The grant paralysed Nepali politics, and nearly brought down a government. After acrimonious wrangling, Parliament three years ago this week ratified the <a href="https://nepalitimes.com/news/putting-the-mcc-in-context">$500 million US project</a> for roads and transmission lines.
Just as the <a href="https://nepalitimes.com/here-now/mcc-ball-in-nepal-s-court">Millennium Challenge Corporation (MCC)</a> started awarding contracts this week for sections of transmission lines, substations, and highways, <a href="https://nepalitimes.com/editorial/trump-s-second-coming">Donald Trump </a>suddenly pulled the plug.
The Finance Ministry said it had received an email last week from Washington that payments for contracts were ‘suspended’ by Trump’s executive order. It is not clear if the stay is only for 90 days, and the MCC has asked for a waiver for Nepal and other countries.
Read also: <a href="https://nepalitimes.com/news/trump-shock-wave-hits-nepal">Trump shock wave hits Nepal</a>, Sudiksha Tuladhar&nbsp;
“This is a temporary suspension, we believe it will eventually work out as it is supposed to,” says former National Planning Commission Chair Biswo Nath Poudel. “If not, the Americans will lose credibility around the world.”
In January, the MCC approved an additional $50 million to cover increased costs, and Nepal is chipping in its own $197 million.
“We will take loans to complete the <a href="https://nepalitimes.com/editorial/a-millennium-challenge">transmission lines</a> if we have to, and Nepal is now capable of operationalising projects of that value,” Poudel told us.&nbsp;
The MCC was caught up in the <a href="https://nepalitimes.com/news/sino-american-rift-impacts-climate-action">Sino-US competition</a> for dominance in the region. It was Washington’s response to Beijing’s <a href="https://nepalitimes.com/opinion/bri-enters-the-tenth-year">Belt and Road Initiative (BRI)</a>. Abandoning MCC will leave Nepal open for <a href="https://nepalitimes.com/here-now/china-lobbying-against-mcc">China to step in</a> with its own infrastructure.&nbsp;
“I don't see the Chinese replacing the US in terms of dollar-to-dollar aid in Nepal, including on the MCC, which is also an export-to-India-oriented project,” says Amish Mulmi, author of All Roads Lead North. “But, yes, China can use the aid and investment vacuum left by the US to assist Nepal.”
The debate about whether Nepal should accept <a href="https://nepalitimes.com/here-now/power-politics-delays-mcc-in-nepal">the MCC polarised politics</a>, even splitting leaders within parties. <a href="https://nepalitimes.com/opinion/comment/inoculation-against-misinformation">Conspiracy theories and disinformation</a> spread like <a href="https://nepalitimes.com/news/wildfire-season-starts-early-in-nepal">wildfire in Nepal</a>’s cybersphere, alleging that the MCC was a ploy to base US missiles in Nepal aimed at China. The Chinese added fuel to the fire, trying to stop ratification.&nbsp;
Not surprisingly, the suspension of MCC contracts this week was greeted with the same trolling that filled <a href="https://nepalitimes.com/news/no-comment">social media </a>during the MCC debate and after ratification in 2022. This time, the posts have an additional ‘we told you America was not a reliable partner’ refrain.
One self-described influencer posted on X: ‘The MCC has only been suspended, it should be entirely cancelled…(it) is an absolute military trap.’
Finance Ministry officials last week assured that the MCC would not be affected by <a href="https://nepalitimes.com/news/how-usaid-cut-affects-nepal">the freeze on USAID supported programs </a>worldwide, including Nepal.&nbsp;
On Wednesday at Mar-a-Lago, Trump singled out Nepal, and said USAID’s $20 million to support <a href="https://nepalitimes.com/editorial/feudal-federalism">federalism</a> and $19 million for <a href="https://nepalitimes.com/here-now/conversation-with-mr-conservation">conservation</a> was a “fraud”. Other US-supported government programs worth $131 million to improve healthcare, education, <a href="https://nepalitimes.com/here-now/back-to-the-land-in-the-cities">agriculture </a>and inclusion are halted.&nbsp;
In 2022, USAID and Nepal signed a five-year Development Objective Agreement worth $659 million for climate adaptation, environment protection, <a href="https://nepalitimes.com/banner/nail-salon-workers-say-proper-ventilation-can-protect-their-reproductive-health">gender and reproductive rights</a>. That is also now in limbo.
