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After years of strained relations, China has recently intensified its engagement with the Nepali Congress (NC), Nepal’s oldest and largest democratic party. Over the past decade, the relationship between China and the NC had soured due to various political and diplomatic reasons. However, recent developments indicate a shift in China’s approach, as Chinese diplomats and leaders of the Communist Party of China (CPC) have begun actively engaging with NC leaders.

A notable example of this renewed engagement is the recent visit of an NC delegation led by senior leader Sujata Koirala to China. During the visit, the delegation toured several Chinese cities, including Chengdu, and held meetings with senior CPC officials. This marks a significant step in China’s efforts to strengthen ties with the Koirala family, a prominent political dynasty within the NC.

In early March, Sun Haiyan, Vice-Minister of the International Department of the CPC Central Committee, met with Koirala. According to a Chinese readout, Sun praised the NC and the Koirala family for their long-standing commitment to fostering China-Nepal friendship and for upholding the correct stance on issues related to Xizang (Tibet) and Taiwan. Sun emphasized the CPC’s willingness to enhance exchanges and cooperation with the NC and other major political parties in Nepal, urging both sides to focus on implementing the consensus reached between the two countries.

Koirala, in response, reaffirmed the NC’s firm support for the One-China principle and expressed her party’s eagerness to leverage the 70th anniversary of Nepal-China diplomatic relations to deepen mutual understanding and collaboration. This marks a notable shift from the past, when relations between China and the NC deteriorated significantly. One key incident was in 2016, when NC President Sher Bahadur Deuba shared a stage with a representative of the Tibetan government-in-exile at an event organized by the India Foundation in Goa. This incident, among others, led to a period of mistrust and strained ties.

Other factors contributing to the rift included China’s preferential engagement with Nepal’s communist parties, often at the expense of sidelining the NC, as well as the NC’s public criticism of China’s alleged border encroachment and its cautious stance on China’s Belt and Road Initiative (BRI). During this period, Chinese state media frequently portrayed the NC as a pro-Indian party, further exacerbating tensions.

However, relations began to improve following the signing of the Framework for Belt and Road Cooperation during Prime Minister KP Sharma Oli’s visit to China in December 2023. NC General Secretary Gagan Kumar Thapa and Foreign Minister Arzu Rana Deuba played pivotal roles in facilitating the agreement, despite strong opposition within their own party. Their support for the BRI marked a turning point in China-NC relations, even as senior NC leaders like Prakash Sharan Mahat and NP Saud continued to voice concerns about the initiative, arguing that it contradicted the party’s position against taking loans under the BRI.

Since the signing of the BRI agreement, there has been a noticeable increase in visits by NC leaders to China, and the Chinese Embassy in Kathmandu has actively engaged with senior NC figures. This represents a departure from China’s previous approach of primarily engaging with Nepal’s communist parties, a trend that had persisted for over a decade. During this period, China focused on fostering unity among Nepal’s communist factions, leading to a perception among NC leaders that they were being marginalized.

China’s recent outreach to the NC suggests a recognition of the need to broaden its engagement beyond communist parties. This shift is seen as an effort to build a more balanced and inclusive relationship with Nepal’s political landscape. While senior communist leaders have frequently visited China over the years, NC leaders have rarely done so. The current wave of engagement indicates that both sides are working to address past misunderstandings and strengthen bilateral ties.

This renewed engagement comes at a critical juncture, as China seeks to consolidate its influence in Nepal amid evolving regional dynamics. By fostering closer ties with the NC, China aims to ensure that its initiatives, including the BRI, gain broader political support within Nepal. For the NC, this represents an opportunity to reaffirm its role as a key player in Nepal’s foreign policy and to balance its relationships with both China and India.

Sixteen years have passed since the abolition of Nepal’s 238-year-old monarchy, yet the political landscape remains unsettled.

The occasional statements from former King Gyanendra Shah and the persistent protests by his supporters continue to rattle the fragile foundations of the federal republic established in 2008. Interestingly, these pro-monarchist demonstrations often serve as a unifying force for Nepal’s major political parties, temporarily bridging their deep-rooted divisions.

As spring arrives, pro-monarchist forces have once again intensified their protests, echoing their perennial demands for the restoration of the Hindu state and the monarchy. While large-scale demonstrations were rare between 2008 and 2018, the momentum has been steadily building since then, though it has yet to reach a tipping point capable of overturning the 2015 constitution.

