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The government decision to ban TikTok, citing disruption of social harmony, family structure  and goodwill, has left everyone puzzled. There is no clear answer as to why the government abruptly shut down the popular video-sharing app. This move contradicts constitutional provisions and international commitments to safeguard freedom of speech and expression.  

While the government has the authority to ban apps affecting national security, social harmony, and law and order, the lack of clear reasons for the TikTok ban is problematic. Currently facing 10 writ petitions in the Supreme Court, and more in the pipeline, the government's decision is under scrutiny. Advocate Dinesh Tripathi, one of the petitioners, warns that the government may extend the ban on other apps as well.

The misuse of TikTok has been a persistent concern for government agencies, prompting continuous discussions between TikTok and the Nepal government regarding content regulation.  On 3 November, TikTok representatives presented a detailed working process, moderation and model of collaboration to the Nepal government. Earlier, an internet safety summit was organized in the presence of TikTok representatives, civil society and government officials. Similarly, TikTok has signed a Memorandum of Understanding (MoU) with Nepal Telecommunication Authority to create awareness about the misuse of the platform.

Also in June, TikTok provided access to the Trust and Enforcement Tool to Nepal to ensure the reporting of content that is in violation of local laws. TikTok says it has since removed around three million videos by Nepali users for violating community standards. It appears that the government's desire for complete control over the so-called objectionable content led to the ban.

According to one government source, the ban was prompted after TikTok refused to remove all the videos that were flagged by the government.  The government's decision lacks transparency, with no specific reasons shared with the public. Three major political parties—Nepali Congress, CPN-UML and CPN (Maoist Center)—have by and large remained mum about the ban. Minister for Information and Communication Technology Rekha Sharma has suggested that there was an all-party consensus to ban TikTok. 

The silent position taken by major parties backs Sharma’s claim of all-party consensus. While some Congress leaders including Gagan Kumar Thapa, Bishwa Prakash Sharma and Shekhar Koirala have opposed the decision, the party President, Sher Bahadur Deuba, has not said anything.

In an all-party meeting held a few days ago, leaders expressed their concerns over the use of TikTok to disturb social harmony and religious tolerance. Following the discussion, the government came up with social media guidelines, asking the public to avoid the misuse of social media. Observers say, major parties may have agreed to ban TikTok after new political parties and rabble-rousers were heavily featured on TikTok clips where they defamed politicians and government. Security agencies have also expressed concerns about the misuse of TikTok to create social discord. A senior security officer says there were several videos on TikTok that created discord and disharmony among various religious and ethnic groups. 

But former deputy inspector general of Nepal Police, Hemanta Malla, says the government’s ban on TikTok cannot be justified. He notes that  there are far more objectionable contents on other platforms. Some experts say geopolitical factors may also have influenced the government’s decision to ban TikTok, as there have been global concerns about TikTok's potential threat to data security.  The ban has particularly hit small businesses, especially those led by women. For them, TikTok was a crucial platform to promote their products and brands. The app also helped to promote Nepal’s tourism destinations.

After India along with 59 Chinese-owned apps  banned TikTok in 2020, Nepal was the largest market for the platform.  The ban by India came shortly after a clash between Indian and Chinese troops at a disputed Himalayan border killed 20 Indian soldiers and injured dozens. 

As TikTok does not want to lose its user base in Nepal, its representatives are in Kathmandu to negotiate the lift on the ban. Experts suggest regulating the platform instead of a complete ban, but government officials argue that Nepal lacks sufficient mechanisms for content regulation. The plea for social media giants to open offices in Kathmandu echoes the need for better regulation rather than outright prohibition.

According to news agency AP, TikTok, owned by China’s ByteDance, has faced scrutiny in a number of countries because of concerns that Beijing could use the app to harvest user data or advance its interests. 

Countries including the United States, Britain and New Zealand have banned the app on government phones despite TikTok repeatedly denying that it has ever shared data with the Chinese government and would not do so if asked, according to AP.  It has 1 billion uses globally. Nepal has banned all pornographic sites in 2018. 

TikTok, owned by Chinese technology company Bytedance, has long maintained that it doesn’t share data with the Chinese government. It says a project to store American user data in the U.S. will put it out of China’s reach and it disputes accusations that it collects any more user data than U.S. social media companies do, according to AP. 