Slashing all this assistance has impacted over 300 consultancies and non-profits in Nepal, and threatens to undermine past successes in maternal and child health, <a href="https://nepalitimes.com/news/the-goal-is-empowerment-and-independence-of-women">women’s empowerment</a>, free press and rural development. &nbsp;
Says Mulmi: “What the US withdrawal on MCC will do is further erode US credibility inside Nepal, particularly since it was such a politically charged subject. It will also signal a change in its stance on China in South Asia, as the MCC was a direct challenge to the BRI and <a href="https://nepalitimes.com/news/nepal-s-love-triangle-with-china-and-india-impacts-investment">Chinese investments</a> in infrastructure.”
If there is one lesson from all this, it is that<a href="https://nepalitimes.com/news/missing-links-in-nepal-s-mcc-debate"> foreign assistance is rarely a free lunch</a> and often comes with strings attached. Nepal should look out for itself and be self-reliant, after all <a href="https://nepalitimes.com/opinion/is-free-health-care-possible-in-nepal">basic health care </a>and environmental protection are responsibilities of the Nepali state, not of donors.&nbsp;
This means investing in infrastructure and development to <a href="https://nepalitimes.com/multimedia/staying-home-to-create-jobs">create jobs at home</a>, actually spending budget outlays for capital expenditure, and making optimum use of domestic resources such as<a href="https://nepalitimes.com/here-now/pump-water-store-energy"> hydropower</a>.
Says Bishwo Nath Poudel: “The MCC was never anti-China. In fact, India and China are our most important neighbours. What is really important for us is to leverage their growth to pull us along.” &nbsp;

Sonia Awale

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The Great Game, 2nd Half

<figure><img width="2211" height="1541" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221114101116/6372080d9c7e80680e0b54c7jpeg.jpg" alt=""/><figcaption></figcaption></figure>A much-delayed half-billion dollar US government project to upgrade Nepal’s infrastructure <a href="https://www.nepalitimes.com/latest/mcc-row-rocks-nepals-ruling-coalition/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/mcc-row-rocks-nepals-ruling-coalition/&amp;source=gmail&amp;ust=1643783587117000&amp;usg=AOvVaw1mPNK10b4Qti4kBCQ2ZqtY">threatens to split Nepal’s governing coalition</a>, amidst indications the <a href="https://www.nepalitimes.com/here-now/china-lobbying-against-mcc/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/here-now/china-lobbying-against-mcc/&amp;source=gmail&amp;ust=1643783587117000&amp;usg=AOvVaw3xLZatwKG1qUAKCvOP5DVb">Chinese have intensified lobbying</a> with politicians to oppose it.Prime Minister Sher Bahadur Deuba of the Nepali Congress (NC), a minor coalition partner Janata Samajbadi Party (JSP), as well as the main opposition UML support the project. But it is vehemently opposed by two Communist parties: the Maoist Centre (MC) and the Unified Socialists.The strain within the coalition appears to have taken a turn for the worse after Prime Minister Deuba got wind that <a href="https://www.nepalitimes.com/latest/nepal-speakers-ipu-trip-slammed/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/nepal-speakers-ipu-trip-slammed/&amp;source=gmail&amp;ust=1643783587117000&amp;usg=AOvVaw1748mrZsIq3zaEcjwoZOZ_">Parliament Speaker Agni Sapkota</a> of the MC postponed a sitting of the House on Sunday that was to discuss the Millennium Challenge Corporation (MCC) project.After a meeting of the five coalition partners on Saturday failed to agree on getting the MCC ratified by Parliament, Sapkota called off a scheduled House sitting for ten days without informing the prime minister.Deuba is said to be so put off that he has leaked a threat to register a proposal to unseat Speaker Sapkota, and has hinted that he will push through the MCC even if it means a split in the coalition.China’s Ambassador to Nepal Hou Yanqi has been meeting various coalition leaders in the past months to lobby against the MCC, the latest was a one-on-one with the opposition UML’s K P Oli at his residence on 22 December.Then on Saturday, just after the inconclusive coalition meeting, the Maoist Centre’s Pushpa Kamal Dahal held an hour-long hush-hush virtual meeting on Saturday with Song Tao, the high-ranking head of the International Department of the Communist Party of China (CPC).Although the conversation was said to have centred around greeting each other on Chinese New Year and Dahal being congratulated for being re-elected chair of the Maoist Centre, the timing of the online discussion on Saturday evening is seen as significant.In November also, CPC officials had