The growing disillusionment with successive governments, plagued by unfulfilled promises and systemic failures, has fueled anti-establishment sentiment. This dissatisfaction has provided fertile ground for the resurgence of royalist forces, whose recent street protests have sparked fear and anxiety among Nepal’s major political parties. Spring, traditionally a season of political unrest in Nepal, has once again become a stage for demonstrations, with royalist protests capturing significant attention this year. Even within the largest party, the Nepali Congress, there are vocal advocates for reinstating the Hindu state—though not necessarily the monarchy.

The latest wave of protests was triggered by former King Gyanendra Shah’s Democracy Day message on Falgun 7. In his address, he called on all “nationalists,” democrats, and patriots to unite and address the country’s deepening crisis. While he stopped short of explicitly urging people to take to the streets, his message was notably more pointed than his previous vague appeals. Following this, pro-monarchist forces organized sizable protests in Pokhara, Biratnagar, and Madhes provinces, sending alarm bells ringing among mainstream political parties.

The former king’s message, likely crafted after informal consultations with his supporters, has galvanized a series of protests across the country. Two prominent parties—the Rastriya Prajatantra Party led by Rajendra Lingden and the Rastriya Prajatantra Party (Nepal) led by Kamal Thapa—have openly endorsed the king’s agenda. However, dozens of smaller groups and outfits are also actively working toward the same goal. While Gyanendra Shah has not formally aligned himself with any political party, he has provided tactical support, including financial backing, to these groups.

This is not the first time monarchist forces have made their presence felt. Significant demonstrations in 2021 and 2023 drew considerable attention from both domestic political parties and the international community. However, these protests have lacked a unified structure or leadership, with deep divisions among the various groups hindering the emergence of a cohesive movement.

In response to the growing unrest, the CPN (Maoist Center), which prides itself as a defender of the 2015 constitution, has suspended its ongoing party programs. Party leaders cite the need to monitor the royalist forces, whom they accuse of attempting to create chaos. Meanwhile, Prime Minister KP Sharma Oli, CPN (Maoist Center) Chairman Pushpa Kamal Dahal, Nepali Congress President Sher Bahadur Deuba, and other leaders have issued a unified message to the former king: if he wishes to return to power, he should register a political party and contest elections. Some have even threatened to arrest him if he undermines the current political system. Royalist parties have countered by asserting that the king is a unifying figure above partisan politics and therefore cannot be expected to contest elections.

Gyanendra Shah has been actively touring the country to rally support, while also making frequent visits to Uttar Pradesh, India, to meet Chief Minister Yogi Adityanath, a long-time supporter of his bid to regain power. The former king appears to be seeking backing from India’s Bharatiya Janata Party (BJP) for his campaign to reinstate the monarchy and the Hindu state. While some within the BJP support the idea of Nepal as a Hindu state, it remains unclear whether they endorse the restoration of the monarchy. Last August, Gyanendra’s visit to Bhutan at the invitation of King Jigme Khesar Namgyel Wangchuk fueled rumors of third-country involvement, adding another layer of intrigue to his efforts.

Adding to the political turbulence, former US President Donald Trump’s remarks labeling USAID funding for Nepal’s fiscal federalism as a “fraud” have bolstered pro-monarchy and right-wing forces in Nepal. These comments have been seized upon by royalist groups to discredit the current federal system and argue for a return to a more centralized, monarchical governance model.

As major political parties face growing unpopularity due to rampant corruption, unemployment, and economic stagnation, royalist forces see an opportunity to advance their agenda. On a recent Sunday, supporters organized a mass demonstration in Kathmandu, coinciding with Gyanendra’s return to the capital after a week-long stay in Pokhara. He was greeted by enthusiastic supporters at the airport and escorted to his residence, Nirmal Niwas, under heightened security.

Criticism of the 2015 constitution is mounting, fueled by the failures of the political parties that have governed since the monarchy’s abolition. Widespread corruption, economic stagnation, and a lack of opportunities have created a pervasive sense of pessimism, which royalist forces are exploiting to push their agenda. Political analysts warn that the current system could be in jeopardy if mainstream parties fail to address these issues effectively.

While even the monarchist forces doubt that street protests alone can restore the monarchy, they believe their movement could pressure mainstream parties into making concessions. However, the lack of a clear representative for the former king complicates any potential negotiations with the current government. Royalist forces remain steadfast in their belief that only the monarchy can resolve the nation’s deepening crisis. As the political drama unfolds, Nepal stands at a crossroads, with its future hanging in the balance.

