MCC in Nepal (A Grant or Future Debt)

MCC in Nepal (A Grant or Future Debt)
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Recently, Nepali citizens, oppositions are raising questions and protesting against MCC in Nepal and its implementation. Some are raising the question that it is affecting Nepal sovereignty while some are suspecting connection with Indo Pacific Strategy (IPS). It is not that the protest started now, in 2017 when the agreement was signed there was a protest in Maitighar by opposition political parties NCP & Maoist including others and its worker which was covered by Online Khabar at that time. Before moving further let’s understand MCC first.

The full form of MCC is Millennium Challenge Corporation is an independent body and is a bilateral Foreign aid agency established in 2004 by the then US president George W. Bush. It was established after the tragic situation which was held on September 11, 2001. IT is one of the good or you can excellent initiatives were taken by Bush Presidential. Here there are certain criteria (17 criteria indicator in the beginning Now 20) on which scores provided of which selected country get aid from Millennium Challenge Corporation.

There are TWO schemes under which countries get Aid from MCC one is Compact and the other one is Threshold. A compact scheme is provided to the country that scores high on the selection criteria indicators. The threshold is provided to the countries that score poor but have a positive upward trend.

Special purpose legal entity established for smooth functioning of operation of MCC. The area or field where Compact aid expended are:-

  • Agriculture and irrigation,
  • Transportation (roads, bridges, ports),
  • Water supply and sanitation,
  • Access to health,
  • Finance and enterprise development,
  • Anticorruption initiatives,
  • Land rights and access,
  • Access to education.

About U.S.-Nepal Partnership – Millennium Challenge Corporation Nepal

MCC Nepal Bilateral (Both the country contribute and participates) agreement was signed by ruling party congress Finance Minister Mr. Gyanendra Bahadur Karki and MCC Acting CEO Mr. Jonathan Nas in Washington DC in the month of September 14, 2017. Nepal was selected in Asia under 16 criteria indicators out of 20 in 2017 and hence make it eligible for compact Aid. Under this scheme, the US provides USD 500 Million as a grant to Nepal which is around 589 crores Nepali rupees (59 Arba) in 5 Years of time. Nepal has to contribute US USD130 Million in five years of time combing both it is a 630 Million Dollars project.

The amount given is used for two projects mainly on 300KM double circuit400kv Transmission network Connecting Lines (Kathmandu-Damauli- Hetauda & Butwal) and 305KM Strategic road construction & maintenance. This high voltage network line near the Indian border along with strategic road will help Nepal- India trade and improves the consumption of electricity, startups & energy.

Nepal has allocated a budget of NPR 9.1 Billion to MCA account in 2021 for the Operation and implementation of MCC. Economic growth and opportunities for jobs are what the government is saying. More than 23 million individuals and 5.3 million households will be benefited directly or indirectly from this. Nepal scores well under 16 criteria of indicators like fiscal policy, inflation, civil liberties & political rights, etc. These grants also help in getting foreign grants easily and helps international relations. Getting more attention to hydro impact and reduce the problem of electricity which we are facing for decades. MCC already Spent 5.3 Billion NPR on its implementation and execution.

Despite such huge benefits why are Nepali people being rebellious and protesting against it?

It is not that the protest started now when the contract was signed opposition parties were in protest but then it was settled when NCP(communist) became the ruling parties under the leadership of prime minister KP Sharma Oli. Again Robert J Palladino the Deputy Spokesperson of the US State Department mentions at the end of Nepal’s Foreign Minister Pradip Gyawali’s Washington visit in December 2018 that Nepal has a central role to play in the US-led alliance called Indo-Pacific Strategy(IPS). Now US military involvement will be there is what expected which was rejected by Pradeep Geywali.

Another reason is the US has the upper hand on sections of the program like the audit and legal conflict arise between domestic law then MCC will be upheld. People treating it as anti-National policy as it questions Nepalese sovereignty and that is the main reason for it.

We are also seeing the parties which were in support earlier now are against it which makes it clear to understand that it is merely a political agenda. Few activists like Gyanendra Sahi and others as well are opposing this policy and standing strong against it and demand not to execute without ratification. Recently Mr. Sher Bahadur Deuba issued a notification not to protest against it otherwise will he/she will be punished.

Does it affect BRI initiatives by China?

China being a neighbor of Nepal is a huge economy, and has initiated Belt & Road initiatives giving slogans One Belt One Road. under this program, it increases connectivities between countries border by road and trains for the ease of trade and transportation. BRI is one of the great initiatives by china in history and it will impact billions of people across the nation. There is no such impact on BRI with MCC unless there is direct or indirect involvement of the US military.

MCC in India or Afghanistan?

Since the start, the MCC Board has approved 37 compacts worth $13 billion for 29 countries, as of 2020. countries like India, Srilanka & Afghanistan have not been part of it so far.

Advantages and disadvantages of MCC compact


  1. It helps in economic development and reduces poverty
  2. It improves transparency for further programs
  3. Improve good governance
  4. Helps in getting foreign aid
  5. Improved roads & electricity grid built in the country


  1. Getting into the debt trap in the future if not used properly
  2. The power lies with it when conflict arose between laws which makes it difficult for citizens to digest
  3. China being a neighbor may not be happy with better relations with the US (you cant change the neighbor) so better relation will be good

For those who want to read MCC, Nepal pdf is available on the MCC Nepal website. It is available in English and Nepali so the language will not be an issue.

Is it Necessary?

Nepal from 2017 has already got lots of aid and by far already spent USD 500 million as loans and grants till now so this is not so huge funded grant. The risk is bigger than the reward in addition to that hydropower sector can be developed on our own if a proper public investment process makes easy. Nepal got more than NPR 60 Billion grant is there to fight Covid-19 out of which 91 percent in terms of the loan. The required actions against defaulters will result in the development of an electricity board and then ask for public funding making easy approval will make us stand ourselves. But again do we have the willpower to do that, do our leaders and politicians have strategic plans to execute.

We don’t lack in resources we have lots of power generation capacity we can improve distribution, upgrade technology by asking for external help as well as getting help from private sectors.

There are countries where MCC is shown some good growth however the growth is not beyond imagination. It cannot be concluded wrong or right without having proper analysis which is what the parliamentary committee must do. We have a lack of infrastructure but not natural resources availability, proper execution, and global assistance lead to good reports and good growth. The aid we are getting is around 3 % of Nepal’s Budget.


Nepal must initiate diplomatic steps to get ratified certain points and workout out the middle way without getting it delayed, as delay put Nepals at a loss. The loss of investments and opportunities is high, the government must debate with the US secretary to look into it. We can generate a considerable amount from the export of surplus electricity. Various agreements & program from past does not benefit us in many ways so are we prepare for this one is a question. MCC Nepal requires few changes which is a real challenge to stop the critic’s mouth. Thinking in a broader way it is good to have for nations with some critical changes in provisions. Resolving disputes include social awareness results in excellent results in the coming days.

Also, Read

What stops Nepal from developing until 2021

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