MILLENNIUM CHALLENGE COMPACT BETWEEN THE UNITED …

1 MILLENNIUM CHALLENGE COMPACT BETWEEN THE UNITED STATES OF AMERICA ACTING THROUGH THE MILLENNIUM CHALLENGE CORPORATION AND THE FEDERAL democratic republic OF NEPAL ACTING THROUGH THE MINISTRY OF FINANCE MILLENNIUM CHALLENGE COMPACT TABLE OF CONTENTS Page ARTICLE 1. GOAL AND 1 Section COMPACT Goal .. 1 Section Project Objectives .. 1 ARTICLE 2. FUNDING AND RESOURCES .. 2 Section Program Funding .. 2 Section COMPACT CDF .. 2 Section MCC Funding .. 3 Section Disbursement .. 3 Section 3 Section Government Resources; Budget.

2 3 Section Limitations on the Use of MCC Funding .. 3 Section Taxes .. 4 ARTICLE 3. IMPLEMENTATION .. 5 Section Program Implementation Agreement .. 5 Section Government Responsibilities .. 5 Section Policy Performance .. 6 Section Accuracy of Information .. 6 Section Implementation Letters .. 6 Section Procurement and Grants .. 6 Section Records; Accounting; Covered Providers; Access .. 7 Section Audits; Reviews .. 7 ARTICLE 4. COMMUNICATIONS .. 8 Section Communications .. 8 Section Representatives.

3 9 Section Signatures .. 9 ARTICLE 5. TERMINATION; SUSPENSION; EXPIRATION .. 10 Section Termination; Suspension .. 10 Section Consequences of Termination, Suspension, or Expiration .. 10 Section Refunds; Violation .. 11 ii Section Late Payment Interest .. 11 Section Survival .. 11 ARTICLE 6. COMPACT ANNEXES; AMENDMENTS; GOVERNING 11 Section 11 Section Amendments and Modifications .. 12 Section Inconsistencies .. 12 Section Governing Law .. 12 Section Additional 12 Section References to MCC Website.

4 12 Section References to Laws, Regulations, Policies, and Guidelines, References to COMPACT Expiration and Termination .. 13 Section MCC Status .. 13 ARTICLE 7. ENTRY INTO FORCE .. 13 Section Domestic Requirements .. 13 Section Conditions Precedent to Entry into Force .. 13 Section Date of Entry into Force .. 14 Section COMPACT Term .. 14 Section Provisional Application .. 14 ARTICLE 8. ADDITIONAL GOVERNMENT COVENANTS .. 14 Section Covenant for the Electricity Transmission Project.

5 14 Annex I: Program Description Annex II: Multi-Year Financial Plan Summary Annex III: COMPACT Monitoring & Evaluation Summary Annex IV: Conditions to Disbursement of COMPACT CDF Annex V: Additional Conditions Precedent to Entry Into Force Annex VI: Definitions Annex VII: Tax Schedules MILLENNIUM CHALLENGE COMPACT PREAMBLE This MILLENNIUM CHALLENGE COMPACT (this COMPACT ) is BETWEEN the UNITED States of America, acting through the MILLENNIUM CHALLENGE Corporation, a UNITED States government corporation ( MCC ), and the Federal democratic republic of Nepal ( Nepal ), acting through its Ministry of Finance (the Government ) (individually, a Party and collectively, the Parties ).

6 Capitalized terms used in this COMPACT will have the meanings provided in Annex VI. Recognizing that the Parties are committed to the shared goals of promoting economic growth and the elimination of poverty in Nepal and that MCC assistance under this COMPACT supports Nepal s demonstrated commitment to strengthening good governance, economic freedom and investments in people; Recalling that the Government consulted with the private sector and civil society of Nepal to determine the priorities for the use of MCC assistance and developed and submitted to MCC a proposal for such assistance to achieve lasting economic growth and poverty reduction; and Recognizing that MCC wishes to help Nepal implement the program described herein to achieve the goal and objectives described herein (the Program ); The Parties hereby agree as follows: ARTICLE 1.

7 GOAL AND OBJECTIVES Section COMPACT Goal. The goal of this COMPACT is to reduce poverty through economic growth in Nepal (the COMPACT Goal ). MCC s assistance will be provided in a manner that strengthens good governance, economic freedom, and investments in the people of Nepal. Section Project Objectives. The Program consists of the projects described in Annex I (each a Project and collectively, the Projects ). The objective of each of the Projects (each a Project Objective and collectively, the Project Objectives ) is to: (a) Increase electricity consumption by facilitating power trade and by improving the availability and reliability of electricity supply in Nepal s electricity grid; and by facilitating power trade, and (b) Maintain road quality across the strategic road network.

8 2 ARTICLE 2. FUNDING AND RESOURCES Section Program Funding. Upon entry into force of this COMPACT in accordance with Section , MCC will grant to the Government, under the terms of this COMPACT , an amount not to exceed Four Hundred Fifty-Nine Million Five Hundred Thousand UNITED States Dollars (US$459,500,000) ( Program Funding ) for use by the Government to implement the Program. The allocation of Program Funding is generally described in Annex II. Section COMPACT CDF. (a) Upon the signing of this COMPACT , MCC will grant to the Government, under the terms of this COMPACT and in addition to the Program Funding described in Section , an amount not to exceed Forty Million Five Hundred Thousand UNITED States Dollars (US$40,500,000) ( COMPACT CDF ) under Section 609(g) of the MILLENNIUM CHALLENGE Act of 2003, as amended (the MCA Act ), for use by the Government to facilitate implementation of this COMPACT , including for the following purposes.

9 (i) financial management and procurement activities; (ii) administrative activities (including start-up costs such as staff salaries) and administrative support expenses such as rent, computers, and other information technology or capital equipment; (iii) monitoring and evaluation activities; (iv) feasibility, design, and other project preparatory studies and activities; and (v) other activities to facilitate COMPACT implementation as approved by MCC. The allocation of COMPACT CDF is generally described in Annex II.

10 (b) In accordance with Section , this Section and other provisions of this COMPACT applicable to COMPACT CDF will be effective, for purposes of COMPACT CDF only, as of the date this COMPACT is signed by MCC and the Government. (c) Each Disbursement of COMPACT CDF is subject to satisfaction of the conditions precedent to such disbursement as set forth in Annex IV. (d) If MCC determines that the full amount of COMPACT CDF available under Section (a) exceeds the amount that reasonably can be utilized for the purposes set forth in Section (a), MCC, by written notice to the Government, may withdraw the excess amount, thereby reducing the amount of the COMPACT CDF available under Section (a) (such excess, the Excess COMPACT CDF Amount ).