Time is so powerful. Just a few months ago, USAID was spending millions of dollars to combat the growing spread of misinformation and disinformation across the globe. Now, it has become a victim of disinformation, not only in Nepal but across the world. US President Donald J Trump and Elon Musk have emerged as key figures spreading such misinformation.

The support provided by USAID over the past seven decades comes from American taxpayers, as often highlighted in banners stating “From the American People”. Therefore, the Trump administration’s decision to investigate corruption, misuse and irregularities in spending is imperative. However, some statements made by Trump and Musk have fostered a perception, particularly in the Global South, that accepting American support equates to committing treason.

In Nepal’s context, Trump’s statement that allocating money for Nepal’s fiscal federalism is “a fraud”, combined with Musk’s branding of USAID as “a criminal organization”, has cast all US support to Nepal in a negative light. Organizations and individuals working with USAID are being trolled on social media, overshadowing the significant contributions USAID has made in Nepal over seven decades in improving quality of life, establishing a robust health system, modernizing agriculture and increasing access to education, among others.

Nepal’s conservative forces, who have long claimed that the political changes in 2008 were part of a “foreign agenda”, have now found a new narrative to attack republicanism, secularism, federalism and inclusion. They argue that political parties acted on behalf of the US to implement these agendas. Social media, which has become more influential than traditional media in terms of reach and impact, is being used to propagate the idea that USAID support was used as an instrument to remove the monarchy, establish federalism and secularism and even promote religious conversion.

This has created a false impression among ordinary people that USAID came to Nepal only recently. Many are unaware—or pretend to be unaware—that the monarchy itself laid the groundwork for USAID’s footprint in Nepal in the late 1950s. During the Cold War, the US sought to prevent the influence of the Communist Party of China and the rise of communist movements in Nepal. King Mahendra, on his part, sought to legitimize his Panchayat regime through development initiatives. Thus, for two primary reasons—to counter Chinese influence and to legitimize his rule—King Mahendra embraced the US support which was channeled through USAID.

Development cooperation between Nepal and the US dates back to 1951, when the US supported Nepal through its Point Four Program. On 23 Jan 1951, the two countries signed their first bilateral aid agreement. Key priorities of US assistance during the 1950s included building roads, establishing telephone exchanges, eliminating malaria from the Tarai region and enabling agricultural development. In 1959, the US supported the development of a telecommunications system that provided Kathmandu with 1,000 telephone lines and the country’s first automatic exchange. The first US-supported road in Nepal was the 87-kilometer link between Bharatpur and Hetauda, part of the Rapti Development Program. Similarly, the construction of the Hetauda-Kathmandu ropeway began in 1959.

In the 1960s, when King Mahendra was consolidating the Panchayat system, there was a huge surge in US aid to Nepal. US President Dwight Eisenhower’s unexpected pledge of $15m to King Mahendra in April 1960 marked a turning point in US involvement in Nepal’s development. USAID pursued programs in agriculture, health, education and industrial development. After King Mahendra dissolved parliament and banned political parties in 1960, US aid was directed toward the successful implementation of his Panchayat system. The US supported the construction of administrative structures across the country, viewing the Panchayat system as a potential vehicle for mobilizing Nepal’s human resources and fostering economic, social and democratic political development.

“The most important role in strengthening the Panchayat system in Nepal was played by US economic aid. On the ideological front—in propagating the democratic values of the system—the role of US Peace Corps volunteers and embassy officials was noteworthy,” writes SD Muni in his book “Nepal’s Foreign Policy”.

On his part, King Mahendra sought both economic and technical support to sustain his rule. During the Panchayat regime, King Mahendra’s key agendas, including land reform, were backed by the US. After the political changes in 1990, USAID programs reflected broader US support for democratic governance and free markets. In the 1990s, the US emphasized the need for sound economic policies: competitive markets operating with minimal government regulations. This shows the priority of support changes with regime change.

Following years of political instability, Nepal drafted a new constitution in 2015, laying the foundation for stability and development. After the constitution’s promulgation, US assistance to Nepal has focused on consolidating gains in peace and security, furthering democratic transition, supporting the delivery of essential social services, scaling up proven health interventions, reducing extreme poverty, and addressing food insecurity and climate change challenges.

