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After the breakup of the erstwhile ruling coalition, the Madhav Kumar Nepal-led CPN (United Socialist) seems to be in a dilemma on whether to join the government or stay in the opposition. After its split with the CPN-UML, it’s a given that the two parties are not on good terms. Many critics argue that the new ruling coalition under the CPN (Maoist Center) and the CPN-UML has endangered the future of the newly formed CPN (US). Against this backdrop, Pratik Ghimire of ApEx talked to Jagannath Khatiwada, deputy general secretary and head of the party’s publicity department.

Who do you think is responsible for the breakup of the previous coalition? Nepali Congress or the CPN (Maoist Center)?

For me, both parties are equally responsible. Sher Bahadur Deuba had pledged Pushpa Kamal Dahal premiership (for the first half of the five-year term), but he reneged on his promise. Congress, at first, cheated the Maoist Center. Partners in the previous coalition have always felt that Congress was dominating and insulting. Dahal had reiterated that he would never break the coalition for position and power. What he did is there for all to see. Dahal broke the coalition in the interest of regressive forces. So, he is responsible too.

Leaders of the Maoist Center point out that UML had shown regressive tendencies during the previous parliament. In their eyes, is the UML regressive no more?

That force was regressive a couple of days ago as well. After offering premiership to the Maoist party, the UML is no longer regressive? It has become progressive, automatically? Our party has no problem with the Maoist Chair Dahal becoming the prime minister. But he quit the previous ruling coalition without discussing the matter or giving anything in writing. That's where the problem lies.

Is it right for your party to join the new ruling coalition?

We have seen UML’s behavior and even experienced their domination for quite long. So, we will hold discussions within the party and think it through before making a decision. On what terms has this coalition taken shape? We have no idea. We have a bit of time to think about these things and make a decision. Our party will wait, watch and decide.

Are there any discussions in your party about merging with the Maoist Center or the UML?

It is not an agenda of the party’s working committee. But a few rounds of talks took place on the matter and we were positive on starting homework for the road ahead. But this chapter is closed for now.

Then when will we see expansion of your party organization at the district and local level?

The standing committee of the party has already met. Our party will soon call meetings of the central committee and the politburo. These meetings will decide our further political course and expansion of the party organization. We are committed to making long-term plans for the party.

Nepali Congress President Sher Bahadur Deuba has come under heavy criticism from within the party for his role in breaking the five-party ruling alliance with the CPN (Maoist Center) and other fringe parties, something which made way for a ruling dispensation comprising the Maoist party, the CPN-UML and other fringe parties. Questions have also arisen as to what the NC will do next after this debacle that has ended up consigning the largest party in the parliament to the opposition bench in the federal parliament and the provincial assemblies.   In this context, Pratik Ghimire of ApEx talked to Gururaj Ghimire, a Congress leader.

Why did the NC-Maoist coalition fail?

In the coalition, I feel that every party has the right to claim the prime minister’s position. Dahal had openly asked for it. Chitra Bahadur KC too could have asked for it as he was among the veterans. So could have Loktantrik Samajbadi Party as no one from Madheshi communities has become Nepal’s prime minister as yet. We have discussed these agendas too. But in our party, people around Deuba cultivated in the Congress this mindset that the party should lead the government. For me, it’s not only the fault of the Maoists, but also the incapability of our party.

What will be the political scenario now?

There is a chance of the UML and the Maoist party uniting once again and CPN (US) becoming a part of it|. Together, they could be the largest party, which means the Congress losing everything in the federal and provincial cabinets. Our party should have thought about a possible scenario like this. Despite being the largest party, we have lost everything. This has impacted our cadres across the nation and I feel there is no way out for us for the next 10-15 years.

How will this impact the next general election?

We will have to compete with a mighty communist party, which is not an easy job. We felt it in the 2017 elections. The rise of the Rastriya Swatantra Party is also a matter of concern. They took the deputy prime minister and the home ministry. They will aggressively expand their party now, which will pose a serious challenge for us. This party has many advantages and options to attract the votes. There are multiple hurdles for us now, some more will come up in coming years.

What do you think of Deuba leadership?

