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The year 2025 has been a roller coaster ride for the development sector. Some development partners have discontinued; others have downsized and focused on certain geographies/sectors and others still have changed course completely. What is clear is aid is not what it used to be, the pot is shrinking and shrinking fast. Developing countries must find alternative sources of finance to fund development outcomes—and strategically leverage grants and concessional capital to maximise financing of development needs. The British Embassy Kathmandu has been designing and implementing financial instruments that unlock and mobilise public and private sector finance to support economic growth, private sector development and climate change mitigation.

Nepal is a unique country and has been on a unique development trajectory. Nepal received more than $10bn in remittance in the last fiscal year supporting a positive macro-economic outlook. Still, challenges and vulnerability remain. Dependence on remittance has, sometimes, taken attention away from private sector development and local job creation. Nepali businesses are not adequately integrated with global value chains and attract the lowest levels of foreign investment in South Asia. This limits access to foreign partnerships, technology and know-how. Nepal’s tourism sector, for example, remains stagnant, largely due to a lack of innovation and market access. Despite this and other obvious challenges in the Nepali economy, there are attractive business and investment opportunities across several sectors which remain untapped.

Access to finance is critical to ensuring inclusive growth in Nepal. A study conducted by the British Embassy calculated the funding gap from formal financial channels to small and medium enterprises (SMEs) at over $950m. More than 80 percent of the SMEs rely on informal financing sources and almost 60 percent rely on family and personal savings to fund their financing needs. Even on the formal financing side, SMEs in Nepal have very limited options for raising capital outside of collateralised bank loans. This puts many women, for example, at a disadvantage when so few of them own property or have access to savings. Limited access to finance also stifles growth, innovation and job creation. While the recent fiscal and monetary policies are more supportive of the private sector and SMEs in Nepal, SME development requires strong collaboration between all stakeholders—the government, development partners and the private sector.

Many developing economies like Nepal struggle to attract foreign investments or local capital into high risk/high rewards investment opportunities. Bilateral and multilateral development finance institutions (DFIs) are keen to invest in Nepal as is shown by the number of DFIs active in the country and those that are keeping a close watch for the right investment opportunities. Bridging the gap between interest and investment requires all stakeholders to join forces to mitigate challenges and find and develop opportunities. Designing innovative financial structures will be key in terms of crowding in large amounts of private sector capital.

Blended finance platforms invite the government, development partners, and development finance institutions (DFIs) to collaborate and unlock access to finance. Blended finance strategically uses development finance (grants) to mobilise local and international private capital (commercial capital) into strategic sectors. Further, a reform-oriented public sector that builds a supportive business environment through policy stability and effective partnerships is essential to achieving sustainable development outcomes. 

The British Embassy Kathmandu has been using a blended finance approach to support access to finance in Nepal. Funds such as Business Oxygen and Dolma Impact Fund achieved the dual goal of supporting development outcomes and enhancing returns to investors. International Finance Corporation (IFC), the investment arm of the World Bank Group, has used UK official development assistance (ODA) to de-risk investments and mobilise finance for SMEs in Nepal. The right financial structuring can help further reduce the gap between demand for capital and supply of capital in the growing SME ecosystem.

Building on previous experience, the British Embassy is establishing Nepal in Business—Catalytic Finance to unlock new sources of capital for SMEs, from the Private Equity and Venture Capital (PEVC) space and financial institutions. This financing facility will be managed by the Dutch Entrepreneurial Development Bank- FMO. Demonstration effects from blended finance facilities—investment leveraged, strengthened capacity of the financial sector, and shifting understanding of risks—can be catalytic in this ecosystem. The facility is also expected to create well above 10,000 new jobs.

The author is the Development Director at the UK’s Foreign, Commonwealth and Development Office (FCDO) in Nepal

“Justice must not only be done, but must also be seen to be done”. This is what Lord Hewart, the then chief justice of England, said while pronouncing the verdict in the case of Rex v Sussex Justices, in Sussex in 1924. A century later, this aphorism coming from a court of law in Sussex has become a law of sorts onto itself. 

With the executive and the legislative falling miserably short of public expectations by landing in one scandal after another, the sovereign people have been pinning high hopes on another vital organ of the state—the judiciary—for quite some time. In this day and age of information and communication technology, where the people have information and knowledge at their fingertips, even the hallowed chambers of law cannot escape public scrutiny. 

People and the fourth estate—the free media—split hairs over judgments coming from the court of law, which is actually good for democracy, human rights and the rule of law. If it is bad for the rule by law, then so be it. At a time when the image of the executive and the legislature has taken a huge beating, the judiciary is under tremendous strain to maintain the sanctity of state institutions. The final interpreter of the Constitution can shoulder this task of Himalayan magnitude only by keeping itself above controversies galore. 

As they say, action speaks louder than words. Talking about action, a division bench of the Supreme Court has issued a verdict in a case related to ancestral property, stating that daughters married before 1 Oct 2015 cannot lay claim to ancestral property. Through this judgment, the court has put to rest a long-pending dispute over ancestral property, at least for now.  