The Trump administration has said that it is reviewing all USAID spending. The administration has already cut millions from the budget allocated to Nepal. It remains uncertain how US support to Nepal will evolve in the future and how Nepal will negotiate with Washington. There is no doubt that Nepal should have reduced its dependence on foreign aid decades ago; instead, this dependence continues to grow. At this critical juncture, Nepal desperately needs foreign assistance, particularly in health, education and agriculture sectors. 

That said, not all USAID activities in Nepal have been beneficial; they have also had negative effects on society, including in politics and culture. Like Trump’s efforts in the US, Nepal should not hesitate to review how USAID funds have been spent. Politicians and government officials have reservations about USAID’s spending in Nepal but often refrain from speaking publicly about it. Former Finance Minister Prakash Saran Mahat recently said that the US government channels assistance to Nepal primarily through INGOs and their chosen NGOs, leaving the Nepali government with little control over how USAID resources are spent. This is a serious issue that warrants greater scrutiny.

For a long time, there have been debates about the spending of NGOs and INGOs and their negative repercussions on Nepali society. These concerns are genuine, and government agencies should closely monitor such activities. However, rejecting all foreign assistance at this time would be detrimental to the country’s economy. It is high time the government reviewed past spending, and identified areas where the US support is needed, and determined where it is not.

The government should begin preparations after broader consultations to present its position to the new US administration. One year from now, after Nepal graduates from the Least Developed Country (LDC) category, it will face numerous challenges. Even after graduation, Nepal will need continued support from major countries, including the US. Therefore, instead of exploiting the current controversy for political or vested interests, Nepal must address the situation with maturity. It is also a positive step if Trump initiates the process of investigation on how money allocated to USAID has been spent everywhere.

In his first tenure as President of the United States, Donald J Trump’s familiarity with Nepal was, at best, minimal. During a 2017 meeting, he reportedly mispronounced Nepal as “nipple” and humorously referred to Bhutan as “button.”  These incidents, while seemingly trivial, underscored a broader lack of US’s engagement with small nations. However, as Trump began his second term on 20 Jan 2025, his approach to Nepal appeared to shift.

This time, not only did he correctly pronounce the country’s name, but he also delved into specific projects funded by the United States Agency for International Development (USAID) in Nepal. For instance, he controversially labeled a $20m allocation for fiscal federalism in Nepal as a “fraud,” though he failed to elaborate on why he held this view. This statement, while brief, has had significant repercussions in Nepal, particularly among anti-federal forces who have long argued that federalism is a foreign-imposed agenda.

Trump’s comments have provided a significant boost to these anti-federal forces, who are actively working to dismantle Nepal’s 2015 constitution. For years, these groups have claimed that federalism is not an indigenous concept but rather a product of foreign influence. Trump’s assertion that USAID’s funding for federalism is fraudulent has been interpreted by these groups as validation of their stance. As a result, many anti-federalists have become vocal supporters of Trump, believing that his administration aligns with their opposition to federalism. This development has added a new layer of complexity to Nepal’s domestic politics, as the debate over federalism continues to polarize the nation.

The impact of Trump’s policies on Nepal extends far beyond rhetoric. In late January 2025, Trump issued an executive order pausing all US foreign assistance for 90 days. While this move has affected numerous countries, its impact on Nepal has been particularly severe. Unlike larger nations such as China, which have been primarily affected by Trump’s trade tariffs, Nepal’s reliance on foreign aid makes it especially vulnerable to aid cuts. For a country that has long depended on international assistance to support its economy, health, education, and infrastructure, the suspension of US aid has been nothing short of devastating.

The immediate effects of the aid suspension are already being felt. From small stationary shops to five-star hotels, businesses that relied on the patronage of NGOs and INGOs funded by USAID are experiencing significant downturns. Stationary shop owners report a sharp decline in sales, as NGOs were among their primary customers. Similarly, hotels that once hosted events organized by international organizations are now struggling to maintain their revenue streams. Domestic airlines have also been hit hard, with a noticeable reduction in flights to major cities like Pokhara, Surkhet, Kailali, and Biratnagar, where NGO activities were once frequent. While precise numerical data on the economic impact of these changes is not yet available, it is clear that the suspension of US aid has disrupted one of the key drivers of Nepal’s hospitality and service sectors.

The ripple effects of the aid pause extend to local non-governmental organizations (NGOs) that depend on USAID funding. Many of these organizations are now downsizing or shutting down entirely, as they receive termination notices for projects funded by USAID or its implementing partners. Over the past few years, USAID had shifted its approach, working directly with local NGOs in an effort to bypass Kathmandu-based partners that were seen as ineffective. This shift had led to the establishment of branch offices in provinces like Lumbini and Madhes, where many NGOs focused their activities. Now, these offices and their staff face an uncertain future, as the suspension of funding leaves them without the resources to continue their work.

