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The Embassy of Germany in Kathmandu celebrated 65 years of diplomatic relations between Nepal and Germany amidst the presence of over 400 guests at Hotel Hyatt in Kathmandu on Thursday.

National Assembly Chairman Ganesh Prasad Timilsina presided over the event as chief guest.

Officials of various ministries, leaders of political parties, heads of Kathmandu-based diplomatic missions, civil society members, Human Rights advocates, businesspersons, media persons and people from various walks of life were present in the program.

In his welcome speech, German Ambassador to Nepal Thomas Prinz said, “We are celebrating 65 years of bilateral relations between Nepal and Germany. 65 years of friendship and solidarity. We have been standing with Nepal in difficult times, be it the civil war, the 2015 earthquake or the Covid-19 pandemic. We welcome the huge progress Nepal has made and continue our support.” He also conveyed his condolences to the victims of the terrorist attacks in Israel, reads a statement issued by the Federal Republic of Germany in Kathmandu.

Margin lending by banks and financial institutions in Nepal experienced a significant decline over the past two years. However, it appears that investors, who were previously anticipating the central bank to relax restrictions on such loans, are now motivated to avail these loans. In the first month of the current fiscal year, ending in mid-August, margin loans of banks and financial institutions surged by 19.26 percent compared to the same period in the previous fiscal year, reaching Rs 76.53bn. Such loans stood at Rs 64.07bn at mid-Aug 2022. Margin loans refers to loans provided by banks by accepting shares listed on the Nepal Stock Exchange (Nepse) as collateral.

The total margin loans amounted to Rs 50.40bn in the fiscal year 2019/20. It, however, grew by a whopping 110.84 percent to reach Rs 106.28bn in mid-Aug 2021. Concerned by investment of over Rs 100bn in margin loans, the central bank imposed restrictions on such loans. As a result, such loans fell by 24.25 percent to Rs 80.50bn by mid-July 2022, further declining to Rs 64bn in the following month. However, margin loans have started to recover after the central bank eased restrictions on such loans.

The central bank initially restricted margin lending as it viewed share investment as an unproductive sector. The NRB took the decision after margin loans of banks exceeded Rs 1bn. The central bank first put a cap on margin loans at Rs 40m per investor per bank and Rs 120m in total. The introduction of the new margin lending provision had an immediate impact on the market, causing the Nepal Stock Exchange (NEPSE) index to plummet, reaching as low as 1,818 points from the all-time high of 3,198 points. The lower limit of Rs 40m was removed a year later, enabling individuals to borrow up to Rs 120m from a single bank.

Recently, the central bank further relaxed margin lending rules, permitting banks to invest up to Rs 150m for individuals and Rs 200m for institutional investors. However, investors, who had been advocating for the complete removal of lending caps, have not shown much enthusiasm as reflected in the low transaction volume on the stock exchange. Nabil Bank, Global IME Bank, and Nepal Bank Ltd are the largest providers of margin loans in the country. Until the first month of the current fiscal year, ending in mid-August, Nabil Bank had extended Rs 9.68bn in margin loans, while Global IME and Nepal Bank Ltd had invested Rs 6.28bn and Rs 4.09bn, respectively.

However, eight commercial banks have reported declines in margin loans. Rastriya Banijya Bank Ltd, Citizens Bank International, Sanima Bank, NMB Bank, Agricultural Development Bank, NIC Asia, Machhapuchchhre Bank, and Nepal SBI Bank have all observed a decline in their margin loans. While Standard Chartered Bank does not issue margin loans, other commercial banks have seen increases in their margin loans. Banks have extended margin loans from a minimum of Rs 24m to as high as Rs 9bn. Margin loans issued by development have increased by 21.28 percent to Rs 13.85bn as of mid-Aug 2023 compared to the same period in the previous fiscal year. In contrast, Class ‘C’ financial institutions have witnessed a decrease in their investments in margin loans. The total margin loans of finance companies have fallen by 4.17 percent to Rs 3.65bn in the first month of the current fiscal year compared to the same period in the previous fiscal year.

Nepal crushed Iran by 274 runs in the ACC U-19 Premier Cup in Malaysia on Thursday.

Chasing the target of 354 runs, Iran were bowled out for a paltry total of 79 runs.

Electing to bat first after winning the toss, Nepal made 353 runs in 40.1 overs losing all the wickets.

Captain Dev Khanal scored a century of 60 balls hitting 12 fours and four sixes. Similarly, Deepak Bohara contributed 65 runs of 59 balls with five fours and two sixes.

Likewise, Deepak Prasad Dumre made 69 runs, Dipesh Kandel 29, Akash Chand 19, Hemanta Dhami 23 and Subash Bhandari 18.

The recent economic meltdown in Nepal began after the outbreak of Covid-19. The Russia-Ukraine war has made it worse. Amid questionable claims about the economic recovery, the government has not been doing much to address this crisis even as both imports and exports decline, taking a toll on revenue collection. 

In the name of doing something, the government is taking huge loans to cover up the expenses, causing a surge in debt from both internal and external sources. 

Worryingly, most of this debt services the unproductive sector while the masses remain deprived of daily necessities as if rampant corruption at every level of polity were not enough. 

Due to declining demands, industrial production has suffered as overall negative growth of the business and industries sector shows. While some of the businesses and industries have been operating at a loss, most of them have shut down. The meltdown in the productive sector, which employs a large number of people, means a steep rise in unemployment. 

Loss of jobs reduces people’s incomes and purchasing power goes down with it. Consumers do not even have money to buy the daily necessities, which means a decline in the demand for consumer goods. 

Banks, grappling with a liquidity crisis, are unable to provide loans to business, manufacturing, real estate and auto sectors. Construction works are getting delayed. Government revenue collection is declining and not enough even to meet the regular expenditure.

Meanwhile, the cost of manufacturing goods is going up, possibly due to a rise in the cost of labor and raw materials. When the price of a commodity increases, its demand falls. At the time of falling demands, businesses and industries cannot sell their products by lowering their prices. If they do so, they have to bear huge losses. In a similar manner, a shortage of goods in the market can push their prices up. 

When consumers cut expenses, the revenue of business and manufacturing establishments dips, negatively affecting production and productivity. Such a scenario can cause inflation, which Nepal is facing already. While banks are raising interest rates, business establishments are not taking loans. This means that recession has set in.

The consumer price index (CPI) is rising with prices hitting a new high as latest data from the Nepal Rastra Bank (NRB) show. In the fiscal year 2021/22, , CPI stood at 6.32 percent, while it climbed to 7.74 percent in FY 2022/23. 

