Nepal's northern neighbour China Wednesday pledged a soft loan of $200 million for infrastructure-related projects in the Himalayan republic, including a 61 MW hydropower project.

The Upper Trishuli power project in Nepal's Nuwakot district will be built within three years with Chinese assistance, Nepal's Finance Minister Surendra Pandey told reporters as a memorandum of understanding was signed between China's state-owned Exim Bank, which will disburse the loan, and Nepal's finance ministry.

Exim Bank Vice President Li Jun and Nepal's Finance Secretary Rameshwar Prasad Khanal signed the MoU in which China has pledged the loan at an annual 1.75 percent interest rate.

While about $120 million from the loan would be used for the new hydropower project for power-starved Nepal, the rest would be spent on other projects, the finance ministry said.

Pandey said Nepal Electricity Authority would announce by this week the name of the company that has been shortlisted to execute the project.

Last year, China's Assistant Minister for Foreign Affairs He Yafei had affirmed the loan during a visit to Nepal.

At that time, China had shown interest in funding hydropower projects in Nepal totalling about 100 MW.

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