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Police on Saturday arrested Nepal's former Prime Minister and CPN-UML Chairman KP Sharma Oli from his Gundu-based residence in Bhaktapur. 

An arrest warrant was handed over to Oli before he was taken into custody, according to SP Surys Bahadur Khadka, Chief at the District Police Range, Kathmandu.

A police team had reached his residence at 5 am today to arrest him.

Authorities said that he was detained while implementing the report of the inquiry commission formed to investigate Gen Z protests held on September 8 and 9.

A total of 77 people were killed-many of them protesters shot by police- during the protests, which also resulted in the destruction of government and private property worth billions of rupees.

The move follows the Cabinet decision taken on Friday to immediately implement the commission's recommendations. 

Government spokesperson and Minister for Education, Science and Technology Sasmit Pokharel had said that the first Cabinet meeting held under the headship of  Prime Minister Balendra Shah in Singha Durbar on Friday had decided to implement the issues recommended by the inquiry commission.

The meeting had also decided to form a study committee to examine issues pertaining to the security mechanisms involving individuals and bodies named in the report and act in accordance with the recommendations submitted by the committee, and to direct the concerned bodies to promptly act on the recommendations made by the commission in the case of others.

Following the decision, Home Minister Sudhan Gurung directed Inspector General of Police Dan Bahadur Karki and Inspector General of Armed Police Force Raju Aryal to arrest UML Chairman Oli and Nepali Congress leader Ramesh Lekhak.

ALSO READ: Nepal’s former Home Minister Ramesh Lekhak detained

Meanwhile, UML Secretary Mahesh Basnet has criticized the arrest of former Prime Minister KP Sharma Oli and former Home Minister Ramesh Lekhak, calling it an act of political revenge and prejudice.

In a social media post, Basnet criticized the current government led by Prime Minister Balendra Shah, particularly the appointment of Home Minister Sudan Gurung, describing it as controversial and inexperienced.

Calling for action, Basnet urged party members and supporters to participate in demonstrations to safeguard democratic values and oppose what he described as “revenge politics.” He added that further details of the protest program would be announced following a party secretariat meeting scheduled for the morning.

Meanwhile, taking to Facebook, a social media platform, Home Minister Gurung said that the actions were guided by law and not driven by revenge.

He clarified that the arrest was made following the recommendation of the inquiry commission formed to investigate the Gen Z protests held on September 8 and 9.

"No one is above the law. This is not revenge against anyone. It is just the beginning of justice", Minister Gurung stated.

He also expressed confidence that the country will now take a new course.

Major countries including India, China, and the United States have congratulated Prime Minister Balendra Shah on being sworn in as the Prime Minister of Nepal.

Indian Prime Minister Narendra Modi extended warm congratulations, stating: “Your appointment reflects the trust reposed in your leadership by the people of Nepal. I look forward to working closely with you to take India–Nepal friendship and cooperation to even greater heights for the mutual benefit of our two peoples.”

Similarly, the United States extended its congratulations to Prime Minister Shah and his new government. In a statement, the Bureau of South and Central Asian Affairs said that the United States looks forward to working with Nepal to advance mutual prosperity and regional stability.

Chinese Premier Li Qiang also sent a congratulatory message, noting that China and Nepal are traditional neighboring countries connected by mountains and rivers. He expressed that the Chinese government supports Nepal’s governance and reaffirmed China’s continued support in safeguarding Nepal’s independence, sovereignty, and territorial integrity.

Premier Li further stated his willingness to work with Prime Minister Shah to advance high-level China–Nepal cooperation under the Belt and Road Initiative, deepen collaboration across various sectors, and promote the China–Nepal strategic partnership characterized by long-term friendship aimed at development and prosperity.

A spokesperson for China’s Foreign Ministry also extended congratulations to Prime Minister Shah and expressed readiness to work with Nepal’s new government to strengthen traditional friendship and practical cooperation.

Similarly, Japanese Prime Minister Sanae Takaichi extended her congratulations to Prime Minister Shah. In her letter, she expressed her intention to work together to enhance bilateral relations between Japan and Nepal.

British Ambassador to Nepal Rob Fenn also congratulated Prime Minister Shah. He stated that as the new government sets its priorities, the United Kingdom looks forward to collaborating with Nepal on economic growth, youth employment, climate resilience, and other shared interests.

The European Union also extended its congratulations. EU spokesperson Anaouar El Anouni stated that the EU looks forward to further developing its longstanding relations with Nepal and supporting the government in implementing its development priorities.