Data from the central bank suggest that both export and import have been declining over the years. The imports stood at Rs 19bn and Rs 16bn in FY 2021/22 and 2022/23 respectively, while the export figures in both the fiscals were almost the same. These declining figures also mean that the trade deficit has gone down. In the FY 2021/22, trade deficit was Rs 17bn it came down to Rs 14bn in FY 2022/23, narrowed down by Rs 3bn. 

A deficit balance of payment in FY 2021/22 by Rs 3bn has been turned into surplus by the same amount in FY 2022/23. Evidently, the foreign exchange reserve has increased from Rs 12bn in 2021/22 to Rs 15bn in 2022/23. Export and import are the major sources of government revenues. Plummeting government revenues can affect the government’s capacity to spend, taking a toll on development activities. This means a government has to take loans even to cover daily or monthly expenses.

Nepal is not self-reliant even in food production. It has to import on a large scale to feed its citizens. India has banned the export of paddy in recent days. The government is in a rush to request India to supply rice to Nepal even as millions of hectares of farmlands remain barren both in the hills and the Tarai Madhes, mainly due to the absence of irrigation facilities and a shortfall of human resources, among other factors. With farmlands lying fallow, the share of the farm sector to GDP has been declining over the years. Improvement in the agri sector is a must also for sustainable development.

Industrial activities are melting down. Agriculture activities are also on a downward trend and so are business activities. Clearly, the Nepali economy is unwell. 

 Which sector has been playing an active role even in this grim scenario to keep the economy afloat? 

There is only one sector, which has stood as a source of livelihoods for the Nepali people and that is the foreign employment sector. A large number of Nepali youths are migrating in search of livelihood of late. They are sending increasing amounts of money to their families living in Nepal. In FY 2021/22, Nepal received Rs 10.7bn in remittances, while in the FY 2022/23, it received a whopping Rs 12.2bn, an increase of 21.2 percent. This proves that remittance is a major source of foreign exchange and livelihood for the Nepali people.

Nepal and Germany have signed a Joint Declaration of Intent (JDoI) on the Skilled Labor Migration and Knowledge Exchange at the Federal Ministry of Labor and Social Affairs of Germany on Tuesday, the Embassy of Nepal in Berlin, Germany, stated in a press release, shared by the Ministry of Foreign Affairs here today.

Ambassador of Nepal to Germany Ram Kaji Khadka and Michael van der Cammen, Director, International Affairs, German Federal Employment Agency, signed the JDoI on behalf of their respective governments in the presence of Minister for Labor, Employment and Social Security Sharat Singh Bhandari and Leonie Gebers, State Secretary (Deputy Minister) of Federal Ministry of Labour and Social Affairs of Germany.

The singing of the JDoI was preceded by a bilateral meeting between the high-level Nepali delegation led by Minister Bhandari and the high-level German delegation led by the State Secretary (Deputy Minister) Gebers.

On the occasion, the leaders of the two delegations shared views, primarily, on the agenda of Nepal-Germany bilateral relations, skilled labor migration, Nepal's commitment to legal migration, workers' welfare and social security, German language and vocational training, and circular migration.

During the meeting, the two leaders expressed happiness over the growing relations between the two countries in recent years and stated that the signing of the JDoI would be the first step in the roadmap towards fair and legal labor migration from Nepal to Germany.

Minister Bhandari also expressed Nepal's willingness to collaborate with the friendly Government of Germany in all sectors of mutual benefits.

State Secretary Gebers also stated that the signing of the JDoI would open the way forward for institutional arrangement in immigrating Nepali skilled workers as per the need of the German job market. She also highlighted the positive sides of the recent German Skilled Immigration Act which has eased the process of recruiting foreign skilled workers in Germany.

The Nepali delegation led by Minister Bhandari included Secretary at the Ministry of Labour, Employment and Social Security, Kewal Prasad Bhandari, the Ambassador of Nepal to Germany, and other officials from the Ministry of Labor, Employment and Social Security, Ministry of Foreign Affairs and Embassy of Nepal, Berlin.

The German delegation led by Gebers included the high-level officials from the Federal Ministry of Labour and Social Affairs, Federal Employment Agency and other relevant Departments of Germany.

Meanwhile, on October 9, 2023, the Nepali delegation held discussions with the delegation of International Labor Organization (ILO) Berlin Bureau led by Dr Annette Niederfranke, Director at the Embassy of Nepal, Berlin. During the meeting, various labor-related issues including welfare of workers, measures against the exploitation and trafficking of workers, inclusive foreign employment and reintegration of migrant workers in the country of origin were discussed.

In the afternoon, the Nepali delegation participated in an interaction program with the Nepali diaspora living in Germany organized by the Embassy.

The Nepali delegation is holding a meeting with the representatives of private sectors of Germany today.

The delegation is scheduled to leave Germany for Nepal tomorrow.

The World Bank has projected that Nepal's economy is poised to achieve a growth rate of 3.9 percent in the fiscal year 2024. This marks a notable improvement compared to the previous fiscal year, FY 2023, when the country’s economic expansion was limited, registering only a 1.9 percent growth rate.

The World Bank’s optimistic report comes amid a deep economic crisis that the country is facing. Releasing its Nepal Development Update-October 2023 on Tuesday, the World Bank has said that Nepal’s economy is expected to rebound to 3.9 percent in FY 2024 owing to the impact of the lifting of import restrictions, a strong rebound in tourism, and the gradual loosening of monetary policy. The economic growth in FY 2025, will be five percent, according to the World Bank.

In its report, the World Bank says that the impact of lifting the final import restriction measures in January 2023 and the gradual loosening of monetary policy are expected to support growth in the industrial and services sectors. “Sub-sectors that suffered the brunt of the import restrictions and monetary policy tightening in FY 2023, including wholesale and retail trade, construction, and manufacturing, are expected to gradually recover over the forecast period,” reads the report.

While wholesale and retail trade are expected to benefit from the lifting of import restrictions and boost service sector growth, the report says, agricultural sector growth is expected to slow in 2024 due to the impact of the lumpy skin disease on livestock and a decline in rice production.

According to the report, strong energy sector growth helped to avoid an industrial contraction, since manufacturing and construction outputs shrank. Hydroelectric generation increased significantly for the second year in row and added close to 500 megawatts of hydroelectric power to the national grid, the report says, Nepal nevertheless remains a net energy importer.

The top financial body further states that slow credit growth and import restrictions contributed to a reduction in private investment on the demand side. Lower capital expenditure and revenue underperformance drove lower public investment. As a result, total investment decreased by more than 10 percent, a sharper reduction than in 2020. Private consumption remained robust, owing to strong remittance inflows.

