Nepal‚ US set to sign 'compact agreement'

Under the pact country may receive grant of up to $698 million for a five-year period.

Feb. 13, 2015, 5:45 p.m. Published in Magazine Issue: Vol: 08 No. -15 January. 30- 2015 (Magh 16, 2071)

The government will most likely sign a crucial agreement with the US government within a year, which will entitle the country to a grant of up to $698 million from the world’s largest economy for development of energy and physical infrastructure sectors.

Nepal and the US are preparing to sign the deal after the board of Millennium Challenge Corporation (MCC), an independent US agency dedicated to fighting global poverty and stimulating economic growth, declared the country eligible for its ‘compact’ program in December.

“It might take one year to shape the compact agreement after which Nepal will start receiving MCC’s grants,” MCC CEO Dana J Hyde, who is currently here to lay the groundwork for MCC partnership, told journalists today.

MCC’s compacts — agreements between MCC and a country to fund specific programs — provide grants in the range of $66 million to $698 million to a country for a five-year period reports The Himalayan Times.

Although MCC is yet to fix the size of the grant for Nepal, average size of the financial aid extended to 25 countries, where compact programs are currently being implemented, ranges between $350 million and $400 million.

It is said a big chunk of fund that Nepal will receive under the program will be used for development of energy and physical infrastructure sectors.

The funds will be channeled through the government, private sector and civil society, according to Hyde, who has already met with Prime Minister Sushil Koirala, different ministers and CEO of Investment Board since her arrival on Tuesday.

“Through this program, we will look at different sectors holistically, find out impediments and root causes of problems, and suggest policy reform measures,” Hyde said.

In this regard, MCC will soon start engaging with different partners, including the government, private sector and civil society, conducting economic analysis, identifying opportunities in the private sector and evaluating various sets of data.

The projects will be designed on the basis of these studies, and approved by a board comprising government officials and experts deputed by the US government before they are implemented. “Also, social and gender issues would be addressed through MCC projects,” Hyde said.

MCC, created by the US Congress in 2004, offers grants through compact and threshold programmes. Under the threshold programme, smaller-scale grants are awarded to countries that are firmly committed to improving policy performance.

Nepal was chosen for threshold program in 2012. Since then Nepal has made ‘significant progress in increasing peace and stability by completing integration of ex-combatants in Nepali army, successfully holding peaceful elections and continuing to draft a new constitution’.

Because of these improvements and demonstration of clear progress in institutionalizing democracy, Nepal was unanimously selected for compact program by MCC’s board of directors.


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