International Relations and Foreign Affairs

News Brief

Beijing has halted construction of the Rasuwa dry port at the Nepal–China border after July’s flash floods destroyed over 90 % of the nearly completed facility, and it remains unclear if or when work will resume. The project, largely funded by China and about 80 % finished before the disaster, saw most infrastructure swept away, leaving only one building standing. Nepal had already invested significant funds, with about Rs 1.5 billion spent, but Chinese authorities have not provided a clear reason for stopping the work.

The Rasuwagadhi border crossing with China partially reopened after being closed for nearly six months following July’s flash flood. However, only residents of Rasuwa district are currently allowed to cross, and hundreds of containers are stranded on the Chinese side. Officials said a temporary Bailey bridge has been installed and there is hope for full operations from January 1, but detailed rules on import, export, and wider movement remain unclear. Traders say the limited reopening offers little relief since they cannot reach Kerung to inspect or retrieve consignments, prompting appeals for eased restrictions.

Security along the Indo-Nepal border in Uttar Pradesh has been significantly tightened ahead of New Year’s celebrations, with local police and the Sashastra Seema Bal (SSB) deploying a multi-layered security grid across seven key border districts. Intensive 24/7 checks are being conducted at major crossing points such as Sonauli, Barhni, and Rupaidiha, with strict verification of all pedestrians and vehicles entering from Nepal. Intelligence networks in border villages have also been activated to monitor unusual movement and share real-time information with control rooms. These measures aim to ensure safety and prevent illegal crossings during the festive period.

Nepal has launched the Foreign Nationals Management Information System (FNMIS) to digitally register and track foreign visitors’ movements and activities in real time, starting with star-rated hotels in the Kathmandu Valley from January 1, 2026. The government says the platform will improve visitor safety, ensure compliance with visa conditions, strengthen security, and enhance tourism data management by linking immigration with hotels, airlines and travel services. Implementation will expand nationwide from March 1, requiring all service providers dealing with foreign nationals to integrate with the system.

News Analysis

Is Geopolitics Really a Threat to Nepal?

The recent diplomatic shifts in Kathmandu, including the departure of China’s ambassador, Chen Song, and the recall of the U.S. ambassador, Dean Thompson, along with India’s envoy Naveen Srivastava being evacuated due to illness while hiking, have sparked intense public debate about Nepal’s geopolitical position.

These events occurred after the “Gen-Z” protests of 2025, a fast, digitally-organized uprising that gained global attention and led to a mix of accurate reporting and misinformation. International observers and some Nepali commentators suggest that increased foreign interest and possibly covert interference could result from the unrest.

Politicians from various parties have jumped at this moment. CPN-UML General Secretary Shankar Pokharel's warnings on social media about a geopolitical plot to destabilize Nepal framed a broader narrative that external powers now pose the main threat. Journalist Anil Giri and others quickly questioned the evidence behind that claim. They wondered if the facts support such alarmist views or simply serve political agendas.

Both perspectives have some truth. Nepal is situated between major powers, which limits its policy options due to historical ties and inequalities. Scholars and journalists often talk about a constant “geopolitical squeeze” that restricts maneuverability and raises real concerns.

However, two points should be noted. First, being strategically close and having transactional interests don’t always mean there are hostile intentions. Most outside players prefer stable, cooperative relations to protect trade, investment, and influence. Second, local actors—such as political parties, factional leaders, and media figures—can use the language of external threats to serve their political goals: it rallies supporters, undermines opponents, and distracts from failures in governance.

With this perspective, the current conversation in Nepal resembles a familiar pattern. It combines real structural limits (geography, power imbalances) with local motivations to exaggerate those limits for domestic audiences. The dangers are twofold: a policy overreaction that compromises autonomy in the name of security and inflated rhetoric that undermines public discourse.