As indicated earlier, the onus is on the top court to remain squeaky clean by minimizing extraneous influence to the maximum possible extent. For quite some time, the judiciary has been courting controversy over the appointment of justices close to a party or the other. It is a given that such appointments increase the risk of miscarriage of justice that can lead to all sorts of unwanted consequences for the country and the people. 

Some lay people, including skeptics, predicting judgments based on the benches hearing the cases is no good tiding—neither for the judiciary, nor for the state as a whole. As the top court of the country continues to deal with piles and piles of important cases ranging from property disputes to the protection of national boundaries and more, here’s wishing that an infallible sense of justice prevails in the hallowed chambers, driven by international conventions, precedents, our customs, traditions, societal norms and values as well as our own charter. 

Former President Bidya Devi Bhandari has made it clear that her political ambition is to lead the party and eventually become the prime minister. She has signaled that current party leader KP Sharma Oli should hand over leadership to her, suggesting that, if necessary, a healthy internal election could decide the matter.

The UML leadership is under pressure to make key decisions at its upcoming statute convention, scheduled for next month in Kathmandu. Oli raised the issue of Bhandari’s recent political activities at the ongoing UML Secretariat meeting. “Her announcement to return to politics has increased polarization within the party,” Oli said. “To stop further division, we must move forward in a united manner. The time has come for an institutional decision.”

Oli added that Bhandari’s decision to return to party politics has now become a subject for internal party discussion, and a conclusion will be reached through dialogue. He is of the view that Bhandari needs to clearly communicate her goals and intentions. 

Bhandari has been expanding her political presence through the Madan Bhandari Foundation and recently launched her personal website to publicize her activities.

Meanwhile, the government’s image has been tarnished by corruption scandals involving cabinet ministers. Minister for Federal Affairs and General Administration, Raj Kumar Gupta, resigned following the release of an audio clip allegedly linking him to a bribery deal. Bhagawati Neupane has since replaced him. Similarly, a video implicating Land Reform Minister Balaram Adhikari has surfaced, though it remains unverified whether the clip is authentic or AI-generated.

Despite Prime Minister Oli’s declared policy of zero tolerance toward corruption, the government is under fire for failing to contain such scandals. Over recent months, corruption cases have multiplied, further eroding public trust in the political system. Many argue that coalition governments, by nature, are more vulnerable to corruption than single-party administrations.

Adding to the government’s woes, two coalition partners—Janata Samajbadi Party (JSP) and Nagarik Unmukti Party—have withdrawn support. While this may not have immediate national implications, it signals a weakening of the government’s political base. As a result, the ruling coalition has lost its majority in the National Assembly (Upper House), potentially complicating the passage of key legislation. The land reform bill lies at the heart of the dispute between JSP and the government. Notably, even NC and UML remain divided on several key provisions of the bill.

There is speculation that Prime Minister Oli may reshuffle underperforming ministers to boost the government’s performance. Some ministers have publicly stated that during their swearing-in last year, the prime minister had indicated they might be removed after one year.

The Oli government has now completed its first year in office, with a mixed record. While it has managed to ensure relative stability, it has been criticized for failing to initiate the long-promised constitutional amendments. In terms of governance, little progress has been made, although anti-corruption bodies like the Commission for the Investigation of Abuse of Authority (CIAA) have uncovered major scandals. Notably, the CIAA has filed corruption charges against former Prime Minister Madhav Kumar Nepal, a move many view as politically motivated.

Ministers continue to highlight their achievements publicly, but the general public remains unimpressed by their performance.

Like in previous years, capital expenditure once again failed to meet targets. As usual, a last-minute rush in the final month of the fiscal year, commonly referred to as Asare Bikash (July Development), led to potentially inefficient spending. Such practices often open doors for corruption, yet no effective mechanism exists to monitor these expenditures.

Intra-party tensions have also escalated within the Rastriya Prajatantra Party (RPP). Party Chairperson Rajendra Lingden has removed Navaraj Subedi from the Disciplinary Committee and Sagun Kumar Lawati as the party spokesperson. Senior leader Dhawal Shumsher Rana has publicly criticized the move and is positioning himself to challenge Lingden in the upcoming leadership contest. The once-vocal royalist movement has lost momentum, and the RPP is now reassessing its direction. Some leaders believe that if former King Gyanendra Shah is not genuinely committed—having reportedly contributed only Rs 10m—it is time to drop the monarchy agenda and focus solely on promoting Hindu nationalism. Ironically, the royalist revival campaign has ended up dividing the RPP itself.

The government has launched parallel investigations into two controversies: the disappearance of individuals during Prime Minister Oli’s official visit to Spain, and the leaked audio implicating former Minister Raj Kumar Gupta in a bribery case. Minister for Communication and Information Technology, Prithvi Subba Gurung, confirmed that an inquiry is underway into reports that several people—outside the official delegation—who traveled with the prime minister to Spain did not return.

The Rastriya Swatantra Party (RSP) claims that 2.5m people have signed a petition asserting that the legal cases against party leader Rabi Lamichhane are politically motivated. The party also reports raising over Rs 4m in public donations for Lamichhane. Party workers continue to campaign door-to-door to rally support.

