Nepal has signed an agreement with the US government' Millennium Challenge Corporation to receive a grant worth USD 500 million in next five years to spur private investment and economic growth to reduce poverty in the country.
Nepal would contribute another USD 130 million to support the Millennium Challenge Corporation (MCC).
Nepalese Minister of Finance Gyanendra Bahadur Karki and MCC Acting CEO Jonathan Nash signed the agreement in this regard at the State Department.
The ceremony was joined by Deputy Secretary of State John J Sullivan, Acting Assistant Secretary of State for South and Central Asia, Alice Wells, and Lis Curtis who heads the South Asia division of the National Security Council, the White House.
Describing it as a historic occasion, Sullivan said the signing of an MCC grant agreement is not only a milestone for development, but also serves as a mark of great distinction for Nepal.
"The compact recognizes Nepal's vast progress and ongoing efforts to establish the rule of law and implement democratic institutions. The Board of Directors of the Millennium Challenge Corporation first selected Nepal for a compact in December of 2014," he said.
Sullivan said Nepal's progress over the past few years, both politically and economically, represents a vital turning point for the country.
By holding its first elections under a new constitution, Nepal has signaled the beginning of a new democratic age.
"This compact will enable support for Nepal's greater economic security and help to transform lives for the better. As Acting CEO Nash mentioned, with the signing of this USD 500 million compact, we are committing to tackle the greatest constraints to growth in Nepal's energy and transportation sectors," he added.
"But this is more than just a grant. It's a plan for investment jointly developed to address the inadequate supply of electricity in Nepal and the high cost of transportation in that country. Together, we will work to improve the availability of electricity and make road transportation safer and more affordable," the top American diplomat said.
Karki said this compact of USD 500 million, combined with the Government of Nepal's commitment of USD 130 million, will surely create a lasting impact on Nepal's sustainable development for generations to come.
Recognising the several decades of cooperation between two countries in socioeconomic development programs, the Finance Minister said over the years, America has supported Nepal in building peaceful, prosperous, and a democratic society.
"Today's signing ceremony is the epitome of the US' continued encouragement towards democratic development and a lasting peace in Nepal, he said.
According to Nash, the programme will tackle two of Nepal's most binding constraints to economic growth: low energy supply and high transportation cost.
This includes the construction of high-voltage power lines the equivalent length of one-third the length of Nepal.
It will also facilitate increased electricity trade with India, a strategic partner, and activities that will strengthen sector governance, increasing transparency, efficiency and competition in Nepal's power sector.
In the transportation sector, the compact includes investments that will strengthen the road maintenance regime, which is particularly important to the movement of goods and people in a landlocked mountainous country such as Nepal, he said.
According to MCC, the Electricity Transmission Project is designed to transform Nepal's power sector by expanding and strengthening the high voltage electricity transmission network to support new investments in generation.
The project includes the construction of approximately 300 km of high voltage power lines, equivalent to one-third the length of Nepal; the addition of a second cross-border transmission line to facilitate greater electricity trade with India; and activities to improve sector governance to increase private investment.
"MCC's Nepal Compact is designed to spur private investment and economic growth to reduce poverty. MCC's investments will also support regional energy connectivity in South Asia by strengthening Nepal's power sector and facilitating electricity trade with India," State Department Spokesperson Heather Nauert told reporters at her daily news conference.
"A stable and economically growing Nepal is in the best interest of not just the people of Nepal, but also the region and the US. MCC's work to support stability and strengthen institutions also helps countries withstand global threats such as conflict and natural disasters," she said.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)