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Dec 12, 

Shantinagar, Kathmandu

When I entered the teashop, five young boys in their early twenties were seated at a corner table. Two of them were busy filling out forms, seemingly immersed in their task. After observing for a while, I realized they were preparing documents to apply for a loan from the microfinance next door, as they were planning to fly abroad for employment.

Their intentions became clearer when a staff member from the microfinance joined them, assisting with the paperwork. A young woman from the same office reassured the boys that their loan would be approved within a day if they submitted all required documents immediately. Over cups of tea and light snacks, the boys began discussing their future plans once they started earning abroad.

“I need to support my two brothers with their education,” one said. “So, I might not save money for the next five years.” Another shared his priorities: repairing his house and preparing for marriage. These boys, hailing from Madhes province, had arrived in Kathmandu two weeks earlier, chasing the dream of better opportunities abroad. Their candid conversation painted a picture of aspirations entwined with familial responsibilities.

As I listened to their discussion, two men walked into the teashop. They were familiar with the owner, who greeted them warmly. Their conversation veered into an unusual topic: the divorce case of a mutual friend. The man in question, aged 72, had remarried three months ago but had divorced only days earlier. The tea shop owner shared that the man had since stopped visiting the establishment, and the conversation quickly turned to rising divorce rates.

“At a time when divorces among young couples are increasing, it’s hardly surprising to see it happening among older couples too,” remarked one man. They discussed possible reasons behind these trends but focused disproportionately on blaming women. I refrained from delving deeper into their views, noting the deeply entrenched gender bias that lingered in their comments—an issue pervasive from tea shops to workplaces.

The four boys had left by this point, heading to the microfinance, and the two men exited shortly after, leaving just me and the shop owner. The owner struck up a conversation, commenting on the bitter cold and how it doubled the time needed to prepare tea. Then, out of the blue, he asked, “Sir, what’s going to happen to Rabi Lamichhane? Will the court free him or convict him?”

I replied cautiously, “There are multiple allegations; it’s hard to predict the outcome.” He nodded, adding, “Today, Kantipur reported allegations about misappropriated funds meant for charity. Do you think the news is true?” His curiosity was palpable, but I had no definitive answer for him. The case had clearly piqued public interest.

As I sipped my tea, two men entered and began discussing the stagnant real estate sector. From their conversation, it was clear they were investors struggling to sell land and meet their interest payments. The market slowdown had left them in distress, their voices heavy with worry.

Soon, five morning walkers entered the teashop, their familiarity with the owner evident. They didn’t bother specifying their tea preferences; the owner already knew their choices. One of them brought up former President Bidya Devi Bhandari and Vice-President Nanda Kishor Pun rumored plans to re-enter active politics.

“It’s absurd,” one of them exclaimed. “After holding such high offices, why would they join party politics?”

This sparked a lively debate. Some cited examples from India, the US, and other countries, pointing out how rare it is for former presidents or vice presidents to return to party politics. “If they join,” one argued, “it’ll cast doubt on their neutrality while in office and weaken the presidency’s integrity in the future.”

Another participant added, “They should follow the example of former President Ram Baran Yadav, who hasn’t rejoined party politics. Instead, they could focus on philanthropic work, like American presidents do after retirement.”

The conversation shifted to CPN (Maoist Center) Chair Pushpa Kamal Dahal. One of the men speculated that after signing the Belt and Road Initiative (BRI) agreement with China, the government was under pressure. “Dahal is supporting Rabi Lamichhane to form a new government,” he claimed.

Another participant countered, suggesting there wouldn’t be a new government but rather a cabinet reshuffle. “Youth leader Gagan Thapa might become deputy prime minister and finance minister,” he predicted. The room fell silent, except for one man who expressed concern over the potential impact on the stock market.

Their discussion reminded me of a conversation I’d had earlier in the week with a senior Rastriya Prajatantra Party leader. He had hinted at murmurs within political circles about a potential government change and the need for his party to be ready to take a role if invited.

