The US Government’s Millennium Challenge Corporation (MCC) has approved a $500 million (approximately Rs52 billion) ‘compact programme’ with Nepal. This is MCC’s first compact in South Asia.

Nepal has committed to contributing an additional $130 million to support MCC’s investment.

The compact is expected to be signed by both governments in September, according to a statement of Kathmandu-based US Embassy.

The Millennium Challenge Corporation (MCC) is an independent US government agency working to reduce global poverty through economic development.

This is the biggest grant assistance being offered by the US government to Nepal and the single biggest grant amount that the country is receiving from development partners operating in Nepal.

One of the conditions of the MCC programme is that all projects must be completed exactly after five years of their implementation date. If not, the funds will go back to the US.

“I am pleased to announce the Millennium Challenge Corporation Board of Directors’ approval of the Nepal Compact,” said acting MCC CEO Jonathan Nash. “This compact with Nepal focuses on the power and transportation sectors to improve regional connectivity, spur private investment, drive growth, and reduce poverty. The contribution of an additional $130 million from the Government of Nepal, which is the single largest up-front country contribution in MCC’s history, enables our investment to have an even greater impact.”

The program has been in development since MCC’s Board selected Nepal in December 2014 as eligible to develop a compact – MCC’s larger grant program – in recognition of the country’s efforts to establish rule of law and democratic institutions and its strong performance on MCC’s policy scorecard.

This is the first compact to be approved by MCC’s Board of Directors under the Trump Administration.

The compact includes two projects. The Electricity Transmission Project is designed to transform Nepal’s power sector by expanding and strengthening the high voltage electricity transmission network to support new investments in generation. The project includes the construction of approximately 300 km of high voltage power lines, equivalent to one-third the length of Nepal; the addition of a second cross-border transmission line to facilitate electricity trade with India; and activities to improve sector governance to promote private investment. The Road Maintenance Project is designed to improve the maintenance regime in Nepal and will complement existing efforts by others to build new roads.