There was an established narrative that our party president could easily handle the inter-party alliances. Even in our general convention, there was no discussion on the agendas. The only thing that came under discussion was Deuba’s capacity to give continuity to the alliance. But this narrative is no longer valid. I have only one expectation from him now. Deuba must admit he is not capable of running the party, should resign and make way for a new leadership. This must be discussed in our party meeting soon. If he doesn’t agree on this, there must be a call for a special convention to throw him out.

How do you see the future of NC?

If the party calls a special convention and manages all this mess, we will emerge stronger. But if this doesn’t happen and we wait for the current coalition to fail with the hope of rising again, I see a dark future for our party. This will lead our party to hell, literally. We need an aggressive reform in the party, at any cost. 

Soon after the Nepali Congress emerged as the largest party in the House of Representative, the party leaders started staking claim for the posts of president and prime minister. This opinion was not limited to NC President Sher Bahadur Deuba and his coterie. Deuba’s rival leaders Shekhar Koirala and Gagan Thapa also joined the chorus.  

As the largest party, the NC leaders were of the view that the party was the bona fide contender to run Sheetal Niwas and Baluwatar. This didn’t go down well with the CPN (Maoist Center), NC’s election ally and pre-election coalition partner.

Before the Nov 20 elections, Deuba had agreed to hand over the prime ministerial post to Maoist Chairman Pushpa Kamal Dahal. After seeing that Deuba was planning to renege on the deal, Dahal mobilized some of his party leaders for power-sharing talks with the CPN-UML. Deuba and his supporters were confident that Maoist party would never partner with UML, given the bad blood between Dahal and UML chair KP Oli.

Even when Dahal walked out of the power-sharing meeting with the NC, Deuba and his supporters were hoping the former to return. The NC leaders were stunned when they learned that Dahal and Oli had agreed to a power-sharing deal. Aghast, Deuba immediately called Dahal and tried to offer the premiership, but the latter replied that it was already too late.  The NC, which holds 89 seats in the HoR, suddenly found itself relegated to the opposition benches.

The Maoist and UML cobbled together a seven-party alliance. This same alliance is likely to form governments in provinces as well, rendering NC powerless.   

Now, Deuba is under heavy pressure from the party rank and file. There have been calls for his resignation. To neutralize the dissenting voices, he has called for the party’s Central Working Committee (CWC) meeting. But NC leader Guru Raj Ghimire says the damage has already been done. “Nepali Congress cannot recover from this loss for another 10-15 years,” he says. “The party president must resign for this blunder.” Ghimire fears the three communist forces—UML, Maoist and CPN (Unified Socialist)—could merge to become the single largest party. It is not just the leftist parties coming together that the NC needs to worry about.

Right of center parties like the newly formed Rastriya Swatantra Party is also gaining ground. Ghimire admits it is going to be tough for the NC in the next election. “Besides President Deuba, other senior office-bearers should also take the blame for what happened,” he says. As the party prepares for its CWC meeting, the rival faction led by Koirala is planning to make a strong case against Deuba’s leadership. The group met on Wednesday to discuss the agenda for the meeting, where they concluded that the debacle was caused by some leaders’ lust for power.  

In a surprise move, CPN-UML and CPN (Maoist Center) and other fringe parties have formed a coalition government, consigning the largest party in the Parliament, Nepali Congress, to the opposition bench. NC President Sher Bahadur Deuba is facing criticism over this debacle. Against this backdrop, Pratik Ghimire of ApEx talked to Congress Spokesperson Prakash Sharan Mahat.

How do you see the move of Pushpa Kamal Dahal?

Dahal's bottom line was that he must be the prime minister. In our party too, there were discussions on giving him the first premiership and we offered him the position at last, but he decided to go with the other alliance.

Who is responsible for such a situation?

Some leaders have resorted to social media to pinpoint specific leaders. Our party had officially decided to form a government under our leadership. As the largest party in the parliament, it was natural for us to claim government leadership. So, it is not appropriate to put blame on specific leaders. Yet, our President Sher Bahadur Deuba was lately in favor of keeping the coalition intact by offering Dahal the premiership. 

Why did the Congress not adopt flexibility on power-sharing?