The sensible approach is clear: recognize real geopolitical concerns, demand proof before claiming conspiracies, and create a cross-party agreement on key foreign policy principles. These should include neutrality in stance, transparency in international dealings, and enhanced institutional capacity to manage external relations. Nepal’s leaders should refrain from using fear as a weapon and instead strengthen the solid institutions and public trust that make sovereignty meaningful.

Domestic Politics and Federalism

News Brief

After three months of debate and deliberation, the government and Gen Z leaders signed a 10-point agreement to give legitimacy to the September uprising. However, there was a section of Gen Z activists, including the ‘Gen Z Movement Nepal’ and Miraj Dhungana, who protested and rejected the agreement for not capturing the spirit and sentiment of the movement.

PM Karki has expanded her Cabinet for the fourth time, inducting four new ministers. Shraddha Shrestha has assumed charge at the Ministry of Women, Children, and Senior Citizens; Kumar Ingam at the Ministry of Land Management, Cooperatives, and Poverty Alleviation; Rajendra Singh Bhandari at the Ministry of Labor, Employment, and Social Security; and Madhav Chaulagain at the Ministry of Forests and Environment. Two weeks later, the cabinet was further expanded, with Former Nepal Army General Balanada Sharma appointed as the Minister for Foreign Affairs.

The CPN-UML’s 11th general convention kicked off in Bhaktapur amid heightened intra-party tensions. The party has elected KP Sharma Oli as its chair for a third consecutive term. Despite the call for change in party leadership and the removal of the old guard, Oli won by a huge margin, securing 1,663 votes, while Ishwor Pokhrel received 564 votes. Addressing the convention, Party chair Olidismissed the agreement signed between the government and Gen Z as “bogus,” framing it as part of a larger conspiracy. He reiterated his demand for the reinstatement of the House of Representatives (HoR) once again.

Meanwhile, parties in opposition to the NC-UML coalition until September 9 are strongly in favor of the March polls. Addressing the ‘unity rally’, Nepali Communist Party (NCP) coordinator Pushpa Kamal Dahal stated that the election is the only viable option for the country. Similarly, Rastriya Swatantra Party (RSP) President Rabi Lamichhane, who was recently freed on bail, has also stated that there is “no alternative” to the elections.

The Nepali Congress (NC) has decided on the dates for its 15th general convention as January 10-12, 2026. Acting President Purna Bahadur Khadka presented the schedule during a meeting of the central committee. NC President Deuba has emphasized the need to ensure greater youth participation through the upcoming general convention. The party has also decided to extend the term of the working committee led by Deuba until February 12, 2026. More members of the dissolved HoR from the NC are in the process of submitting a petition at the Supreme Court, following the CPN-UML’s decision to seek the restoration of Parliament.

RSP President Rabi Lamichhane and Kathmandu Metropolitan City Mayor Balen Shah have signed a seven- point agreement to work together in the HoR elections. According to the agreement, RSP will propose Shah as the prime minister (PM) after the upcoming HoR election, while Lamichhane will continue as the party’s central chairman. It has been decided that the party’s name, election symbol, and flag will remain those of RSP. After an initial speculated rift, Kulman Ghising has joined the RSP, following an agreement to make him the party’s top-ranked vice-president.

Madhesh Chief Minister Saroj Kumar Yadav resigned. The resignation came two days after the Supreme Court ordered Yadav to seek a vote of confidence within 24 hours. Krishna Prasad Yadav of the NC has been appointed Chief Minister of Madhesh. He has appointed three ministers, Jangilal Rai of NC, Mahesh Prasad Yadav of the Janamat Party, and Kanis Patel of CPN (Unified Socialist).

PM Karki had called for an all-party meeting at the PM’s official residence in Baluwatar. During the meeting, NC General Secretary Gagan Thapa said that the way political party leaders are threatened in the name of Gen Z daily is not right. UML General Secretary Shankar Pokhrel ruled out elections on March 5, stating that the electoral climate is not favorable and that the party is not confident they will take place. He further stated that the party’s two-pronged strategy was adopted to keep the government, Gen Z groups, and security agencies on their toes.

