The Government of Prime Minister Balendra Shah, with its parliamentary power and political momentum, must work to address unresolved and emerging international issues that impact Nepal’s wellbeing. Rather than a swashbuckling style and attitude, the management of foreign affairs requires sobriety, historical sensibility, and long-term outlook.
As seen in the past, times of political upheaval provide opportunity to course-correct and energise national policies with thought-out initiatives before they can be stifled by bureaucratic inertia and politicisation. However,tackled without forethought, such transitions can generate risks for country and society. Mistakes in domestic governance can be corrected through academic watchdogging and keen activism, but errors in foreign affairs can have long-lasting consequences, difficult or even impossible to reverse.
While the conduct of foreign affairs has been compromised in the past due to periods of authoritarianism, internal conflict and political instability, today’s global scenario is fraught. It is dominated by the transactional proclivities of US President Donald Trump, the rise of China as an economic and strategic powerhouse, and the weakening of India on the world stage even as it remains a powerhouse vis-à-vis Nepal. The Narendra Modi government, known for its 2015 Blockade and its aversion for Nepal’s Constitution, remains in place in New Delhi, while all the constituent states of India bordering Nepal are now under the saffron flag of theBharatiya Janata Party (BJP). Meanwhile, the Limpiyadhura Triangle territorial dispute has dug a diplomatic chasm between Kathmandu and New Delhi.
Even more than for many other countries, foreign affairs has a direct bearing on the socio-economic prospects of Nepal, well endowed by history, demography and geography but with a people cheated by democracy deficit, political instability and foreign intervention. Without mature foreign affairs management, Nepal is bound to slide further in international standing, most vividly seen in the weakness of the national passport. A credible ranking index shows Nepal’s passport at 97thout of 103. With millions of citizens now living overseas or those in-country needing to connect internationally,the weak passport impacts them through travel constraints, visa restrictions, reduced business opportunities, education challenges, and so on.
The earth-shattering events that pursue Nepali polity with regularity have not helped enhance the country’s international standing. The intelligentsia is still trying to understand the train of events from the violence of 8-9 September 2025, the emplacement of an interim government outside the Constitution, and the extraordinary results of the5 March 2026 elections that gave the Rastriya Swatantra Party (RSP) its near two-thirds majority in Parliament. While masterful use of algorithmic populism clearly had a central role to play, there is speculation as to the cast of characters, national and international, who may have assumed a part.
The Interim Government of Sushila Karki and the subsequent elected Balendra Shah Government have appeared to lean towards power centres in India and the United States, although the foreign offices and think tanks in both New Delhi and Washington DC are said to be perplexed by the unconventional attitude of the newly minted Kathmandu regime. Beijing, for its part, seems to have adopted a wait-and-see approach towards Kathmandu.
There are those who believe that PM Shah’s approach to governance is so individualistic and out-of-the-box that he may surprise everyone who suspect his intentions, but Nepal does seems to have entered a phase of weakening democracy and excessive engagement of unaccountable foreign entities.
At a time when Nepal needs to expand and deepen its international outreach and take advantage of evolving geopolitical and economic opportunities, there is a drumroll in Kathmandu for insularity and reduction in the number of embassies abroad. This is a formula for Kathmandu to remain fixated on India and China, with the United States as ‘close distant neighbour’. To prevent Nepal’s international standing from shrinking beyond the point of repair, academia and opinion-makers must keep close watch on the Balendra Shah Government’s foreign policy, including on the issues and concerns listed below.
Nepal–India Theatre
The there has been a steady erosion in the Nepal–India diplomatic ties over the decades, from the 1950s when the prime ministers were in a trusting relationship. India’s independence was a vulnerable time for Nepal, given New Delhi’s penchant for taking over principalities such as Hyderabad (Deccan) and Junagadh. Nepal remained untouched for two main reasons: firstly, the Nepal–UK Treaty of 1923, which guaranteed an international personality above that of the subcontinental princely states and nawabates; secondly, the Nepal’s democratic leaders who sought to end Rana rule fought alongside the freedom fighters for India’s Independence. That camaraderie stood as a roadblock against acquisitive desires.
Time has taken its toll, with Kathmandu now a greatly weakened entity vis-à-vis New Delhi, overwhelmed by heavyweight Indian diplomacy, intelligence apparatchiks running amok, and the latest intrusion of Hindutva propelled by the Rastriya Swayamsevak Sangh (RSS) organisation. Amidst this downturn, Kathmandu is asked to demand reciprocity from India on all bilateral matters, because sovereignty should not have regard for size or exceptionalism.
Matter of Reservoirs: Since the Panchayat era, Kathmandu politicians and bureaucrats have understood Nepal’s water resources mainly in terms of the production of hydropower and export to India. In its 100-point work agenda published soon after taking charge, the Shah Government repeated this approach, focusing on electricity generation and sales to India.
