The government’s decision to appoint Yubaraj Khatiwada, who resigned as the finance and communication minister earlier this month, as prime minister’s special economic adviser can create more rifts in the ruling Nepal Communist Party while having a profound impact on governance as well, insiders and analysts say.

A Cabinet meeting on Monday decided to appoint Khatiwada as Prime Minister KP Sharma Oli’s special economic adviser.

“Khatiwada has been appointed special economic adviser to the prime minister with benefits on par with a minister,” said Foreign Minister Pradeep Gyawali, who is also the government spokesperson, at a press briefing on Tuesday evening.

Party insiders say the move to bring Khatiwada back as Oli’s economic adviser indicates the prime minister is not going to appoint a separate finance minister in the immediate future. Since Khatiwada resigned, Prime Minister Oli has kept the finance and communication portfolios with himself.

At least two ruling party Standing Committee members said though it is the prime minister’s prerogative to appoint anyone as his adviser, the way Oli is giving preferential treatment to Khatiwada has created an uneasy situation within the party, as there were some leaders, including incumbent ministers, who were eying the Finance Ministry.

Party vice-chairman Bamdev Gautam, General Secretary Bishnu Poudel, Standing Committee members Surendra Pandey and Janardan Sharma are among the leaders aspiring to head the Finance Ministry, according to insiders. Even Barshaman Pun, who is the energy minister in the Oli Cabinet, was also hoping that he would succeed Khatiwada at the Finance Ministry, they say.

“I don’t think there will be a new finance minister anytime soon,” Top Bahadur Rayamajhi, a Standing Committee member, told the Post. “It’s up to the prime minister whom he appoints his adviser. So it does not matter whether some people are happy or not.”

Though senior party leaders have not made any public statement on Khatiwada’s appointment, the issue is likely to surface during the party’s Secretariat meeting scheduled for Friday, according to a leader close to Pushpa Kamal Dahal, the other party chair.

The leader said that during a meeting between Oli and Dahal, the latter had raised the issue, its possible implications and the possibility of appointing a new finance minister in the future.

Khatiwada had to resign as a minister because Oli could not nominate him to the National Assembly under pressure from party vice-chair Gautam. After Khatiwada completed his two-year term as a National Assembly member on March 3, Oli had reappointed him as the finance minister on March 4.

As per constitutional provisions, someone who is not a member of parliament can be appointed a minister but the appointee must take the oath as a member either of the House of Representatives or the National Assembly within six months of the appointment to continue on the job.

After Oli’s position became tenuous in the wake of growing calls for his resignation as party chair and prime minister from the faction led by Dahal, he was left with no option but to bring Gautam into his fold, as he was slipping into the minority in the nine-member party Secretariat. The only way Oli could win over Gautam was the implementation of the February 26 decision to nominate him to the National Assembly.

Gyawali on Tuesday did not brief on the Cabinet’s decision to recommend to the President Gautam’s appointment to the Upper House, at least two ministers on Monday evening had told the Post about the decisions.

Some ruling party leaders are now calling Khatiwada as the “de-facto finance minister” who is also likely to oversee other ministries, as he has the backing of the prime minister. And this could invite serious conflicts between Khatiwada and other ministers and top officials.

A close aide to Khatiwada told the Post that Khatiwada as Oli’s economic adviser will have a wider mandate and working scope, even though the terms of reference have not been made public.

According to the aide, Khatiwada will try to harness domestic and foreign investments, will assess the Covid-19 impact on the economy, coordinate and work closely with international finance institutions including bilateral and multilateral donor agencies, and oversee big-ticket projects which are currently under the ambit of the Investment Board Nepal and matters and projects related to energy, trade, commerce, import and export, and tourism.

“That will clearly mean Khatiwada’s inputs, advice and suggestions will have an overarching impact,” the aide who spoke on the condition of anonymity told the Post. “His scope of work will be definitely beyond the Finance Ministry.”

Insiders and analysts say such an arrangement will give rise to a difficult situation, as it will concentrate power in Oli, weaken institutions and make existing agencies defunct.

Since his return to power in February 2018, Oli has been in a bid to centralise power, which he started with by bringing some independent agencies like the National Intelligence Department, Department of Revenue Investigation and the Department Money Laundering Investigation under the Prime Minister’s Office.

At least two secretaries from the ministries that fall under the advisory role of Khatiwada said they have yet to be briefed on what Khatiwada’s appointment as the prime minister’s economic adviser entails.

“But if we receive instructions from multiple people on the same issue and report to multiple people then it will certainly hamper the functioning,” an incumbent secretary told the Post on condition of anonymity because he feared reprisal.

According to Purushottam Ojha, a former secretary, the government’s new move could add to bureaucrats' dilemma if they are not clearly briefed on how they are supposed to report and who they are supposed to take instructions from.

If bureaucrats are to take instructions from Khatiwada and report to him, they will also have to think about how they are supposed to deal with the prime minister’s other advisers.

Apart from Khatiwada, Oli has Bishnu Rimal as his chief adviser, Surya Thapa as press adviser, Rajan Bhattarai as foreing relations adviser, and Lal Shankar Ghimire as his economic development adviser.

“No doubt, Khatiwada has become the de-facto finance minister with a wider and stronger scope of work,” said Ojha. “Such multiple layers can have an adverse impact on governance.”