PM Karki had invited Durga Prasai for talks on December 8th. During the meeting, Prasain demanded a referendum on the republican system and sought the PM’s response by December 17th. He also submitted a separate 27-point demand to Home Minister Aryal related to socio-economic issues. The government has formed a dialogue team, led by Minister for Communication and Information Technology Jagadish Kharel, to engage with Prasai.

The Supreme Court has directed the Nepal Police and the District Police Office, Rautahat, to proceed with the investigation of the Gaur massacre case of 2007.

News Analysis

What the Balen–RSP–Ghising Pact Signals for Nepal’s Next Elections

The Rastriya Swatantra Party’s (RSP) seven-point agreement with Kathmandu Mayor Balendra “Balen” Shah, followed by the subsequent induction of former Nepal Electricity Authority (NEA) Chief Kulman Ghising, marks a definitive shift in Nepal’s evolving political landscape. Under the pact, RSP Chair Rabi Lamichhane retains party leadership, while Balen will serve as the prime ministerial candidate and parliamentary party leader if RSP secures a majority.

There was widespread speculation over former Ghising’s possible entry into the alliance. However, his public remark that “unity cannot be built by eliminating others’ identity” pointed to a certain level of disagreement among them. The lack of clarity around his political role and place in the new arrangement initially prevented a consensus. However, negotiations later resulted in an agreement to appoint him as the party’s top-ranked Vice-President, after which Ghising decided to formally join, bringing the three alternative leaders together under a single party structure.

From a strategic standpoint, the pact demonstrates that alternative forces are gradually learning to work together in a more mature and calculated manner. This transition is evident in Balen’s own evolution. In the aftermath of the Gen Z uprising, his name was floated as a potential interim prime minister, but he declined the offer. His initial refusal contrasts with the marathon rounds of meetings and consultations he held last week, culminating in his decision to join forces with RSP. Balen now appears ready to step into national politics following a deliberate mapping of the political space and allies.

For Balen and Ghising, joining RSP reduces the risk of splitting the “alternative vote” that previously weakened their prospects. Ghising brings national appeal rooted in his leadership at the NEA, where he is widely credited for ending prolonged load-shedding in the country. However, the alliance also faces structural challenges. Its support base is concentrated among urban youth, civil society networks, and social activists. Organisational depth in rural constituencies remains limited, and the alliance’s presence across the Tarai belt is still weak. Without strong local structures and cadre networks, expanding beyond urban strongholds will be difficult. Meanwhile, traditional parties, despite internal dysfunction, retain local reach, patronage networks, and decades-old loyalties.

The Balen–RSP–Ghising pact has undoubtedly disrupted the political status quo and posed a real challenge to traditional parties. Yet its long-term viability depends on disciplined organisational expansion, a policy platform that moves beyond anti-establishment sentiment, and a capacity to convert individual credibility into sustained grassroots mobilisation. Without this, even a high-profile alliance risks falling short against established political parties. Ultimately, the pact represents a significant turning point that could redefine Nepal’s political trajectory and determine whether alternative forces can transition into a credible national political force.

Political Economy and Development

News Brief

The Nepal Rastra Bank officially released its 1st Quarterly Review of Monetary Policy for FY 2082/83 on December 1, 2025. The central bank reduced the policy rate to 4.5% (from 5.0%) and the bank rate to 6.0% (from 6.5%). This action, reflecting a response to the current banking liquidity surplus, occurred amid low consumer price inflation (1.47%) and high foreign exchange reserves. The NRB also introduced regulatory relaxations to aid borrowers and promote loan restructuring.

As of mid-December government data indicates that capital expenditure has reached only approximately 8% of the total allocated budget for the first five months of FY 2082/82. This spending category covers critical development projects, infrastructure, and public works which are essential for stimulating economic activity.

