A significant victory by the Rastriya Swatantra Party (RSP) in Nepal’s recent parliamentary elections is expected to decrease immediate political uncertainty and enhance policy predictability, according to Fitch Ratings. The RSP, a relatively young party, secured 125 out of 165 seats through the First-Past-the-Post (FPTP) system and garnered close to 48% of votes under the proportional electoral system. This outcome positions the RSP to hold nearly two-thirds of the seats in the House of Representatives.
The election results are anticipated to diminish the chances of prolonged coalition talks and frequent government changes that have characterized Nepal’s political landscape in recent years. The victory of the RSP could also potentially uplift investor confidence over time if there are visible improvements in governance and economic reforms. The country witnessed multiple governments in the past three years due to fragmented mandates, with public discontent over political corruption leading to significant protests and a change in government leadership.
The RSP’s landslide victory signifies a voter mandate for a departure from traditional power-sharing politics. With the Nepali Congress and CPN-UML losing seats, the possibility of a single-party majority could expedite the political transition and sustain momentum for reforms, especially in leveraging hydropower investments for broader economic growth. The RSP aims for an ambitious economic growth target of around seven percent over the next five years, focusing on enhancing productivity, creating formal jobs, and driving private sector investments across various sectors.
Fitch Ratings, in reaffirming Nepal’s ‘BB-‘ sovereign rating with a Stable Outlook, emphasized the importance of sustainable growth supported by governance enhancements and investment-friendly policies. The agency highlighted that while Nepal’s growth potential is promising, challenges related to implementation capacity remain, particularly in governance effectiveness and regulatory quality. The success of the new government’s policy agenda will be critical in surpassing Fitch’s current growth forecast of 4.5% for the fiscal year ending July 15, 2027.
