Author: Sujeev Shakya, Beed Management

While 2022 began with modest expectations for Nepal, it was also a year of hope. The pandemic receded and lives returned to normal, while elections brought some hope, with new leaders dislodging old ones.

Despite challenges in governance and politics, Nepal vaccinated nearly all of its eligible population — 95.7 per cent, one of the highest numbers in South Asia. This was possible due to responsibility being passed on to Nepal’s 753 local government units — rather than being managed at the federal level — demonstrating the role of local governments in delivering public goods. Nepal was also fortunate to have foreign governments donate vaccines and facilitate purchases and supply.

In terms of Nepal’s relationship with the world, 2022 was eventful. A US$500 Millennium Challenge Corporation grant from the United States became a point of major political controversy, but was ultimately approved by Parliament. The debate also revealed a deep divide in the way Nepalis perceive the United States, as well as the increasingly overt role of China in national issues.

The first half of 2022 was also about balancing geopolitics, with China–India rivalry pushing Nepal to continuously balance these two large neighbours’ interests. When Indian Prime Minister Narendra Modi visited Buddha’s birthplace in Lumbini, Nepal on Buddha’s birthday, he came in a helicopter from across the border rather than flying into the newly built Bhairawa airport. The airport was built by a Chinese contractor under an Asian Development Bank arrangement and is seen as a Chinese-funded project.

Nepal’s economy saw a continued decline in liquidity as interest rates increased. Collusion among banks continued, limiting options for managing the challenge posed by the liquidity crisis. The central bank continued to intervene by banning imports of luxury items and instituting strict restrictions on foreign exchange. A spat between the finance minister and central bank governor did not help — the governor was fired by the finance minister, only to be reinstated by the Supreme Court.

The economic crisis in Sri Lanka also hurt Nepal, as Indian media and think tanks lumped Nepal with Sri Lanka as countries facing economic crisis. Hindi-language news channels with huge followings in Nepal produced especially critical stories. But the Nepal Economic Forum and other think tanks in Nepal maintained that the issues affecting Sri Lanka and Nepal are chalk and cheese.

The biggest events of 2022 were two elections — local elections were held in May and the federal election in November. In the local elections, 81 per cent of candidates elected were new faces. It was a strong anti-incumbent vote. In Kathmandu, a young rapper running as an independent made headlines, and in Dharan in eastern Nepal, a lone campaigner won the mayoralty. Both occupied significant attention on social media.

This prompted more people to run as independent candidates in the subsequent federal election. These independents formed a new party and became the fourth-largest in Parliament. There was a strong #NoNotAgain campaign against the old, male politicians across established parties who have been dominant for the past three decades. Many of them lost re-election. There are new faces in Nepal’s Parliament, and many of them are educated and have global exposure. Out of the 23-member cabinet, 15 are new ministers, many of them first-time parliamentarians.

The federal election also saw political opportunism — parties that fought the election in one coalition promptly joined other coalitions in order to form government. When the prime minister sought a vote of confidence, only 2 of 270 parliamentarians opposed the motion — highlighting that the government is a cartel of parties with diverse ideological stances.

The election also saw Nepali Congress’s leader, former prime minister Sher Bahadur Deuba, challenged within the party, with 2022 probably being the last election he will stand in.

Nepal’s biggest challenge in 2023 will to be for its fragile coalition to last and not descend into intra-coalition fights for plump government appointments. Geopolitics — with war in Ukraine and a brewing Cold War between China and the United States — will remain complicated. The global economy will face challenges. All of this will impact Nepal. 2023 will be year of survival, hope and recovery.

Sujeev Shakya is the founding CEO of Kathmandu-based consulting firm Beed Management, Senior Advisor for Nepal and Bhutan at BowerGroupAsia and Chair of the Nepal Economic Forum.

The post Stubborn challenges and fresh faces for Nepal in 2022 first appeared on East Asia Forum.