Prime Minister Pushpa Kamal Dahal on Friday addressed the second Voice of Global South Summit organized by India.  Addressing the session, PM Dahal said that the world is facing unprecedented crises generated by the COVID-19 pandemic, climate change, and deepening geo-political complexities. They have impacts on food and nutrition, health and education, economy and environment, and peace and security, he said.  More than 125 countries from the Global South attended the Summit. 

Developing countries especially the LDCs are the most affected ones by these crises. Rising food and energy prices, tightening financial conditions, and persistent cycles of vulnerabilities continue to add to their worries, PM Dahal said, many countries of the Global South are under unsustainable debt burden which is straining investments in health, education, social justice, and other pressing national priorities. 

We believe that in order to address the challenges facing the world, the international community must focus on common goals of peace, progress and prosperity. For this, building of trust, promoting partnership and collaboration and working in solidarity remain crucial, PM Dahal said.  We need to champion inclusive and sustainable global growth, in which the Global South receives a fair share to eradicate poverty and give their people a decent life, PM Dahal said, that Nepal remains steadfast in its commitment to multilateralism with the United Nations at the center.

Nonetheless, we believe that the existing global governance architecture needs a timely reform to make it relevant and reflective of today’s realities. At the same time, reform of the international financial architecture should be a top priority with full consideration to the voice of the countries in special situations, including LDCs, LLDCs and SIDS, PM Dahal said. 

“Climate change remains a grave threat to humanity. Climate-vulnerable countries like Nepal have been bearing the burden of climate change. The effect of climate change on the Himalayas has posed a severe threat to the lives and livelihoods of millions of people living in our region. We all must commit ourselves to achieving the set ambitions in a time-bound manner.” 

PM Dahal further said that Nepal is graduating from the LDC status by 2026 and we are committed to making this process smooth, sustainable, and irreversible.  Sustainable Development Goals remain at the center of our development vision and priorities with integration into national policies and plans. But even the progress that we achieved so far has been threatened by the multitude of global crises, he said.  “Hence, we have been calling for an enhanced level of international support from our partners such as development assistance, FDI, trade facilitation, technology transfer and technical assistance. The South-South cooperation should also be forthcoming to lifting the neediest countries.” 

Addressing the Summit Indian Prime Minister Narendra Modi said that Global South wants its autonomy and it is ready to take up greater responsibility in global matters. The Indian PM said that Global South wants its voice in global governance.  “Geographically, the Global South has always existed, but it is getting a voice for the first time, and this is because of joint efforts. We are more than 100 countries but our priorities are similar,” he said.   He also spoke of the 5 ‘Cs’, a commitment to which would power the growth of these countries.  The 5 ‘Cs’ are “consultation, cooperation, communication, creativity and capacity building”. 

The foreign ministers’ session deliberated on major global agendas, including climate change, energy transition, technological transformation, and restoring trust in multilateralism. Addressing the Summit, S Jaishankar, Minister for External Affairs of India, said India took over its G20 Presidency in the backdrop of a very challenging global, and in its Presidency, India’s anchor was the Global South.  Its voices inspired our priorities, fueled our efforts, and galvanized a path-breaking consensus, he said.  

Recognizing our shared past, the Global South will continue to make efforts for One Earth and to strengthen the voices of the developing countries, the Indian minister said, as one family, the Global South will continue to act with everyone’s interests in mind and drive transformation and building synergies.  

In the Summit, India has announced some initiatives. One of them is the Global South Centre of Excellence which will work as a think tank and will also work as a repository of knowledge and development initiatives in order to interface with the Global South and seek ways to forge collaboration with countries in this region.  

India is all set to host the second Voice of Global South Summit on Friday in a virtual formation. Prime Minister Pushpa Kamal Dahal is likely to attend the Summit.  

Earlier, India had hosted the inaugural Voice of Global South Summit (VOGSS) on 12-13 January 2023, in a virtual format. This unique initiative brought together 125 countries of the Global South to share their perspectives and priorities on a common platform, said India’s Ministry of External Affairs.

Throughout its G20 Presidency, India has worked to ensure that the concerns of the Global South receive due cognizance and that the priorities of the Global South were duly factored in finding solutions to the most pressing global challenges.

The 2nd VOGSS would focus on sharing with countries of the Global South the key outcomes achieved in various G20 meetings over the course of India’s Presidency, said the press release issued by India.

