US Passes Law Allowing One-Year Extension for Nepal’s Millennium Challenge Corporation Program

The United States has enacted legislation permitting an extension of up to one year for development assistance under the Millennium Challenge Corporation (MCC) program in Nepal if necessary. This law, approved by both houses of the US Congress and signed by President Donald Trump, allows extensions of the MCC compact duration by up to one year in Nepal and three other countries.

In Nepal, the MCC’s ongoing projects—including the construction of electricity transmission lines and roads—still have a little over two years and four months remaining for completion. President Trump signed this law in February. Meanwhile, Nepal’s Ministry of Finance has stated that it has no proposals underway to extend the MCC program’s tenure.

An official spokesperson for the US Department of State described the MCC Nepal Compact as a strong partnership between the two countries supporting shared economic growth. After taking office, President Trump reviewed foreign aid programs and temporarily suspended several MCC compacts. In Nepal, projects paused since January 2025 resumed in late July. The fiscal year 2026 appropriation law now facilitates a potential one-year extension for MCC programs in Nepal and other countries, subject to available funding.

Since 2004, the Millennium Challenge Corporation has provided five-year grants under specific programs upon agreement with the partner countries. According to MCC’s website, compacts are currently being implemented in five countries. The reinstatement legislation specifies that “subject to funding availability, the MCC may extend compacts by up to one year in Indonesia, Kosovo, Nepal, and Senegal.” However, the law requires notifying the relevant Congressional committees before any extension is granted.

Under the MCC, the United States has granted Nepal 550 million US dollars (equivalent to over NPR 8.18 billion at current exchange rates) to support electricity transmission line and road construction. This 2017 agreement represents Nepal’s largest-ever foreign grant and has triggered geopolitical tensions. Despite controversies amid Washington-Beijing rivalry, Nepal’s Parliament approved the MCC agreement with interpretative declarations in 2022, enabling the compact’s full implementation.