Corruption And Crisis Define Nepal’s 2024 – Analysis
Nepal’s 2024 news headlines were dominated by political instability, geopolitics and corruption. The limitations of the grand ruling coalition — made up of the Communist Party of Nepal–Unified Marxist–Leninist (CPN–UML) and Nepali Congress party — internal feud in the CPN–UML, relations with China and fund misappropriation cases by executives and popular leaders are key issues that gripped society. Economic and financial health indicators do not show encouraging improvement either.
In July 2024, CPN–UML Chairman Khadga Prasad Sharma Oli became Nepalese prime minister for the fourth time. Oli decided to end his support for the Communist Party of Nepal–Maoist Centre government led by former Nepalese prime minister Pushpa Kamal Dahal ‘Prachanda’, instead joining hands with the Nepali Congress’ Sher Bahadur Deuba. The grand coalition between the two largest parties promised to yield a ‘national consensus’ government for constitutional amendments in a power-sharing arrangement in which the prime minister position alternates between Oli and Deuba.
But as of March 2025, the coalition has failed to garner a common framework with major stakeholders for possible constitutional amendments. On the contrary, Oli has issued back-to-back executive orders despite the coalition having a comfortable majority — enough to follow the parliamentary procedure. The coalition’s ordinance to amend the Land Act in February 2025 drew strong criticism from the opposition, with speculation about the ruling coalition’s effort to bribe some parliamentarians to break their opposition. This strong criticism led the coalition to not push ahead with the ordinance.
As Oli has hijacked the democratic practice, collective decision-making and leadership selection within the CPN–UML, efforts are again underway by some leaders to undercut Oli’s hold on power. Not to mention — as an injured tiger — former prime minister Prachanda is relentless in his efforts to break the Oli–Deuba coalition.
The growing displeasure in Nepali Congress against the CPN–UML was also apparent when Oli signed a Belt and Road Initiative (BRI) agreement in China, especially regarding the investment modality. Congress emphasised receiving ‘aid assistance financing’, not loans. Oli has not yet visited India this term, he has reportedly not been invited. Oli instead went to Beijing in December 2024 and signed a BRI Cooperation Framework with China that mentions specific infrastructure projects for Nepal.
The BRI agreement uses the wording ‘aid financing’, leaving room for interpretation about the nature of Chinese finance. In fact, Nepal and China had signed a Memorandum of Understanding on BRI cooperation in 2017, where China later emphasised Nepal’s Pokhara Airport as part of the BRI — a claim which Nepal denied. There is no big-ticket project so far that officially carries a BRI label.
But this time, the US administration is halting funding from the US Agency for International Development. A vacuum created by this may encourage stakeholders to implement BRI projects. US President Donald Trump’s approach is clearly leading to a new geopolitical dynamic for Nepal. While there will be more a favourable environment for China–Nepal ties to deepen further, the growing India–EU strategic convergence will try to balance Chinese influence in Nepal.
On the trade front, the trade deficit is huge, apart from slight changes in the export–import scenario. There are hardly any signs of long-term improvement. The youth exodus abroad is putting pressure on policymakers to get investment to provide employment at home.
The foreign currency surplus is at a good level because of the youth exodus for foreign employment and the remittance that generates. Though some indicators show an increase in liquidity and the interest rates are lower, loan defaults are also very high and borrowers are hesitant given the environment of overall uncertainty.
Haphazard urbanisation, sub-standard roads and means of transportation, a lack of quality public services for citizens, corruption and rent-seeking are among the perennial problems that citizens continue to face, stifling growth and development. Any effort by governments is a short-term fix to show good numbers for public consumption, but lacks vision and capacity to change the lived reality of a person in Nepal. There are sectors where growth is possible but given these negative factors, investment growth and employment creation is unlikely.
It seems that 2025 will not be very different from 2024 — politically, economically or otherwise. In terms of political stability, one estimate shows 68 per cent of Nepalis think Nepal is heading in the wrong direction. Several political forces seem to be preparing to launch a movement and even the former Nepalese King Gyanendra Shah gave an announcement asking people to support his reinstatement. As old problems persist and new problems arise, 2025 offers little hope for real change in Nepal.