The challenges posed by global developments are also likely to be discussed. Further, the Summit will serve as a platform to discuss ways to sustain the momentum generated towards our common aspiration of a more inclusive, representative, and progressive world order, reads the press release.

Head of State from Global South will attend the inaugural session which will be chaired by Indian Prime Minister Narendra Modi. 

The theme of the Inaugural Leaders’ Session is "Together, for Everyone’s Growth, with Everyone’s Trust” and that of the Concluding Leaders’ Session is "Global South: Together for One Future”.

In addition, there will be 8 Ministerial Sessions, with the following themes:

· Foreign Ministers’ Session on "India & the Global South: Emerging Together for a Better Future”

· Education Ministers’ Session on "Making Human Resources Future Ready”

· Finance Ministers’ Session on "Financing People-Centric Development”

· Environment Ministers’ Session on "Sustainable Solutions for Climate Resilience and Climate Finance”

· Foreign Ministers’ Session on "Global South and One Development”

· Energy Ministers’ Session on "Affordable & Inclusive Energy Transition for Sustainable Development”

· Health Ministers’ Session on "Solutions from the Global South for One Health”

· Commerce / Trade Ministers’ Session on "Global South & Resilient Supply Chains”

 Last year, Nepal’s then Finance Minister Bishnu Poudel attended the Voice of Global South Summit. And, Nepal had attended the meeting of the Finance Tasks force held during the G-20 Summit. 

Amid the geopolitical tumult, American President Joe Biden and Chinese President Xi Jinping held a historic talk that focused on a wide range of international, regional, and bilateral issues. The two major powers held talks at a time when the crisis in the Middle East was escalating and the Russia-Ukraine war continued.  

According to the Voice of America report, Biden and Xi have agreement on some vital issues. Xi agreed to help curb the production of the illicit fentanyl that is a deadly component of drugs sold in the United States. The two leaders have agreed to resume high-level military communications; China had severed the military hotline after then US speaker Nancy Pelosi’s visit to Taiwan in 2022. The relationship was further soured after the US accused China of sending a spy balloon in its airspace.

In the conversation, Joe Biden said their discussion was straightforward and frank, and I have always appreciated them. A readout from White House said: “We have not always agreed, which was not a surprise to anyone, but our meetings have always been candid, straightforward, and useful.”  I value our conversation because I think it is paramount that you and I understand each other clearly, leader to leader, with no misconceptions or miscommunication, Biden said, we have to ensure that competition does not veer into conflict, and we also have to manage it responsibly—that competition.

Regarding the understanding between two countries to resume military communication, Biden said: “We are back to direct, open, clear and direct communication.” The American President characterized the talks as some of the most constructive and productive discussions they have had. But Biden said that he still considers Xi as a dictator which is likely to annoy Beijing. He said: “Well, look, he is a dictator in the sense that he is a guy who runs a country that is a community country that is based on a form of government totally different from ours.”

President Biden reiterated the US One China policy in the meeting with Xi. "I reiterated what I have said since I have become president, and what every previous president of late has said: That we maintain an agreement that there is One China Policy." 

According to The Global Times, on the Taiwan question, Xi emphasized that it remains the most important and sensitive issue in China-US relations, and China values the positive statements made by the US side during the Bali meeting. The US should implement its stance of not supporting "Taiwan independence" into concrete actions, stop arming Taiwan, and support China's peaceful reunification, according to the Chinese president, The Global Times reports.

According to Chinese news agency, Xinhua, Xi called on China and the United States to assume a new vision and build together five pillars for bilateral relations. Xinhua report says: China is consistently committed to having a stable, healthy and sustainable relationship with the United States, and China has interests that must be safeguarded, principles that must be upheld, and red lines that must not be crossed.  And the critical global challenges we face, from climate change to counternarcotics to artificial intelligence, demand our joint efforts, Biden said.

Xi further added that the China-US relationship, which is the most important bilateral relationship in the world, should be perceived and envisioned in a broad context of the—accelerating global transformation unseen in a century. It should develop in a way that benefits our two peoples and fulfills our responsibility for human progress, Xi said.

The Chinese President further added that major-country competition is not the prevailing trend of current times and cannot solve the problems facing China and the United States or the world at large. Planet Earth is big enough for the two countries to succeed, and one country’s success is an opportunity for the other. We should heavy responsibilities for the two people, for the world, and for history, Xi said, I look forward to having an in-depth exchange of views and reach new—reach new understandings with your on strategic and overarching issues critical to the directions of China-US relations and on major issues affecting world peace and development.

