Nepal’s recent political upheaval marks a critical turning point, as the collapse of the UML-led government, formerly backed by the Nepali Congress (NC), was triggered by mass youth-led protests against systemic corruption and demands for stronger free speech protections. This movement directly challenges a long-rooted political establishment, composed of the NC, UML (and its factions), and the Maoists, which have been widely accused of prioritizing political interests over effective governance. Through decades of political manipulation, these groups reconfigured state structures to serve their agendas, crippling public services and weakening economic foundations.
The crisis reached a tragic climax on September 8, when police, under Home Minister Ramesh Lekhak’s orders, used lethal force against peaceful student protesters in uniforms from colleges and schools, marching from Maitighar to New Baneshwor, killing at least 74 and injuring over 300. This massacre ignited nationwide outrage and a total loss of legitimacy, ultimately forcing Prime Minister Khadga Prasad Oli to resign.
The protests were fueled by high-profile corruption scandals involving top leaders, mainly from the NC, UML (and its splinter groups), and Maoists, whose unchecked excesses were exposed dramatically. Demonstrators raided the homes of five-time Prime Minister Sher Bahadur Deuba and his wife, former Foreign Minister Arzu Rana Deuba, where large sums of local and foreign currency were burned. Media reports further galvanized public anger by revealing cash hoards at properties linked to former three-time PM Khadga Prasad Oli, as well as the lavish residences of three-time PM Pushpa Kamal Dahal, complete with indoor swimming pools, banknote storage rooms, and collections of expensive imported liquors—a stark contrast to his proclaimed revolutionary image. Pushpa Kamal Dahal has long faced allegations of corruption, including involvement in a controversial cantonment scandal, symbolizing the profound ethical decay at the highest levels of power.
The Underlying Economic Crisis
The pervasive culture of corruption is widely cited as a primary cause of Nepal's severe economic underdevelopment. This environment, characterized by a bloated bureaucracy, a judiciary perceived as lacking independence, and the diversion of public resources, collectively stifles economic growth and erodes public trust.
The consequences are stark. Nepal faces a critical "brain drain," with approximately 550,000 youths leaving for foreign employment each year and an additional 200,000 renewing work permits annually. This exodus deprives the country of its most productive human capital. Furthermore, the fiscal landscape is unsustainable. According to Nepal Rastra Bank (NRB), for the fiscal year 2024/25, a massive trade deficit of Rs 1,527.9 billion highlights an economy heavily reliant on imports, with an import-to-export ratio of 15.4:1.
Government finances are severely strained. A public finance deficit of NRs 404.42 billion was recorded, with recurrent expenditure (Rs 980.28 billion) dwarfing capital expenditure (Rs 222.68 billion), indicating a budget prioritizing operational costs and debt maintenance over productive investment. Total public debt stood at Rs 2,669.5 billion, or 43.71% of GDP. While worker remittances provide a crucial inflow of Rs 17,623.27 billion, bolstering foreign reserves, they are a symptom of the domestic economy's failure to create sufficient opportunities. This financial stability is precarious, remaining dependent on external labor markets. Ultimately, the high cost of essential public services, combined with these structural weaknesses, places a severe burden on ordinary citizens and fuels widespread public anger and frustration toward political groups, mainly the NC, UML, and Maoists.
Geopolitical and Economic Imperatives
The new government operates within an exceptionally complex geopolitical environment. Nepal must maintain a delicate balance in its relations with both China and India. Previous administrations, led by the NC, UML (and its factions), and Maoists, systematically failed to sustain positive diplomatic relations with these two historically friendly nations. This failure has resulted in significant economic challenges for Nepal.
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Agricultural dependency: Reviving the domestic economy requires drastically reducing agricultural imports by boosting local production and productivity through improved management, extension services, and revitalized agricultural institutions.
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Exorbitant infrastructure costs: Public projects in roads, energy, urban development, water management, and air transport are consistently plagued by massive time and cost overruns due to corruption and poor planning. Notorious examples include the Narayanghat-Butwal Road, Bheri-Babai Diversion, and the Mugling-Pokhara Highway.
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A compromised private sector: The private sector often operates with minimal oversight, engaging in underpricing and over-invoicing in international trade to reap excessive profits under the guise of being the "engine of growth." Meanwhile, the financial system fails to provide accessible credit to small businesses and individuals without political connections.
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Inequitable fiscal and monetary policy: Economic policies have disproportionately favored selected business houses and political elites, failing to address the challenges of ordinary citizens and neglected regions like Karnali, Sudurpashchim, and remote hills and Terai. The interim government must establish fair, equity-based policies to advance these underprivileged regions. This requires significant capacity building and oversight for the Ministry of Finance and Nepal Rastra Bank to design policies that incentivize investment in marginalized geographies. A clear, equity-driven framework would also better guide international donors toward impactful projects in priority regions, rather than allowing funds to be spread thinly for superficial reporting.
Institutional Decay in Public Projects
Systemic corruption has become embedded within the bureaucracy, particularly in line ministries, the National Planning Commission, and the Investment Board of Nepal. This has critically compromised the entire public project lifecycle. Essential processes—including project screening, selection, and economic, technical, environmental, and social assessment—are routinely compromised, enabling the selection of unqualified contractors. A critical conflict of interest exists, as government bureaucrats often act as shadow advisors to the same contractors they are meant to oversee. The consequences are systematic fund mismanagement, massive cost and time overruns, and poor infrastructure quality. High-profile failures like Gautam Buddha International Airport (built on an unstable limestone base unsuitable for commercial aircraft) and Pokhara International Airport exemplify institutional failure.
A New Mandate: The Interim Government
Following a 72-hour negotiation period, former Chief Justice Madam Sushila Karki was sworn in as Nepal’s 42nd Prime Minister on Bhadra 27, 2082, becoming the nation’s first female head of government. Her appointment represents a historic break from the political establishment, directly responding to the demands of the youth-led protest movement. Recognized for her anti-corruption crusade and judicial independence during her tenure as Chief Justice, Madam Karki embodies a promise of integrity amid systemic decay. Her interim government has dissolved parliament, paving the way for a fresh people’s mandate—a move that has drawn criticism from traditional political groups, whose objections are widely perceived as attempts to reclaim influence rather than uphold constitutional principles.
A sustainable recovery hinges on dismantling institutionalized corruption and restructuring inefficient public expenditure. Reallocating funds from bloated recurrent budgets toward productive capital investment requires deep reforms: embedding accountability, deploying technology like AI to ensure transparency in procurement, and modernizing fiscal management. Beyond technical fixes, Nepal must mobilize its economic and financial system strategically, leveraging contractual savings, development bonds, and capital markets to channel resources into growth-driving sectors. Ultimately, lasting change depends on appointing ethically sound officials and empowering autonomous bodies like the Commission for the Investigation of Abuse of Authority and the judiciary. Only through institutional credibility can Nepal honor the sacrifices of its youth and deliver on the demand for a future free from corrupt political elite capture.
The mandate from Gen Z is clear: our future must not be sacrificed for their fortune.