International Relations and Foreign Affairs
News Brief
During his China visit to attend the Global Sustainable Transport Forum on September 25, Deputy PM and Finance Minister Bishnu Paudel met Chinese Vice Premier Ding Xuexiang and CIDCA’s chairman Luo Zhaohui and urged them to implement the infrastructure projects committed by China. The Chinese leaders expressed their willingness to advance the projects under the Trans-Himalayan Multi-Dimensional Connectivity Network (THMDCN).
After the Chinese Ambassador in Nepal categorized four CIDCA-funded projects, whose letters of exchange were signed recently, under the Belt and Road Initiative (BRI), calls for a transparent parliamentary discussion on the framework has grown. At a parliamentary committee attended by Foreign Minister Arzu Deuba, MP Shishir Khanal demanded an explanation and an open parliamentary debate on the matter.
PM Oli led the Nepali delegation to the 79th session of the United Nations General Assembly (UNGA) held on September 20-27. During his long US visit, PM Oli met several world leaders, including Indian PM Modi and Chinese Foreign Minister Wang Yi, as well as the heads of multilateral and aid agencies such USAID Chief Samantha Power, MCC CEO Alice Albright, UN General Secretary António Guterres, and World Bank president Ajay Banga. He also spoke at the interaction programs organized at Columbia and Harvard Universities.
At the UNGA sidelines, Foreign Minister Arzu Rana Deuba also engaged in a number of diplomatic meetings and exchanges with leaders and counterparts from around the world, including South Korea, the Philippines, and Serbia. She also participated in the High-Level Convening of the Women Political Leaders (WPL). Nepal also signed the Bilateral Consultation Mechanism (BCM) agreement with the US and BCM and Visa Exemption Agreement for diplomatic and official/service passport holders with Indonesia.
At a ministerial-level meeting of the NAM countries, Foreign Minister Arzu Deuba Rana stressed that the Israel-Palestine issue should be addressed through a two-state solution. Addressing a question about the Israel-Hamas conflict, PM Oli also stated that Nepal was not in support of one side or the other but instead always in the favor of peace, as a non-aligned country where Buddha was born.
On September 19, the Parliamentary Hearing Committee approved the names of the ambassadors appointed for 16 countries. While 12 were approved unanimously, four including Shankar Sharma for India were done on the basis of a majority.
Due to the floods and landslides caused by the heavy rainfall, both Tatopani and Rasuwagadhi border points connecting China have closed, which has affected the locals as well as traders.
News Analysis
For the past few months since the two largest parliamentary parties formed a new coalition government, PM Oli has tried hard to define a foreign policy position that he appears to believe would offer him legitimacy from both the neighbors China and India. Against the backdrop of a rapidly evolving geopolitical landscape in the region, characterized by a “very significantly disturbed” India-China relations, a growing US-India strategic convergence, and a reaffirmation of regional groupings such as the Quad, a clear foreign policy that balances the core interests of Nepal’s partners will prove not only beneficial but crucial. However, PM Oli’s approach to governance and diplomacy has often stood in clear contradiction to this necessity.
One of the more obvious examples involves his handling of the Nepal-India relations. On the one hand, he seems willing to mend ties with India and PM Modi, whereas on the other hand, he continues to display an uncanny cynicism for India, often accusing it of plotting against him. An intensive diplomatic effort was able to arrange his meeting with Modi at the UNGA sidelines, where the two sides agreed to solve the pending issues by activating the existing bilateral mechanisms. During an interaction at Columbia University, he stressed the importance of addressing the problems “through fact-based discussion and dialogues.” However, his frequent anti-India remarks and insistence on repeated insistence on issues such as the EPG report, which India now views dead, does little to create a favorable environment for diplomatic negotiations.
Nepal’s relation with China under PM Oli has not seen any considerable improvement either. Although high-level meetings have reaffirmed China’s commitment to advancing the infrastructure projects promised by the northern neighbor, these assurances have barely translated to any real progress. With ever growing calls for open parliamentary discussions on BRI, its implementation in Nepal continues to be at a standstill, and PM Oli is left with few options to entertain this Chinese priority. What further weakens his position is the current shape of the coalition, where CPN-UML’s partner Nepali Congress commands a strong control, especially with Arzu Deuba Rana as the Foreign Minister. In addition, Oli has also had to face a gradually increasing public pressure against him, be it due to his confrontation with Kathmandu’s celebrity Mayor Balen Shah or the more recent frustration for his government’s failure to act responsibly during the floods and landslides that ravaged the country. In the face of these challenges, therefore, PM Oli is likely to see more difficult times ahead in his effort to maintain good relations with both India and China, which apparently the US also wants.
