SCENARIOS-What next for Nepal after Maoists sack army chief?

Mon May 4, 2009 3:01am EDT

MAY 4 (Reuters) - Nepal's president has asked sacked army chief General Rookmangud Katawal to stay in his post, defying the Maoist government and thrusting the Himalayan republic deeper into political crisis. For the main story, click on [ID:nSP478366].

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

MAOISTS DECISION ACCEPTED

All sides, including the army and the opposition political parties, come to accept the Maoists' decision. The general, due to retire in four months, also accepts his dismissal. This scenario would have the least economic impact, but looks increasingly unlikely, especially now the President has asked the sacked army chief to stay in his post.

CONSTITUTIONAL CRISIS

President Ram Baran Yadav has called the sacking "illegal", but who has the final say on the chief's dismissal is ambiguous. Yadav's defiance could result in confrontation between him and the Maoists and lead to a constitutional crisis.

The general may appeal to the Supreme Court, which could rob the Maoists of legal backing for the move. The court caused trouble for the Maoists in March by blocking their attempts to retire eight army generals and it may not shy away from confronting Nepal's ruling party again.

GOVERNMENT COLLAPSES

The Communist UML party, the second biggest grouping in the ruling coalition, and another junior partner have withdrawn support to the Maoists. More groups could desert the government leaving it in the minority.

This will force a parliamentary vote. If the Maoists lose, an alternative government could be formed with or without the Maoists. The Maoists have 238 members in a 601-member parliament.

As long as the fight remains in parliament, the economic fallout would remain minimal, analysts said.

STREET PROTESTS

The government's decision has already triggered street protests by opposition parties. Maoist supporters, too, are rallying in Kathmandu. Protests could intensify. The Maoists could also make it difficult for any new coalition to govern.

Prolonged unrest should not have a big impact on trade with Nepal's main economic partner, India, although last year street protests briefly cut off oil supplies to the capital.

DAMAGE TO THE PEACE DEAL

Political uncertainty may delay drafting a new constitution by May 2010, 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.

ARMY COUP

Nepal has no history of army coups and analysts say this is an unlikely scenario.

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 in the latest turmoil.

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; Editing by Alistair Scrutton and Bill Tarrant)






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