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Municipalities in Nepal stand at a crossroads, facing complex challenges posed by the rapid urbanization the country is witnessing. New towns have emerged to accommodate the nation’s growing urban population while existing ones have expanded rapidly over the last decades. The rapid growth of towns has placed municipalities at the forefront of managing the country’s escalating urbanization challenges, the mismanagement of which can severely impact urban well-being. While the pressure on local governments to address the issues before them is mounting, they remain poorly financed and functionally restrained, risking the perils of haphazard urbanization, the consequences of which bear serious repercussions. 

Local governments in Nepal were entrusted with key responsibilities after the adoption of federalism in 2015, and they now have local health, education, agriculture and several other functions under their remit. They are entitled to receive federal grants, provincial budget transfers and shares from tax collections to support their finances, and can even borrow if required. Uniquely, the country’s municipalities are assuming responsibilities at a time when local governments globally face mounting civic challenges amplified by climate change. This makes Nepal’s federalization process both crucial and delicate, but the agenda remains politically deprioritized and institutionally stalled, and several provisions surrounding federalism fail to be implemented. 

While the dynamics of federalism in the country are in a state of flux, an argument that makes the case for fast-tracking the power transfer to local governments is that delaying this process has high costs. Research shows that countries urgently need to increase municipal investments to sustain civic well-being, and Nepal is no exception. Municipalities need to invest now in establishing planned colonies to curb informal settlements that cause urban congestion. They need to invest now in disaster management measures that wreak havoc in cities every monsoon. They need to commit resources now to urban mobility, pollution management and green infrastructure without which livability in towns will remain compromised and deteriorate over time. These investments need to be made at a speed that matches the rapid urbanization Nepal is witnessing. The World Bank reports that Nepal is the fastest urbanizing country in South Asia, giving the Himalayan nation only a small window to make these time-sensitive investments that will profoundly dictate the quality of life in the country.

Many cities in Nepal are already facing the fallout of failing to act on time, and Kathmandu stands as a prime example. The capital’s congested urban sprawl is the result of poor governance during the 2000s when rapid urbanization overwhelmed the government’s capacity to manage the city’s haphazard growth. Kathmandu’s inadequate road infrastructure, lack of open spaces and inefficient transport networks are direct consequences of years of flawed planning and neglect of municipal priorities. Besides the government’s poor policy foresight, this outcome exposes the general underestimation of municipalities as important actors in driving development, gravely ignoring their vital role in enhancing citizens’ quality of life. Birgunj, Biratnagar and Bhairahwa are other major cities that have struggled to manage their rapid urbanization and now face pressing urban issues like congestion, poor mobility and limited open spaces for recreation. 

Despite the urgency of interventions, local governments are able to do little to address the issues before them. In addition to the federal government's reluctance to devolve key functions, municipalities face critical financing challenges that constrain their ability to act. The budgets of most local governments are already under strain from the extensive responsibilities they manage with limited resources, leaving little room for investment in high-cost urgent interventions. Most local units have limited self-generated revenue and lack the capacity to improve tax administration or diversify income sources. The Intergovernmental Fiscal Arrangement Act 2074, the legislation that outlines financial relationships between three levels of government, allows sub-national governments to secure domestic loans, but municipalities have failed to borrow due to their low creditworthiness. 

International aid and urban climate finance that support municipal investments are in their early stages, and accessing these funds is challenging for Nepal where data on municipality-level financing needs are not robust. Internally, the municipal financing environment isn’t favorable either, with the Town Development Fund being the only specialized municipal lender. Despite receiving support from global development partners, the fund is able to cater to only a fraction of local governments and mostly engages in financing small to medium-scale projects. This combination of limited resources and a nascent borrowing environment creates a substantial funding shortfall for Nepal’s municipalities, leaving them helpless to act. 

It is concerning to see the level of government closest to the citizens, and bearing prime functional responsibilities, face challenges of such magnitude. Even more concerning is the lack of recognition of local governments as powerful entities capable of improving lives at scale through the powers vested in them. While the role of the federal and provincial governments is important for driving national growth, municipalities overwhelmingly fulfill the more immediate needs of daily life that define our day-to-day well-being. Hence, empowering municipalities with resources to invest in pressing municipal needs is imperative. 

The federal government, media, policy professionals, and most importantly, the public, need to view municipalities as important stakeholders whose performance greatly shapes the quality of lives we live. It is of critical importance that local governments are given their due means to perform their functions and make the interventions that are the need of the hour. Failing to do so will leave our cities vulnerable and depress the already poor quality of urban life in many parts of the country. Though reforms are underway, their pace is below the mark and stakeholders’ efforts lack the required enthusiasm. Municipalities are in a race against time, and we must act promptly to use the window of opportunity before the time runs out. 

The author is research fellow at the Nepal Economic Forum

The tragic case of Nepali student Prakriti Lamsal, who was compelled to take her own life following continuous harassment by an alleged male acquaintance at KIIT University, has sparked significant discourse. The incident, which took place on February 16, was particularly distressing as Lamsal had lodged a formal complaint with the university administration four months prior, seeking protection. However, the failure to address her grievances in a timely manner led to this unfortunate outcome.