Returning to the teashop chatter, the focus shifted to the government’s decision to take a concessional loan from the Asian Development Bank (ADB). Someone pointed out the irony: “The Nepali Congress had said it wouldn’t take loans under the current circumstances. Now, they’ve changed their stance.”

This triggered laughter among the group. One man quipped, “Our politicians care more about commissions than loans or grants.” His comment drew nods and chuckles before everyone began leaving to start their day.

By then, it was already 9 am. I finished my tea, paid Rs 20, and stepped out. The mix of conversations I witnessed at the teashop was a microcosm of Nepal’s society. From aspirations of young men seeking opportunities abroad to discussions about real estate woes and political dynamics, it reflected the concerns, challenges, and debates shaping the nation today. Even the lighthearted moments and humor, like the comment about politicians’ commissions, underscored a deeper truth about public perception of leadership and governance.

China’s Belt and Road Initiative (BRI) has once again unsettled Nepal’s coalition government, formed in July. Prime Minister KP Sharma Oli is preparing for an official visit to China, but two key coalition partners—the CPN-UML and the Nepali Congress (NC)—remain divided on advancing BRI projects. While Oli, who leads the UML, advocates for BRI projects, the NC opposes taking loans under BRI, fearing it could lead Nepal into debt.

Since 2022, the NC has consistently communicated its opposition to financing BRI projects through loans, a stance championed by NC President Sher Bahadur Deuba during his tenure as prime minister. Conversely, the UML and other leftist factions argue that Nepal should make headway on BRI to balance its acceptance of the US-backed Millennium Challenge Corporation (MCC) and to maintain geopolitical equilibrium.

To reconcile these differences, Prime Minister Oli is negotiating with the NC. Currently, there are three major issues regarding BRI. First is the signing of the BRI implementation plan, which was drafted during former Prime Minister Pushpa Kamal Dahal’s visit to China in September last year.. Second, although Nepal has proposed four projects under BRI, the coalition partners have yet to agree on an investment model. Third, Nepal has requested China to waive the loan for constructing the Pokhara International Airport, where alleged corruption in the airport's construction has also become a point of contention.

To date, Nepal has only signed a BRI framework agreement in 2017, outlining general directions for the initiative. However, debates have since persisted, particularly around China’s claim that certain infrastructure projects, like the Pokhara airport, are part of BRI, a claim rejected by Dahal’s administration. Additionally, Nepal wants Chinese grants for BRI projects, but China’s official position states that BRI funding only involves loans, not grants, facilitated by the Chinese government. Nepal has proposed that, if loans are necessary, the interest rates should align with those of the World Bank and other international lenders.

The 2017 BRI agreement outlines cooperation in policy exchange, connectivity, trade, financial integration and people-to-people interactions. Although the agreement allows for flexibility in cooperation areas, the debate in Nepal has focused largely on infrastructure and financial arrangements.

A recent 2023 Chinese white paper describes BRI as a joint venture rather than a form of foreign aid, emphasizing collaborative development. “The principle of extensive consultation signifies that the BRI is not a solo endeavor by China, but a collaborative effort involving all stakeholders. The principle of joint contribution highlights that the BRI is not one of China’s international aid programs or a geopolitical tool, but a collaborative effort for shared development.” 

According to the  MoU  signed in 2017, , the BRI does not include grants and primarily involves loans, with a possible contribution from Nepal. Nevertheless, the framework agreement does leave room for mutual agreements on funding sources.

The document states: “Adaptation of appropriate modes of cooperation for mutual benefit to support development and implementation of major programs in the BRI and provisions of investment, financing and technological support for these programs through mutually agreed sources of funds, and strengthening of exchange and cooperation to ensure program’s sustainability and safety.” 

There is also contention regarding China’s integration of numerous activities under the BRI umbrella. However, the 2017 framework does explicitly include areas like cultural exchange, media, health, tourism, agriculture, parliamentary visits and cross-border exchanges—reflecting the current scope of China’s involvement in Nepal. Thus, while BRI has become a significant component of bilateral cooperation, other forms of collaboration can still occur outside BRI’s framework.