The challenges are not limited to local NGOs. American institutions operating in Nepal are also grappling with the fallout from Trump’s executive order. Many are laying off staff and considering whether to close their offices altogether. The lack of clear guidance from US headquarters has left these organizations in a state of confusion, unsure of how to proceed. Some have already terminated employee contracts due to a lack of funds to pay salaries. Even organizations aligned with the Republican Party’s agenda are not immune to these challenges, as the pause on foreign assistance applies across the board.

One of the most significant casualties of Trump’s aid suspension is the Millennium Challenge Corporation (MCC), a US-funded initiative that signed a $500m compact with Nepal in Sept 2017. The MCC compact aims to improve road quality, increase the availability and reliability of electricity, and facilitate cross-border electricity trade between Nepal and India. However, the project has been mired in controversy since its inception. From 2019 to 2022, the MCC became a divisive issue in Nepali society, with the country’s communist parties leading the charge against it. They argued that the MCC was part of the US Indo-Pacific Strategy (IPS) and should be rejected. China also opposed the project, labeling it a “Pandora’s box” that could undermine Nepal’s sovereignty.

Despite these objections, the Joe Biden administration worked tirelessly to secure parliamentary approval for the MCC. Senior US officials reportedly pressured Nepali leaders, even threatening to review bilateral relations if the compact was not endorsed. In the face of this pressure, Nepal’s political parties eventually approved the MCC in 2022, accompanied by a declarative interpretation stating that the compact was not part of the IPS. Since then, MCC projects have been making steady progress. However, Trump’s decision to suspend all foreign assistance for 90 days has brought these projects to a halt, raising concerns about whether the MCC will meet its five-year deadline. The suspension has also reignited political debates over the MCC, with opponents seizing the opportunity to renew their calls for its cancellation.

The broader implications of Trump’s aid suspension are deeply concerning for Nepal. Over the past few decades, Nepal has become increasingly dependent on foreign aid to address critical challenges in areas such as education, health, and climate change. Rather than reducing this dependence, the country has seen it grow. The sudden withdrawal of US support has exposed Nepal’s vulnerability, as the government lacks the resources to fill the void left by the aid cuts. For example, the US has officially canceled $19m in funding for biodiversity conservation, a critical issue for Nepal, which is on the frontlines of climate change. The loss of this funding will have dire consequences for Nepal’s ecosystems, which are already experiencing shifts in species distribution and an increased risk of extinction for many native plants and animals.

The suspension of funds for fiscal federalism and the cancellation of regional projects will further exacerbate Nepal’s challenges. These cuts come at a time when the country is already grappling with political instability, economic uncertainty, and the ongoing effects of climate change. The Nepal government and political parties have yet to officially respond to the aid suspension, as they are waiting to see whether the US will resume support after the 90-day pause. However, early indications suggest that the Indo-Pacific region remains a top priority for the Trump administration, which could mean continued support for Nepal, albeit through new mechanisms or agencies.

Some analysts speculate that the Trump administration may offer increased assistance to Nepal in exchange for reduced engagement with China. There are already murmurs within Nepal’s diplomatic circles that the US could pressure Nepal to scale back its participation in China’s Belt and Road Initiative (BRI), similar to what occurred in Panama. Additionally, there are concerns that the US may push Nepal to abandon its longstanding policy of non-alignment and align more closely with Western powers. Such a shift would represent a fundamental change in Nepal’s foreign policy, which has traditionally sought to maintain balanced relations with all major powers.

Given Nepal’s geopolitical position, experts argue that the country cannot afford to abandon its policy of non-alignment. Sandwiched between two regional giants, India and China, Nepal must navigate a delicate balancing act to preserve its sovereignty and independence. If the US ultimately decides to cut aid to Nepal, there are discussions within the political sphere about seeking support from other middle powers, such as the United Kingdom, Germany, South Korea, and Japan, to fill the void left by the US withdrawal. These countries are already exploring ways to support Nepal in critical areas if US assistance is not resumed after the 90-day pause.