The Office of the Comptroller General (FCGO) report (as of 2025-12-30) shows that while recurrent expenditure (salaries and administration) remains on track, development spending continues to lag significantly.

Following a series of physical assaults on bank employees in various districts, four major financial sector organizations, including the Nepal Bankers’ Association (NBA), launched formal protests.

On December 15, these organizations issued a joint statement condemning the attacks and demanding immediate government intervention to ensure staff safety.

The NBA reaffirmed its position by the month's close: banking services might be halted unless the government ensures a safe operational environment.

Nepal’s cabinet has approved a measure allowing Nepali and Indian citizens to carry up to INR 25,000 in cash in the new INR 200 and 500 notes when crossing the border.

Following Nepal Rastra Bank's repeated requests and India's recent relaxation on carrying notes over INR 100 note to Nepal, India formally recognized higher-denomination notes.

Officials say the change should help tourists, students and migrant workers and reduce problems tied to informal currency exchange and smuggling.

The Election Commission (EC) has finalized and announced new spending ceilings for candidates running for the House of Representatives (HoR). Under the new rules, candidates are mandatorily required to conduct all campaign-related financial transactions through designated bank accounts to ensure traceability. The EC stated that this measure aims to increase transparency and curb the influence of illicit funds in the electoral process. These regulations also include specific reporting requirements that candidates must adhere to during and after the election period.

News Analysis

An Economy Out of Balance: Supply Pushed, Demand Missing

As 2025 concludes, the Nepalese economy is grappling with an unusual challenge: the central bank has significantly eased monetary policy, yet this has not been complemented by a corresponding acceleration in government expenditure.

This lack of coordination has effectively resulted in a classic liquidity trap. In essence, while substantial liquidity is available, it is failing to stimulate economic activity because the primary driver of aggregate demand—namely, government spending—remains constrained.

The banking system’s current overflow of cash is a symptom of economic stagnation, not health. While the Nepal Rastra Bank (NRB) has cut rates to 4.25% to encourage borrowing, the market’s response has been defensive. The fact that banks offered Rs 1.22 trillion in bids for a mere Rs 25 billion deposit collection instrument reveals a critical dysfunction: banks prefer parking money safely with the central bank for minimal returns rather than lending to a private sector devoid of confidence.

The mechanism meant to transfer cheap money into new business activity is broken. Monetary policy works by lowering the cost of investment but the lack of government capital spending has created a self-reinforcing cycle of stagnation.This cycle effectively breaks the economy's vital multiplier effect. With capital expenditure frozen at just 8% by mid-December, the construction and supply chains are starved of cash flow. Without these public sector triggers, private businesses have no reason to borrow, rendering the NRB’s rate cuts ineffective.

The plummeting inflation rate confirms that the economy is suffering from a demand shock. This is not the "good" kind of low inflation caused by efficiency; it is the "bad" kind caused by a lack of buyers. Until the government unlocks the development budget to inject real spending power into the market, the central bank’s liquidity injections will remain "sterile"—circulating within the financial system without ever touching the real economy.

Environment and Climate Change

News Brief

Throughout December 2025, a severe thermal inversion trapped particulate matter across the Kathmandu Valley and the Terai, driving the Air Quality Index (AQI) into hazardous territories. While Kathmandu recorded a daily average AQI peak of 322 on December 15, the crisis was statistically worse in the southern plains, where Lumbini recorded a staggering AQI of 340—over 23 times the WHO safety standard. This toxicity precipitated a public health emergency; major tertiary centers like Bir Hospital and Tribhuvan University Teaching Hospital (TUTH) reported handling over 300 respiratory outpatients daily, with wards at full capacity. Concurrently, a severe cold wave in the Terai districts of Saptari and Rautahat resulted in at least nine confirmed fatalities, primarily among marginalized communities unable to escape the freezing, smog-laden air.

