Nepal will sign an agreement with the US government on September 14 to secure a grant of $500 million (approximately Rs51.5 billion) for construction of transmission lines and maintenance of various road sections.

A Nepali delegation is planning to leave for the US on September 12 to seal the deal. The members of the Nepali delegation have not been finalised till date.

This is the biggest grant that the country is receiving from a single development partner. The grant will be disbursed in Nepal by the Millennium Challenge Corporation (MCC), an independent US government agency working to reduce global poverty through economic development.

The $500-million US grant is part of the $630-million compact programme designed by the MCC for Nepal. To implement the programme, the Nepal government has expressed commitment to contribute $130 million, which is the single largest up-front country contribution in MCC’s history.

The fund will be used to extend electricity transmission network by around 300 km and maintain up to 300 km of roads. 

These efforts are expected to make the Nepal’s energy and transport infrastructure robust, enabling the country to attract more domestic and foreign investment, and 

gear up for higher trajectory of economic growth.

The MCC board of directors selected Nepal for its compact programme in December 2014. Nepal was selected for the MCC programme “in recognition of the country’s efforts to establish rule of law and democratic institutions and its strong performance on MCC’s policy scorecard”.

Since then, the MCC has agreed to support two broad projects in Nepal: the Electricity Transmission Project and the Road Maintenance Project, as energy shortage and inferior transport network are two binding constraints for Nepal’s rapid economic growth.

Of the investment being made in Nepal, a bulk, or $520 million, will go towards development of 300 km of 400kV transmission lines from eastern to western parts of the country and three power substations. 

Another $55 million will be used to maintain 305 km of road segments; the remaining amount will be used for activities like monitoring and evaluation of projects being implemented, hiring of procurement and fiscal agents, and covering other administrative expenses.

The project related to the energy sector is expected to have an impact on at least 72 percent of the households currently connected to the grid, while maintenance works on around 305 km of road segments will benefit 205,000 households across the country, according to the MCC.

All projects under the MCC’s compact programme must be completed exactly after five years of their implementation date. If not, the funds will go back to the US.