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Nepal today stands at a critical intersection. Prime Minister Balendra Shah has captured public imagination with his compelling icon of modern governance, promising to separate politics from administration and insisting that the government must serve citizens rather than partisan interests. Yet the central question remains: Is PM Balendra truly governing, or merely presiding over government machinery? The honeymoon period has now ended, and the verdict on his first hundred days demands honest examination.

The promise and the reality

Within his first hundred days, PM Shah unveiled an ambitious ‘shopping list’ of reforms, installed a youthful cabinet, and passed the 2026/27 budget. These actions initially inspired hope among citizens weary of conventional politics. However, for ordinary Nepalis: farmers, wage earners, students, housewives, and commuters’ tangible relief remain conspicuously absent. Instead, recycled appointments, politically exposed figures in universities, and retirees recalled to key posts evoke frustration rather than confidence. Essential services remain stagnant while kitchen prices soar from Taplejung to Surkhet. The paradox is stark and unsettling: the leader most cherished by the electorate risks missing the very mission of governance that brought him to power. Unless PM Balendra moves beyond symbolism toward substantive reform, hope may dissolve into disillusionment, trapping Nepal once again in cycles of stagnation.

The state of public health

When citizens voted for the RSP, they envisioned accessible, affordable healthcare delivered with dignity at their doorsteps from the hills of Mugu to the valleys of Dang. The reality, however, is starkly different. Public health institutions remain crippled: doctors are frequently absent, new equipment lies idle, and families are forced to sell gold or mortgage land to pay for private treatment. From district headquarters to Bir Hospital, TU Teaching Hospital, Patan, and Bhaktapur, the story repeats itself overcrowded wards, scarce professionals, and indifference where compassion should prevail. This is not the governance people hoped for. 

Reform has yet to materialize, leaving citizens frustrated and despairing. The absence of humility and kindness, compounded by systemic neglect, steadily erodes public trust. Without visible improvements affordable care, functioning institutions, humane treatment; the government risks squandering the very mandate that brought it to power. Governance must move beyond endless discussion; it must deliver tangible relief to those who need it most.

The crisis in public education

Education stands among the most critical public goods. Citizens expected that strengthening public schools would reduce dependence on costly private institutions. Yet the reality remains disappointing. The Ministry of Education has staged drama rather than genuine reform. Private schools continue to impose rising monthly fees and arbitrary charges in the name of ‘development’, ‘annual costs’, ‘stationery’, and ‘infrastructure’. Parents are forced to pay inflated prices for school supplies, often far higher than market rates. Instead of protecting families, regulators appear complicit, allowing profiteering to flourish unchecked. 

Where is the reform that PM Balendra promised? Where is the accountability for schools that ruthlessly burden parents with punitive costs under countless headings? Neither public education shows signs of meaningful improvement, nor do private schools face consequences for exploitative practices. This failure leaves citizens deeply frustrated. Parents who once hoped for relief now confront the same cycle of exploitation. Without decisive action to strengthen public education and regulate private institutions, PM Shah’s mission risks becoming yet another unfulfilled promise.

Energy governance: Promise unfulfilled

Hydropower has long been hailed as Nepal’s economic game-changer, with estimates suggesting more than Rs 10trn in investment opportunities for new projects. Yet the Ministry of Energy’s disappointing performance has become another source of public frustration. Instead of meaningful reform, the sector remains mired in favoritism: some officials are removed, others are protected, and key appointments appear to be influenced more by political patronage than merit and performance. 

The situation across the Nepal Electricity Authority (NEA), its subsidiaries, and government-promoted hydropower companies reveals a troubling pattern. Leadership positions at institutions such as Budhi Gandaki Hydropower Company, Rastriya Prasharan Grid Company Limited, Hydroelectricity Investment and Development Company Limited, and numerous others continue to be held by officials whose appointments have attracted public scrutiny. Although senior officials at the Ministry reportedly signaled that these appointments would be reviewed, no meaningful action followed. 

Instead, the government’s subsequent engagement with the same officials created the perception that its initial commitment to accountability had given way to accommodation. Many of these institutions continue to operate under acting leadership for extended periods or under long-entrenched management. The inconsistency is difficult to ignore. While the government moved swiftly to remove the leadership of NEA, SEBON, and ERC through ordinances or executive decisions, officials heading several government-promoted hydropower companies have remained in place. Such uneven application of governance reforms inevitably raises questions about the credibility and consistency of the government’s reform agenda. 

Despite repeated promises of governance reform, PM Shah’s administration has largely failed to establish consistent standards of accountability, transparency, and merit-based appointments across the sector. The result is a system in which public enterprises are not treated equally, governance standards remain weak, and the enormous potential of Nepal’s hydropower sector is being squandered through poor leadership and weak oversight. Hydropower could transform Nepal’s economy, but without decisive leadership, the promise will remain unrealized.

Banking and finance: A fragile foundation

Nepal’s economy today stands at a fragile path where governance must extend beyond symbolism into structural reform. PM Balendra’s promise of modern administration resonates with citizens, yet the banking and financial sector exposes the fragility of this mission. Financing for SMEs: the backbone of any economy remains shallow. Class-A BFIs prefer lending to promoters and large shareholders, leaving new sectors starved of credit. Deposits are abundant, but the Nepal Rastra Bank has failed to deepen monetary policy or widen access. 

PM Balendra’s direct meetings with the NRB governor and business elites, bypassing his finance and commerce ministers, echo the old political style he vowed to replace. Governance cannot be reduced to private consultations; it must energize cabinet institutions and deliver results. The capital market suffers from favoritism, with retirees recycled into leadership instead of visionary reformers. Oversight of listed firms is weak, and SME financing windows like those pioneered in China remain absent. Nepal's financial system requires ruthless oversight, credible appointments, and policies that channel credit into productive sectors. Without decisive reform, the promise of change risks dissolving into repetition.

The disconnect: 68,348 votes and zero public meetings

The electoral triumph of PM Balendra in Jhapa-5 was nothing less than a political earthquake. By unseating Khadga Prasad Sharma Oli; a four-time PM and Chairman of CPN-UML by a staggering margin, PM Balendra did not merely secure a parliamentary seat; he earned a resounding democratic mandate for transformative change. This was no ordinary turnover. It was a profound expression of trust and hope from the electorate, signaling their desire for a genuine ‘game-changer’ capable of addressing Nepal’s most entrenched challenges. Yet the magnitude of this endorsement makes his subsequent disengagement from the very populace that elevated him to power both perplexing and disconcerting. 

In a vibrant democracy, governance must embody Lincoln’s ideal: of the people, by the people, and for the people. That principle, however, appears conspicuously absent from the current administration’s practice. Following such a historic victory, it is an egregious oversight that PM Balendra has not prioritized direct, substantive engagement with his constituents. The absence of town hall meetings, public forums, or structured dialogues leaves citizens distressed, awaiting acknowledgment and reciprocity. This democratic silence raises a fundamental question: is this the expected conduct of a leader entrusted with a landslide mandate?

