How will the U.S. grant – approved despite a raging controversy – factor into both upcoming elections and Nepal’s diplomatic positioning?

Back in 2017, when Nepal formally accepted the $500 million grant under the U.S. Millennium Challenge Corporation (MCC) to improve its power and road networks, few could have foreseen the chaos outside the parliament on February 27, 2022, the day Nepal’s parliament ratified the MCC Nepal Compact.

On that fateful Sunday, an estimated 1,500 protestors surged toward Nepal’s Federal Parliament in Kathmandu, the national capital, just as they had been doing on and off for the previous few weeks. To disperse the unruly, stone-pelting mob, the police had to fire rubber bullets and deploy water cannons and tear-gas.

Five years ago, there was little controversy over the agreement. Many Nepalis saw it as bringing easy, interest-free money for their country’s development. The whole project under the grant would have to be done and dusted in five years, or the compact would be abrogated. But, if successful, it would be a rare infrastructure project in Nepal completed within the estimated time and budget, setting a wonderful precedent.

In the final parliamentary vote on the compact, four of the five biggest parties in the ruling coalition led by Prime Minister Sher Bahadur Deuba’s Nepali Congress voted in its favour. The main opposition and biggest party in Parliament – the Communist Party of Nepal-Unified Marxist-Leninist (CPN-UML) – chose not to take part in the voting.

But parliamentary ratification is only a step toward the compact’s implementation. Land acquisition and securing the right of way for the electricity transmission lines to be built under the compact have only just started. Historically big infrastructure projects have been the trickiest issue to resolve in Nepal. But should things go as planned, the compact will enter into force in around a year-and-a-half. After that, the project has to be completed within five years.

Even amid the raging MCC controversy, the government had announced local level elections for May 13, to be followed by provincial and federal elections. But many in the ruling coalition are now in favor of dissolving the Parliament  and jumping straight into federal polls.

Some analysts believe the compact debate will have little impact on elections, whenever they take place.

Local elections seldom feature larger national or international issues. They turn more on personal connections and local concerns.

Even in the case of provincial and federal elections, political analysts think the controversy’s impact will be minimal. All of Nepal’s major parties backed the compact. Deuba’s ruling coalition partners – the Communist Party of Nepal (Maoist Center) and the Communist Party of Nepal (Unified Socialist), both of which had earlier been resisting parliamentary endorsement – had to give in to Deuba’s dogged stand on endorsement.