Ahead of COP28, the two leaders discussed climate change issues. According to The Global Times, they expressed their joint commitment to promoting the success of the COP28 and announced the China-US Enhancing Climate Action 2020s working group to accelerate specific climate actions. Despite the differences on a host of issues, China and America have similar positions on several climate change issues which has not gone well in the developing countries.

Chinese experts have said the talk continues the tone set in Bali last year. Speaking to The Global Times, Diao Daming, associate professor at the Renmin University of China said: Looking forward, it will be important to see whether the US can truly achieve a correct understanding. If the US can adjust its understanding and truly adopt a responsible perspective, recognizing each other’s position, effectively managing differences, and advancing mutually beneficial cooperation, it will further stabilize the relations between the two countries.” 

The United States of America has requested Nepal to become a member of the Open Government Partnership (OGP), a multilateral initiative that aims to secure concrete commitments from governments to promote transparency, fight corruption, and harness new technologies to strengthen governance.

Till now, more than 55 countries have joined the OGP. At a meeting with Minister for Foreign Affairs Narayan Prakash Saud at Washington, DC, USAID Administrator Samantha Power discussed the matter.

It is not clear how Nepal reacted to the US offer. USAID Spokesperson Jessica Jennings said: Administrator Power reinforced the US government’s partnership to further strengthen the relationship with Nepal and recognized Nepal’s democratic progress, including potential membership in the Open Government Partnership.

During the conversation, the duo discussed the impact of USAID’s long-standing investment in Nepal and discussed the new development priorities.  According to the spokesperson, Administrator Power expressed commitment to advancing Nepal’s inclusive economic development and highlighted USAID’s work with the Nepal government and private sector to unlock the country’s investment potential. After the bilateral talks with his American counterpart, Foreign Minister NP Saud is holding talks with heads of USAID, MCC and other development agencies.

Saud also held a meeting with US International Development Finance Corporation's CEO Scott Nathan where he highlighted the measures taken by Nepal to enhance private investment in various sectors of the economy and urged DFC to encourage the American private sector to invest in Nepal.  

CEO Nathan said DFC wants more projects in Nepal, including in infrastructure development, energy, and agro-business, apart from its current involvement with SMEs. He noted that DFC is not only involved in financing, but also helps to create the ecosystem for private-sector development.

Minister Saud also participated in a talk program titled Nepal’s Foreign Policy Outlook hosted by the United States Institute of Peace. Speaking about Nepal’s foreign policy orientation, Minister Saud stressed Nepal’s pursuit of an independent foreign policy which is based on the Charter of the United Nations, non-alignment, and principles of Panchasheel. “Our conduct of external relations is based on a balanced and independent outlook, which is rooted in the historical fact that we were among the few countries that always remained independent, free from any colonial rule,” he said.

Highlighting Nepal’s political transformation of historic proportions, the Minister said, “We ended armed conflict in the country by establishing a home-grown peace process tailored to our requirements. We were able to settle differences by making a democratic constitution. That happened in Nepal. In the country of the Buddha, peace prevailed; democracy prevailed. In this journey, the support from our partners like the USA was important.”

Foreign Minister Narayan Prakash Saud held talks with US Secretary of State Antony J Blinken in Washington, DC on Monday, focusing mainly on matters of bilateral, regional and international concerns, including the Millennium Challenge Corporation (MCC) compact, bilateral cooperation in multilateral forums and the unfolding situation in the Mideast. 

The high-level talks in the American capital, which come in the wake of a series of visits by senior US officials to Nepal, bear special significance, also because opportunities for Nepal’s foreign ministers to engage in bilateral talks with the US are relatively rare.

Before Saud, his predecessor, Pradeep Kumar Gyawali, had held official meetings with the then American Secretary of State Mike Pompeo in 2018. However, Foreign Minister Gyawali’s visit courted criticism as some leaders within his own party accused him of aligning with America’s Indo-Pacific Strategy (IPS). Importantly, there has been no reciprocal visit by a US Secretary of State to Nepal since Colin Powell’s visit in 2002.