The disconnection is further compounded by internal inconsistencies within the RSP. While the party commendably organized orientations for its lawmakers with intellectuals and public figures, Balendra Shah himself; the senior leader and PM, failed to address this critical assembly. Such absenteeism signals fragility within the political party governance that risks appearing rudderless. Equally troubling is his omission in thanking or meeting RSP lawmakers whose support was instrumental in his election as Parliamentary Leader. This neglect undermines cohesion at a time when unity is indispensable.

The path forward

As the administration’s ‘honeymoon period’ is no more, the record of its first hundred days remains conspicuously thin. PM Balendra has been absent from the parliamentary floor and reluctant to engage the public. Citizens do not demand ceremonial pageantry; they demand substantive dialogue. From Phungling in Taplejung to the streets of Kathmandu and villages of Dang, the electorate that placed its faith in him now feels abandoned. Governance cannot be conducted from insulated rooms in Singha Durbar or the kitchen cabinet of Baluwatar. 

PM Balendra must transcend these confines visiting schools, hospitals, farms, and communities to honor the monumental trust placed in him. The time for rhetoric has passed. The time for visible, accountable, people-centric governance is now. The real test of PM Balendra’s administration lies not merely in governing the government but in reforming the institutions entrusted with Nepal’s future. Without such transformation, the hope that swept him into power may dissolve into the very disillusionment he promised to overcome.

Nepal’s political course toward federalism reflects a complex interplay between democratic aspirations and the realities of party governance. Since the restoration of multi‑party democracy in 1990, the system has often been defined less by institutional reform than by power consolidation. This dynamic is most visible in the histories of its two dominant traditions: the democratic, Nepali Congress and the communist left. The Nepali Congress, despite its foundational role in establishing democracy, has long been plagued by factionalism. Leadership transitions marked by internal struggles weakened Nepali Congress party strength and undermined governmental stability. 

The recent rise of Gagan Kumar Thapa, as party president amid party divisions underscores the persistence of generational conflict and cemented power structures. Nepal’s leftist parties exhibit a parallel pattern of fragmentation. Emerging from a shared heritage, they splintered into factions orbiting the Communist Party of Nepal under leaders of Madan Bhandari to KP Sharma Oli, and the Maoist led by Pushpa Kamal Dahal. Frequent mergers and splits, driven by ambition and ideological schisms since the 1960s, have produced a perpetually fractured political party governance landscape. Coalition governments became the norm, with ideological commitments often subordinated to pragmatic power‑sharing. This explosiveness continues to erode party governance principles and political system.

Historical foundations

Nepal’s political system  and party governance evolved through successive ruptures. The century‑long Rana oligarchy (1846–1951) fixed with feudal absolutism, later replaced by the crown‑backed Panchayat system that suppressed dissent until 1990. The Jana Andolan of that year compelled King Birendra to restore multi‑party parliamentary governance, though fragile constitutions failed to secure stability. The 2006 Loktantra Andolan marked a decisive break: parliament curtailed royal prerogatives, and in 2008 the monarchy was abolished. Key milestones include the 2007 Interim Constitution, which enshrined secularism and federalism, and the 2015 Federal Constitution, which established Nepal as a federal democratic republic with federal government, seven provinces, 753 local governments. The charter codified inclusive representation and fundamental rights, though implementation remains contested and uneven.

Party governance and political institutional dynamics

Nepal’s governance operates within a fragmented multiparty framework dominated by rivalry between the Nepali Congress and communist factions. In recent years, the Rastriya Swatantra Party has emerged as a challenger to these traditional forces. The March 21, 2026 election marked a turning point: the old parties’ reliance on coalition governments, formed through electoral arithmetic, was dramatically disrupted. For the next five years, the coalition climate that produced chronic instability is expected to recede. Cabinets, once reshuffled frequently as loyalties shifted, undermining policy continuity, now face a different political landscape. 

Patronage networks continue to complicate governance. Party leaders distribute resources, power, and appointments to consolidate clientelistic bases, often prioritising geography or ethnic identities over programmatic policy. Smaller parties wield disproportionate influence as kingmakers, extracting concessions that dilute executive coherence. These dynamics foster factionalism and impede progress on federal implementation, economic reform, and transitional justice.

Even the newly formed RPP has not escaped the rifts of party governance. Within its cabinet and lawmakers, sharp divisions persist: one faction seeks to institutionalize values and strengthen party governance, while another undermines those very principles. This persistent fragmentation ultimately burdens ordinary citizens and voters who tirelessly hope for the fruits of meaningful progress in the nation, for themselves and for their children.

Comparative perspectives

Under President Xi Jinping, China’s party‑state governance functions through disciplined “democratic centralism,” balancing collective and participatory consensus with unified execution. This framework ensures long‑term strategic coherence across successive five‑year plans, translating party vision into mega‑scale investments and development. In 2026 alone, capital expenditures aimed to exceed 7trn yuan targeted the “six networks” of water systems, computing grids, next‑generation ICT, logistics, and subterranean urban infrastructure. By merging technological advancement with green transition goals, China has consolidated global leadership in electric vehicles, battery innovation, robotic engineering and artificial intelligence. This state‑led engine underpins China’s historic transformation, including the eradication of absolute poverty after lifting 800m citizens into the middle class.

Globally, China projects this model through the Belt and Road Initiative (BRI) and the Global Development Initiative (GDI) with a shared future for humankind, mobilizing over $23bn for Global South partners. In Nepal, bilateral cooperation has advanced connectivity, digital transformation, and agricultural modernization. This paradigm resonates with John Rawls’s conception of a just order as a cooperative venture for mutual advantage and equitable opportunity, justice and fairness. Human‑capital investments such as the “Healthy China 2030” program, expanded hospital networks, and world‑class academic and engineering centers highlight China’s prioritization of tangible human development courses. 

Ultimately, the integration of innovation, public health, and state capacity forms the bedrock of its high‑quality and sustained development model. Furthermore, modern China operationalizes Marxist political economy as a “socialist market economy.” In this “stage of socialism,” market mechanisms and private enterprise coexist with state authority. State‑owned enterprises govern strategic infrastructure, planning guides long‑term goals, and party governance directs capital toward socio economic development, environmental protection, common prosperity, education, health, energy and technological progress, etc.

