Political turmoil

Nepal’s Maoist Prime Minister Prachanda resigned on Monday after a crisis sparked by his sacking of the country’s army chief, plunging the Himalayan republic into political turmoil.

Here are some scenarios of what could happen next in the young Himalayan republic and their economic impact.

NEW COALITION IS FORMED

The main opposition Nepali Congress party and the moderate Communist UML party could try and form a government with the help of smaller groups. This coalition may or may not include the Maoists. This is the most likely scenario, analysts say, and one that would have the least economic impact.

FRESH ELECTION

This is the most unlikely scenario. No party is even near-ready to go to the polls. It is not even necessary as last year’s election was part of a process to write a new constitution that will spell out how a permanent parliament is to be set up. The constitution has to be written by May 2010.

STREET PROTESTS

Maoist supporters have already hit the streets. These protests are expected to intensify and the Maoists are expected to resort to other forms of civil disobedience to make it difficult for any new coalition to govern.

DAMAGE TO THE PEACE DEAL

Political uncertainty may delay drafting a new constitution, a key part of a 2006 peace deal. But the former rebels, whose fighters are in U.N.-monitored camps under the deal, are unlikely to return to the jungles and resume fighting. If that’s the case, then the economic fallout could be contained.

MAOISTS’ FUTURE

By quitting the government, the Maoists are seen as claiming the moral high ground which is likely to help them win the sympathy of the people. The ball is now in the opposition’s court to move the political process forward.

ECONOMIC WOES

Nepal’s government has so far failed to fully implement its economic agenda in one of the world’s poorest countries. Nepalis have been hit by high inflation, sluggish industrial output and power shortages, all of which could remain or worsen now.

Nepal’s tourist industry, one of its biggest foreign exchange earners, could also take a hit just as it was tentatively recovering from the 10-year-old civil war.

(Reporting by Gopal Sharma and Krittivas Mukherjee; Editing by Sugita Katyal)

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