In Nepal,  corruption has morphed into sophisticated, institutionalized kleptocracy. It is a system through which the state’s structures, culture, and hierarchies are engineered to serve a parasitic elite. For decades, the arbitrary conduct of our leaders and a systemic lack of accountability has shattered public trust.

But now,  a new Gen-Z movement, catalyzed by years of state-sponsored dysfunction, has overturned the old political regime. Unlike the aftermath of uprisings in Indonesia, Madagascar, Kenya, Sri Lanka, Bangladesh and elsewhere – where youth-led movements often struggled to institutionalize their gains – Nepal is finding itself on a different path. In Bangladesh, while students successfully toppled a regime, they are now barely represented in the formal halls of power. In Nepal, the youth movement did not just shift the politics; it shifted the generation in power. In a country where youth remain the largest demographic, the Prime Minister is now one of their own. At 35, Prime Minister Balendra Shah leads a cabinet with an average age below 40, and is in the process of turning a protest movement into a governing reality.

The Economics of State Capture: A Tragic Opportunity Cost

Nepal’s greatest challenge remains State Capture, through which party elites and business cronies manipulate the machinery of government to serve private interests. This isn’t just theory; it is a perfectly functioning engine that has produced a series of brazen scandals. From the fake Bhutanese refugee scam, where top officials sold out their own citizens, and the Lalita Niwas land grab, to the wide-body aircraft procurement and the Giribandhu Tea Estate land swap, the pattern is clear: public assets are treated as private loot.

The scale of this rot is reflected in the staggering figures released by the anti-graft authority. In the 2024/25 fiscal year, the Commission for the Investigation of Abuse of Authority (CIAA) filed cases involving financial claims totaling Rs 5.97 billion, following a massive Rs 8.4 billion claimed the previous year. The cost of this capture is measured in stolen human potential. This wealth could have equipped every rural hospital or modernized a crumbling education system. Instead, while a few elites capture the nation’s resources, many have to emigrate- struggling as manual laborers in the heat of the Gulf, seeking abroad the dignity that was stolen from them at home. This is why the Gen-Z movement isn’t just asking for better leaders; they are demanding a total dismantling of the kleptocratic infrastructure.

A Crisis of International Credibility

Beyond our borders, Nepal is failing its international obligations. This recently led to Nepal being placed on the Financial Action Task Force (FATF) Gray List for the second time. We have fulfilled only 21 out of 40 FATF recommendations, primarily due to lax enforcement of anti-money laundering (AML) laws and inadequate oversight of high-risk sectors like real estate. This increases the cost of doing business and threatens to decouple Nepal from the global banking system. Furthermore, despite accepting numerous recommendations under the Universal Periodic Review (UPR), Nepal’s compliance remains “performative,” failing to internalize meaningful human rights reforms or provide legal status to vulnerable refugee populations.

Bold Steps and a New Mindset

The new government is strictly enforcing AML laws, banning political trade unions within the bureaucracy, and scrapping over 15 outdated laws that impeded business. Prime Minister Shah has introduced a decisive “hire-and-fire” approach, removing the Minister of Labor over Conflicts of Interest – demonstrating that this government prioritizes ethical integrity over political convenience. At the same time, the Prime Minister has warned the Health Minister about oversight of the health sector. Taking this kind of action so soon is unprecedented; previously, ministers were appointed based on political egos, and inter-party conflicts often made it impossible to fire underperformers. 

The road to reform is not easy. It requires a complete overhaul of the system with a new mindset – one open to ideas and collaboration with civil society and business change-makers. At Accountability Lab, we catalyze this process by creating powerful spaces for policy debate and evidence generation, convening youth, parliamentarians, and civil servants to prevent corruption before it starts.

The Dawn of a New Beginning

Nepal stands at the dawn of a new beginning, filled with immense hope. We are currently the centre of attention on a global scale- and an example of  what happens when a youth-led movement successfully reforms a captured state. However, this hope is accompanied by great expectations. This is likely the final opportunity for the political class to prove its honesty. If this government fails to improve governance – if it falls back into the old patterns of “performative reform” while the kleptocratic engine continues to operate – it will spell the end of this democratic experiment in Nepal.

We are no longer just changing faces; we are dismantling an ecosystem. The world is watching to see if this Gen-Z led government can turn a kleptocracy into a transparent, thriving democracy. The time for excuses is over; the era of results and radical accountability is here.

Narayan Adhikari is a co-founder of Accountability Lab and a member of the ‘Governance Roadmap 2082’ Preparation Committee.