This outlook ignores the fact that what New Delhi wants from Nepal is primarily high dams and large reservoirs. Due to urbanisation and irrigation demands of the Ganga plain, there is a need for storage of monsoonal water, for which the deep valleys of Nepal’s major rivers are ‘ideal’. New Delhi’s undeclared core agenda vis-à-vis Nepal is to build high dams on the Kosi, Gandaki, Karnali, and other watercourses. Insufficient attention paid to this Indian priority by Nepal’s academia and bureaucracy has been a boon thus far for New Delhi.
Thus, New Delhi policymakers want to shape the narrative in Nepal in favour of high dams, which largely explainsthe decades-long interventionist agenda against the neighbour. Without informing Nepali authorities, New Delhiplanners have already mapped out huge canals running across Nepal’s Tarai plains to carry the flow into a grandiose ‘river linking’ project. Propelled by a sense of infrastructural gigantism, the technocrats who propose high dams and deep reservoirs are yet to be challenged on inundation, climate change, seismicity and siltation.
Limpiyadhura Triangle: Basing itself on the text of the Sugauli Treaty of 1816, Kathmandu claims the Lipulek-Kalapani-Limpiyadhura region as its own. New Delhi refuses to hear of the matter, and amidst the bilateral rupture Indian engineers continued building a road up to the high pass of Lipulek. In June 2015, PM Sushil Koirala sent diplomatic communication protestingan agreement between New Delhi and Beijing over the use of the Lipulek for trade and pilgrimage. PM KP Oli sent a similar note in August 2025, and raised the matter directly with President Xi Jinping at a summit meeting in Tianjin on 30 August 2025.
After what seemed like initial hesitation, PM Shah’s Foreign Ministry put out a press note on 3 May 2026, reiterating that “the Government is clear and committed to the fact that the area east of the Mahakali River incorporating Limpiyadhura, Lipulek and Kalapani are integrally part of Nepal”.
There are some who question whether Kathmandu can take on the might of India on a territorial dispute of this magnitude, with New Delhi having stonewalled all efforts at dialogue. Some commentators question the utility of sending repeated diplomatic to Beijing and New Delhi to no effect, as if it were wrong to reiterate claims against the powerful neighbours.
As far as India-Nepal relations are concerned, the way forward is suggested by how India itself has dealt with its claims on territories not in possession –the Aksai Chin and Azad Kashmir regions have remained on official map for seven decades without India exercising control. Following suit, there is nothing to stop Kathmandu from maintaining its claim over the Limpiyadhura Triangle, remaining open to dialogue on the matter, and otherwise normalisingbilateral ties.
EPG Report: In February 2016, the governments of Nepal and India constituted the Eminent Persons Group (EPG) to update and strengthen bilateral ties by forging common understandings. Although the report was completed unanimously in July 2018 by respected citizens selected by the two governments, PM Modi apparently has had second thoughts about the whole exercise. The matter has remained in limbo, with successive governments in Kathmandu unwilling to challenge New Delhi on the matter.
New Delhi’s reluctance is unwarranted because neither government is obligated to accept the recommendations, while the provisions are expected to help improve and stabilisethe relationship across the open border. The PM Shah Government must diplomatically urge PM Modi to move to jointly accept the EPG report.If New Delhi continues to stonewall, good sense demands that PM Shah move to unilaterally release the EPG report.
Agnipath Scheme: While Nepali citizens have served in the British Army since 1818, Indian independence in 1947 led to a tripartite agreement that divided the erstwhile Gurkha Brigade, with six regiments joining the Indian Army and four becoming part of the British Army. Even as Nepal evolved as a contemporary nation-state, thearrangement of formally sanctioned foreign military recruitment continued.The fact that the British Gurkha and Indian Gorkha regiments have provided quality employment to the ‘martial hill tribes’ of Nepal left few intellectuals and politicians willing to challengethe tradition.
While formally sanctioned service in foreign militaries raises questions with regard to both receiving countries, participation in the Indian Army raises proximate concernsin terms of sovereignty and diplomacy, Nepali citizens having fought under the Indian flag in conflicts involving China as well as Pakistan, and also in counter-insurgency operations in Sri Lanka under the Indian Peace Keeping Force (IPKF). And the question emerges, how can a member country of SAARC permit its citizens to raise arms on behalf of one neighbour against another?
The fact is, over the past two decades Nepali citizens have entered job markets around the globe by the millions, with an average 2000 flying out of Tribhuvan International Airport every day. Gorkha recruitment into the Indian Army hovered around a thousand annually.
Under the circumstances, it was PM Narendra Modi who ‘gifted’ Nepali authorities an excuse to halt recruitment. In 2022, he introduced the Agnipathscheme, offering new recruits into the Indian military a four-year initial service term, with only 25 per cent to be made permanent. A cost-cutting measure widely criticised in India, the scheme provided Nepali authorities with the opportunity to quietly move to halt Gorkha recruitmentfor going against the 1947 agreement.