Swiss Ambassador to Nepal Danielle Meuwly, in her message, said: “We look forward to deepening cooperation between Switzerland and Nepal, and to further strengthening the longstanding friendship, goodwill, and mutual trust that bind our two countries.” She added, “We extend our best wishes for a successful tenure as you pursue the aspirations of the people of Nepal, advancing peace, development, and prosperity.”

Today, Balendra Shah takes the oath as the 42nd Prime Minister of Nepal. Shah enters Singha Durbar amid towering public expectations and daunting structural challenges. His party, the Rastriya Swatantra Party, emerged from the March 5 election with a near-two-thirds majority in the House of Representatives. From corruption to jobs, from bureaucratic gridlock to foreign policy tightropes, his premiership will be defined not by rhetoric, but by action. This marks the first time in Nepal's recent history that a new generation of leaders has reached the helm of power.

Corruption on trial

There is a widespread public perception that corruption has reached unprecedented levels over the past decades. Scandals involving public procurement, infrastructure projects, and state enterprises have long dominated headlines, public discourse, and popular anger. During the campaign, voters expected swift and decisive action on major corruption cases. However, many corruption networks span political parties, business interests, and the bureaucracy. Dismantling them will invite fierce opposition from multiple quarters. Anti-graft bodies are slow and politicized, and without structural reform, addressing corruption in any meaningful way will be extremely difficult.

Service delivery

Nepalis are frustrated. Slow service delivery—be it in citizenship processing, construction permits, tax administration, or infrastructure rollout—has become a symbol of state dysfunction. The prolonged delay in printing driving licenses is a case in point; many people have waited over three years without receiving theirs. Passport delays tell a similar story. Both Shah and his party have promised rapid transformation in government services, but the bureaucratic machinery he inherits is rigid, hierarchical, politicized, and deeply resistant to change. Past prime ministers have struggled to push through such reforms.

Job creation

Unemployment was among the top issues driving voters in the March election. Nepal’s youth unemployment rate of 20.6 percent is the highest in South and Southeast Asia. Shah’s critics argue that job creation cannot happen overnight and requires structural reform, private investment, and time. Yet the electorate wants immediate results. The RSP’s election manifesto has promised 1.2m jobs annually.

According to data from Nepal Rastra Bank, the national GDP at current prices has reached Rs 6,107.2bn, but the composition of this figure reveals a troubling reality. The service sector dominates at 62.01 percent, while agriculture and industry contribute a mere 25.16 percent and 12.82 percent, respectively, according to Kathmandu-based economist Laxman Neupane. This heavy reliance on services has failed to generate sufficient high-quality employment or meaningful value-added growth, placing immense pressure on the incoming RSP government to pivot toward aggressive industrial expansion, he adds.

A business-friendly Nepal

Nepal’s economic potential is considerable—spanning hydropower, tourism, agriculture, and, more recently, information technology services. Realizing that potential requires systemic reform. Red tape remains a major obstacle, with business registration, licensing, land acquisition, and import-export approvals requiring multiple clearances across agencies. 

Foreign assistance has declined in recent years, and major donor countries are increasingly signaling a shift toward facilitating private investment rather than direct aid. Every major power sees opportunity in Nepal, but all are calling for legislative reform, digitalization of services, and stronger investor protections. Foreign investors will be closely watching how Nepal balances openness with regulatory certainty. Failure to attract industrial investment means Nepali youth will have little choice but to continue relying on foreign labor markets, says US-based analyst Sushil Thapa. At the same time, instability in the Middle East and ongoing international conflicts are making those markets increasingly risky and uncertain, he adds.

Economic challenges

Nepal’s economy presents a mix of apparent stability and deep structural fragility. Macroeconomic indicators, including low inflation and strong foreign exchange reserves of around Rs 3,200bn, paint a broadly positive picture. Yet domestic demand remains weak, banks face rising non-performing loans, and investor confidence is low. The economy is heavily dependent on remittances, which account for nearly 24 percent of GDP, while manufacturing and industry are shrinking and youth migration continues to rise. The RSP government faces the task of translating electoral enthusiasm into tangible economic growth.

Its ambitious goals include doubling GDP to $100bn within five years, raising per capita income to $3,000, and creating 1.2m jobs annually. Key challenges include reforming import duties, broadening the tax base, attracting foreign investment without incurring debt traps, and managing potential labor crises stemming from Gulf instability. While genuine prospects for reform and growth exist, political constraints and high public expectations make the path forward complex.

