The general election of 2026 endorsed the agendas of Gen Z uprising and provided a majority of seats in the House of Representatives parliament. The Gen Z uprising in Nepal on 8-9 September, 2025 called for controlling corruption, good governance and individual freedom (lift of social networking sites ban), which escalated to cause an unprecedented loss of precious lives and properties.

Unlike previous elections, major political parties were contesting their nominations for prime ministerial candidates. Thirty-five-years old, rapper turned politician, Balendra Shah, popularly known as Balen, senior leader of the Rastriya Swatantra Party (RSP) garnered an overwhelming mandate. Balen had supported the Gen Z uprising, last year confronting the erstwhile coalition government old guards: CPN (UML) and Nepali Congress.

The rise of youths in the national politics has been considered as the generational change that carries high aspiration of transformative change in the country.

The new government is going to inherit comfortable indicators in the economy right at this moment, however, vulnerability is high considering the internal and external adversaries. The new government led by the 39^th Prime Minister, Balendra Shah will execute the manifesto of the RSP that has envisioned to achieve seven percent growth per annum in next five to seven years, elevating the per capita income to at least USD 3,000 and the size of economy to around USD 100 billion (in current price).

Further, timely implementation of development projects with at least 10 signature projects such as 30,000 km of roads, affordable internet across the country, assurance of 24/7 reliable and affordable electricity supply along with expansion of grid connected electricity to 15,000 Megawatts and 1.2 million decent jobs in ICT, construction, tourism, agriculture, mines, industries and service trade are promised in RSP’s manifesto.

In order to achieve sustainable growth by generating employment opportunities in the country, the RSP will have to intervene and address the structural problems of the economy. Nepal’s economy is largely import driven and imports and consumption are fueled by remittances. Contribution of the service sector in the economy has been expanding over the years, on the other hand other two major sectors, agriculture and industries remain constant. Agriculture and industry contribute 22.2% and 11.3%, respectively, to the country’s GDP, shares that have remained largely constant in recent years, underscoring the economy’s persistent vulnerability.

Unless the aforementioned structure of the economy is changed from service sector driven to production led growth that offers employment opportunities and a sustainable production base, it would be a herculean move towards a sustainable growth trajectory. The competitiveness of the production sector depends on how efficiently the inputs—cost of capital, logistics cost of trade, use of technology and skills or capacity of human resources among others—are mobilised. Thus, the private sector capital including foreign direct investments (FDI) can be attracted for the industrial sector anchored by the investment climate reform. The RSP has also promised to scrap two dozen decades-old laws, which are simply irrelevant at the moment. Emphasis has been given in institutional reform and eliminating cumbersome bureaucratic processes. However, reform is not magic, it is a continuous and rigorous process, equally mundane. Those reforms require a higher degree of buy-in from the investors and must improve the public service delivery so that people can feel and see tangible changes.  In fact, it would be a litmus test of the Young Turks, who promised a lot, often criticizing old guards who delivered little, triggering a rage in the society.

Another constraining factor for the new government is the fiscal space, the new government has limited space for mobilizing a high debt. So far the country mobilized Rs. 2858.97 billion debts, equivalent to 46.81% of the country’s GDP. The foreign and domestic debt stand 24.72% and 22.09%, respectively. The Public Debt Management Act bars the government from availing foreign loans below 33% of the GDP to prevent the risk of debt distress.

Another fundamental aspect to be taken care of is Nepal’s Graduation to the league of developing nations from after November 2026. In the new spectrum, Nepal is going to lose the facilities such as export tariff relaxation provided by developed countries, subsidized credit facilities and foreign grants could cause adverse impact in the economy. The new government has to immediately decide whether Nepal can sustain the developing country status and request to United Nations Economic and Social Council (ECOSOC) for the deferral for next few years like Bangladesh did recently despite having a strong export-base.

In addition, it is the fact that execution remains a major challenge for Nepal and timely completion of projects even before the deadline is promised by the RSP and Prime Ministerial candidate Shah during the election campaigns. There are various constraining factors for the delays in implementation—lack of scientific allocation, project study, timely preparation of bidding documents, contractor  for construction, consultant, goods and service procurement, procedural hassles and force majeure conditions, resource and capacity constraints, right of way clearance and land acquisition difficulties among others. Complete digitalization of public procurement will create the transparent digital trail and minimize the risk of corruption and delays.

The encouraging aspects in the economy are record high foreign exchange reserves, low inflation, influx of remittances and Banks and Financial Institutions (BFIs) are flushed with huge liquidity.

Most importantly, the new government has to take action against those involved in burning private and public properties. The impunity could deter the private investments, which are crucial to achieve the desired growth and create employment in the country. Moreover, Nepal is currently making efforts to come out from the FATF gray list, however, the weak enforcement of Assets (Money) Laundering Prevention Act is deeply concerned by the Financial Action Task Force. Nepal’s inability to come out of the gray list not only deter foreign investments but also increase the cost of trade.

Lastly, the new government could have to contend with the fuel crisis if the tensions in the middle-east prolong. Dealing with smooth management of supply of essentials could strike on importance for building resilience in many fronts, especially ensuring food and energy security.

People are anticipating a transformative change in terms of development and governance, and the countdowns begin following the formation of the new government.