For its own interests, New Delhi would want to revive the recruitment of Nepali citizens, among other things to continue influencing Nepali society through socialisation, salaries and pension schemes. But Nepal’s national priorities, economic possibilities, as well as evolving geopolitical complexities require an end to Gorkha recruitment. The Government of Balendra Shah should consider a formal announcement to this effect, to prevent Nepali citizens as ‘Agniveers’ going into battle for India.
Nepal and the Indian Economy: Overall, Nepal is seen as a weak neighbourto India, and internalising this trope has led to a fair amount of diffidence in Kathmandu’sown dealings with New Delhi. The fact that the Nepali currency NPR is pegged to INR, though little discussed publicly, is potentially a coercive ‘handle’ that New Delhi has on Kathmandu.
Remittances and exports show that Nepal’s economy is not inconsequential for India, however. The presence of Nepali citizens engaged in migrant labourin India is often presented as proof of Nepal’s economic status, but the fact is that Nepal is the seventh-largest economy receiving migrant labour from India. The money repatriated by Indiansworkers in Nepal helps sustain the rural economies in the poorest parts of India, from Jharkhand to Biharand Odisha.
What does fractured mandate mean for foreign policy?
Money repatriated by Indian migrant workers is said to hover around USD 3 billion per annum, while according to one estimate Nepali migrants in India send back no more than a third of that amount. New Delhi commentators and geo-strategists also need to consider Nepal’s weightage for India’s economy, given that it is the eleventh-largest export destination for Indian goods and services, second only to Bangladesh within Southasia.
The China Angle
Nepal’s geopolitical, economic and cultural history link it to Tibet as much as to the Ganga plain, which is why relationsin both directions must be considered ‘natural’ and ‘special’. It was mercantilism of the late colonial era that forced Nepal’s economy and polity to pivot southwards in the early 20th century. The Asia-wide evolution of transport and infrastructure in the 21st century means Nepal need no longer consider itself ‘India-locked’. For this reason, as also a nod to historical ties with Tibet/China, Kathmandu must reassure Beijing that it is not a prisoner of any kind of geopolitical ‘tilt’.
As China continues to rise as a global power – from advances in industrial production to the service sector, military prowess and robotics – it would be folly for Kathmandu to allow the lines to the northto weaken. While Beijing’s leaders of the Mao Zedong era used to magnanimously urge Nepali dignitaries to remain on good terms with New Delhi, Beijing is now an assertive presence in Kathmandu. All the more reason for Kathmandu to profess as well as observe non-alignment.
Kathmandu’s politicians and bureaucrats are conditioned to genuflect towards Beijing, which is but an awkward attempt to counterbalance the overwhelming influence of New Delhi on Nepal’s economy and society. This subservience might explain the occasionally perfunctory attitude of Chinese officials towards Nepali counterparts. A corrective is needed, and Beijing’s representatives could start by not requiring Nepali delegations to parrot the litany at the start of high-level meetings: “Nepal is committed to the One China policy and will never allow its territory to be used against China.” Some things should have been self-evident by now.
An example of how the Chinese can go overboardwas seen at the state banquet hosted by President Bidya Devi Bhandari for President Xi Jinping on 13 October 2019. In his address, President Xi stated baldly that anyone who sought to split any part of China “will end in crushed bodies and shattered bones”. Such descriptive language while on a state visit to a friendly neighbourwas uncalled for.
Understandably, Beijing is sensitive about the Nepal-Tibet frontier, but this cannot be an excuse to intervene on matters that affects the lives and livelihoods in Nepal’s high valleys, as it does through the Home Ministry of Nepal. The religion and culture of much of the ‘Himali’ northern Nepalare of the Mahayan tradition, similar to that practiced in much of Tibet. Neither Beijing nor Kathmandu should view the Himali community as ipso facto supporters of the ‘Free Tibet Movement’. At the same time, Tibetan refugees should continue to receive documentation in accordance with international standards, as was the case two decades ago before timidity set in on Kathmandu.
In March 2016, following India’s Blockade, PM KP Oli visited Beijing and signed 10 agreements and MoUs on trade, transit, connectivity, infrastructure and energy. More agreements were signed later by PM Oli in Beijing, including nine in December 2024. A BRI Framework Agreement was also inked then to develop a ‘trans-Himalayan multi-dimensional connectivity network’. The slew of agreements has remained mostly unimplemented due to bureaucratic inertia and geostrategic nervousness in Kathmandu. Many of the deals brought home by PM Oli are low hanging fruits for PM Shah to own and implement, for the sake of progress and through trade and connectivity.