Domestic Politics and Governance
News Brief
House obstructed over the use of word ‘violence’
The meeting of the House of Representatives (HoR) was adjourned on 15 September after the obstruction by CPN (Maoist Centre). They objected the use of the word ‘violence’ by CPN(UML) Secretary Yogesh Bhattarai, and demanded it to be removed from the parliament’s records. However, it was not removed as Speaker Devraj Ghimire said that the term was not unparliamentary.
RSP Chair Lamichhane embroiled in cooperative controversy
The parliamentary sub-committee formed to investigate the cooperative scandal concluded that although RSP chair Rabi Lamichhane was not directly involved in orchestrating the scam, he did misuse the funds illegally brought into the Gorkha Media, which was led by Lamichhane then. The leading parties in the government such as Nepali Congress, the CPN-UML, Ashok Rai’s Janata Samajbadi Party, and the Janamat Party have been demanding to sue Lamichhane for his wrongdoings in the case.
Rajendra Mahato announces formation of new party
Rajendra Mahato announced the formation of a new party on September 17. The party has been named as ‘Rastriya Mukti Kranti Party’ and is to be registered with the Election Commission soon. The press statement from the party states that they are seeking for a peaceful struggle and revolution starting mid-November.
Discussions carry on regarding constitution amendment
The ruling parties including the Nepali Congress and CPN(UML) have started discussions on the amendments of the constitution. In the discussion held on September 9, leaders emphasized prioritizing necessary amendments and creating appropriate laws to ensure political stability.
News Analysis
Constitution amendment and disagreements
The ruling parties have started their discussions on the amendment of the constitution. Leaders of Nepali Congress and CPN(UML) have weighed on the constitutional amendments that need to be made.
The goal of the meeting held on September 9 was to understand all sides' points of view before coming to a decision. While the leading parties claim the same, the opposition parties- Rastriya Swatantra Party and the CPN (Maoist Centre) have expressed their dissatisfaction. According to Maoist chair Dahal, the CPN (UML)-Nepali Congress coalition was formed not for the constitutional amendment, but rather because of his leadership's actions in taking legal action against prominent figures implicated in corruption cases. Opposition leaders from RSP have further argued that the discussions have been shifting to amendment of the constitution instead of implementing it. However, Dahal and the CPN(Maoist Centre) are open to a constitutional amendment that would replace the current system with a directly elected executive head, and they even welcome it.
Ruling party leaders have made it clear that the current mixed electoral system, in particular proportional representation (PR), is their main target. They are confident that proportional representation is the main reason behind the constant formation and dissolution of governments. Nepal’s own experience from the 1990s- of holding multiple elections post the establishment of democracy makes it abundantly evident that this is not the case. Similarly, in the parliament, in 2018, the Communist Party of Nepal(CPN)-UML had held a nearly two-thirds majority. The majority position also could not validate political stability in the country. This implies that the main causes of the uncertainties in the political sector of Nepal lie in factors like political culture, settlements, problems with leadership and management, wishful thinking, mindset of leaders and so on.
Different ruling parties and their chairs have their own vested interests when they reach into positions of power. In the case of amendment of constitution, Nepali Congress leader Sher Bahadur Deuba has hinted that secularism could be up for negotiation. Similarly, prime minister KP Sharma Oli has claimed that the document will be more liberal than before, but seems uncertain, given his previous stance on inclusion and provincial authority. Moreover, the most difficult parties to convince are Madhesh based parties. As parties and leaders from the Madhesh view federalism, the proportional system, and other concepts as the main accomplishments of their movements, they are unlikely to agree to remove the same system. A move which the ruling parties consider a clever move, might push towards igniting sentiments of extreme nationalism that could result in prolonged conflict.
Overall, the ruling parties can identify issues and review them before moving ahead with the amendments, and possibly avoid another wave of political instability.
