International Relations and Foreign Affairs

News Brief

During his first formal address to Parliament, Prime Minister Balendra Shah ignited an intense border debate by stating that "not only India but also Nepal has encroached on India's land in some places". The remarks drew swift pushback from domestic border experts and opposition lawmakers who criticized the statement as unverified and diplomatically risky, forcing the government into damage-control mode. PM Shah further stated that the government has reached out to Beijing, New Delhi, and the United Kingdom, arguing that the UK should take an interest since the boundary issues date back to British rule in India.

Bypassing prolonged uncertainty surrounding PM Shah’s official state travel, Rastriya Swatantra Party (RSP) Chairman Rabi Lamichhane accepted an official invitation from India’s Ministry of External Affairs for a three-day visit to New Delhi beginning June 1. Lamichhane’s itinerary includes high-level talks with Prime Minister Narendra Modi, External Affairs Minister S. Jaishankar, and National Security Adviser Ajit Doval.

The strategic 357-kilometer Jogbani–Kimathanka road corridor, which directly links India’s Bihar state to the Chinese border in Tibet via eastern Nepal, achieved full connectivity. Following the completion and formal handover of the final, highly challenging cliff section by the Nepali Army, cargo transport vehicles successfully reached the remote northern border outpost of Kimathanka for the first time. Business leaders highlight that if upgraded to an all-weather highway, this corridor will drastically reduce cross-border trade costs and alter regional logistics.

Continuing a wave of high-level Western engagements, US Under Secretary of State for Public Diplomacy Sara B. Rogers arrived in Kathmandu on May 31 for an official multi-day visit. Her arrival marks the third major US diplomatic delegation to visit Kathmandu within a two-month span, following visits by Samir Paul Kapur and Sergio Gor. The delegation is focusing on expanding cultural dialogue, public diplomacy, and bilateral technical cooperation with the new administration.

News Analysis

Nepal-India relations faced a sudden diplomatic test after Prime Minister Balendra Shah publicly stated that border encroachment has been "mutual" between the two countries. Aware of the geopolitical risk posed by the Prime Minister's comments, the Ministry of Foreign Affairs (MoFA) quickly issued a clarifying statement in an effort to manage the diplomatic repercussions. Domestically, the Prime Minister's remarks sparked strong opposition. Leaders like Gagan Thapa criticized the claim, arguing that such unverified statements undermine Nepal's legal position and historical border information.

This sudden tension does not arise in isolation. It comes just after Kathmandu sent an official diplomatic note to New Delhi about the Limpiyadhura issue, reaffirming Nepal's claims to the strategic northwestern territory.

This friction comes at a time when both capitals are working to sustain a gradual bilateral recovery. Following a highly challenging decade marked by transit disruptions and map standoffs, New Delhi had shown distinct enthusiasm for a diplomatic reset after the fall of K.P. Sharma Oli’s government, signaling a willingness to engage constructively with Nepal's new political landscape.

While the recent exchange may create a temporary setback to this renewed engagement, it does not imply a permanent derailment. Instead, it shows the deep sensitivity of the bilateral frontier and highlights the need for the administration to ensure that high-stakes foreign policy functions as a highly integrated, state-coordinated effort

Domestic Politics and Federalism

News Brief

President Ram Chandra Paudel authenticated three new ordinances related tocooperatives,public procurement, and the Constitutional Council. Although President Paudel had returned the ordinance related to the Constitutional Council for reconsideration, he later endorsed it after the government resent it without amendments. The ‘Special Ordinance on Removal of Public Officials, 2083’ resulted in 1,594 political appointees being relieved of their posts. While the opposition has criticised the increasing use of ordinances, PM Shah’s political advisor Asim Shah has defended the move, stating that ordinances are intended to remove legal hurdles and improve public service delivery. While opposition parties havemoved to block some ordinances in the National Assembly, it haspassed two key election-related bills, the ‘House of Representatives Member Election (First Amendment) Bill, 2026’ and the ‘Voter Roll (First Amendment) Bill, 2026.’

Tensions emerged during a joint session of the federal parliament, when President Paudel was presenting the government’s policies and programmes for the upcoming fiscal year. PM Shah walked out midway through the President’s speech, triggering criticism over parliamentary norms and democratic values. The controversy escalated after the PM skipped subsequent HoR discussions on the policies and programmes, authorising Finance Minister Swarnim Wagle to respond on his behalf. Opposition parties strongly criticised the PM’s absence, demanding an explanation as well as the PM’s resignation.

