Nepal will receive $659 million in grants in the next five years from the United States as the Nepal Cabinet has approved a new draft five-year agreement with the USAID, a development agency of the US government.

The aid will be used in priority sectors like health, education, and local governance institutions, Gyanendra Bahadur Karki, the minister for information and communication informed. Significantly, the amount is $100 million more than the country had received from the USAID in the last five years.

Nepal had renegotiated the terms of aid under the USAID and its approval from the cabinet came almost two months after the Parliament ratified the Millennium Challenge Corporation (MCC), a foreign aid program of the US government that later became controversial in Nepal, irking its important northern neighbor, China.

“This is a kind of paradigm shift because all the programs and projects agreed under the grant will be part of the budget,” Madhu Kumar Marasini, Nepal’s Finance Secretary, was quoted as saying by The Kathmandu Post. 

“The USAID will spend the money on our terms. The Office of the Auditor-General will conduct the auditing to see if the money is being spent under budget or non-budget,” he added.

Importantly, this will be the first major aid agreement with the US after the MCC fiasco. China, unlike in the past when it pursued quiet diplomacy in Nepal, became quite vocal against the MCC, accusing the US of pursuing “coercive diplomacy” in Nepal, attempting to undermine its sovereignty and independence. [Read More]

While the US’ renewed interest in Nepal, a traditional battlefield of influence between India and China, is evident from the MCC agreement and increased bilateral engagements and assistance offers, Nepal may struggle to satisfy the security concerns of a newly assertive China.

Earlier contestation between the US and China in Nepal had ended in 1973 when the US stopped supporting Tibetan insurgents, known as Khampa rebels, in Nepal’s northern region of Mustang, after then US President Richard Nixon reached out to China’s Mao Zedong.

Commenting on these recent developments, Amish Raj Mulmi, an expert on Nepal’s foreign policy, recently wrote, “What is clear is that the US-China global contest has once more arrived in the Himalaya, and Nepal is where it likely will be centered, just as it was in the cold war.”

“Few foreign-aid issues have been so vigorously discussed across all sections of Nepali society in recent history; and few have been so thickly misinformed,” Mulmi wrote, referring to intense debate around the MCC, partly fuelled by the deliberate disinformation campaign, seemingly waged by China.
 
On the other hand, Chinese Foreign Minister Wang Yi, who visited Nepal last month after the MCC ratification, gave a pointed warning when he said Beijing opposed “any attempt to undermine Nepal's sovereignty and independence, interfere in its internal affairs and engage in geopolitical games” in Nepal.

(SAM)