Inflation is gradually increasing and a new report says that it is likely to go up.  Average consumer price inflation reached a seven-year peak in 2023. Average inflation amounted to 7.8 percent, above the central bank’s seven percent policy ceiling, driven by both food and non-food prices. Key drivers of food prices, which increased by 6.9 percent, included supply side shocks such as India’s wheat and rice export restrictions, and domestic policy changes including the removal of VAT exemptions on multiple basic food items and price support to producers of rice paddies, milk, and wheat, the report says.

Non-food prices rose by 8.5 percent, driven by higher housing and utility prices, and an increase in the consultation fee of medical doctors in May 2023, the report states, the decline in edible oil prices from February 2023 onwards, reflecting global price reductions, had an offsetting effect on prices. The persistence of high inflation impedes policies to stimulate growth. Particularly, Nepal’s vulnerability to external shocks implies a difficult trade-off between policies that boost growth and those that contain inflation, according to the report.

Agricultural output remained resilient and expanded by 2.7 percent. Rice paddy production supported the sectoral growth and increased by 6.9 percent, reflecting a good summer monsoon and improved seed varieties (Figures 1 and 2). However, a lumpy skin disease has affected livestock as of early April 2023, infecting more than 1m and killing close to 50,000. The resulting lower dairy product and meat production could negatively affect agricultural output growth. Updated statistics will be released by the National Statistics Office in April 2024.

Manufacturing and construction shrank by two percent and 2.6 percent, respectively. The decline was partly due to lower production of key construction materials (cement, basic iron, and steel) and vegetable oils in the first half of FY 2023. Higher frequency indicators suggest that the decline continued in the second half of FY 2023. Lower demand resulting from the elevated prices of manufactured goods and construction materials further weighed on industrial output, which increased by a meager 0.6 percent.

Sluggish wholesale and retail trade slowed the pace of services sector growth. Authorities estimate that the services sector expanded by 2.3 percent in this year, the slowest pace since 2020. Growth of the wholesale and retail trade sub-services sector declined 0.5 percent due to high inflation and lower goods imports.

Looser monetary policy and the lifting of import restrictions imply an increase in goods imports over the medium-term, the report states, policies to contain credit growth and lower one-off imports, including of Covid-19 vaccines, are expected to keep imports below its 2022 historic high. Near-record migration of Nepali workers should be reflected in strong medium-term remittance inflows which, however, are not expected to balance the goods and services trade deficit. Consequently, the current account deficit is expected to widen to 3.7 percent of GDP in 2025, and 4.6 percent of GDP in 2025. 

Revenues are expected to increase in line with higher goods imports, given that taxation focuses heavily on trade. The 2024 budget envisions lower federal spending on capital investment and fiscal transfers to subnational governments, yet higher debt servicing costs. Overall, the recovery of revenues is expected to reduce the fiscal deficit to 3.5 percent in 2024 and 3.3 percent in 2025. Together with the rebound in growth, tighter fiscal policy is expected to keep the overall public debt burden contained at around 41 percent of GDP in 2024 and 2025.

In the external sector, the current account deficit narrowed to a six-year low in 2023, driven by lower imports and higher remittances. The current account deficit fell from 12.6 percent of GDP in 2022 to 1.3 percent of GDP this year.  The reduction occurred through lower imports of goods and services, which fell from 42.6 percent of GDP in 2022 to 34.5 percent of GDP in 2023. Exports on the other hand remained stable, and remittances rebounded strongly. Foreign reserves ended 2023 at a comfortable level of 10 months of concurrent import cover, above the policy floor of 7 months of import cover.

Official remittance inflows surged to a five-year high in this year. Remittance inflows climbed from 20.4 percent of GDP in 2022 to 22.7 percent of GDP.  Nepal’s dependence on the export of workers and remittance inflows increased sharply over the past two decades. Goods and services exports have fallen significantly since the early 2000s as a percentage of GDP.

In FY23, total exports amounted to 6.9 percent of GDP, only one-third of what the average South Asian middle-income country exports. Not surprisingly, the 2019 World Economic Forum Global Competitiveness Index ranked Nepal 108th out of 141 countries.30 Net foreign direct investment (FDI) has also underperformed. Remittance inflows on the other hand increased to 22.7 percent of GDP in FY23, are the main source of foreign currency, and the main driver of private consumption and economic growth.

According to the bank, the near-record migration of Nepali workers should be reflected in strong medium-term remittance inflows which, however, are not expected to balance the goods and services trade deficit. “Consequently, the current account deficit is expected to widen to 3.7 percent of GDP in FY 2024, and 4.6 percent of GDP in FY 2025,” reads the report.

However, there are multiple risks to the outlook including an erratic monsoon, which could dampen agricultural growth; a renewed spike in commodity prices or continued food export bans by India which would raise prices; and higher inflation which could keep policy rates elevated, increase domestic debt servicing costs, and drag on growth. 

“Amid challenges, Nepal is leading the way towards operationalizing its green, resilient, and inclusive development vision to shape the country’s long-term economic recovery,” said Faris Hadad-Zervos, World Bank Country Director for Maldives, Nepal, and Sri Lanka. “Improved external competitiveness is key to driving this recovery and enabling Nepal to compete in export markets, in terms of both prices and quality. This requires an emphasis on reforms to help increase domestic productivity and reduce the inflation differential with Nepal’s trading partners.”

 Major points

• Nepal’s export performance has continuously declined.
• Real appreciation of exchange rate and productivity deficit negatively affected exports.
• The budgetary process needs further strengthening to better support planning.
• Increasing domestic productivity and containing domestic inflation key to improving external competitiveness.
• Credit growth to the private sector slowed owing to policy measures taken to help correct the external imbalances.
• Fiscal space diminished further with the contraction of revenues.
• Economic activity is expected to gradually gain momentum. 
• The current account deficit is expected to increase moderately.
• A rebound in revenues should reduce the fiscal deficit and contain public debt.
• Prudent policies to stimulate growth and contain downside risks are key.

Recommendations

• Changing the current tax model by shifting taxation away from the border and reducing high import tariffs
• Improving the implementation of fiscal federalism which would facilitate effective investments in infrastructure and services
• Simplifying and streamlining processes to attract more FDI which would create significant knowledge and spillover effects.
• In addition, containing domestic inflation would reduce the inflation differential with trading partners. This would help avoid further real appreciation of the exchange rate.

A government survey shows that the stock of Foreign Direct Investment in Nepal increased by 16 percent to Rs 264.3bn at the end of the fiscal year 2021/22. Paid-up capital is the major component in FDI stock as it accounts for 53.7 percent of total FDI stock, whereas the reserves and loans in total FDI stock accounts for 31.7 percent and 14.6 percent respectively, the report says. 

