KATHMANDU (Reuters) - Nepali Prime Minister Madhav Kumar Nepal has resigned in a move aimed at resolving a political crisis which had imperiled a 2006 peace deal when the Maoists ended a decade-long civil war that killed thousands.
The move came after pressure from the former rebels who are demanding a return to power at the head of a unity government to oversee the drafting of a new constitution, a major condition of the peace deal.
Following are some questions and answers about the unity government and where the situation might be headed:
Nepal currently has no parliament and a special constituent assembly elected in 2008 to draft a new constitution doubles as the national legislature.
No political party commands a majority in the assembly dominated by the Maoists. Any government's primary responsibility is to oversee the drafting of the new constitution, the first after Nepal abolished the 239-year-old monarchy two years ago.
Neither the Maoists nor other political parties can garner the two-thirds majority in the assembly required to pass the statue without the support of each other. Therefore, every one talks about a national unity government - one based on the consensus and participation all or most of the 25 political parties, including the Maoists, to ensure the writing of the constitution by the stipulated time of May next year.
President Ram Baran Yadav has given political parties until next Wednesday to cobble a consensus coalition.
The Maoists insist that they must be allowed to head the new government because they are the biggest political group in the assembly. The centrist Nepali Congress and the moderate Communist UML party, which are the second and the third biggest groups, say the former rebels must first agree on a clear cut time table to integrate and rehabilitate more than 19,000 former Maoist fighters.
Main political parties say even if they agree to support a Maoist led government they would not back their chief Prachanda for the prime minister. This could improve the chance for Prachanda's India-educated deputy Baburam Bhattarai, a Maoist ideologue.
Some political parties say they are themselves trying to form a new coalition with or without the Maoists but according to analysts keeping the Maoists out would mean fresh protests and the chance that Nepal will miss a deadline to finish writing the constitution.
Any failure to find an early settlement would intensify fresh power struggle among parties and prolong the political instability.
Nepal is located between India and China that compete for influence over the nation which is rich in hydroelectric potential and controls many rivers that supply fresh water to millions including in India.
The political turmoil has kept the impoverished economy on a low growth path. Nearly one-fourth of Nepalis live on a daily income of less than a dollar.
Any new government will have to boost the 3.5 percent economic growth also caused by a crippling shortage of electricity, double digit inflation, regular labour strikes and weakening investors' confidence in the aid-and-tourism dependent nation - factors fuelling popular frustration.
(Editing by Alistair Scrutton and Sanjeev Miglani)