After the Flames

The burning images from Kathmandu have shaken investor confidence and exposed a fragile social contract. The coming months will decide whether Nepal will slip deeper into instability or seize the chance to reinvent itself

Burned government vehicles are seen inside the Parliament premises, a month after a “Gen Z” led mass anti-corruption protests in Kathmandu, Nepal, Friday, Oct. 10, 2025. Photo: AP/RSS

The flames that recently engulfed the Hilton in Kathmandu did more than damage a building — they sent a shockwave through the global investment community, branding Nepal as a place of uncertainty and risk. For decades, Nepal has been caught in a cycle of political turbulence and economic inertia. But the events of recent weeks have exposed just how fragile the country’s social contract has become. The world is watching, and the message is clear: unless leaders act decisively, Nepal risks sliding deeper into instability and economic decline.

The images of burning parliament building, supreme court, shopping malls and crowds surging through the capital are not just local headlines; they are viral signals, live-streamed to a global audience that includes investors, development partners and the Nepali diaspora. The symbolism is potent: when icons of international business and hospitality come under attack, it is not just a protest against the government but also a warning that Nepal is not a safe haven for capital. The cost of this perception is incalculable as it threatens to choke off the very investment and tourism that the country desperately needs for recovery.

At the heart of this crisis is a generation that feels betrayed. Young Nepalis, armed with smartphones and a sense of urgency rather than ideology, took to the streets because a system has failed them. Their grievances are genuine: no jobs, no opportunities, no hope. Their fury is directed not just at politicians who cycle through power with little to show, but at the institutions now synonymous with inertia and patronage.

The interim government has a daunting task in this volatile situation. Finance Minister Rameshore Khanal, a figure known for his technocratic rigor, must now look beyond spreadsheets and embrace an outward-looking vision. Nepal cannot afford to retreat inward; it must actively court global partners, from multilateral banks to private investors, and demonstrate both stability and the will to deliver bold, transparent reforms that restore confidence and unlock new sources of growth.

The Nepal Rastra Bank (NRB), too, must rise above the political patronage that has too often constrained its mandate. The central bank’s role is not merely to keep inflation in check, but to foster innovation, expand financial inclusion and support the private sector in creating jobs. This requires independence, vision and a willingness to challenge the status quo — qualities that are in short supply when institutions are beholden to shifting political winds.

The stakes could not be higher. Nepal’s economic fundamentals are sobering: growth has stagnated, youth unemployment is rampant and remittances, while a lifeline, mask the failure to create opportunities at home. The country’s vast hydropower potential and natural beauty remain largely untapped, held back by bureaucratic inertia and a lack of investor confidence. The recent violence has only deepened these challenges, threatening to set back development by years, if not decades.

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Yet, there is still a window for renewal. If Nepal’s leaders can demonstrate the courage to break with the past -- by embracing transparency, reaching out to the world, and empowering institutions to act independently -- they can begin to restore trust and chart a new course. The alternative is a slow slide into irrelevance, as capital, talent, and hope drain away.

The world is watching Nepal, not just as a site of unrest, but as a test of whether a small nation can summon the leadership and vision to break free from its cycles of disappointment. The next moves by the finance minister, the central bank governor, and the interim government will determine whether Nepal remains a cautionary tale or becomes a story of resilience and renewal. For the millions of young Nepalis demanding change, and for the investors weighing their next move, the message is the same: the time for bold action is now.

But what does bold action look like in a country so accustomed to incrementalism and compromise? It means, first and foremost, a willingness to confront uncomfortable truths. Nepal’s economic growth, which once soared to nearly 7.5% in the years before the pandemic, has slowed, with recent projections hovering around 3.99%. The country’s per capita income, while doubling in a decade to $1,496, still trails its regional peers. The trade deficit has ballooned to Rs 1,527 billion, and public debt has quadrupled, with more than 85% of new borrowing going simply to service old loans. These are not just numbers but signs of a system addicted to short-term fixes and bling to long-term vision.

The frustration of Nepal’s youth is not hard to understand. Each year, hundreds of thousands of young Nepalis leave the country in search of work. Remittances sent by them are supporting the economy but concealing the lack of opportunities at home. More than 6.4 million Nepalis have received labor permits for foreign employment, a staggering number for a country of just over 30 million. The streets of Kathmandu are filled with young people who see little future for themselves in a system that seems rigged against them. Their anger is both palpable and justified.

The recent violence has exposed the fragility of Nepal’s social contract, but it has also revealed the resilience and determination of its people. The challenge now is to channel that energy into constructive change. This will require more than just technocratic fixes or cosmetic reforms. It will require a fundamental rethinking of the relationship between the state and its citizens, and a willingness to invest in the institutions and infrastructure that can support broad-based, inclusive growth.

Nepali leaders must recognize that the world has changed. In an era of instant communication and fluid global capital, reputation matters more than ever. The images of burning hotels and street protests have already done damage, but they do not have to define Nepal’s future. With the right leadership, the country can turn this moment of crisis into an opportunity for renewal. That requires embracing transparency and accountability at every level of government, rooting out corruption and creating a regulatory environment that encourages investment and innovation.

It also means investing in the country’s greatest asset: its people. The education system must be reformed to equip young people with skills for a global economy. The financial sector, which has seen deposits rise Rs 1,910 billion to Rs 7,300 billion over the past decade, should be mobilized to support entrepreneurship and job creation, not just speculation and rent-seeking. The central bank must be empowered to act independently, with a clear mandate to support growth and stability.

Nepal cannot do this alone. The international community — development partners, investors and the diaspora — all have a role to play. But their support depends on the government demonstrating a genuine commitment to reform. This means moving beyond rhetoric and delivering visible, concrete changes that restore confidence and unlock new sources of growth. There are reasons to be optimistic. Nepal’s vast hydropower potential could make it a regional leader in clean energy. Its natural beauty, paired with investment in infrastructure and marketing, could revive and expand the tourism industry. But these opportunities will not realize themselves. They require leadership, vision and above all, courage — the courage to break with the past, to challenge entrenched interests and to put the needs of the country above the demands of politics.

The stakes could not be higher. If leaders fail to act, the country can slide into a cycle of instability and decline, as capital, talent and hope drain away. But if they rise to the challenge, Nepal can become a model of resilience and renewal -- a small nation that reinvented itself in the face of adversity.

The question is whether Nepali leaders can learn from the past and chart a new course. This will require a willingness to listen — to the voices of young people demanding opportunity, to the concerns of investors seeking stability and to the aspirations of a nation that has too often been let down by its leaders. It will require a commitment to building institutions that are capable, accountable and responsive to the needs of the people. This will require a vision that looks beyond the next election or budget cycle, toward the country’s long-term future.

The choices made in the coming months will shape the country’s trajectory for years to come. Will Nepal remain trapped in a cycle of disappointment and missed opportunities, or will it seize this moment to build a more inclusive, dynamic, and resilient economy? The answer will depend on the courage and vision of its leaders, and on the determination of its people to demand and drive change.

The story of Nepal is still being written. The flames that lit the Kathmandu sky were a warning—but they can also be a catalyst. If Nepali leaders act boldly and decisively, they can turn this crisis into opportunity and set the country on a path to a brighter, more hopeful future.

This opinion article was originally published in October 2025 issue of New Business Age magazine.

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