All leaders were on the same page that the party should claim both the president and prime minister. So, Deuba is not solely responsible for the current situation as claimed by the media and even some of our party leaders. There is a tendency to criticize Deuba. We would have faced more scathing criticism from party leaders if we had agreed to support Dahal as the new prime minister. Party leaders should realize that only a united party makes all party leaders strong.

As I said, Deuba was convinced at last that Dahal should get the premiership when the latter went to Balkot to form an alliance with UML. We even contacted Dahal and asked him to return. But Dahal said it was already late as he had made an understanding with the UML.  Congress was flexible on this issue but a few leaders pressed our party president not to give away any of the important positions (to the Maoist party). They would not even participate in meetings and give their opinions publicly, thereby hampering the Congress-led ruling coalition. As a responsible party member, I had suggested to Deuba that we should be flexible to keep the coalition intact and he was positive too.

Being the largest party, Congress didn’t look prepared to be in the opposition. What will your party do now?

Yes, we were not ready as everything was moving in a positive direction. But we now have to review how this situation came about and who is actually responsible.  The current ruling coalition consists of both pro and anti-federalist parties. Pro-monarchy and anti-monarchy forces are also there. This coalition has no ideological consensus, so it might break in the near future and we might return to power.

What role will the Congress play as the main opposition?

Since we are the largest party, we will make our presence felt in the parliament. We will not resort to vandalism and protests as our history doesn’t allow us to do that. In the past, we could not play an effective role as the opposition because we had a few parliamentarians who had won through the first-past-the-post system. This time, we have many of them and we will emerge as an effective opposition. 

A Chinese technical team is in Kathmandu to initiate the feasibility study of the Keyrung-Kathmandu railway line. China has agreed to conduct the study under grant assistance. The team is holding consultations with the Department of Railways, Kathmandu. During the then Foreign Minister Narayan Khakda’s China visit in August this year, China had agreed to conduct the study.

A spokesperson for the Chinese Embassy in Nepal said this arrival is an important step toward the implementation of both countries’ leaders’ consensus, and a solid step to turn Nepal from a land-locked to a land-linked country.  The two countries had reached an understanding on this issue during Chinese President Xi Jinping’s Nepal visit in 2019. Pre-feasibility study of the railway, which identified several bottlenecks, has already been completed.  The two sides are yet to agree on the investment modality of the railway. 

The Chinese delegation landed in Nepal a day after CPN (Maoist Center) Chairperson Pushpa Kamal Dahal assumed office as prime minister.  China has also been urging Nepal to give more impetus to its signature Belt and Road Initiative. It may be noted that Kathmandu’s relations with the northern neighbor had thawed during the premiership of Nepali Congress President Sher Bahadur Deuba.

One of the vital trade points with China, the Tatopani customs point, remains literally shut after the 2015 Gorkha earthquake, hampering trade between the two countries.  In the past five years since the signing of the BRI framework, negotiations between the two sides have focused on preparing legal documents. The only other achievement in this period was the inclusion of Nepal-China Trans-Himalayan Multi-Dimensional Connectivity Network, including a cross-border railway, in the joint communique of the second BRI conference in 2019. 

BRI is basically about taking loans from Chinese banks to build infrastructure. But Nepali leaders who are in conversation with Chinese leaders have been emphasizing grants for the BRI projects. For instance, in 2018, the KP Sharma Oli-led government negotiated with the Chinese on the Keyrung-Kathmandu railway. The Oli government reportedly told the Chinese side to provide a grant for the railway project.

With the formation of the UML-Maoist alliance, the NC is also likely to lose its strength in all seven provinces as well. The alliance has the required majority to form governments in all provinces.  The UML is the largest party in Province 1 and Madhes, while the NC maintains the lead in the remaining five provinces.

In order to form a government in the 93-member Province 1 assembly, parties need the support of 47 members. The UML-led alliance currently has the support of 60 lawmakers, including 40 from UML, 13 from the Maoists, six from the Rastriya Prajatantra Party (RPP), and one from the Janata Samajbadi Party (JSP). 

The seven-party alliance is also in a comfortable position in the 53-member assembly of Sudurpaschim assembly. The alliance has the support of 29 members: 11 from Maoists, 10 from UML, seven from Nagarik Unmukti Party (NUP), and one from RPP. In Bagmati province, a new government can be formed without the NC’s support.