The reduction of US influence in Nepal could be seen as a positive development for both India and China, which have long been wary of America’s growing presence in the region. However, it remains unclear how the Trump administration’s policies will evolve and how Nepal’s major political parties will respond to this new reality. Compounding the uncertainty is the fact that Nepal’s Embassy in the US is currently without an ambassador, as the newly appointed envoy has yet to assume office. In Kathmandu, think tanks and policy experts have begun deliberating on the potential impact of Trump’s policies and how Nepal should navigate this challenging period.

The Trump administration’s approach to Nepal has already shaken the foundations of the longstanding partnership between the two countries. The suspension of US aid is having far-reaching consequences, affecting everything from local businesses to large-scale infrastructure projects. As Nepal grapples with the fallout from these changes, it must also contend with the broader geopolitical implications of reduced US engagement. The coming months will be critical in determining the future of Nepal-US relations and the extent to which Nepal can adapt to this new reality.

Since his inauguration on Jan 20, US President Donald Trump has issued more than 300 executive orders, significantly impacting both the United States and countries around the world. His orders on foreign aid, illegal immigration, environmental regulations, gender policies and abortion rights are expected to have direct repercussions for Nepal. In response, Nepal’s Ministry of Foreign Affairs has directed its embassy in Washington to closely monitor these developments and identify areas of concern.

Following Trump’s executive orders, the United States Agency for International Development (USAID) and the American Embassy in Kathmandu have paused all activities, including small-scale projects. Consequently, non-governmental organizations (NGOs) operating with USAID funding have been forced to suspend their work for the past three months, potentially affecting Nepal’s health, education and humanitarian sectors. However, the Nepal government has yet to issue an official response. Meanwhile, the US State Department is conducting a review of all foreign aid programs to ensure alignment with the administration’s “America First” policy.

In addition to foreign aid restrictions, the Trump administration has launched a nationwide immigration crackdown, leading to the arrest of over 1,000 individuals, according to Immigration and Customs Enforcement (ICE). These arrests include individuals without prior criminal records. White House Press Secretary Karoline Leavitt stated that while criminal offenders remain the top priority, all undocumented immigrants are subject to enforcement. Preliminary reports indicate that ICE has already detained some Nepali immigrants, including students working beyond their permitted hours.

According to ICE, approximately 1,400 Nepalis are residing illegally in the US and may face deportation. The Trump administration has reiterated that it is each country’s responsibility to repatriate its undocumented citizens. However, Nepali officials have remained silent on whether they have received a formal request from the US government regarding deportations. Some Nepali students are reportedly experiencing difficulties due to these new restrictions.

Despite reports of Nepali nationals being detained, Nepal’s embassy in Washington has not issued a statement. Meanwhile, US Ambassador to Nepal Dean R Thompson recently met with Foreign Minister Arzu Rana Deuba to discuss bilateral matters, though neither side has disclosed details of their conversation. A senior official at the Foreign Ministry stated that the government cannot publicly comment on US immigration policy, as it is their internal matter. However, Nepal’s agencies should take steps to support affected citizens.

Regarding US aid, USAID has halted its programs, though the implications for the Millennium Challenge Corporation (MCC) remain uncertain. While MCC is not directly tied to USAID, its activities may also be affected. However, given bipartisan support for the MCC, the initiative is expected to continue. Nepal and the US signed the MCC compact in 2017 during Trump’s first term. Additionally, Trump’s decision to withdraw from the Paris Climate Agreement could have some impact on Nepal. The administration, however, has stated its commitment to “sensible environmental protections” while prioritizing national interests.

A senior official at the Ministry of Finance commented: “Although Nepal may not face a direct cut in US aid, certain projects that do not align with Trump’s policies could be discontinued.” The official clarified that a temporary pause in assistance does not necessarily indicate an overall reduction in US support. Observers suggest that Nepal should engage in diplomatic negotiations to ensure continued US support, particularly for critical sectors.

The Trump administration is still in the process of making key appointments at the State Department, following the dismissal of numerous senior officials appointed by the Biden administration. The administration is expected to introduce new policies, including an aggressive stance toward China and further developments in the Indo-Pacific Strategy (IPS). Nepali policymakers must remain vigilant and adaptable to these changes. Some officials suggest that dealing with Trump’s administration could be more challenging than engaging with Biden’s.

Under the Biden administration, US assistance and investment in Nepal increased significantly, with high-level engagements and diplomatic visits. Nepal now faces the challenge of maintaining this momentum through negotiations with the Trump administration, given its need for continued support. Over the past four years, US-Nepal relations have strengthened through extensive diplomatic efforts, including the implementation of the MCC project, a priority for the Biden administration.

