Deuba Nepal

In 2021, Nepal dealt with the economic and domestic uncertainties of the ongoing pandemic. Like the rest of the world, the Himalayan nation struggled to overcome the effects of the coronavirus pandemic. The domestic politics of Nepal saw a huge upheaval as Prime Minister K.P. Sharma Oli was forced out of office through a landmark Supreme Court verdict that catapulted Nepali Congress President Sher Bahadur Deuba to the coveted post for the fifth time . In Nepal’s international relations, most of the government’s diplomatic efforts were concentrated towards securing vaccines against COVID-19. The pandemic has taken more than 11,000 lives so far and its toll is being gradually felt in Nepal’s economy. The change in government may not be enough to solve Nepal’s problems as political stability and good governance will be key factors in facing challenging times in the future.

Domestic Politics

In spite of the Nepali people yearning for political stability for decades, the political situation remained volatile throughout the year due to political bickering among parties and changes in the political equation.  

One year ago, in December 2020, fissures between two chairpersons of the then ruling Nepal Communist Party (NCP), Prime Minister Oli and Pushpa Kamal Dahal—also known as Prachanda—ultimately led Oli to dissolve the House of Representatives. The reverberations of this were felt throughout the year, and in February 2021 the Supreme Court invalidated his decision and ordered the parliament to be reinstated. In an act of further political maneuvering, Oli signed a peace deal with the outlawed Communist Party of Nepal led by Netra Bikram Chand, also known as Biplav, in March 2021. Through this move Oli tried to carve out an image of a leader who was focused on bringing outlawed parties and groups in the political mainstream.

The change in government may not be enough to solve Nepal’s problems as political stability and good governance will be key factors in facing challenging times in the future.

Another surprising verdict came in March when the Supreme Court annulled the Nepal Communist Party (NCP) that was formed in 2018 through a merger of the Oli-led Communist Party of Nepal (Unified Marxist Leninist) and Dahal-led Communist Party of Nepal (Maoist Center) citing that a party by the same name was already registered in the Election Commission. It went a step ahead and ordered the revival of CPN (UML) and CPN (MC). These political events heightened political uncertainty as intra-party feuds within the CPN (UML) and Oli’s rivalry with Dahal raised questions over the government’s future.

Nepal’s political course took a twist in May 2021 when Oli lost a vote of confidence motion in the parliament with many in his own party faction not voting for him. Later, both Oli and Nepali Congress President Sher Bahadur Deuba, made their case for forming a new government to Nepal’s President Bidya Devi Bhandari—each arguing they had the support of a majority of lawmakers. Just as the president’s office concluded that neither Oli or Deuba commanded a clear majority, Oli, who was still Prime Minister at the time, was quick to recommend the dissolution of the House of Representatives again and call snap elections for November 2021, which was duly approved by Bhandari.

The never-ending political saga took another turn in July 2021 when the Supreme Court reinstated parliament for the second time and ordered Deuba to be appointed as the prime minister. Deuba became prime minister for the fifth time in his life and formed a coalition government comprising of NC, CPN (MC), Nepal-Khanal faction of CPN (UML) and a few other minor parties. In August 2021, the Madhav Nepal-Jhalanath Khanal faction broke away from the CPN (UML) and registered as a new party named Communist Party of Nepal (Unified Socialist). The sequence of events was a dramatic fall from power for Oli who had commanded the majority of nearly two-thirds member of parliament just a few months before and had set a vision for a “Prosperous Nepal, Happy Nepali.” The sequence of political events once again exposed the unstable nature of Nepali politics that has hindered the country’s progress.

After only being in power for a few months, Deuba caused political uproar in October when he appointed Gajendra Bahadur Hamal, a close relative of Chief Justice Cholendra Shumsher Rana, as Minister for Industry, Commerce and Supplies. It was alleged that Rana had coerced Deuba to appoint him. Although Hamal resigned immediately, a majority of Supreme Court judges, lawyers, civil society organizations demanded the resignation of Rana from the post of Chief Justice. Rana has been facing accusations of colluding with the Prime Minister for his vested interests as well as indulging in corruption and misconduct. Such a situation has severely dented people’s faith on the impartiality of judiciary. There have been calls for political parties to impeach Rana in the parliament, but they have been reluctant to do so till date.  

Despite the turmoil of the past year Oli, Deuba, and Dahal—old faces in Nepali politics—are poised to remain in positions of power and people will still have to wait for a new generation of leaders.

According to Nepal’s constitution, political parties must elect their office bearers at least once in every five years. This year two major political parties, CPN (UML) and NC, and the royalist Rastriya Prajatantra Party (RPP) had their general conventions. Oli was re-elected as Chair of CPN (UML) at the end of November—easily beating his challenger Bhim Bahadur Rawal. The departure of Madhav Nepal and Jhalanath Khanal from CPN (UML) created a condition for Oli to get reelected and cement his power further in the party. In early December, RPP General Secretary Rajendra Lingden beat long-time RPP Chair Kamal Thapa to obtain the party’s high office in an upset result. Lingden has claimed that RPP will strive stronger than before toward restoration of Nepal as a Hindu state and monarchy. NC President Deuba was re-elected to the post defeating Shekhar Koirala in a runoff. NC’s general convention was a keenly watched event as Deuba’s defeat in the party could have undermined his authority in the coalition government structure. CPN (MC) is also conducting its national conference in December with the reelection of Dahal all but certain. Despite the turmoil of the past year Oli, Deuba, and Dahal—old faces in Nepali politics—are poised to remain in positions of power and people will still have to wait for a new generation of leaders.  