Comparing China’s current engagement with the BRI document, there is a common ground between the two countries. In that sense, it seems that Nepal is already a part of BRI and scores of programs are in progress under the BRI. But it does not mean that bilateral cooperation can happen only under the BRI. The document has clearly mentioned that even if the MoU signed in 2017 is terminated, it will not affect any ongoing projects between two countries.

As for the BRI implementation plan and project selection, officials indicate that these steps primarily signify another principle agreement, not one that includes financing details or loan agreements. A senior UML leader said, “It’s similar to the 2017 MoU, without raising the loan concerns voiced by the Nepali Congress.” Although a final investment structure may not be concluded during Oli’s visit, there could be a consensus to include specific projects under BRI, though the NC may resist finalizing these agreements.

The China factor is a sensitive issue that risks widening the rift between NC and UML leaders. Oli is actively engaging with NC and Foreign Minister Arzu Rana Deuba to manage these differences. Tensions between the NC and China have escalated recently, driven by the NC’s stance on alleged border encroachments in Humla and its critical position on BRI. Additionally, external pressures may be influencing the NC to limit Nepal’s engagement with China, complicating the situation further. NC leaders have openly stated that BRI should also  follow the model of MCC, which involves primarily US grants with minimal Nepali investment.

Prime Minister KP Sharma Oli’s upcoming visit to China in the first week of December marks a notable departure from the Nepali tradition of newly appointed prime ministers prioritizing India for their first international visit. In his previous terms, Oli adhered to this unspoken convention, but this time, India has not extended an invitation despite his four months in office, signaling what some interpret as a shift in India’s approach to Nepal.

Oli’s visit is generating significant attention both domestically and internationally, largely due to his track record of signing strategic agreements with China during his past tenure. This will be his third official visit to China as Nepal’s prime minister; he previously visited in 2016 and 2018. Notably, during his premiership, Chinese President Xi Jinping also made a landmark visit to Nepal in 2019, the first by a Chinese leader in over two decades.

In 2016, as Nepal was recovering from months-long economic blockade imposed by India, Oli signed a Transit and Transport Agreement with China, granting Nepal access to Chinese ports for essential imports and reducing Nepal’s reliance on India. The agreement also marked a major shift in the age-old Nepal-India relations. This agreement was formalized in 2019, further strengthening bilateral ties between Nepal and China. 

Although high-level exchanges between Nepal and China are not new, Oli’s upcoming visit is under heightened scrutiny.

One of the major focuses of this visit is China’s Belt and Road Initiative (BRI), with which China has long urged Nepal to make concrete progress. Discussions are ongoing about a BRI implementation plan—a topic broached but left unresolved during former Prime Minister Pushpa Kamal Dahal’s visit to Beijing. Nepal is also expected to request debt relief on a Chinese loan for Pokhara International Airport, potentially in exchange for BRI commitments. India and Western countries have expressed implicit concerns, warning Nepal of potential debt risks and corruption associated with the BRI. While Nepal signed the BRI framework in 2017, specific project implementation has stalled due to Nepal’s reservations and external pressures.

Oli’s visit also highlights Nepal’s complex diplomatic balancing act amid growing international interest in its relations with China. India and Western nations are increasingly wary of Chinese influence in South Asia, including in Nepal, and are closely monitoring this visit. Within Nepal’s ruling coalition, there is a disagreement over engagement with China; the Nepali Congress is cautious about progressing with the BRI, whereas Oli’s party, the CPN-UML, advocates for advancement. Oli has sought to maintain coalition harmony by consulting coalition leaders, including Congress President Sher Bahadur Deuba, as they work to finalize the agenda.

A few days earlier, UML and NC held a meeting to discuss Oli’s planned China visit. The two parties agreed that Foreign Minister Arzu Rana Deuba would work on the agenda of the visit after consultations with NC leaders. The meeting between UML and NC indicates that Prime Minister Oli wants to deal with China without upsetting his coalition partner.

