KATHMANDU: Nepal’s new government, led by Balen Shah of the Rastriya Swatantra Party (RSP), has begun its tenure with an ambitious-and politically fraught-promise: to confront corruption not as rhetoric, but as a system. Its opening move, a 100-day action plan unveiled immediately after taking office, places economic governance, transparency and administrative efficiency at the center of statecraft. The question is not whether the agenda is bold. It is whether it is survivable.

At the heart of the plan lies a striking proposal: the creation, within 15 days, of a powerful asset-investigation committee under the prime minister’s office. Its mandate is sweeping. It will scrutinize the wealth of senior politicians and top bureaucrats who have held public office since 1991, a period spanning Nepal’s democratic transition, civil conflict and post-monarchy political churn. Few initiatives in recent memory have promised such a direct confrontation with the country’s entrenched political economy.

The sequencing is equally deliberate. The government intends first to examine assets accumulated between 2006 and 2026-years shaped by republican transition and institutional expansion-before turning to the earlier democratic era. This phased approach is pragmatic. It targets the most recent accumulation of wealth, where documentation is likelier to exist and political accountability may be more feasible. Yet it also reveals the scale of the undertaking: this is less an investigation than a systemic audit of the state’s post-1990 elite.

The early signals are designed to reinforce credibility. Within a day of announcing its agenda, authorities arrested a senior opposition figure, Deepak Khadka, on money-laundering charges. More strikingly, Sher Bahadur Deuba, a five-time prime minister and one of the country’s most enduring political figures, has reportedly come under scrutiny. Even symbolic actions-such as restricting alterations to his damaged private residence-suggest a government eager to demonstrate that no figure is beyond reach.

Such gestures may galvanize public support. In a country where frustration with corruption is both widespread and deeply ingrained, the promise of accountability carries political currency. Yet they also raise the stakes. Anti-corruption drives in fragile institutional settings often falter not for lack of intent, but because they collide with the very networks that sustain political power. Investigating “everyone” is an appealing slogan; prosecuting them is a different matter entirely.

The government’s broader reform architecture reflects an attempt to move beyond ad hoc enforcement. Plans to restructure the National Vigilance Center, coupled with the central bank’s proposal to build an integrated digital asset registry, point toward institutionalization. If implemented, such a system—linking bank accounts, digital wallets, securities holdings and other financial activities, and flagging suspicious transactions through automated risk indicators-could mark a significant shift from reactive policing to data-driven oversight.

This matters not only domestically, but internationally. Nepal’s placement on the Financial Action Task Force (FATF) grey list in 2025 underscores persistent concerns about money-laundering risks, particularly in banking, cooperatives, real estate and high-value trade sectors. The country now faces a narrowing window-less than a year-to demonstrate credible reform. Failure would risk escalation to the blacklist, with consequences that extend beyond reputation to tangible economic costs: constrained financial flows, diminished investor confidence and reduced access to global capital.

Here, the government’s anti-corruption push intersects with macroeconomic necessity. Exiting the grey list will require more than investigations. FATF standards demand not only the identification of illicit wealth, but its confiscation and the successful prosecution of offenders. This is where Nepal’s past efforts have often faltered: enforcement has been selective, legal processes protracted, and political interference difficult to contain.

Skepticism, then, is not unwarranted. Even sympathetic observers acknowledge the difficulty of pursuing comprehensive accountability across decades of political and bureaucratic leadership. The sheer scale of coordination required-spanning tens of thousands of private entities and dozens of public institutions-poses formidable administrative challenges. More fundamentally, the state must confront a paradox: the actors it seeks to investigate are often those who shaped, and still influence, the institutions tasked with investigating them.

Yet the potential upside is equally significant. If the government can translate its early momentum into sustained institutional reform-combining credible investigations with systemic transparency-it may begin to alter the incentives that have long underpinned corruption in Nepal. Success would not simply remove the country from an international watchlist. It would signal a deeper recalibration of governance itself.

For now, the initiative sits at a delicate juncture: buoyed by public approval, but constrained by political reality. Anti-corruption campaigns are easy to launch and notoriously hard to complete. Nepal’s latest attempt may prove no exception. But in choosing to confront the problem at its roots, rather than its symptoms, the government has at least reframed the terms of the debate.

Anti-corruption moment

Nepal’s new government, led by Prime Minister Balendra Shah, has opened with a striking proposition: to audit the state’s past in order to secure its future. By announcing a sweeping investigation into the assets of political leaders and senior officials dating back to 1991, the administration has signaled a break-at least rhetorically-from a political culture long defined by selective accountability and negotiated impunity.

The plan is ambitious. Within 15 days, a powerful asset-investigation committee is to be established under the prime minister’s office, mandated to examine financial records, property holdings and transactional histories across decades of governance. Framed as a push for transparency, integrity and public trust, the initiative aims not merely to expose illicit wealth but to reset the moral contract between the state and its citizens.