In the 110-member assembly, the ruling alliance commands support of 61 members: 27 from UML, 21 from Maoists, and 13 from RPP.  The coalition is also in a strong position in the 60-member assembly of Gandaki province, where UML, Maoists, and RPP have a total 32 seats.

The Madhes province assembly has 107 members. So, parties will need the support of 54 members to form a government. The alliance of seven parties currently holds 62 seats in the assembly: 23 from UML, eight from Maoists, 16 from Janata Samajbadi Party, 13 from the Janamat Party, one from the RPP, and one from NUP. Additionally, an independent group of lawmakers led by Prabhu Sah has also joined the alliance.

In the 87-member Lumbini province assembly, the seven-party alliance has 52 members, which is sufficient to form a government. UML and the Maoist Center have 29 and nine members, respectively, while the RRP and NUP have four members each and Janamat has three. 

Similarly, the alliance also has a majority in the 40-member Karnali province assembly, with 24 members: 13 from Maoists, 10 from UML, and one from the RPP. This meets the requirement of 21 members to form a new government. 

China has congratulated Prime Minister Pushpa Kamal Dahal expressing willingness to work with the new government to deepen the bilateral ties.  “Beijing observed that the election of Nepal was conducted smoothly and we congratulated Dahal for becoming the new prime minister,” Mao Ning, spokesperson for the Chinese Foreign Ministry, told a routine press conference on Monday. “We believe that with the joint effort of the Nepalese government and people, and with the consultation and coordination of various parties and political forces, Nepal will maintain stability and economic and social development.”

Mao further said that China attaches great importance to China-Nepal relations, and is willing to work with the new government of Nepal to expand and deepen friendly exchanges and cooperation between the two countries in various fields. “The two countries will jointly build a high-quality Belt and Road network, injecting new impetus to the development and prosperity of China-Nepal friendship from generation to generation,” she added.  Over the last one year, the relationship between the Sher Bahadur Deuba government and China did not go well due to several factors. Beijing felt that the Deuba-led government had tilted toward the West.

Chinese officials openly said that the engagement between two countries slowed down after the formation of the Deuba government. In this period, China expressed its concerns through Dahal, who was a vital coalition partner of Deuba. Beijing also maintained a close communication with Dahal about its interests in Nepal. 

“It [Beijing] was always pushing for a left unity in Nepal so Dahal’s appointment as new PM is obviously a good message for us,” said a Beijing-based analyst.  The main concerns of Beijing are implementation of past agreements reached between two countries, implementation of Belt and Road Initiative and preserving its core security interests.

With the formation of the new cabinet of ministers, all eyes are now on how the Pushpa Kamal Dahal-led government will resurrect the economy and boost the morale of the private sector.  As soon as he takes office, the new Finance Minister Bishnu Poudel has to get into action.

As the economy grapples with multiple issues, Poudel has his task cut out. From increasing capital expenditure, improving revenue collection, and uplifting the morale of the private sector, Poudel, in his third stint as Finance Minister, has a lot to do to resurrect the recession-mired economy. The continued recovery of the country’s external sector is expected to give some breathing space to the new finance minister.

The latest macroeconomic report published by the Nepal Rastra Bank (NRB) shows the balance of payment (BOP), remittance inflow and forex reserves all have increased, offering some level of respite to the government. Nepal’s balance of payments (BOP) is at a surplus of Rs 20.03bn, and forex reserves have increased by 2.5 percent to Rs 1,246.27bn in mid-Nov 2022.

The current state of the forex reserve is sufficient to cover merchandise imports for 9.7 months, and merchandise and services imports for 8.4 months.  But, declining imports and the slowdown in economic activities have put the government’s budgetary position, primarily in revenue collection, in a shaky position. The government revenue has been declining drastically over the last couple of months. 

While the import restrictions on vehicles, expensive mobile sets, and foreign liquors, helped the country to avert the looming forex reserves crisis, the government is now facing another crisis as it struggles to collect the targeted revenue as current revenue collection is not sufficient even to meet growing recurrent expenditure.   The government has failed to meet the revenue collection target in the first five months.

