By P.R. Pradhan
Balendra Shah is expected to assume office on Friday, March 27, 2026, backed by a near two-thirds majority in Parliament. While this strong mandate ensures political stability and legislative ease, it does not insulate him from the complex and immediate challenges that lie ahead as he steps into the role of prime minister.
One of the most pressing concerns stems from the broader geopolitical environment, particularly the repercussions of the United States–Israel attack on Iran. The fallout from this conflict has already begun to affect Nepal’s fragile economy. A shortage of liquefied petroleum gas (LPG) has emerged in the domestic market, disrupting daily life. At the same time, a growing number of Nepali workers in Gulf countries are returning home amid regional instability. This trend poses a dual challenge: a likely decline in remittance inflows—one of Nepal’s economic lifelines—and the urgent need to absorb and employ returning workers within the domestic economy. Managing this potential labor surplus will be a critical test for the incoming government.
Beyond economic concerns, geopolitical tensions are also becoming increasingly evident. Nepal’s two immediate neighbors, India and China, appear uneasy about the sweeping electoral victory of the Rastriya Swatantra Party (RSP). There is growing speculation—though unverified—that the RSP has received backing from external forces aligned with U.S. strategic interests, particularly in the context of containing India and China from the Nepali soil. Such perceptions, whether accurate or not, risk straining Nepal’s delicate diplomatic equilibrium.
A notable development reinforcing these concerns is the reported decision by India and China to initiate trade through Lipulekh Pass—a territory of Nepal—starting this June, allegedly without prior consultation with Kathmandu. This move could signify a coordinated sidelining of Nepal in matters concerning its own territorial and economic interests, raising serious questions about the country’s diplomatic leverage.
Domestically, recent political developments also warrant scrutiny. The Gen-Z protests of September 8 and 9 were reportedly influenced by externally trained groups, further fueling narratives of foreign involvement in Nepal’s internal affairs. Similarly, the interim government led by Sushila Karki has been portrayed by some critics as being aligned with U.S. interests. The congratulatory message extended by the Tibetan government in exile added another layer of geopolitical sensitivity, given China’s longstanding concerns over Tibetan activities.
Looking ahead, the new government may face mounting pressure from the United States to revisit the State Partnership Program (SPP), a proposed military cooperation framework between the Nepal Army and the U.S. military. This remains a contentious issue, as Nepal’s longstanding foreign policy doctrine explicitly discourages entering into military alliances with any country.
In this context, the articulation of foreign policy by the RSP government becomes critically important. In a recent diplomatic exchange with China, the party emphasized its commitment to an “independent” foreign policy. However, this terminology marks a subtle yet significant departure from Nepal’s traditional adherence to a “non-aligned” stance. The distinction is not merely semantic. An “independent” policy could, in principle, allow Nepal to pursue strategic partnerships with any country, even if such engagements risk alienating its immediate neighbors or undermining regional stability.
This evolving posture raises a fundamental question: will the new government recalibrate Nepal’s foreign policy in a way that departs from its historical balancing act? If so, the consequences could be far-reaching. At a time when global and regional tensions are intensifying, Nepal’s strategic choices will require careful calibration to avoid being drawn into broader geopolitical rivalries.
In sum, while Balendra Shah enters office with strong political backing, the road ahead is fraught with economic pressures and geopolitical sensitivities. How his administration navigates these challenges will not only define his tenure but also shape Nepal’s position in an increasingly polarized world.
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