The Survey Report on Foreign Direct Investment in Nepal published by Nepal Rastra Bank states that Nepal has received foreign investment from 57 different countries as of mid-July 2022.  In terms of total FDI stock, India takes top position with Rs.88.6bn followed by China (Rs 33.4bn), Ireland (Rs 20.9bn), Singapore (Rs 16.1bn), and Saint Kitts and Nevis (Rs 15.1bn).

Industrial sector accounts for 62.6 percent of total FDI stock. Of which, the electricity, gas, steam and air conditioning sector constitutes 32.8 percent and manufacturing sector 29.5 percent of total FDI stock. About 37.3 percent of total FDI stock is in the service sector. Of which, the financial and insurance services sector constitute 25.6 percent, accommodation and food services sector 5.3 percent, and information and communication sector 4.8 percent of the total FDI stock.

The electricity, gas, steam and air conditioning sector, particularly hydropower, in Nepal has been a preferred sector for FDI in recent years, the report says. A latest survey shows that 32.8 percent of FDI stock and 41.8 percent of total paid-up capital is in this sector. Moreover, the hydropower sector has also attracted other sources of external financing such as foreign loans in addition to FDI; the electricity, gas, steam and air conditioning sector accounts for 41.4 percent outstanding foreign loan at the end of the FY 2021/22, the report says.

Nepal has initiated institutional and legal reforms in recent decades with the aim of promoting FDI to complement the resource gap in capital formation. Gradual liberalization of FDI inflows in various sectors has been encouraged by creating an investment-friendly environment and prioritizing foreign investment-related reforms. There are several legal frameworks for guiding and encouraging FDI in Nepal:

• Foreign Investment Policy, 2015
• Foreign Investment and Technology Transfer Act, 2019 (FITTA)
• Public-Private Partnership and Investment Act, 2019
• Industrial Enterprises Act, 2020, e) Institutional reforms such as the establishment of One Stop Service Center to facilitate foreign investment
• Nepal Rastra Bank Foreign Investment and Foreign Loan Management Bylaw, 2021 (Second Amendment)

The World Investment Report 2023 published by UNCTAD shows that global FDI inflow decreased 12.4 percent to $1,294.7bn in 2022 from $1,478.1 in 2021. The Russia-Ukraine war, high food and energy prices, fears of a recession, and debt pressures resulted in the decline of FDI inflows around the world.

FDI inflows to Asia decreased 0.05 percent from $662.1bn in 2021 to $661.8bn in 2022. The region remains the largest recipient of FDI, accounting for 51.1 percent of global FDI (UNCTAD, 2023). However, the inflows are highly concentrated among its largest recipients: China ($189.1bn), Singapore ($141.2bn), and Hong Kong-China ($117.7bn).

In contrast to the global trend, FDI inflows to South Asia increased nine percent to $55.9bn in 2022. FDI in India, the largest FDI recipient of the sub-region, increased by 10.3 percent with inflows of $49.4bn in 2022. In 2021/22, Rs 15.7bn was approved for dividend repatriation by companies with foreign investment. The highest dividend repatriation approval was for the manufacturing sector followed by the information and communication sector.

According to the report, as of mid-July 2022, the outstanding foreign loans (excluding direct loans from foreign direct investors) of FDI companies stood at Rs.68.7bn. Such loans were Rs 40.7bn a year ago. The companies in the hydropower sector have utilized more foreign loans as the outstanding loan of this sector stood at Rs 28.4bn in mid-July 2022. 

The Belt and Road Initiative (BRI), a Chinese project introduced in 2013, has generated interest and concerns around the world. Through a network of highways, railroads, ports and other infrastructure, it seeks to link Asia, Africa, and Europe. One of the 149 nations that have ratified BRI is Nepal. Between China and India, Nepal has experienced its fair share of BRI-related advancements. This article investigates the contention that Nepal will fall into a debt trap as a result of BRI and analyzes the economic, geopolitical and developmental ramifications.

Understanding BRI: The BRI is a massive international infrastructure initiative that aims to link nations through a network of ports, highways, trains and other crucial infrastructure. It aspires to improve connectivity, trade and investment between participating countries. However, worries have been mounting in recipient nations over a possible debt burden resulting from these initiatives. In the case of Nepal, BRI’s effects are wide-ranging and intricate. Before signing any agreement related to BRI, Nepal must thoroughly weigh its advantages and hazards. 

The debt debate: According to critics, BRI projects, most of which come with Chinese loans attached, could result in a debt trap where recipient nations struggle to pay off their debts, which reduces their ability to make strategic decisions. Nepal may encounter this problem, given its constrained fiscal capability. Also, proponents highlight the possibilities for infrastructure development, economic growth and job creation that BRI projects may offer to Nepal.

There is a chance that Nepal may gain a lot from BRI. It might help in enhancing the nation's connectedness, boosting its economy and generating jobs. However, there are worries that Nepal could fall into a debt trap because of BRI as China is presumably ‘giving unfavorable loans to developing nations to seize their assets’. This claim has been made in relation to BRI and other Chinese investment initiatives in underdeveloped nations. The debt trap argument is supported by some evidence. For instance, several nations, which borrowed money from China, have had difficulty paying back their loans and have been compelled to cede control of critical resources like ports. To be clear, not all Chinese loans are predatory, and the debt trap argument is frequently exaggerated.

BRI engagements: Nepal has expressed interest in BRI and sees it as a chance to address its lack of infrastructure. The BRI’s proposed cross-border road, hydropower, and railway projects have the potential to improve Nepal’s connectivity and energy security. The financial viability, environmental effect, and transparency of these initiatives continue to be a source of concern.

Risk factors

Debt sustainability: China’s loans account for a sizable amount of Nepal’s external debt, raising concerns about the country’s debt-to-GDP ratio. Implementing projects successfully and achieving strong economic growth are essential for repaying these debts on time and avoiding a debt catastrophe. 

Geopolitical implications: Given its ties to both China and India, Nepal’s participation in BRI has geopolitical implications. Maintaining a balance between these two powerful neighbors is essential for the stability of Nepal. 

Project viability: The long-term profitability, potential for revenue generation and adherence to environmental and social criteria all play a role in how economically viable BRI projects are in Nepal.

Mitigation techniques: Nepal might use a number of techniques to avoid falling into a debt trap and profit from the BRI. 

Transparent project evaluation: Thorough cost-benefit evaluations and open tendering procedures can be used to find projects that are both fiscally and developmentally feasible for Nepal. 

