Foreign policy and defense
Foreign policy is characterized by a balance
between China and India. Largest is the dependence of
India which encloses Nepal on three sides. However,
Chinese influence can be said to increase.
The exchange with India is large and most of Nepal's
trade and contacts with the rest of the world go through
neighboring countries. But relationships are strained
periodically; Nepal has constantly tried to assert its
political and economic independence.
Overview of business holidays and various national observances in Nepal for years of 2020, 2021, 2022, 2023, 2024 and 2025.
Nepal and India have signed trade and transit
agreements that give Nepal duty free in India and the
possibility of transporting goods to ports in
Bangladesh. Agreements have also been made on the joint
use of water resources.
During the civil war in Nepal 1996–2006, India became
an important ally for the government side, as domestic
Maoist rebels also worried the authorities in New Delhi.
India delivered weapons to the Nepalese army and seized
high-ranking Nepalese Maoists in 2004. Unsurprisingly,
relations deteriorated when a Maoist-led government took
office in Kathmandu in 2008. They soon strengthened
again and from 2013 India resumed its arms deliveries to
India supported Nepal with money as well as soldiers
in the rescue work that followed the severe earthquake
in the Kathmandu Valley in the spring of 2015. At the
same time, relations deteriorated during the year as
India expressed its support for indiscriminate madhesi
groups and in protest against the new constitution
blocked roads into India.
With dissatisfaction, India is looking at Beijing's
ambitions to connect Central Asia and South Asia more
closely through low-cost loans for extensive
infrastructure projects. Nepal is also receiving Chinese
support to develop infrastructure such as roads and
bridges, something that is greatly needed after the
The United States and Britain also supported the king
militarily and the United States terrorized the Maoist
guerrillas during the war. In recent years, the United
States has increased its assistance to Nepal and in 2012
the Maoists were removed from the US list of terrorist
organizations. After the 2015 earthquake, the United
States was one of the countries that provided the most
help and assistance. Bilateral trade has also increased.
Relations with other Western countries have generally
been good. The UK and the rest of the EU were quick to
pledge aid when the peace process took off in 2006.
Since Tibet's conflicts were settled in the 1950s,
relations with China have been predominantly good. Nepal
has restricted the ability of Tibetan refugees to act
politically, and the Chinese government distanced itself
from the Nepalese Maoists when forming a banned
Since the mid-2010s, economic cooperation between the
two countries has increased significantly. China's
official assistance to Nepal fivefold between 2014/2015
and 2015/2016, from $ 24 million to $ 128 million. In
the same year, China took over India's place as the
country that makes the most direct investment in Nepal.
China also responded quickly to Nepal's plea for help
after the 2015 earthquake and contributed, among other
things, with tents and medical personnel and equipment.
Shortly thereafter, an agreement was signed on both aid
and investment from China to Nepal.
In March 2016, Prime Minister KP Oli visited Beijing,
where the two countries signed a series of bilateral
agreements. One important such was giving Nepal access
to Chinese ports, which was expected to reduce Nepal's
dependence on India for trade with the outside world. In
the same year, bilateral trade with China increased by
In April 2017, China and Nepal conducted their first
joint military exercise. A month later, the countries
signed the framework for Nepal's participation in
China's huge infrastructure initiative, the new Belt and
Road Initiative. As part of this, a new freight railroad
has been built between Guangdong in southeastern China
and Kathmandu, via Xigaze in Tibet.
Cooperation between the two countries was further
strengthened when Chinese President Xi Jinping visited
Nepal in October 2019, the first Chinese state visit in
23 years in the country. Xi then pledged nearly half a
billion dollars more in financial aid, between 2020 and
2022, to "raise the standard of living of the Nepalese".
A decision was made to build a new railway and a tunnel
across the Sino-Nepalese border. Collaboration
agreements on hydropower, security, trade and education
were also signed.
Relations with Bhutan have been strained since the
1990s, when about 100,000 Bhutanese of Nepalese origin
fled persecution to Nepal. The refugees were placed in
UN-supported camps and were not allowed to settle in
Nepal. Under the auspices of the UN, the majority of
refugees have been relocated to western countries,
primarily the United States, but at the beginning of
2018, approximately 8,500 were still in two camps.
With Bangladesh, Nepal is cooperating on the
availability of water in the rivers that flow from the
Himalayas to the Gulf of Bengal. Bangladesh invests in
Nepalese hydroelectric power to buy electricity from it.
Nepal may also use Bangladeshi ports for its foreign
Nepal has been a member of the UN since 1955. The
country was a founding member of the regional
cooperation organization Saarc (South Asian Association
for Regional Cooperation), which is headquartered in
Kathmandu. The Saarland countries have signed the Safta
(South Asian Free Trade Area) Free Trade Agreement.
Nepal is also part of another regional cooperation
organization, Bimstec (Bay of Bengal Initiative for
Multi-Sectoral Technical and Economic Cooperation).
Nepal's army consists of professional soldiers. They
are usually hired for ten years and receive the same
salary as government officials, which attracts many.
Since the 19th century, Nepalese Cucumber soldiers (see
Population and Languages) have been recruited to foreign
armies, especially in India and the United Kingdom. In
total, there are tens of thousands of Nepalese in
foreign service. Nepal is also one of the most diligent
participants in UN peacekeeping efforts.
During the Civil War, the defense was heavily
equipped. After the war, the task was to wrestle the
army and at the same time incorporate parts of the armed
forces of the Maoist guerrillas. Both the army and the
former guerrillas were monitored by the UN until January
2011 when the Nepalese government decided not to extend
the mandate of the UN mission.
FACTS - DEFENSE
96 600 men (2017)
Military expenditure's share of GDP
1.6 percent (2017)
Military spending's share of the state budget
5.8 percent (2017)