ratified from the House without amendment. The US grant is meant for two infrastructure projects.

There has been a clear division between Prime Minister Deuba and Nepal’s top diplomat Foreign Minister Khadka over how to ratify the MCC, in a revelation that there is no unanimous view inside the Nepali Congress on the compact.

Talking to reporters in Dhandagi on Friday, Deuba had said the MCC should be ratified and that he was in favour of an early ratification. “There’s no need to debate over it and, if needed, the United States is ready to amend the MCC Compact if a request is made,” Deuba said.

“We are in favour of ratification of the MCC. There has been disinformation about the MCC,” he added. Deuba gave examples of the World Bank and the Asian Development Bank saying that their conditions and rules do not apply to Nepal when the country accepts their loans.

“The MCC has clarified that it will comply with Nepal’s law and the MCC does not supersede Nepali laws and other legal provisions,” said Deuba, who is in favour of an early ratification of the MCC compact without any changes in the existing agreement.

Foreign Minister Khadka, speaking in Biratnagar on Saturday, however, presented a different view on the ratification of the MCC compact. “The MCC cannot be approved in its existing form,” Khadka said during an interaction with reporters. “The MCC will only be ratified after building consensus among the parties and we are trying to forge a common position on it.”

“The MCC cannot be ratified until political parties reach a consensus. We are trying to forge a consensus. It is not possible to ratify until political parties do not reach a consensus on it,” said Khadka.

Some Nepali Congress leaders said they were surprised to hear the conflicting statements coming from the two leaders. Khadka was hurriedly appointed foreign minister by Deuba on September 22 to lead Nepal delegation to the UN General Assembly.

Khadka made a similar confusing statement on the MCC compact in September in New York during an interaction with the Nepali community living in the US, a senior Nepali Congress leader requesting anonymity said. It looks like he is toeing the line of the other members of the ruling coalition including the Maoist Center the CPN (Unified Socilalist) that want the compact agreement amended before its ratification.

But another coalition member, the Janata Samajbadi Party, holds a similar view as the Nepali Congress.

Even though the prime minister was ready to table the MCC Compact in the House for deliberations, the idea was later shelved, sensing that it could create a division within the ruling coalition, the NC leader close to Deuba, said.

If the MCC is tabled in the House, the Congress, the opposition CPN-UML and the Janata Samajbadi Party and the Loktantrik Samajbadi Party could possibly extend their support for ratification but two key ruling partners, the Maoist Centre and the CPN (Unified Socialist) look set to oppose it. “In that situation, the alliance could break apart,” the Congress leader said. “To keep the alliance intact, the MCC compact has been put on hold.”

In Dhangadhi, Prime Minister Deuba while stressing the need for MCC ratification said that the MCC compact is a grant and the MCC headquarters has said that it will comply with the domestic law of Nepal. “They have already said Nepal’s law prevails over the MCC. They have said MCC is below the Nepali law, they have already clarified this,” Deuba said.

Signed in 2017 between the US and the Nepal government, the MCC has courted controversy after several public intellectuals, political parties and experts raised several questions over the MCC’s legal provisions and linked it with the Indo-Pacific Strategy of the US.

Besides the US Embassy in Kathmandu issuing clarifications about the MCC compact, the MCC headquarters on September 9 sent a 13-page response to Nepal answering 11 major questions and supplementary concerns raised by the Finance Ministry, including whether the MCC agreement is above Nepal’s constitution and whether it is part of the Indo-Pacific Strategy. Regarding the concern, if the MCC agreement is above the Nepal constitution, the MCC has said, “no.”

“The Constitution of Nepal prevails over the MCC compact,” the MCC said in its response.

A day after the MCC headquarters’ response, the vice president and deputy vice president of the Department of Compact Operations, Fatema Z Sumar and Jonathan Brooks respectively visited Nepal when Nepal’s parliament convened its new session

The duo met with top political and bureaucratic leadership as well as held discussions with parliamentarians and civil society members and urged them to ratify the compact.

In September-end, the MCC Board held a review meeting where progress and obstacles that the MCC compact Nepal is facing was discussed but no decision was taken, according to sources. The MCC headquarters is scheduled to discuss the status of the MCC Nepal compact again in December.

Some experts and observers said that the prime minister and the foreign minister holding divergent views on such an important issue ‘definitely does not bode well’. “At least there should be consistency between the views of the prime minister and the foreign minister on such a sensitive issue,” Rameshore Khanal, former finance secretary said.

“As a foreign minister it is Khadka’s duty to defend the MCC which was signed during the earlier premiership of Deuba in 2017,” said Khanal, adding, “If the foreign minister makes a conflicting statement then it will be difficult to ratify the MCC.”

The Nepali Congress leader said the then foreign minister Pradeep Gyawali would toe then Prime Minister KP Oli’s line on the MCC although their party, the CPN-UML, was divided on the issue, the Nepali Congress leader said.

Another member of the ruling coalition, the Maoist Centre, has clarified that its position on the MCC has not changed.

“It cannot not be ratified in its present form,” senior Maoist Center leader Narayan Kaji Shrestha said.

“If the US or the MCC headquarters is ready to amend the MCC agreement, then it can be ratified in Nepal. Our position on the MCC has not changed,” said Shrestha.

But a leader close to Deuba said that once the current crisis created by the floods and landslides is over, discussion will be held at the top political level about presenting the MCC compact in parliament.

“As we amended the constitution to incorporate the new political map of Nepal in the coat of arms during the tenure of prime minister Oli, we want a similar open and frank discussion on the MCC in parliament. Let the House decide it, let the House discuss it,” said Min Bishwakarma, a leader close to Prime Minister Deuba.

“But we know the political risk and its fallout if the MCC is put to vote in Parliament, so we need to have a political agreement before presenting it in Parliament,” Bishowkarma said.