Kathmandu The controversial US-funded Millennium Challenge Corporation (MCC) agreement, which was supposed to be tabled in Nepal’s Parliament on Wednesday, was deferred amidst clashes between protesters and police over the USD 500 million grant.

Nepal’s political parties are sharply divided over the issue of whether to accept the US grant assistance under MCC agreement, which is under consideration in the House of Representatives.

Nepal and the United States in 2017 signed the MCC agreement, meant for building Nepal’s infrastructure such as electric transmission lines and improvement of national highways.

During a meeting on Wednesday morning, Prime Minister Sher Bahadur Deuba and CPN (Maoist Centre) Chairman Pushpa Kamal Dahal ‘Prachanda’ decided not to present the MCC grant agreement in the House of Representatives, according to sources in the ruling Nepali Congress (NC).

Deuba and Prachanda have decided to hold a meeting of the ruling coalition on Thursday to decide whether to table the agreement in Parliament, they said.

Earlier in the day, a meeting of the parliamentary party of the ruling Communist Party of Nepal (Maoist Centre) decided to vote against the government’s proposal if the MCC project is tabled without amendments.

Maoist Centre Chief Whip Dev Gurung had warned that the alliance would break automatically if Parliament passes the MCC project without the consent of the ruling coalition.

Last week, the US warned Nepal to ratify the proposed grant assistance from America under MCC by February 28, saying if Kathmandu did not accept the USD 500 million programme, Washington would review its ties with the Himalayan nation and consider China’s interests behind its failure.

US Assistant Secretary of State Donald Lu raised the issue on Thursday last during his separate telephonic conversation with Prime Minister Deuba, CPN-Maoist Centre chief Prachanda and main Opposition CPN-UML chairman K P Sharma Oli.

According to NC party sources, Lu warned that if Nepali political leadership failed to endorse the MCC compact grant within the stipulated deadline of February 28, the US would be forced to review its ties with Nepal”. He further warned that “it would consider China’s interest behind Nepal’s failure to ratify the compact.”

Meanwhile, demonstrations were held both in favour and against the USD 500 million US aid project.

Agitators protesting MCC ratification on Wednesday clashed with police at Baneshwor area near the Parliament building. Police fired tear gas shells and water cannons to disperse the crowd. In retaliation, the protestors pelted stones and bricks at the police.

A pro-MCC demonstration was held in central Kathmandu. A motorcycle rally organised by MCC supporters originated from Anamnagar and travelled through several places, including Maitighar mandala in the capital city.

The participants carried placards and banners that read Welcome MCC’. They called for not politicising the aid proposal as “it is for Nepal’s development primarily for the power development and road infrastructure”.

Although the ruling Nepali Congress has decided to endorse the MCC through Parliament, other ruling alliance members including CPN-Maoist Centre led by Prachanda and CPN-Unified Socialist led by Madhav Kumar Nepal have expressed their reservation.

Nepal’s Leftist political parties have been opposing the pact, saying it was not in national interest and that it was meant for countering China.

Further, there are reports that China is behind spreading misleading rumours against the MCC pact.

If the US reviews its ties with Nepal following Nepal’s failure to endorse the MCC pact, it would adversely affect Nepal’s economic sector as Washington has been the largest bilateral donor of Kathmandu for decades.

“Nepal could lose bilateral and multilateral aid as well as foreign direct investment if it fails to ratify MCC,” according to a recent report in Kathmandu Post newspaper, which had quoted finance ministry sources.

Nepal Prime Minister Deuba in December underlined the need to ratify the proposed grant assistance from the US under the MCC by forging consensus among all political parties, asserting that the USD 500 million programme is not against the national interest.

Nepal was the first country in South Asia to qualify for the programme after it met 16 out of the 20 policy indicators.

The Millennium Challenge Corporation is a bilateral United States foreign aid agency established by the US Congress in 2004. It is an independent agency separate from the State Department and USAID.

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