China’s party governance contrasts sharply with Nepal’s multi‑party federal democracy. While Beijing leverages unified leadership for strategic execution, Nepal’s development remains constrained by fragile coalitions, frequent parliamentary turnovers, and rooted patronage networks. Contemporary challenges climate vulnerability, brain drain, inefficiency of government, and corruption compound these weaknesses. Yet opportunities exist: youth movements demanding transparency, growth in tourism, computing, education, health, industrial development, enterprises, and regional connectivity through BRI. To seize them, Nepal must strengthen its federal framework, insulate economic policy from partisan cycles, and professionalize public administration. Its socio‑economic future depends on visionary leadership that fuses democratic pluralism with effective governance to deliver sustained, inclusive growth.

Contemporary challenges and opportunities

Nepal faces pressing challenges: climate vulnerability, inefficient governance, and systemic corruption. Yet opportunities abound. Youth movements demanding transparency, coupled with potential in tourism, computing, education, technical skills, industrial development and regional connectivity through China’s BRI, present avenues for renewal. To harness these opportunities, Nepal must strengthen its federal arms, insulate economic policy from partisan cycles, and professionalize public administration. Visionary leadership capable of curbing corruption and delivering inclusive growth is essential. The country’s socio‑economic future is inseparable from party governance. While China demonstrates the power of continuity and state‑led execution, Nepal must synthesize democratic pluralism with effective governance to achieve sustained development.

The Rastriya Swatantra Party (RSP)-led government has presented a national budget of Rs 2.124trn for the fiscal year 2026/27. The fiscal plan allocates 51.08 percent to recurrent expenditure, 29.28 percent to capital expenditure, and 19.67 percent to financing. Compared to the previous fiscal year, the budget has increased by 7.03 percent, reflecting a blend of ambition and caution.

Prepared in line with the RSP's citizen contract, its “100 Points Governance Improvement” agenda, and the party’s position paper, the budget has drawn mixed reactions. While the position paper was widely praised for its intellectual rigor, the budget itself has received both support and criticism.

Finance Minister Swarnim Wagle’s consultations with former finance ministers appear to have encouraged several bold policy measures, which many view as an attempt to address Nepal’s deep-rooted structural weaknesses. Yet concerns have also emerged. Sapana Aryal, a development practitioner and homemaker, criticized the tax imposed on electricity consumption above 50 units, arguing that it discourages energy use, raises household bills, and undermines affordability. She noted that the Nepal Electricity Authority's service charges often finance staff allowances and facilities rather than improvements in power distribution, thereby penalizing consumers and discouraging productive energy use.

Critics have also pointed to inconsistencies in public investment priorities, noting that expected returns in the social, economic, environmental, and governance sectors have not been clearly articulated. The government's target of achieving seven percent GDP growth has been described as unrealistic. Although total expenditure has risen by 8.16 percent to Rs 1.602trn, ambitious commitments to technology and infrastructure continue to face challenges related to revenue generation, project execution, and policy credibility. Rising costs of education, healthcare, and essential consumer goods have also not been adequately addressed. While the 21 percent salary increase for government employees has been welcomed, concerns remain about its potential inflationary impact. Agricultural incentives have likewise been criticized as impractical, with stakeholders calling instead for interest subsidies and stronger financing mechanisms for small and medium enterprises.

Strong positions

The budget presents a bold vision of future-oriented reforms, signaling a shift toward a knowledge-based economy. Technology incentives include a 50 percent tax exemption on IT service exports and a full exemption on sweat equity for technology professionals, measures expected to energize Nepal’s growing IT sector. Equally forward-looking is the proposed establishment of Nepal’s first Sovereign AI Compute Center in Kathmandu, leveraging surplus hydropower to support advanced AI services.

The budget also seeks to strengthen the startup ecosystem by formalizing remote work arrangements and allowing outbound investments. On infrastructure, capital expenditure has increased by 71.5 percent to Rs 431.1bn, with Rs 70bn allocated for transmission lines and substations to support expanded electricity generation. Agriculture receives support through fertilizer subsidies and irrigation projects aimed at addressing supply-side constraints.

For the middle class, relief measures include raising the personal income tax exemption threshold to Rs 1m and granting government employees a 21 percent salary increase after a four-year freeze. These measures are expected to stimulate consumption, reduce incentives for corruption, and reinforce the government's vision of “more governance, less government.” The budget also emphasizes human capital development, allocating Rs 218bn to education and Rs 101bn to health, reaffirming social development as a national priority.

Weak positions

Despite its ambitions, the budget faces significant weaknesses. The most pressing challenge is revenue generation. Even before the budget announcement, Wagle acknowledged a gap of approximately Rs 150bn between projected revenue of Rs 1.18trn and mandatory expenditures of Rs 1.33trn. Tax reductions are likely to widen this gap further.

The budget relies heavily on borrowing, with nearly 31 percent of total resources expected to come from domestic and foreign debt, raising concerns about long-term fiscal sustainability. Equally troubling is Nepal's poor record of capital expenditure absorption.

Ambitious spending plans have frequently remained on paper because of chronic implementation failures. In the fiscal year 2025/26, for example, the capital budget was revised downward from Rs 407.88bn to Rs 243.3bn due to weak implementation. Without substantial improvements in project management, procurement, and execution capacity, the 71.5 percent increase in capital allocation may not translate into tangible infrastructure outcomes.

The budget also rests on highly optimistic growth assumptions. A seven percent GDP growth target is nearly double the estimated 3.85 percent growth rate for the current fiscal year and significantly exceeds Nepal’s decade-long average of 4.2 percent. This optimism contrasts sharply with structural weaknesses such as premature deindustrialization, heavy dependence on remittances, and a trade imbalance in which exports cover only 14.8 percent of imports. These vulnerabilities cast doubt on the country’s ability to achieve robust economic growth or graduate from Least Developed Country (LDC) status on a strong foundation.

SDG dimensions

The budget attempts to align with the Sustainable Development Goals (SDGs), allocating 8.82 percent to poverty reduction, 3.26 percent to zero hunger, 2.27 percent to health, 2.96 percent to education, 1.21 percent to clean water and sanitation, 3.3 percent to clean energy, 3.33 percent to decent work, 8.85 percent to innovation and infrastructure, 6.69 percent to sustainable cities, and only 0.51 percent to climate change adaptation.

This distribution reveals troubling inconsistencies. Despite Nepal’s acute vulnerability to floods, landslides, heat waves, and other climate-related disasters, climate adaptation receives minimal investment. Tourism, agriculture, and forestry, sectors with significant employment potential, also require greater attention, particularly as the country experiences large-scale outmigration of its workforce.

Federalism

The budget provides only limited insight into programs designed to strengthen federalism. Yet federalism is not merely a fiscal arrangement; it is a people-centered governance system that must be aligned with broader political economy dynamics. Grants and fiscal transfers alone cannot ensure effective federalism. Efficient use of public investment and the development of local economic opportunities are equally important.

