Nepal achieved a historic milestone this month as tens of thousands of young Nepalis took to the streets and set fire to symbols of elite privilege and state power. Outrage over widespread corruption and ill governance sparked the Gen Z movement, which evolved into a broad rejection of a political system that had failed to meet the needs of its citizens since the abolition of the monarchy two decades ago. Dissatisfaction, especially among young people, was fueled by unemployment, lack of efficient and citizen-centred service delivery, nepotism and favouritism. The movement led to the ouster of KP Sharma Oli, who was leading the government.

The post-2006 accord, which resulted in a republican transition, had turned Nepal into a remittance-patronage state. Subsequent governments lived off remittances, exported labour as a safety valve, and permitted corruption to thrive rather than create a viable economy and accountable institutions. While the youths waited in line for foreign permits, the children of the affluent showed off their luxurious lifestyle on TikTok.

Anger flared, and protest culminated when the government attempted to stifle digital dissent by imposing a social media ban. In the meantime, public confidence in democracy declined, coalition administrations turned into platforms for rent-seeking and high-level corruption scandals remained unpunished. Young people no longer believe that exile to foreign countries is their fate. They call for jobs, dignity and a government that works for everyone, not just a select few.

Learning from others

Nepal is not the only country facing this reality. Sri Lanka’s economic collapse in 2022 provided a clear warning. The collapse was a result of careless tax cuts, poor debt management and a flawed fertiliser ban. Under an International Monetary Fund (IMF) programme, the nation had to endure agonising austerity, which restored macroeconomic stability but at the expense of a rise in poverty. The message for Nepal is clear: Institutional autonomy and financial restraint are non-negotiable. Vulnerability is only increased by populist giveaways that deplete public coffers.

Another example is Rwanda, which underwent a purposeful, state-led reform rooted in a long-term national vision following the 1994 genocide. Rwanda established a progressive state through Vision 2020. Now with Vision 2050, it aims for reconciliation, strategic investment promotion, meritocratic bureaucracy and anti-corruption as a national brand. Between 2000 and 2020, its per capita income increased from $333 to $826, while poverty rates sharply decreased.

Rwanda’s success depends on several interrelated factors, including the establishment of unique institutions focused on national ownership and governance; government-led, aid-supported strategic investments in infrastructure, high-return economic sectors and human capital; the reconstruction and expansion of the domestic tax base; policies intended to lessen dependency on aid through export growth and private investment; and a purposeful approach to utilising gender inclusion as a driver of economic strength.

Although the circumstances vary, Nepal can learn a valuable lesson from Rwanda: Crises will recur in the absence of a cohesive long-term vision and a competent state to carry it out.

Pillars of restoration

Nepal is at a critical juncture. Although it has a limited duration, the interim government led by former Chief Justice Sushila Karki has moral credibility. Four priorities must be taken into consideration to utilise the opportunity. First, the government must focus on creating a new ruling philosophy and forging a social contract. Nepal requires a good vision, not only anti-corruption slogans. A vision that unites youth, civil society, business and the diaspora around a common objective of “national developmentalism” should be drafted through a thorough consultative process. This practical philosophy would centre state policy around inclusive economic growth, productivity, sustainable development and broad-based prosperity.

Moreover, without being influenced by political parties, a new meritocratic organisation, such as the National Development and Investment Board, directly under the PM’s office, may coordinate investment and industrial strategy to restore international and domestic investors’ trust.

Second, the economic paradigm should be changed to focus on employment and productivity. Nepal cannot continue to rely on remittances. Remittances accounted for 33.6 percent of the country’s GDP in 2024. However, at around 20 percent, youth unemployment is still one of the highest in South Asia, after Sri Lanka. Since FDI and remittances drive consumption rather than output, a study in Bangladesh reveals that a correlation, along with higher unemployment, exists between them.

Nepal must take the lead in domestic job creation. This entails supporting labour-intensive sectors supported by infrastructure and strategic investment, such as light manufacturing, agro-processing and sustainable tourism. Vocational training must also be redesigned. Such results-based methods can be scaled to address the skills gap. Lastly, creativity can be unleashed by supporting entrepreneurship through digital platforms, incubators and youth-friendly finance.

Third, the government should emphasise rebuilding trust both domestically and globally. The currency of the interim government must be integrity. This calls for audacious transparency initiatives, such as independent audits, merit-based hiring and public asset declarations. Nepal should align its governance with international Environmental, Social and Governance (ESG) norms and reposition itself as a location that offers “investment in integrity”. The government must move away from reliance on aid. Instead, it should move towards proactive collaborations abroad, including neighbours, enlisting its diaspora as a source of talent and capital rather than only remittances. Rebuilding trust can lead to both foreign support and internal legitimacy.

Lastly, priority should be given to reforming the bureaucracy. Alongside the continuing political change, Nepal’s bureaucracy needs extensive improvements. Both technical and soft skills are necessary for civil servants. Digital literacy, communication and fostering citizen trust among others should be prioritised in training and developing civil servants.

What next?

It would be beneficial to create a centre/group/alliance/network, for example, the Centre for Transitional Support and Change, to translate this authority into sustainable policy. The centre would be an independent, technocratic engine. It would comprise Nepal’s top think tanks, public intellectuals and civil society organisations. It would facilitate national dialogue and offer evidence-based policy recommendations. It would also ensure the reform process remains transparent, inclusive and free from the influence of discredited political parties. This frustration-driven crisis can potentially spur the development of a more robust, productive and just Nepali state. Although the road ahead is difficult, the time for significant change has arrived.

The government ought to initiate a national employment strategy linked to industrial policy, beginning with labour-intensive public works projects that will create jobs while establishing the framework for future expansion. This won’t be simple. Expectations are high, resources are limited and vested interests will be a hindrance. However, the alternative, which is returning to elite capture, patronage politics and disenchantment among young people, would prove far more costly. Nepal has a generational opportunity to change its course.

Nothing less is acceptable, given the sacrifices made on the streets. The Gen Z uprising has unfolded both warnings and opportunities. A new social contract based on fairness, dignity, productivity and trust may emerge if seized on time. The interim government has no single moment to lose.