Yet the significance of this moment lies less in the announcement than in what follows. Nepal has, after all, built anti-corruption laws, institutions and strategies before-only to watch corruption deepen. The country’s problem is not the absence of frameworks, but their systematic neutralization.

At the center of this failure sits the investigative architecture, most notably the Commission for the Investigation of Abuse of Authority (CIAA). In theory, it is the state’s chief anti-graft body. In practice, it operates with constraints that are as political as they are legal. Its jurisdiction excludes key domains-cabinet “policy decisions”, parliamentary privileges and large parts of private-sector wrongdoing. Its leadership appointments are often shaped by political bargaining rather than professional merit. Its institutional capacity remains thin: limited technical expertise, outdated investigative methods and no strong local presence.

The result is predictable. Investigations tend to be narrow, prosecutions selective and outcomes uncertain. Public trust, unsurprisingly, remains low.

Even when cases reach the courts, the system falters. Adjudication is slow, often painfully so. Cases linger for years. Legal processes are prolonged. Conviction rates remain weak. Structural gaps-such as the absence of robust witness protection, limited mutual legal assistance and inadequate specialized expertise-further dilute enforcement. In such an environment, the risk of corruption is low; the rewards remain high.

This is the paradox confronting the Shah government. It seeks to prosecute a system using institutions that are themselves products of that system.

A futurist reading of Nepal’s anti-corruption push suggests that success will depend not on high-profile investigations, but on whether the state can transition from reactive enforcement to systemic prevention. The global trend in anti-corruption is clear: the battlefield is shifting from courts to code.

Digitization, if properly deployed, can compress discretion-the oxygen of corruption. Integrated financial tracking systems, real-time transaction monitoring and automated risk flagging can make illicit flows harder to conceal. Public service delivery, when moved online with clear timelines, reduces the everyday rent-seeking that frustrates citizens and normalizes petty corruption. In this sense, governance reform is increasingly a data problem as much as a political one.

But technology alone cannot substitute for political will. Nepal’s deeper challenge lies in what might be termed “policy corruption”-the manipulation of laws and regulations themselves to serve private interests. Here, corruption does not break the system; it rewrites it. Legal loopholes are engineered, cabinet decisions are used as shields, and regulatory changes are tailored to benefit narrow networks. As long as this layer of corruption persists, enforcement at lower levels will have limited effect.

The broader political economy compounds the difficulty. Corruption in Nepal is not an isolated act but a shared equilibrium. Political parties, bureaucratic networks and business interests are often interlinked, each with the capacity to resist or dilute reform. Punishing one group risks destabilizing coalitions; targeting another invite institutional pushback. The incentive, therefore, is to act selectively-or not at all.

Breaking this equilibrium requires alignment-something Nepal has historically struggled to achieve. Anti-corruption cannot be sustained as a partisan project. It demands cross-party commitment, institutional independence and sustained public pressure. Without these, even the most well-intentioned initiatives risk becoming symbolic.

And yet, the stakes are rising. Corruption is no longer merely a governance issue; it is an economic constraint. Investment is deterred, public spending diluted and inequality widened. A generation of young Nepalis is voting with its feet, leaving the country in search of systems that function. Trust in institutions, once eroded, is difficult to rebuild.

Internationally, the pressure is also mounting. Global frameworks such as the United Nations Convention Against Corruption increasingly emphasize not just legal compliance, but demonstrable outcomes-asset recovery, successful prosecutions and cross-border cooperation. In an interconnected financial system, corruption is no longer domestic; it is transnational.

This is where the Shah government’s initiative could prove consequential. If it evolves beyond investigation into institutional redesign-strengthening investigative autonomy, modernizing judicial processes and embedding digital transparency-it may begin to alter the incentives that sustain corruption. If not, it risks reinforcing a familiar cycle: bold imitative, gradual dilution and eventual stagnation.

Nepal, in short, stands at an inflection point. The choice is not between action and inaction, but between transformation and display. One path leads to a more accountable state, capable of sustaining growth and public trust. The other preserves the existing equilibrium-functional enough to endure, but too compromised to deliver.

For a country that has already undergone profound political change, the next transition may be less visible, but no less significant: from a system that manages corruption to one that meaningfully constrains it.

Corruption trap

On paper, Nepal is a democratic success story. A monarchy has been dismantled, a constitution drafted, and power formally devolved to provinces and local governments. Elections are regular, political parties vibrant, and international partners generous. Yet beneath this institutional architecture lies a more troubling reality: a system in which corruption is not an aberration, but a method of governance.