International Relations

Nepal’s international engagement was subdued in 2021 as no incoming or outgoing visits at the level of head of state or government took place. The highest level visit by a Nepali official to India was that of foreign minister Pradeep Kumar Gyawali in January 2021, however, there was no significant achievement that came out of the visit. Nepal’s relations with India had soured after both the countries entered into a map row concerning the territories of Kalapani, Lipulekh and Limpiyadhura last year. In a bid to restore cordial relations with India, neither Oli nor Deuba raised the issue seriously this year. The Deuba government also ruffled Chinese feathers when it constituted an investigation committee in September to probe a probable border encroachment by China in Humla district of Nepal. Much to everyone’s surprise, the report has not yet been made public. If the report has indicated that there has been an encroachment, then the government should take up with issue with the Chinese government. Similarly, there was no headway in the Belt and Road Initiative (BRI) projects as both Nepal and China have not shown enough zeal to make progress.

The main international event was Deuba’s attendance at the COP26 Summit in November. In a year marked by negligible foreign visits, the forum was an ideal platform for Deuba to exchange views with world leaders. He raised the issue of climate change in the Himalayas and urged the world to give priority to mountain-related agenda in climate negotiations. By declaring that Nepal would host the “Sagarmatha Sambad” (Everest Dialogue), he tried to project the Himalayan nation’s image in the global quest against climate change. Nepal’s contribution to United Nations peacekeeping mission also ushered into a new era as the Nepali Army became the second largest troop contributor in 2021.

There are even speculations that the ruling coalition might collapse due to differences in MCC ratification.

The hottest topic of debate related to Nepal’s international relations in 2021 was the Millennium Challenge Corporation (MCC) agreement. The proposed MCC compact is a USD $500 million grant by the United States to Nepal for building electrical transmission lines and improving road connectivity. U.S. Assistant Secretary of State for South and Central Asian Affairs Donald Lu urged Nepali leaders during his visit in November to decide quickly on the matter. So far, the political parties have not been able to create a consensus on ratifying the agreement and have given conflicting views on the matter. Several fringe leftist parties have staged demonstrations against the MCC arguing that it is part of United States the broader Indo-Pacific Strategy. Home minister Bal Krishna Khand, in contrast, has stated that it was the responsibility of the government to take the MCC forward while coalition government partner CPN (MC) chair Dahal has opined that MCC could not be passed without amendments. Failure to ratify the agreement could hamper Nepal’s political and economic relations with the United States. There are even speculations that the ruling coalition might collapse due to differences in MCC ratification.

The COVID-19 pandemic provided an opportune moment for countries to unleash “vaccine diplomacy”. While India could not supply the vaccines in desired quantities as promised, China has emerged as the largest supplier of vaccines to Nepal. Some have expressed their frustration with countries like India and the United Kingdom, with whom Nepal shares close historical relations, for their failure to supply vaccines during the time of dire need. As the single largest supplier of vaccines to Nepal, China has been able to use this moment to shape public perception in its favor.

COVID-19 and Economic Slump

Nepal’s economy and tourism was hit hard due to the second wave of COVID-19 as the country imposed a four-month lockdown starting in April. So far, 58 percent of adults above 18 years of age have received at least one dose of the vaccine. There is still uncertainty over how the government plans to ensure vaccines for children under 12 years. The Asian Development Bank estimated that Nepal’s economy would grow by four percent in the fiscal year 2021-22 propelled by enhanced vaccination drive, increase in agricultural and industrial output. However, economic indicators have not been convincing of late. Remittance, which forms the backbone of Nepal’s economy, has been gradually declining. The country is also facing a liquidity crunch aided by low capital expenditure as banks and financial institutions have been hit hard by a lack of cash in the market. The stock market has taken a nosedive and the real estate market is also slumping due to the liquidity crisis and lack of bank loans. The Deuba government has not yet spelled out a clear policy to mitigate these unfolding crises. However, daily coronavirus cases are declining (although the Omicron variant may pose a new threat) and if the situation remains under control, then there will be high chances of economic activities springing back to life.


Nepal is expected to see intense political turbulence in the year ahead. The results of the local elections, expected to take place in April, will give a hint of things to come in the provincial and parliamentary elections slated for November. However, if the coalition government collapses in the aftermath of the MCC controversy, provincial and parliamentary elections might be held earlier than scheduled. Nepal will also have to engage more proactively with both India and China in the political and economic domains to make up on the lost time due to the pandemic. Similarly, the fate of MCC will decide how Nepal-US relations will progress. One of the major tasks of the Nepali government will be to ensure that its citizens are vaccinated against COVID-19. As the economic indicators have painted a grim picture toward the end of year, Nepal faces an uncertain year ahead economically. In these uncertain times, the political parties and their leaders should show maturity and come together so that the year 2022 will be better than 2021.


Image 1: PRAKASH MATHEMA/AFP via Getty Images

Image 2: COP26 via Flickr

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