U.S. approves continuation of MCC projects in Nepal

The U.S. government has officially allowed the MCC (Millennium Challenge Corporation) program in Nepal to continue without interruption. This decision removes all uncertainty about the future of the MCC Nepal Compact.

Earlier this year, in February 2025, the U.S. paused foreign aid for 90 days, which also affected the MCC projects in Nepal. As a result, payments were delayed, and there was confusion about whether the program would move forward. However, after a review, the U.S. decided to give a special exemption to Nepal in July 2025.

Following this, the U.S. Embassy in Kathmandu sent a formal letter to the Government of Nepal, confirming that the MCC program could go ahead as planned. MCA-Nepal, the agency responsible for carrying out the project, welcomed the decision and said that work on key infrastructure projects would continue smoothly.

The MCC Nepal Compact is a large aid agreement that includes:

• $500 million in grant support from the U.S.
• $197 million in additional funding from the Government of Nepal

This money is being used to build 297 kilometers of electricity transmission lines, repair roads, and construct major substations in Butwal, Ratamate, and Damauli. An 18-kilometer cross-border transmission line from Butwal to Gorakhpur is also under construction.

MCA-Nepal has already signed contracts with companies to build these projects. Several parts of the work, like substation design, land surveys, and early construction, are already underway. Payments have also been made to contractors, and tenders have been invited for additional construction, including 40 kilometers of road between Dhan Khola and Lamahi.

The MCC Compact was signed in 2017 and officially started in August 2023. It is expected to be completed within five years, by 2028. With the U.S. government’s latest decision, the projects can now move forward without further delays.