Matthew Miller, spokesperson at the Department of State, said Saud and Blinken highlighted the ‘recently launched $500m Millennium Challenge Corporation Compact that will build infrastructure, increase access to electricity and support cross-border power trade.’ The Nepali Embassy in Washington stated in a press release that Secretary of State Blinken expressed the US wish to “see Nepal as a strong and prosperous democracy”.

The two sides also exchanged views on Nepal-US cooperation in multilateral forums, and other matters of regional and global concerns, including the situation in the Mideast, per the statement. The United States and Nepal established diplomatic relations in 1948, and the US has consistently been Nepal’s largest donor country. US policy objectives in Nepal have revolved around the promotion of a peaceful, prosperous, resilient and democratic nation, observers say. 

Over the past decade, American engagement with Nepal has substantially increased, notably seen in increased financial support through USAID and MCC, technical assistance in trade, deepened cooperation in security and defense, humanitarian assistance and disaster response.  This expansion in cooperation is reflected in the growing number of US visits to Nepal, according to the experts. 

A growing rivalry between the US and China, the Russia-Ukraine conflict, the US withdrawal from Afghanistan, climate change and other global concerns have prompted the US to intensify its engagement with Nepal. To counter the growing influence of China in the Indo-Pacific region, the US introduced the IPS, first unveiled by the Trump Administration in 2018 and further developed by the Joe Biden administration in 2022.

A vital role in the Indo-Pacific

Although Nepal is not explicitly mentioned in the IPS, the Trump administration recognized Nepal's potential central role in the Indo-Pacific in 2018. As a result, Nepal is considered a high-priority country in the region for US policymakers. Nevertheless, Nepal has consistently maintained that it does not intend to become a part of the IPS, despite all bilateral cooperation and assistance between Nepal and the US operating within its broader framework.

A key US priority in Nepal is the successful completion of projects under MCC, which entered its entry into force phase in August, accompanied by a five-year deadline. Two months have already passed since the deadline began, but there is much work still to be done. US officials view the MCC compact as a significant milestone in the 75-year partnership between the two countries. Given China’s strong opposition to the compact, the US anticipates potential roadblocks and is making additional efforts to ensure its smooth implementation.

In the meeting with Foreign Minister Saud, Secretary of State Blinken underlined the importance of timely implementations of projects under MCC. After the meeting, Blinken said, “I met with Nepali Foreign Minister Narayan Prakash Saud to highlight US investment in Nepal, including a $500m compact from MCC to support economic growth.”

As China advances its debt-lending mega-project, the Belt and Road Initiative (BRI), in an attempt to attract developing countries, the US aims to showcase the benefits of MCC projects, funded by US grants and substantial financial contributions from the government of Nepal. Simultaneously, the US perceives strong anti-MCC sentiments in Nepal as reflective of growing Chinese influence in the country. For their part, Chinese analysts say they are not opposed to American projects but seek a level-playing field for all players in development cooperation.

Combating corruption is another top US priority in Nepal. The US is closely monitoring developments like investigations into corruption cases, including the Bhutanese refugee scam. US Anti-Corruption Coordinator Richara Nephew visited Nepal in August of this year, engaging with representatives of anti-corruption institutions, law enforcement and civil society.

President Joe Biden has framed current global tensions as a struggle between democracy and autocracy. Since 2021, the Biden administration has been hosting the Summit for Democracy, highlighting the ability of democracies to address the world’s most pressing challenges and deliver for their citizens. Nepal is one of the few South Asian countries invited to participate in the summit.

Under the Democracy Delivers Initiative launched in 2022, the US provides support to mobilize resources for countries undergoing democratic renewal, maximizing the likelihood that their democratic gains endure. The US recently pledged over $145m, with more than $35m in new funding through USAID for the Democracy Delivers cohort, which includes Nepal. Additionally, the US’ International Development Finance Corporation announced $110m to support new private sector-led projects.

In 2022, the government of Nepali and USAID signed a new development cooperation grant amounting to $659m spread over a five-year period. This February, USAID Chief Samantha Power announced that USAID would provide up to $58.5m to advance democratic progress in Nepal. Following transparent and peaceful elections in 2022, Nepal has an opportunity to strengthen federalism, advance the inclusion of women and marginalized communities, empower its young people and demonstrate that democracy can deliver for its citizens.#

In addition to these initiatives, the US has intensified its defense cooperation with the Nepali Army and other security agencies. 