Federalism
News Brief
In order to accommodate power-sharing agreements between the Nepali Congress and CPN (UML), the Gandaki Province government has increased the number of ministries from seven to nine. After wrangling over power sharing, the number of ministries was increased from seven to nine to accommodate more ministers.
The cabinet meeting on September 1 decided to split two ministries: social development and health, and industry, tourism, forests, and environment. Chief Minister Surendra Raj Pandey announced that the change was aimed at bringing the UML into the government., The UML shall be allocated four ministries, and Congress will be holding five ministries, including the chief minister.
The Gandaki provincial assembly meeting is scheduled for September 11, after a two-month gap. The last meeting passed the budget for the current fiscal year. The assembly has two bills under discussion: one regarding hazardous pesticides and another concerning private firms.
Koshi Chief Minister Hikmat Kumar Karki expanded his Cabinet, inducting three new ministers and a minister of state from the Nepali Congress. The Maoist Centre did exit from the Koshi government on July 26. Four party ministers, including a minister of state, quit the government following a change in alliance at the center. But as of now, no new ministers have been inducted. The Koshi Assembly is at a standstill due to the delay in Cabinet expansion.
The Sudurpaschim provincial assembly has finally endorsed the annual budget after more than two months since the start of the current fiscal year. The budget was passed amid dissatisfaction from the ruling parties. The Congress-UML has a majority in the 53-member provincial assembly. On September 16, the Congress-led government put forward the annual budget totaling Rs31.62 billion.
The provincial governments are urging the federal government to adjust the police force at the provincial level and pass the Federal Civil Service Act. The Koshi government has put forward a 10-point demand on the same to the National Development Action Committee. The province has stressed that provincial police administration and public security fall under the jurisdiction of the provinces, demanding immediate adjustment of police personnel.
News Analysis
Provincial Police force Adjustment
The Provincial Police Force Adjustment is not a new agenda, it has been in pipeline since Nepal adopted the Federal Constitution. This year marks the nine years since the apoption of federal constitution in Nepal. There also has been continuous pressure from the Provincial governments for the Provincial Police, yet there has been no positive response on Police Force Adjustment.
In January 2024, former Prime Minister Pushpa Kamal Dahal had directed concerned agencies to expedite the police adjustment process without delay. He did expressed concern over the hindrances caused by the absence of federal laws and the incomplete police adjustment process. In February 2024, the Ministry of Home Affairs (MoHA) had formed a five-member police personnel adjustment committee to oversee the completion of tasks related to the adjustment of police personnel in the federal setup. The committee will ensure the effective implementation of federalism by facilitating the adjustment of police personnel between the Nepal Police and Provincial Police Services. However, it has not been materialized up until now.
The Madhesh provincial assembly endorsed a resolution motion on December 6 2023, stating that the provinces should be allowed to exercise all the authorities delegated to them by Schedule 6 of the Constitution of Nepal. Also, the Police Adjustment Act, which was approved by the President in 2020, has not been yet implemented due to the federal government's reluctance. This has led to the provinces not being able to exercise their constitutional right to maintain peace and security. Time and again, the home ministers of all seven provinces have come to Kathmandu to urge the central government to implement the Act, but the implementation remains in limbo.
Economy and Development
News Brief
Nepal's economy remains sluggish despite some positive signs, including slowing inflation and high foreign exchange reserves. Consumer confidence is low, leading to decreased trade and hesitancy among investors, as noted by Finance Minister Bishnu Prasad Paudel. Although banks have ample liquidity and interest rates are falling, demand in the market has not improved. Experts emphasize the need for increased capital expenditure and private sector collaboration to stimulate growth. The central bank's recent interest rate cuts aim to enhance market activity, but challenges persist, particularly high living costs and stagnant demand.
Nepal's economy remains heavily reliant on remittances, which rose by 18% to about 1.036 trillion NPR in July. Despite stagnant exports, tourism, and investment, strong remittance inflows support foreign exchange reserves and current account balances. For the fiscal year, remittances totaled around 14.45 trillion NPR, up 16.5%. While foreign reserves reached 20.92 trillion NPR, experts caution that overall economic progress is lacking due to stagnant imports and private sector activity. Government engagement with the private sector is crucial for sustainable growth, especially as inflation decreased to 4.10% in July.