The budget remains naïve in its treatment of federalism, overlooking Nepal’s inability to retreat from its federal experiment. A robust approach would analyze federalism through political economy and institutional performance. Effective federalism fosters decentralized governance, empowers citizens, promotes innovation, and circumvents bureaucratic bottlenecks. Without effective federalism, the seven percent GDP growth target is unattainable.

In this regard, the budget appears somewhat naïve, overlooking the reality that Nepal cannot retreat from its federal experiment. A stronger approach would assess federalism through the lens of political economy and institutional performance. Effective federalism can foster decentralized governance, empower citizens, encourage innovation, and reduce bureaucratic bottlenecks. Without strengthening federal institutions and local capacities, the government's seven percent GDP growth target is unlikely to be achieved.

Conclusion

This budget is best understood as a high-risk, high-reward policy document. Although opposition parties have raised objections, much of their criticism appears driven by political positioning rather than substantive policy analysis.

Overall, the budget is ambitious and reform-oriented, though not without limitations. It seeks to break from past practices through bold reforms, expanded capital spending, and transformative incentives. If the RSP-led government can effectively absorb the capital budget and successfully implement its technology agenda, Nepal could accelerate economic growth and move closer to becoming a knowledge-based economy.

However, historical weaknesses continue to outweigh the strengths. Nepal’s poor record in revenue mobilization and capital expenditure absorption, combined with highly ambitious targets, risks leaving the country caught between aspiration and reality. Wagle could have more aggressively explored financing options through strategic negotiations with bilateral and multilateral institutions, including restructuring principal and interest payment obligations over a five-year horizon. Such measures might have freed resources for urgently needed capital investments while reducing dependence on additional borrowing.

The budget is thoughtfully prepared, particularly considering the limited time available after the formation of the government. Yet its ultimate success will depend on implementation.

In sum, the fiscal year 2026/27 budget embodies ambition and reformist intent, but its credibility rests on execution. Without effective delivery, it risks becoming another well-intentioned experiment constrained by fiscal realities rather than a transformative pathway toward sustainable growth. This budget demonstrates both courage and optimism in pursuing institutional reform and long-term development. It signals the government’s willingness to confront entrenched weaknesses, but the true test lies in translating fiscal ambition into tangible outcomes.

On April 27, Finance Minister Swarnim presented the ‘Current Economic Status Paper’, a seminal diagnostic and visionary blueprint for Nepal’s economic structural rebirth. Transcending standard administrative reporting, this 24-page status paper serves as “white paper”, merging empirical precision with strategic foresight, reflecting a profound commitment to institutional integrity and fiscal transparency. Its analytical rigor rivals that of premier international institutions like the United Nations, multilateral financial institutions and bilateral development partners. 

By anchoring policy in exhaustive data, the document demonstrates exceptional intellectual leadership. This professional critique objectively examines the paper’s roadmap, aiming to bridge the divide between high-level policy rhetoric and Nepal’s material developmental realities.

Nepal’s place in the world

The paper highlights that Nepal is increasingly affected by global undesirable events. For example, conflicts in West Asia threaten the money sent home by migrant workers, which is a huge part of Nepal’s income. Additionally, being placed on an international ‘Gray List’ for financial weaknesses has hurt the country’s reputation. As Nepal prepares to graduate from the grouping of ‘Least Developed Countries’ in late 2026, it must urgently reduce corruption and improve its international standing to attract the investment needed for long-term growth.

Premature de-industrialization 

The paper also outlines that Nepal’s growth trajectory has been low and erratic, averaging below regional peers. The economy has shifted toward services without undergoing genuine industrialization, a case of premature de-industrialization. 

Agriculture remains dominant, while productive industries are weak. Hydropower, forests, and mineral resources remain underutilized, despite their potential to anchor transformation. Tourism, though rich in potential, has not yet become a year-round industry. Destination sites such as Lumbini and Kanchenjunga remain underdeveloped, and the tourism sector has failed to deliver significant economic returns.

Savings and investment dynamics

Gross domestic savings remain critically low, widening the savings-investment gap and limiting capital formation. This structural weakness undermines Nepal’s ability to finance development domestically. Revenue mobilization has slowed, consistently underperforming against targets. 

Nearly 45 percent of revenue depends on imports and consumption, leaving the fiscal base vulnerable. The informal economy remains large, with only about half of transactions flowing through formal accounts. The paper calls for broadening the revenue base, expanding formal participation, and reducing reliance on import taxes. The paper critically assesses the saving and investment dynamics; provide a road map to improvements in future by fiscal measure.

Budgetary integrity and public debt

For the first time, the paper critically observes that Nepal’s budget size is detached from fiscal capacity and feasibility. Poor allocation, inadequate expenditure, and low-quality capital spending have hampered economic growth. Recurrent expenditure consumes nearly two-thirds of total spending, crowding out productive investment. The widening budget deficit has increased reliance on public debt, while pending liabilities remain high. Weak fiscal discipline has fueled irregularities. These structural weaknesses demand urgent reform to align budgeting with development priorities, particularly employment creation and industrial expansion. Public debt has risen to 43.8 percent of GDP, with debt servicing consuming a growing share of federal expenditure and revenue. 

In FY 2024-25, debt payments absorbed 24 percent of expenditure and 35 percent of revenue. This crowding out of capital investment threatens long-term growth. Without disciplined fiscal management, Nepal risks falling into a debt trap, especially as growth remains insufficient to outpace liabilities.

Fiscal federalism and foreign aid

Nepal’s federal structure reveals deep imbalances. Federal polity accounts for one-third of expenditure but contributes less than eight percent of revenue. Their dependence on federal transfers undermines fiscal autonomy. Weak spending capacity, limited technical expertise, and poor project implementation further constrain local development. Unless federal polity is empowered through capacity building and revenue devolution, the promise of federalism will remain unfulfilled. 

Foreign aid has declined as a share of the budget, falling from 21.5 percent to 14.6 percent over the past decade. Loans now dominate assistance, rising to over 80 percent, while grants have shrunk. Aid mobilization remains weak, achieving less than half of targets. Implementation of foreign-assisted projects is sluggish, with many failing to deliver meaningful returns. This reality underscores the need to reframe aid utilization toward genuinely productive purposes. Despite decades of aid, nearly half a million Nepalis continue to leave annually for foreign employment, raising questions about aid effectiveness.

Institutional integrity, financial stability and trade regime

The Status Paper candidly assesses Nepal’s fragile economic architecture, emphasizing an urgent need for modernization. Public enterprises currently drain resources through chronic underproductivity, making reform to international accountability standards a fiscal necessity. Monetary stability remains deceptive; while a domestic slowdown anchors prices, the rupee’s depreciation against the dollar reveals deep-rooted external weaknesses that only a robust export economy can fix. 