Saud’s visit to the US should be analyzed in the context of a growing engagement between the two countries and rising geopolitical tensions. Nepal’s two close neighbors India and China will be closely watching Saud’s visit to America. There is a convergence between the US and India on the issue of countering Chinese influence in Nepal, while China is more concerned over growing American influence in Nepal.  

An important partner

Antony Blinken, US Secretary of State

We have 76 years of diplomatic relations between Nepal and the United States, and Nepal is today a very valued partner in the Indo-Pacific. We’re working together to ensure that we have a free, open, secure, prosperous region. And in so many ways, Nepal is leading, not just in the region but globally, as a very constructive actor in international organizations—of course, with so many peacekeepers, who are trying to help people move from conflict to peace around the world. And in our own bilateral relationship, we’re working to deepen it and strengthen it even more, particularly with more people-to-people as well as economic ties.

Ahead of COP28, which is taking place in the UAE from Nov 30 to Dec 12, UN Secretary-General Antonio Guterres has pledged to draw the attention of the international community about the unfolding climate crisis in the Himalayas.

Nepal’s political leaders and environmentalists say COP28 is the best platform to highlight the issues of climate change in the Himalayas. Gutterres is likely to flag this issue at COP28, which will immensely help to internationalize the mountain agenda.

After a visit to the Everest region, he urged the international community to stop the madness of climate change. “The rooftops of the world are caving in,” he said, noting that Nepal had lost nearly a third of its ice in just over three decades. Nepal’s glaciers melted 65 faster in the last decade than in the previous one, said Guterres.

The UN chief further said, “Today from the base of Mt Everest, I saw for myself the terrible impacts of the climate crisis on the Himalayas. As temperatures rise, glacier melt increases—threatening the lives and livelihoods of entire communities.”

In the Everest region, the UN head held interactions with local communities and learned about the multifaceted impact of climate change in their daily lives and livelihoods.

Glaciers in the wider Himalayan and Hindu Kush ranges are a crucial water source for around 240 million people in the mountainous regions, as well as for another 1.65bn people in the South Asian and Southeast Asian river valleys below, according to AFP.

The glaciers feed 10 of the world’s most important river systems, including the Ganges, Indus, Yellow, Mekong and Irrawaddy, and directly or indirectly supply billions of people with food, energy, clean air and income, AFP reports.  “I am here today to cry out from the rooftop of the world: stop the madness,” Guterres further said.

“The glaciers are retreating, but we cannot. We must end the fossil fuel age,” he said. Hardest hit are the most vulnerable people and the world’s poorest countries, which have done little to contribute to the fossil fuel emissions that drive up temperatures.

“We must act now to protect people on the frontline, and to limit global temperature rise to 1.5 degrees, to avert the worst of climate chaos,” Guterres said. “The world can’t wait.”

“Melting glaciers means swollen lakes and rivers flooding, sweeping away entire communities,” he added. But all too soon, glaciers will dry up if change is not made, he warned. “In the future, major Himalayan rivers like the Indus, the Ganges and Brahmaputra could have massively reduced flows,” he said. “That spells a catastrophe.”

Though the impact of climate change on mountains is devastating, it does not figure prominently in the global summits like COP. For a long time, Nepal has been raising this issue in the international platforms asking all stakeholders to take this matter seriously.

While addressing the 78th UNGA, Prime Minister Pushpa Kamal Dahal said climate vulnerable mountainous countries like Nepal have been bearing the severe brunt of climate change. 

The Himalayas are the source of freshwater for over two billion people, PM said: Global warming has induced rapid receding of ice in our Himalayas. It has not only eroded the health of our mountains but also endangered the lives and livelihoods of millions of people living downstream. 

Nepal’s economy is grappling with the bitter reality of a recession, even if it hasn’t been officially acknowledged by the government. Despite rosy forecasts from global financial heavyweights like the World Bank, International Monetary Fund and Asian Development Bank, the nation’s economy is reeling under a multitude of challenges.

A relentless surge in inflation is delivering a harsh blow to the commoner. Experts say that Nepal’s economy seems trapped in a downward spiral of high inflation and sluggish growth. Pushpa Kamal Dahal’s government is facing intense pressure from opposition parties and various stakeholders to take immediate action to revive the faltering economy.