Diversified partnerships: Including a variety of parties like global financial institutions helps lessen reliance on a single lender and advance monetary stability. Put an emphasis on local benefits: Projects that promote local employment, technology transfer and skill development should be given first priority to maximize the beneficial effects on Nepal’s economy.

There are opportunities and hazards involved in the complex discussion of whether BRI will trap Nepal in a cycle of debt. To maximize the advantages and reduce potential risks of BRI, Nepal’s rigorous evaluation of project viability, transparency decision-making, and proactive interaction with different partners will be essential. Nepal’s response to BRI projects will influence its economic and geopolitical trajectory for years to come as the initiative develops.

Nepal defeated Mongolia by 273 runs in the T20I match under the Asian Games on Wednesday.

Invited to bat first after losing the toss at the Pingfeng Cricket Ground in Zhejiang University of Technology, China, Nepal gathered 314 runs at the loss of three wickets in allotted 20 overs.

Chasing the mammoth target, Mongolia were bowled out in 13.1 overs scoring 41 runs.

Nepal's bowlers, Karan KC, Abhinas Bohora and Sandeep Lamichhane took two wickets each and Sompal Kami, Kushal Bhurtel and Deependra Singh Airi sent one each to the pavilion.

Earlier, Kushal Bhurtel and Deependra Singh Airi of Nepal made record runs.  Kushal Malla set a world record by smashing a maiden century off 34 balls.

He broke the fastest-century records by David Miller (South Africa), Sudesh Bikramashekhar (Czech Republic) and Rohit Sharma (India) All three batsmen had a record of smashing centuries off 24 balls.

Likewise, Deependra Singh Airi made another world record by smashing half a century in nine balls. Earlier, there was a world record in the name of Indian batsman Yubraj Singh who struck half a century off 12 balls.

Kushal Malla scored unbeaten 137 runs off 50 balls and Airi 52 runs off 10 balls to steer Nepal to the record win.

Likewise, Captain Rohit Kumar Poudel made 61 runs off 27 balls, Kushal Bhurtel 19 off 23 balls and Sheikh 16 runs off 17 balls.

Nepal will play their next match against the Maldives.

The Asian Development Bank (ADB) has projected that Nepal’s economy is poised to achieve a growth rate of 4.3 percent in the fiscal year 2024. This marks a notable improvement compared to the previous fiscal year, FY 2023, when the country's economic expansion was constrained, registering only a 1.9 percent growth rate.

However, the Manila-based agency has revised its growth forecast for Nepal for 2024. According to the Asian Development Outlook-September 2023, it now anticipates Nepal’s economy to expand by 4.3 percent in 2024, which is a downward revision from its previous forecast. Initially, the Manila-based agency had anticipated a five percent growth rate for Nepal’s economy in 2024. 

In FY 2024, ADB predicts that growth will be subdued due to ongoing restrictive macroeconomic policies, reduced external demand, and delayed monsoon rains. However, ADB acknowledges that the Nepal Rastra Bank's decision to decrease the policy rate is expected to result in reduced commercial interest rates and a boost in economic activities.

“Along with moderation in inflation and comfortable foreign exchange reserves, the Nepal Rastra Bank has adjusted its monetary policy stance by lowering the policy rate by 50 basis points to 6.5 percent, which is expected to help lower commercial interest rates and stimulate economic activities,” reads the Asian Development Outlook-September 2023 report. 

The ADB has acknowledged a notable progress in restoring external balance has been made but warned that fiscal challenges still persist. “Despite some progress in restoring price and external sector stability, fiscal challenges persist. While the estimated fiscal deficit for 2024 is moderate at 2.4 percent of GDP, much lower than the deficit of 6.1 percent in 2023, the actual deficit could be substantially higher if the government does not meet its ambitious revenue target for FY 2024,” said Jan Hansen, ADB Principal Economist for Nepal.

According to ADB, economic activities in 2024 will be curtailed by low domestic and external demand, continued weakness in investor confidence, high-interest rates, and deficient rainfall in June that will likely suppress agricultural output. 

The service sector is expected to perform well with expansions coming from real estate, wholesale and retail trade, and accommodation and food services. Agriculture growth may however decelerate owing to deficient rainfall in June and erratic weather patterns, further aggravated by lumpy skin outbreaks. 

The central bank’s decision to lower the policy rate by 50 basis points to 6.5 percent and relax provisions on working capital loans to revive investor confidence will help stimulate economic activities. 

While the government has prioritized capital budget execution with the issuance of guidelines for its effective implementation, fixed investment will provide the main impetus to growth in 2024, reversing the drag it exerted in 2023. According to ADB, there is little risk to external balance given the comfortable foreign exchange reserves the country now has.

“External risks remain relatively well contained. Considering the recent trends and the central bank’s prudent monetary policy stance, the target of maintaining foreign exchange reserves sufficient to sustain at least seven months of imports seems achievable,” reads the report. “Amid stable remittances and higher imports, the current account deficit is expected to widen to 1.8 percent of GDP as growth revives in FY 2024.”

The ADB report projects annual average inflation to fall to 6.2 percent in 2024 from 7.7 percent in 2023 on subdued oil price increases and a decline in inflation in India, Nepal’s main source of import.

Downside risks to the economic outlook in 2024 may arise from more contractionary economic policy by the authorities to stem price rises given the uncertainties centered around geopolitical tensions. This may dampen consumption and domestic production and adversely affect growth.

When you find yourself in a microbus where discriminatory and gender-biased opinions become a source of amusement and laughter and activities to exchange misogynistic thoughts become normal and commonplace, even traveling from Kirtipur to Kathmandu becomes an interminable journey. When I once traveled in a microbus from Kirtipur to Kathmandu, I became a victim of this discussion. 

In the microbus, there were two elderly passengers, four to five young people who could have been between 20 and 24 years old, and five to six mid-aged uncles and aunties. The micro was entirely occupied. For the first few minutes after I entered the microbus, the driver and the mid-aged uncle and aunties were engaged in somewhat typical Nepali conversation about life and daily chores in life. However, shortly after those few minutes had passed, when we stopped at a particular bus station and a young girl asked to hold the vehicle for a few more seconds while she collected her bags (she was seen traveling alone and had several heavy bags with her), She didn’t seek assistance from anybody around, but the driver casually and unhesitatingly made a remark about how ‘Lazy’ women are. And he claimed, “Women should constantly be active and should appear smart because they are born as creatures who are destined to move into other people's homes when they reach a certain age”. Additionally, not just for women, Driver had a theory about men as well: “Men can be lazy as long as they live in their own house.”