talked to senior party leaders in Kathmandu to actively dissuade them from passing the American project. The deputy head of the International Department of the CPC Chen Zhao had even called the UML General Secretary Ishwar Pokhrel on 13 December to try to change his party leadership’s pro-MCC stance. Zhao also spoke to Madhav Kumar Nepal of the Unified Socialists, and the latter is said to have assured him that he would not let the MCC be ratified.Speaker Agni Sapkota has been known to be close to Beijing, and has made no secret for his opposition to the MCC, and this week was not the first time that he blocked ratification in Parliament. His predecessor Krishna Bahadur Mahara, also a close confidante to Dahal, was also publicly anti-MCC before he was removed from office in 2019 after allegations of rape.   <a href="https://www.nepalitimes.com/latest/is-china-now-micro-managing-nepal-politics/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/is-china-now-micro-managing-nepal-politics/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw1ZjFWwIUS-IjUQIDA_jTNV">China’s suspicions about the MCC</a> as being an American geo-strategic counter to its own Belt Road Initiative (BRI) can also be gleaned from Chinese academics who have been <a href="https://mp.weixin.qq.com/s/TgjzJv5skEkt6rjm9pyU8w" target="_blank" rel="noopener noreferrer">writing in state controlled media</a> as well as in interviews with Nepali portals. Wang Yiwei of Renmin University in an op-ed in October called the MCC ‘American ploy’.Besides geopolitics, the MCC has also become a factor as <a href="https://www.nepalitimes.com/banner/dance-of-democracy/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/banner/dance-of-democracy/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw2v7G-9XPUQE_b0yVvy5RP7">Nepal’s domestic politics</a> as parties try to position themselves for upcoming local government elections in May and federal polls later this year.Last week, Deuba managed to convince Dahal and Nepal to <a href="https://www.nepalitimes.com/latest/nepal-coalition-dilly-dallying-on-polls/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/nepal-coalition-dilly-dallying-on-polls/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw3bRn0dwVnuNcGvc5nNm05E">lift their opposition to holding local elections</a> on time in exchange for keeping the coalition in an electoral alliance. Although NC insiders say they also got a commitment from them to back the MCC, the two leaders have denied this.Both say they will back the MCC only “with amendments” to clauses in the contract that they say undermines Nepal’s sovereignty.For its part, the UML has obstructed Parliament for the past six months, accusing Speaker Sapkota of allowing a breakaway group from the Nepal faction to keep their seats.Amidst all this, Deuba appears to be losing his patience with coalition partners. He takes personal responsibility for having signed the MCC agreement during his previous tenure five years ago, and fears loss of credibility for Nepal from international partners if the agreement is not ratified.Sources said that in Saturday’s meeting, Deuba actually brought up the possibility of the coalition splitting if the MCC is not passed. Deuba is gambling that an electoral alliance with the coalition is important for the MC and the Unified Socialists, both of which have been <a href="https://www.nepalitimes.com/latest/who-wants-early-elections-and-why/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/who-wants-early-elections-and-why/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw3EuLUjhgdgtlUAmjsBpP1O">weakened by their split with the UML.</a>The UML itself is now playing coy, and K P Oli has made no secret of its aim to use the MCC to split the coalition. Deuba is determined to push the MCC to Parliament even if it means getting UML support, since the NC and JSP alone do not have the numbers to ratify it.UML Chair K P Oli was a strong backer of the MCC when he was prime minister till July last year, and it was in fact his erstwhile party colleagues Pushpa Kamal Dahal and Madhav Kumar Nepal who <a href="https://www.nepalitimes.com/latest/mcc-damned-if-we-do-damned-if-we-dont/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/mcc-damned-if-we-do-damned-if-we-dont/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw2o4JhiHrU0WJYe66eGhiHV">weaponised the MCC</a> to bring him down. Ultimately, this led to their Nepal Communist Party to split into the MC and the UML, and the UML itself later split with Nepal breaking off to form the Unified Socialists.Having been so vehemently opposed to MCC, Dahal and Nepal can now not do a 180 degree on the project. And they also have to contend with the Chinese breathing down their necks.One of the more vocal proponents of the MCC has been former Maoist ideologue and ex-prime minister Baburam Bhattarai who fell out with Dahal and is now with the JSP.Bhattarai, who also has a PhD in urban planning, tweeted on Monday: ‘The MCC is a trial by fire for Nepal’s political parties, mainly the Communists. First: Will we try to balance the US and India and China or be beholden to one of them? Second: If we do not want American support, what will we do with aid from the WB, IMF or ADB? If an American grant is untouchable, how about aid from India, China or others?’ <img width="640" height="175" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221114101116/637208109c7e80680e0b54c8jpeg.jpg" alt="">The $500 million project was signed in 2017 when Prime Minister Deuba led a coalition that also had the Maoists as a partner in government. The Americans have denied that the project has any military component, saying Nepal qualified for it and there are no strings attached.Increasingly impatient with delays in Nepal and irritated with what it sees as Chinese obstruction, the Americans have sent a <a href="https://www.nepalitimes.com/latest/mcc-row-rocks-nepals-ruling-coalition/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/mcc-row-rocks-nepals-ruling-coalition/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw2Io7kTRWitTQBFQcPJndxQ">slew of high officials to Nepal</a> in the past six months, who has also warned Nepal that project approval is time-bound, and the MCC can withdraw the grant if Nepal does not want it.The project will pay to expand <a href="https://www.nepalitimes.com/latest/the-cost-of-no-mcc/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/the-cost-of-no-mcc/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw3ftWPiTFZ8uZospptUy9b3">Nepal’s electricity grid</a> with a 400kVA transmission line to distribute power from eastern to western Nepal, as well as export surplus to India. Nepal’s <a href="https://www.nepalitimes.com/banner/nepals-precious-electricity-going-waste/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/banner/nepals-precious-electricity-going-waste/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw2H55BAU4KQwQs8tcmB84xz">power producers could lose</a> up to Rs142 billion annually if the electricity lines are not built to evacuate the estimated 5,000MW of generation capacity by 2025. The project also has a component to <a href="https://www.nepalitimes.com/latest/generating-electricity-and-cash-for-nepalis/" data-saferedirecturl="https://www.google.com/url?q=https://www.nepalitimes.com/latest/generating-electricity-and-cash-for-nepalis/&amp;source=gmail&amp;ust=1643783587118000&amp;usg=AOvVaw212arRNKdVKZSYW2VBkCRW">boost economic growth</a> through improvements in highway connectivity in Central Nepal.

MCC risks split in Nepal’s ruling coalition

The monsoon has got bad press because Nepal’s tourism operators actively told visitors to avoid <a href="https://nepalitimes.com/opinion/managing-the-monsoon?%2F">the rainy season</a>. It is time to change that. The reason can be found right here in the vast alpine meadows of Central Nepal where this time of year you can walk on velvet grass of pastures abloom with delicate pink, red and yellow flowers as the mist rolls up the valley. There is no sound except the hum of bumble bees. &nbsp;&nbsp; There are dozens of places across high Nepal called Chaurikharka, which means yak pasture. But this particular Chaurikharka in Rukum East located at an altitude of 4,000m stands out for its serene beauty, rustic charm and bucolic setting. There is just the occasional chime of <a href="https://nepalitimes.com/here-now/when-yaks-go-so-does-culture">yak bells</a> in the distance, and the sharp whistle of herders corralling sheep. &nbsp;&nbsp; The grass shoots are so fragile that one hesitates to step on them, the rounded ridges appear and quickly vanish in waves of mist. With the<a href="https://nepalitimes.com/here-now/before-the-next-monsoon"> arrival of monsoon</a>, these meadows are a soothing shade of green dotted with millions of <a href="https://nepalitimes.com/review/the-anatomy-of-a-flower?%2F=">multi-coloured flowers</a>. Until very recently, it took a week or so to hike up to places like Chaurikharka, but with the expansion of the road network even to these far-flung mountains in the lap of Dhaulagiri, they are much more accessible. It is just a three-hour uphill from the Mid-Hill Highway on the border between Baglung and Rukum East.