Peace first, reform later

Ram Sharan Mahat said likely Maoist involvement in mainstream politics and a broad-ranging interim coalition government made market reforms hard as Nepal seeks to emerge from a decade of rebellion that has shattered the economy.

"Many radical reforms may not be possible because of the spectrum of political forces in the government. And after some time the Maoists could be in government for a brief time," Mahat told AFP in an interview.

"Radical market-oriented reforms may have to wait for some time until the political situation stabilises," said Mahat, who took over Nepal's finances after mass protests forced King Gyanendra to give up absolute rule in April.

After battling for a one-party communist republic in a revolt that has claimed over 12,500 lives, the Maoists have entered peace negotiations with the interim government after the two sides joined forces to sideline the monarch.

Still, one tough decision Mahat does expect to have to take is to raise oil prices closer to world levels even though a petrol product price increase last year sparked a general strike in the capital Kathmandu.

The move is necessary to stem losses at state-owned Nepal Oil Corp.