The deal was under China's ambitious Belt and Road Initiative.
A day before Nepal Prime Minister Pushpa Kamal Dahal 'Prachanda' lost a vote of confidence in Parliament, he gave a nod to an agreement to connect the Himalayan nation with China by rail under Beijing's ambitious Belt and Road Initiative.
Quoting government sources, the MyRepublica news portal said this decision carries more operational than political significance and aligns with Nepal's participation in Chinese President Xi Jinping's multi-billion-dollar pet infrastructure project.
"The Cabinet meeting held on Thursday decided to approve the 'Strengthening the Development Cooperation in Building the Trans-Himalayan Multidimensional Connectivity Network' agreement between Nepal and China," the report quoted Communication Minister and the government's spokesperson Rekha Sharma as saying.
However, a minister downplayed its immediate impact, stating, "This is an initial decision; details of project implementation and BRI modalities are yet to be finalised."
'Prachanda' lost the vote of confidence in Parliament on Friday after coalition partner Communist Party of Nepal-Unified Marxist Leninist (CPN-UML) withdrew support for him, a development that will lead to the formation of a new government led by ex-prime minister K P Sharma Oli.
Prachanda received only 63 votes in the 275-member House of Representatives (HoR) and there were 194 votes against the motion. At least 138 votes are needed to win the vote of trust.
A total of 258 HoR members participated in the voting while one abstained.
Prachanda's move, made just before he departed from office, is viewed not only as progress towards implementing BRI projects but also crucial for initiatives like the Kerung-Kathmandu railway and broader infrastructure development along the Nepal-China border, the report said.
Earlier, ahead of signing a power-sharing agreement with UML, the Nepali Congress had resolved to "only accept grants and not loans under the BRI project". The government was also set to decide on implementing the 2017 BRI agreement with China, which has been pending at the cabinet.
The BRI has raised global concerns over China's debt diplomacy of extending huge loans to smaller countries for unsustainable infrastructure projects. The Hambantota port, which was funded by a Chinese loan, was leased to Beijing in a 99-year debt-for-equity swap in 2017 after Sri Lanka failed to pay off the debt.
India has protested to China over BRI's $60-billion China-Pakistan Economic Corridor flagship project as it is being laid through Pakistan-occupied Kashmir.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)