KATHMANDU: The United States government has decided to allow the continuation of the Millennium Challenge Corporation (MCC) Compact in Nepal, granting a special exemption to ongoing development projects despite a broader freeze on American foreign aid programs.

Millennium Challenge Account-Nepal (MCA-Nepal), the implementing agency of the compact, issued a statement on Wednesday confirming the U.S. decision and welcoming the move. The compact, which is worth $500 million in American grant assistance, focuses on upgrading Nepal’s electricity transmission infrastructure and improving key sections of the East-West Highway.

According to MCA-Nepal, the U.S. decision enables full implementation of the compact’s critical components, including the construction of 297 kilometers of 400 kV electricity transmission lines and road maintenance activities.

So far, contracts have already been awarded for three major 400 kV substations and an 18-kilometer cross-border transmission segment.

While the exact date of the U.S. government’s decision has not been publicly disclosed, the MCC had earlier, in March, sent a formal letter to Nepal allowing procurement and operational work to proceed amid the ongoing review of American foreign assistance programs.

The suspension stemmed from a directive issued by U.S. President Donald Trump which called for a pause and reassessment of several foreign aid projects. The MCC Nepal Compact was among those temporarily halted, with a 90-day review period in place.

Despite the pause, both the U.S. Embassy in Nepal and MCC headquarters had expressed continued commitment to the Nepal Compact.

Wednesday’s announcement reaffirms that commitment and ensures that key infrastructure work—seen as vital for Nepal’s energy security and economic development—will move forward without interruption.

Of the total $500 million grant, $398 million is allocated for transmission line construction, while $52 million is earmarked for road upgrades, particularly along the Dhankhola–Bhaluwang–Lamahi–Shivakhola stretch of the East-West Highway.

MCA-Nepal stated it is working closely with MCC to finalize procurement processes and expedite implementation of all planned components under the compact.