Nepal may be selected for US grant

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    Country could get Millennium Challenge Corporation’s compact funding

    millenniumKATHMANDU: Nepal may be selected for the compact funding programme of Millennium Challenge Corporation (MCC) — the US government’s independent foreign aid agency under direct supervision of the foreign secretary — for the first time, according to a recent report of the Centre for Global Development (CGD), a Washington-based think tank that closely monitors the MCC programme.

    It would mean the country would be selected for the compact funding three years after its selection for threshold funding.

    Nepal was selected for MCC’s threshold funding in December 2011. Despite reselection for the threshold programme in 2012 and 2013, the country is yet to receive grant under this programme. Threshold funding is a small-scale grant of about $10 to $20 million, which is provided to remove the growth constraints recognised by the joint team of respective government and threshold programme coordinator from MCC. Nepal had finalised the ‘Growth Constraints Analysis’ report in May 2014 to be eligible for threshold grants to diagnose the constraints.

    The MCC board meeting, chaired by US foreign secretary and scheduled for December-end, will take a decision on providing threshold or compact funding to the countries. Compact funding is the second phase programme under MCC for substantive investment to attain high growth. The board selects the grant recipient countries on the basis of 20 independent and transparent policy indicators, including human development indicators, rule of law, corruption perception index and commitment to move forward in democratic principles.

    The CGD report says MCC board is likely to consider Nepal for compact eligibility because of its substantial economic ties to India and MCC investment in Nepal could be strengthened by a regional lens that incorporates its large neighbour.

    Nepal’s threshold programme agreement is largely ready and it has agreed on 17 indicators out of 21, according to Paul J Keiser, Nepal threshold programme coordinator. Keiser’s team has also met Energy Minister Radha Gyawali and appreciated efforts on hydropower sector development that could play a key role in Nepal’s economic transformation.

    The recent report of CGD has said that the country has made some headway towards a more stable political environment compared to the situation three years ago when MCC first selected Nepal for the threshold programme and expects its selection for compact funding.

    Nepal’s ‘Growth Constraints Analysis’ report has prescribed reforms in four major areas to improve country’s investment climate. The document has identified low hydropower generation, lack of transport infrastructure, policy uncertainty and labour relations as the constraints to growth, and a majority of them were related to hardware (infrastructure), rather than software (policies) areas.

    The findings of the growth constraints could only be solved through compact funding and the MCC board may take a decision of selecting Nepal for it, according to the report.

    Source : The Himalayan Times