Political
The political situation continues to be unstable and is characterized by uncertainty (see graph). There is widespread skepticism as to whether the Constituent Assembly (CA) elections will be held on 22 November as planned. While logistically, preparations are progressing relatively smoothly, the political momentum for the elections has not yet picked up. The will of major parties to carry on with the elections appears to be directly linked to their prospects of faring better after these elections than under the current interim arrangement. According to an opinion poll conducted in 66 of the 75 districts between March and May, the Nepali Congress (NC) can expect to receive around 18% of the votes in the CA, while the CPN-M (Maoists) and the CPN-UML (mainstream leftist party) would get around 14% each. While both the NC and the CPN-M have lost popular support since the Madhesi (inhabitants of the southern plains, the Terai) uprising in spring, the CPN-UML is the only party still optimistic about its electoral success. While most ruling parties involved in the peace process have not yet started their political campaigning, the CPN-UML wants the CA elections to be held on time, is preparing its election manifesto and has started mobilizing its cadres. Although negotiations between the NC and its splinter party NC-Democratic have been going on for some time, unification of the two parties has not yet materialized. At the same time, the possibility of a leftist electoral alliance between the CPN-M and the CPN-UML is withering because inter-party competition has driven the two parties apart.
The CPN-M leadership – which in principle is committed to the peace process – has to increasingly walk the tight-rope between satisfying the demands of its radical lower-level followers and its counterparts in the Seven Party Alliance (SPA). At the end of July/beginning of August, the CPN-M held a central committee meeting and its fifth plenum meeting at which a policy document drafted by CPN-M chief Prachanda was adopted. The document states that the declaration of a republic (seemingly through the interim parliament) and a fully proportional electoral system are preconditions for the CA polls. Moreover, at a press conference on 12 August, Prachanda warned that the CPN-M would quit the government and launch a peaceful movement if its demands were not met. This more radical rhetoric has to be seen as a compromise by the CPN-M leadership to party hardliners at the local level and as an attempt to win back the Madhesi and ethnic groups who the CPN-M feel have deserted their cause. However, some analysts also see the new demands by the CPN-M as an effort to derail the CA election process since the CPN-M might not be in the position to secure a respectable number of seats. The new demands raised by the CPN-M have unexpectedly met widespread criticism from the other ruling parties, who claim they are in breach of previous commitments made by the CPN-M in the framework of the peace process. It is yet to be seen how adamant the CPN-M leadership will insist on this new agenda – and if this agenda will jeopardize the CA elections and the peace process as a whole. King Gyanendra has seen his wings further clipped by interim bodies, which cut his allowances in the 2007/08 budget and decided to bring several royal palaces under government ownership.