Himalayan Trilateralism
Nepal’s southern border is open, while the northern border is controlled. With the development of highways, in several parts it is becoming possible to travel south-north within a day. Both neighbours may therefore perceive increased risks emanating from Nepali territory, a matter not as yet addressed by Kathmandu’s academia and home administration.
Economic sovereignty demands that Nepal has the right to engage with the Chinese economy, yet New Delhi has arrogated veto power to itself. Himalaya Airlines, with Chinese investment, has an expanding network across Asia but is denied access to next-door India. Neither does New Delhi allow Pokhara Airport (built with Chinese loans) or Bhairahawa Airport (constructed through global bidding also involving a Chinese contractor) to be connected to Indian cities, one reason that both have thus far failed as ‘international’ airports.
Before importing electricity from Nepal, New Delhi inspects all paperwork in order to deny access to hydropower plants with Chinese involvement of any sort, whether in finance or construction. Such tactics, which undermine Nepal’s sovereign autonomy, must perforce be challenged by Kathmandu, but it has not happened. The Shah Government must now ask the simple question fo New Delhi: if India itself is so deeply connected to China’s economy, why this coercion in the case of Nepal? The Government of Nepal should also seek the Chinese Government’s ’s opinion on the matter, as this ban on Chinese-linked goods and service would seem to be an unfriendly act by New Delhi towards Beijing.
New Delhi interlocutors wanting Nepal to remain distanced from the Chinese economy should be asked to introspect, particularly when India’s own economy is so deeply enmeshed with China’s. And if Kathmandu seeks to participate in the Belt and Road Initiative (BRI) according to its interests, like other South Asian countries apart from India, New Delhi should not throw its weight around and try to block the way.
SAARC and Southasia
It is distressing that Nepal has not acted as a protector and promoter of the South Asian Association for Regional Cooperation (SAARC), headquartered in Kathmandu and whose chairmanship has been held by Kathmandu since 2014. After the 18th Summit held in Kathmandu in November of that year, the subsequent 19th Summit (and transfer of chairmanship) was scheduled for Islamabad in November 2016. Unfortunately, PM Modi’s refusing to go to Islamabad has left the organisation in limbo.
One of the primary international tasks of the Shah Government will be to revive SAARC, for which the 19th Summit must be made to happen. Even though some of the activities under the SAARC umbrella have continued after a fashion,a summit would indicate ownership of the concept of South Asian regionalism by all the member countries, most importantly the stumbling block of India. The Summit would also herald a move towards normalisation of India–Pakistan relations, which would in turn act as a catalyst for peace and socio-economic advancement across Southasia.
There are enough snide announcementsof the ‘death of SAARC’, but that is nothing more than fatalistic masochism, emanating from commentators steeped in ‘nation-statism’. Locked into the narrative set by specific foreign offices, they fail to understand the social, cultural, economic and geopolitical advantages of Southasian cohabitation, including people-to-people contact, reduced military spending, economic growth, and the possibility of South Asia evolving as a cohesive global ‘bloc’. As it settles down to work, as SAARC Chair, the Shah Government must communicate with all Southasian capitals to rejuvenate the organisation.
Beyond the SAARC process, Kathmandu must also work on separate bilateral and subregional connections with the other countries of Southasia. Pakistan has long been kept at arm’s length by Kathmandu because of unnecessary nervousness about New Delhi, and a revival of contact would be beneficial for Nepal in arena from trade to academia, tourism to climate crisis. Relations can be revived with the simple flipping of one switch, which is the restoring direct flights between Kathmandu and Karachi and/or Lahore.
Given that the worldly and regional outlooks of Bangladesh, Nepal and Sri Lanka tend to coincide, including on the need to balance relations with New Delhi and Beijing, the Shah Government must seek to develop collaborative educational, cultural, diplomatic and developmental connections with Colombo and Dhaka.
Soft Power, Third Neighbour
Nepal is not a small country by population and natural resources, and should be able to present itself accordingly on the global stage. Its achievements as an open and democratic society in Southasia constitute diplomatic and economic capital, and the government and pubic alike must be able to build on this to mobilise Nepal’s soft power (saumya shakti). Nepal has no reason to be considered by others or see itself as a ‘basket case’, and the first step is to recogniseone’s soft power rather than be swamped by the ‘failed state’ narrative.
With its welcoming visa regime, amenable public and salubrious climate overall, the country is an attractive international destination;as such, it can be a vibrant meeting point for South Asia, Asia, and the world. If it can attain political stability and avoid the kind of public mayhem seen, for example, on 9 September 2025, the country will evolve into a global hub for conferences, education, and healthcare. The torching of national edifices and international brand hotels were aberrations, but not much has been done refresh the national image since other than the momentary global romance with a ‘rapper turned prime minister’.
