KATHMANDU: With the trade disruption in southern Nepal due to the Tarai turmoil and unofficial economic blockade by India coming to an end, the inflation in the country is also easing, though still at double digits.
The inflation, as measured in consumer price index (CPI), came down to 11.3 percent in mid-February of the current fiscal year 2015/16, compared to 12.8 percent of year-on-year CPI of 12.1 percent in the previous month of the current fiscal year, according to Nepal Rastra Bank (NRB).
Unveiling the Current Macroeconomic and Financial Situation of Nepal (based on seven months’ data of 2015/16), the NRB said that the price rise has begun to moderate due to improvement in supply disruptions that had driven up the inflation over the last couple of months.
“The consumer price inflation has begun to moderate on account of improved supply of fuel and other consumable items following the return of normalcy in the southern customs points,” read the periodic report of the central bank. However, the inflation is still 1.8 percentage points higher than the NRB’s revised inflation target of 9.5 percent.
NRB voiced its optimism in its report stating that inflation will decline further in the coming months. “Going forward, inflation rate is likely to moderate gradually following the ease of trade routes in the southern parts of the country,” it added.
According to NRB figures, food and beverage group inflation saw a jump of 12.8 percent while non-food and services group rose by 10.1 percent in the seventh month of the current fiscal year. With inflation at 14.3 percent, Kathmandu Valley saw highest rise in prices as of mid-February. Hilly region followed suit with the region’s inflation rate reaching 11.4 percent.
Following the protests in the Tarai and subsequent unofficial economic blockade imposed by India for nearly four months that started from the last week of September, inflation started to climb up due to the disruption in supplies. The spiraling price rises and stagnation in the economic output have led the central bank to conclude that the country could face ‘stagflation’ if the situation persisted.
