MCC Projects in Nepal Unharmed Despite U.S. Foreign Aid Freeze

January 28, 2025
MCC Projects in Nepal Unharmed Despite U.S. Foreign Aid Freeze

The decision by the U.S. government to halt foreign aid for three months is unlikely to affect the Millennium Challenge Corporation (MCC) program.

Following an executive order by President Donald Trump, U.S. Secretary of State Marco Rubio decided to suspend U.S. foreign aid administered by the State Department and the United States Agency for International Development (USAID) for three months.

The State Department stated that this review of foreign assistance programs was initiated under President Trump’s executive order, aimed at reassessing and restructuring foreign aid to align with U.S. foreign policy priorities under the “America First” agenda, while ensuring these programs are effective.

As a result of this decision, programs managed by the State Department and USAID have been suspended for three months. However, since MCC is not included in the Secretary of State’s directive, the investments under MCC worldwide remain unaffected.

Following the Secretary of State’s decision, the Ministry of Finance issued a statement confirming that all USAID programs have been instructed to suspend operations for 90 days. “The letter does not mention MCC, meaning the plans under MCC will not be impacted,” a ministry source said.

Established by the U.S. Congress in 2004 to assist the world’s poorest countries, MCC focuses on promoting democratic governance, economic freedom, and investment in people in these nations. It provides grants to promote economic growth and poverty alleviation, which must be implemented within a specified time frame.

In Nepal, MCC is providing a grant of $550 million (approximately NPR 75.35 billion) for the construction of transmission lines and road improvements. Although the initial agreement in 2017 allocated $500 million, the U.S. Congress recently approved an additional $50 million due to budget shortfalls in the transmission line projects under MCC.

In addition to MCC’s grant, the Nepalese government is investing $195 million (approximately NPR 26.71 billion) in the same project. The project, which came into effect last year, must be completed within four years. If not, the remaining unspent grant funds from the U.S. will be returned.

Finance Ministry Communicates USAID Project Suspension

The Ministry of Finance issued a notice stating that assistance for four projects under the Development Objective Agreement (DOAG) signed on May 5, 2022, has been temporarily suspended for 90 days as per a directive from USAID.

The notice highlighted that “all agencies involved have been informed not to create liabilities for projects funded through the consolidated fund, including those related to health, education, agriculture, and inclusive policy.”

The Ministry of Finance reported that USAID currently has projects worth $695 million (approximately NPR 95 billion) in operation. According to Dolindra Sharma, Undersecretary at the Ministry’s International Economic Cooperation Coordination Division, commitments amounting to $411 million had been received by the end of the last fiscal year.

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