In a significant legal development, a division bench of the Supreme Court ruled that daughters married before 1 Oct 2015, are not entitled to ancestral property. This verdict settles a long-standing legal dispute, at least for now. The judiciary, however, remains under public scrutiny for alleged political affiliations in judicial appointments.

Meanwhile, efforts are underway to restore the trade routes and rescue stranded Nepalis after the Rasuwa landslide severed connectivity between Nepal and China. The government has requested China to install a bailey bridge before the Dashain festival.

Bangladesh’s decision to join the United Nations Water Convention on June 20 is a seminal turn of events given its struggle with transboundary water management, especially in the shared river systems with India. It became a 56th party and the first South Asian country to sign to the framework, and hopes to improve cooperation and fairness in water sharing, which is important to its water security, because it depends on 57 shared rivers, major among like the Ganges and Teesta River, but this decision comes with challenges such as the expiry of the 1996 Ganges Water-Sharing Treaty in 2026 and the pending resolution of the Teesta River dispute, in the midst of political instability domestically in Bangladesh.

The UN Water Convention, known officially as the Convention on the Protection and Use of Transboundary Watercourses and International Lakes, was established in 1992 under the United Nations Economic Commission for Europe (UNECE), and became open to global accession in 2016. It espouses ideals like fair use, do no significant harm, and sustainably manage, as well as requiring cooperation and monitoring regulations and dispute resolution.

This step is in line with Bangladesh’s requirement for an organized tool to control its water resources, since it is highly deltaic by topography and the majority of its river waters are derived from the Ganges-Brahmaputra-Meghna (GBM) system.

The 1996 Ganges Water-Sharing Treaty, which is in effect until 2026, had been the keystone of India-Bangladesh water cooperation, dividing water at the Farakka Barrage to guarantee 35,000 cusecs during the lean season to Bangladesh, but opponents, including Bangladeshi water experts, say it does not come with such a minimum flow guarantee and does not take account of climate-induced variability. So, It’s time of the essence to renegotiate an accord that rivers the treaty, and the principles of the UN Water Convention could help steer a new, more flexible and equitable accord, which might take into account environmental flows and climate resilience.

The Teesta River dispute, which has simmered since an almost-agreement in 2011 was derailed by the political opposition in West Bengal, remains a flash point. The Teesta is crucial for Bangladesh’s north, providing water for farming and other occupations there, but Indian activities upstream and local priorities in the state of West Bengal make sharing difficult. The focus of the convention on the involvement of different stakeholders may also help to foster a discussion involving, for example sub-national governments and communities, as a way out of the impasse.

The convention also provides a legal and institutional structure that would work in Bangladesh’s favor in negotiations. The proposed mechanisms of joint monitoring and data sharing could mitigate hydrological information asymmetry and improve the performance of the Joint Rivers Commission (JRC), formed in 1972. According to UNECE, the JRC, although a leading body for water negotiations, is not provided with the necessary enforcement capacity, and the convention's modalities for dispute settlement may offer a model. Nevertheless, as India is not party to the 1997 UN Watercourses Convention or the 1992 UN Water Convention, the strength of direct enforcement is limited and Bangladesh must rely on diplomatic persuasion or international attention.

The convention has been gaining global acceptance, with recent accessions by African and Middle Eastern nations such as Chad, Senegal and Iraq, which illustrates its usefulness in promoting cooperation on shared waters, according to UNECE. Bangladesh is free to learn as to how to go about creating joint water commissions in Africa and they may be able to provide an example that could be inaugurated in South Asia with the participation of Nepal and Bhutan for instance.

Domestic Politics Bangladesh’s internal situation has had recent turmoil such as the removal of Sheikh Hasina’s government and the rule of the interim government under Muhammad Yunus as referred to in the user’s question, which could affect its ability to be a capable actor. An unstable political environment can result in ambivalence in foreign policy, thereby reducing its negotiation capability, facilitated with the diplomatic bargaining that is expected to accompany the renegotiation of contracts. Recent reports, including UNEP, call attention to Bangladesh’s cooperation with the UN over the environment, although political obstacles may impede action. West Bengal plays a significant role within India’s federal structure which adds another dimension since local politics often takes precedence over national interests and that further complicates Teesta talks.

Geopolitics are playing out as well with China’s commitment of a $1bn loan for Teesta management last year, as mentioned in the user query, also worrying India. It indicated a mounting trend of preferring to focus on national developmental needs and could push India to a harder line in negotiations over the Ganges treaty.

Bangladesh’s decision to accede to the UN Water Convention is a tactical step to improve transboundary water governance, providing tools for negotiation and cooperation. However, its ability to resolve the Ganges treaty expiration and Teesta dispute will hinge on the ability to overcome political instability, mobilize India, and use third party support. The principles of the convention could provide a spur towards progress, but the outcomes are not a given and will need the active involvement of both countries and the international community. As Bangladesh charts these waters, its regional leadership could in fact become a model for cooperation over water in the region, and lead not to upholding global norms, but rather to their outright adoption.