Furthermore, the financial sector struggles with sluggish credit expansion and rising non-performing loans despite high liquidity. Systemic risks from unregulated cooperatives and a burgeoning capital market necessitate specialized oversight to ensure long-term market integrity and investor protection. 

Nepal’s trade regime is structurally imbalanced. Exports remain narrow, dominated by re-exported edible oil, which adds little value or employment. Imports are skewed toward consumer goods rather than productive machinery. Remittances sustain external stability, but foreign direct investment remains weak. Infrastructure, education, health, and climate change challenges persist, alongside poverty, unemployment, and inequality.

Opportunities for economic transformation

The ‘Current Economic Status Paper’ of 2026 serves as a rigorous, data-driven diagnostic of Nepal’s macroeconomic landscape, offering a candid analysis of past fiscal failures rooted in poor implementation and fragmented prioritization. By blending empirical precision with a pragmatic roadmap, the paper seeks to bridge the gap between political rhetoric and material reality through disciplined resource mobilization and institutional accountability. This landmark paper in economic transparency provides the essential foundation for the upcoming budget of FY 2026-27, identifying critical sectors such as energy derivative economy, high-value tourism, farm-forestry value chain, climate economy, and digital technology as catalysts for economic development and growth. 

However, the paper cautions against viewing these opportunities as mere checklists; true transformation requires measurable policy coherence and aggressive anti-corruption reforms to reach ambitious targets, including seven percent annual growth and a per capita income exceeding three thousand dollars and one billion dollar GDP. 

Key strategic pivots include the expansion of small-business ecosystems and a sophisticated integration of climate and tourism economics. By utilizing agricultural and forest residuals for biochar and pellet technologies, Nepal can mitigate wildfires, enhance soil fertility, and enter international carbon markets. 

Furthermore, elevating destinations like the Kanchenjunga Conservation Area to global standards through UNESCO Man and Biosphere (MAB) declaration, trail upgradation, service standardization, and better infrastructure will transform natural capital into sustainable wealth. Finally, the paper calls for a comprehensive review of federalism and private finance to ensure that decentralization and capital allocation are directly aligned with job creation and national productivity.

Balendra Shah, widely known as Balen, is a successful structural engineer who has emerged as one of Nepal’s youngest political leaders of the modern era. As Mayor of Kathmandu, he reshaped the city’s trajectory by restoring ancient architecture and advancing a vision for a cleaner, greener, and healthier urban environment. His initiatives in education and employment were equally transformative.

Through the Kathmandu Metropolitan City scholarship program, thousands of students continued their studies beyond the Secondary Education Examination (SEE), while job fairs connected citizens to meaningful work opportunities. His anti-corruption drive within KMC further strengthened public trust. These achievements elevated Balen to national prominence. From elderly residents in Jhapa to young children in Dang, Surkhet, and Kalikot, citizens flocked to his campaign rallies, signaling a generational shift in political enthusiasm. His landslide victory in Jhapa against UML leader Khadga Prasad Sharma Oli underscored his growing influence. 

Rabi Lamichhane, Chair of the Rastriya Swatantra Party (RSP), has also advanced political reforms. Yet his decision to endorse Balen for Prime Minister reflects a profound act of statesmanship. By prioritizing national progress over personal ambition, Rabi positioned Balen as the face of a new governance model: one defined by efficiency, prosperity, and the principle of “less government, more governance”. Accordingly, Nepal must now bring forward and implement a new economic agenda. In the post-UN LDC graduation era, policies must be efficient, impactful, productivity and export driven. Only through such reforms can Nepal sustain growth, strengthen sovereignty, and meet the aspirations of its citizens

A case of bureaucratic resistance

A young agricultural graduate from Narayanpur of Dang, initiated Kesar (Saffron) cultivation at his house rooftop balcony with an initial investment of about Rs 4m, combining personal equity with loans from relatives and friends. His goal was to engage his son from going abroad, who had graduated in agriculture from a premier Indian institution, in building a model farm. The venture proved highly successful: saffron production thrived, demand was strong, and buyers, primarily hotels, readily procured Kesar. 

Yet despite this success, the young entrepreneur struggled to expand. His repeated appeals to provincial government authorities and banks for subsidized loans were rejected. He sought financing from multiple sources to upgrade production and establish a model saffron farm in Dang, but his efforts were consistently thwarted by bureaucratic resistance. This case illustrates the frustration of talented young citizens committed to advancing productivity, production and innovation, only to be obstructed by a system that poisons innovation and service delivery.

Bureaucracy as the greatest obstacle

The greatest obstacle to the RSP-led government lies in Nepal’s lethargic bureaucracy. For decades, senior officials have enjoyed serving traditional political interests, enjoyed privileges while obstructed reform. A telling example occurred a couple of months ago when the sitting Finance Secretary dismissed the Health Minister’s concerns over health insurance funding; an essential service for vulnerable communities. Such resistance reflects a broader administrative culture designed to frustrate reformist agendas. To succeed, the Balen-led government must dismantle this culture of indifference and transform the bureaucracy into a service-oriented institution. 

Security forces, courts, health workers, administrative staffs and corporate houses, etc. as gatekeepers must be reoriented toward delivering public goods rather than protecting traditional political interests. Only by overcoming these systemic barriers can the aspirations of Nepali citizens be realized, cementing Rabi-Balen as icons of a reformed nation.

The economic paradigm post LDC graduation

Nepal’s upcoming graduation date from UN Least Developed Country (LDC) status in November 2026 marks both a milestone and a challenge. While successive international programs like the Paris Declaration Action of Program (1990), the Brussels Program (2001-2010), the Istanbul Program (2011-2020), and the Doha Program of Action (2022-2031) etc.; promised preferential access and support, these opportunities rarely translated into sustained industrial and export led growth. ITC Geneva suggests Nepal could lose over four percent of export income due to tariff changes post-graduation. 

Traditional sectors such as carpets and garments already face steep disadvantages, with production costs nearly 25 percent higher than competitors like Bangladesh. The current economic model, reliant on remittances and consumption, is unsustainable. Each year, more than half a million young Nepalis leave to work abroad, a stark indicator of systemic failure. To reverse this trend, the RSP government must pivot toward domestic production and export-led growth. Nepal’s fertile river basins and abundant hydroelectricity provide a foundation for industries such as agro-processing, dairy, fertilizer production, data centers, tourism, advancing bio energy like biochar production and manufacturing establishment. Rather than exporting energy cheaply, Nepal should harness it to power local industries and generate high-value goods for exporting regional and global markets.

Building a productivity system

Nepal’s survival after graduating from LDC status will hinge on productivity. Today, policy uncertainty, high tariffs, and inadequate connectivity networks inflate costs and discourage investment and productivity. Freight expenses alone add nearly 20 percent to production costs, eroding competitiveness. A productivity-centered agenda must therefore streamline regulations, strengthen connectivity across mountainous terrain, marginal river basins and ensure reliable electricity for services, processing, and storage. 