In terms of socio-political values, Nepal leads. It is one of the few countries of Asia without the death penalty, with courts that are closer to the citizenry because decisions are issued in Nepali and not the King’s English. Nepal has adopted a transitional justice process to stabilise society after the internal conflict of 2005–2015, something that could be emulated elsewhere in the in countries that have suffered deep conflicts for longer periods.
Given its geography and demography, Nepal is a ‘barometer of climate change’, and so should be playing a major role in climate diplomacy and science. The Shah Government’s decision to resume the Sagarmatha Dialogue, started by the Oli Government, is welcome and should be supplemented by appointing a ‘climate envoy’ to raise the level of urgency about the accelerating global emergency.
Nepal’s foreign policy tends to be centered on India, China and the US, whereas it should reach out confidently to all of the Global North and Global South. A ‘third neighbour’ policy such as that propounded by Mongolia, squished between China and Russia, would serve Nepal well. Diplomatic, intellectual, economic and cultural ties must be deepened not only with next door SAARC members and farther afield with countries in Europe, as well as Japan, Australia, South Africa, Brazil, and so on. Given also landlocked Mongolia’s tradition of the MahayanBuddhism, Kathmandu-Ulaanbaatar must be connected by air across the expanse of the Himalaya and the Tibetan Plateau. Nepal and Mongolia can conveniently become each other’s ‘third neighbour’.
A country with soft power ambitions should not turn inwards and xenophobic, but this is a trend that has been accelerating over the past decade, even as attitudes towards minorities, foreigners, refugees, and neighbours harden. The Shah Government, put in power by a populist surge fed by social media, should fight what looks like an urge for Panchayat-era insularity.
Upon coming to power, the Shah Government announced the sine die cancellation of thousands of ‘political appointments’ of previous governments. In the process, adding to recalls of ambassadors by the Interim Government, the present Government has pulled back all non-career ambassadors and cancelled all consul-general appointments worldwide. Countries presently without Nepal’s ambassador are: Australia, China, Denmark, Germany, India, Israel, Japan, Malaysia, Qatar, Russia, Sri Lanka, Spain, South Africa, South Korea, UK and US. It is significant that this matter is being discussed in Kathmandu’s drawing rooms and seminar halls, all of it happening when Nepal should in outreach rather than withdrawal mode.
At the heart of Nepal’s international soft power is its open, democratic society – which has a direct relationship to socio-economic growth. For this reason, amidst uncertain times and led by a political party which has yet to decide on its political ideology but seems to be leaning isolationist and conservative, Nepal must protect its representative governance, constitutionalism and democracy. In their absence, our soft power and socio-economic potential will wither away.
Ab initio, putting Nepal’s best foot forward requires Nepal’s topmost leaders to pull back from making a fool of themselves on the international stage. An egregious example was when the son of PM Pushpa Kamal Dahal, at the BRICS-BIMSTEC summit in Goa in October 2016, took a picture of his mom and dad, President Xi Jingping and PM Narendra Modi at an unguarded moment while they waited for their vehicle pickup. He put the unauthorised photograph on Facebook, and the Nepali delegation promoted the picture that went viral as proof of successful trilateral diplomacy, but the other delegations were not amused with the immature act.
If Prime Minister Balendra Shah were to be judged on the same scale as others before him, the question to ask would be:Why as Mayor of Kathmandu did you put up on your office wall that fanciful map of ‘Greater Nepal’, incorporating regions from present-day HimalchalPradesh to Sikkim, the Bihar plains and even a part of Bangladesh?He would be asked about the intemperate midnight tweet of 1 November 2025, where he expressed profanities against America, India and China as well as Nepal’s political parties. That was two months before he joined the RSP and was anointed its prime ministerial candidate.
Calls to Hatred
New Delhi’s interference in Nepali politics and state administration has been continuously operative in the diplomatic, economic and intelligence arena. Over the past decade, the advent of exported political Hindutva has represented a heightened level of threat, as it seeks to penetrate the cultural fabric of Nepali society and inject inter-community poison. In India, the Hindutva ideology dominant in northern and central regions has created social polarisationsbased on a rigid interpretation of Hindu tradition. Whereas India’s Hindutva is centred largely on an exclusivist interpretation of the worship of Shri Ram, Nepal’s ‘sanatan’ tradition has not yet been swamped by the version promoted by the RSS.
‘Hindu identity’ in present-day Nepal encompasses traditions ranging from Masto and Dhami–Jhankri practices originating in the Karnali (Sinja) region and part of the spiritual heritage of the dominant Khas community, to Shaiva, Krishna Pranami, Tantra and other streams. There is significant syncretism among various spiritual and religious communities, as well as a tradition of harmony among followers of various Buddhist traditions, nature worshippers, Muslims, Christians, Sikhs, and others.
