Leaders of ruling parties who ratified the Millennium Challenge Corporation (MCC) compact last year have started disputing over the US aid a week after it entered the implementation phase.

One of the ruling parties, the CPN (Unified Socialist), has even formed a separate panel led by its vice-chair to study if the compact “undermines Nepal’s sovereignty” in the course of project implementation.

Also, a political party in a four-party bloc Socialist Front Nepal, which also includes Prime Minister Pushpa Kamal Dahal’s CPN (Maoist Centre), has announced protests against implementation of the MCC compact.

The Socialist Front Nepal includes three ruling parties—CPN (Maoist Centre) led by Prime Minister Pushpa Kamal Dahal, CPN (Unified Socialist) led by former prime minister Madhav Kumar Nepal, and Janata Samajbadi Party led by former deputy prime minister Upendra Yadav. The fourth member is the Communist Party of Nepal, a Maoist party led by Netra Bikram Chand. Chand’s party is not in government. The front is led by the chiefs of the constituent parties on a rotational basis. Currently, the CPN (Unified Socialist) chairs the bloc.

The Chand-led Communist Party of Nepal, a staunch opposer of the MCC compact, announced last week its plans to obstruct MCC-funded projects ‘if they undermined Nepal’s sovereignty’.

Also last week, the CPN (Unified Socialist), which is a key party in the ruling coalition, announced the committee to monitor the implementation of the MCC Nepal compact.

The five-member committee led by party vice-chair Rajendra Pandey has deputy general secretaries Gangalal Tuladhar and Jagannath Khatiwada, secretary Garima Shah, and an expert on the issue as members.

Party insiders and observers, however, described the decision to form the panel as a move to unnecessarily stir up an already-settled issue into intra-party disputes.

“Our party has a clear stance that the MCC [compact] should be implemented with the interpretative declaration as its integral part,” said party spokesman Khatiwada following a secretariat meeting on Monday. “But they have started implementing the compact by ignoring the concerns of our party and Parliament.”

Khatiwada said the party formed the committee to monitor the implementation of MCC projects and see whether the 12-point interpretative declaration becomes part of the compact. It would also study the consequences of the projects. The panel will also take initiatives to form a parliamentary committee to monitor the MCC compact implementation, he said.

Earlier, the then Nepal Communist Party that was formed after unification between CPN-UML and CPN (Maoist Centre), but was later dissolved, had formed a three-member committee to study whether the MCC is a part of the Indo-Pacific Strategy (IPS) of the United States. Former prime minister Jhalanath Khanal led the team in which former ministers Bhim Rawal and Pradeep Gyawali were members. Khanal and Rawal are critical of the MCC compact arguing that it falls under the IPS.

In recent party committee meetings, Khanal challenged party chair Nepal by questioning the policies proposed by the latter. Khanal, who also presented a parallel political proposal, has also accused Nepal of making the party merely as a follower of a ‘rightist Nepali Congress’.

“As the party’s second-in-command Khanal has challenged party chair Nepal on various issues, the party chief chose to form the monitoring panel to pacify Khanal,” said a senior leader of the party, requesting anonymity.

But Khanal has still been claiming that the MCC compact would essentially undermine the country’s sovereignty.

The ruling parties have again raised questions about the MCC even though it was endorsed by the federal parliament on February 27 last year and they were also involved in the endorsement process. The interpretative declaration was also acknowledged and agreed by the US.

In a statement on March 1 last year, the MCC had acknowledged the Nepali Parliament’s decision to ratify the $500 million compact signed between the MCC and the Nepal government in September 2017.

Some political analysts say that the political parties’ move to protest and doubt the MCC compact after the projects entered the implementation phase may cause division even within the Front. The MCC compact entered into force on August 30.

Pandey, the convener of the Unified Socialist’s MCC compact monitoring committee, said his team will monitor whether the 12-point Interpretative Declaration is adhered to while implementing the projects.

“Having differing views on the MCC won’t affect the Front as member parties are entitled to make their own positions on various issues. But it will depend on how the activities of the parties play out,” said Pande. “Even our party won’t accept the compact if there is anything suggesting that it is a part of the Indo-Pacific Strategy.”

Pande also said leaders of his party and the Front still believe that the US has not embraced the 12-point interpretative declaration endorsed by Nepal’s Parliament.

According to a political analyst, the MCC issue has caused rifts in the Socialist Front.

“Prime Minister Dahal [speaking in Butwal last week] said he would launch an agitation if he found anything suspicious in the MCC compact, but we couldn’t figure out whom his comment was aimed at,” said Arun Subedi, a political analyst and former foreign affairs advisor to then Prime Minister Sher Bahadur Deuba. “[Unified Socialist chair] Madhav Nepal is also speaking against the MCC.”

He said if Upendra Yadav also toes the line of Maoist Centre leader Dev Gurung and Unified Socialist leaders on the compact, it could prompt the international democratic community to review their stance on him.