The Trump administration also engaged with Nepal during its previous tenure. In 2018, then-Foreign Minister Pradeep Gyawali visited the US for bilateral discussions—the first such visit in years. However, the visit sparked controversy in Nepal when the US State Department suggested that Nepal could play a central role in the Indo-Pacific region. More recently, in 2023, Foreign Minister NP Saud paid an official visit to the US to discuss a broad range of bilateral issues.

The Donald Trump administration’s decision to freeze all foreign aid has begun to show its effects in Nepal. US Secretary of State Marco Rubio issued an internal memo to all relevant agencies and diplomatic missions, announcing the suspension of foreign aid with exceptions only for emergency food assistance and military funding for Israel and Egypt.

In Nepal, USAID and its implementing partners have temporarily halted numerous ongoing projects. Pre-scheduled visits from US officials to Nepal have also been canceled. Organizations working with USAID now face an uncertain future, with no clarity on the fate of previously signed projects. Officials indicate that all activities will remain suspended for the next three months, adding to the ambiguity surrounding existing programs.

USAID has been Nepal’s largest donor in sectors such as health, education, agriculture and food security, water and sanitation, energy, environment and humanitarian assistance. Organizations collaborating with USAID were reluctant to comment on the impact of the freeze but acknowledged they were rushing to communicate with stakeholders about the decision.

The memo seen by Agence France-Presse (AFP) explicitly states, “No new funds shall be obligated for new awards or the extension of existing awards until each proposed new award or extension has been reviewed and approved.” This directive effectively pauses US funding for critical initiatives like PEPFAR, an anti-HIV/AIDS program launched under President George W Bush in 2003. PEPFAR, which has saved an estimated 26m lives, primarily in developing countries, is now facing uncertainty. The memo permits exceptions on a case-by-case basis and allows temporary funding for salaries and administrative expenses during this period.

The freeze comes with an 85-day timeline for an internal review of all foreign assistance. Rubio justified the decision by stating that it was necessary for the new administration to ensure foreign aid commitments were not duplicated, were effective and aligned with President Trump’s foreign policy priorities. Rubio, once a proponent of development assistance, noted the need for greater oversight.

The US has long been the largest donor in dollar terms, providing more than $64bn in overseas development assistance in 2023, according to the Organization for Economic Cooperation and Development. However, the Trump administration’s approach marks a significant departure from bipartisan support for foreign aid in Washington.

On his first day in office, Trump signed an executive order suspending foreign assistance for 90 days. Anti-poverty organization Oxfam criticized this move, calling it a drastic shift from a longstanding US consensus on foreign aid. “Humanitarian and development assistance accounts for only around one percent of the federal budget; it saves lives, fights diseases, educates millions of children and reduces poverty,” said Oxfam America President Abby Maxman. She warned that cutting these programs could have severe “life or death consequences.”

Trump’s decision to withdraw from the Paris Climate Accord and the World Health Organization further compounds potential challenges for countries like Nepal, where foreign aid plays a vital role in addressing critical issues.

In May 2022, the Nepal government and USAID signed a five-year assistance agreement worth $658m. The grant aimed to strengthen democratic governance, promote enterprise-driven economic growth, and build resilience in communities most vulnerable to natural disasters and climate change. This partnership highlighted the long-standing collaboration between the US and Nepal in addressing developmental and environmental challenges.

However, the recent freeze has cast doubt on the continuation of such initiatives. USAID operations in neighboring countries like Bangladesh have also come to a halt, citing the executive order. The suspension of foreign assistance underscores the Trump administration’s shifting priorities and its potential repercussions for vulnerable nations like Nepal.

As the freeze unfolds, the implications for Nepal’s development, public health and disaster resilience remain uncertain. The situation demands close monitoring, as delays in funding and project implementation could disrupt critical progress across multiple sectors.

Prime Minister KP Sharma Oli’s recent 47-page political document offers a detailed justification for his decision to form a ruling coalition with the largest party, Nepali Congress (NC). A close reading of this document reveals that the CPN-UML is unlikely to sever its alliance with NC before the 2027 elections, as Oli describes this coalition as a ‘new political course’. This marks the first Central Committee meeting Oli has chaired since becoming prime minister for the third time in July last year.

According to the document, the idea of a coalition with NC had been under consideration even before the 2022 elections. Oli notes that the UML had proposed to NC that it contest the elections independently, without forming an alliance with the CPN (Maoist Center). This proposal, however, was not accepted by NC, leading to the formation of alliances out of necessity rather than preference.

