Nepal, the once-upon-a-time Himalayan kingdom beloved equally over the years by freaked-out hippies, seekers of Eastern bliss and the hardiest of mountaineers, has had a tumultuous few recent decades. Among other explosive events, there have been urban street battles, civil war in the countryside, the massacre of a royal family and the election of a revolutionary Maoist prime minister. The turmoil isn’t over yet.

On Monday Prime Minister Puspha Kamal Dahal–who goes by his revolutionary name, Prachanda– resigned after he tried to dismiss the army commander in chief and was overruled almost immediately by the country’s president, Ram Baran Yadav, who is a leader in the main opposition party, the Nepali Congress. Yadav, a physician, became the country’s first president last July after Nepal abolished the monarchy and declared itself a republic. Prachanda, leading a coalition of leftist parties, became prime minister in April 2008.

A standoff over the promised integration into the Nepali army of fighters from the Maoist movement has been festering for months. A 2006 peace agreement supported by the United Nations, which has been overseeing the disarming of Maoist guerrillas, is now in jeopardy. The UN has long been concerned that some armed revolutionaries are still at large and may have been involved with attacks on journalists and others who have challenged them. A UN human rights office has been established in Kathmandu to monitor developments.

When Prachanda was in the United States last fall to attend the opening of the UN General Assembly, where government leaders speak first in the annual debating season, he addressed a number of influential New York audiences, including at the Asia Society. There, he was careful to affirm Nepal’s commitment to a democratic government, a free market and a welcoming atmosphere for nongovernmental organizations. He was, however, a little cagey about how the desperately poor countryside would be developed, appearing to prefer a communal approach, which he did not describe in detail. He also hedged on the disarming of youth militias.

The International Crisis Group, which has reported regularly and in great depth on the ever-evolving crisis in Nepal, credited the Maoists in a report in February for adhering to the democratic process. But the report also said: “Maoist commitment to political pluralism is still highly questionable. Debate within the party–renamed the Unified Communist Party of Nepal (Maoist), following its merger with a smaller group–shows the goal of a communist ‘people’s republic’ is still in place. Although leading the government, Maoist leaders continue to threaten renewed revolutionary struggle and the ‘capture of state power.’ Such threats have been underlined by cadres’ continued violent behaviour and an apparent drive to consolidate alternative power bases through affiliated organizations like trade unions.”

Nepal’s disarray is rooted in the long dominance of the Nepali Congress, a centrist party that upheld democratic principles under enormous strain through periods of conflict with the monarchy and rule by the hereditary Rana ministerial dynasty, but was unable to turn over party leadership to a younger generation when Nepal needed new blood. A sclerotic establishment that included mainstream Marxist-Leninists (distinct from the revolutionary Maoists in the countryside) continued to play musical chairs with government offices while gaps between the urban elite and the rural poor grew.

On Sunday the Nepali Congress and the United Marxists-Leninists, a traditional leftist party long in politics, were on the same side in opposing the sacking of the army chief. The UML withdrew from the governing coalition, leaving Prachanda without a working majority in Parliament.

A recurrence of street violence in Nepal, after hopes of permanent peace were so recently raised, would not only slow the writing of a new constitution and affect the crucial tourism industry, which was just beginning to recover, but it would also concern India, which has a significant Maoist rebellion of its own stretching through the heart of the country. Outside the region, major donor nations, the United States among them, will have another South Asian trouble spot to watch.