Penal settlement in the country (5)

I believe the answer is:

nepal

'country' is the definition.
(Nepal is an example)

'penal settlement' is the wordplay.
'settlement' indicates anagramming the letters.
'penal' is an anagram of 'NEPAL'.

'in the' is the link.

(Other definitions for nepal that I've seen before include "Himalayan state" , "Himalayan kingdom" , "Plane country north-east of India" , "hilly part of Asia" , "Himalayan republic" .)

I've seen this clue in The Telegraph, The Guardian and The Globe and Mail.

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