By P.R. Pradhan

What foreign powers want from Nepal can be sensed from the remarks and writings of some “intellectuals” who appear to serve foreign interests against the greater interests of their motherland.

Recently, one such “intellectual” called for increasing the number of local governments beyond the existing 753. In the past, Baburam Bhattarai proposed 14 provinces based on ethnicity, with extensive autonomy. Upendra Yadav advocated “One Madhesh, One Province,” proposing to bring the Tarai districts into a single province. Critics argue that such proposals could undermine Nepal’s territorial cohesion.

Since Nepal adopted federalism, the own-source revenue of the seven provinces and 753 local governments has remained weak, leaving them heavily dependent on federal grants and revenue sharing. There is little indication that they are becoming financially self-reliant. Meanwhile, the federal government increasingly relies on borrowing to finance public expenditure.

Nepal’s total public debt has reached approximately Rs. 2.975 trillion, equivalent to around 45 percent of GDP. The federal government plans to mobilize around Rs. 54.8 billion in new borrowing each month to finance the budget deficit. Public expenditure remains heavily tilted toward recurrent and non-productive spending rather than capital investment. These indicators present a worrying fiscal picture, possibly a debt trap.

Nepal was once moving toward industrialization, but that process was derailed. The country was encouraged to shut down or privatize government-owned industries, often following advice from foreign experts and international institutions. Many industries providing employment to citizens were closed or disposed of, contributing to the exodus of young people seeking difficult and low-paid jobs abroad.

Even a government enjoying nearly a two-thirds majority has struggled to address problems ordinary citizens have faced for years. People are struggling to obtain LPG cylinders; farmers face fertilizer shortages; prices of essential goods continue to rise; and petroleum products remain expensive.

The new government led by young political leaders has expanded the tax net, placing additional pressure on households and businesses. Meanwhile, the economy appears to be experiencing stagnation. Commercial banks have ample liquidity, yet demand for credit remains weak. Entrepreneurs are reluctant to borrow even at low interest rates because they lack confidence in the security and profitability of their investments.

Voters concluded that traditional political parties had failed to deliver meaningful improvements and therefore gave the Rastriya Swatantra Party (RSP) a strong mandate to govern alone. However, the new political force also appears to be struggling to meet public expectations. This suggests that the problem may be deeper than the performance of any particular party. The political system itself requires serious reconsideration. Without fundamental constitutional and structural reforms, building a sustainable future will remain difficult.

When the government lacks resources for productive investment, infrastructure development becomes difficult. Excessive taxation can also discourage private investment and undermine the investment climate. Although the government continues to seek foreign direct investment, relatively few investors appear willing to commit substantial capital to Nepal, reflecting concerns about policy uncertainty, bureaucracy, political instability and investment security.

The immediate priority should be to reduce unnecessary public expenditure and redirect resources toward productive investment. The provincial structure and large number of local government units should be reviewed based on financial sustainability and administrative efficiency. Rationalizing these structures could save public resources for infrastructure, industrialization and employment generation.

Nepal cannot build prosperity simply by expanding government structures, increasing taxation and accumulating debt. It needs a political and economic system sustained primarily by domestic revenue, productive investment and a strong private sector.

To conclude, Nepal needs fundamental political and economic reform. The existing system should be reviewed to create a more efficient, accountable and financially sustainable structure—one that serves the national interest and can ultimately sustain itself through Nepal’s own productive capacity and domestic revenue.

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