The United States government has granted a special exemption to allow the continuation of the Millennium Challenge Corporation (MCC) Compact in Nepal, permitting ongoing development projects to proceed despite a broader freeze on American foreign aid programs.
Millennium Challenge Account-Nepal (MCA-Nepal), the agency responsible for implementing the compact, issued a statement on Wednesday confirming and welcoming the US decision. The $500m American grant aims to upgrade Nepal’s electricity transmission infrastructure and improve key sections of the East-West Highway.
According to MCA-Nepal, the exemption allows for the full implementation of the compact’s critical components, including the construction of 297 kilometers of 400 kV electricity transmission lines and essential road maintenance activities. Contracts have already been awarded for three major 400 kV substations and an 18-kilometer cross-border transmission segment.
While the exact date of the US decision has not been disclosed, the MCC had formally informed Nepal in March that procurement and operational work could not proceed amid an ongoing review of American foreign assistance programs.
The temporary suspension stemmed from a directive issued by former US President Donald Trump, calling for a pause and reassessment of several foreign aid initiatives. The MCC Nepal Compact was among the projects temporarily halted under a 90-day review. Despite the pause, both the US Embassy in Nepal and MCC headquarters had reiterated their continued commitment to the Nepal Compact. Wednesday’s announcement reaffirms that commitment and ensures that key infrastructure projects—seen as crucial for Nepal’s energy security and economic development—will continue without interruption.
Of the total $500m grant, $398m is allocated for transmission line construction, while $52m is designated for road upgrades, particularly along the Dhankhola–Bhaluwang–Lamahi–Shivakhola section of the East-West Highway. MCA-Nepal stated it is working closely with the MCC to finalize procurement processes and accelerate the implementation of all planned components under the compact.
