Nepal, a country in search of direction

Nepal finds itself at yet another crossroads. With elections now set for March 5, 2026, the Himalayan republic, squeezed between the geopolitical ambitions of India and China, faces a monumental test. Its caretaker prime minister, Sushila Karki, has promised free and fair polls. Still, beneath the surface of assurance lies a deeper uncertainty about the country’s political future, its collapsing economy, and a restless generation that has lost faith in politics altogether.

Karki’s elevation last month, following the removal of K.P. Sharma Oli amid youth-led protests, was welcomed. At 73, she is Nepal’s first female prime minister, a figure of integrity with a judicial background and little appetite for populist gamesmanship. But her mandate is narrow: preserve stability and rebuild the political institution by holding elections.

The biggest challenge before Karki’s interim administration is survival as the caretaker structure. It limits the interim government’s authority to introduce major policy changes, as the fractured political system and role of old political parties are bent on pulling down the system. Yet the public’s expectations are as high as the mountains of the Himalayas. The Gen Z movement, which toppled Oli’s government after weeks of street protests, has transformed political discourse. Its demands, ranging from the right to digital freedom to an overhaul of the corruption-ridden political class, reflect a generational impatience with Nepal’s old guard, but Gen Z leaders hardly know how to govern, yet are eager to bring the change.

Karki’s tone so far has been conciliatory. She is meeting leaders of nearly all major political parties, from the Nepali Congress and CPN-UML to the Rastriya Swatantra Party. She demands consensus on election preparations and anti-corruption measures. Most parties agreed on the need for timely elections. But beneath the formal politeness lies mistrust. Nepal’s politics in the past have seen strange bedfellows and drifting coalitions. In the past, political parties have split, leading to personal rivalries. Suspicion, mistrust flows even over the ground.

The collapse of the political system has led to the failure of economy of the country. Nepal’s growth has sharply slowed down. Tourism is massively affected. The country’s local media suggests it is hugely dependent on remittances from the diaspora. Media reports also suggest that public debt has ballooned to over $15 billion, roughly 45% of GDP. The World Bank warns that without fiscal reform, debt servicing could consume nearly a third of state revenue within two years. Karki’s caretaker government’s other priority is to reassure lenders that Nepal remains solvent.

Political observers feel that Nepal’s political class, once buoyed by the promise of post-monarchy democracy, now appears exhausted. Since the abolition of the monarchy in 2008, the country has cycled through 14 prime ministers, none of whom completed a full term. Each administration has blamed the previous government for economic stagnation, least knowing that many of the political leaders were recycling into power with different coalitions rather than looking into their individual survival rather than the Country’s interest. Revenge and corruption investigations remained more political tools rather than thinking of stabilising the fragile economy and democracy of the country.

This power fight led to public mistrust, eagerly looking forward to new leadership. The Gen Z protests, even though they were triggered by a social media ban, but fuelled by long-simmering discontent, unemployment, and erosion of faith in the present political leadership. For many young Nepalis, the issue is not merely corruption but the absence of a viable future at home. Over a million Nepalis are presently working in India, Gulf, Malaysia, and Korea and several other countries. Remittances now account for around a quarter of GDP. The domestic job market continues to sink. The New York Times quoting a 22-year-old unemployed youth, who represents a generation’s dilemma, said. “There is no work here.” “Even cleaning jobs require connections.” He spent two years in Dubai, earning four times his Nepal wage, only to return disillusioned. Yet he plans to go abroad again. For many, migration has become the only economic policy that works.

The Gen Z movement, which brought tens of thousands to Kathmandu’s streets, is trying to convert anger into organisation. Last week, its leaders announced plans to form a political party, contingent on the government meeting certain conditions: direct election of the executive, voting rights for Nepalis abroad, and citizen-led investigations into corruption.

Nepal’s Election Commission has already registered over 120 parties, warning against fragmentation. The country’s proportional representation system, designed to give space to minorities, has often produced hung parliaments and weak coalitions in the past. If the Gen Z party enters the fray without clear organisational depth, it risks becoming another marginal force in the morass of Nepal’s politics.

Nepal is landlocked between India and China, even though for the last two decades, Nepal has mastered diplomacy and the art of balancing both, but still, they have not been able to keep both satisfied or pleasing. India remains Nepal’s largest trading partner, where borders are open for its citizens and are allowed to work in India without any special permit or permission, but political mistrust, post-monarchy, shadows the relationship. There are intermittent border disputes raised by Nepal that were hardly there in the past. Exports to Nepal from India have plunged amid protests and political transition.

China, meanwhile, is making a way in with its experts helping the country with infrastructure, promises under the Belt and Road Initiative (BRI). Yet progress has been slow with debt fears and logistical bottlenecks. For now, Nepal relies on India for energy, trade routes, and essential supplies, even as Beijing’s presence grows in education, technology, and local investments. Karki’s interim government so far is walking a tightrope without alienating either side.

Nepal’s debt is heavily tilted toward concessional multilateral loans, but Chinese lending, often opaque and tied to BRI projects, has risen sharply. Economists warn of a “soft debt trap,” where repayment pressure forces Kathmandu into political concessions. Nepal faces the immediate challenge of repaying external loans while maintaining social spending. Inflation remains high, and the Nepali rupee’s slide against the Indian rupee worsens import costs. With the private sector stagnant and investment confidence low, the caretaker government’s room for manoeuvre is minimal.

Presently, the nation is at a pause. Future history may judge Karki’s tenure by her ability to restore faith in Nepal’s institutions by holding a credible election amid maintaining discipline and peace in the country, but the real work of economic reform and political renewal will fall to whoever wins in 2026. Political observers feel that even if the polls are held in a credible and fair way, governance will be difficult until some international support to the new government is rebuilt. Still, optimism glimmers at the edges. The youth movement, for all its rawness, has injected civic energy into a worn-out democracy. For the first time since 2015’s constitution, young Nepalis are talking about structural change rather than migration alone. If that energy can translate into political participation, not just protest, Nepal might rediscover a sense of purpose. As the caretaker prime minister stands before her citizens promising order and fairness, she knows she is on a difficult road ahead and on a test. The clock is ticking. Each month, more Nepalis leave; each month, foreign loans deepen. The world is watching closely and waiting for the outcome of the March 2026 elections.

 Surinder Singh Oberoi,

National Editor Greater Kashmir