Nepal Compact

Nepal is one of the poorest countries in Asia, with nearly half of the population living on less than three dollars a day. It continues to face extensive economic development challenges caused by high transportation costs to move both goods and people as well as an inadequate supply of electricity. Decades of political transition and the devastating earthquakes of 2015 further compounded Nepal’s development challenges.

The MCC compact with Nepal marks a new chapter in the U.S.-Nepal Partnership. MCC’s Nepal Compact is designed to increase the availability of electricity and lower the cost of transportation in Nepal. These investments will help the Government of Nepal better deliver critical services to its people, ease the movement of goods around the country, and open up new opportunities for private investment. Strengthening the reliability of key infrastructure will put the country’s economy on a firmer growth trajectory, advance stability, support regional security, and reduce poverty.

An additional $130 million from the Government of Nepal in support of the compact − the highest up-front contribution from a partner country − enables MCC’s investment to have an even greater impact.

Financials

Compact Budget

Milestones

  • Signed:
    September 14, 2017

Compact Projects

Electricity Transmission Project

The objective of the Electricity Transmission Project is to increase domestic electricity consumption by improving the availability and reliability of electricity in Nepal’s electricity grid. Specifically, the project will expand and strengthen the high voltage electricity transmission network to support new investments in generation. The project includes the construction of approximately 300 kilometers of high voltage power lines, equivalent to one-third the length of Nepal, including a link to the Indian border to facilitate electricity trade; construction of three substations to help transform power from one voltage level to another for further transmission or distribution to customers; and activities to improve sector governance to promote private investment. In addition to this infrastructure, the project will also include a benefit sharing program to increase access, reliability, and productive use of electricity within project-affected municipalities.

Projected Long-Term Results

Transportation Project

Poor road maintenance in Nepal makes travel and transport of goods and people challenging and expensive. To address the high cost of transit, the objective of this investment is to maintain road quality across the strategic road network, preventing further deterioration of Nepal’s road network. The project includes an incentive-matching fund to encourage the expansion of Nepal’s road maintenance budget, in addition to the periodic maintenance of up to 305 kilometers of the country’s strategic road network. The project will also improve the administration of road maintenance through training and capacity building. Investments in this sector are critical to promoting economic activity.

Projected Long-Term Results

As of April 2, 2020