Caretaker PM faces protests, collapsing economy, and looming monarchy amid march to 2026 elections.

The tumultuous happenings over the last few days in Nepal have catapulted Sushila Karki, Nepal’s first female Chief Justice, to the ‘throne of thorns’ in Kathmandu’s Singha Durbar.

The jurist, long celebrated for her independence, now occupies the prime minister’s chair, not as an ambitious politician but as a reluctant caretaker. Her task seems modest on paper – to guide a fractured nation to credible elections in March 2026.

In practice, it is a trial of the Himalayan nation’s democratic experiment itself. Karki’s rise followed the dramatic resignation of KP Sharma Oli and his government after violent protests by the country’s youth that roiled this nation of 30 million over the last week.

Where earlier uprisings bargained with the political class, this generation issued a violent ultimatum and managed to get its way as royalists and ultra-leftists joined their ranks.

The protestors, dubbed Gen Z activists, organised as much on Discord as in Kathmandu’s plazas, turning disaffection into a mass movement. Their grievances—youth unemployment above 20 percent, chronic corruption scandals, and a stagnant economy—leave even the educated jobless or underemployed.

While none doubt their genuine anger that the government of the day has failed them, many questions remain unanswered even as observers draw parallels with similar events in Dhaka a year back.

Among the shadows are questions about the antecedents of the NGO Hami Nepal, which emerged as the main organiser of the protests, and about the nature of wounds suffered by protestors—head, chest and abdomen hits from high-velocity rifles—suggesting the handiwork of trained snipers rather than regular policemen, who have been accused of panicking and shooting at students.

Karki’s early moves have been welcomed by all – both students and existing political parties ranging from CPN-UML to the Nepali Congress. She slashed the cabinet to fifteen ministers, spurning the patronage networks that have long defined Nepali governance. Her choices – Finance Minister Rameshwor Khanal, Energy Minister Kulman Ghising, and Law and Home Affairs Minister Om Prakash Aryal – are seen as technocrats with reputations for competence rather than party loyalty.

She has also done something few predecessors dared: meet the protesters on their own terms. From hospital visits to injured demonstrators to online chats with student leaders, Karki has signalled that the street matters.

However, the stakes ahead are not merely political. Attacks on conglomerates like the Bhat-Bhateni supermarket chain and the FMCG-to-energy major Chaudhary Group, as well as showrooms of multinationals including Hyundai, Toyota, and Tata, have rattled investors and threatened to plunge the economy into a backspin.

Tourism, the mainstay of the economy, already fragile, has suffered hugely. Pilgrimages to Kailash–Mansarovar are down sharply. Hotel cancellations are rolling in like waves, spelling alarm for the economy. Economists warn of losses approaching three trillion Nepali rupees—roughly half the nation’s GDP—when infrastructure damage and disrupted trade are taken into account. Growth forecasts have sunk toward 1 per cent, raising the spectre of Nepal seeking emergency support from neighbours such as India as well as multilateral lenders.

For a caretaker prime minister with no mandate for sweeping reform, the challenge is paradoxical—stabilise an economy she has no licence to reshape while preserving the moral momentum of a movement that demands deep change.

Nepal’s history offers a cautionary echo. The army, which has now willy-nilly become the quiet arbiter of political fate, is keeping a watchful neutrality that few believe is purely passive. Royalist factions, sensing opportunity, speak of restoring the monarchy. Yet even former King Gyanendra hesitates to reclaim the throne without a democratic mandate, exposing fractures within the royalist camp. To some Gen Z activists, monarchy is a distraction—a symbol of the old order they have already rejected. However, to many among Nepal’s youth, especially the millions of unemployed between 18 and 35, the monarchy represents a “better age” of which they have heard tales from their forefathers.

New Delhi, wary of Beijing’s growing reach, views Karki as a stabilising interlocutor. Her academic ties to Banaras Hindu University and friendships with Indian intellectuals give her unusual credibility in India’s political circles.

The Modi government, among the first to welcome her, is likely to offer financial and infrastructure support if sought, seeing her tenure as a chance to reset relations strained under Oli’s nationalist rhetoric and Beijing tilt.

China, less overt but ever present, continues to expand investments in Nepal’s energy and transport sectors. Each bilateral deal signed by the previous Communist governments—whether on hydropower grids or mountain highways—carries geopolitical weight.

For now, Karki governs in the narrow space between crisis management and democratic aspiration, embracing the world while quietly working to retain neutrality. Her mandate is to preserve stability, not engineer a new social contract. Whether the youth movement can translate its street power into lasting political legitimacy remains the larger, unanswered question. Groups like Hami Nepal insist on staying outside the state, guarding their independence even as they debate forming a party before the 2026 vote.

President Ramchandra Paudel, the only symbol of the older government, has urged calm, but the deeper reckoning lies ahead.