| October 25, 2020

Inflation hits 12.1 pc in current FY first half

Inflation hits 12.1 pc in  current FY first half

Central bank sees positive economic outlook in coming days with blockade ending

KATHMANDU, Feb 22: Inflation has climbed to 12.1 percent in the first half of the current fiscal year 2015/16, as against Nepal Rastra Bank's target of containing it below double digits.

Unveiling the 'Current Macroeconomic and Financial Situation of Nepal Based on Six Months Data' for the current fiscal year today, the central bank said that inflation as measured by the Consumer Price Index (CPI) jumped to 12.1 percent in mid-January. Inflation was 6.8 percent in the corresponding period last fiscal year, 2014/15.

The rise in the price of essential items due to the supply disruption caused by the tarai unrest and India's unofficial blockade posed a challenge to the central bank, which had vowed to contain inflation below double digits this year. NRB's efforts to control inflation through monetary measures could not succeed.

According to the central bank, the price rise is mainly due to the prolonged strike in the tarai region and the subsequent economic blockade imposed by India since mid-September. Disruption of supplies in the wake of the tarai turmoil and the Indian unofficial blockade have driven up the price of various food and non-food items.
Inflation in the food and beverage group surged to 15.2 2 percent in the review period while the non-food and services group inflation saw a growth of 9.7 percent in mid-January 2016. Geographically, Kathmandu Valley saw a relatively higher rate of inflation at 13.8 percent followed by the hills region at 12.1 percent, the tarai at

10.7 percent and the mountain region at 10 percent in the review period.

Two months ago, the central bank had warned that the prolonged poilitical crisis could lead to stagflation due to slowdown in economic growth and rising prices.

However, NRB has now expressed optimism over the country's economic outlook in the days to come, with the strikes in the tarai and the blockade coming to an end.

"Economic activities are expected to rebound following the ease in the trade routes in the southern parts of the country," reads the periodic situation analysis of the central bank. "Industrial production is likely to pick up following the improvement in the supply of fuel, together with the return of normalcy in the southern parts of the country. The tourism sector is expected to rise slowly as the positive message of the return of peace throughout the country spreads to the countries of tourist origins," it added.

The central bank also expects that normalization of trade movements in the tarai will also reduce the inflationary pressure that has been felt since mid-August.
Sagar Ghimire

Ghimire is associated with Republica, English National Daily, since November 2013. He reports and writes on banking, financial, cooperatives, labor and foreign employment issues.


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