Across the country, from the corridors of Singha Durbar to the smallest municipal office, a growing public consensus has taken hold. Corruption, many Nepalis now believe, is not merely widespread-it is organized, protected and deeply institutionalized. It binds together politicians, bureaucrats, business elites and, at times, even civil society actors into a dense web of mutual interest. Scandals erupt with numbing regularity. Outrage follows. Investigations are announced. And then, almost invariably, the system resets-largely unchanged.

The pattern is familiar. A major scandal breaks-gold smuggling, fraudulent refugee schemes, questionable land deals, or opaque corporate transactions. The government moves swiftly, at least initially. A handful of arrests are made, often involving mid-level officials or peripheral actors. Headlines follow. Yet the cases rarely climb the chain of command. Those widely believed to be the architects—the political patrons, senior officials, or well-connected business figures-remain untouched. Cases drag on. Evidence dissipates. Public attention shifts. Accountability dissolves. This selective enforcement has fostered a corrosive belief: that justice in Nepal is tiered. There is one system for the powerful, and another for everyone else.

The politics of impunity

The persistence of corruption is not merely a failure of enforcement. It is, increasingly, a reflection of political equilibrium.

Narayan Kaji Shrestha, a senior political leader and deputy prime minister, recently offered a rare moment of candour. If politicians are investigated, he noted, party leaders threaten to withdraw support from the government. If civil servants are targeted, unions mobilize protests. If business elites are scrutinized, they warn of economic collapse. In such an environment, accountability becomes politically costly-and often untenable.

This dynamic reveals a deeper truth: corruption in Nepal is sustained not by secrecy, but by negotiation. Power is fragmented across parties, factions and interest groups, each capable of destabilizing the government. Coalition politics, while democratic in form, often produces a system of mutual restraint—where actors refrain from pursuing accountability in exchange for protection.

The result is a form of collective impunity. Everyone knows the system is compromised. Few are willing to disrupt it.

This helps explain why anti-corruption institutions struggle to function effectively. Bodies such as the Commission for the Investigation of Abuse of Authority (CIAA) are formally empowered, yet practically constrained. Leadership appointments are often shaped by political patronage. Investigations can be influenced, delayed or quietly buried. Over time, institutions designed to check power risk becoming extensions of it.

Even legal frameworks have evolved in ways that shield the powerful. One of the most consequential changes came with the removal of “improper conduct” from the jurisdiction of anti-corruption authorities in the 2015 constitution. What remains is a narrower definition of wrongdoing-one that leaves ample room for abuse under the guise of policy decisions.

When corruption becomes policy

If petty bribery represents the visible face of corruption, Nepal’s deeper challenge lies elsewhere: in the realm of policy itself.

Policy corruption-the manipulation of laws, regulations and administrative decisions for private gain-has become increasingly prevalent. It is less visible than cash bribes, but far more consequential. Rather than breaking the law, powerful actors reshape it.

Consider the way legal loopholes are embedded during the drafting process. Provisions are deliberately left ambiguous, creating space for future exploitation. The exclusion of cabinet “policy decisions” from anti-corruption investigation is a case in point. Because the term “policy decision” remains undefined, it can be applied expansively-effectively insulating high-level decisions from scrutiny.

This creates a perverse incentive. Matters that might otherwise fall under administrative or ministerial authority are escalated to the cabinet level-not for efficiency, but for protection. Once labelled a “policy decision”, they become difficult, if not impossible, to investigate.

The consequences are visible in some of Nepal’s most prominent scandals. Land deals, tax settlements, procurement contracts and regulatory changes have all, at various times, been shaped by decisions that appear legal on paper but serve narrow interests in practice.

The Lalita Niwas land scandal, for instance, involved the transfer of valuable government land into private hands through a series of bureaucratic manipulations and cabinet approvals. Despite the scale of the affairs accountability has been uneven. Similarly, amendments to procurement laws have, at times, favored specific contractors, allowing projects to be delayed without penalty.

Even historical episodes reveal the pattern. The “Pajero scandal” of the 1990s-where lawmakers granted themselves tax exemptions on imported vehicles—illustrated how policy could be crafted for personal gain. More recent cases, involving land swaps and lease extensions of public assets, suggest that the practice has evolved rather than disappeared. In each instance, the mechanism is similar. The law is not broken. It is rewritten.

The cost of a broken system

The effects of such systemic corruption extend far beyond headlines. They shape the everyday experience of governance-and, increasingly, the trajectory of the country itself.

Infrastructure projects are a case in point. Roads take years longer than planned, often at double the original cost. Construction quality is poor. Dust, delays and accident become part of daily life. The cause is not merely inefficiency, but a system in which contracts are awarded based on connections rather than competence, and where oversight is weak or compromised.