Equally concerning was the response of certain university officials, particularly two women in administrative roles, whose handling of the situation was widely criticized. Their conduct was not only perceived as insensitive but also included remarks that were offensive to the dignity of Nepal and its people. The ensuing protests by Nepali students, later joined by Indian students, underscored the gravity of the issue and the necessity of institutional accountability.

A coordinated response

While the situation was deeply distressing, the manner in which it was managed through diplomatic engagement prevented further escalation. Immediate actions were taken at multiple levels, demonstrating a commitment to justice and the protection of students.

Following the incident, both the Nepali Embassy in New Delhi and the Indian Embassy in Kathmandu actively engaged in addressing the repercussions. Nepali Prime Minister KP Sharma Oli and Foreign Minister Arzu Rana took to social media, urging swift action against the perpetrator and ensuring the safety of Nepali students protesting for justice. Prime Minister Oli also directed two embassy officials to travel to Odisha to assess the situation firsthand and engage with the university administration.

Recognizing the sensitivity of the matter, the Indian government responded by addressing the government’s immediate concerns. The KIIT administration, under mounting pressure, took corrective measures, including the suspension of senior hostel officials and an associate professor who were caught on record making inappropriate remarks against Nepali students. Two security personnel responsible for excessive force against protesting students were also dismissed. Additionally, the university's international relations officer was suspended.

Efforts to contain the fallout

Despite these corrective actions, many Nepali students had already begun leaving Bhubaneswar, citing security concerns. In an attempt to restore confidence, the university's vice-chancellor issued multiple statements, expressing regret and assuring the provision of adequate security for Nepali students. However, the delay in addressing the original complaint and the subsequent mishandling of student grievances had already tarnished the institution's reputation.

The university further attempted to mend relations by formally apologizing and committing to preventive measures, including stricter oversight of student complaints and enhanced security protocols. These steps, though necessary, were widely regarded as reactive rather than proactive, raising broader concerns about the institutional handling of harassment cases.

Broader solidarity

The incident resonated beyond university walls, sparking widespread condemnation across India. Student organizations, including those affiliated with the Bharatiya Janata Party (BJP) and the Indian National Congress, stood in solidarity with the Nepali students. Their support not only amplified calls for justice but also highlighted the shared concerns of students across national borders.

The issue also gained extensive media coverage, with Indian outlets highlighting the need for greater sensitivity in handling international student affairs. Editorials and news reports questioned the university’s response, placing pressure on educational institutions to prioritize student welfare over administrative convenience.

Importantly, this case did not devolve into a bilateral political controversy. Instead, it was addressed through institutional dialogue and diplomatic channels. India’s Ministry of External Affairs (MEA) publicly acknowledged the seriousness of the issue, reinforcing its commitment to a thorough investigation. The Odisha state government, despite initial criticism, took control of the situation by forming an independent panel to conduct an impartial inquiry.

Long-term measures

The tragedy of Prakriti Lamsal has sparked critical conversations about institutional accountability and the safety of international students in India. Following this incident, KIIT University announced a series of reforms aimed at preventing such occurrences in the future. These measures include the establishment of a dedicated student grievance redressal mechanism, a stronger anti-harassment policy and a commitment to mandatory sensitivity training for faculty and staff.

Additionally, the university pledged to strengthen its support system for international students by providing counseling services, legal assistance and emergency response teams. These initiatives, if properly implemented, could serve as a model for other institutions hosting a diverse student body.

Beyond KIIT, this incident has prompted discussions at the national level in India regarding the need for clearer policies on student safety, especially for foreign students. Universities across the country have been urged to reassess their policies on handling complaints related to harassment and abuse.

The path forward

This case serves as a crucial reminder of the importance of timely intervention, institutional accountability and the role of diplomacy in crisis management. The establishment of a scholarship in Prakriti Lamsal’s name by the university’s founder-principal is a step toward recognizing the need for systemic improvements in student protection mechanisms.

The collaborative approach demonstrated by both Nepal and India in handling this sensitive issue set a constructive precedent. Rather than fueling discord, the incident demonstrated how mutual cooperation and a commitment to justice can lead to meaningful resolutions.

Going forward, both governments and academic institutions must take proactive steps to ensure the safety and dignity of international students. Strengthening grievance redressal mechanisms, fostering inclusive environments and instituting clear accountability measures are necessary to prevent such tragedies.

Importantly, diplomatic cooperation between Nepal and India in this case highlights the strength of people-to-people relations, which remain at the heart of bilateral ties. The mature handling of the crisis facilitated by diplomatic efforts, media scrutiny and civil society engagement set a positive example for future cross-border student issues.

Ultimately, this incident highlighted the power of collective action. From students to government officials, media outlets to diplomatic representatives, multiple stakeholders played a role in ensuring that justice was pursued and lessons were learned. The tragedy of Prakriti Lamsal should serve as a catalyst for lasting reforms, ensuring that no student, regardless of nationality, is ever left unheard in their pursuit of safety and justice.