Over the past few years, mainly after Xi Jinping’s Nepal visit in 2019, bilateral cooperation between two countries is ever expanding. Along with continuous development partnership, two countries are cooperating in the new areas. Another vivid change in China’s engagement in Nepal is through its Communist Party of China. Over the past few years, CPC has been engaging with Nepal’s major parties, particularly focusing on communist parties. Senior leaders of CPC continuously visit Nepal and China is also inviting Nepal’s political parties from center to local levels. Similarly, China also organizes sessions with leaders of Nepal’s major parties to inform about the decisions taken by CPC and Chinese government.

In the third week of Oct 2024, Chen Gang, Secretary of China’s Qinghai Province, led a delegation visiting Nepal with two major objectives, first organizing an interaction program with Nepal’s political parties and another to meet Nepal’s political parties. The delegation shared the decisions made by the Third Plenary Session of the 20th CPC Central Committee which has taken some important decisions in the areas of opening up after 1978. This is just an example CPC often organizes such programs in Kathmandu and Beijing. In January this year, Sun Haiyan, Vice minister of the international Liaison Department of CPC, conducted a high-level discussion with the leaders of parties represented in Nepal’s Parliament. In the program, she made a remark that some forces are trying to spoil Nepal-China relations so Nepal’s political parties should be cautious of it.

Since President Xi’s visit in 2019, China’s presence in Nepal has expanded beyond government-to-government partnerships, notably through the Chinese Communist Party (CPC) directly engaging with Nepal’s political landscape. Dozens of delegations mainly from three communist parties—CPN-UML, CPN (Maoist Center) and CPN (Unified Center)—have visited China to participate in various programs. Leaders from NC, Rastriya Swatantra Party and other fringe parties have also visited China over the years, but not quite as often as the communist parties.

Senior CPC leaders have also frequently visited Nepal, fostering ties primarily with Nepal’s communist parties and facilitating interactions that include briefings on CPC policies. In October 2024, Chen Gang, the CPC Secretary of China’s Qinghai Province, led a delegation to discuss recent CPC decisions and further bilateral cooperation, underscoring this growing political engagement.

CPC is mainly engaging with Nepal’s communist parties, often advising them to unite and form one powerful communist force. In August this year, when Nepal faced unprecedented floods and landslides, it was the CPC and not the Chinese government that rushed to provide relief to the disaster survivors. The CPC channelized the aid through Nepal’s major political parties. 

There is no doubt that China’s influence in Nepal is increasing at different levels. The rising presence of Chinese NGOs, which were virtually absent a decade ago, is one example. Organizations such as the China Foundation for Rural Development (CFRD) now actively participate in health, education, agriculture, and disaster relief in Nepal, often collaborating with UN agencies on initiatives like the Global Development Initiative (GDI). 

China’s influence in Nepal has grown significantly over the past decade, and Oli’s visit is expected to further deepen this relationship. Should Oli secure agreements with China that align with coalition interests, particularly with Nepali Congress’s consent, Nepal’s relations with India and the broader international community may experience further shifts.

This week, Prime Minister KP Oli was occupied in New York, attending various multilateral forums, delivering lectures and participating in bilateral meetings. Two significant engagements stood out: one with Indian Prime Minister Narendra Modi and another with senior US officials.

In a notable 30-minute meeting, the first between Oli and Modi since Nepal's new government was formed in July, the two leaders discussed bilateral relations. The meeting is expected to bolster Oli's political standing in Nepal, as there is a perception in Kathmandu that India has not fully supported his government. While Oli has yet to receive an official invitation to visit India, preparations are reportedly underway for a possible visit by Modi to Nepal.

During his appearances in New York, Prime Minister Oli addressed topics such as Nepal's transitional justice process, climate change impacts and sustainable development goals. He also met with Alize Albright, CEO of the Millennium Challenge Corporation (MCC), where both parties emphasized the importance of completing the MCC project to improve Nepal’s transmission lines and highways. Additionally, Oli held talks with USAID Administrator Samantha Power, focusing on Nepal's development efforts and the ongoing support from USAID.