Unfortunately, the effect of the hardline Hindutva narrative is making itself felt across the open border in Nepal, supported by the widespread consumption of Indian television and social media. While the calls to hatred and attempts to organise mayhem have not yetcatalysedinto something bigger and harsher, we do not yet know whether Balendra Shah Government has the social-political commitment to take on the rigid, exclusivist ideology propagated by India’s RSS. To begin with, the Kathmandu Government should be aware of the not-so-subtle suggestion of RSS/BJP Hindutva that it seeks to merge the entire Southasian region into a ‘Akhanda Bharat’combine, an invasive, undivided region of fevered imaginations. A map confirming this exclusivist, colonial intent hangs in the new Parliament building in New Delhi.
There are Nepali groups that take their cue from the RSS in Nagpur, Maharashtra, and they have been in overdrive in Nepal, especially since it became a republic with the interim Constitution of 2007. Some proponents are royalists embittered by the change of regime, while many are from Brahminical classes that have lost their traditional hold over communities, historically maintained through learning, liturgy and ritual. There is a growing youthful flank that has taken on exclusionary Hindutva in both hill and plain, as also individuals in the major political parties who have succumbed to the siren call of the RSS. One would have thought that the anti-Muslim doctrine imported from north India would not have found much traction in Nepal, given its separate societal evolution.
Not satisfied with working through Nepali organisations leaning towards Hindutva, the RSS has gone on to establish its own base in Kathmandu. The office of the Hindu Swayamsevak Sangh (HSS) has been operating from a five-storey building in Kathmandu’s Gujeswari locality, named ‘Keshav Dham’, with Indian citizens serving as organisers and propagators. The HSS is not the ashram of a babaji or spiritual leader, but a political organisation created to promote the ideology of a political outfit of a neighbouring country.
Successive governments in Kathmandu have been uncaring of the polarising impact of Indian Hindutva on Nepal’s societal fabric. The Shah Government in Kathmandu should show clarity and courage in responding to RSS designs on Nepali society, necessary for both internal harmony and the country’s international standing. Foreign political organisations of various stripes are not allowed to operate in Nepal, and in line with this policy the ‘HSS Nepal Central Office’ should be ordered shut.
Gaze on Muslims
A government responsible for maintaining dignified international relations must also remain vigilant that external influencers do not use exclusivist narratives to divide a society that has long maintained equilibrium, since the end of the Rana Era till the present.The Government should take heart from Nepal’s relatively harmonious inter-community relations and instruct all the Central District Officers accordingly, particularly with regard to flashpoint towns of the plains.
In the current context, the polarising influence of India’s RSS has meant increased pressure on Nepal’s Muslims, while Janajati (ethnic), Dalit and other activists are also worried. The social narrative has evolved in such a manner that a terror incident in Jammu and Kashmir immediately generates animosity towards Nepal’s Muslims. When extremists attack Hindus in Bangladesh, why should Muslims of Nepal be made to feel insecure?
The Rohingya of Myanmar are among the world’s most persecuted communities, and at least 500 have taken refuge in Nepal. Their situation most insecure, without documentation and amidst considerable social resentment, with many forced to move from place to place in search of shelter. In line with international humanitarian standards, the Government must ensure the security and well-being of Rohingya refugees.
The mindset of the Kathmandu Government and intellectual circles towards Israel is puzzling. It is linked, among other things, to the attitude of the Indian ruling party towards Benjamin Netanyahu as opposed to the Palestinians. During the Gaza conflict – with over 70,000 Palestinians, including children, the elderly, women and men have been killed in genocidal violence, Nepali society as a whole did not demonstrate concern and commitment. There has therefore been no public pressure on the authorities, then or now.
If Nepal aims to play a rightful role in international affairs based on its history and diplomatic tradition, the Government of Balendra Shah should adopt a critical, even accusatory, stance on Tel Aviv distinct from New Delhi’s. Nepal does not need to mirror the ‘forgiving’ attitude of PM Narendra Modi towards PM Netanyahu. A significant démarcheby Kathmandu would be to vet Israeli conscripts visiting Nepal on holiday, barring individuals accused of crimes against humanity from entering the country.
US, SPP and GSI
In the modern era beginning in the 1950s, the United States has supported Nepal in various ways — including propagation of wheat agriculture, dispatching Peace Corps volunteers to underserved districts, providing Fulbright and Humphrey education fellowships, eradication of malaria, among others. However, geopolitical pressure on Kathmandu from Washington DC has increased in the Trump era with the heightened US-China rivalry, even as Kathmandu’s capacity to respond is reduced.
