Overview: This research article evaluates the evolving landscape of digital governance in Nepal as it transitions into the second phase of the Provincial and Local Governance Support Programme (PLGSP 2024–2029). While the initial phase focused on foundational automation and the deployment of integrated information systems like SuTRA, this study analyzes the subsequent shift toward long-term institutional resilience and ethical data management. Key Research Areas: Socio-Technical Systems (STS) Evaluation: Analyzing how technology interacts with the human and political structures of Nepal's federalism. National AI Policy 2081 (2025) Integration: Assessing the readiness of sub-national governments (Palikas) for Artificial Intelligence and predictive governance. The GESI Paradox: Exploring the tension between collecting disaggregated data for social inclusion and the resulting privacy vulnerabilities for marginalized groups. Cybersecurity and Resilience: Identifying the critical need for localized security frameworks to protect citizen biometrics and personal data. Institutional Sustainability: Evaluating the transition from vendor-dependency toward autonomous municipal IT units and professionalized civil service career paths for IT Officers. Methodology: The study utilizes a qualitative case study approach, combining a systematic desk review of MoFAGA and UNDP program documents with expert observation based on the author's tenure as an IT & E-Governance expert (2019–2023).