In another significant development this week, Nepal and China resumed the joint military drill after a five-year hiatus. According to Chinese media, the exercises between the Nepali Army and China’s People’s Liberation Army are focused on skills such as rappelling, IED detection and disposal, checkpoint blockades, infiltration and armed rescue.

Also this week, Nepal Police moved forward with the report submitted by a parliamentary probe into the cases of cooperative deposit scams. A case has already been filed in the Chitwan District Court regarding the misappropriation of funds from various cooperatives. Chhabi Lal Joshi, former DIG of Nepal Police and one of the founders of Gorkha Media Network, was arrested and transferred to Pokhara for investigation. Reports suggest that Rastriya Swatantra Party (RSP) Chairman Rabi Lamichhane, who was also associated involved with Gorkha Media, may also face arrest for his alleged involvement in the misuse of cooperative funds. Lamichhane has called for public pressure to resist the potential arrest. 

On a more positive note, the International Monetary Fund (IMF) this week reported that Nepal's economy is gradually recovering. According to the IMF, “Credit growth is recovering while remaining appropriately below nominal GDP growth. Inflation continued to decelerate to around 3.6 percent mid-July, partially reflecting favorable commodity prices and weak demand. International reserves continued to rise, underpinned by robust remittances, recovering tourism, and still subdued imports.”

In political news, former president Bidya Devi Bhandari has made it clear she intends to re-enter politics, announcing that she hopes the CPN-UML will become a decisive force in the 2027 elections. Speaking at an event organized by the Madan Bhandari Foundation, Bhandari expressed her desire for UML to produce the next president and hinted at her own ambitions to return to power. UML insiders suggest that Oli may retire after the next election, paving the way for Bhandari to take a leadership role within the party.

This week, businessperson Durga Prasai was arrested following complaints accusing him of cybercrime. Prasai, known for his vocal criticism of current political leaders and for spreading unfounded claims on social media, has faced backlash despite his past close ties with Prime Minister Oli and CPN (Maoist Center) leader Pushpa Kamal Dahal. His supporters have protested his arrest, while police are preparing to file cybercrime charges. Prasai, now advocating for the restoration of the monarchy, appears to be raising his political profile.

In another story this week, CPN (Maoist Center) Chair Dahal expressed concerns over the proposed constitutional amendment, warning that while he is not opposed to the idea, it must be approached with caution to avoid triggering instability. “Amending the constitution could be like opening Pandora’s box,” Dahal said at a program, emphasizing the need for careful deliberation.

Lastly, while there was widespread celebration after Parliament passed the bill on the Truth and Reconciliation Commission, there has been little progress in making appointments to the transitional justice mechanisms. The process is expected to gain momentum once Prime Minister Oli returns from the UN summit.

That’s all for this week. Have a great weekend! 

Two weeks have elapsed since Prime Minister KP Sharma Oli assumed office, backed decisively by the largest party in the House of Representatives, the Nepali Congress (NC). While it is customary to reserve judgment on a new government’s performance for at least 100 days, vigilant oversight remains essential from the outset.

During this period, Prime Minister Oli has focused on assembling his team, securing a vote of confidence from the Parliament, and receiving briefings from various government agencies. He has appointed key aides, including former Finance Minister Yubaraj Khatiwada as his economic advisor, though appointment of press and foreign affairs advisors remain pending. A close examination of Oli’s first fortnight in office reveals a promising trajectory.

Breaking from tradition, Prime Minister Oli has opted not to prepare a Common Minimum Program (CMP) or announce populist agendas to capture public attention. This contrasts with his previous tenures, as he now seems intent on allowing his administration's results to speak for themselves. Notably, the Nepal Rastra Bank has introduced a new monetary policy, eliciting mixed reactions but holding potential as a remedy for the nation’s economic challenges. Despite a significant downturn in the stock market following the new government’s formation, there is optimism for progress in the real estate sector. The private sector, a crucial driver of growth, is adopting a cautious “wait and see” stance regarding the policy’s efficacy.