The USD 500 million grant provided by Washington DC under the Millennium Challenge Corporation (MCC) programme became mired in controversy because of some double-dealing Kathmandu politicians, even though it was provided after a rigorous bilateral review over several years based on Nepal’s needs and governance record. The grant is a welcome injection to meet the economy’s infrastructure needs at a time when foreign grant assistance has dipped drastically. The MCC project is meant to expand and rationalise Nepal’s electricity grid and upgrade some highways. In Beijing, a Chinese government spokesperson unnecessarily got involved in third-country matters when in February 2022 he criticised MCC’s presence in Nepal as part of the US’s “coercive diplomacy”.
The US State Partnership Programme (SPP) cannot be viewed in the same welcoming light as the MCC. The SPP involves cooperation with the American National Guard, and in Nepal’s case it is proposed mainly as disaster management support for the Nepal Army. Correspondence began in 2015 and the Nepal Army sent a letter requesting participation in SPP, but as controversy arose in Kathmandu on what could be construed as a military alliance, the Sher Bahadur Deuba Government in 2022 decided to back out. The programme is currently suspended, with the SPP website listing Nepal as being in a “dormant relationship”.
For Nepal, engaging in military or semi-military cooperation that has the potential of alarming New Delhi and/or Beijing is a matter that requires thorough public debate. Nepal does not have the wiggle room that other countries have= given its land borders with the two Asian giants, nor does Kathmandu presently have the diplomatic capacity to reassure both neighboursabout entering into arrangements such as the SPP. While US support in disaster management is welcome, including for the Nepal Army, it can be provided through civilian channels if Washington DC so desires.
The same reasons for Kathmandu to avoid joining SPP would also apply to Beijing’s Global Security Initiative (GSI).It is presented as a concept alternative to the alliance-based security of the West, but the very fact that it is presented as a challenge to the West should make it unpalatable for what Nepal needs to be seen to be,i.e. avowedly neutral. Perceptions matter.
Something extraordinary happened during PM KP Oli’s visit to Tianjin for the Shanghai Cooperation Organisation summit and ‘Victory Day’ commemoration in August 2025, where he had a summit meeting with President Xi. A subsequent Chinese Foreign Ministry readout stated that Nepal had endorsed the GSI, and the Nepali delegation was double quick to inform the press that nothing of the sort had been discussed. The Nepal side seemed to regard the matter urgent enough to react even if the Chinese hosts would surely be displeased, with a member of the delegation telling The Kathmandu Post that “such an alliance (has) security and military connotations”.
While PM Oli himself has not come out to clarify as to what transpired in the one-on-one meeting between President Xi, Nepal clearly needs to be careful as it charts the murky diplomatic waters between Washington DC and Beijing. All the more reasonPM Balendra Shah and his team to understand the need for finesse, decorum and clear communication for the maintenance of international relations. In this context, the tendency of PM Shah to maintain radio silence, speaking only via his social media account, is problematic.
Indeed, unnecessary bravado in the conduct of foreign affairs is not required, such as when PM Gor decided not to make time for visiting American diplomat Sergio Gor in early May 2026, apparently for reasons of protocol hierarchy. The Prime Minister’s Office did not give due importance to the fact that Gor is the US President’s Special Envoy for South and Central Asia, not just the serving Ambassador to India.
Civilian Supremacy
In a democracy, the military must operate under civilian control on all domestic matters, neither should it have inordinate influence on foreign affairs. Back in 1950s, BP Koirala realised the vulnerability of democratic institutions vis-à-vis the military when the ‘Bijuli Garat’ elite force of the Nepal Army was moved from the Singha Durbar governmental secretariat to the Narayanhiti Royal Palace. The 30-year Panchayat royal autocracy was defended essentially by force of arms and King Gyanendra’s coup of 2005 was conducted with the soldiers on hand, which showed once again the need for the military to be confined to the barracks.
Debates over ‘civilian supremacy’ in relation to the Nepal Army’s actions have surfaced off and on, most significantly in May 2009, when Maoist Prime Minister Pushpa Kamal Dahal sought to disrupt the Army’s chain of command by appointing a chief of his choice. The Army has came to the forefront of public criticism once again in the context of the mayhem of 8–9 September 2026, when it was unable to save key installations under its protection from arson (Singha Durbar, Shital Niwas, the Presidential Secretariat, etc.). Immediately thereafter, while keeping the Oli cabinet under house arrest (though presented as a safety measure), the Nepal Army was instrumental in the selection of the Interim Government of Sushila Karki.
Prime Minister Balendra Shah is known to be close to the Army, showing deference to the military that he does not extend to Parliament, nor the office of the President or his own cabinet. Under the circumstances, there is a need to ensure proper adherence to the principle of civilian rule, including ensuring that the interests of the military brass do not cloud the transparency in the conduct of foreign relations. Surely the Army becoming overly influential in governance and international relations carries with it the danger of possible alignment with one global power or another. Civilian supremacy also applies to foreign affairs.