Nepal's foreign exchange reserves reached 20 trillion 92 billion 22 crore rupees by the end of Shrawan 2081, up 2.5% from Ashad 2081. In U.S. dollars, reserves rose from 1.527 billion to 1.558 billion (2.0% increase). These reserves can cover 16.7 months of goods imports and 13.5 months of total imports. The Nepal Rastra Bank's reserves grew by 1.9% to 18 trillion 83 billion 42 crore rupees, while other banks' reserves increased by 8.4% to 2 trillion 8 billion 79 crore rupees. Indian currency represents 22.6% of total reserves.
The International Monetary Fund (IMF) reports early recovery signs in Nepal's economy, citing improvements in imports, tax collections, and public investment. Inflation has dropped to about 3.6%, aided by favorable commodity prices and strong remittances. The IMF calls for accelerated reforms for sustainable growth, focusing on public investment, revenue mobilization, and addressing issues in savings and credit cooperatives. Vigilance is needed to manage non-performing loans and strengthen regulations. Ongoing efforts under the IMF-supported program are encouraged.
Gold prices in Nepal have surged dramatically throughout September, hitting record highs driven by global market trends and investor interest following the U.S. Federal Reserve's interest rate cuts. As of September 26, fine gold is trading at Rs 160,700 per tola, up from Rs 160,400 the previous day, reflecting a significant increase from Rs 153,300 on September 4. Silver prices have fluctuated but remained stable at Rs 1,955 per tola. The continuous rise in gold prices highlights strong demand amid a favorable economic environment for precious metals. Continued price surges also indicates robust demand amidst these macroeconomic factors, though volatility remains a risk in the short term.
News Analysis
The Asian Development Bank (ADB) has updated Nepal’s economic growth forecast to 4.9% for the 2024-25 fiscal year, driven by improvements in agriculture, electricity production, and tourism.
Nepal's economy is currently facing significant challenges, with GDP growth projected to slow to 1.9% in fiscal year (FY) 2023, down from 5.6% in FY2022. This downturn is largely driven by a tight monetary policy aimed at controlling inflation, the unwinding of COVID-era fiscal stimuli, and persistent global economic headwinds. These factors raise concerns about the resilience of various sectors within the economy.
Sectoral performance presents a mixed picture. Agriculture has shown relative strength, with growth increasing to 2.7% from 2.2% the previous year. This improvement is attributed to favorable monsoon conditions and the adoption of better seed varieties, resulting in a 3.9% rise in key cereal production, including paddy, wheat, and maize. In stark contrast, the industrial sector struggled, achieving only 0.6% growth after a robust 10.8% expansion in FY2022. This decline is linked to higher interest rates, import restrictions, and weakened domestic and external demand. The services sector also faced challenges, with growth nearly halving from 5.3% in FY2022, primarily due to contractions in wholesale and retail trade.
On the demand side, private consumption expenditure rose by 4.1%, down from 6.8% the previous year, supported by significant remittances from Nepali workers abroad. However, investment has sharply deteriorated, with fixed investment falling by 10.9% after a modest rise in FY2022. Both private and public investments contracted significantly, contributing to a 3.9 percentage point decline in GDP. Notably, a 21.6% reduction in imports unexpectedly became a contributor to GDP growth, highlighting the complexity of Nepal’s economic interdependencies.
Inflationary pressures remain a significant concern, with average annual inflation rising to 7.7% in FY2023 from 6.3% the previous year. This increase is driven by higher oil and commodity prices and the depreciation of the Nepali rupee. Food inflation averaged 6.6%, while non-food inflation reached 8.6%. Tight monetary policy and import restrictions have limited merchandise imports and weakened aggregate demand, leading to a fiscal deficit increase to 6.1% of GDP in FY2023.
Looking ahead, modest recovery is anticipated, with GDP growth projected at 4.3% in FY2024. Key sectors such as manufacturing and construction are expected to recover as economic activities normalise. The Nepal Rastra Bank has begun to adjust its monetary policy, lowering the policy rate to 6.5%, which should stimulate growth. Nevertheless, external shocks, including geopolitical tensions and climate variability, pose ongoing risks. Sustaining stability will require prudent monetary policy and ongoing reforms, particularly in customs and trade facilitation, to enhance Nepal’s competitive position as it nears the end of its least-developed country status in 2026.