Tourism and agriculture—forestry: two pillars of Nepal’s economy require urgent modernization. The tourism sector must prioritize value per worker through digital transformation, diversification of destinations, standardized services, and improved connectivity. Regions such as Kanchenjunga demand trail standardization and initiatives toward establishing a Man and Biosphere (MAB) reserve, capable of attracting higher-value international visitors. Agriculture, likewise, must integrate modern market infrastructure, logistics, and processing to move beyond subsistence farming and basic tour guiding.

This transition requires a sequenced agenda: first, strengthening extension service agencies and regulatory institutions; then enabling firms to adopt new technologies that can compete in regional and global markets. Ultimately, economic sovereignty depends on coordination among the Ministry of Finance, the Central Bank, and sectoral ministries. Traditional fiscal and monetary policies must be reframed, alongside a critical reassessment of three decades of liberal economic policy and the Sixteenth Five-Year Plan. 

Federal ministries, often lethargic in their working style, must undergo reform. Policy frameworks should guide sectoral strategies, programs, and projects, while federal grants must empower subnational governments to foster innovation rather than perpetuate political patronage. If Nepal fails to transition from a remittance-dependent economy to a productive, export-led system, the overwhelming public mandate for change will be squandered. The path forward requires unified commitment to international standards and a resilient productivity agenda. Only then can Nepal sustain growth beyond the safety net of LDC status and achieve the economic sovereignty that has remained elusive for decades. 

The election of March 5 stands as a transformative milestone in Nepal’s democratic evolution, effectively dismantling the long-standing narrative that the Constitution of Nepal 2015 created insurmountable structural barriers to a single-party mandate. For years, the prevailing wisdom among political analysts suggested that the country’s mixed electoral framework, with its heavy emphasis on proportional representation, rendered a decisive majority nearly impossible for any nascent political force. 

However, the Rastriya Swatantra Party (RSP) defied these theoretical constraints by securing an unprecedented number of parliamentary seats and over 5m proportional votes. This massive electoral ‘signature’ served as a powerful public referendum on the leadership of Rabi Lamichhane, functioning as a popular exoneration while he remained in legal custody facing allegations of cooperative finance fraud. This outcome suggests that a significant portion of the electorate viewed these judicial proceedings as politically motivated rather than purely legal, signaling a profound shift in the national psyche toward a collective aspiration for prosperity that transcends traditional partisan arithmetic.

By positioning itself as a disruptor of systemic corruption and administrative lethargy, the RSP has demonstrated that a platform centered on institutional integrity can overcome the perceived limitations of a fragmented multiparty system. Yet, this victory brings with it a complex set of challenges, particularly regarding the intersection of judicial process and political will. 

While the RSP successfully harnessed public frustration to secure power, it must now perform the difficult task of translating populist momentum into stable, rule-of-law-based governance. To satisfy the expectations of a diverse citizenry without further polarizing the nation’s legal and political institutions, the party must convert its immense political capital into a coherent and functional fiscal pathway. The mandate is rooted in a fundamental public trust that the RSP can modernize the economy and restore ethical purity to state institutions; a goal that necessitates a radical departure from a status quo-ist fiscal policy.

A central pillar of this reform agenda involves a comprehensive overhaul of Nepal’s Public Financial Management (PFM) to address deep-seated structural imbalances that have long stunted national economic development and growth. According to data from the Nepal Rastra Bank, the national GDP at current prices has reached Rs 6,107.2bn, but the composition of this figure reveals a concerning reality: the service sector dominates at 62.01 percent, while agriculture and industry contribute a mere 25.16 percent and 12.82 percent, respectively. 

This heavy reliance on services has failed to generate sufficient high-quality employment or significant value-added economic growth, placing immense pressure on the incoming RSP government to pivot toward aggressive industrial expansion. Strengthening the industrial sector is not merely a fiscal preference but a structural necessity for fostering meaningful job creation, setting up an export-oriented economy and achieving long-term, sustainable economic stability.

The existing national revenue architecture, though diverse, remains increasingly strained by its reliance on a complex but inefficient portfolio of instruments, including income taxes, VAT, and specialized levies for health and education. Even as the Inland Revenue Department reports a steady upward trajectory in total revenue from Rs 429.3bn in 2020-21 to Rs 583.82bn in 2024-25, these nominal gains mask significant underlying vulnerabilities. 

Most especially, the Department of Customs highlights a precarious imbalance where import-related revenue reached Rs 478bn in the latest fiscal year, dwarfing export-related revenue of only Rs 277bn. This datapoint underscores a disproportionate and risky dependence on trade-based public revenue, which leaves the national budget highly susceptible to global market fluctuations and external shocks.

Despite rising revenue figures, the Ministry of Finance continues to face formidable challenges in meeting its fiscal targets due to systemic weaknesses within its primary institutions. These institutional bottlenecks include a chronic deficit of skilled human capital, substandard technological infrastructure, and the persistent threat of moral hazard within the PFM administration. Such vulnerabilities ensure that the modernization of PFM entities remains a critical but largely unfulfilled mandate. 

Without addressing these fundamental administrative flaws and diversifying the tax base away from volatile import duties, the government will likely continue to struggle with fiscal shortfalls. Consequently, the RSP must lead a comprehensive PFM reform that simplifies tax structures while broadening the base across all levels of the federal polity, ensuring that the modernization of PFM entities move from a theoretical goal to an operational reality.

Furthermore, a decade into the federal transition, the promise of genuine fiscal federalism remains in a state of perilous limbo. At the subnational government level, revenue mobilization is severely hampered by operational hurdles and an inefficient bureaucracy that prevents provincial and local governments from exercising their constitutional fiscal autonomy. Revitalizing subnational governance is a vital priority and without enhancing the efficacy of the subnational polity, the federal system can neither collect nor strategically mobilize the resources required to address the urgent needs of its citizenry. 

Establishing transparency in budgeting, auditing, and fiscal reporting is essential to fostering public trust and enhancing the scientific application of federal transfers. Additionally, the government must adopt strategic debt management, strictly limiting sovereign borrowing to productive, high-yield investments to close the financing gap for high-priority projects without jeopardizing long-term solvency.

The budget (for the fiscal year 2026-27) of the RSP must also prioritize inclusive microeconomic integration to uplift rural and marginalized communities who have placed their faith in the RSP. The objective is to move beyond mere subsistence, fostering an environment where marginalized populations are integrated into national economic value chains by stimulating local entrepreneurship and increasing productive capacity. This requires a dual-track approach to youth engagement and industrialization that balances short-term job creation with long-term structural transformation. Rather than maintaining a narrow focus on traditional microfinance, which often leads to high-interest debt cycles without capital growth, the budget should emphasize comprehensive rural finance programs designed to facilitate capital formation and technical scaling. 

