Bridging Trust: A Strategic Approach to External Support

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Nepal’s Gen-Z (individuals born between 1997 and 2012) movement unleashed widespread unrest, exposing deep-rooted frustrations with corruption and governance failures. Following the devastating 2015 earthquake and the severe impact of the COVID-19 pandemic between 2020 and 2021, these protests have further exacerbated the nation’s existing challenges. The combined toll on the country has been immense, with initial estimates suggesting hundreds of billions in infrastructure damage and economic losses – a substantial portion of Nepal’s GDP. A comprehensive study is still needed to determine the full extent of the damage. The BBC reported that the economic impact totaled Rs 3 trillion, nearly half of Nepal’s GDP, crippling tourism, hospitality (Rs 25 billion in losses), and retail, with 10,000 jobs lost and widespread looting.
For eight decades, Nepal has relied on foreign aid, initially in the form of grants but increasingly through loans. In the 2025-26 fiscal year (2082/83), with a budget of Rs 1,964 billion, foreign grants constitute 2.72% (Rs 53.45 billion), while loans (foreign and domestic) account for 30.48% (Rs 598.66 billion). This heavy reliance on borrowing, with Nepal’s debt nearing 45% of GDP, underscores the need for cautious financial strategies. Despite reduced aid from the US’s “America First” policy and the UK’s cut from 0.5% to 0.3% of Gross National Income (GNI), collaborative support from India, China, Japan, Switzerland, Finland, Norway, Australia, the US, UK, EU, World Bank, and ADB is vital for rebuilding damaged infrastructure, restoring essential systems, mitigating economic fallout, and rebuilding trust.

Critical Issues: The Gen-Z movement highlighted five critical issues:

• Infrastructure Damage: Hundreds of billions of rupees in losses, disrupted roads, and utilities. Key government buildings, including Singha Durbar, the Supreme Court, provincial offices, and private sector properties like hotels, are unusable. Immediate repairs are estimated at a huge amount.
• Systemic Weaknesses: Bureaucratic inefficiencies, judicial delays, and weak policy enforcement slowed crisis response, eroding public trust in governance.
• Security Lapses: Inadequate policing and coordination fueled the looting of banks, telecom offices, and businesses, worsening the disorder during the protests.
• Low Morale: Bureaucrats face intense scrutiny, police are criticized for excessive force, and politicians struggle with legitimacy deficits, leading to burnout and institutional paralysis.
• Economic Fallout: Rs 3 trillion in economic loss, including Rs 25 billion in tourism and hospitality damages and 10,000 job losses, threatens long-term stability. External support must align with Nepal’s federal structure and sovereignty to avoid geopolitical tensions and excessive debt accumulation.

International Cooperation for Crisis Recovery: To effectively harness external support, Nepal should adopt a stepwise approach, drawing on its 2015 earthquake recovery experience:

• Evaluate Destruction: Conduct a rapid assessment of damages across infrastructure, economic sectors, and institutional capacity to quantify needs and prioritize interventions.
• Develop a Crisis Recovery and Reconstruction Assessment (CRRA): Building on the 2015 Post-Disaster Needs Assessment (PDNA), Nepal should prepare a CRRA to detail damages, recovery needs, and timelines. Involving donors and neighbors during the CRRA process ensures transparency and aligns aid with national priorities.
• Request Targeted Support: Post-CRRA, Nepal should request grants and technical assistance from donors and neighbors, emphasizing quick-impact projects and capacity building over loans to manage debt risks.
• Coordinate Implementation: Establish a multi-stakeholder task force to oversee aid distribution, ensuring accountability and local leadership.

This selective approach prioritizes grants and technical expertise, leveraging Nepal’s PDNA experience to create a robust recovery framework while safeguarding fiscal sustainability.
Cross-Border Solidarity for Nepal’s Recovery: India and China can provide immediate, targeted aid, as demonstrated during the 2015 earthquake:

• India: India’s support can be a strategic investment in Nepal’s stability and democracy, providing funding for infrastructure and offering technical expertise and logistics for the March 2026 elections. India can also share its federal governance experience to streamline provincial administration and conduct joint police training to enhance community policing and restore order.
• China: China’s support for a strategic and impactful package of support by leveraging its Belt and Road Initiative to provide grants, not loans, for reconstruction. This targeted funding can rebuild critical infrastructure, including key government offices like the Parliament, which China initially built, as well as vital rural infrastructure, mainly the Araniko and Pasang Lhamu highways.

The Nepal-India Joint Commission and Nepal-China Intergovernmental Committee should coordinate efforts to ensure equitable support.
Securing Support from Development Partners: Global partners bring critical expertise and funding. The US can expand the $550 million Millennium Challenge Corporation compact for smart grids and roads, the State Department supports election observation and voter education in the upcoming election, and introduces digital tools for transparent governance to help reduce corruption. The UK’s rule-of-law expertise and the EU’s Global Europe Neighborhood funds can reform judicial systems and support climate-resilient infrastructure, with EU observers ensuring a fair March 2026 election.

Japan’s earthquake-resistant designs, Japan International Cooperation Agency’s (JICA) disaster management support, and cultural exchanges can rebuild infrastructure and morale. Switzerland, Finland, Norway, and Australia can enhance governance transparency, education, conflict mediation, and job creation. The World Bank and ADB can finance infrastructure projects with anti-corruption safeguards, prioritizing grants to limit debt.
The Nepal Development Forum should track recovery with transparent metrics, ensuring alignment with Nepal’s priorities.
A Framework for Nepal’s Recovery: The Six-Pillar Plan: This strategic plan for effective collaboration is built on six key pillars, ensuring a focused and dynamic approach without expanding the text.

• Infrastructure Revival: Quickly fund (1-2 years) and implement projects to restore key infrastructure like roads, energy, and government buildings, prioritizing technology transfer to build local expertise.
  • Systemic Strengthening: Support digital governance and anti-corruption platforms, ensuring they are compatible with Nepal’s federal system to enhance efficiency and transparency.
  • Morale Restoration: Rebuild trust in public institutions by offering wellness programs for officials, creating mentorship opportunities with Gen-Z leaders, and incentivizing ethical service.
  • Security Enhancement: Strengthen law enforcement training and coordination, leveraging international best practices to prevent future public disorder and ensure citizen safety.
  • Economic Recovery: Promote job creation through vocational training and provide targeted support for key sectors like tourism and small businesses to restore livelihoods.
  • Monitoring and Inclusivity: Establish an independent oversight body that includes civil society and youth to dynamically monitor progress, ensure accountability, and adapt strategies as needed.

Nepal must lead to maintain agency and ensure accountability, prioritizing grants over loans to manage debt risks.
Conclusion: The “Zen-G” movement, while disruptive, offers Nepal a chance for renewal. By adopting a strategic approach to external support, the country can prioritize grants and technical assistance over loans, building on its post-2015 earthquake recovery efforts. With key partners like India, China, and various global institutions, Nepal can rebuild resilient infrastructure, strengthen transparent governance, and empower its institutions. This collaborative effort aims to mend internal divisions and establish the country as a model of adaptive federalism. Ultimately, global partners have a vested interest in supporting Nepal’s stability and long-term recovery.