During an unscheduled question-and-answer session, which marked PM Shah’s first address in Parliament, he responded to several questions raised by lawmakers. He stated that the government would provide land to landless squatters currently residing in government-managed facilities, work toward ensuring free education and healthcare services for citizens from indigenous communities, and confirmed that Nepal has requested a postponement of its graduation from Least Developed Country (LDC) status. However, the PM’s remarks on the Nepal–India border dispute has triggered sharp criticism from the opposition and border experts. He stated, “You might find it strange, but I also learned only recently—after becoming prime minister—that it’s not just India; Nepal too has encroached upon Indian territory in many places.”

Nepal celebrated its 19th Republic Day on May 29 with various programmes across the country. Traditionally, the Prime Minister addresses the official ceremony in the presence of the President. However, this year, the Office of the Prime Minister and Council of Ministers sent a letter recommending that the President deliver the address instead.

The Constitutional Council broke the longstanding rule of seniority in the recommendation of the Chief Justice. The Councilrecommended Justice Manoj Kumar Sharma, the fourth-ranking judge, over Sapana Pradhan Malla, the senior-most justice, and Kumar Regmi and Hari Prasad Phuyal. Nepali Congress President Gagan Thapa accused the RSP of attempting to hand-pick the Chief Justice “out of their pocket,” and CPN-UML General Secretary Shankar Pokharel stated that the government had given a clear message that it is keeping the judiciary within its influence. That said, Manoj Kumar Sharma was sworn in as the new Chief Justice.

The government approved the Nepal Government (Work Division) Regulations, 2083, reducing the number of federal ministries from 22 to 18 as part of broader administrative reforms and austerity measures aimed at cutting recurrent expenditure and improving efficiency.

The Constitutional Amendment Taskforce, coordinated by Asim Shah, held discussions with arange of stakeholders, including political parties, former chiefs of constitutional bodies, former chief secretaries, foreign experts, administrators, and media representatives, as part of efforts to prepare a discussion paper on constitutional amendment. However, a group of Gen Z activists, including Rakshya Bam and Majid Ansari,

boycotted the consultation process, arguing that it lacked transparency, accountability, and credibility. In a joint statement, they described the process as inadequate and untrustworthy, citing the government’s failure to implement past agreements and deliver accountability for previous commitments. The task force has floated a range of proposals for discussion, including a directly elected executive president, voting rights for Nepalis abroad, and the reappointment of judges at all levels of the courts. It also invited suggestions from the public, requesting written suggestions within a week.

News Analysis

Nepal’s Changing Democratic Practice

Nepal’s democratic practice is undergoing a gradual but noticeable shift under the new political leadership. At the core of Nepal’s democratic system is the Parliament, where elected representatives debate policies, scrutinise executive decisions, and shape national direction through structured dialogue. In principle, it is the balance between the ruling side and the opposition that safeguards democratic practice. However, the new government appears to be prioritising speed and reform-oriented governance over legislative deliberation. A key example is the government’s increasing use of ordinances, with eight introduced so far. An ordinance is a temporary law issued by the President on the recommendation of the Council of Ministers when Parliament is not in session. It is usually intended for situations where a delay in legislation could affect public interest. While ordinances allow for quicker policy implementation, their repeated use centralizes power in the executive and undermines the constitutional principle of parliamentary supremacy.

This shift is also reflected in Prime Minister Balen Shah’s leadership style and relationship with the Parliament. While it has been over two months since he assumed office, he has yet to address the nation directly. Similarly, his engagement with Parliament has been characterised by absences, walkouts, reliance on ministers to respond on his behalf, and controversial remarks. While such actions reflect an unconventional leadership style, they also raise wider questions about accountability and respect for parliamentary norms and democratic values.

Taken together, these developments suggest that Nepal’s democratic practice is gradually changing. While institutions are active and functional, the political leadership must ensure that reforms, administrative efficiency, and executive action move alongside democratic practice. A leadership committed to rapid change must also recognise that democratic legitimacy depends not only on outcomes, but also on transparency, accountability, and institutional processes through which those outcomes are achieved.

Political Economy and Development

News Brief

Nepal’s economy continues to navigate a complex mix of opportunities and vulnerabilities as reflected in recent economic developments. According to the Economic Survey 2025/26, the economy is projected to grow by 3.85 percent this fiscal year, signaling a modest recovery.

A major development during the month was the announcement of the Rs 2.12 trillion budget for FY 2026/27 by Finance Minister Swarnim Wagle. The budget focuses on fiscal consolidation, private sector revitalization, and administrative reform.

External shocks have emerged as a growing concern. Tensions in West Asia have pushed up global fuel prices, increasing transportation and commodity costs in Nepal. Similarly, India’s decision to extend its sugar export ban until September 2026 has heightened concerns over sugar price stability and supply security. Global fertilizer price increases have also compelled Nepal to seek emergency fertilizer imports from India to safeguard agricultural production.