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250802130828_a0b06b494d751b2144ffbbf10894ea64b29e8aed844bc8c66171783abfaf4e16.jpg" data-media-id="editor_4" data-image-id="20250802130828_a0b06b494d751b2144ffbbf10894ea64b29e8aed844bc8c66171783abfaf4e16" data-rendition-name="original" width="2048" height="1365" loading="lazy" alt="Visit Nepal in the monsoon"> </figure>  Purists would say that such easy access devalues the sanctity of these remote high meadows, but it also means more people will be moved to treasure the experience, appreciate <a href="https://nepalitimes.com/banner/natures-fragile-gift-to-nepal">the value of nature </a>so they can take steps to protect it.&nbsp; To be sure, the <a href="https://nepalitimes.com/here-now/deadly-monsoon-in-nepal-turns-deadlier">monsoon season can be challenging for road travel</a>. The roads are rough even at the best of times, and in the monsoon they become muddy and treacherous, often blocked by<a href="https://nepalitimes.com/news/monsoon-deluge-in-nepal"> landslides</a>. But that could be precisely the kind of adventure that the more intrepid visitors crave. Improved road connectivity has already made Chaurikharka and places like Badimallika &nbsp;and other sacred lakes in the mountains of western Nepal popular with domestic tourists. What is driving this traffic is the urge to go to exotic new places and share videos and selfies on social media. Several of Nepal’s travel vloggers have visited Chaurikharka and popularised the place, enticing followers on TikTok or YouTube to retrace their footsteps. But even as they become more popular, these fragile and once-remote places should be protected from over-tourism.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250731110736_f97110b7cdc3e7f80d5877690948fc9f4c95a09c583deb23b07355491e6c5446.jpg" data-media-id="editor_8" data-image-id="20250731110736_f97110b7cdc3e7f80d5877690948fc9f4c95a09c583deb23b07355491e6c5446" data-rendition-name="original" width="1083" height="699" loading="lazy" alt="Visit Nepal in the monsoon NT"> </figure>  <h2>INCREASING FOOTFALL</h2> Chaurikharka is located in Bhume Rural Municipality of East Rukum, near the scenic valley of Dhorpatan in Baglung district. Even in the <a href="https://nepalitimes.com/banner/monsoon-culture">middle of the monsoon</a>, there is a steady stream of Nepali hikers trooping to these high pastures – especially during festival days like Saune Sankranti which this year was on 17 July and actually marks the auspicious beginning of the monsoon here. “This year the rains have not been as heavy and there have been some clear mornings when we could see everything from Dhaulagiri to Machapuchre,” says Khageswar Bhandari, who trekked up here from the road. “The flowers, the greenery and the snowy mountain views make this an incredibly unique place.”&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250802130824_1b9e26f2e9853fdfe69154bb42a7c9ea6da4bf4940efc1da99b304dcfbd7d3d9.jpg" data-media-id="editor_10" data-image-id="20250802130824_1b9e26f2e9853fdfe69154bb42a7c9ea6da4bf4940efc1da99b304dcfbd7d3d9" data-rendition-name="original" width="2048" height="1152" loading="lazy" alt="Visit Nepal in the monsoon"> </figure>  Chaurikharka is worthwhile to get to in any season, but it has a different charm during the monsoon. Word has spread and because it is now easy to get to from Baglung or even Pokhara, people have been flocking here.&nbsp; “Holidays and Saturdays see the largest crowds, with up to 500 visitors every day,” says ward chair Mankaji Pun of Bhume.&nbsp; There was a time not too long ago when local herders brought sheep, goats, cows, buffaloes, horses, and mules to graze here during the monsoon. Although there are still livestock around, animals have been replaced by visitors taking selfies. Read also: <a href="https://nepalitimes.com/here-now/the-monsoon-and-nature-s-arithmetic">The monsoon, and nature’s arithmetic</a>, Tom Robertson Ward Chair Pun says infrastructure development is his main priority. A foot trail to Chaurikharka was built last year by the Tourism Division Office in Kohalpur, but access via the Raniwas-Koipa road section still remains challenging.&nbsp; “If we get more budget, we can improve the road and facilities to make Chaurikharka the main tourist attraction of this region,” says Bhume Municipality Chair Hom Prakash Shrestha. “After that, we hope to promote Chaurikharka as a top tourist spot.”&nbsp; Economic activity is also picking up with the arrival of visitors, but there seems to be a need to manage the makeshift sheds made of corrugated sheets that spoil the beauty of the place. Tea shops and lodges are also available but facilities are basic. Kuldeep Neupane took a three-day trip from Ghorahi in Dang to visit Chaurikharka recently, and says: “This is an ideal trip to make a quick getaway and let nature recharge your mind and body. And it is much more fun with a tent, to watch the sunrise over the Himalaya or the mist blowing in.”