By providing affordable, long-term credit and strengthening SME financing policies, the RSP can ensure that capital is directed toward productive investments rather than just consumption, making the youth stakeholders in a decentralized, inclusive economy.

To catalyze this broader transformation, the RSP must prioritize a strategic pivot toward energy and infrastructure, investing in new generation projects to lower electricity costs and modernizing the grid to support industrial demand. Rather than exporting raw energy at a discount, the goal must be the cultivation of an energy-intensive domestic economy at every river basin level supported by robust logistics hubs. Parallel to this, the ICT sector offers immense potential for economic diversification. By spearheading a digital economy initiative and providing tax incentives for startups, the state can leverage domestic energy to fuel technology services. A national digital training program for youth, coupled with the full digitization of government business, would absorb the trained labor force and reduce administrative costs, mirroring successful models of youth mobilization seen in advanced economies.

Ultimately, the RSP’s success will be measured by its ability to drive agrarian transformation and industrial revitalization. The budget must emphasize ‘smart farming’, integrated agro-processing, and robust rural infrastructure to minimize post-harvest losses. Simultaneously, the strategic revival of distressed or ‘sick’ industries such as jute, rubber, paper, and textiles; offers a ‘triple benefit’ of employment generation, import substitution, and enhanced national competitiveness. 

By modernizing social services through digital classrooms and Science, Technology, Engineering, and Mathematics (STEM) curricula, the RSP can ensure long-term human development and capability lead to function. Shifting national priorities away from a reliance on remittances and toward high-growth sectors like tourism and sustainable farming will build a truly inclusive macroeconomic framework. These reforms serve as a tangible reward for the mandate granted by the citizenry, translating the political support for leaders like Rabi Lamichhane and Balendra Shah into a resilient, self-sufficient national economy that finally fulfills the public trust. 

March 5: A democratic fest

The promise of an election is the promise of change, a peaceful transfer of the people’s voice from the ballot box to the halls of power. For Nepal, the historic election of March 5 represented this promise in its most potent form. Yet, the path to this democratic festival was paved with tragedy, and the victory it yielded for the Rastriya Swatantra Party (RSP) now presents a profound challenge: to translate a powerful electoral mandate into tangible, lived reality for its citizens. The question that hangs in the air is whether the echo of the ghanti (the bell, the election symbol of the RSP); the student protests that sparked this political realignment can truly move from being a symbol of agitation to a force for effective governance, ending corruption and shaping to the sustained economic development.

The election was not born of ordinary political circumstance, but from a crucible of national tragedy. On Sept 8-9 last year, students in uniform marching peacefully with a demand for effective governance and an end to corruption were met with lethal force. The image of school students in uniform, shot dead while exercising their civic voice, ignited a firestorm of grief and rage that consumed the nation. Public buildings, business houses including the hallowed halls of Singhdurbar and the Supreme Court, were set ablaze. The Khadga Prasad Sharma Oli (aka KP Sharma Oli) government collapsed, and the homes of political leaders across the spectrum were attacked. This was not a mere political crisis; it was a popular uprising against a systemic failure of governance, mayhem of corruption, a violent repudiation of a status quo that had prioritized power over people. It was from the ashes of this upheaval that Prime Minister Sushila Karki’s call for a national election emerged, not as a routine political exercise, but as a desperate bid to channel the nation’s fury into a democratic and constructive path.

Against this backdrop, the election itself became a powerful act of civic renewal. Citizens from the entire nation embraced it as a "festival of democracy," a collective affirmation of hope for an impactful future for them, their children and prosperity for future generations. The campaign trail became a magnet for this yearning, with the RSP under Rabi Lamichhane and the former mayor of Kathmandu, Balendra Shah, tapping directly into the public's desire for fundamental change. Their message was not one of transactional politics, but of a shared national prosperity: to connect people and communities to prioritize service over self-interest, and to dismantle the systems of deep-rooted corruption and phony governance. 

The result was a landslide of unprecedented proportions. The RSP’s victory—over 125 parliamentary seats and five million plus proportional votes—is more than a win; it was a seismic shift in Nepal’s political landscape of history. It signals the electorate’s decisive rejection of established, corrupt kitchen family-centric  political groups and a clear, unequivocal mandate for the reform agenda championed by  Rabi Lamichhane and Balendra Shah as the new guard. The challenge, however, is that securing a mandate and wielding power are two vastly different endeavors.

The most immediate and formidable obstacle confronting the RSP is not a political opposition, but the deep-seated inertia and corruption within Nepal’s bureaucracy. This administrative machinery, long accustomed to serving the interests of the old political order, is now expected to implement the radical reforms of the government system currently operating. Many bureaucrats, with fixed loyalties to political groups, the electorate just repudiated, view the new leadership with suspicion, if not with outright hostility. Their mastery lies not in public service delivery, but in navigating and exploiting legal loopholes, perpetuating rent-seeking behaviors, and ensuring that the status quo remains unchallenged. For the RSP, this presents a paradox: their government must govern through a system they were elected to dismantle. Mobilizing the lethargic and often obstructive apparatus to improve public services, from administrative, health and education to infrastructure and market access will be the first true test of their governing capability in the Singhdurbar. Failure to do so risks rendering their electoral promises hollow and eroding the very public trust that swept them into office.

This form of bureaucratic resistance is compounded by profound structural weaknesses in Nepal’s economic governance. The nation’s fiscal health tells a story of chronic mismanagement. For years, the bulk of the national budget has been consumed by recurrent expenditures, salaries, pensions, and administrative costs, while capital investment, the lifeblood of development and job creation, has languished. The figures are stark: between the fiscal year of 2019-20 and 2023-24, ratio of expenditure on total recurrent averaged 70.36 percent of the total budget spending went to recurring costs, while a mere  of 16.67 percent allocated for capital expenditures and a 12.97 percent went for debt servicing in the reporting period of five years averaged. This imbalance starves the economy of the infrastructure and productive capacity it desperately needs financing. Furthermore, a banking system that is prohibitively expensive for small and medium-sized enterprises, a private sector often more focused on tax evasion than innovation, and a monetary policy that has historically favored a few large corporate houses all conspire to stifle broad-based economic growth. Compounding these issues is a burgeoning public debt, now approaching 46 percent of GDP. For the RSP,  the task is not merely to tweak the system, but to fundamentally re-engineer it. First, the RSP government must overhaul the Ministry of Finance, transforming it from a passive administrator of routine into a strategic engine for resource generation and investment. The RSP must create a financial ecosystem that rewards entrepreneurship and productivity, not rent-seeking and evasion.