Structural weaknesses continue to weigh on economic performance. Weak private sector investment has constrained revenue growth and increased pressure on public finances and debt management. The government’s flagship digital transformation initiatives remain hampered by project delays, loan

implementation challenges, and institutional bottlenecks. This has resulted in limited productivity gains and public service modernization.

The financial sector is also grappling with the aftermath of the cooperative crisis. The government has begun refunding deposits to victims of problematic cooperatives, aiming to provide relief to affected households and restore public confidence.

Overall, the recent developments highlight an economy that continues to face significant structural constraints, external vulnerabilities, and investment challenges. These trends reinforce concerns over productivity, job creating and economic competitiveness. Following such vulnerabilities the government of Nepal has decided to defer the country’s graduation from Least Developed Country (LDC) status until 2029.

News Analysis

Budget Analysis: Reform-Oriented but dependent on Optimistic Assumptions

The FY 2026/27 budget is one of the most reform-oriented fiscal packages in recent years. It includes significant income tax relief, lower customs duties on 273 industrial raw materials, the removal of excise duties on 360 items, and plans for institutional restructuring. Together, these measures signal the government's intent to stimulate private sector activity, strengthen the middle class, and accelerate economic growth. The budget also promotes a broader vision of economic transformation based on investment, productivity, digitalization, and private sector-led development.

The private sector has largely welcomed the budget. Measures such as the higher personal income tax exemption threshold and the rationalization of customs tariffs are expected to increase disposable income and reduce business costs. These reforms address concerns over weak private investment, which has constrained growth, job creation, and revenue mobilization in recent years.

The government has targeted 7 percent economic growth and 6 percent inflation for the next fiscal year. This comes despite growth being projected at only 3.85 percent in the current year. Achieving this target will require a substantial increase in investment, productivity, and overall economic momentum.

The budget's reliance on borrowing is another key concern. To finance the Rs 2.12 trillion expenditure plan, the government plans to mobilize Rs. 247.28 billions via external loans and Rs. 410 billion via domestic borrowing. Higher borrowing could increase pressure on public debt and fiscal sustainability if revenue and growth targets are not achieved. The proposed budget also exceeds the expenditure ceiling recommended by the National Planning Commission, raising questions about its financing capacity and implementation feasibility.

The budget's benefits are expected to be concentrated among middle-class households and formal sector taxpayers. While tax concessions may support consumption and investment, the budget offers limited direct relief to lower-income groups facing rising living costs. This raises questions about the inclusiveness of the proposed reforms and their distributional impact.

Overall, the budget marks a strategic shift toward economic reform and private sector empowerment. Its success, however, will depend on implementation. Stronger institutional capacity, better capital expenditure execution, and consistent policy delivery will be essential. Without these improvements, the budget's ambitious objectives may prove difficult to achieve.

Environment and Climate Change

News Brief

A landmark study published in Nature, led by the University of Bristol in collaboration with Tribhuvan University and Agriculture and Forestry University, has found that the decline of insect pollinators directly threatens nutrition, farm income, and public health in Nepal. Researchers tracked 776 people across 10 villages in Jumla over a year, conducting more than 15,000 dietary recall surveys. Pollinators were found to account for 44% of household farming income and over 20% of families’ intake of key micronutrients including vitamin A, folate, and vitamin B6.

Despite government forecasts projecting a below-average monsoon season driven partly by possible El Niño conditions, Nepal’s National Disaster Risk Reduction and Management Authority (NDRRMA) has warned that over 1.9 million people across 457,145 households could be affected by monsoon-related disasters this year. Glacial lake outburst flood (GLOF) threats have risen in high Himalayan zones, while the Terai faces heightened risk of floods, landslides, and inundation. Lumbini Province has been identified as potentially the hardest-hit region.

New data from the Division Forest Office has confirmed that 363.38 hectares of forest land in Dadeldhura district have been encroached upon since 1998/99, with only 46.32 hectares recovered so far. Encroachment along the Bhimdutta Highway has contributed to the loss of nearly 18,000 hectares of Mahabharat forest, aided by legal loopholes in the Forest Act.

Unseasonal snowfall in early May disrupted the Muktinath Yatra pilgrimage season and damaged agricultural plots in Mustang district, adding to mounting concerns about shifting seasonal patterns in Nepal’s high-altitude zones. Untimely snowfall disrupted the Yarsagumba harvest and highlighted increasing climate variability in the Himalayan region while also raising concerns about income for mountain communities who depend on the harvest.

News Analysis

When Bees Disappear: Nepal’s Pollinator Crisis and the Quiet Unravelling of Food Security

A May 2026 Nature study offers a quiet but sobering look at how pollinator decline in Jumla, Nepal, is gradually reshaping what farming families eat and earn. Pollinators contribute 44% of household farming income and over a fifth of key micronutrient intake in the communities studied. For more than half the children already assessed as stunted, the researchers warn, further loss is not a distant concern but a health emergency quietly deepening.