Visit Nepal in the monsoon

Two weeks ago, Prime Minister KP Sharma Oli announced jubilantly on social media that Nepal had achieved a historic annual growth of 81.8% in exports. He was right. Nepal’s trade did take a great leap forward compared to last year. But the dramatic rise was mainly due to processed soya bean oil.&nbsp; However, Nepal does not produce the edible oil it exports. In fact, the soya and palm oil that make up 44% of total exports are imported from Southeast Asia and South America, and simply re-exported, mostly to India.&nbsp; Under the SAFTA (South Asian Free Trade Area) Agreement, Nepal can export products to India duty-free if it has at least 30% value-added. Nepal’s traders have taken advantage of SAFTA even though the edible oils they export do not reach that value addition threshold. “The 30% value addition requirement is often only on paper,” says former commerce secretary Purushottam Ojha. “It is clear that simply packaging edible oils in Nepal does not fulfil the terms of the trade agreement.” Prime Minister Oli is aware of this, and even called Nepal’s export figures “fake” at an earlier event. The government is relying on other iffy figures to suggest that Nepal’s economy is strong and getting stronger. For example, the value of imports rose by 13.25% in 2024-25 compared to the previous fiscal year.&nbsp; Some of it was due to a jump in electric vehicle imports worth Rs 31.76 billion, but mostly it was because more wholesale soya oil was imported to be re-packaged and sold in India. The very fact that the government boasts about increased imports is an indication of how much it relies on taxing them for revenue. Touting such trade figures cannot be the basis to claim an economic rebound.&nbsp; “A jump in the value of imports can be interpreted as an increase in purchasing power, but it is not evidence of a stronger economy,” says economist Keshav Acharya. “Even though imports have increased, Nepal's domestic production and productive capacity have not improved.” Nepal Rastra Bank's semi-annual economic activity study report shows that industrial production was down in the first six months of the last fiscal year. This despite an increase in the number of new industries registered and investment commitments. Out of the Rs70.2 billion proposed foreign investment, Nepal received only Rs17.9 billion last year.&nbsp; Meanwhile, the rate of capital formation was limited to 24% last year, which is lower than the year before, suggesting that new investment, job creation and economic expansion all declined. If domestic production does not improve in relation to this year’s inflated trade figures, the outflow will put pressure on foreign exchange reserves like it did three years ago. At that time, Nepal borrowed from the IMF under its Extended Credit Facility Program to kickstart the economy.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/2025080710084_2cdaaa5795828c4a7de93a0604ba884ef0a8b8f24cccd939f6c24e279ab6058f.jpg" data-media-id="editor_0" data-image-id="2025080710084_2cdaaa5795828c4a7de93a0604ba884ef0a8b8f24cccd939f6c24e279ab6058f" data-rendition-name="original" width="1633" height="723" loading="lazy" alt="Nepal's bubble economy NT"> <figcaption>Source: NEPAL RASTRA BANK</figcaption> </figure>  The macroeconomy is on firm footing with foreign exchange reserves at a comfortable Rs2,520 billion in May, up 23% from last year. This was largely due to remittances, and partly due to a falling NPR exchange rate. Real estate transactions and the stock market index have also been climbing as a result of government policies to revive the sector.&nbsp; However, former executive director of Nepal Rastra Bank Nar Bahadur Thapa cautions: “This is not organic growth, it is the result of deliberate policy decisions to relax rules on real estate and stock markets transactions.” In reality, the sharp rise in land prices have increased the cost of production, and excessive monetisation of the real estate has become the main source of Nepal’s economic woes. The central bank has announced a slew of new policies, shifting the terms of loan repayment for industrialists and entrepreneurs, reducing interest rates, and injecting more working capital — all designed to inject adrenaline into the real estate and stock market sectors.&nbsp; When he was governor, Mahaprasad Adhikari made several financial reforms during the latter half of his tenure to stimulate the economy, including tightening credit flow.&nbsp; By the last fiscal year, additional financial reforms had resulted in a credit expansion rate of around 8%. As the pace of credit expansion slows, real estate prices have started to fall. This is actually beneficial to the economy, because it lays the foundation for improvements in land-related entrepreneurship, production, and the construction sector. Just because real estate and the stock market transactions increase, it does not indicate an economic turnaround — especially when manufacturing and productive sector continues to languish.&nbsp; “It is foolish to believe that real estate and the stock market have magically revived our economy. Agriculture employs more than half of the population, but it is in decline. Investment in the productive sector has not increased, and job creation has not increased.” Two years ago, Nepal’s industrialists, business leaders, and political leadership predicted a recession amidst a sluggish business, declining market demand, large-scale job loss, and a shrinking real estate and share market.&nbsp; Still, the economy grew by 3.36% in fiscal year 2023/24. In fact, Nepal’s economy has grown nominally over the last two decades even when all sectors of the economy are in decline.&nbsp; Says Keshav Acharya: “The growth in trade, real estate, and the stock market are bubbles. The real economy remains stagnant.”

