KATHMANDU: The government of Japan has extended an additional loan of JPY 5.7 billion for Nepal’s Nagdhunga Tunnel Construction Project, increasing its total financial assistance for the project to JPY 22.336 billion.

The Exchange of Notes for the additional financing was signed on June 3, 2026, by Japanese Ambassador to Nepal Maeda Toru and Finance Ministry Secretary Ghanshyam Upadhyaya.

According to the Embassy of Japan, the additional funding, equivalent to approximately Rs 5.5 billion, was provided to address a budget shortfall caused by rising construction costs and other factors. Japan had initially committed up to JPY 16.636 billion for the project in December 2016.

Nepal’s first road tunnel through a mountainous region is expected to significantly improve transportation connectivity and boost local economic activity after it comes into operation later this year.

Construction of the tunnel began in 2019 and has faced major engineering challenges due to the complex and still-evolving geology of the Himalayan region. The excavation process encountered repeated flooding and tunnel collapses, requiring close collaboration between Japanese and Nepali engineers to overcome technical difficulties.

The Embassy stated that the project has also provided an opportunity to transfer advanced Japanese tunneling and engineering expertise to young Nepali professionals.

The additional support comes as Nepal and Japan mark the 70th anniversary of diplomatic relations. Japan expressed confidence that the project will contribute to Nepal’s sustainable economic development while serving as a symbol of the enduring friendship and cooperation between the two countries.