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.

Of late, business incubation support in Nepal’s startup ecosystem has received widespread attention from various sectors. This trend involves startup networks, national and international development agencies, government bodies at all levels, industry associations and other stakeholders. These groups are collectively striving to cultivate entrepreneurial mindsets among young people through initiatives such as startup festivals, competitions, pitch sessions, seed funding opportunities and the like. These initiatives are helping early-stage ventures receive timely support to navigate the risks and challenges of producing market-fit products. 

However, there is a notable absence of academia in the startup ecosystem in this evolving startup landscape, especially in the business incubation support stage, which raises significant concerns. Fostering critical thinking and innovation has traditionally been a core function of academia, yet it seems to struggle to take the lead in the incubation and ideation domain. This prompts reflection on whether the division of responsibilities within this ecosystem is being approached effectively. 

Unintentionally, these practices can lead to blurred roles and responsibilities, creating confusion rather than effectively leveraging individual areas of expertise. Academia’s role should focus on helping students develop critical thinking skills, identify problems and guide them toward the ideation stage. Once ideas are incubated, the industry, development agencies and government bodies can step in to accelerate these concepts, each contributing their unique perspectives and resources. 

Academia in Nepal often lacks a proactive stance toward incubation support programs—some might even label it “non-reactive.” Academic leadership usually appears disconnected from Nepal’s startup ecosystem, yet boldly claims that their educational programs will shape the entrepreneurs of tomorrow. This disconnect highlights an urgent need for academic leadership to rethink and realign their approach to actively contribute to the startup ecosystem. However, does this lack of unawareness and inactivity justify academia relinquishing half of its responsibilities to other entities? In a landscape where NGOs, INGOs and development agencies are leading research efforts and the industry is taking charge of incubation support, one might wonder: where does this leave academia, and how can it assert its relevance in this evolving context? 

Some academicians believe there is a lack of clear distinction between incubation and acceleration, leading to confusion regarding the division of roles. They further suggest that academia should focus less on directly participating in the incubation stage and instead prioritize creating and disseminating knowledge. The primary reason all sectors are heavily engaged in the incubation stage is their desire to build their own pipelines of potential startups for future investment. Accelerators and investors face challenges in finding viable startups to invest in, prompting them to intervene directly at the incubation stage. For example, academic institutions could conduct research to assess whether industry involvement in incubating startups contributes to scalability, evaluate existing policies and analyze their impacts on the startup ecosystem. 

Other academics offer a contrasting perspective that the active involvement of non-academic actors in the incubation stage stems from a lack of trust in the quality of academia’s work and the students it produces. This trust gap reflects a significant disconnect between industry and academia, with industry stepping in due to concerns over the preparedness and capabilities of graduates. 

A thriving entrepreneurial ecosystem, particularly for startups, can only emerge when all actors play to their strengths, understand their roles, adopt a collaborative mindset and share resources with the collective goal of uplifting one another. Currently in Nepal, everyone is competing for the same opportunities without realizing that they are all competing for a single, finite pie rather than working together to expand it. This raises a critical question regarding whether the enthusiastic yet uncoordinated scrambling of activities creates genuine, meaningful and long-lasting impact, or are these efforts merely excuses for allocating CSR budgets and safeguarding established funding networks? 

A leading example of academia and industry collaboration in this domain in our region is from IIT Madras, India, which has successfully created a collaboration model between academia and industry through its incubation cell. This initiative effectively connects research, innovation and entrepreneurship, fostering a sustainable startup ecosystem within South Asia. The model at IIT Madras promotes innovation through dedicated research labs, specialized entrepreneurial courses and programs such as the Nirmaan pre-incubation program, which helps students and researchers refine their ideas, develop prototypes and prepare them for the market. Building on the initial incubation support, the IIT Madras incubation cell partners with industry leaders to offer startups access to funding, mentorship and state-of-the-art facilities. The cell supports ventures across various sectors, including clean energy, healthcare and deep tech. As a result, over 240 startups have been nurtured and raised approximately $145m in funding. Success stories like Ather Energy (an electric scooter company) and Detect Technologies (industrial safety solutions) highlight the program’s impact. The ecosystem has generated over 4,000 jobs, contributing significantly to regional economic growth and social development. 

As a way forward, academic institutions can collaborate with key actors in the startup ecosystem—such as accelerators, government agencies and industry—to co-design a framework that ensures seamless collaboration and value transfer. For instance, academic institutions can actively generate startup ideas, leveraging faculty expertise and internal resources to mentor and refine these concepts. This approach  will also help the industry save valuable time and resources during the incubation support stage. Once the ideas are pitched, accelerators/industries can further develop them using their specialized resources. If the ideas fail to meet real-world market standards, the industry can step into the academic space to provide upskilling and capacity-building opportunities for academia while guiding students on advancing. 

This collaborative framework will not only foster synergy among all stakeholders but also advance the value exchange framework between industry and academia.