Progress is also evident in addressing the contentious issues surrounding the Truth and Reconciliation Commission. A tripartite task force comprising the NC, UML, and the CPN (Maoist Center) is nearing a resolution of longstanding issues. If they reach a consensus, it will be a great achievement, given its two-decade history fraught with delays and disagreements. The Maoists, despite their recent ejection from power, are cooperating on TRC matters.

Unlike previous administrations, the Oli-led government has refrained from transferring government secretaries, as well as issuance of extensive, often unimplemented directives. The frequent transfer of secretaries has historically impeded service delivery. Additionally, the government is expediting ambassadorial appointments in key countries following the recall of ambassadors by the previous administration.

However, public scrutiny has emerged in response to some decisions by the UML and NC. The government's transfer of senior police officials has been poorly received, attracting criticism from opposition parties. The NC and UML are amicably resolving disputes over provincial government formations, marking a significant positive development. However, the selection of ministers at the provincial level has faced backlash. 

The administration has also contended with significant tragedies, including the Saurya plane crash and a fatal bus accident in Chitwan, which demanded urgent governmental response. Furthermore, the government had to rescue Nepali students in Bangladesh amid prolonged protests against the quota system in government jobs.

Despite these challenges, the government’s initial performance indicates a positive direction. It has not pursued ambitious yet unfeasible agendas, focusing instead on substantive progress. Criticism from ruling and opposition party leaders has been minimal. Favorable developments in the stock market, monetary policy, real estate sector, and declining inflation have created a conducive environment for the government.

While early indications are promising, numerous challenges remain. The government and political parties must abandon ineffective practices of the past. Prime ministers and ministers, in particular, should prioritize official duties over ceremonial engagements and project inaugurations to ensure continued progress.

Soon after stepping down from power, CPN (Maoist Center) Chair Pushpa Kamal Dahal has initiated efforts to engage with fringe communist parties, particularly former Maoist leaders, to strengthen his position in national politics.

It has been observed that Dahal tends to reach out to his former Maoist colleagues, who have formed splinter groups, especially after the major split in the Maoist party in 2012 when senior leader Mohan Baidya established a separate party due to serious ideological differences with Dahal. A few months ago, while still in power, Dahal formed the Samajbadi Manch (Socialist Front), a loose coalition of fringe parties within the government. However, this front remained inactive as Dahal did not perceive any immediate threat to his government after aligning with the CPN-UML four months ago. 

On Tuesday, Dahal convened a meeting that included CPN (Maoist Center), CPN (Unified Socialist), Nepal Communist Party, and Samajbadi Forum. Of these, only the Maoist party led by Dahal and the CPN (Unified Socialist) led by Madhav Kumar Nepal have a presence in the national parliament. The Nepal-led party had supported Dahal during his vote of confidence in Parliament on Friday. The meeting of the Socialist Front has labeled the NC-UML coalition as opaque and unnatural. The four parties view the NC and UML’s plans to amend the constitution with suspicion, fearing that these two parties might regress from the progressive provisions of the 2015 constitution. Consequently, the four parties have formed a task force to thoroughly study the policies and activities of the newly-formed coalition.

For the first time in 10 years, the Maoist party finds itself in the opposition bench, a position it last occupied in 2014 when the NC and UML formed an alliance to deliver the constitution. Since then, the Maoist party managed to remain in power despite multiple major and minor splits. After the promulgation of the new constitution in 2015, Dahal’s long-time comrade Baburam Bhattarai left the party to form a separate faction. Bhattarai has been a vocal critic of Dahal, unlike other Maoist splinter groups, which still regard Dahal as their leader.

Despite maintaining moderate strength through electoral alliances with the NC and UML, the Maoist party’s influence is waning. Party leaders fear that contesting elections without alliances could further weaken their position in the national parliament.

Numerous Maoist party leaders and cadres, who were excluded from benefits during Dahal’s tenure, believe it is crucial for Dahal to reflect on his past decade in power and work toward strengthening the party organization. The Maoist party is steadily losing public support and organizational strength. Officially, Dahal will not become the main opposition leader as he lacks the requisite 65 seats. However, as the third-largest party in Parliament, the Maoists remain a significant opposition force, supported by the fourth-largest party, Rastriya Swatantra Party, which holds 21 seats in Parliament, alongside other fringe parties.

