King Gyanendra of Nepal could be made homeless after the interim Government, under the influence of ultra-Left Republicans, scrapped the Royal Family’s personal allowance and said that the royal palace would be nationalised.

Ram Sharan Mahat, the Finance Minister, made no monetary provision for the royal household in his annual budget speech to parliament yesterday. The omission was an aggressive attempt to marginalise the unpopular monarch.

Under the 169 billion rupee (£1.3 billion) budget for the coming financial year, the Royal Family has not been allocated the 32.7 million rupees stipend that it enjoyed last year.

Dr Mahat gave warning that the family’s properties would be used “in the national interest”. He made no mention of the 700-strong palace staff, although officials had suggested previously that their allowances and benefits would be covered by the State.

The move is the latest humiliation to befall the King. He was stripped of his powers last year after a popular uprising that could lead to the abolition of the 240-year-old monarchy after constitutional elections in November.

This month foreign diplomats including the British Ambassador boycotted his lavish 60th birthday celebrations on the request of foreign ministry officials. Key figures in the Armed Forces – of which the King use to be the head – also stayed away.

By scrapping his personal allowance, his opponents – led by Girija Prasad Koirala, the once-supportive Prime Minister – hope to force the King to step down or leave the country before the elections on November 22. However, he is an independently wealthy man through various business interests, including hotels and tea plantations, and could remain a private citizen in Nepal. “Financially he’s comfortable, although he would have to move out of the palace,” Professor S. D. Muni, a consultant for the Institute for Defence Studies and Analyses in Delhi, said.

This year’s budget sought to distribute more state funds to upgrade a crumbling infrastructure in one of the world’s poorest countries. It also allocated 3.5 billion rupees to the elections, including extra security. This suggests that the Government fears some unrest, although analysts estimate that the King has the support of no more than a fifth of the population.

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