Inflation Hits Highest Level in a Year

Despite strong external sector economic indicators, inflation in Nepal has surged due to a slowdown in domestic economic activity.

According to the Current Macroeconomic and Financial Situation Report for the first four months of the current fiscal year released by the Nepal Rastra Bank on Thursday, consumer inflation has reached 5.60 percent as of mid-November, marking its highest level in a year.

Inflation had initially declined after reaching 7.5 percent from mid-September to mid-October last year, falling to 5.38 percent the following month (mid-October to mid-November) and further dropping to 3.57 percent by the end of the last fiscal year. However, inflation has been rising steadily since the beginning of the current fiscal year in mid-July.

The sharp increase in inflation was fueled by floods and landslides in late September, which caused extensive damage to crops and roads. Additionally, rising food and beverage prices further pressured overall inflation, which stood at 9.10 percent for food and beverages and 3.65 percent for non-food and services during mid-October to mid-November. According to the Current Macroeconomic and Financial Situation Report for the first four months of the current fiscal year released by the Nepal Rastra Bank on Thursday, consumer inflation has reached 5.60 percent as of mid-November.

Under the food and beverage category, the year-on-year (y-o-y) price index of vegetable sub-category increased 33.99 percent, pulses and legumes 10.78 percent, cereal grains and their products 10.15 percent and ghee and oil 9.29 percent. However, the y-o-y price index of spices sub-category decreased 1.41 percent, sugar and sugar products 1.28 percent and meat and fish 0.02 percent.

Under the non-food and services category, y-o-y price index of miscellaneous goods and services sub-category increased 10.41 percent, alcoholic drinks 6.35 percent, clothes and footwear 4.57 percent and tobacco products 4.24 percent.

During the review period, the current account remained at a surplus of Rs 143.42 billion compared to a surplus of Rs 97.10 billion in the same period of the previous year. Balance of Payments (BOP)also  remained at a surplus of Rs 205.83 billion in the review period compared to a surplus of Rs 150.24 billion in the same period of the previous year.