Public services tell a similar story. Government offices tasked with issuing driving licenses or passports are notorious for delays. Hospitals struggle with shortages of medicine, equipment and personnel. Public schools produce declining outcomes, pushing families toward private alternatives they can scarcely afford.

The economic consequences are equally stark. Investors—both domestic and foreign—are wary of entering a system where rules are unpredictable and enforcement selective. Small businesses, lacking political connections, face barriers that larger.  Perhaps the most visible symptom is migration. Each month, tens of thousands of Nepalis leave the country in search of work. Students depart for education abroad, many never to return. This exodus represents not just an economic loss, but a social one: the gradual erosion of a generation’s trust in its own country.

Inequality, too, is rising. Measures such as the Gini coefficient and Palma ratio suggest a widening gap between rich and poor. But the disparity is not merely financial. It extends to access-to education, healthcare, justice and opportunity. For many Nepalis, the system appears not just unequal, but rigged.

A fragile development model

Nepal’s development story is, in many ways, a paradox. The country has made significant progress over the past two decades, supported by international partners and multilateral institutions. Around a quarter of the national budget is financed through external assistance. Infrastructure has expanded. Poverty rates have declined. Yet corruption threatens to undermine these gains.

Aid leakage remains a persistent concern. Donors, wary of misuse, increasingly channel funds through parallel mechanisms, reducing the overall effectiveness of development support. Trust-once lost-is difficult to rebuild.

The implications extend beyond economics. Persistent corruption risks eroding the legitimacy of democratic institutions. If citizens come to believe that the system serves only a narrow elite, disengagement-or unrest-may follow.

Nepal’s ambition to graduate from least-developed-country status adds further urgency. Such a transition requires not only economic growth, but institutional credibility. Without meaningful reform, that goal may prove elusive.

The limits of reform

Efforts to tackle corruption are not new. Nepal has ratified international conventions, established oversight bodies and introduced legal reforms. Yet progress has been uneven.

Part of the difficulty lies in scale. Combating money laundering and illicit financial flows requires coordination across thousands of entities—banks, cooperatives, businesses and government agencies. The administrative challenge is formidable.

More fundamentally, reform confronts resistance from within the system. Those who benefit from the status quo have little incentive to change it. Political will, often cited as the decisive factor, is itself constrained by the very dynamics it seeks to overcome.

This creates a cycle. Weak enforcement enables corruption. Corruption strengthens networks of influence. Those networks, in turn, weaken enforcement.

Breaking this cycle requires more than incremental change. It demands a reconfiguration of incentives-political, institutional and social.

A moment of reckoning

And yet, there are signs of pressure building.

Public frustration is no longer confined to private conversations. It is increasingly visible-in media coverage, civil society activism and, at times, street protests. A younger generation, more connected and more vocal, appears less willing to accept corruption as inevitable.

Technology offers some grounds for optimism. Digital systems-if designed and implemented effectively—can reduce discretion, increase transparency and limit opportunities for rent-seeking. Online service delivery, integrated financial tracking and automated auditing could, over time, reshape the mechanics of governance.

But technology is not a panacea. Without institutional integrity, even the most sophisticated systems can be circumvented.

Ultimately, the challenge is political. It requires a willingness among political actors to priorities long-term credibility over short-term advantage-to accept that accountability, applied consistently, may carry immediate costs but yield broader gains.

The road ahead

Nepal stands at a crossroads. The current trajectory-marked by entrenched corruption, rising inequality and declining public trust—is not sustainable. The risks are clear: economic stagnation, social unrest and the gradual hollowing out of democratic institutions.

Yet alternatives exist.

A credible anti-corruption agenda would begin with transparency—resolving major scandals openly and decisively. It would require strengthening oversight bodies, ensure their independence and holding them accountable for results. Public services would need to be modernized, with clear timelines and digital tracking to reduce delays and discretion.

Equally important is inclusion. Citizens must have avenues to demand accountability—through media, civil society and participatory governance. Without public pressure, reform is unlikely to endure.

International partners, too, have a role to play. By aligning support with governance reforms and maintaining consistent pressure for accountability, they can reinforce domestic efforts. But ultimately, the impetus must come from within.

A system-and a choice

Corruption in Nepal is not merely a series of isolated failures. It is a system—one that has evolved over decades, adapting to political change while preserving its core logic.

Dismantling such a system will not be easy. It will require confronting powerful interests, rethinking institutional design and, perhaps most challenging of all, changing expectations.

For now, the country remains caught in a delicate balance: between public anger and political inertia, between reformist rhetoric and entrenched reality.

The question is not whether Nepal recognizes the problem. It clearly does. The question is whether it is prepared to confront it-fully, consistently and at all levels of power. If it is, the rewards could be transformative. If it is not, the costs-already visible-will only deepen. And for a country with so much at stake, that may be the greatest risk of all.