A report published by Nepal Rastra Bank reveals that consumer price inflation reached a worrisome 8.19 percent in mid-Sept 2023, up from 7.52 percent in the previous month. According to the World Bank, consumer prices are scaling new heights in the current fiscal year.

The numbers are unsettling. Food and beverage inflation has skyrocketed to 9.74 percent, while non-food and service inflation is at 6.99 percent. Economists are sounding the alarm, warning that inflation is poised to rise in the coming months, further increasing the cost of living.

Economist Dilli Raj Khanal says the rising inflation is a glaring example of failed monetary policy. He warns that inflation is likely to grow after the festivals if the government fails to see the problems through new and innovative ways, adding that fresh crises are on the horizon. 

The price index for spices has surged by an astonishing 45.46 percent, sugar and sugar products by 17.86 percent, and vegetables by 14.51 percent. Cereal grains and their products are up by 13.38 percent, milk products and eggs by 12.60 percent, and restaurant and hotel prices have climbed by 10.97 percent. The brunt of this rising inflation is felt most acutely by the people. 

In its recent report, the World Bank underscores the challenges of taming high inflation and the need for a careful balancing of policies to stimulate growth.

The decline in edible oil prices from Feb 2023 onwards, reflecting global price reductions, had an offsetting effect on prices. But the persistence of high inflation impedes policies to stimulate growth. Nepal’s vulnerability to external shocks implies a difficult trade-off between policies that boost growth and those that contain inflation.

The World Bank report also identifies key drivers of food price hikes, including supply side shocks such as India’s export restrictions on wheat and rice, along with domestic policy changes like the removal of VAT exemptions on basic food items. The report further highlights the importance of price support to producers of rice, milk and wheat.

To compound matters, factors like the lumpy skin disease and unpredictable monsoons are impacting agricultural output, while services and industry are being affected by higher-than-expected import prices and export bans from India.

In this tumultuous economic landscape, Nepal’s private sector has voiced its concern, claiming that international financial institutions are exerting undue pressure on Nepal Rastra Bank and the Ministry of Finance. Despite the various challenges the nation faces, Nepal’s external position has strengthened, thanks to prudent fiscal and monetary policies, thriving remittances, and a boost in tourism.

However, the number of Nepali workers taking approval for foreign employment decreased 28.3 percent to 74,466 in September.   

The Nepali remittance sector, according to the NRB report, saw a remarkable 22.1 percent increase to Rs 228.37bn compared to an increase of 19.8 percent in the same period of the previous year. However, the number of Nepali workers seeking approval for foreign employment has seen a significant 28.3 percent decline to 74,466 in September. The economic landscape is complex, with some positive signs like a 3.8 percent increase in gross foreign exchange reserves to Rs 1,598.9bn in mid-September compared to Rs 1,539.36bn in mid-July 2023.

While Finance Minister Prakash Sharan Mahat acknowledges some gradual improvements in the nation’s economic situation, it's evident that not all internal indicators suggest a smooth ride.

Reflecting the current state of affairs, the government’s total expenditure reached Rs 131.14bn in the first two months of the fiscal year 2023/24. Recurrent expenditure, capital expenditure and financial expenditure stood at Rs 87.66bn, Rs 8.16bn, and Rs 35.31bn, respectively, during the review period. Up till mid-Sept, the government’s total revenue collection, including funds transferred to provincial and local governments, reached Rs 141.08bn, with tax revenue accounting for Rs 127.96bn and non-tax revenue at Rs 13.12bn.

The total expenditure stood at Rs. 4.77bn and resource mobilization of provincial governments stood at Rs 21.16bn, respectively. The total resource mobilization of provincial governments include the grants and revenue transferred from government totaling Rs 15.15bn, and revenue and other receipts of provincial governments totaling Rs 6.01bn.

The provincial governments have also been active on the financial front, with total resource mobilization reaching Rs. 21.16bn. This figure includes grants and revenue transferred from the central government, amounting to Rs 15.15bn, as well as provincial governments’ own revenue and receipts, totaling Rs 6.01bn.

Economy at a glance

• Inflation at 8.19 percent
• Exports decrease by 7.8 percent
• Trade deficit decreases by 4.7 percent
• Remittances increase by 22.1 percent
• Balance of payment remains at a surplus of Rs 53.61bn
• Forex stood at Rs 159.90bn
• Government expenditure amounts to Rs 131.14bn
• Revenue collection Rs 141.08bn