National Security and Climate Change
News Brief
Days of heavy monsoon rains have wrought widespread flooding and landslides across Nepal, with nearly 200 deaths and thousands displaced. Submerged areas include southern Kathmandu and its environs, while the major rivers have swollen far above danger levels. Rescue teams, including those from the Armed Police Force, Nepali Army, and Nepal Police have used zip lines, boats, and helicopters to save stranded residents, although many more are still trapped in remote areas. The highways are cut off, power lines are down, and hundreds of homes are destroyed, adding to the devastation brought on by record extremes in weather over the past. Experts said the increased ferocity of this year's monsoon is linked to the escalating climate crisis.
Prime Minister KP Oli warned of a looming climate catastrophe and escalating geopolitical tensions, he said are pushing the world toward instability. In his speech at the UN General Assembly, he mentioned Nepal's disaster vulnerabilities. He called for urgent action from the global community on climate change, especially for countries like Nepal, which top the list among the most disaster-prone. Oli drew on the marked disparities in the North-South divide and damned the accumulation of capital in the developed world while poverty persisted en masse among the least developed countries. He then underlined the need for an assertive and cooperative global leadership to bridge these discrepancies and commit to peace, inclusivity, and sustainable development of Nepal. The Prime Minister underlined the protection of the fragile Nepali Himalayan ecosystem, one of the crucial "natural climate stabilizers," and called for increased attention to mountain issues in climate negotiations, paralleled by adequate financing for adaptation.
President Ramchandra Paudel conferred the insignia of Chief of Army Staff on Ashok Raj Sigdel through a special ceremony at Sheetal Niwas. Sigdel appointed on August 28 took over the post from September 9, took an oath of office and secrecy administered by the President. Vice President Ramsahaya Prasad Yadav and Prime Minister KP Sharma Oli were among the participants in the high-profile function. Sigdel replaces outgoing Chief of Army Staff Prabhu Ram Sharma, who went on leave on August 8 and will also serve a three-year term.
News Analysis
Government's Inadequate Disaster Preparedness Claims Numerous Lives in Nepal
Nepal’s annual monsoon season has yet again exposed the state which is chronically ill-prepared to face the calamities. At least 220 people have lost their lives and another 96 injured since September 28 due to the floods and landslides. Dozens more are missing, and the toll may rise further. The government's disaster management response was very poor despite advance forecasts of severe weather, and the absence of Prime Minister KP Sharma Oli, who was attending meetings in the US, further made the state mechanisms incapable of handling the disaster.
The Nepal disaster management system is still reactive, rather than preventive in nature. It lacks sufficient infrastructure and preparedness to mitigate the various vagaries of monsoon-related disasters. Failure to establish early warning systems and invest in disaster-resistant infrastructure such as flood barriers and landslide-proof buildings have turned the country into a recurring nightmare. This is despite the continuous destruction since similar disasters killed hundreds of people back in 2022 and 2023. It is a fact that even with correct weather forecasts, the state has been very sluggish and disorganized in its response to leave citizens to their fate as part of the price of misgovernance.
The poorly constructed roads with poor safety measures and drainage have added to the crisis. This unplanned construction and dumping of soil has aggravated the threats of landslides and floods, making the already fragile regions more prone to disaster. In this context, there is an urgent need for Nepal to introduce proper engineering to have clearer policies on road maintenance to alleviate these risks.
What is needed is wholesale reform in disaster preparedness: regular community drills are called for, emergency response training, and much closer coordination between local and national governments. It is the only way local governments can be equipped with the resources and know-how to take swift action when disasters hit.
The government’s failure to prepare, despite knowing the risks, has led to unnecessary loss of life and suffering. With climate change making the monsoon even more intense, it has never been timelier to have an effective and adequately funded disaster management system in place. Resilient infrastructure, bolstered preparedness, and safety for all citizens must be accorded due importance with urgency and continuity by Nepal.
