A delegation from the U.S. Government’s Millennium Challenge Corporation (MCC) led by Fatema Z. Sumar, Regional Deputy Vice President for Europe, Asia, the Pacific, and Latin America, met with Prime Minister Deuba and senior government officials of Nepal to discuss final provisions of a planned MCC grant assistance (compact).

The MCC is finalizing plans for a five-year $630 million investment in the power and transportation sectors. MCC will invest up to $500 million via grant and the Nepali government will contribute an additional $130 million.  The next steps in MCC’s process are for the Nepali Cabinet to approve the Compact and then for MCC’s Board of Directors to vote on the Compact, expected in the next few weeks. Once approved by the Board, it can then formally be signed by both the parties.

“The development phase of the proposed MCC compact with the Government of Nepal is entering the final stages. The compact aims to improve the availability of both electricity and control transportation costs in Nepal,” said Sumar.

After MCC selected Nepal for a smaller threshold program in December 2011, MCC and the Government of Nepal analyzed Nepal’s constraints to economic growth and jointly prepared a policy improvement program based on the results. Given Nepal’s strong performance on its MCC policy indicator scorecard through 2014, MCC’s Board of Directors selected Nepal as eligible to develop a compact, a larger grant-based investment.

MCC and the Government of Nepal mutually agreed to focus on addressing two binding constraints to economic growth: the inadequate supply of electricity and the high cost of transportation. The compact proposal seeks to address these constraints by investing in an Electricity Transmission Project (ETP) and a Road Maintenance Project (RMP). ETP would transform Nepal’s power sector by expanding and strengthening the high voltage electricity transmission network to support new investments in generation and allow greater cross-border electricity trade. The RMP would improve the road maintenance regime in Nepal and complement existing efforts to build new roads by other parties.

The Millennium Challenge Corporation is an independent U.S. government agency working to reduce global poverty through economic growth.  Created in 2004, MCC provides time-limited grants and assistance to low-income countries that meet rigorous standards for good governance, from fighting corruption to respecting democratic rights.