The interim government headed by Prime Minister Sushila Karki says it is fully prepared to conduct parliamentary elections on March 5—a task that stands as the administration’s central responsibility after the Gen Z-led uprising reshaped the country’s political landscape.

Most political parties have already agreed to take part in the polls as scheduled, signaling broad acceptance of the election timeline despite lingering tensions following the unrest that toppled a powerful Congress-UML coalition of almost two-thirds majority.

Although the Gen Z movement led to the deaths of scores of people and widespread destruction of public and private property, key external economic indicators remain relatively stable, largely supported by remittance inflows from migrant workers.

Domestically, however, the picture is less encouraging. Private sector representatives say investor confidence remains weak due to persistent political uncertainty. At the same time, young people continue to leave the country in large numbers, citing limited opportunities and a lack of faith in Nepal’s economic future.

Years of political instability, low job creation, and unfulfilled promises eventually pushed young people to the streets, culminating in violent clashes in September.

The youth-led protests were driven by demands for systemic change, an end to corruption, and the creation of an economic environment capable of generating jobs at home. For now, the first concrete step towards that change is the election scheduled for March 5.

Economists and political analysts say the election period itself is likely to inject momentum into the economy, as government agencies, political parties, candidates, institutions, and citizens become actively engaged.

Traditionally, elections in Nepal are associated with a surge in spending. The government releases billions of rupees into the market to manage logistics and security, while candidates spend heavily to court voters, stimulating demand across sectors.

Such spending, analysts say, often results in a temporary economic uptick.

Multiple studies indicate that Nepal’s economy typically expands by 1 to 2 percent during election years, driven largely by consumption rather than long-term investment.

The Election Commission plays a major role in this spending cycle, undertaking voter education, publicity campaigns, polling arrangements, vote counting, and result announcements. In the process, the commission alone spends billions of rupees on logistics, human resources, and operations.

“In a broader sense, elections bring political change, and that change is directly linked to the economy,” says economist Chandra Mani Adhikari.

He says that while the possibility of a leadership transition can initially discourage investment, the political budget cycle often works in favor of growth over the longer term if elections raise hopes for better governance.

“People expect elected leaders to deliver on their promises, and that optimism itself affects economic behaviour,” Adhikari says, adding that electoral cycles almost always lead to noticeable shifts in economic activity.

In the short term, elections boost real GDP growth through increased consumption. “When billions of rupees are mobilised for voter education, publicity, polling, counting, temporary police recruitment, and campaign activities, it significantly revs up the economy,” Adhikari says.

Because Nepal’s economy is heavily consumption-driven, higher spending during elections leads to increased imports, which in turn raises government revenue through customs and taxes.

However, elections do little to stimulate productive or industrial activities, analysts caution.

Addressing a national economic dialogue in Kathmandu on Wednesday, Chandra Prasad Dhakal, president of the Federation of Nepalese Chambers of Commerce and Industry, said elections are a means to institutionalise democracy.

“For the upcoming elections, the leadership and dedicated efforts of the prime minister, all ministers, and the government are commendable. The willingness shown by all political parties to participate in the elections shows that the nation is moving forward,” Dhakal said.

“However, despite all this progress, we have noticed that the protection of the private sector remains somewhat neglected. There is still no guaranteed environment for the private sector to operate unhindered. It is natural to be concerned that impunity may continue to grow if those who engage in wrongdoing are not held accountable.”

Adhikari points out another dimension of election economics: the flow of informal and unaccounted money into the market.

“Elections bring unauthorised cash into circulation to buy votes. Money reaches almost every household,” he says.

Experts have long warned that expensive elections often lead to more corruption, and say that successive governments have largely ignored these warnings.

Pradip Pokharel, former chair of the Election Observation Committee Nepal, who monitored the 2022 elections, believes traditional parties are unlikely to abandon old practices such as vote-buying and secret deals to secure support, regardless of how strictly the election code of conduct is enforced.

“They have the same attitude and behaviour,” Pokharel says, though he adds that the upcoming elections may not be as costly as those in 2017 and 2022.

According to Pokharel, those who finance politicians do so after carefully calculating returns.

“Once elected, leaders feel obligated to return favours, either through policies or by creating a conducive environment for their backers,” he says. “Ultimately, this comes at the expense of the country and the people.”

Pokharel also notes that in previous elections, the ruling party itself repeatedly violated the code of conduct.

