US warns of reviewing ties with Nepal if $500mn aid not ratified

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US President Joe Biden’s administration has warned that it will review its ties with Nepal if the $500 aid pledged under the Millennium Challenge Corporation (MCC) was not ratified by the Himalayan nation’s Parliament.

In separate telephone conversations with Prime Minister Sher Bahadur Deuba, CPN-UML chair K.P. Sharma Oli and Maoist Centre chair Pushpa Kamal Dahal ‘Prachanda’ on Thursday, US Assistant Secretary of State Donald Lu said that Washington will review its relations with Nepal in the event of its failure to ratify the MCC compact from Parliament by February 28, according to multiple media reports in Kathmandu.

“Secretary of State Lu conveyed to Chairman Oli that the US will be forced to review its bilateral ties with Nepal if the MCC is not ratified by the given deadline set by Deuba and Dahal,” The Kathmandu Post daily quoted Rajan Bhattarai, the head of the UML’s Foreign Department, as saying.

In response, Oli, according to Bhattarai, said that the US has been one of the biggest assistance partners of Nepal in various sectors for decades.

Nepal signed the $500 million grant under the MCC facilities in 2017 but to the strong opposition from some communist parties including from Prachanda’s CPN-Maoist Center, the US aid has failed to execute and ratify from the house.

One of the clause in the MCC agreement is to ratify it from Parliament for timely completion of the project in five years.

Assistant Secretary Lu told the Nepali leaders that if the grant agreement did not move forward, the US would understand that China played a role in the South Asian country’s internal politics, resulting in indecision on MCC and its ultimate suspension.

According to the media reports, Secretary Lu clearly told Maoist Chair Prachanda that the MCC agreement could not be amended nor its deadline for parliamentary ratification extended.

“Now you have to decide – whether you approve it or not,” Lu added.

Prachanda, on his part, said that public opinion was divided on MCC and his party also had some objections.

However, Secretary Lu communicated to Prachanda that the US would think that MCC was turned down owing to China’s pressure in Nepal.

“We will understand that China intervened and suspended our aid,” he said.

The US assistance project MCC has long been under consideration in the House of Representatives.

MCC, in a letter dated February 6 and addressed to Prime Minister Deuba and Prachanda, had set February 28 deadline for Nepal to decide on grant agreement.

The letter was in response to another one dispatched by Deuba and Prachanda to the MCC on September 13 last year.

In the letter, the two leaders sought at least four months assuring to create an environment for MCC approval.

A consensus among major political parties is still lacking.

Prime Minister Deuba’s efforts to move forward MCC is encountered by delay tactics employed by the ruling coalition partners, Maoist Center and the Unified Socialist.

Deuba, who is also the Nepali Congress president, sought the support of the main opposition but the CPN-UML clearly told him that it would reveal its stance on MCC only after the coalition clarified its position.

The meeting of the House of Representatives has been postponed several times due to lack of consensus among the parties on agenda.

Preparation is afoot to postpone the next sitting slated for February 14.

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