The seasonal hydrological deficit forced the Nepal Electricity Authority (NEA) to pivot abruptly from energy exports to heavy imports. With winter drought reducing river flows, domestic generation plummeted to approximately 1,600 MW against a peak winter demand of 2,280 MW. To bridge this deficit, the NEA secured a renewal from India’s Central Electricity Authority to import 654 MW via the Dhalkebar– Muzaffarpur and Tanakpur corridors through March 2026. This reliance on imported thermal power, combined with foreign exchange losses, contributed to a reported 37.32% decline in the NEA’s annual profits, highlighting the persistent financial vulnerability of Nepal’s run-of-river dominated grid.

On the diplomatic front, Nepal secured a significant institutional victory at the COP30 summit in Belém, Brazil, with the inclusion of the "Mountain Agenda" in the final "Global Mutirão" decision text. This outcome establishes an annual dialogue on cryospheric risks, a key objective for the Ministry of Forests and Environment (MoFE). However, the delegation returned with limited immediate financial recourse; despite the diplomatic win, no specific funds from the Loss and Damage Fund were disbursed to Nepal by year's end. Furthermore, while Nepal signed the "Belém Declaration" pledging a transition away from fossil fuels, the lack of a binding global phase-out schedule leaves the Himalayas exposed to temperature anomalies, which tracked +1.5°C above the 30-year average in December.

Conservation efforts yielded mixed results, characterized by a sharp divergence between species recovery and human safety. Chitwan National Park extended its streak to 516 consecutive days of zero rhino poaching, a global benchmark for anti-poaching enforcement. However, this ecological saturation has spilled into buffer zones, leading to fatal conflicts; in Bardiya, two fatal attacks involving a tiger and a leopard were recorded in late December, adding to a decadal toll of 127 wildlife-related deaths in the Chitwan arc alone. Simultaneously, the Wildlife Crime Control Bureau noted evolving smuggling tactics, seizing luxury "Scorpio" SUVs in Madhesh Province used to transport illegal Sal timber, a shift from the traditional use of tractors to evade detection.

News Analysis

Diplomatic Heights, Domestic Lows: Nepal’s Environmental Paradox

The disparity between Nepal’s international standing and its domestic reality has never been sharper. While Nepali diplomats successfully institutionalized the "Mountain Agenda" in Brazil, the state apparatus at home effectively collapsed in its duty to protect citizens from immediate environmental hazards. The inability to enforce the National Air Quality Management Action Plan (NAQMAP) in December is directly linked to the broader political instability triggered by the "Gen Z" protests. With over 90 police posts and 200 government offices destroyed in Madhesh Province alone, the security vacuum paralyzed environmental enforcement. The state cannot police open burning or vehicular emissions when its physical presence in the plains has been incinerated. Consequently, the smog crisis is not merely a meteorological event but a symptom of a governance crisis where environmental regulation is the first casualty of political disorder.

The energy sector’s struggles in December expose the dangerous rigidity of Nepal’s "clean energy" narrative. Despite boasting an installed capacity nearing 4,000 MW, the country remains a hydrological hostage. The winter drought’s ability to slash generation by nearly 60% renders the grid dependent on Indian imports exactly when electricity is most needed for heating. This seasonality forces the NEA to spend precious foreign currency on dirty thermal power from India, effectively exporting its carbon footprint during the winter while claiming green credentials in the summer. Until reservoir-type projects (like Budhi Gandaki) come online to provide dry-season ballast, Nepal’s energy security will remain an oscillation between surplus and scarcity, dictated entirely by rainfall patterns.

Furthermore, the economic implications of the environmental crisis are shifting from "externalities" to direct drags on GDP. The convergence of the cold wave and pollution did not just fill hospital wards; it grounded flights and disrupted the peak winter tourism season, causing estimated losses in the millions for the hospitality sector. When combined with the workforce productivity loss from widespread respiratory illness, the "smog season" is now a macro-economic liability. For the remainder of the winter, the government must prioritize decoupling environmental enforcement from the political fray. If the Department of Environment cannot operate independently of the volatility affecting the Home Ministry’s police forces, the gains made in Belém will be rendered moot by the choking reality on the ground in Kathmandu.

