Nepal is all set to tap a funding pool of $500 million (approximately Rs52 billion), the biggest foreign grant amount in its history, under the “compact programme” pledged by the Millennium Challenge Corporation (MCC) of the US government.

The Millennium Challenge Corporation (MCC) is an independent US government agency working to reduce global poverty through economic development.

In this connection, a MCC delegation led by Fatema Z. Sumar, Regional Deputy Vice President for Europe, Asia, the Pacific, and Latin America, met with Prime Minister Sher Bahadur Deuba and senior government officials in Kathmandu to discuss final provisions of the planned MCC grant assistance on Friday.

“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.

Under the compact programme, the MCC will invest up to $500 million via grant while Nepal government will contribute an additional $130 million in the field of power and transportation over the period of five years.

It is learnt that if all projects are not completed exactly after five years of their implementation date, the funds will go back to the US.

The final grant agreement is likely to be penned before the US fiscal year ends in September. Once the final deal is sealed, the government and the MCC will fix a date to roll out the projects. However, for this, Nepali cabinet should approve the compact programme and MCC’s Board of Directors also need to vote on the compact.

“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,” read a statement released by the US embassy today.