Historical context of collaboration

Oli’s document traces the historical precedents of collaboration between the UML and NC, emphasizing their shared roles in pivotal moments of Nepal’s political history. He highlights their partnership during the 1990 democratic movement, their joint efforts in the 2006 second people’s movement, and their collaboration in promulgating the 2015 constitution. After the second Constituent Assembly elections, NC and UML formed a government that played a crucial role in drafting the constitution. Oli argues that this historical context underscores the natural alignment of the two largest parties in times of national need.

Following the 2022 elections, the UML had initially proposed to NC that they form a government together to ensure political stability. However, NC declined the proposal, leading UML to form a coalition with other parties, including the Maoist Center. This alliance proved fragile and eventually collapsed when the Maoist Center supported NC’s candidate, Ram Chandra Poudel, in the presidential elections. Subsequently, UML returned to its long-standing proposition of a coalition with NC, which Oli asserts was driven by a commitment to political stability rather than opportunism.

Justifying the coalition

Oli’s document provides a critical analysis of the 2022 election results, arguing that the fragmented mandate failed to deliver the political stability the country desperately needed. He describes the results as fostering instability and weakening the ability of any single political force to lead decisively. Oli criticizes Maoist Center leader Pushpa Kamal Dahal for engaging in opportunistic behavior and secret consultations with other parties, actions that he claims undermined trust and governance.

The coalition with NC, according to Oli, was therefore a calculated response to the prevailing political instability. He portrays the alliance as a means to foster hope and trust among the populace, mitigate societal pessimism, and bolster the democratic process. Oli also contends that the partnership is vital for addressing growing geopolitical challenges and ensuring Nepal’s national interests are safeguarded in an increasingly polarized global environment.

Mechanisms for collaboration

To ensure effective governance, UML and NC have established several bilateral mechanisms aimed at addressing key national issues. These include working groups focused on constitutional amendments, federalism implementation, pending legislation, governance reform, economic restructuring, and public expenditure management. These mechanisms are intended to bridge differences between the parties and provide actionable inputs to the coalition government.

Oli claims that these collaborative efforts have already yielded significant results, citing the passage of the transitional justice bill with all-party consensus as a major achievement. However, he acknowledges delays in appointing members to the transitional justice mechanism, a gap that needs urgent attention.

Economic and foreign policy perspectives

On the economic front, Oli’s document expresses cautious optimism, stating that the country’s economic situation is gradually improving despite unfavorable indicators. He argues that the strong coalition government has boosted private sector confidence, which is crucial for sustained economic recovery. Oli’s administration has also prioritized governance reforms and efforts to streamline public expenditure, which he believes will yield long-term benefits.

In terms of foreign policy, Oli highlights achievements such as his meeting with Indian Prime Minister Narendra Modi on the sidelines of the 79th General Assembly. He emphasizes the importance of the Framework Agreement on the Belt and Road Initiative (BRI), viewing it as a critical step toward improving Nepal’s connectivity infrastructure, diversifying transit facilities, and enhancing trade opportunities. Oli acknowledges the need for vigilance regarding the escalating China-US rivalry and its potential implications for Nepal, advocating for a balanced and pragmatic approach to international relations.

Future prospects of the coalition

Oli’s document suggests that the UML-NC coalition is not merely a temporary arrangement but a long-term strategic partnership. He underscores that the UML remains committed to the alliance as long as NC upholds its end of the agreement. Oli’s vision for the coalition extends beyond the immediate term, framing it as a cornerstone for ensuring political stability, fostering democratic values, and addressing Nepal’s pressing socio-economic challenges.

Six months into the coalition government, Oli asserts that it has already delivered a message of stability and progress, countering widespread skepticism about its longevity. He envisions the alliance as a platform for addressing deep-rooted issues such as governance inefficiencies, economic stagnation, and geopolitical vulnerabilities.

Conclusion

Prime Minister Oli’s political document serves as a comprehensive defense of the UML’s decision to partner with NC, highlighting its historical, political, and strategic rationale. By framing the alliance as a necessity born out of a commitment to national stability and progress, Oli seeks to position the coalition as a transformative force in Nepal’s political landscape. While challenges remain, including differences within the coalition and delays in key appointments, the document reflects a strong resolve to navigate these hurdles in pursuit of a more stable and prosperous future for Nepal.

Dec 12, 

Shantinagar, Kathmandu

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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