Kathmandu. In accordance with the Trump administration’s “America First” foreign policy, the United States has finished reviewing the foreign aid portfolio for the Millennium Challenge Corporation (MCC). According to a news release from MCC, the new approach will make the US “safer, stronger, and more prosperous.” Following the MCC Board’s decision-making process and more discussions with the US Congress and partner nations, more information will be released.

The government is working with us to implement the $500 million MCC Compact. The government has agreed to provide an additional $197 million, bringing the project’s total cost to $747 million. The compact will expand Nepal’s transportation and electrical transmission network, fostering regional energy integration and national prosperity.

The US government’s decision to permit the project’s continuation under a special exception with the ongoing suspension of larger foreign aid programs was previously praised by Millennium Challenge Account Nepal (MCA-Nepal).

In line with the “America First” approach, US President Donald Trump issued an executive order on January 20th that mandated a review of all US foreign aid. As a result, aid from agencies such as USAID and MCC was suspended for ninety days. MCC’s financing was later included in the suspension, notwithstanding its initial exemption.

Nonetheless, MCC authorised Nepal to carry on with necessary office and procurement functions in March. Since then, work on the project has continued. The US Congress and the Nepali cabinet have not yet confirmed the disbursement of the additional $50 million that the MCC Board approved in January 2025 to resolve cost overruns in the gearbox line component.

Contracts have been awarded for an 18-kilometer transmission line between the New Butwal substation and the Indian border, as well as for three substations: Tanahun (Damauli), Nuwakot (Ratmate), and Nawalparasi. In most locations, physical work has already started.

Additionally, MCA-Nepal has submitted bids for the final 297 kilometres of transmission lines, and bid assessments are under underway. An earlier 315-kilometer tender had to be cancelled because bids exceeded expected expenses by more than 60%.

On August 30, 2023, the five-year compact went into effect. Any funds that remain after the deadline will be given back to the US government. According to ForeignAssistance.gov, obligations under the MCC Nepal Compact are $471.3 million so far in fiscal years 2023 and 2024.

After years of political wrangling, the MCC-Nepal Compact was ultimately ratified by parliament on February 27, 2022, having been signed in September 2017. After six years since the agreement was signed, the project was finally formally launched in August 2023.

Nepal has already raised its part from the $130 million that was initially agreed upon to $197 million, but it is still unclear whether it will receive the additional $50 million in MCC help. It is unclear if the Trump administration will authorise the extra funding and if Nepal’s cabinet will support it.

Congress created the Millennium Challenge Corporation (MCC) in 2004 as a separate government organisation with the mission of reducing poverty worldwide by funding short-term initiatives for institution building, economic growth, and poverty alleviation. Although development in partner nations is the agency’s primary focus, advancing American interests overseas is also part of its mandate.

After much discussion, Nepal was granted the $500 million award and qualified for MCC support in 2014. The compact, which is being executed under MCA-Nepal, an office created under the Development Board Act of 2013, is one of the largest bundles of US assistance to Nepal ever.