Managing multiple social groups

The Shah government faces a complex and delicate challenge in responding to the demands of multiple societal groups, each with distinct and pressing concerns. Cooperative victims, who have suffered financial losses due to mismanaged or failed cooperatives, seek justice and compensation, requiring careful legal and administrative handling. Informal lenders may press for regulatory leniency, creating a difficult balance between formal financial governance and existing lending practices. 

Teachers and other professional groups are likely to demand fair wages, better benefits, and improved working conditions, reflecting broader concerns about public sector reform and labor rights. Various other community and interest groups will also mobilize, making the public sphere a forum for multiple, often competing demands. Navigating all of this will require not only policy acumen but also strong negotiation skills, empathy, and the ability to prioritize solutions that uphold social harmony while addressing legitimate grievances.

Managing major powers

Relations with India, China, and the United States will remain one of the defining foreign policy challenges for Shah. All three countries are waiting to hear his strategic blueprint before making their next moves. They view RSP as a genuinely new political force and want to understand Balen’s approach before offering commitments.

China has emerged as a key player in Nepal’s foreign policy calculus. Beijing has signaled patience alongside clear expectations. It is willing to engage broadly with the new administration in areas such as artificial intelligence, rural digitization, infrastructure development through concessional loans, and cooperation in health, education, and agriculture. At the same time, China has sent an unmistakable message about its security and strategic interests in Nepal. Shah’s choices will determine whether Nepal can leverage China’s willingness to invest without compromising its sovereignty or regional equilibrium.

India presents a more nuanced challenge. While it remains Nepal’s most vital economic partner, New Delhi is closely watching how the new government handles longstanding bilateral disputes. Economic cooperation will likely remain central, but Nepal must tread carefully to avoid straining this critical relationship. The United States, meanwhile, offers opportunities primarily in business and security cooperation. With USAID assistance having significantly declined, American private investors are looking for a favorable investment climate. Shah’s administration will need to demonstrate political stability, regulatory clarity, and transparency to attract such investment while aligning with broader US interests in the region.

Intra-party unity

Nepal’s political history since the 1950s is filled with prime ministers brought down not by external adversaries, but by fractures within their own parties. The collapse of KP Sharma Oli’s government in 2020, driven by intra-party conflict, stands as a cautionary tale for Shah. Despite a strong electoral mandate, the RSP remains a young party with limited institutional experience. Aligning its members around a unified agenda will require patience, sustained consultation, and strategic delegation. The working relationship between Balen Shah and RSP Chair Rabi Lamichhane is something many observers are watching closely.

Cross-party dialogue

Cross-party cooperation will be equally important. While the RSP commands a strong mandate in the House of Representatives, it holds no seats in the National Assembly. Major legislation will therefore need to be negotiated with other parties, particularly the Nepali Congress and CPN-UML, to ensure passage. Outside Kathmandu, provincial and local governments remain dominated by traditional parties. Shah’s adversarial stance toward those parties could ultimately prove a liability for his own agenda.

Building a capable team

When Shah served as Mayor of Kathmandu Metropolitan City, he built a small, focused team to manage different areas of work. The role of Prime Minister demands something broader and more sophisticated. Unlike the mayoralty, the premiership requires a different level of institutional coordination and strategic thinking, says New Delhi-based researcher Aditi Paul. Managing sensitive matters of security and trade with neighboring countries calls for diplomatic finesse. Shah will need to rely on experienced advisors and assemble a capable team equipped to handle Nepal’s complex regional dynamics, she adds.

Prime Minister Balen Shah expanded the Cabinet on Friday.  He expanded the Cabinet soon after he took the oath of office and secrecy at Sheetal Niwas.

The ministers recommended by the Prime Minister took the oath of office and secrecy amidst a function at Sheetal Niwas.

The names of some ministers were finalized following a discussion between Rastriya Swatantra Party President Rabi Lamichhane and Parliamentary Party leader Shah.

According to a source at the RSP, Dr Swarnim Wagle has been appointed as Finance Minister, Sudan Gurung as Home Minister, Shirshir Khanal as Foreign Minister, Sunil Lamsal as Minister Physical Infrastructure, Biraj Bhakta Shrestha as Energy Minister, Khadka Raj Ganesh Paudel as Tourism Minister, Sasmit Pokharel as Education Minister, Sobita Gautam ass Minister for Law and Parliamentary Affairs, Pratibha Rawal as Minister of General Administration, Bikram Timilsina as Minister for Communications and Information Technology, Nisha Mehata as Minister for Health and Population, Gita Chaudhary as Agriculture Minister, Sita Badi as Minister for Women and Children and Deepak Shah was minister without portfolio.