Nepal’s bubble economy

The final investigation report on the crash of a Saurya Airlines jet on 24 July 2024 at Kathmandu airport has revealed flaws in the carrier’s technical operation procedures, poor monitoring by the Civil Aviation Authority of Nepal (CAAN) and gaps in the airport’s emergency response. Eighteen people including a child were killed, and only the captain survived as the plane plunged seconds after takeoff, crashing within the airport perimeter. This was the latest in a series of aircraft accidents in previous years, and further tarnished Nepal’s already poor aviation safety record and contributed to the country being retained in the EU’s air safety list. &nbsp;&nbsp;&nbsp; The circumstances in the Saurya crash were different from the Yeti Airlines crash in Pokhara in January 2022 that killed all 72 on board, and two Tara Air crashes in February 2016 and May 2022 on approach to Jomsom that together claimed 45 lives. However, all four tragedies were a result of negligence of carriers and crew, failure to follow procedures, regulatory slackness, and overconfidence. The Saurya crash, especially, was a glaring example of how an ailing airline broke its own rules to allow passengers, including non-employees, a joy ride to Pokhara on a maintenance ferry flight. CRASH REPORT The Final Investigation Report prepared by the Aircraft Accident Investigation Commission and released on the first anniversary of the crash last week carried a long list of rules that were ignored or broken, and of regulatory failure. The first mistake was to cram spares, tools and inflammable chemicals needed for the aircraft’s C-Check in Pokhara into the cargo hold flouting its own ground handling procedures.&nbsp; There was no check-in of passengers, some of whom were not even employees – even though regulations say only flight and maintenance crew should be on board a maintenance positioning flight. Many brought their own luggage into the plane and stored it unsecured in the cabin. There was no flight attendant to give a safety briefing to passengers. The load and trim charts given to the flight crew were rough estimates, and the total takeoff weight of the plane was 18,300kg plus or minus 200 kg. That would still have been all right, but there was a glaring mistake in the speedchart Saurya pilots were using to calculate the minimum takeoff speed (known as VR), and it had been wrong ever since the 21-year-old aircraft entered service with the airline in 2017. FAULTY DATA&nbsp; The Commission probed Flight Data Recorder inputs from previous takeoffs of the Canadian-built CRJ200-LR in 2023-2024 and found that the undetected error in the speedchart had caused the plane to pitch up at an abnormal rotation rate at least 18 times on previous takeoffs.&nbsp; Any rotation rate more than 3°/sec is regarded as unusual. But on at least two occasions, this aircraft with tail number 9N-AME had rotation rates of 5.8°/sec and 5.5°/sec, the second one was when the pilot who survived was flying in March 2024.&nbsp; On this particular day, the plane’s rotation rate was 6.5°/sec, causing it to go into a deep stall soon after takeoff, the Commission report said. Essentially, the plane was not flying fast enough down the runway to take off safely.&nbsp; It is not yet clear whether excess weight, unsecured luggage, wrong centre of gravity were also factors, but relying on a faulty speedchart for the given takeoff weight, the captain flying pulled back on the yoke before the plane had reached takeoff speed and at a pitch angle that was too steep. The investigation report says the plane then went into a deep stall and started banking right with the stick shaking. At this point, the flight officer on the right hand seat is heard on the cockpit voice recorder saying: “Whoa, whoa, whoa. Sir, Sir, Sir…” It then banked left before the pilot flying turned the plane sharply to the right again in an evasive action to avoid the parking aprons of the international and domestic terminals. Had he not done so, there would have been a disaster of a much greater magnitude at Kathmandu airport that day. The plane scraped the runway with its right wingtip, collided with a container having helicopter spare parts, and plunged into a gully east of the runway, exploding in a fireball. The investigation also noted that the impact forces seemed to be survivable for some occupants. The fire trucks took unnecessarily long to reach the site even though it was inside the airport perimeter. The absence of an ICAO-standard runway strip, inadequate rescue drills, lack of training, and a blocked emergency service gate leading to the crash site were cited as other factors. &nbsp;&nbsp; <h2>Timestamp of a Disaster</h2>  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250731110724_39cdd04693994ce6e55a5b302905c0fa4884fe85bed21ff0779bb1439f3a5725.jpg" data-media-id="editor_0" data-image-id="20250731110724_39cdd04693994ce6e55a5b302905c0fa4884fe85bed21ff0779bb1439f3a5725" data-rendition-name="original" width="778" height="826" loading="lazy" alt="Flouting rules caused Saurya tragedy NT"> </figure>  11:10:34 - The Saurya Airlines CRJ200 on the takeoff roll from runway 02. It had a takeoff weight of about 18,300kg, but the pilot’s speedcard had a previously undetected mistake about the minimum takeoff speed. 