According to the Financial Comptroller General Office (FCGO), the government’s revenue collection has a shortfall of Rs 138bn of the target during this period.  Poudel, who is known as a ‘facilitator’ for his successful involvement in many political and governmental dealings and a private sector-friendly leader, Poudel will have to first bring the relationship between the Ministry of Finance (MoF) and Nepal Rastra Bank (NRB) to a ‘working level’.

The deterioration of the relationship between the ministry and the central bank during Janardan Sharma’s tenure has cost the economy dearly. Many observers and business community members say the lack of trust between two key institutions driving the economy is the main cause of the current economic mess.

Given that current NRB Governor Maha Prasad Adhikari was appointed by the then UML-led government, it is expected that the finance minister-governor relations will be better during Poudel’s tenure. Economists and private sector representatives say economic revival should be the prime agenda of the new government.

Economist Keshav Acharya says the first thing the new Finance Minister has to do is to convene a meeting with the National Planning Commission and Nepal Rastra Bank to take stock of the economy, i.e., the government fiscal situation, and monetary situation. “As soon as he takes charge of the Finance Ministry, the new minister has to sit down with them (NPC and NRB) for a detailed and serious review of the state of the economy,” he said.

The interest rate of banks and financial institutions has doubled within a year due to a prolonged liquidity crunch. Despite raising the interest rates, banks are struggling to provide loans. On the other hand, the private sector is now reluctant to expand investments by borrowing money at higher interest rates. Poudel has to walk a tightrope of providing stability to the interest rate, as well as boosting the confidence of investors.

Amid the current private sector-government face-off, the most worrying aspect is the deep slowdown in business and production activities. Most types of business activities have slumped to levels never seen before. How the new government and new finance minister re energize the private sector will be the key to the country’s economic revival. 

The recent surveys carried out by the Federation of Nepalese Chambers of Commerce and Industry and Confederation of Nepalese Industry show that the capacity utilization of manufacturing industries has hit a new low, investment plans have been put on hold and overall market demand in the country has shrunk dramatically.  

The FNCCI survey shows industries producing construction materials like cement and iron, and steel are operating at 30 percent of their installed capacity. The sales of daily consumable goods have declined by 18 percent, while the electrical equipment transactions have decreased by 55 percent. The housing and real estate transactions dropped by 48 percent in the first four months of the current fiscal year, while the stock market transactions have declined by 40 percent during the review period, according to the federation.

Similarly, the CNI survey said that new investments have halted in almost all sectors with 70 percent of investors postponing their new investment plans due to rising interest rates, impact on cash flow, and a huge drop in market demand for goods and services. 

With the private sector continuing its protest against high-interest rates and working capital loan guidelines, the new Finance Minister, according to Acharya, should ask the NRB which are the issues that can be addressed and cannot be addressed.   

According to Acharya, the new finance minister should also intervene in the country’s development administration to make capital expenditure meaningful. “He should also hold a discussion with the NPC team on what are the issues that hold the government agencies to expedite the capital expenditure,” said Acharya adding that there is an urgent need to identify the legal, administrative and political factors that have been affecting capital expenditure. 

The new Finance Minister also has to sit down with the concerned ministries directly related to the economy such as Energy, Industry and Commerce, Physical Infrastructure, and Transport—to expedite capital expenditure as well as resolve the issues related to the private sector.   Given the continuous slide in revenue collection, Poudel has the challenge to arrest this slide and improve the revenue. Acharya says Poudel would do well if he implements the report of the Public Expenditure Review Commission.

“Given the state of revenue collection, the Finance Ministry must hold a serious review meeting to find the causes and way out,” said Acharya.  The private sector says the first and only priority of the government should be the economy. “Economic revival should be the only priority of the new government,” said Deepak Raj Joshi, Director General of CNI. 

I will consider suggestions of experts and stakeholders: Minister Poudel

The newly appointed Deputy Prime Minister and Finance Minister Bishnu Paudel on Monday said that the economy has reached the point of crisis. Paudel said he will work hard to bring the economy back on track. “The economy is on the brink of crisis, we have to work hard to bring it back to a safe place,” Paudel said after assuming office on Monday. “I will identify the problems and consider suggestions of experts and stakeholders to find a solution.”