After a little pause, the driver again presented his version of events by making a sexist remark to a passenger who also happened to be his neighbor. He questioned the passenger aunty saying, “Why are you traveling in a vehicle to merely travel for 2 kilometers? Have you not got legs? Are you not terrified of your husband? It must be so much joy for you to spend every penny your husband works so hard to earn. And in defense, the aunty, who was in her mid-to-late-thirties, said that she was traveling because she lacked helping hands and was carrying a full gas cylinder. Concerningly, she responded as if she had made some sort of mistake. She also noted that she still had to pick up her child from school, but even in that circumstance, she considered explaining it to a patriarchal man who lacked common sense. 

After she exits the car, an uncle in the rear speaks out without being asked and offers his viewpoint. He said that, in comparison to the past, when women were extremely engaged in supporting their husbands’ families and committed to their husbands’ lives and jobs, they are now sluggish spenders of their husbands’ hard-earned money. As was to be expected, the driver supported the prospective opinion, and the aunties in attendance likewise applauded it while joking about how funny the uncles were. Despite the fact that I and the other youngsters present tried our hardest to correct them about many aspects throughout the discussion, the people grew increasingly stiff and condescending. 

The majority of people in Nepal, including women as well as men, think that giving women shelter and food should be sufficient for them. They believe that women should be subservient to men and that they should fear men. To demonstrate their masculinity to society, men in Nepal always try to show that they are the ones who support women and that women should owe them their lives and freedom. But because women are constantly pressured by society to be inferior to men and because they are raised in such a brainwashing environment, they (women) never have the chance to think and act on their confidence or abilities. Lastly, women also start to develop misogynistic opinions. Do we want this, though? Why can’t we simply support someone, regardless of gender, to accomplish a certain objective that’s consistent with their capacities in life? Why shouldn’t each and every one of us be skilled and competent in what we do and the fields we are in? And in order for this to take place initially, there must be a significant shift in Nepali society’s nurturing system. This culture has to cease pressuring people into having children, getting married, and engaging in many other ancillary activities. 

There are many things in life, and now that we are living in the 21st century, the world has advanced significantly. Just a few weeks ago, a rocket from our neighboring nation traveled to the moon for research reasons, and many men and women collaborated to make that mission a success. But when we look at Nepal, we still can’t get over our prejudice and discriminatory thoughts, and the funny part is that we still want to transform Nepal into Switzerland.

Dikshya Adhikari 

Ist Year, BALLB

Kathmandu School of Law

Amidst the country’s economic downturn, there has been a sharp upswing in banking offense cases in the last fiscal year. Both large and small businesses, along with individuals, have encountered difficulties in meeting their financial responsibilities on time, which according to Nepal Police has resulted in a rise in banking offense cases. 

The statistics of Nepal Police show such cases increased by 124 percent in terms of number and 386 percent in terms of amount in FY 2022/23. A total of 12,128 cases of banking offenses with the amount equal to Rs 69.15bn were registered in the last fiscal year. 

The majority of banking offense cases were related to cheque bounce, followed by denial by cooperatives to withdraw depositors' money.

Out of all the banking offense cases, an overwhelming 99 percent were associated with bounced or dishonored cheques. According to the Banking Offense and Punishment Act of 2008, failing to honor a written check three times due to insufficient funds in the account is considered a banking offense. Police records indicate that a staggering 12,030 cases were filed for bounced cheques, involving a total sum of Rs 47.50bn.

The second-highest number of registered banking offense cases pertains to cooperative institutions, where depositors have faced difficulties accessing their deposited funds. A total of 53 cases related to cooperative fraud have been recorded, involving a substantial amount of Rs 18.82bn.

The data reveals a significant spike in both bad check cases and cooperative fraud cases in the last fiscal year compared to the preceding one. In FY 2021/22, there were 5,370 cases involving bad cheques, amounting to Rs 6.71bn, and 15 cases related to cooperative fraud, totaling Rs 7.39bn.

In most cooperative fraud cases linked to defaults, promoters have gathered deposits by enticing depositors with the promise of substantial returns. They then invested these funds in unproductive sectors such as real estate. When depositors sought to retrieve their money, the promoters were unable to fulfill their obligations.

Out of the 32,000 cooperatives operating in the country, the bulk of the problematic ones belong to the category of savings and credit cooperatives. The Department of Cooperatives has identified issues in approximately 125 cooperatives.

Thousands of individuals who entrusted their hard-earned money to these cooperatives are now facing difficulties as the operators have become unreachable. In cases where contact is still possible, depositors are being informed that an immediate return of their deposits cannot be facilitated.

Experts link the increase in banking fraud to the ongoing economic turmoil. The market has experienced a disruption in the circulation of money, primarily due to an extended liquidity shortage and a decrease in overall demand. Furthermore, the higher interest rates imposed by banks and financial institutions have had a severe impact on small businesses.

Companies and individuals issue cheques of a certain date to settle their business and personal transactions. However, due to the recent downturn in business, the ability of companies and individuals to pay their creditors has weakened. People often issue bad cheques to their creditors to avoid a difficult situation.

.Both companies and individuals commonly use dated cheques to settle their commercial and personal transactions. Nevertheless, owing to the recent decline in business conditions, the capacity of both companies and individuals to meet their financial obligations has diminished. As a means of circumventing a challenging predicament, individuals frequently end up issuing insufficient funds checks to their creditors. Nepal Police Spokesperson Kuber Kadayat said that the number of banking fraud cases has increased due to the recent economic crisis.

According to police data, cases related to banking fraud have been increasing every year. There were only 755 banking offense cases registered by the Nepal Police in FY 2017/18 which continued to surge in the next two fiscal years. However, there was some decline in the registration of fraud cases in FY 2020/21. However, in the last two years, banking offense cases have again started to increase. Along with the cases, the monetary amount of banking fraud has also surged.

According to police statistics, instances of banking fraud have been on a consistent upward trend over the years. In the fiscal year 2017/18, Nepal Police recorded just 755 banking offense cases, but this number steadily rose over the following two fiscal years. However, there was a slight reduction in the incidence of fraud cases during FY 2020/21. Nevertheless, over the last two years, the occurrences of banking offenses have once again started to climb, and concurrently, the monetary value associated with these fraud cases has also surged.

Banking Offense Cases

The Centre for Social Inclusion & Federalism (CESIF) held a seminar on ‘The Evolving Nepal-China Relationship: Navigating Challenges & Seizing Opportunities,’ at Marriott Hotel in Kathmandu on Wednesday.

The seminar was divided into three panels: ' Nepal-China Relations: Current Status,’ ‘Looking to the Future: Chinese Initiatives, BRI, GSI & National Security,’ and ‘Politics of Bilateral Relations.’