11:10:55 -The plane with tail number 9N-AME goes into deep stall soon after takeoff because it does not have enough speed to lift its weight. The plane also has an abnormally steep nose-up attitude.&nbsp; 11:11:03 - Without enough speed to generate lift, the plane banks right, then left and right again in CCTV photos taken from the domestic apron (below). If it had not banked right, it could have hit the aprons and terminal buildings. Seen parked is Saurya’s other CRJ200 with tail number 9N-ANM.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250731110732_608132f7225c649125cca2691dd6a6bf930984c5b359e888d7ad9e5eacce3afd.jpg" data-media-id="editor_1" data-image-id="20250731110732_608132f7225c649125cca2691dd6a6bf930984c5b359e888d7ad9e5eacce3afd" data-rendition-name="original" width="770" height="555" loading="lazy" alt="Flouting rules caused Saurya tragedy NT"> </figure>  11:11:08 - The plane scrapes the runway with its right wingtip, and falls into the gully. The captain is thrown off the left side of the cockpit and survives. 11:11:15: Plane explodes in a fireball inside the airport perimeter. Firefighters take time to reach the site because of lack of access road and a blocked gate. Read the full investigation report <a href="https://www.tourism.gov.np/files/9N-AME%20AIC%20Final%20Report.pdf">here</a>.

Flouting rules caused Saurya tragedy

American artist Peter Makela was in Nepal in 2022 on a Fulbright scholarship when he experienced the Matya festival in Patan in which devotees made the rounds of the city’s shrines.&nbsp;
He joined the procession, walking through 2,600 stupa and 140 bahal of the town. That immersion left a lasting impression.
As part of Gallery Mcube’s international residency program in Patan, he put his inspiration to canvas in the exhibition Yala Yatra: Walking, Working, Worshipping. The exhibition also coincides with this month’s Matya festival.&nbsp;
Makela has visited Nepal often in the past 11 years but he mostly stayed in and spent his time around Boudha. “This time I stayed in Patan, put the sites I wanted to visit on my map, and off I went,” he tells us. “Each of my artwork is inspired by the stupas and shrines in Patan that I visited.”
The stupa and Ganesh are recurring motifs in his watercolours, and the elephant gods are located in chaityas — reflecting the interplay and blending of the Hindu and Buddhist faiths in Kathmandu Valley.&nbsp;
The stupas and Ganesh are painted in vivid red, yellow, blue and green against abstract backgrounds meant to represent the sky.
“I use the sky as a backdrop because the sky has no border,” says Makela. “The four colours represent the four elements, the different Buddha families and also lights bouncing off of a rainbow.”
The use of just four colours for all the artwork stands out, and combined with the absence of heavy canvases, frames or stands render Makela’s art striking in its simplicity.&nbsp;
The Ganesh is always holding something and the art also portrays the elephant god’s sacred vehicle, the mouse.
While his vibrant stupas and Ganesh reflect the tangibility of Patan’s tradition and heritage, it is as if the backdrops with their shades of grey and red and yellow capture the soul of the city’s shrines.
“If you look closely, there is a sense of form and formlessness at the same time,” he says.&nbsp;
Makela walked 108 kora around the shrines during his exploration of the town, and in the process developed a spiritual connection with Patan’s heritage and traditions.&nbsp;
The exhibition connects with visitors on a deeper, more spiritual, level as well. And with it, they feel a sense of pride as well as the need to urgently preserve Patan’s heritage for future generations.
“Peter’s inclination and approach towards Nepali art and culture is fascinating, and it reflects in his work,” says Mcube curator Manish Lal Shrestha, whose international artist residency program promotes Nepal’s cultural heritage. &nbsp;&nbsp;
Yala Yatra: Walking, Working, Worshipping
1-5 August&nbsp;
10AM-7PM
Gallery Mcube, Patan

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Walking, working, worshipping in Patan