The causes differ by altitude. Higher up, shifting temperatures are pulling flowering seasons and pollinator activity out of sync. Lower down, pesticide use and agricultural intensification are taking their toll. The good news is that practical remedies exist: wildflower plantings, native bee conservation, and better pollination management could lift farm incomes by up to 15%. The harder task is building the institutional will to carry them through.

A proposed National Pollinator Strategy points in the right direction, though it arrives at a difficult moment, with fertiliser supply concerns, a weak monsoon forecast, and stretched rural budgets all competing for attention. What the study ultimately asks us to recognise is something simple. Biodiversity loss and food insecurity are not isolated issues in Nepal. They are one, unfolding at different speeds. The bees are part of the food system. When they decline, so does the system itself.

Gender, Social Inclusion and Human Rights

News Brief

With the new Parliament in place and the Shah government beginning to shape its first major policy agenda,

May became a test of whether Nepal’s inclusion promises would move beyond speeches and

announcements. The month saw attention on women’s rights, caste discrimination, disability inclusion, gender and sexual minorities, social security, and human rights accountability. Together, these developments showed a government trying to speak the language of inclusion, while still facing the older problem of weak delivery.

Rights groups called for stronger measures in transitional justice, women’s rights, Dalit and minority rights, migrant workers’ protections, LGBTI rights, housing, freedom of expression and protection from forced eviction. They also expressed concern about due process and rule of law, especially in relation to early government actions such as evictions of landless people from informal settlements. The Supreme Court also gave a mandamus directive to conclude the long-pending transitional justice process, continuing to put pressure on the state to deal with violations from the conflict period.

A major human rights issue of the month was forced eviction. Children were not sent to school with uniforms, books, notebooks, pens and even a place to stay. The eviction impacted the most vulnerable first, as most of the 203 individuals sent to a holding centre were from 66 displaced families, including children, elderly, pregnant women and new mothers. This made the issue more than urban management. It became a question of housing, education, dignity and state responsibility.

The focus on women’s rights continued to be at the forefront. In Nepal, gaps in the abortion law have been noticed by the international community, where legal recognition does not necessarily equate with safe and equal access to reproductive rights. The Ministry also called on victims and witnesses of gender-based violence to report incidents through helplines 1145, 100 and 1098. On National Women’s Rights Day, leaders reiterated promises to stop child marriage, Chhaupadi, dowry, witchcraft accusations, domestic violence and digital violence.

Both institutional and legal efforts were made to address caste discrimination. The government directed the operation of a fast-track desk against racial discrimination . In another important judgment, the High Court upheld the conviction against Pokhara ward chair Bharat Bahadur Adhikari for caste-based discrimination against Maiya Nepali, a Dalit woman ward member, with imprisonment, a fine and compensation ordered in the case .

Disability inclusion was also added to the policy discussion when the government announced autism schools to all seven provinces as models. The plan was applauded but experts pointed out that the plan would be incomplete without trained teachers, support in therapy, early diagnosis, flexibility and consultation with families already engaged in the profession.

It was also emphasized that gender and sexual minority rights are included. It was previously renamed to incorporate gender and sexual minorities and this was sung as a symbolic victory. But, the citizenship, marriage registration, access to health services, census recognition and resource allocation for GLs remained unaddressed, noted activists. Earlier reports also showed that transgender citizens continued to face

difficulties in documentation and legal gender recognition, despite Nepal’s progressive image on LGBTI rights.

The budget provided NPR 2.27 billion for women, children, gender and sexual minorities, and included programmes focusing on women’s entrepreneurship, Dalit child nutrition, disability inclusion, autism schools, pregnant and lactating mothers, and campaigns against harmful practices. There was, however,

criticism that Nepal’s gender-responsive budgeting has become a paper exercise, since “gender responsive” spending was being recorded without enough evidence of actual impact on women’s lives.

News Analysis

Inclusion Must Move Beyond Recognition

The current developments show that Nepal’s inclusion agenda is visible, but still uneven. The state now speaks confidently about rights, dignity and social justice, but vulnerable groups continue to suffer when policies are implemented without planning and safeguards.

The squatter eviction issue captured this most clearly. When children lose schools, families lose shelter and relocation remains uncertain, enforcement becomes a human rights concern. The same pattern appeared in queer rights, disability inclusion, women’s rights and budgeting. A ministry renamed can give visibility, but visibility must lead to services and procedures. Autism schools may sound progressive, but without trained support systems, they risk remaining symbolic. Gender-responsive budgeting must be judged not by labels, but by whether it reduces violence, improves access and changes lives.

For the new government, this might be an early warning. What it needs now is enforcement with safeguards, budgets with outcomes, and institutions that protect citizens before they are pushed further to the margins.