The seminar was timed to coincide with the Prime Minister's upcoming visit to Beijing this month.

Vijay Kant Karna, Executive Chair at CESIF, began the discussion program with a welcome remark. He pondered the Prime Minister's impending visit and the weight it carries for Nepal-China diplomatic relations.

“The Prime Minister’s visit is seen as an important occasion to resolve the existing issues and strengthen the bilateral ties. It is expected that PM Dahal will hold a discussion on the various avenues of bilateral relationships, including the long-stalled BRI projects and other issues of economic and bilateral cooperation,” he said, reads a statement issued by Centre for Social Inclusion & Federalism.

“While PM Dahal will have a hard time managing the diversified priorities of the parties in the ruling coalition back home while dealing with China, PM Dahal’s visit is expected to bring forth some tangible benefits to strengthen the bilateral relationship and resolve existing differences.”

The first session on ‘Nepal-China Relations: Current Status,’ brought together Ambassador Madhu Raman Acharya, former ambassador of Nepal, Purushottam Ojha, former secretary of the Ministry of Industry, Commerce and Supplies and Avasna Pandey, Lecturer at the Department of International Relations and Diplomacy, Tribhuvan University.

The session was moderated by author and researcher Amish Mulmi.

The session brought to the limelight Nepal’s need to focus on trans-border connectivity for improved cross-border trade, improved B2B movement, and better negotiations through varied forums. "China has been shifting its goalposts regarding its engagement in Nepal.

Earlier China’s engagement was confined largely within arenas of security and trade but now China wants Nepal to be a part of its diverse initiatives – this is directed at realizing its larger geopolitical aims and ambitions," Ambassador Madhu Raman Acharya said.

The second session on ‘Looking to the Future: Chinese Initiatives, BRI, GSI & National Security’ brought together General Gaurav Shumsher JB Rana (Retd.), former Chief of Army Staff at Nepal Army, Ambassador Dinesh Bhattarai, former ambassador of Nepal, Chandra Dev Bhatta, Political Scientist and Public Intellectual and Anil Giri, senior journalist at The Kathmandu Post.

The session was moderated by Ambassador Vijay Kant Karna, Executive Chair at CESIF.

The session brought to attention China’s new global initiatives and their implications for Nepal.

“In the current geopolitical context, Nepal would be wise to stick to its Constitution's principles of Panchasheel and non-alignment. We must be cautious but also flexible in our foreign policy; flexible being the keyword.” Gen. Gaurav Shamsher JB Rana (Retd.) expressed.

The final session on the ‘Politics of Bilateral Relations,’ brought together Shisir Khanal, Member of Parliament, representing Rastriya Swatantra Party, Dr Minendra Rijal, former Defense Minister of Nepal and Nepali Congress leader, Dr Lila Nyaichyai, Professor at the Tribhuvan University and the former member of the Constituent Assembly and Hari Sharma, Executive Director at Purak Asia and a Public Intellectual.

The session was moderated by Dr Govinda Raj Pokharel, former Vice Chairperson of the National Planning Commission and the Central Committee member of the Nepali Congress.

The panelists discussed the necessity to capitalize upon the Nepal-China relations whilst understanding China’s regional and global position.

“There has been a significant shift in the geopolitical landscape when compared to that of the 1950s, 60s – so, drawing parallels between these different contexts to analyze the contemporary geopolitical situation wouldn’t be so apt- and it doesn’t help in our diplomatic endeavors either.” Khanal shared.

The Prime Minister’s upcoming visit to Beijing was agreed by all to be a good opportunity to improve bilateral ties.

Panelists also shared a few priorities for the visit, including the implementation of previous agreements, negotiation for trade facilitation, upliftment of unilateral border control of different border points, and FDI traction.

The seminar event brought together noted intellectuals, academicians, politicians, bureaucrats, and journalists.

Centre for Social Inclusion & Federalism (CESIF) is a not-for-profit, autonomous, and independent private research institution serving the public interest, with significant independence from any interest group. Our mission is to help the government create a democratic, secure, and just society by making informed and transparent decisions about policies and practices.

India has endorsed a memorandum of understanding (MoU) to purchase electricity from Nepal.

Under this agreement, India has agreed to import 10,000 megawatts (MW) of electricity from Nepal in the next ten years.

According to Nepal's ambassador to India, Dr Shankar Prasad Sharma, the federal Council of Ministers of India formally endorsed the agreement on the power trade with Nepal and India shared information about this through social media X (twitter).

He said the decision would contribute to accelerating Nepal's economic development and restructuring efforts.

The MoU was initially signed between the two countries during Prime Minister Pushpa Kamal Dahal's latest visit to India (May 31-June 3, 2023) and at the time the Prime Minister termed the moment historic. Energy secretaries from both countries signed and exchanged the document.

Following India's latest decision to endorse the agreement, the energy secretaries from both neighboring countries will participate in a special ceremony to formally resign it.

Joint Secretary at the Ministry of Energy, Hydro Resources and Irrigation and Spokesperson for the Ministry, Madhu Prasad Bhetuwal said they were unofficially informed about the official decision of the Indian government to endorse the agreement and expect to receive an official confirmation regarding the decision.

With the decision, the door to export the electricity produced in the Indian market in an easy and smooth manner has been opened.

Nepal had been urging for power export in the Indian market in short-term, mid-term and long-term. 

The Nepal Electricity Authority (NEA) has been exporting 452 megawatt electricity in the Indian Energy market on a daily basis. 

Nepal and India had signed a power trade agreement in 2014. The Indian Company, Satluj Jal Vidyut Nigam, is constructing a 900-megawatt Arun III hydropower project. Although the Indian company, GandhI Mallikarjun Rao, has been said to construct a 900-megawatt Upper Karnali hydropower project, it has not been started yet.

Similarly, Indian companies have forwarded necessary processes for the construction of different projects including Lower Arun, West Seti and SR-6.

An agreement has been reached between Nepal and India to construct some projects after preparing joint investment.

Nepal has been making preparations to export 40-megawatt electricity in Bangladesh soon.

The private sector has been demanding the government to grant permission for power trade. The proposed new electricity bill has made this arrangement.

The Cabinet meeting held on August 29 had given permission to the Energy Ministry to table the electricity bill in the Federal Parliament.

Russia’s invasion of Ukraine has triggered a debate regarding Nepal's commitment to non-alignment policy. As the world watched, Nepal voted in the United Nations’ proposal that condemned Russia's aggression, while neighboring South Asian countries, including India, chose the path of abstention.

This divergence of stance stirred criticism from foreign policy experts and communist parties, who vehemently posited that Nepal's vote in the UN resolution represented a stark deviation from its enduring non-alignment doctrine. They contended that Nepal, like several regional counterparts, should have maintained a resolute neutral position.