While the intelligentsia needs to watch out for ‘military creep’ in internal affairs and external relations, it does need to support the Nepal Army in another front. Despite being a major participant in UN Peacekeeping over the decades, and as of 2026 providing the largest contingent, the UN system has not provided the Nepal Army with adequate command positions. Nepal did recently secure such a position in Sudan after years of lobbying, but there is a need for more diplomatic effort. Further, the Nepal Army’s role as a training institution for the world’s militaries in arenas spanning mountain warfare to disaster preparedness should also be enhanced and supported.
Bhutan and Refugees
Bhutan and Nepal are two countries of the Himalayan chain that should have been close partners, to confront together the myriad geopolitical, economic, environmental and climate-related challenges. However, Thimphu and Kathmandu have been distanced from each other for more than three decades.The two countries have been at odds since Thimphu’s expulsion of a large portion of its Nepali-speaking citizenry in the late 1980s and early 1990s.
In all, more than 110,000 Lhotshamparefugees exited Bhutan, being ‘escorted’ across Indian territory and left without support in the plains of eastern Nepal.After two decades of melancholic existence in the hot and humidflats, the refugees were suddenly approached and offered third-country settlement by the West. By now, a majority have been resettled in third countries, mostly in the United States, with others placed in Australia, Canada, New Zealand and some European recipients. However, around 7,000 refugee remain in the camps of Jhapa, most of them maintaining their hope of returning home to the hills of Bhutan.
The failure to resolve the Bhutanese refugee issue is linked to Thimphu’s polished diplomacy as supported by New Delhi, which has been complemented by Kathmandu’s weak and lackadaisical approach to the Lhotshampa question. The Shah Government must initiate new diplomatic efforts to repatriate remaining refugees to Bhutan with dignity, which will immediately contribute to normalise relations with an important Southasianneighbour.
Diligent reporting by journalists in Kathmandu over the last few years helped expose a ‘fake refugee’ scam, which erupted into a major affair that has dented Nepal’s international reputation. Involving some Nepali politicians at the topmost rung, the attempt of the scamsters was to make a killing from Nepali citizens by promising to send them to the Western receiving countries as phony Bhutanese refugees. In reality, the resettlement programme handled by the International Organisation for Migration(IOM) had already closed by the time the bogus refugees were being created.
Because of the scandal, the entire refugee matter has become a hot potato for Nepal’s bureaucracy, leading to the refugees being victimised further, denied travel and identity papers and facing hardship in livelihoods. While the Balendra Shah Government must focus on providing documentation and support assistance in accordance with humanitarian standards, all those in the ‘chain of command’ that sought to make money off fake refugees must be investigated and prosecuted. This is required for the sake of natural justice and restoring Nepal’s international credibility.
FATF and Money Laundering
A current and critical aspect of Nepal’s international vulnerability is the fact that it is in the cross-hairs of the international anti-money laundering watchdog,the Financial Action Task Force (FATF). The country is presently in FATF’s Grey List, which means that its economy and governance is under increased international scrutiny, triggering a domino effect from reduced foreign direct investment to stricter compliance checks by the global banking system, and difficulties in dealings with international financing institutions.
Nepal was placed in the FATF Grey List in 2011 and got out in 2014 after providing convincing proof of structural reform, however as political instability and associated corruption escalated it found itself back on the Grey List in February 2025. There are presently 22 countries in the FATF Grey List including Nepal. There is clear and present danger that Nepal may entering the FATF Black List, which has only three other countries as of now.
The regional office of FATF known as Asia Pacific Group (APG) recently sent a warning to Kathmandu that it is in danger of falling into the Black List, formally known as‘High-Risk Jurisdictions Subject to a Call for Action’. Nepal’s savvy Finance Minister Swarnim Wagle will have his hands full trying to get a reprieve, pushing internal reform while convincing the international community of the Shah Government’s good intentions.
End Note
In addition to pre-existing pre-existinggeopolitical infirmities, Nepal is vulnerable to the unprecedented global churning that has been triggered by the policies of US President Donald Trump, including most recently the attack on Iran. The resulting impact on oil prices,fertiliser scarcity, as well as projected reductions in remittance flowscoupled with an overall global slowdown – all of this adds unexpected challenges for the government of PM Balendra Shah. Nepal is not insulated from world affairs as it was in the past, when the subsistence economy could survive international disruptions.
While addressing internal governance challenges that are bound to escalate, the Balendra Shah Government must double down to firm up Nepal’s international image and position. With China growing stronger and more assertive as a global power and India facing economic and internal social challenges, Nepal must prepare to confront diplomatic challenges from both north and south while expanding its presence in the international arena.
To respond with skill and confidence, Nepal’s foreign policy has to be guided by an in-depth understanding and appreciation of the country’s historical significance, its human and natural resources, as well as its geography and economic potential.
This is an expanded version of an article that originally appeared in Nepali in Nagarik daily on May 6, 2026.
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