Nepal, a lower-middle income state in South Asia between India and the People's Republic of China (PRC, or China), held parliamentary elections on March 5, 2026, six months after youth-led protests led to the resignation of Prime Minister K.P. Sharma Oli. Protestors expressed frustration with Oli, who had begun a fourth term in office in 2024, and other members of the political establishment in initially peaceful demonstrations that were overtaken by widespread unrest. In a repudiation of establishment political forces, the March 5 elections delivered a decisive victory to the Rastriya Swatantra Party (RSP), a relatively new, centrist political formation created in 2022. Former Kathmandu mayor Balendra Shah was sworn in as the RSP government's prime minister on March 27.
Nepal became a republic with the abolition of the monarchy in 2008, two years after the conclusion of a 10-year-long Maoist insurgency. Nepal's government has brought former insurgents into the political system and seen peaceful transitions of power through free and fair elections, but shifting alliances among the country's political elite have consistently prevented governmental stability. Between 2015 and 2025, three prime ministers served across eight cabinets, effectively rotating through the position as parliamentary coalitions shifted. At the same time, the country has faced persistent economic challenges.
On September 4, 2025, Nepal's government blocked 26 social media platforms for failing to comply with new legislation intended to regulate social media. This move sparked large-scale protests on September 8, when tens of thousands of demonstrators, predominantly young people, gathered in Kathmandu. The protests tapped into broader disaffection with the major political parties. Protestors expressed frustration with corruption, highlighting the lavish lifestyles of some officials' children. The initially peaceful protests were overtaken by widespread unrest after police opened fire. Later that day, the government announced that the social media ban would be lifted, but protests continued on September 9, and unrest expanded to arson attacks on government buildings and other targets. Prime Minister Oli resigned that afternoon. Overall, at least 75 people were reported killed, and over 2,000 were injured. Economic damages were estimated at over $586 million.
During the protests, Balendra Shah, known as Balen, a civil engineer and rapper who became mayor of Kathmandu in 2022, emerged as a potential new leader. Shah, 35, expressed support for the protestors, but reportedly declined an offer to become Nepal's interim prime minister. An online vote organized by youth protest leaders on the social platform Discord selected Sushila Karki, Nepal's former chief justice, as the country's interim leader. After Karki was sworn in as the country's first female prime minister on September 12, President Ramchandra Paudel dissolved parliament and set elections for March 5, 2026.
An independent as mayor of Kathmandu, Shah ran as part of the RSP in what some observers termed "a marriage of convenience." The RSP won 182 of 275 seats in the lower house of parliament, far outpacing the political forces that had dominated parliament for almost 20 years—the Nepali Congress (NC) won 38 seats, the Communist Party of Nepal-United Marxist Leninist (CPN-UML) won 25 seats, and the Nepali Communist Party won 17 seats. This strong showing by the RSP, two seats short of a supermajority, marks the first time one party has secured a parliamentary majority in Nepal since 1999. Shah handily defeated Oli, of CPN-UML, in a Kathmandu constituency. Several other senior politicians also lost to RSP candidates.
The March elections signaled a desire for change on the part of the electorate, representing opportunities but also potential challenges for Shah and the RSP. Shah gained popularity as an anti-establishment figure and a reformer, but his record governing as mayor has been described by some analysts as mixed. Some note that Shah has been "short on specifics" on how he intends to govern. Shah communicates primarily through Facebook posts, rather than engaging with traditional media.
Some analysts foresee potential tensions between Shah and RSP leadership. One analyst describes RSP as "an umbrella organization that brings together those disaffected with the existing parties under a technocratic vision centered on governance reform." Upon taking power, the new government unveiled a 100-point framework for governance reform. How Shah approaches fighting corruption and pursuing accountability for the September 2025 violence may influence public sentiment toward his administration. The incoming RSP government also faces a range of economic and geopolitical challenges, including high youth unemployment, the return of migrant workers from Persian Gulf states and disruptions to remittance flows due to U.S. and Israeli military operations against Iran, and energy shortages.
Nepal maintains relations with both India and China, its two much larger neighbors, and with the United States. Some observers forecast that Shah's foreign policy will be pragmatic and centered on national interests. Others suggest that the new government's foreign policy "remains an open question." Congress could assess what potential opportunities and challenges this represents for the United States. RSP senior leadership has promised a "balanced and independent" foreign policy with a focus on "development diplomacy." It remains unclear what that could mean for infrastructure projects through China's Belt and Road Initiative, which have experienced "glacial" progress in Nepal.
The Trump Administration in 2025 reportedly terminated over $329 million in foreign assistance programs in Nepal and initially put on hold Millennium Challenge Corporation (MCC) projects in the country. In February 2025, Secretary of State Marco Rubio exempted the MCC Nepal Compact from the Administration's 90-day pause on U.S. foreign assistance, and the Administration announced in July 2025 that MCC projects in Nepal would continue. A November 2025 amendment to the Compact increased funding by $50 million.
A longstanding element of U.S. policy toward Nepal has been support for Tibetan refugees in the country. The PRC government reportedly has pressured the Nepali government to restrict free assembly and expression by Tibetans in Nepal. For FY2026, Congress appropriated $13 million for Tibetans outside Tibet, with a portion of those funds being for programs to support Tibetans in Nepal.