Nepal at a Crossroads: Balancing Domestic Political Momentum with Looming Global Economic Risks

As this article is being written, the Rastriya Swatantra Party (RSP) is present in the capital with full force, energized by the unprecedented public mandate following the final election results, anticipating the formation of a new government. According to reports, Balen Shah (Balen) is scheduled to take the oath of office as Prime Minister on Chaitra 13. This is the first time since the 1991 election that public opinion has converged so strongly in this manner.

However, while such encouraging domestic developments are unfolding, global affairs are becoming turbulent. Gulf and other regions hosting large numbers of Nepali workers are gradually being engulfed by conflict. In this period of complete uncertainty, it is difficult to predict what situation might arise and when. One fact is clear: a country like ours, which sends 20 percent of its population abroad for employment and relies on their earnings to support households, could face serious problems in the coming days.

Overall, this will put severe pressure on the country's balance of payments. When the external sector of the economy declines, the support structure begins to falter, increasing the risk. According to the report published by the central bank last week, based on data from the first seven months of the fiscal year 2082/83, indicators such as the country's foreign trade, remittance inflow, balance of payments position, and foreign exchange reserves appear positive.

According to Nepal Rastra Bank, the total foreign exchange reserve stands at NPR 3302.66 billion. In US dollars, this reserve has reached $22.76 billion, which is sufficient to cover imports of goods and services for 18 months. The current account is in surplus by NPR 493.78 billion, and the balance of payments position is in surplus by NPR 572.73 billion. Remittance inflow has increased by 39.8 percent in Nepali Rupees and 33 percent in US dollars. This is a pleasant picture as of the end of Magh.

Nepali society has witnessed extraordinary political and social changes over the past few decades. Democratic movements, constitution drafting, the federal structure, and the expansion of civil rights have made society extremely dynamic politically.

But, a different scenario has suddenly emerged globally since the beginning of Chaitra. There is no sign that the high price hike of petroleum products will stop, and the import of essential fertilizers for agriculture seems almost halted. The RSP government is being formed against this complex backdrop.

Looking at the fresh election results and domestic events, Nepal currently stands at a crucial juncture in history. The future path of Nepali society, standing at the crossroads of immense possibilities and equally significant challenges, seems dependent on the momentum of the Gen-Z movement and the incoming Balen government following the recent election. Nepali society has witnessed extraordinary political and social changes over the past few decades. Democratic movements, constitution drafting, the federal structure, and the expansion of civil rights have made society extremely dynamic politically.

Today, the main challenge facing the country is not political, but rather economic backwardness and inequality. The people have made immense sacrifices for change. Now, the public expectation is to transform political achievements into economic prosperity. The mandate received by the new government is not just the right to govern, but also the responsibility to convert public expectations into tangible results. If these expectations are not met, intense frustration will rise among the people again. The real test of the upcoming government will be determined by economic statistics and visible changes in people's lives.

Nepal's geography itself is an economic opportunity. Being situated between the world's two largest emerging economies—China and India—is a great coincidence for us. If Nepal can utilize its location correctly, it can become a strong bridge for regional trade, tourism, and the service sector.

We have produced many plans and policy documents, but the implementation aspect has always remained weak. Take tourism as an example—due to the Himalayas, religious sites, and natural beauty, Nepal is a globally attractive destination. However, we have not fully utilized the benefits derived from it. If we could attract even just 1 percent of the total tourists from China and India, our tourism sector could be transformed. The current tourism industry is incomplete and expensive. The government is failing to invest in infrastructure, while the private sector is accused of being more profit-oriented than service-focused.

The biggest challenge for the government led by Balen is stopping youth migration. Approximately 2,000 youths are forced to go abroad daily. Due to the recent tensions in the Gulf region following the US and Israeli attacks on Iran, a large number of Nepalis wish to return home. Providing them with economic opportunities at home is an urgent and massive challenge.

A government with a two-thirds majority must take 'bold' steps in economic development. The first step should be to 'merge' government entities of a similar nature to reduce the financial burden.

In such a situation, tourism is the sector that yields the quickest returns. It is necessary to rethink tourism in a new way. Attention should be paid not only to increasing the number of tourists but also to increasing their spending and length of stay. Strategies should be formulated specifically targeting the Asian market.

For the rural economy, there is no alternative to modernizing and commercializing agriculture. Overcoming the shortage of fertilizer and global market issues, the government must connect agriculture, tourism, and local markets. Small and medium-sized enterprises, food processing, and herbal industries can create significant employment. The digital economy has opened new doors for the youth. Young people can be connected to the global market through information technology and outsourcing.

A government with a two-thirds majority must take 'bold' steps in economic development. The first step should be to 'merge' government entities of a similar nature to reduce the financial burden. The Citizen Investment Trust, Employees Provident Fund, and Social Security Fund should be integrated and restructured to ensure common citizens' access to education and health.

Similarly, Rastriya Banijya Bank, Nepal Bank, and Agricultural Development Bank should be merged to establish a 'National Agriculture and Industrial Infrastructure Bank' with a paid-up capital of one hundred billion rupees. This will manage investable loans and bring stability to interest rates.

A review of social security allowances is also mandatory. The age for receiving old-age allowance should be raised to 75 years, and other allowances should be limited only to the most needy and targeted groups (minorities, endangered communities, and underdeveloped districts). Indiscriminate social security spending has not significantly benefited the truly marginalized class.

To cut administrative expenses, there must be stricter control over unnecessary 'official deputation' (Kaj) and travel allowances for employees. Billions of rupees annually can be saved just by reducing vehicle purchase and maintenance costs. Capital expenditure must reach at least 80 percent, and the practice of budget reallocation at the end of the fiscal year or during the monsoon season must be completely stopped.

Nepal is currently at a moment of historic opportunity. A society filled with political consciousness is now hungry for economic transformation. With clear priorities, quick decisions, and effective implementation, Nepal can progress in a short time. Nepal has resources, energy, and youth power. What is now needed is leadership with firm resolve, capable of transforming political achievements into a journey of prosperity.

(Dr. Sharma is an economic-political analyst.)