Rising Inflation Poses Challenge for Nepali Economy

The already tattered Nepali economy now has a new challenge to confront with rising inflation, according to the Nepali central bank's statistics for the first three-quarters of the current fiscal year, which was issued in Kathmandu on Sunday.

The inflation scaled up to 8.9 percent, which is over three-percentage points more than the target set by the monetary policy.

Nepal Rastra Bank (NRB) officials said that rising food price is the major factor that inflates the national inflation index.

According to the latest price data, the price of food and beverages, which commands a 53.2 percent weight in the National Urban Consumer Price Index, recorded a whopping rise of 12.6 percent. The inflation for the food and beverages group during the first eight months was 9.4 percent.

Key economic factors suggest there is almost no way to avert the pain of double-digit inflation. Given the market trend, chances are high that the prices of food items may rise further, which may lead the month-to-month inflation to cross the single- digit mark by the end of the current fiscal year, said Dila Ram Subedi, assistant director at the Price Division of the central bank.

The central bank's statistics reveal that the prices of rice and oil as well as ghee, which together hold more than 20 percent weight in the urban consumer basket, recorded a rise of 25 percent for rice and 33 percent for oil and ghee.

It is extremely worrisome that the country is witnessing a painful price rise in agro-based products at a time when it enjoyed a record 10 percent rise in agriculture production this year.

NRB officials also said that continued domestic oil price suppression despite a 60 percent rise in global oil prices has also helped contain the inflation within the single-digit.

Source: CRIEnglish