Dahal, according to close associates, will strive to consolidate his power by uniting various Maoist factions, although a formal unification is unlikely. The potential unification could be influenced by shared concerns over war-era human rights violations if the NC and UML join forces. Whether the new government will prioritize transitional justice issues remains uncertain, but these issues could serve to unite the Maoist factions. 

Additionally, Dahal may reach out to political outfits advocating identity politics. As the NC and UML aim to amend the constitution to alter the current electoral system, Dahal and other identity-based groups are likely to vehemently oppose any such change. Consequently, Dahal is expected to lead a front that staunchly resists any attempt to amend the constitution.

Arzu Rana Deuba, a Central Working Committee member of the Nepali Congress, has been appointed the Minister of Foreign Affairs in the KP Sharma Oli-led government. This marks her first ministerial role, and she has undertaken a portfolio of significant importance amidst the rapidly evolving regional and international geopolitical landscape.

Although this is her first ministerial position, her extensive experience over the past three decades in observing state functions—partly through her role as the spouse of five-time Prime Minister Sher Bahadur Deuba—affords her a unique advantage. She has been privy to high-level negotiations and has cultivated valuable personal connections, positioning her favorably compared to her predecessors. 

Coming from a well-educated family, Deuba also possesses a strong command of English, which is crucial for effective communication in bilateral talks and negotiations. Without relying on a translator, she can clearly and articulately present Nepal’s stance on both regional and international platforms. 

How she fares in her job is yet to be seen, especially in today’s volatile geopolitical climate. 

One of Deuba’s foremost challenges, says foreign policy expert Bijaya Kanta Karna, will be aligning the growing interests of major powers with Nepal’s national interests. 

Navigating the dynamics between the United States and China, as well as India and China in South Asia, is a significant task for the new government. Karna suggests that Nepal should leverage this complex situation to attract more investment and technology, thereby garnering international attention in Nepal’s favor.

The government must maintain balanced and cordial relations with all major powers, resisting pressures to align too closely with any one nation. Since the international media often frames new governments of Nepal as being “pro-China” or “pro-India,” influencing global perceptions, it is crucial for the Oli government to craft and project its own narrative.

Binoj Basnyat, a former major general of Nepal Army and political analyst, says the change in the coalition government and the alliance of the main two constitutional forces to form a national government reflect underlying constitutional weaknesses, political instability, institutional corruption, politicization of institutions, and erratic foreign policy behavior. He adds this situation arose as Nepal underwent significant transformation since 2008, while also facing the emergence of Cold War 2.0, a new global order marked by complex interactions of conflict, cooperation and competition among geopolitical rivals.

Basnyat suggests Nepal’s foreign policy should pursue three key objectives. First, domestic measures to ensure meritocracy, realism and honesty as the foundation for implementing national foreign policy within the framework of national interests. Second, economic diplomacy, which includes programs, policies or activities aimed at improving the economic well-being and quality of life for the community. This involves addressing geopolitical aspirations by accepting geographic realities, national necessities and democratic values. Third, upholding the principles of Panchasheel to protect freedom of action and maintain equilibrium with its competing partners and immediate neighbors, China and India, and global rivals, China and the US. 

Nepal’s strategic endeavors, Basnyat says, should follow a visionary approach, encompassing immediate, short-term and long-term development planning within national strategic policies to address financial arrangements. This will help avoid geopolitical uncertainty and prevent falling into strategic traps linked to political and economic conditions imposed by global visions.

As for foreign policy, he adds Nepal should strive for neutrality and a non-alignment policy to foster economic development, following the theme of ‘Yam between two boulders’ within a uniquely Nepali political and governance system.

On specific issues, Prime Minister Oli and the Nepali Congress (NC) have differing views, particularly on China’s Belt and Road Initiative (BRI). Following an agreement with Oli’s CPN-UML, the NC officially decided against taking loans under the BRI, preferring terms similar to those offered by the World Bank and the Asian Development Bank. Conversely, UML leaders advocate moving forward with BRI projects on concessional loans. 