Gender, Social Inclusion and Human Rights

News Brief

Newly appointed Minister for Women, Children and Senior Citizens Shraddha Shrestha, who was sworn in at Shital Niwas on 12 December 2025, assumed office the same day and approved the National Gender Audit Procedure, 2082 aimed at promoting gender-responsive governance across public institutions.

A National Dialogue on Improving Access to Justice for Technology-Facilitated Gender-Based Violence (TFGBV) survivors- children, adolescents, youth, and women was held in Lalitpur on December 19, jointly organized by CZOP-Nepal and Saathi in collaboration with UNFPA, AEIN-Luxembourg, and Men Engage Alliance Nepal, with stakeholders calling for stronger action against TFGBV.

Nepal observed Human Rights Day on December 10 with activities across the country. Leaders, including President Ramchandra Paudel, Vice President Ramsahay Prasad Yadav, and Prime Minister Sushila Karki, highlighted the rights enshrined in Nepal’s constitution, reaffirming their commitment to protecting and promoting human rights in line with the Universal Declaration of Human Rights.

On the 77th International Human Rights Day, Minister for Law, Justice and Parliamentary Affairs Anil Kumar Sinha called for collective support from civil society and human rights activists, pledging that the government will fully implement the recommendations of the NHRC, Truth and Reconciliation Commission, and Commission on Investigation of Enforced Disappearances.

While Nepal’s government report to the UN Human Rights Council claims substantial progress on human rights since the last Universal Periodic Review, civil society groups say most recommendations, particularly on child rights, gender-based violence, human rights institutions, and equity remain partially or unimplemented. Nepal will be quizzed during the fourth review cycle on 21 January 2026 in Geneva.

Nepal has faced serious human rights challenges recently, including the tragic deaths of a girl and her father in Bardiya over difficulties obtaining a citizenship certificate. Prime Minister Sushila Karki expressed deep grief and apologized to citizens over the incident. Rising domestic and sexual violence against women, as reported by Nepal Police, further underscores the urgent need for systemic reforms to protect and fulfill human rights.

News Analysis

Nepal’s Human Rights on the Edge

Nepal’s human rights situation has worsened over the past year, with reports of excessive police force during protests, custodial deaths, rising gender-based violence, and politically influenced appointments undermining justice. Civil society and international watchdogs warn that the National Human Rights Commission (NHRC) remains largely ineffective, failing to investigate violations, support victims, or enforce its recommendations, highlighting an urgent need for institutional reforms and strengthened accountability.

Nepal’s human rights situation is worsening, and the problems are more than just isolated incidents. The deadly crackdown on Gen Z protesters shows that political priorities often outweigh citizens’ rights. Law enforcement has acted with little accountability, and dissent is often treated as a threat rather than a legitimate expression, which undermines democracy.

Gender-based violence continues to rise, despite laws meant to protect women and children. Slow investigations, social stigma, and weak support systems mean many victims never see justice. This shows that laws alone are not enough; strong institutions, better enforcement, and public awareness are essential to protect vulnerable groups.

The National Human Rights Commission (NHRC), tasked with protecting rights, has largely failed to act effectively. Political influence, internal conflicts, and resignations of key commissioners have weakened the institution. As a result, many human rights violations go uninvestigated, and victims lose trust in the system. Political interference also allows people with serious allegations to gain power, reinforcing a culture of impunity.

Overall, Nepal’s human rights challenges are tied to weak governance, political interference, and ineffective institutions. Legal protections exist on paper, but without independent institutions, accountability, and political will, violations will continue. Urgent reforms are needed to strengthen the NHRC, ensure justice, and protect citizens’ rights.