Significantly, on July 22, 2016, Communist Party of Nepal-Maoist-Centre (CPN-Maoist-Centre), a major coalition partner with 82 seats in 598-member Constituent Assembly (CA) in the Communist Party of Nepal-Unified Marxist Leninist (CPN-UML)-led coalition Government, tabled a no-confidence motion in Parliament against Prime Minister Oli. Bimalendra Nidhi, a central-level leader of the Nepali Congress (NC), the largest opposition party with 206 seats, seconded the no-confidence motion tabled by Pushpa Kamal Dahal, chairman of the CPN-Maoist-Centre. CPN-UML has 182-members in the 598-member CA.  

Earlier, on July 12, 2016, CPN-Maoist-Centre had withdrawn its support from the incumbent Government, declaring that CPN-UML was reluctant to implement the "gentlemen's agreement" and the nine-point agreement made with it on May 5, 2016. In a letter addressed to PM Oli, Dahal had declared:

Our party saw the need for national consensus to implement the new statute, complete the remaining tasks of peace process along with the transitional justice, resolve the issues raised by Madhesis, Janajatis and Tharus, and provide relief to the people and carry out reconstruction of the country in the wake of the last year's devastating earthquake. And the spirit of nine-point agreement that the Maoist party and CPN-UML forged in May was also national consensus. But as the leadership of the existing government was not ready to implement the nine-point agreement and the three-point gentlemen's agreement, it would be politically inappropriate for our party to remain in this government. Thus, we withdraw our support from this government now.

According to the "gentleman's agreement", Oli was to let Dahal take over the reins of Government after the tabling of the fiscal budget. Further, the nine-point agreement provided blanket amnesty for human rights abusers over the decade-long Maoist insurgency in order to save Maoist leaders from being implicated in war crimes. However, when Oli refused to step down even after the passage of the Appropriation Bill on July 9, 2016, the Maoists decided to withdraw support.

As expected, a day after the CPN-Maoist Center withdrew its support to the CPN-UML-led Government, the main opposition NC, during its Central Working Committee meeting held at the Nuptse Hall in the Parliament building on July 13, 2016, decided to lend support to Dahal as the new Prime Minister. The meeting also endorsed a seven-point agreement that the party President, Sher Bahadur Deuba, forged with Dahal to build a new coalition Government. As per the understanding between the two leaders, Dahal would first lead the coalition Government and Deuba would succeed him after 10 months.

Subsequently, on the same day, seeking support for passing the no-confidence motion against Oli and taking part in the new Government, both NC and CPN-Maoist-Center leaders had approached the agitating parties of the United Democratic Madhesi Front (UDMF) comprising the Upendra Yadav-led Federal Socialist Forum-Nepal (FSF-N), the Mahantha Thakur-led Tarai Madhes Democratic Party (TMDP), the Rajendra Mahato-led Sadbhawana Party (SP) and the Mahendra Raya Yadav-led Tarai Madhes Sadbhawana Party (TMSP). Following a joint request from NC and CPN-Maoist Center, 19 MPs from UDMF signed on the no-confidence motion. Again, on the same day, the Federal Alliance, an alliance of 30 ethnic and Madhesi parties formed on July 31, 2015, declared that it would also help NC and CPN-Maoist-Centre to unseat the CPN-UML-led coalition Government. There are about four dozen lawmakers in the Federal Alliance.

Further, on July 15, 2016, Dahal showed up at Khulamanch in Kathmandu, where the Federal Alliance was officially concluding its 39-day relay hunger strike. Addressing the function, Dahal declared, "The first point of seven-point agreement between Nepali Congress and Maoist Centre has considered the Alliance's demands. Political solution will be sought [to address them] through positive dialogue." Dahal was accompanied at the function by NC leader Purna Bahadur Khadka. The Federal Alliance had been demanding identity based autonomous states in Nepal and greater proportional representation in Parliament. Under the new Constitution, a smaller percentage of lawmakers are elected by proportional representation - 45 per cent, as compared to 58 per cent under the Interim Constitution. The Federal Alliance wants the provisions of the Interim Constitution restored in this regard.

Subsequent to Oli's resignation, President Bidya Devi Bhandari on July 24, 2016, asked the present Government to continue in a caretaker capacity until a new Government is formed. As the incumbent Cabinet on July 23 had recommended the President to invoke Article 305 for removing the difficulties because there was no provision to elect a new Prime Minister after the Prime Minister's resignation in the transitional cabinet, President Bhandari issued an order on July 25 to elect a new Prime Minister in accordance with Article 298 (2) and (3) of the Constitution.

Though it is expected that the Maoists and the NC along with other parties, including the Madhesis, will come together to form a Government soon, innumerable challenges remain. Foremost among them are three pending Bills. Out of four bills - Appropriation Bill, Financial Bill, Bill to Raise Public Debt, and Loan, and Guarantee Bill - presented in Parliament on May 28, 2016, the Appropriation Bill, which allows the Government to implement budgetary programmes and utilize funds as per allocations made through the budget document, was approved by Parliament. However, the Financial Bill, Bill to Raise Public Debt, and Loan, and Guarantee Bill are yet to be approved and these are important for the Government to administer to the country's economic needs and more urgent at a time when Nepal is still to recover from the losses of the April 2015 earthquakes. The importance of these bills are underlined by the fact that a meeting of the ruling parties', including CPN-UML, Rastriya Prajatantra Party-Nepal (RPP-N), Madhesi People's Right Forum-Democratic (MPRF-D), Rastriya Prajatantra Party (RPP) and some other smaller parties held in Kathmandu on July 17, 2016, had decided not to allow a discussion on the no-confidence motion on July 21 without allowing a debate on three budget related bills first. Further, on July 19, 2016, Prime Minister Oli had urged the Speaker Onsari Gharti Magar to allow a debate on the three budget related bills before the discussion over the no-confidence motion. However, Parliament rejected the bills tabled by the incumbent Government, right before Dahal tabled the no-confidence motion against the incumbent Prime Minister. The prominent challenges which the new Government will have to address further include demands for transitional justice measures in the country, as Dahal is now expected to lead the Government. The new Government will also have to address the issues of accommodating the aspirations of the Madhesis and other minority communities in the constitutional scheme. Both these have been fractious issues that past Governments have failed to secure consensus on.

Since the restoration of parliamentary democracy in 1990, unstable politics, frequent ruptures of political parties and all-too-frequent changes of Government have plagued Nepal. The country has seen 23 Government changes in 26 years. Although, a Government has the mandate to rule for five years and thus pursue long-term plans and policies, the frequent turnover has resulted in half baked plans, ill executed policies, and way too many changes in working styles. Caught in the struggle between power hungry politicians and a highly unstable democratic system, many Nepalis feel trapped and helpless. Nepal has been in a state of political crisis for many years, and people's hopes that the country would eventually sort itself out, establishing a measure of political stability and economic growth, continue to be belied.