The path to reform also runs through the marble halls of the judiciary and the complex architecture of fiscal federalism. For the average citizen, the promise of justice remains a distant dream, mired in a court system known for interminable delays and prohibitive costs. Without meaningful judicial reform, the RSP’s pledge of accountability will ring hollow. What’s more, the promise of federalism, now over a decade old, has largely evaporated into poor performance and misaligned incentives. Subnational governments, rather than becoming vibrant centers of local governance, have often devolved into parking lots for party pawns and resting places for bureaucrats awaiting their retirement, contributing little to the development of their federal polity. The RSP’s inception mandate is not to get bogged down in the complex Constitutional Amendments Affairs, but to focus on this practical, improving ground-level dysfunction. From the very first day in office, citizens expect to see a difference and change in how their government functions faster public service delivery, more efficient administration at all three tiers of government, and an end to the chronic delays and cost overruns that plague development projects, which are often themselves a form of sanctioned corruption.

From Ghanti’s echo to delivery

Ultimately, the RSP’s historic victory must transform the Ghanti’s echo from a cry of grief into a demand for impactful results that the student sacrificed for. The Ghanti has echoed with unprecedented clarity, delivering not merely a rejection of personality-driven politics and infamy patronage, but a direct mandate for meaningful reform and impactful performance. The obstacles before the RSP government are formidable: a bureaucracy resistant to change, a structurally weakened economy, and a collection of institutions that have long failed to serve the public. The RSP’s success, therefore, will not be measured by the size of their parliamentary majority, but by its capacity to overcome these deeply concreted forces. It must prove that democracy can deliver that the act of casting a ballot can translate into superior governance, cultivating inclusive microeconomic opportunity, a functioning system of justice that honors slain students. The opportunity before the RSP is as immense as the challenge it faces: to move Nepal beyond its cemented cycles of misgovernance and demonstrate that the people’s voice, even when forged in the tragedy of school student killed in uniform, can indeed shape a future where the promise of a better life is finally and faithfully kept.

Nepal’s political landscape is dominated by long-standing parties: the Nepali Congress (NC), the CPN (Unified Marxist–Leninist), and the Nepali Community Party (NCP) with many names and faces remaining the same. Despite the emergence of reformist challengers like the Rastriya Swatantra Party (RSP), the nation’s most persistent developmental hurdle, the management of hydropower and water resources remains unresolved. While investments in this sector have exceeded Rs 7trn, hydropower has yet to catalyze the transformative economic prosperity once envisioned. Today, the electorate is increasingly scrutinizing the systemic failures of traditional parties, the rising appeal of the RSP, and the broader implications for governance, transparency, and the future of Nepali democracy.

The paradox of ‘white gold’

Hydropower is frequently hailed as Nepal’s ‘white gold’. With its network of high-altitude rivers and steep gradients, the country possesses the natural capacity to generate tens of thousands of megawatts of electricity. If properly harnessed, these resources could power domestic industrialization, eliminate import dependency, and stimulate a diverse energy-based economy rather than merely generating revenue through cross-border trade. Furthermore, integrated water resource management encompassing irrigation, potable water, flood control, mitigating risks of glacier lakes’ outburst, public health, environment and tourism could fundamentally restructure the national economy.

However, despite decades of political rhetoric, the sector remains significantly underdeveloped. Managing the technical, regulatory, and administrative complexities of hydropower is a monumental task. As hydropower shares are now traded on the public market, the need for scientifically grounded, independent regulation has become critical. Without robust oversight, public and private investments risk being squandered. To date, over the Rs 7trn invested has yielded disappointing results, characterized by: infrastructure gaps, chronic delays and weak transmission grids; operational inefficiency: plants operating well below capacity and underutilization of domestic end-use remains minimal relative to the potential. This disconnect between massive capital expenditure and tangible outcomes has fueled a deep-seated public skepticism. Citizens are left asking a fundamental question: if such vast sums have been spent, why has prosperity remained out of reach?

Systemic failures of governance

For over three decades, the NC, UML, and NCP (Maoist) merged with UML factions have governed Nepal, often through musical chair coalitions. While leaders of these parties promised structural transformation, practical progress has been stifled by corruption, a lack of transparency, and the politicization of state institutions. Singhadurbar, the seat of the government, has become a symbol of bureaucratic apathy and political patronage. 

The electorate has grown weary of a cycle of broken and false promises regarding ‘load-shedding’ (power outages), irrigation expansion, infrastructures and export growth. Governance concerns are paramount; public procurement in the energy sector is frequently manipulated by political elites, leading to inflated costs and substandard infrastructure. Because regulatory bodies often lack the independence to provide true oversight, public trust in the state’s capacity to manage large-scale projects and public economy has eroded.

Rising appeal of the RSP

In response to this stagnation, the Rastriya Swatantra Party (RSP) has emerged as a disruptive political force. Unlike traditional entities, the RSP positions itself as a technocratic and reformist movement, emphasizing: depoliticization: removing party influence from civil and regulatory institutions; digital governance by increasing accountability through technology and economic geography by leveraging regional advantages for growth like Karnali. 

This platform resonates strongly with younger voters and the vast community of Nepali migrant workers abroad. These laborers, who left the country due to a lack of domestic employment opportunity, are increasingly urging their families and keen at home to reject the status quo. Their logic is pragmatic: since traditional parties have failed repeatedly, the nation must test a new alternative.

Voter sentiments

The prevailing public mood is one of palpable frustration. Voters are questioning the moral authority of legacy parties to seek re-election after decades of unmet goals with the same faces but changing color like lizards. This anger extends beyond hydropower to a general failure in delivering public goods, services, and accountability. The upcoming elections will serve as a referendum on governance. The stakes are historically high: if the RSP can translate its reformist rhetoric into measurable action, it could redefine Nepal’s political trajectory. 

However, caution is necessary. New parties often encounter the same structural constraints such as rooted patronage networks that hampered their predecessors. Realizing Nepal’s hydropower potential requires more than just a change in leadership; it requires technical expertise, financial discipline, and a total overhaul of the regulatory framework.

Conclusion

The hydropower sector is a microcosm of Nepal’s broader struggle: immense natural potential hamstrung by chronic governance failures. While trillions have been spent, true prosperity remains elusive due to corruption and a lack of strategic vision. As traditional parties struggle to justify their track records, the RSP offers a glimmer of hope for an electorate desperate for transparency. Ultimately, Nepal’s future depends on whether its leaders can move beyond political maneuvering to implement the transparent, productive policies necessary to turn its water resources into national wealth.

The author is a hydropower engineer and multiple gold medalist with an MSc in Hydropower Engineering from the AIT, Thailand. Laxman Neupane, PhD is the former chairman of the Nepal Stock Exchange (NEPSE). The opinions expressed here are strictly personal and do not represent any political party, institution, or organization