Nepal’s Foreign Policy: Challenges and the Potential of Universal Basic Income

 Nepal, nestled between the geopolitical giants of India and China, has historically played a balancing act in its foreign policy. However, its recent approach to international relations has revealed significant weaknesses, raising concerns about its strategic planning and decision-making. Coupled with internal economic challenges, the need for a transformative policy framework is evident. Universal Basic Income (UBI) could be a tool not only to address domestic issues but also to strengthen Nepal’s international standing.

Nepal’s foreign policy has often been criticized for being reactive rather than proactive. This shortcoming stems from several factors: overreliance on its immediate neighbors, inconsistent policies due to frequent changes in government, weak diplomatic infrastructure, and neglect of regional opportunities. The country’s heavy dependence on India and China for trade, investment, and aid has led to limited diversification of its international partnerships, reducing its bargaining power and leaving it vulnerable to external pressures. Frequent political transitions have resulted in inconsistent foreign policies, undermining Nepal’s credibility on the global stage. Additionally, underfunded and understaffed diplomatic missions limit the ability to engage effectively with the international community, while missed opportunities in regional platforms like SAARC and BIMSTEC have hindered economic integration and development collaborations.

The reliance on India and China has not only created an economic imbalance but has also fostered political controversies. India’s influence in Nepal’s political affairs, particularly through its unofficial blockades and diplomatic pressure, has led to strained bilateral ties. Similarly, China’s increasing involvement in Nepal’s infrastructure projects, such as the Belt and Road Initiative (BRI), has sparked concerns about debt dependency and sovereignty. These dynamics illustrate the urgent need for Nepal to diversify its international relations and adopt a more strategic approach to diplomacy.

Furthermore, Nepal’s inability to leverage regional platforms like SAARC and BIMSTEC has diminished its role in fostering regional stability and economic growth. The South Asian Association for Regional Cooperation (SAARC) has remained largely inactive due to political tensions among member states, particularly between India and Pakistan. However, Nepal’s failure to advocate for its interests and drive collaborative projects within these organisations highlights its lack of diplomatic assertiveness. Similarly, while the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) offers significant opportunities for trade and connectivity, Nepal’s limited engagement has prevented it from reaping the full benefits of regional cooperation.

Internally, Nepal’s economic challenges exacerbate its foreign policy weaknesses. The country’s GDP heavily relies on remittances, which account for nearly a quarter of its economy. This overdependence on remittances not only reflects a lack of domestic economic opportunities but also leaves the economy vulnerable to external shocks, such as global economic downturns or changes in labor migration policies in host countries. Additionally, Nepal’s trade deficit continues to widen, with imports far outweighing exports. This economic imbalance limits Nepal’s ability to invest in critical sectors like education, healthcare, and infrastructure, further weakening its global competitiveness.

While foreign policy reforms are essential, addressing domestic challenges is equally important for Nepal to strengthen its position globally. Universal Basic Income (UBI) could play a pivotal role in transforming Nepal’s socioeconomic landscape and, indirectly, its foreign policy. UBI could reduce poverty and inequality by providing a fixed income to all citizens, ensuring a safety net for the most vulnerable and fostering social cohesion. Nepal’s poverty rate, though declining, remains a significant concern, with nearly 17% of the population living below the national poverty line. Implementing UBI could provide immediate relief to these communities while creating long-term opportunities for economic mobility.

By providing financial security, UBI encourages entrepreneurship and risk-taking, driving economic innovation and resilience. This, in turn, enhances Nepal’s ability to negotiate and collaborate internationally. Furthermore, UBI enables individuals to invest in education and health, strengthening human capital and aligning with Nepal’s need to compete in a globalised world. For instance, improved access to education and skills training could help reduce the dependency on foreign employment and foster a domestic workforce capable of driving industrial growth. A healthier and more educated population would also position Nepal as an attractive destination for foreign investment.

Implementing UBI would position Nepal as a progressive nation willing to experiment with bold socioeconomic policies, attracting international attention, partnerships, and investments. A stable and prosperous Nepal also contributes to regional stability, benefiting its neighbours and enhancing its diplomatic leverage. For example, reducing poverty and unemployment through UBI could mitigate social unrest and political instability, which often spill over into regional conflicts. By demonstrating a commitment to inclusive development, Nepal could strengthen its relationships with international allies and regional partners.

To maximise the impact of UBI on its foreign policy, Nepal must seek international support by collaborating with organisations and donor countries to fund and pilot the program. Leveraging diplomatic channels to showcase UBI as a model for poverty alleviation and inclusive growth would enhance Nepal’s role in shaping international development agendas. Strengthening regional cooperation through initiatives that complement UBI, such as cross-border infrastructure projects and trade agreements, would further Nepal’s economic integration. Additionally, engaging the Nepali diaspora to support UBI through investments and advocacy can amplify its impact. The diaspora, which contributes significantly to Nepal’s remittance-based economy, could play a crucial role in funding UBI initiatives and promoting Nepal’s development agenda on a global scale.

Critics of UBI often raise concerns about its feasibility, particularly in low-income countries like Nepal. However, successful pilot programs in countries such as India and Kenya have demonstrated the potential of UBI to uplift marginalised communities and stimulate local economies. Nepal could adopt a phased approach to UBI, starting with targeted programs for the most vulnerable populations and gradually scaling up based on the results. Funding mechanisms could include reallocating existing subsidies, leveraging international aid, and implementing progressive taxation policies. Moreover, Nepal could explore partnerships with global organisations like the United Nations Development Programme (UNDP) and the World Bank to design and implement UBI pilots.

Nepal’s poor foreign policy has exposed its vulnerabilities on the global stage. However, adopting transformative domestic policies like Universal Basic Income could address these shortcomings by fostering internal stability and economic growth. A stable and prosperous Nepal, underpinned by UBI, would be better equipped to assert its interests internationally and engage more effectively with the global community. By aligning its domestic reforms with its foreign policy objectives, Nepal can pave the way for a brighter future. The intersection of domestic stability and international diplomacy offers Nepal a unique opportunity to redefine its role in the global arena, ensuring long-term progress and prosperity for its citizens.