“This time, a non-party interim government is overseeing the election, and there is a possibility of some change, as its main objective is good governance,” he says, adding that the election will be closely watched by Gen Z voters.

For the March 5 campaign, the Election Commission has set constituency-based spending limits.

Candidates contesting in five Kathmandu constituencies—Kathmandu-1, 3, 6, 7, and 8—may spend up to Rs2.5 million each. In 17 constituencies, the ceiling is Rs2.7 million. Candidates in 65 constituencies are allowed to spend up to Rs2.9 million, while those in 52 constituencies can spend Rs3.1 million. In 26 constituencies, the maximum limit has been set at Rs3.3 million.

Commission spokesperson Narayan Prasad Bhattarai says candidates must open separate bank accounts for campaign expenses and conduct all transactions through them. Detailed expenditure reports, including the names of authorised spenders, must be submitted to the Election Officer.

Despite these measures, analysts remain sceptical.

They argue that vote-buying and other inducements will continue, fueled by large reserves of informal cash held by established parties.

Much of the bargaining and alliance-building, observers say, is still done in cash. “Old-party cadres won’t even campaign unless they are assured of meat, beer, and nightly entertainment,” Pokharel says.

Nepal plans to spend around Rs27 billion on the upcoming election, with Rs7 billion allocated to the Election Commission and Rs20 billion for security, excluding the political parties spendings.

Around 147,000 security personnel will be deployed, and international partners have been asked to provide vehicles and non-lethal equipment.

In 2017, federal and provincial elections were held in two phases, on November 26 and December 7. A domestic observer group estimated that total spending by the government, parties, and candidates reached Rs131.63 billion. Observers warned of widespread underreporting, as candidates’ actual expenses may have far exceeded official figures.

During the 2022 House of Representatives and provincial assembly elections, the Election Commission reported spending Rs65.56 billion. Including party and candidate expenses, observers estimate total election spending was significantly higher than during the 2017 polls.

“There were no formal studies conducted on the 2022 election spending, but our informal estimates suggest it far exceeded 2017 levels,” said Ujwal Adhikari, a researcher specialising in election campaigns.

A separate survey highlighted a worrying gap between reported spending figures and actual candidate expenditures. For example, although UML candidate Raghubir Mahaseth claimed to have spent Rs1.12 million, many respondents estimated that candidates likely spent between Rs10 million and Rs50 million. The survey pointed to systemic underreporting that raises serious concerns about electoral transparency.

Adhikari also cited a policy dialogue in Kathmandu, where Nepali Congress leader Govinda Raj Pokharel, who contested for a parliamentary seat from Pyuthan district, admitted he had planned to spend Rs2.5 million but ended up spending over Rs10 million.

This discrepancy underscores the need for stricter monitoring and transparency in election financing to maintain the credibility of Nepal’s electoral process.

For the March parliamentary election, the commission has capped individual candidate spending at Rs3.3 million, while provincial assembly candidates may spend between Rs1.5 million and Rs2.3 million.

Neighboring countries and the United States have pledged assistance for the March 5 polls, though details remain unclear.

Independent observers estimate total election-related spending could exceed Rs200 billion, despite tighter restrictions imposed by the interim government to curb corruption.

Election seasons typically drive up demand across sectors, from meat and vegetables to beverages, hotels, and airlines, as leaders travel extensively to woo voters and host parties.

In contrast, the 2022 election period was subdued, especially in Kathmandu, due to the post-Covid economic slowdown. Soon after those elections, Nepal slipped into its first recession in six decades, weighed down by inflation and political instability.

Economic contraction intensified in the second quarter of fiscal year 2022-23 as trade slowed and construction and mining activities declined, following an earlier drop in the first quarter.

The government had initially projected 8 percent growth for fiscal year 2022-23, an election year that fell far short of expectations.

Looking ahead, the World Bank projects Nepal’s growth to slow to 2.1 percent in fiscal year 2025–26 from 4.6 percent in 2024-25, citing the impact of the September unrest and continuing political uncertainty.

Nepal witnessed its worst unrest in decades on September 8-9, after a social media ban sparked protests against corruption that escalated into widespread violence and destruction.

The protests reflected deep frustration with governance failures and the lack of opportunities for young people.

On September 9, prime minister Oli resigned, and on September 12, the President appointed an interim government tasked with holding elections on March 5, 2026. Damage to public and private infrastructure from the unrest has been estimated at Rs84.45 billion, underscoring just how high the stakes are in the upcoming elections.