In recent months, a fresh discourse has taken root among foreign policy luminaries and political leaders, probing the question of whether Nepal should relinquish its non-alignment policy in light of the ever-shifting regional and global power dynamics. Yet, some proponents of this shift offer their case without specifying what should supplant the non-alignment policy.

The Non-Aligned Movement (NAM), born in the cauldron of the 1950s and 1960s, had at its heart the notion of eschewing alignment with either of the two prevailing blocs: the democratic realm led by the United States or the communist sphere headed by the Soviet Union. Following the fall of the Berlin Wall, the bipolar world transitioned into a unipolar landscape under US dominion. Currently, there are 120 members that follow the non-alignment policy. 

Nepal has enshrined it in its constitution of 2015. Article 51 of the constitution explicitly mandates Nepal to conduct an independent foreign policy based on the United Nations Charter, non-alignment, Panchasheel principles, international law, and world peace norms. It underscores the overarching imperative of safeguarding Nepal's sovereignty, territorial integrity, independence, and national interests.

Those advocating for abandoning the non-alignment policy often cite India as an example. They argue that India has embraced a multi-alignment doctrine in recent years. India's reduced emphasis on global non-alignment conferences is seen as a testament to this shift. Experts assert that India has deftly carved a path of strategic autonomy and multi-alignment, all while preserving the core tenets of non-alignment.

In the context of the Russia-Ukraine war, India's steadfast neutrality and ongoing engagements with both Russia and the US have underscored the nuanced nature of its foreign policy. Professor of international relations, Khadka KC, contends that even India has not categorically severed ties with non-alignment, hinting that Nepal, in its own way, has been practicing a form of multi-alignment since the 1960s, all while upholding the principles of non-alignment.

It's argued that Nepal actively pursues economic benefits from major global powers, including Russia, and, since 1960, has remained untethered to military alliances. Experts assert that the current non-alignment doctrine does not preclude Nepal from engaging with any nation to further its national interests. However, the unique geography of Nepal necessitates a cautious avoidance of taking sides in global conflicts.

Beyond Nepal's borders, the Global South at large grapples with the intricacies of non-alignment and neutrality, particularly in the wake of the Russia-Ukraine war. Despite fervent lobbying by the US and its allies, many Global South nations have refrained from endorsing US sanctions on Russia. The positions of these smaller nations have triggered consternation, as they effectively curtail the impact of the sanctions on Russia’s economy.

Professor KC staunchly advocates for Nepal's continued adherence to non-alignment, affirming that it's intrinsic to Nepal's foreign policy fabric. He emphasizes that geography and evolving regional and global power dynamics underscore the primacy of Nepal's non-alignment policy.  “Nepal can simultaneously reap economic benefits from major powers while remaining committed to non-alignment,” he says.
Former diplomat Dinesh Bhattarai insists that at the core of Nepal's non-alignment policy lies the art of making independent judgments without tilting toward any side, a principle perfectly aligned with Nepal's unique geographical constraints. He dismisses claims that non-alignment stifles development.

“I have heard the contention that non-alignment policy hinders our development. What I say is geography is an omnipotent factor, and taking sides offers no guaranteed path to rapid progress.” 

Mriendra Bahadur Karki, executive director at the Centre for Nepal and Asian Studies, offers a nuanced perspective. “Nepal should reinvent non-alignment to involve active engagement in global affairs while sidestepping military alliances,” he says.  

Karki also defends Nepal's prudent decision to vote against Russia's invasion of Ukraine, portraying it as an embodiment of active non-alignment.

International relations analyst Gaurab Shumsher Thapa underscores that non-alignment does not entail turning a blind eye to regional or global events. “Instead, it beckons active engagement in world affairs without shackling Nepal to any military blocs.”  Given Nepal's intricate geopolitical milieu, Thapa asserts that the relevance of non-alignment will likely increase rather than dwindle in the country's future.

To date, Nepal remains an ardent advocate of the non-alignment policy. In a recent ministerial meeting of the Non-Aligned Movement Coordinating Bureau, Foreign Minister NP Saud reaffirmed Nepal's unwavering faith in the principle of the Non-Aligned Movement. He stressed the imperative of international cooperation within NAM, the strengthening of south-south collaboration, and the fortification of multilateralism with the United Nations at its nucleus, as a means to surmount contemporary global challenges.

Saud maintained: "As NAM members, we must address the root causes of persistent global problems, such as poverty, conflict, and violence. We must champion enduring peace through dialogue and respect for diversity while accelerating our economic development to attain the 2030 Agenda for Sustainable Development."

Officials from the Ministry of Foreign Affairs, in conversation with ApEx, contend that the ongoing debate on non-alignment falls short of mirroring the contemporary reality. In the face of external forces exerting pressure to enlist Nepal in their ranks, they say the most prudent course for Nepal would be to remain steadfast on its non-alignment commitment. 

They firmly assert that Nepal, in view of its unique position, cannot afford to antagonize any nation by picking sides. Critics of non-alignment, they argue, have yet to furnish a coherent alternative.

In May, 2020, Nepal’s Parliament unanimously issued a new political map showing Kalapani, Limpiyahura and Lipulekh as Nepali territories. All political parties supported the initiative of the then government under CPN-UML Chairman KP Sharma Oli.

However, it appears that the then government did not follow the due process to make the new map acceptable to the international community, including the neighbors—India and China. The government should have informed the United Nations, Google and other international communities, but it didn’t, in all likelihood. The Department of Survey printed the English version of the map, but it was not circulated to the international community.

Speaking at a program on Sunday, Foreign Minister Narayan Prakash Saud said, “We have not officially communicated with the international community about the new map, ministers of the previous government are claiming that they have informed the international community but I have no record of such communication taking place.”

On 28 Aug 2023, China published its ‘standard map’, which did not show the Lipulekh, Kalapani and Limpiyadhura areas inside Nepal. 

Amid this controversy, a statement from the Ministry of Foreign Affairs reads, “Nepal stands firm and clear on its political and administrative map that the Parliament unanimously approved in 2020. The Government of Nepal unequivocally believes that our neighbors as well as the international community must respect 

this map.” 

According to the ministry, Nepal remains committed to resolving the boundary matters through dialogues and diplomacy.

Meanwhile, the International Relations Committee of the Parliament is planning to take the foreign ministry to task regarding its take on the map controversy.

“There are conflicting claims from the then and current ministers about the map, so we are preparing to seek a clarification from the Ministry of Foreign Affairs,” said Raj Kishor Yadav, the committee chair