Tug-of-War Within Ruling Coalition Over Nepal Rastra Bank Governor Appointment

As the deadline for appointing a new governor of Nepal Rastra Bank (NRB) approaches, tensions are rising between the two major ruling coalition partners, CPN (UML) and Nepali Congress. With the central bank set to become leaderless from Chaitra 25 (April 08, 2025), the government faces pressure to finalize the appointment before then. Given the responsibility of preparing the budget for the new fiscal year, experts argue that the governor’s post—considered the government’s chief economic advisor—should not remain vacant even for a single day.

The two coalition partners have been engaged in a power-sharing arrangement for key positions. While UML secured the leadership of the Nepal Securities Board, Nepali Congress claimed the Nepal Insurance Authority under its quota. Similarly, the appointment of Hitendra Dev Shakya as the executive director of the Nepal Electricity Authority (NEA), replacing Kulman Ghising, required significant political maneuvering. Previously, UML Chairperson and Prime Minister KP Sharma Oli had appointed Shakya, only for then-Prime Minister Sher Bahadur Deuba to remove him and reinstate Kulman. Oli later reversed Deuba’s decision, reinstalling Shakya despite public and judicial support for Kulman, a move that saddled Congress with considerable unpopularity.

Having reinstated its candidate in the NEA at a high cost, UML’s acquiescence to Congress staking a claim on the NRB governor’s post seems natural. Reports suggest that an understanding to this effect exists between the two parties. However, certain interest groups are reportedly working to derail this agreement. These groups are accused of trying to influence Oli to appoint a governor who would serve their interests, while simultaneously attempting to fracture the UML-Congress alliance and destabilize Oli’s premiership.

External Forces and Oli’s Strategy

Certain external powers with influence over Nepali politics are said to be displeased with Oli’s continued tenure in Baluwatar. Amid their efforts to dislodge him, there are indications of a strategy to provoke Congress by disrupting the governor appointment process, thereby straining the coalition. In recent days, individuals urging Oli to abandon the agreement with Congress have reportedly been active in Baluwatar.

Meanwhile, Oli, who has taken credit for appointing Nepal’s first female president and first female chief secretary, is now said to be considering the idea of appointing the country’s first female governor. The name of current Deputy Governor Neelam Dhungana has surfaced in this context. Neelam previously served as acting governor when Mahaprasad Adhikari faced disciplinary action, during which her capabilities were evident. However, she is unpopular among NRB staff, who refer to her as a "quarrelsome deputy." Critics argue that her poor rapport with employees and questions over her commitment to good governance make her an unsuitable candidate. "Neelam has already made history as the first female deputy governor; if Oli trusts her further, he could field her from Jhapa in elections and make her a finance minister or even prime minister. But entrusting her with the keys to the nation’s treasury would be a mistake," an analyst remarked.

Allegations of Regional Bias

Oli has faced accusations of favoring candidates from his home district of Jhapa for key positions. Neelam, also from Jhapa, is believed to benefit from this perceived bias. Critics point to the tenure of former governor Yubaraj Khatiwada, another Jhapa native, arguing that it yielded little for the country’s economy. "This nation stretches from Mechi to Mahakali; every qualified candidate deserves equal consideration," an economist stressed.

Congress’s Proposal: Gyanendra Dhungana

Nepali Congress, on the other hand, has put forward Gyanendra Dhungana, a former NRB executive director, as its candidate for governor. Dhungana is widely regarded as a competent and professional figure. After leaving NRB, he left a mark in the private sector and multilateral forums, enhancing the reputation of every institution he served. His successful management of bank mergers and expertise in India’s monetary policy make him well-suited to address Nepal’s current economic and monetary challenges. Congress leadership appears united in supporting his candidacy.

If Oli antagonizes Deuba over the governor’s appointment, it could spell trouble on multiple fronts, potentially jeopardizing the coalition and emboldening royalist forces. Analysts suggest that respecting Congress President Sher Bahadur Deuba’s proposal is Oli’s best option to sustain his government and maintain the alliance between the two major parties. "The credibility of an institution like NRB and the national interest should take precedence over partisan gains or the whims of interest groups," an expert noted.

The coming days will reveal whether Oli and Deuba’s understanding steers the nation’s economic leadership in a constructive direction.