NC and UML are also not on the same page on some issues related to India. Foreign Minister Deuba, like her predecessors, is likely to face pressure from the opposition and other parties to address the ongoing border dispute with India. However, during former Prime Minister Pushpa Kamal Dahal’s visit to India last year, both nations agreed to allow more time for diplomatic mechanisms to address this issue.

To address the pressing economic challenges, particularly stagnation and job creation, the new government requires the support of major powers and long-standing development partners to attract investment. International investment in Nepal has declined in recent years, while external debt has increased. To reverse this trend, Deuba could play a key role here for setting up effective coordination among the Ministry of Foreign Affairs, the Ministry of Finance, and the Office of the Prime Minister and the Council of Ministers.

The NC-UML coalition has yet to finalize the government’s policies and programs, leaving its foreign policy orientation and priorities somewhat ambiguous. Nevertheless, significant shifts in foreign policy are unlikely. Effective foreign policy will depend on proper coordination and communication between the Ministry of Foreign Affairs and the Office of the Prime Minister. Historical precedent shows that conflicts can arise when the Prime Minister and Foreign Minister hail from different parties.

The new government is expected to put economic diplomacy at the center of its engagement with major powers, setting aside other differences. Economic recovery and infrastructure development are key priorities for Nepal. Both coalition parties agree that Nepal should not align with any single country but should engage major powers on economic issues rather than geopolitical tensions. 

The new government’s foreign policy will likely be driven by domestic agendas, such as economic recovery, job creation and securing funding for infrastructure development. In order to accomplish these agendas, Prime Minister Oli must avoid actions that could undermine trust with major powers and other development partners.

Throughout Monday, the media and political circles were on edge due to reports of a possible change of government. Even top leaders of major parties were struggling to uncover what had transpired during recent meetings between Sher Bahadur Deuba, leader of the main opposition Nepali Congress, and KP Sharma Oli, CPN-UML chairman and a major coalition partner in the Pushpa Kamal Dahal-led government. 

The secrecy maintained by Deuba and Oli regarding the content of their meetings has further fuelled the rumor that NC is attempting to remove Dahal from power by forming a new alliance with UML. 

Despite the rapid developments on Monday and chatter on social media, there were no clear indications of any top-level political maneuvers. 

But according to multiple sources, it is evident that Congress has indeed offered the premiership to Oli, who was ousted from power in 2021 following a Supreme Court order. Oli and his party may take some time to decide on the offer from NC, the largest party in the 275-member House of Representatives. 

After a long gap, Deuba visited Oli's residence in Balkot this Saturday, following two rounds of talks in Kathmandu. There are reports that Deuba and Oli have agreed to form a national consensus government to address current issues such as constitutional implementation and economic challenges. Oli has repeatedly stated that the country cannot progress in its current state and is consulting within his party about the NC’s offer.

Oli is reportedly dissatisfied with the government's performance, including the recently passed budget, which he claims was introduced without coalition consultation. This makes it difficult for him to make an immediate decision, especially since his closest rival, NC, has offered him the prime ministerial position.

In a meeting with his party’s top leaders on Monday, Deuba mentioned his cordial relationship with Oli but refrained from commenting further on their ongoing talks. Deuba did not share concrete details with his party colleagues. On the same day, Prime Minister Dahal and Oli held a lengthy discussion, but neither side disclosed the content of their meetings. When asked about the possibility of becoming prime minister, Oli told journalists that he might not assume the role this year.

Amid discussions of an NC-UML alliance, Prime Minister Dahal addressed the Cabinet, assuring them that the current government would continue for a long time. Government Spokesperson Rekha Sharma stated, “The prime minister briefed that media reports regarding a new government are untrue and there have been no talks about forming a national unity government.”

Sources indicate that Oli favors forming a national unity government rather than a coalition of just two parties. The key agenda for such a government would be to amend the constitution, change the current electoral system, and remove secularism from the constitution.