Gender, Social Inclusion & Human Rights
News Brie
Rajendra Mahato Launches Rastriya Mukti Kranti Party for Identity
On 17th September 2024 Tuesday, Rajendra Mahato announced the creation of the Rastriya Mukti Kranti Party following his departure from the Loktantrik Samajwadi Party. He had been leading a national campaign under this name since mid-February.The announcement took place during a national committee meeting of the Rastriya Mukti Kranti Party that began in Kathmandu. Mahato indicated that the party would soon be registered with the Election Commission. As the chairman of the new party, he included members from the campaign in the central committee, which featured Suman Sayami, Buddha Tsering Moktan, and Keshav Jha.
Parliamentary Hearing Committee Advocates for Proportional Inclusivity in Ambassador Appointments
The Parliamentary Hearing Committee has instructed the government to recommend ambassadorial candidates following the principle of proportional inclusivity. Committee Chairperson Ishwori Devi Nyaupane emphasized that the recommendations must align with Clause 1 of Article 282 of the Constitution and Clause 1 of Article 3 of the committee's procedures, 2080. Additionally, all necessary documents verifying candidates' qualifications should be submitted together, as required by Clause 2 of Article 3 of the committee's procedures and Clause 6 of Article 3 of the ambassador appointment directives.
Dalit Civil Society Protests for Economic Justice and Social Security
Demanding economic justice and social security, representatives from Dalit civil society and various organizations have staged a protest at Maitighar Mandala. The demonstration, organized by the "Asia Dalit Rights Forum," called for the state to implement effective policies and plans to economically empower the Dalit community. During the protest, Bhakt Bishwakarma, the General Secretary of the Asia Dalit Rights Forum, stated that economic equality is not possible without social justice. He emphasized the need for an integrated movement for the rights of the Dalit community, highlighting issues such as social security, the right to health, environmental justice, and the end of ethnic discrimination.The protesters demanded for concrete policies and implementation by the state for the economic upliftment of the Dalit community.
News Analysis
Unsolved Ethical Nomination
Prime Minister KP Sharma Oli's government with Nepali congress has been criticized for almost a month when it has failed to bring inclusive nomination for ambassadorship. While the PM had previously recognized the underrepresentation of women and social inclusion in public roles the nominees are now facing comments because of ethical consideration when the Parliamentary Hearing Committee has approved several ambassadorial candidates with controversial backgrounds, emphasizing that moral character and legal qualifications are separate.
Professor Kapil Shrestha, accused of sexual harassment and previously suspended by the National Human Rights Commission, has been recommended as the ambassador to South Africa. This comes despite another candidate, Krishna Man Pradhan, facing similar allegations and being denied a constitutional appointment just two months prior. Kanta Rijal, previously an ambassador to Israel, was proposed for the position in Australia but withdrew her name amid allegations of misconduct. Chitralekha Yadav has now been proposed for the Australian ambassadorship. Sumina Tuladhar, an NGO leader and UML party member, has been approved as ambassador to Denmark after resigning from all party positions.Dhan Prasad Pandit, who was fined for hiding information in government service, is set to become the ambassador to Israel, while Dr. Netraprasad Timalsina, facing corruption allegations with the Red Cross, is approved for Malaysia. Shyam Krishna Bhattarai’s nomination for Sri Lanka is pending due to missing educational documents, which are required for ambassadorial appointments.
Although there are numerous qualified candidates for ambassadorship, the party's decision to nominate individuals facing ethical concerns has caused significant turmoil. Committee Chairperson MP Ishwori Devi Nyaupane emphasized the importance of proper documentation and noted that no complaints had been filed against Shrestha. However, concerns have been raised about appointing individuals with questionable moral character, especially under international scrutiny. By prioritizing political loyalty and affiliations over merit and integrity, the government undermines the principles of fairness, justice, and accountability. Nominations like that of Professor Shrestha, accused of sexual harassment, and Dhan Prasad Pandit, fined for withholding information, call into question the government's leadership standards.The lack of representation for marginalized groups, the superficial inclusion of women, and the nomination of candidates with ethical controversies highlight the government's failure to promote inclusive, merit-based, and ethical governance. This not only risks further alienating underrepresented communities and women but also damages Nepal's reputation on the global stage. A truly inclusive and gender-sensitive approach would prioritize competence, integrity, and representation across all sectors of society, without sacrificing moral and ethical standards.
